Operational Excellence, Low-Cost Production
Drive Cash Generation
Positive Industry Fundamentals in Near- and
Longer-Term
Trailing 12-Month Net Cash from Operating
Activities of $1.5 Billion
CF Industries Holdings, Inc. (NYSE: CF), a leading global
fertilizer and chemical company, today announced results for its
third quarter and nine months ended September 30, 2019.
Highlights
- Nine month net earnings of $438 million(1), or $1.97 per
diluted share; EBITDA(2) of $1,314 million; adjusted EBITDA(2) of
$1,285 million
- Third quarter net earnings of $65 million(1), or $0.29 per
diluted share; EBITDA of $341 million; adjusted EBITDA of $349
million
- Trailing 12-month net cash from operating activities of $1,457
million, free cash flow(3) of $830 million
- Cash and cash equivalents of $1,019 million on the balance
sheet as of September 30, 2019
- Company to redeem $750 million in debt by end of year
- Repurchased approximately 1.5 million shares during the
quarter
Overview of Results
CF Industries Holdings, Inc. today announced for the first nine
months of 2019 net earnings attributable to common stockholders of
$438 million, or $1.97 per diluted share; EBITDA of $1,314 million;
and adjusted EBITDA of $1,285 million. These results compare to the
first nine months of 2018 net earnings attributable to common
stockholders of $241 million, or $1.03 per diluted share; EBITDA of
$1,080 million; and adjusted EBITDA of $1,062 million.
For the third quarter of 2019, net earnings attributable to
common stockholders were $65 million, or $0.29 per diluted share;
EBITDA was $341 million; and adjusted EBITDA was $349 million.
These results compare to third quarter 2018 net earnings
attributable to common stockholders of $30 million, or $0.13 per
diluted share; EBITDA of $308 million; and adjusted EBITDA of $299
million.
“The CF team’s outstanding execution and our company’s position
on the low end of the global cost curve continue to drive
substantial cash generation and an industry-leading free cash flow
yield,” said Tony Will, president and chief executive officer, CF
Industries Holdings, Inc. “Over the last 24 months, this superior
cash flow generation has enabled us to repay $1.1 billion in debt,
with another $750 million to be retired by the end of this year.
Additionally, we repurchased more than 16 million shares for $750
million, distributed $550 million in dividends and invested
approximately $400 million in growth. We believe our structural and
operational advantages, along with positive nitrogen industry
fundamentals, will continue to support our cash generation,
allowing us to build on this track record in 2020 and beyond.”
________________________________________________________________
(1)
During the first nine months and third
quarter of 2019, certain items impacted our financial results and
their comparability to the relevant prior year periods. See the
table accompanying this release for a summary of these items.
(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 to operate safely and efficiently. As of
September 30, 2019, the company’s 12-month rolling average
recordable incident rate was 0.61 incidents per 200,000 work
hours.
Gross ammonia production for the first nine months of 2019 was
approximately 7.6 million tons, and for the third quarter was more
than 2.3 million tons. The company expects gross ammonia production
during the fourth quarter to be higher than in the third quarter
with less maintenance activity scheduled for the final three months
of the year.
Sales Overview
Net sales in the first nine months of 2019 were $3.5 billion
compared to $3.3 billion in 2018 due primarily to higher average
selling prices across all major products. Net sales in the third
quarter of 2019 were similar to the third quarter of 2018.
Total sales volumes for the first nine months of 2019 and third
quarter of 2019 were similar to the prior year periods.
Average selling prices for the first nine months of 2019 were
higher year-over-year across all major products due to a tighter
global nitrogen supply and demand balance than the prior year
period and logistical issues in North America that limited supply
at some inland locations. Average selling prices for the third
quarter of 2019 were similarly higher for urea, urea ammonium
nitrate (UAN) and ammonium nitrate (AN), and were lower for ammonia
due to greater global supply availability.
Cost of sales in the first nine months of 2019 and the third
quarter of 2019 decreased primarily due to lower realized natural
gas costs partially offset by higher freight and distribution
costs.
In the first nine months of 2019, the average cost of natural
gas reflected in the company’s cost of sales was $2.86 per MMBtu
compared to the average cost of natural gas in cost of sales of
$3.14 per MMBtu in the first nine months of 2018. In the third
quarter of 2019, the average cost of natural gas reflected in the
company’s cost of sales was $2.24 per MMBtu compared to the average
cost of natural gas in cost of sales of $3.19 per MMBtu in the
third quarter of 2018.
Market Overview
The company expects that nitrogen industry fundamentals will
continue to improve in both the near- and longer-term as the global
market continues to tighten over the coming years.
In the near-term, demand from import-dependent regions should
support global pricing. In North America, corn crop futures
continue to support an increase in planted corn acres over the next
two seasons. Outside of North America, demand for urea from India
and Brazil remains positive. Through September 2019, India has
imported 5.9 million metric tons of urea, a 36 percent increase
over the same period in 2018. India is expected to issue 1-2 more
tenders through March 2020. Imports of urea to Brazil through
September 2019 were 3.5 million metric tons, up approximately three
percent year-over-year.
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 and thus set the global price floor. 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.
Over this same time period, producers in North America are
expected to continue to benefit from access to low-cost North
American natural gas. For calendar years 2020-2023, the NYMEX Henry
Hub natural gas forward strip is below $2.56 per MMBtu, below the
2019 NYMEX settlements through October of $2.65 per MMBtu.
Capital Expenditures
Capital expenditures in 2019 are projected to be approximately
$425 million.
Liquidity
As of September 30, 2019, the company had cash and cash
equivalents of $1,019 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 third quarter
of 2019, the company repurchased approximately 1.5 million shares
for $72 million. From February 2019, when the share repurchase
authorization was announced, through September 30, 2019, the
company has repurchased approximately 5.7 million shares for $250
million.
On October 9, 2019, the company announced that its wholly owned
subsidiary CF Industries, Inc. has elected to redeem in full the
entire outstanding $500 million principal amount of its 7.125%
Senior Notes (the “2020 Notes”) due May 2020, in accordance with
the optional redemption provisions provided in the indenture
governing the 2020 Notes. The 2020 Notes will be redeemed on
November 13, 2019. Based on market interest rates on October 28,
2019, the company estimates that the total amount for the
redemption of the 2020 Notes will be approximately $513 million,
including accrued interest.
On October 30, 2019, the company announced that its wholly owned
subsidiary CF Industries, Inc. has elected to redeem on December
13, 2019, $250 million principal amount, representing 50% of the
currently outstanding $500 million principal amount, of its 3.400%
Senior Secured Notes due December 2021 (the “2021 Notes”) in
accordance with the optional redemption provisions provided in the
indenture governing the 2021 Notes. Based on market interest rates
on October 28, 2019, the company estimates that the total amount
for the partial redemption of the 2021 Notes will be approximately
$257 million, including accrued interest.
CHS Inc. Distribution
CHS Inc. (CHS) is entitled to semi-annual distributions
resulting from its minority equity investment in CF Industries
Nitrogen, LLC (CFN). The estimate of the partnership distribution
earned by CHS, but not yet declared, for the third quarter of 2019
is approximately $49 million.
Consolidated Results
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
(dollars in millions, except
per share
and per MMBtu amounts)
Net sales
$
1,038
$
1,040
$
3,541
$
3,297
Cost of sales
810
867
2,594
2,622
Gross margin
$
228
$
173
$
947
$
675
Gross margin percentage
22.0
%
16.6
%
26.7
%
20.5
%
Net earnings attributable to common
stockholders
$
65
$
30
$
438
$
241
Net earnings per diluted share
$
0.29
$
0.13
$
1.97
$
1.03
EBITDA(1)
$
341
$
308
$
1,314
$
1,080
Adjusted EBITDA(1)
$
349
$
299
$
1,285
$
1,062
Tons of product sold (000s)
4,752
4,765
14,555
14,606
Supplemental data (per MMBtu):
Natural gas costs in cost of sales(2)
$
2.24
$
3.16
$
2.87
$
3.11
Realized derivatives loss (gain) in cost
of sales(3)
—
0.03
(0.01
)
0.03
Cost of natural gas in cost of sales
$
2.24
$
3.19
$
2.86
$
3.14
Average daily market price of natural gas
(per MMBtu):
Henry Hub
$
2.33
$
2.90
$
2.57
$
2.91
National Balancing Point UK
$
3.42
$
8.40
$
4.56
$
7.98
Unrealized net mark-to-market loss (gain)
on natural gas derivatives
$
2
$
(3
)
$
3
$
(11
)
Depreciation and amortization
$
223
$
233
$
663
$
667
Capital expenditures
$
143
$
133
$
297
$
278
Production volume by product tons
(000s):
Ammonia(4)
2,336
2,456
7,564
7,424
Granular urea
1,206
1,296
3,836
3,675
UAN (32%)
1,584
1,595
4,810
4,957
AN
552
474
1,585
1,355
_______________________________________________________________________________
(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.
Ammonia Segment
CF Industries’ ammonia segment produces anhydrous ammonia
(ammonia), which is the company’s most concentrated form of
nitrogen, containing 82 percent nitrogen. The results of the
ammonia segment consist of sales of ammonia to external customers.
In addition, ammonia is the “basic” nitrogen form that the company
upgrades into other nitrogen products such as urea, UAN and AN.
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
187
$
192
$
847
$
778
Cost of sales
188
181
654
641
Gross margin
$
(1
)
$
11
$
193
$
137
Gross margin percentage
(0.5
)%
5.7
%
22.8
%
17.6
%
Sales volume by product tons (000s)
720
657
2,548
2,415
Sales volume by nutrient tons
(000s)(1)
590
539
2,089
1,981
Average selling price per product ton
$
260
$
292
$
332
$
322
Average selling price per nutrient
ton(1)
317
356
405
393
Adjusted gross margin(2):
Gross margin
$
(1
)
$
11
$
193
$
137
Depreciation and amortization
41
33
123
110
Unrealized net mark-to-market loss (gain)
on natural gas derivatives
1
(1
)
1
(3
)
Adjusted gross margin
$
41
$
43
$
317
$
244
Adjusted gross margin as a percent of net
sales
21.9
%
22.4
%
37.4
%
31.4
%
Gross margin per product ton
$
(1
)
$
17
$
76
$
57
Gross margin per nutrient ton(1)
(2
)
20
92
69
Adjusted gross margin per product ton
57
65
124
101
Adjusted gross margin per nutrient
ton(1)
69
80
152
123
_______________________________________________________________________________
(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 nine months and third quarter
periods:
- Ammonia sales volume increased for the first nine months and
third quarter of 2019 compared to 2018 due to greater supply
availability as a result of increased production.
- Ammonia average selling prices increased for the first nine
months of 2019 compared to 2018 due to a tighter nitrogen supply
and demand balance. Ammonia average selling prices decreased for
the third quarter of 2019 compared to 2018 due to increased global
ammonia supply availability.
- Ammonia adjusted gross margin per ton increased for the first
nine months of 2019 compared to 2018 due primarily to higher
average selling prices and lower realized natural gas costs.
Ammonia adjusted gross margin per ton decreased for the third
quarter of 2019 compared to 2018 due primarily to lower average
selling prices partially offset by lower 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 September
30,
Nine months ended September
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
327
$
353
$
1,103
$
977
Cost of sales
207
238
686
682
Gross margin
$
120
$
115
$
417
$
295
Gross margin percentage
36.7
%
32.6
%
37.8
%
30.2
%
Sales volume by product tons (000s)
1,200
1,363
3,880
3,779
Sales volume by nutrient tons
(000s)(1)
552
627
1,785
1,738
Average selling price per product ton
$
273
$
259
$
284
$
259
Average selling price per nutrient
ton(1)
592
563
618
562
Adjusted gross margin(2):
Gross margin
$
120
$
115
$
417
$
295
Depreciation and amortization
66
74
211
214
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
—
(1
)
1
(3
)
Adjusted gross margin
$
186
$
188
$
629
$
506
Adjusted gross margin as a percent of net
sales
56.9
%
53.3
%
57.0
%
51.8
%
Gross margin per product ton
$
100
$
84
$
107
$
78
Gross margin per nutrient ton(1)
217
183
234
170
Adjusted gross margin per product ton
155
138
162
134
Adjusted gross margin per nutrient
ton(1)
337
300
352
291
_______________________________________________________________________________
(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 nine months and third quarter
periods:
- Granular urea sales volume increased for the first nine months
of 2019 compared to 2018 due to higher volumes of product available
for sale as the company chose to favor granular urea production
over UAN. Granular urea sales volume decreased for the third
quarter of 2019 compared to 2018 due to lower volumes of product
available for sale as a result of planned maintenance
activities.
- Urea average selling prices increased in the first nine months
and third quarter of 2019 compared to 2018 due primarily to a
tighter nitrogen supply and demand balance than the prior year
periods, logistical issues in North America during the second
quarter that limited supply at some inland locations, and a
fertilizer application season that extended into the third
quarter.
- Granular urea adjusted gross margin per ton increased for the
first nine months and third quarter of 2019 compared to 2018 due
primarily to higher average selling prices and lower 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 September
30,
Nine months ended September
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
309
$
270
$
934
$
892
Cost of sales
250
243
722
731
Gross margin
$
59
$
27
$
212
$
161
Gross margin percentage
19.1
%
10.0
%
22.7
%
18.0
%
Sales volume by product tons (000s)
1,741
1,620
4,880
5,109
Sales volume by nutrient tons
(000s)(1)
550
513
1,537
1,615
Average selling price per product ton
$
177
$
167
$
191
$
175
Average selling price per nutrient
ton(1)
562
526
608
552
Adjusted gross margin(2):
Gross margin
$
59
$
27
$
212
$
161
Depreciation and amortization
66
65
183
200
Unrealized net mark-to-market loss (gain)
on natural gas derivatives
1
(1
)
1
(4
)
Adjusted gross margin
$
126
$
91
$
396
$
357
Adjusted gross margin as a percent of net
sales
40.8
%
33.7
%
42.4
%
40.0
%
Gross margin per product ton
$
34
$
17
$
43
$
32
Gross margin per nutrient ton(1)
107
53
138
100
Adjusted gross margin per product ton
72
56
81
70
Adjusted gross margin per nutrient
ton(1)
229
177
258
221
_______________________________________________________________________________
(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 nine months and third quarter
periods:
- UAN sales volume for the first nine months 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. Sales volume for the third quarter of 2019 increased
compared to 2018 due primarily to the impact of late planting in
North America that delayed some fertilizer shipments and
applications into the third quarter of 2019.
- UAN average selling prices improved in the first nine months
and third quarter of 2019 compared to 2018 due primarily to a
tighter nitrogen supply and demand balance than the prior year
periods, logistical issues in North America during the second
quarter that limited supply at some inland locations, and a
fertilizer application season that extended into the third
quarter.
- UAN adjusted gross margin per ton increased for the first nine
months and third 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 September
30,
Nine months ended September
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
136
$
139
$
389
$
363
Cost of sales
100
129
308
320
Gross margin
$
36
$
10
$
81
$
43
Gross margin percentage
26.5
%
7.2
%
20.8
%
11.8
%
Sales volume by product tons (000s)
561
601
1,590
1,586
Sales volume by nutrient tons
(000s)(1)
188
202
533
535
Average selling price per product ton
$
242
$
231
$
245
$
229
Average selling price per nutrient
ton(1)
723
688
730
679
Adjusted gross margin(2):
Gross margin
$
36
$
10
$
81
$
43
Depreciation and amortization
24
35
67
67
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
—
—
—
—
Adjusted gross margin
$
60
$
45
$
148
$
110
Adjusted gross margin as a percent of net
sales
44.1
%
32.4
%
38.0
%
30.3
%
Gross margin per product ton
$
64
$
17
$
51
$
27
Gross margin per nutrient ton(1)
191
50
152
80
Adjusted gross margin per product ton
107
75
93
69
Adjusted gross margin per nutrient
ton(1)
319
223
278
206
_______________________________________________________________________________
(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 nine months and third quarter
periods:
- AN sales volume for the first nine months of 2019 compared to
2018 was similar. Sales volume for the third quarter of 2019 was
lower compared to 2018 due primarily to a delayed harvest in the
United Kingdom affecting the timing of fertilizer purchases.
- AN average selling prices improved for the first nine months
and third 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 nine
months and third quarter of 2019 compared to 2018 due primarily to
lower realized natural gas costs and higher average selling prices.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid
(DEF), urea liquor, nitric acid and compound fertilizer products
(NPKs).
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
79
$
86
$
268
$
287
Cost of sales
65
76
224
248
Gross margin
$
14
$
10
$
44
$
39
Gross margin percentage
17.7
%
11.6
%
16.4
%
13.6
%
Sales volume by product tons (000s)
530
524
1,657
1,717
Sales volume by nutrient tons
(000s)(1)
103
102
327
335
Average selling price per product ton
$
149
$
164
$
162
$
167
Average selling price per nutrient
ton(1)
767
843
820
857
Adjusted gross margin(2):
Gross margin
$
14
$
10
$
44
$
39
Depreciation and amortization
18
18
54
49
Unrealized net mark-to-market gain on
natural gas derivatives
—
—
—
(1
)
Adjusted gross margin
$
32
$
28
$
98
$
87
Adjusted gross margin as a percent of net
sales
40.5
%
32.6
%
36.6
%
30.3
%
Gross margin per product ton
$
26
$
19
$
27
$
23
Gross margin per nutrient ton(1)
136
98
135
116
Adjusted gross margin per product ton
60
53
59
51
Adjusted gross margin per nutrient
ton(1)
311
275
300
260
_______________________________________________________________________________
(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 nine months and third quarter
periods:
- Other segment sales volumes decreased for the first nine months
of 2019 compared to 2018 primarily due to lower nitric acid and NPK
sales, partially offset by higher sales of DEF. Other segment sales
volumes for the third quarter of 2019 compared to 2018 were
similar.
- Other average selling prices in the first nine months and third
quarter of 2019 were lower compared to the prior year periods due
to product mix.
- Other segment adjusted gross margin per ton was higher for the
first nine months and third quarter of 2019 compared to 2018
primarily due to lower realized natural gas costs, partially offset
by lower average selling prices.
Dividend Payment
On October 9, 2019, CF Industries’ Board of Directors declared a
quarterly dividend of $0.30 per common share. The dividend will be
paid on November 29, 2019 to stockholders of record as of November
15, 2019.
Conference Call
CF Industries will hold a conference call to discuss its third
quarter 2019 results at 10:00 a.m. ET on Thursday, October 31,
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, adjusted EBITDA, adjusted
EBITDA per ton, 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,
adjusted EBITDA, adjusted EBITDA per ton, 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, adjusted EBITDA, adjusted EBITDA per ton, 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 September
30,
Nine months ended September
30,
2019
2018
2019
2018
(in millions, except per share
amounts)
Net sales
$
1,038
$
1,040
$
3,541
$
3,297
Cost of sales
810
867
2,594
2,622
Gross margin
228
173
947
675
Selling, general and administrative
expenses
56
53
176
163
Other operating—net
(30
)
(11
)
(63
)
(29
)
Total other operating costs and
expenses
26
42
113
134
Equity in (losses) earnings of operating
affiliate
(14
)
5
(6
)
30
Operating earnings
188
136
828
571
Interest expense
63
59
182
180
Interest income
(4
)
(4
)
(12
)
(9
)
Other non-operating—net
(4
)
(2
)
(7
)
(6
)
Earnings before income taxes
133
83
665
406
Income tax provision
19
12
113
73
Net earnings
114
71
552
333
Less: Net earnings attributable to
noncontrolling interests
49
41
114
92
Net earnings attributable to common
stockholders
$
65
$
30
$
438
$
241
Net earnings per share attributable to
common stockholders:
Basic
$
0.29
$
0.13
$
1.98
$
1.03
Diluted
$
0.29
$
0.13
$
1.97
$
1.03
Weighted-average common shares
outstanding:
Basic
219.0
233.5
221.2
233.8
Diluted
220.7
235.2
222.5
234.9
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
September 30, 2019
December 31, 2018
(in millions)
Assets
Current assets:
Cash and cash equivalents
$
1,019
$
682
Accounts receivable—net
311
235
Inventories
296
309
Prepaid income taxes
17
28
Other current assets
26
20
Total current assets
1,669
1,274
Property, plant and equipment—net
8,247
8,623
Investment in affiliate
87
93
Goodwill
2,344
2,353
Operating lease right-of-use assets
264
—
Other assets
291
318
Total assets
$
12,902
$
12,661
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses
$
459
$
545
Income taxes payable
7
5
Customer advances
184
149
Current operating lease liabilities
87
—
Current maturities of long-term debt
499
—
Other current liabilities
9
6
Total current liabilities
1,245
705
Long-term debt, net of current
maturities
4,204
4,698
Deferred income taxes
1,235
1,117
Operating lease liabilities
181
—
Other liabilities
356
410
Equity:
Stockholders’ equity
2,980
2,958
Noncontrolling interest
2,701
2,773
Total equity
5,681
5,731
Total liabilities and equity
$
12,902
$
12,661
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
(in millions)
Operating Activities:
Net earnings
$
114
$
71
$
552
$
333
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
223
233
663
667
Deferred income taxes
31
35
116
37
Stock-based compensation expense
7
6
24
17
Unrealized net loss (gain) on natural gas
derivatives
2
(3
)
3
(11
)
Unrealized loss on embedded
derivative
1
1
3
2
Loss (gain) on disposal of property, plant
and equipment
2
(1
)
(43
)
(1
)
Undistributed losses (earnings) of
affiliate—net of taxes
13
(2
)
3
(5
)
Changes in:
Accounts receivable—net
(1
)
65
(79
)
31
Inventories
(4
)
(24
)
17
(3
)
Accrued and prepaid income taxes
(23
)
(39
)
12
13
Accounts payable and accrued expenses
27
20
(67
)
(26
)
Customer advances
163
292
35
224
Other—net
(45
)
(9
)
(36
)
(35
)
Net cash provided by operating
activities
510
645
1,203
1,243
Investing Activities:
Additions to property, plant and
equipment
(143
)
(133
)
(297
)
(278
)
Proceeds from sale of property, plant and
equipment
8
3
71
19
Distributions received from unconsolidated
affiliate
—
—
—
10
Insurance proceeds for property, plant and
equipment
15
10
15
10
Other—net
—
—
—
1
Net cash used in investing activities
(120
)
(120
)
(211
)
(238
)
Financing Activities:
Financing fees
—
—
—
1
Dividends paid on common stock
(67
)
(70
)
(200
)
(210
)
Acquisition of noncontrolling interests in
TNCLP
—
—
—
(388
)
Distributions to noncontrolling
interests
(100
)
(80
)
(186
)
(139
)
Purchases of treasury stock
(71
)
(87
)
(280
)
(87
)
Issuances of common stock under employee
stock plans
11
6
17
10
Shares withheld for taxes
—
—
(4
)
(1
)
Net cash used in financing activities
(227
)
(231
)
(653
)
(814
)
Effect of exchange rate changes on cash
and cash equivalents
(2
)
—
(2
)
(4
)
Increase in cash and cash equivalents
161
294
337
187
Cash and cash equivalents at beginning of
period
858
728
682
835
Cash and cash equivalents at end of
period
$
1,019
$
1,022
$
1,019
$
1,022
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS
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.
Nine months ended
September 30, 2019
Twelve months ended
September 30, 2019
Net cash provided by operating
activities
$
1,203
$
1,457
Capital expenditures
(297
)
(441
)
Distributions to noncontrolling
interests
(186
)
(186
)
Free cash flow
$
720
$
830
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS (CONTINUED)
Reconciliation of net earnings attributable to common
stockholders and net earnings attributable to common stockholders
per ton (GAAP measures) to EBITDA, EBITDA per ton, adjusted EBITDA
and adjusted EBITDA per ton (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 and EBITDA per ton 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 and adjusted EBITDA per ton
because management uses these measures, and believes they are
useful to investors, as supplemental financial measures in the
comparison of year-over-year performance.
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
(in millions)
Net earnings
$
114
$
71
$
552
$
333
Less: Net earnings attributable to
noncontrolling interests
(49
)
(41
)
(114
)
(92
)
Net earnings attributable to common
stockholders
65
30
438
241
Interest expense—net
59
55
170
171
Income tax provision
19
12
113
73
Depreciation and amortization
223
233
663
667
Less other adjustments:
Depreciation and amortization in
noncontrolling interests(1)
(22
)
(20
)
(63
)
(66
)
Loan fee amortization(2)
(3
)
(2
)
(7
)
(6
)
EBITDA
341
308
1,314
1,080
Unrealized net mark-to-market loss (gain)
on natural gas derivatives
2
(3
)
3
(11
)
Loss on foreign currency transactions
including intercompany loans
5
4
12
1
Gain on sale of Pine Bend facility
—
—
(45
)
—
Property insurance proceeds(3)
(15
)
(10
)
(15
)
(10
)
Costs related to acquisition of TNCLP
units
—
—
—
2
PLNL withholding tax charge(4)
16
—
16
—
Total adjustments
8
(9
)
(29
)
(18
)
Adjusted EBITDA
$
349
$
299
$
1,285
$
1,062
Net sales
$
1,038
$
1,040
$
3,541
$
3,297
Tons of product sold (000s)
4,752
4,765
14,555
14,606
Net earnings attributable to common
stockholders per ton
$
13.68
$
6.30
$
30.09
$
16.50
EBITDA per ton
$
71.76
$
64.64
$
90.28
$
73.94
Adjusted EBITDA per ton
$
73.44
$
62.75
$
88.29
$
72.71
_______________________________________________________________________________
(1)
For the three and nine months ended
September 30, 2019, and the three months ended September 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 nine months ended September 30, 2018, amount
includes $62 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.
(3)
Represents proceeds related to a property
insurance claim at one of our nitrogen complexes.
(4)
Represents a charge in the three months
ended September 30, 2019 on the books of Point Lisas Nitrogen
Limited (PLNL), the company’s Trinidad joint venture, for a tax
withholding matter. Amount reflects our 50% equity interest in
PLNL.
During the three and nine months ended September 30, 2019 and
2018, certain items impacted our financial results. The following
table outlines these items and how they impacted the comparability
of our financial results during these periods. During the three
months ended September 30, 2019 and 2018, we reported net earnings
attributable to common stockholders of $65 million and $30 million,
respectively. During the nine months ended September 30, 2019 and
2018, we reported net earnings attributable to common stockholders
of $438 million and $241 million, respectively.
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
Pre-Tax
After-Tax
Pre-Tax
After-Tax
Pre-Tax
After-Tax
Pre-Tax
After-Tax
(in millions)
Unrealized net mark-to-market loss (gain)
on natural gas derivatives(1)
2
2
(3
)
(2
)
3
3
(11
)
(8
)
Loss on foreign currency transactions,
including intercompany loans(2)
5
4
4
3
12
9
1
1
Gain on sale of Pine Bend facility(2)
—
—
—
—
(45
)
(35
)
—
—
Insurance proceeds(2)(3)
(37
)
(29
)
(10
)
(8
)
(37
)
(29
)
(10
)
(8
)
Louisiana incentive tax credit(4)
—
—
—
—
—
(30
)
—
—
Costs related to the acquisition of TNCLP
units(5)
—
—
—
—
—
—
2
1
Earnings attributable to noncontrolling
interests - TNCLP(6)
—
—
—
—
—
—
8
8
PLNL withholding tax charge(7)(8)
16
16
—
—
16
16
—
—
PLNL settlement income(7)
—
—
—
—
—
—
(19
)
(19
)
_______________________________________________________________________________
(1)
Included in cost of sales in our
consolidated statements of operations.
(2)
Included in other operating—net in our
consolidated statements of operations.
(3)
Represents proceeds related to an
insurance claim at one of our nitrogen complexes. Consists of $22
million related to business interruption insurance proceeds and $15
million related to property insurance proceeds. The $10 million of
insurance proceeds in 2018 is related to property insurance
proceeds.
(4)
Included in income tax provision in our
consolidated statement of operations.
(5)
Included in selling, general and
administrative expenses in our consolidated statements of
operations.
(6)
Included in net earnings attributable to
noncontrolling interests in our consolidated statements of
operations.
(7)
Included in equity in (losses) earnings of
operating affiliate in our consolidated statements of
operations.
(8)
Represents a charge in the three months
ended September 30, 2019 on the books of PLNL, the company’s
Trinidad joint venture, for a tax withholding matter. Amount
reflects our 50% equity interest in PLNL.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191030006060/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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