Strong Operational Performance Continues to
Drive Solid Results North American Fertilizer Supply Chain
Operating Efficiently Positive Outlook for Spring Nitrogen Demand
in North America
CF Industries Holdings, Inc. (NYSE: CF), a leading global
fertilizer and chemical company, today announced results for its
first quarter ended March 31, 2020.
Highlights
- First quarter net earnings of $68 million(1), or $0.31 per
diluted share; EBITDA(2) of $314 million; adjusted EBITDA(2) of
$318 million
- Trailing twelve month net cash from operating activities of
$1,491 million, free cash flow(3) of $912 million
- Company operations and logistics capabilities have not
experienced pandemic-related disruptions to date
- Ongoing focus on protecting health and well-being of employees
during COVID-19 pandemic
- Lowest 12-month rolling average recordable incident rate in
company’s history as of March 31, 2020
- Gross ammonia production of 2.7 million tons, second highest
quarterly volume in company history
- Company record first quarter granular urea and diesel exhaust
fluid sales volumes
“The CF team is performing exceptionally well in a very
difficult and uncertain environment created by the COVID-19
pandemic,” said Tony Will, president and chief executive officer,
CF Industries Holdings, Inc. “We are operating safely, achieving
high asset utilization rates and reliably supplying our customers
as we enter the peak spring demand period in North America and the
United Kingdom. Our unwavering focus on protecting the health and
well-being of our employees will support our ability to continue to
operate strongly. This will serve us well as we meet the
anticipated high demand for nitrogen in North America this
spring.”
Operations Overview
To this point, CF Industries’ operations, which are designated
as part of the “critical infrastructure” in each country in which
it operates, have not been disrupted by the COVID-19 pandemic, and
the company has continued to operate safely and efficiently. As of
March 31, 2020, the company’s 12-month rolling average recordable
incident rate was 0.34 incidents per 200,000 work hours, the lowest
level ever recorded by the company. Gross ammonia production for
the first quarter of 2020 was approximately 2.7 million tons, which
is the second highest quarterly volume in company history.
________________________________________________________________
(1)
Certain items recognized during the first
quarter of 2020 impacted our financial results and their
comparability to the prior year period. 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 interest. See reconciliation of free cash flow to
the most directly comparable GAAP measure in the table accompanying
this release.
CF Industries is actively managing and responding to the
COVID-19 pandemic, focusing on protecting the health and well-being
of employees and contractors at its locations. The company has
taken, and continues to add, precautionary measures across its
network to limit potential exposure to the virus. These include
shift schedule changes, changes to loading and shipping procedures,
social distancing, remote work arrangements for non-operational
employees, temperature screening, maintaining a close contact log
for employees, self-quarantine logs, requiring face coverings
onsite, restricting visitor access, enhanced cleaning protocols and
travel restrictions for employees. Since the onset of the pandemic,
CF has only had a very small number of employees test positive for
COVID-19, which has not affected the company’s ability to maintain
safe staffing levels. All of the employees who tested positive have
fully recovered and have returned to work.
Additionally, the company has been in constant contact with its
transportation partners to understand their preparations and
contingency plans for the pandemic. It has also engaged customers
regularly to offer flexible solutions to ensure their nitrogen
requirements are met. The company believes the fertilizer supply
chain is operating efficiently.
Financial Results Overview
For the first quarter of 2020, net earnings attributable to
common stockholders were $68 million, or $0.31 per diluted share;
EBITDA was $314 million; and adjusted EBITDA was $318 million.
These results compare to first quarter 2019 net earnings
attributable to common stockholders of $90 million, or $0.40 per
diluted share; EBITDA of $301 million; and adjusted EBITDA of $305
million.
Net sales in the first quarter of 2020 were similar to the first
quarter of 2019. Average selling prices for the first quarter of
2020 were lower than the first quarter of 2019 across all segments
due to increased global supply availability as lower global energy
costs drove higher global operating rates. This was mostly offset
by higher sales volumes across all segments for the first quarter
of 2020 compared to the first quarter of 2019.
Cost of sales for the first quarter of 2020 were slightly lower
than the first quarter of 2019 due to lower realized natural gas
costs and lower maintenance costs, offset by the impact of higher
sales volumes.
In the first quarter of 2020, the average cost of natural gas
reflected in the company’s cost of sales was $2.61 per MMBtu
compared to the average cost of natural gas in cost of sales of
$3.68 per MMBtu in the first quarter of 2019.
Capital Management
As of March 31, 2020, the company had cash and cash equivalents
of $753 million on the balance sheet. This included $500 million in
borrowings under its $750 million revolving credit facility, which
was drawn in March to ensure the company had sufficient liquidity
should credit markets not function properly due to the COVID-19
pandemic. Subsequent to quarter end, the company repaid the
borrowings in full due to confidence in the stability of and ready
availability of liquidity in credit markets and strong nitrogen
fertilizer business conditions.
Capital expenditures in the first quarter of 2020 were $67
million. The company anticipates that capital expenditures for the
full year of 2020 will be in a range of $350 to $400 million. This
is lower than its previous estimate of $400 to $450 million due to
certain activities likely to be deferred as a result of the
COVID-19 pandemic.
The company repurchased approximately 2.6 million shares for
$100 million during the first quarter of 2020. Since the share
repurchase authorization was announced in February 2019, the
company has repurchased approximately 10.2 million shares for $437
million.
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 first quarter of 2020
is approximately $40 million.
Market Outlook
In the near-term, CF expects positive global nitrogen demand
driven by an increase in nitrogen-consuming planted corn and coarse
grain acres in North America in 2020 compared to 2019. The company
anticipates 92-94 million acres of corn will be planted in the U.S.
in 2020, below the U.S. Department of Agriculture’s March forecast
of 97 million acres. The company believes its forecast is supported
by favorable planting conditions across most of North America,
farm-level income support such as crop insurance and
pandemic-related government payments, and the strongest movement of
ammonia for spring fertilizer application from the CF system in any
April since 2015.
Global nitrogen requirements have been underpinned by demand for
urea imports to India and Brazil. India executed its first urea
tender of 2020 in late March and issued its second tender in late
April. Urea tender volumes in India in 2020 may ease from 2019’s
record high based on less favorable growing conditions and new
domestic urea capacity. Demand for urea imports to Brazil is
expected to be higher in 2020 compared to 2019, as domestic urea
production is projected to remain shut down throughout the
year.
CF continues to monitor the impact of the COVID-19 pandemic on
near-term global nitrogen supply and demand. Announced outages due
to the pandemic include certain nitrogen facilities in India and
France. Additionally, new nitrogen capacity under construction may
experience labor and equipment issues related to the pandemic that
delay project completion and commissioning. The company believes
nitrogen demand for industrial applications, such as explosives and
emission abatement, have been affected by the COVID-19 pandemic.
The company expects this to extend through the remainder of the
year as current economic activity remains low due to efforts to
slow the spread of COVID-19. There is also uncertainty regarding
the factors that influence farmers’ planting decisions in 2021,
such as ethanol demand, feed demand, exports, and potential
governmental policy responses to these factors.
The company expects North American nitrogen production
facilities to remain at the low-end of the global nitrogen cost
curve for the foreseeable future due to their access to low-cost
North American natural gas. Additionally, the company projects that
Chinese anthracite coal-based nitrogen complexes will remain the
global marginal urea producer and thus set the global price.
Forward energy curves suggest the cost advantage per metric ton of
urea for North American producers in 2020 should remain well over
$100 compared to Chinese anthracite-coal based producers despite
lower global energy costs. This is approximately 20-35 percent
higher than the cost advantage realized in 2016 and 2017. The
company believes this cost advantage, along with its
high-performing team, consistently high operating rate and
distribution and logistics capabilities, will continue to support
its substantial cash generation capability.
Consolidated Results
Three months ended March
31,
2020
2019
(dollars in millions,
except
per share
and per MMBtu amounts)
Net sales
$
971
$
1,001
Cost of sales
767
781
Gross margin
$
204
$
220
Gross margin percentage
21.0
%
22.0
%
Net earnings attributable to common
stockholders
$
68
$
90
Net earnings per diluted share
$
0.31
$
0.40
EBITDA(1)
$
314
$
301
Adjusted EBITDA(1)
$
318
$
305
Tons of product sold (000s)
4,688
4,087
Supplemental data (per MMBtu):
Natural gas costs in cost of sales(2)
$
2.42
$
3.70
Realized derivatives loss (gain) in cost
of sales(3)
0.19
(0.02
)
Cost of natural gas in cost of sales
$
2.61
$
3.68
Average daily market price of natural gas
(per MMBtu):
Henry Hub
$
1.88
$
2.89
National Balancing Point UK
$
3.20
$
6.56
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
$
(12
)
$
2
Depreciation and amortization
$
211
$
188
Capital expenditures
$
67
$
80
Production volume by product tons
(000s):
Ammonia(4)
2,670
2,567
Granular urea
1,285
1,306
UAN (32%)
1,599
1,637
AN
515
482
_______________________________________________________________________________
(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 March
31,
2020
2019
(dollars in millions,
except per ton
amounts)
Net sales
$
193
$
187
Cost of sales
173
166
Gross margin
$
20
$
21
Gross margin percentage
10.4
%
11.2
%
Sales volume by product tons (000s)
762
606
Sales volume by nutrient tons
(000s)(1)
625
497
Average selling price per product ton
$
253
$
309
Average selling price per nutrient
ton(1)
309
376
Adjusted gross margin(2):
Gross margin
$
20
$
21
Depreciation and amortization
39
29
Unrealized net mark-to-market gain on
natural gas derivatives
(4
)
—
Adjusted gross margin
$
55
$
50
Adjusted gross margin as a percent of net
sales
28.5
%
26.7
%
Gross margin per product ton
$
26
$
35
Gross margin per nutrient ton(1)
32
42
Adjusted gross margin per product ton
72
83
Adjusted gross margin per nutrient
ton(1)
88
101
_______________________________________________________________________________
(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. 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 2020 to 2019 first quarter period:
- Factors affecting ammonia sales volume, which increased for the
first quarter of 2020 compared to 2019, include more favorable
weather allowing earlier fertilizer application compared to the
prior year period.
- Ammonia average selling prices decreased for the first quarter
of 2020 compared to 2019 due to increased global supply
availability as lower global energy costs drove higher global
operating rates.
- Ammonia adjusted gross margin per ton decreased for the first
quarter of 2020 compared to 2019 due 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 March
31,
2020
2019
(dollars in millions,
except per ton
amounts)
Net sales
$
337
$
343
Cost of sales
224
228
Gross margin
$
113
$
115
Gross margin percentage
33.5
%
33.5
%
Sales volume by product tons (000s)
1,381
1,184
Sales volume by nutrient tons
(000s)(1)
635
545
Average selling price per product ton
$
244
$
290
Average selling price per nutrient
ton(1)
531
629
Adjusted gross margin(2):
Gross margin
$
113
$
115
Depreciation and amortization
72
66
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
(4
)
1
Adjusted gross margin
$
181
$
182
Adjusted gross margin as a percent of net
sales
53.7
%
53.1
%
Gross margin per product ton
$
82
$
97
Gross margin per nutrient ton(1)
178
211
Adjusted gross margin per product ton
131
154
Adjusted gross margin per nutrient
ton(1)
285
334
_______________________________________________________________________________
(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. 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 2020 to 2019 first quarter period:
- Factors affecting granular urea sales volume, which increased
for the first quarter of 2020 compared to 2019, include more
favorable weather leading to earlier product deliveries compared to
the year before.
- Urea average selling prices decreased for the first quarter of
2020 compared to 2019 due to increased global supply availability
as lower global energy costs drove higher global operating
rates.
- Granular urea adjusted gross margin per ton decreased for the
first quarter of 2020 compared to 2019 due to lower average selling
prices, partially offset by 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 March
31,
2020
2019
(dollars in millions,
except per ton
amounts)
Net sales
$
235
$
256
Cost of sales
193
195
Gross margin
$
42
$
61
Gross margin percentage
17.9
%
23.8
%
Sales volume by product tons (000s)
1,390
1,268
Sales volume by nutrient tons
(000s)(1)
436
396
Average selling price per product ton
$
169
$
202
Average selling price per nutrient
ton(1)
539
646
Adjusted gross margin(2):
Gross margin
$
42
$
61
Depreciation and amortization
52
46
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
(3
)
1
Adjusted gross margin
$
91
$
108
Adjusted gross margin as a percent of net
sales
38.7
%
42.2
%
Gross margin per product ton
$
30
$
48
Gross margin per nutrient ton(1)
96
154
Adjusted gross margin per product ton
65
85
Adjusted gross margin per nutrient
ton(1)
209
273
_______________________________________________________________________________
(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. 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 2020 to 2019 first quarter period:
- Factors affecting UAN sales volume, which increased for the
first quarter of 2020 compared to the first quarter of 2019,
include more favorable weather allowing for an earlier start to the
spring fertilizer application season in the Southern Plains
compared to the year before.
- UAN average selling prices decreased for the first quarter of
2020 compared to 2019 due to increased global supply availability
as lower global energy costs drove higher global operating
rates.
- UAN adjusted gross margin per ton decreased in the first
quarter of 2020 compared to 2019 due to lower average selling
prices, partially offset by lower realized natural gas costs.
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.
Three months ended March
31,
2020
2019
(dollars in millions,
except per ton
amounts)
Net sales
$
116
$
127
Cost of sales
103
114
Gross margin
$
13
$
13
Gross margin percentage
11.2
%
10.2
%
Sales volume by product tons (000s)
547
501
Sales volume by nutrient tons
(000s)(1)
184
166
Average selling price per product ton
$
212
$
253
Average selling price per nutrient
ton(1)
630
765
Adjusted gross margin(2):
Gross margin
$
13
$
13
Depreciation and amortization
26
22
Unrealized net mark-to-market gain on
natural gas derivatives
(1
)
—
Adjusted gross margin
$
38
$
35
Adjusted gross margin as a percent of net
sales
32.8
%
27.6
%
Gross margin per product ton
$
24
$
26
Gross margin per nutrient ton(1)
71
78
Adjusted gross margin per product ton
69
70
Adjusted gross margin per nutrient
ton(1)
207
211
_______________________________________________________________________________
(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. 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 2020 to 2019 first quarter period:
- Factors affecting AN sales volume, which increased for the
first quarter of 2020 compared to 2019, include higher demand in
North America and Europe for agricultural applications.
- AN average selling prices for the first quarter of 2020
decreased compared to 2019 due to increased global supply
availability as lower global energy costs drove higher global
operating rates.
- AN adjusted gross margin per ton for the first quarter of 2020
compared to 2019 was unchanged.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid
(DEF), urea liquor, nitric acid and compound fertilizer products
(NPKs).
Three months ended March
31,
2020
2019
(dollars in millions,
except per ton
amounts)
Net sales
$
90
$
88
Cost of sales
74
78
Gross margin
$
16
$
10
Gross margin percentage
17.8
%
11.4
%
Sales volume by product tons (000s)
608
528
Sales volume by nutrient tons
(000s)(1)
120
103
Average selling price per product ton
$
148
$
167
Average selling price per nutrient
ton(1)
750
854
Adjusted gross margin(2):
Gross margin
$
16
$
10
Depreciation and amortization
17
17
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
—
—
Adjusted gross margin
$
33
$
27
Adjusted gross margin as a percent of net
sales
36.7
%
30.7
%
Gross margin per product ton
$
26
$
19
Gross margin per nutrient ton(1)
133
97
Adjusted gross margin per product ton
54
51
Adjusted gross margin per nutrient
ton(1)
275
262
_______________________________________________________________________________
(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. 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 2020 to 2019 first quarter periods:
- Factors affecting Other segment sales volume, which increased
for the first quarter of 2020 compared to 2019, include higher
sales of DEF and NPKs.
- Other average selling prices for the first quarter of 2020
decreased compared to 2019 due to increased global supply
availability as lower global energy costs drove higher global
operating rates.
- Other segment adjusted gross margin per ton was higher for the
first quarter of 2020 compared to 2019 primarily due to lower
realized natural gas costs, partially offset by lower average
selling prices.
Dividend Payment
On April 28, 2020, CF Industries’ Board of Directors declared a
quarterly dividend of $0.30 per common share. The dividend will be
paid on May 29, 2020 to stockholders of record as of May 15,
2020.
Conference Call
CF Industries will hold a conference call to discuss its first
quarter 2020 results at 11:00 a.m. ET on Thursday, May 7, 2020.
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 manufacturer and distributor
of nitrogen products for fertilizer, emissions abatement and other
industrial applications. We operate manufacturing complexes in the
United States, Canada, and the United Kingdom, which are among the
most cost-advantaged, efficient and flexible in the world, and an
unparalleled storage, transportation and distribution network in
North America. Our 3,000 employees focus on safe and reliable
operations, environmental stewardship and disciplined capital and
corporate management, driving our strategy to leverage and
sustainably grow the world’s most advantaged nitrogen and chemicals
platform to serve customers, creating long-term shareholder value.
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. Management uses these measures, and believes they are
useful to investors, as supplemental financial measures in the
comparison of year-over-year performance. 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 impact of the novel coronavirus disease 2019
(COVID-19) pandemic, including measures taken by governmental
authorities to slow the spread of the virus, on our business and
operations; 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 United States, Europe and other agricultural
areas; 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 and any additional indebtedness that may be
incurred; the Company’s ability to maintain compliance with
covenants under its revolving credit agreement and 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 March
31,
2020
2019
(in millions, except
per
share amounts)
Net sales
$
971
$
1,001
Cost of sales
767
781
Gross margin
204
220
Selling, general and administrative
expenses
54
58
Other operating—net
6
4
Total other operating costs and
expenses
60
62
Equity in earnings of operating
affiliate
3
7
Operating earnings
147
165
Interest expense
44
60
Interest income
(1
)
(4
)
Other non-operating—net
—
(1
)
Earnings before income taxes
104
110
Income tax provision (benefit)
13
(8
)
Net earnings
91
118
Less: Net earnings attributable to
noncontrolling interest
23
28
Net earnings attributable to common
stockholders
$
68
$
90
Net earnings per share attributable to
common stockholders:
Basic
$
0.31
$
0.40
Diluted
$
0.31
$
0.40
Weighted-average common shares
outstanding:
Basic
216.0
223.4
Diluted
216.6
224.6
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
March 31,
2020
December 31,
2019
(in millions)
Assets
Current assets:
Cash and cash equivalents
$
753
$
287
Accounts receivable—net
251
242
Inventories
379
351
Prepaid income taxes
78
71
Other current assets
19
23
Total current assets
1,480
974
Property, plant and equipment—net
7,938
8,170
Investment in affiliate
91
88
Goodwill
2,346
2,365
Operating lease right-of-use assets
287
280
Other assets
299
295
Total assets
$
12,441
$
12,172
Liabilities and Equity
Current liabilities:
Short-term debt
$
500
$
—
Accounts payable and accrued expenses
378
437
Income taxes payable
19
1
Customer advances
239
119
Current operating lease liabilities
94
90
Other current liabilities
5
18
Total current liabilities
1,235
665
Long-term debt
3,958
3,957
Deferred income taxes
1,217
1,246
Operating lease liabilities
197
193
Other liabilities
431
474
Equity:
Stockholders’ equity
2,728
2,897
Noncontrolling interest
2,675
2,740
Total equity
5,403
5,637
Total liabilities and equity
$
12,441
$
12,172
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three months ended March
31,
2020
2019
(in millions)
Operating Activities:
Net earnings
$
91
$
118
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
211
188
Deferred income taxes
(50
)
14
Stock-based compensation expense
7
6
Unrealized net (gain) loss on natural gas
derivatives
(12
)
2
Unrealized (gain) loss on embedded
derivative
(1
)
1
Loss on disposal of property, plant and
equipment
—
1
Undistributed earnings of affiliate—net of
taxes
(4
)
(8
)
Changes in:
Accounts receivable—net
(12
)
(28
)
Inventories
(29
)
(101
)
Accrued and prepaid income taxes
10
24
Accounts payable and accrued expenses
(47
)
(65
)
Customer advances
120
152
Other—net
8
2
Net cash provided by operating
activities
292
306
Investing Activities:
Additions to property, plant and
equipment
(67
)
(80
)
Proceeds from sale of property, plant and
equipment
—
5
Insurance proceeds for property, plant and
equipment
2
—
Net cash used in investing activities
(65
)
(75
)
Financing Activities:
Proceeds from short-term borrowings
500
—
Dividends paid on common stock
(65
)
(67
)
Distributions to noncontrolling
interest
(88
)
(86
)
Purchases of treasury stock
(100
)
(87
)
Issuances of common stock under employee
stock plans
3
2
Shares withheld for taxes
(8
)
(4
)
Net cash provided by (used in) financing
activities
242
(242
)
Effect of exchange rate changes on cash
and cash equivalents
(3
)
—
Increase (decrease) in cash and cash
equivalents
466
(11
)
Cash and cash equivalents at beginning of
period
287
682
Cash and cash equivalents at end of
period
$
753
$
671
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
interest. 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. It should
not be inferred that the entire free cash flow amount is available
for discretionary expenditures.
Twelve months ended March
31,
2020
2019
(in millions)
Net cash provided by operating
activities
$
1,491
$
1,521
Capital expenditures
(391
)
(434
)
Distributions to noncontrolling
interest
(188
)
(166
)
Free cash flow
$
912
$
921
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 interest.
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 March
31,
2020
2019
(in millions)
Net earnings
$
91
$
118
Less: Net earnings attributable to
noncontrolling interest
(23
)
(28
)
Net earnings attributable to common
stockholders
68
90
Interest expense—net
43
56
Income tax provision (benefit)
13
(8
)
Depreciation and amortization
211
188
Less other adjustments:
Depreciation and amortization in
noncontrolling interest
(20
)
(23
)
Loan fee amortization(1)
(1
)
(2
)
EBITDA
314
301
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
(12
)
2
Loss on foreign currency transactions,
including intercompany loans
18
2
Property insurance proceeds(2)
(2
)
—
Total adjustments
4
4
Adjusted EBITDA
$
318
$
305
Net sales
$
971
$
1,001
Tons of product sold (000s)
4,688
4,087
Net earnings attributable to common
stockholders per ton
$
14.51
$
22.02
EBITDA per ton
$
66.98
$
73.65
Adjusted EBITDA per ton
$
67.83
$
74.63
_______________________________________________________________________________
(1)
Loan fee amortization is included in both
interest expense—net and depreciation and amortization.
(2)
Represents proceeds related to a property
insurance claim at one of our nitrogen complexes.
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION ITEMS AFFECTING COMPARABILITY
During the three months ended March 31, 2020 and 2019, 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 March 31, 2020 and 2019, we reported net earnings
attributable to common stockholders of $68 million and $90 million,
respectively.
Three months ended March
31,
2020
2019
Pre-Tax
After-Tax
Pre-Tax
After-Tax
(in millions)
Unrealized net mark-to-market (gain) loss
on natural gas derivatives(1)
$
(12
)
$
(9
)
$
2
$
1
Loss on foreign currency transactions,
including intercompany loans(2)
18
14
2
1
Insurance proceeds(2)(3)
(10
)
(8
)
—
—
Louisiana incentive tax credit(4)
—
—
—
(30
)
_______________________________________________________________________________
(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 $8
million related to business interruption insurance proceeds and $2
million related to property insurance proceeds.
(4)
Included in income tax provision (benefit)
in our consolidated statement of operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506006013/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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