CF Industries Holdings' CEO Discusses Q4 2011 Results - Earnings Call Transcript

CF Industries Holdings (CF)

Q4 2011 Earnings Call

February 16, 2012 9:00 am ET

Executives

Terrell D. Huch - Senior Director of Investor Relations & Corporate Communications

Stephen R. Wilson - Chairman, Chief Executive Officer and President

Dennis P. Kelleher - Chief Financial Officer and Senior Vice President

W. Anthony Will - Senior Vice President of Manufacturing & Distribution

Bert A. Frost - Senior Vice President of Sales & Market Development

Analysts

Elaine Yip - Crédit Suisse AG, Research Division

Daniel Jester - Citigroup Inc, Research Division

Vincent Andrews - Morgan Stanley, Research Division

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Edlain Rodriguez - Lazard Capital Markets LLC, Research Division

Unknown Analyst

Lindsay Mann - Goldman Sachs Group Inc., Research Division

Michael Picken - Cleveland Research Company

Charles N. Neivert - Dahlman Rose & Company, LLC, Research Division

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the CF Industries Fourth Quarter 2011 Results Call. My name is Chantale, and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Terry Huch, Senior Director, Investor Relations and Corporate Communications. Please proceed, sir.

Terrell D. Huch

Thank you. Good morning, and thank you, all, for joining us on this conference call for CF Industries Holdings, Inc. I am Terry Hutch, the Head of Investor Relations, and with me are Steve Wilson, our Chairman and Chief Executive Officer; Dennis Kelleher, our Senior Vice President and Chief Financial Officer; Bert Frost, our Senior Vice President of Sales and Marketing; and Tony Will, our Senior Vice President of Manufacturing and Distribution.

CF Industries Holdings, Inc. reported its fourth quarter and full year 2011 results yesterday afternoon as did Terra Nitrogen Company LP. On this call, we'll review the CF Industries results in detail and discuss our outlook referring to several of the slides that are posted on our website. At the end of the call, we'll host a question-and-answer session.

As you review the news release posted in the Investor Relations section of our website at cfindustries.com and as you listen to this conference call, please recognize that they contain forward-looking statements as defined by Federal securities laws. All statements in the release and on this call other than those relating to historical information or current conditions are considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements.

These risks and uncertainties include those spelled out in the forward-looking statements included in yesterday's news release and the slides accompanying this call. Consider all forward-looking statements in light of those and other risks and uncertainties, and do not place undue reliance on any forward-looking statements.

Now let me introduce you to Steve Wilson, our Chairman and CEO.

Stephen R. Wilson

Thanks, Terry, and welcome to all of you who are joining the call today. I'm sure you all saw the excellent results we published for the fourth quarter. Before we walk you through these results, I want to cover a couple of points. First, I want to recognize Terry, who as many of you already know is in the midst of a transition to a new, bigger assignment of directing all of our natural gas and sulfur purchasing. He has done a great job in leading our IR efforts for the last 2.5 years and has set a high bar for his successor, who we hope to identify soon.

I'd also like to take a moment to reflect on what we accomplished in 2011. For the year, we had record production, sales volume, revenue, earnings, EPS and cash flow. In doing so, we've proved that we have solidified the platform that was created by acquiring and integrating Terra Industries. We demonstrated our proficiency in operating that greatly improved platform. And I believe our focus on execution allowed us to extract every advantage from it.

In 2011, we improved in key areas that already were strengths, including revenue and margin optimization, production excellence, best practice sharing and safety. We thrive even in the toughest stretches of the year because of what I will call robustness synergies, meaning that our expanded scale and flexibility put us in the strongest competitive position when demand was delayed, when product mix changed and when transportation became difficult.

In 2011, we produced $3 billion of EBITDA, which is very gratifying because it equals an internal goal the management team had discussed earlier in the year. Abundant cash flow has been allowing us to do everything we want to do simultaneously: improve the balance sheet, distribute cash to shareholders and invest in the growth of the business. During 2011, we retired the last of our acquisition-related term loans. We distributed over $1 billion to shareholders through share repurchases and dividends and reallocated funds for significant capital projects for both the near and long term.

We completed a major expansion at our Woodward, Oklahoma nitrogen facility where we are now upgrading an additional 200,000 tons per year of ammonia, to higher value UAN. We laid all the groundwork needed to start production a few months from now of a unique sulfur-enhanced phosphate product that our customers are very excited about. We have proved and commenced a project to expand ammonia production at Donaldsonville, 500,000 tons per year. We announced that we had earmarked an additional $1 billion to $1.5 billion for other capital projects within our existing nitrogen complexes in North America. And we increased the number of plants producing Diesel Exhaust Fluid from 1 to 3, soon to be 4 and put in place to corresponding distribution infrastructure.

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