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CF Industries Holdings, Inc. Reports Record Third Quarter Earnings

Stocks in this article: CF

Safe Harbor Statement

All statements in this communication, other than those relating to historical facts, are “forward-looking statements.” These 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 our control, which could cause actual results to differ materially from such statements. Important factors that could cause actual results to differ materially from our expectations include, among others: the volatility of natural gas prices in North America; the cyclical nature of our business and the agricultural sector; the global commodity nature of our fertilizer products, the impact of global supply and demand on our selling prices, and the intense global competition in the markets in which we operate; conditions in the U.S. agricultural industry; reliance on third party providers of transportation services and equipment; our ability to implement a new enterprise resource planning system and complete other system integration activities; weather conditions; our ability to complete our recently announced production capacity expansion projects on scheduled as planned and on budget or at all; risks associated with other expansions of our business, including unanticipated adverse consequences and the significant resources that could be required; potential liabilities and expenditures related to environmental and health and safety laws and regulations; our potential inability to obtain or maintain required permits and governmental approvals or to meet financial assurance requirements; future regulatory restrictions and requirements related to greenhouse gas emissions and climate change; the seasonality of the fertilizer business; the impact of changing market conditions on our forward sales programs; risks involving derivatives and the effectiveness of our risk measurement and hedging activities; the significant risks and hazards involved in producing and handling our products against which we may not be fully insured; our reliance on a limited number of key facilities; risks associated with joint ventures; acts of terrorism and regulations to combat terrorism; difficulties in securing the supply and delivery of raw materials we use and increases in their costs; risks associated with international operations; losses on our investments in securities; deterioration of global market and economic conditions; our ability to manage our indebtedness; and loss of key members of management and professional staff. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available in the Investor Relations section of the CF Industries Web site. Forward-looking statements are given only as of the date of this release and we disclaim 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
RESULTS OF OPERATIONS
       
 
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
(in millions, except per share amounts)
Net sales $ 1,359.4 $ 1,403.8 $ 4,622.6 $ 4,379.5
Cost of sales   657.4     765.8     2,165.5     2,349.1  
Gross margin   702.0     638.0     2,457.1     2,030.4  
Selling, general and administrative expenses 36.5 30.5 111.6 93.2
Restructuring and integration costs - 0.8 - 4.2
Other operating - net   8.6     39.4     41.7     12.3  
Total other operating costs and expenses 45.1 70.7 153.3 109.7
Equity in earnings of operating affiliates   10.2     15.0     39.5     40.7  
Operating earnings 667.1 582.3 2,343.3 1,961.4
Interest expense 28.7 32.1 104.9 115.0
Interest income (1.6 ) (0.3 ) (2.0 ) (1.5 )
Other non-operating - net   (0.2 )   (0.1 )   (0.9 )   (0.6 )
Earnings before income taxes and equity
in earnings of non-operating affiliates 640.2 550.6 2,241.3 1,848.5
Income tax provision 206.0 184.9 722.0 624.7
Equity in earnings of non-operating
affiliates - net of taxes   23.9     16.7     48.8     35.0  
Net earnings 458.1 382.4 1,568.1 1,258.8
Less: Net earnings attributable to
noncontrolling interest 54.8 51.5 190.1 158.5
Net earnings attributable to        
common stockholders $ 403.3   $ 330.9   $ 1,378.0   $ 1,100.3  
 
Net earnings per share attributable to
common stockholders
Basic $ 6.43   $ 4.77   $ 21.47   $ 15.55  
Diluted $ 6.35   $ 4.73   $ 21.19   $ 15.41  
 
Weighted average common shares outstanding
Basic   62.8     69.4     64.2     70.7  
Diluted   63.5     69.9     65.0     71.4  
 
 
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
SUMMARIZED BALANCE SHEETS
   
 
September 30 December 31,
2012 2011
(in millions)
Assets
Current assets:
Cash and cash equivalents $ 2,221.3 $ 1,207.0
Accounts receivable 340.9 269.4
Inventories - net 310.0 304.2
Prepaid income taxes 118.1 -
Other   24.9   18.0
Total current assets 3,015.2 1,798.6
Property, plant and equipment - net 3,721.8 3,736.0
Asset retirement obligation funds 147.6 145.4
Investments in and advances to unconsolidated affiliates 991.9 928.6
Goodwill 2,064.5 2,064.5
Other assets   241.7   301.4
 
Total assets $ 10,182.7 $ 8,974.5
 
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 393.3 $ 327.7
Income taxes payable 37.3 128.5
Customer advances 617.6 257.2
Deferred income taxes 91.3 90.1
Distributions payable to noncontrolling interest - 149.7
Other   54.1   78.0
Total current liabilities 1,193.6 1,031.2
Notes payable 5.0 4.8
Long-term debt 1,600.0 1,613.0
Deferred income taxes 1,019.1 956.8
Other noncurrent liabilities 386.9 435.8
Equity
Stockholders' equity 5,457.3 4,547.0
Noncontrolling interest   520.8   385.9

Total equity

  5,978.1   4,932.9
 
Total liabilities and equity $ 10,182.7 $ 8,974.5
 
 
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
       
 
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
(in millions)
Operating Activities:
Net earnings $ 458.1 $ 382.4 $ 1,568.1 $ 1,258.8
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion and amortization 99.7 101.6 318.7 314.9
Deferred income taxes 19.6 (9.4 ) 32.8 16.4
Stock compensation expense 3.2 2.9 8.8 8.0
Excess tax benefit from stock-based compensation (14.6 ) (7.1 ) (30.0 ) (25.7 )
Unrealized loss (gain) on derivatives (39.8 ) 14.1 (61.5 ) 27.6
Loss (gain) on disposal of property, plant and equipment and non-core assets 0.4 36.8 4.0 7.4
Undistributed loss (earnings) of affiliates - net (37.0 ) 1.1 (59.0 ) (51.5 )
Changes in:
Accounts receivable - net 21.8 145.0 (67.8 ) (33.7 )
Margin deposits (0.1 ) 0.1 0.8 4.4
Inventories - net (73.2 ) (71.2 ) 3.2 (75.1 )
Accrued income taxes (89.3 ) (55.6 ) (200.1 ) 21.2
Accounts payable and accrued expenses 57.7 20.0 64.0 42.5
Customer advances 496.3 477.2 360.1 446.8
Other - net   2.8     (4.9 )   12.2     (6.9 )
Net cash provided by operating activities   905.6     1,033.0     1,954.3     1,955.1  
Investing Activities:
Additions to property, plant and equipment (103.6 ) (63.7 ) (261.4 ) (169.2 )
Proceeds from the sale of property, plant and equipment and non-core assets 4.4 3.6 11.6 51.3
Sales and maturities of short-term and auction rate securities 15.0 12.3 31.0 36.9
Deposits to asset retirement obligation funds - - (2.2 ) -
Other - net   -     -     -     31.2  

Net cash used in investing activities

  (84.2 )   (47.8 )   (221.0 )   (49.8 )
Financing Activities:
Payments of long-term debt - - (13.0 ) (346.0 )
Advances from unconsolidated affiliates 40.5 - 40.5 -
Financing fees - (1.5 ) - (1.5 )
Purchase of treasury stock - (801.9 ) (500.0 ) (801.9 )
Dividends paid on common stock (25.1 ) (28.3 ) (77.4 ) (42.6 )
Distributions to noncontrolling interests (19.5 ) (98.8 ) (212.8 ) (127.4 )
Issuances of common stock under employee stock plans 7.2 5.9 12.6 14.5
Excess tax benefit from stock-based compensation   14.6     7.1     30.0     25.7  
Net cash provided by (used in) financing activities   17.7     (917.5 )   (720.1 )   (1,279.2 )
Effect of exchange rate changes on cash and cash equivalents   (0.8 )   2.8     1.1     2.3  
Increase in cash and cash equivalents 838.3 70.5 1,014.3 628.4
Cash and cash equivalents at beginning of period   1,383.0     1,355.6     1,207.0     797.7  
Cash and cash equivalents at end of period $ 2,221.3   $ 1,426.1   $ 2,221.3   $ 1,426.1  
 
 
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
NITROGEN SEGMENT DATA
       
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
(in millions, except as noted)
Net sales $ 1,095.2 $ 1,118.0 $ 3,871.0 $ 3,549.0
Cost of sales   456.6     565.9     1,577.4     1,771.8  
Gross margin $ 638.6   $ 552.1   $ 2,293.6   $ 1,777.2  
 
Gross margin percentage 58.3 % 49.4 % 59.3 % 50.1 %
 
Tons of product sold (in thousands) 2,957 3,043 9,690 9,658
 
Sales volumes by product (tons in thousands)
Ammonia 416 403 1,881 1,794
Granular urea 559 701 2,011 2,032
UAN 1,603 1,552 4,631 4,655
AN 206 243 702 755
Other nitrogen products 173 144 465 422
 
Average selling prices (dollars per ton)
Ammonia $ 622 $ 552 $ 619 $ 563
Granular urea 470 425 484 396
UAN 296 319 308 307
AN 261 269 259 260
 
Cost of natural gas (dollars per MMBtu) (1) $ 3.34 $ 4.45 $ 3.32 $ 4.36
 
Average daily market price of natural gas
Henry Hub (dollars per MMBtu) $ 2.87 $ 4.13 $ 2.53 $ 4.22
 
Depreciation and amortization $ 83.7 $ 80.2 $ 250.6 $ 237.1
Capital expenditures $ 83.6 $ 48.9 $ 192.5 $ 117.0
 
Production volume by product (tons in thousands)
Ammonia (2) 1,761 1,769 5,315 5,453
Granular urea 622 663 1,983 1,946
UAN (32%) 1,499 1,638 4,456 4,746
AN 205 251 688 761
 
 
(1) Includes gas purchases and realized gains and losses on gas derivatives.
(2) Gross ammonia production including amounts subsequently upgraded on-site into urea and/or UAN.
 
 
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
PHOSPHATE SEGMENT DATA
       
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
(in millions, except as noted)
Net sales $ 264.2 $ 285.8 $ 751.6 $ 830.5
Cost of sales   200.8     199.9     588.1     577.3  
Gross margin $ 63.4   $ 85.9   $ 163.5   $ 253.2  
 
Gross margin percentage 24.0 % 30.1 % 21.8 % 30.5 %
 
Tons of product sold (in thousands) 517 505 1,526 1,483
 
Sales volumes by product (tons in thousands)
DAP 395 388 1,187 1,101
MAP 122 117 339 382
 
Domestic vs. export sales (tons in thousands)
Domestic 360 265 887 957
Export 157 240 639 526
 
Average selling prices (dollars per ton)
DAP $ 507 $ 566 $ 491 $ 561
MAP 521 567 496 558
 
Depreciation, depletion, and amortization $ 10.3 $ 14.0 $ 32.8 $ 35.8
Capital expenditures $ 12.4 $ 10.3 $ 47.4 $ 39.5
 
Production volume by product (tons in thousands)
 
Hardee Phosphate Rock Mine
Phosphate rock 909 929 2,656 2,566
 
Plant City Phosphate Fertilizer Complex
Sulfuric Acid 672 687 1,908 1,969
Phosphoric acid as P 2O 5 (1) 259 262 739 756
DAP/MAP 515 519 1,479 1,498
 
 
(1)

P 2O 5 is the basic measure of the nutrient content in phosphate fertilizer products.

 
 
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
NON-GAAP DISCLOSURE ITEMS
             
Reconciliation of net earnings to EBITDA:
 
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
(in millions)
Net earnings attributable to common stockholders $ 403.3 $ 330.9 $ 1,378.0 $ 1,100.3
Interest expense (income) - net 27.1 31.8 102.9 113.5
Income taxes 205.8 185.3 721.9 625.6
Depreciation, depletion and amortization 99.7 101.6 318.7 314.9
Less: other adjustments   (6.8 )   (8.8 )   (36.5 )   (39.2 )
 
EBITDA $ 729.1   $ 640.8   $ 2,485.0   $ 2,115.1  
 
 
 

EBITDA is defined as net earnings attributable to common stockholders plus interest expense (income)-net, income taxes, and depreciation, depletion 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. We have presented EBITDA because management uses the measure to track performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

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