CF Industries Holdings, Inc. Reports Fourth Quarter Net Loss of $320 Million and EBITDA Loss of $135 Million; Adjusted Net Loss of $90 Million and Adjusted EBITDA of $133 Million

Capacity Expansion Projects Complete and Generating Cash

Excess Global Nitrogen Supply Pressured Fourth Quarter Results

Reduced Chinese Urea Exports, Improving Prices Suggest Positive First Half of 2017

DEERFIELD, Ill.--()--CF Industries Holdings, Inc. (NYSE: CF), the global leader in nitrogen fertilizer manufacturing and distribution, today announced results for its fourth quarter and full year ended December 31, 2016.

Fourth Quarter Highlights

  • Net loss of $320 million, or $1.38 per diluted share; adjusted net loss(1) of $90 million, or $0.39 per diluted share(1)
  • EBITDA(2) loss of $135 million; adjusted EBITDA(2) of $133 million
  • New ammonia and urea plants at Port Neal Nitrogen Complex in operation
  • Refinanced private placement notes
  • Shipments of UAN in fourth quarter exceeded two million tons, a company record
  • Record fourth quarter exports above 500,000 tons
  • Net loss includes $134 million non-cash impairment charge related to Point Lisas Nitrogen Limited (PLNL)

Full Year Highlights

  • Net loss of $277 million, or $1.19 per diluted share; adjusted net earnings(1) of $109 million or $0.47 per diluted share(1)
  • EBITDA(2) of $395 million; adjusted EBITDA(2) of $858 million
  • Accelerated tax depreciation on capacity expansion projects driving estimated federal and state tax refunds of approximately $800 million, expect to receive in third quarter 2017
  • Record exports of approximately 1.4 million tons in 2016, 110 percent increase over prior year

_________________________________________________________________________

(1)   See reconciliations of adjusted net earnings and adjusted net earnings per diluted share to the most directly comparable GAAP measures in the tables accompanying this release.
(2) EBITDA is defined as net earnings attributable to common stockholders plus interest expense (income)-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.
 

Overview of Results

CF Industries Holdings, Inc., today announced a fourth quarter 2016 net loss attributable to common stockholders of $320 million, or $1.38 per diluted share, and adjusted net loss of $90 million, or $0.39 per diluted share. Fourth quarter 2016 EBITDA loss was $135 million, and adjusted EBITDA was $133 million. These results compare to fourth quarter 2015 net earnings attributable to common stockholders of $27 million, or $0.11 per diluted share; adjusted net earnings of $168 million, or $0.72 per diluted share; EBITDA of $254 million; and adjusted EBITDA of $445 million. Fourth quarter 2016 results include a realized loss on natural gas hedges of $5 million for the fourth quarter of 2016, compared to a realized loss on natural gas hedges of $30 million for the fourth quarter of 2015.

For the full year 2016, net loss attributable to common stockholders was $277 million, or $1.19 per diluted share, and adjusted net earnings was $109 million, or $0.47 per diluted share. Full year 2016 EBITDA was $395 million, and adjusted EBITDA was $858 million. These results compare to full year 2015 net earnings attributable to common stockholders of $700 million, or $2.96 per diluted share; adjusted net earnings for the full year 2015 of $896 million, or $3.79 per diluted share; EBITDA of $1.67 billion; and adjusted EBITDA of $1.98 billion. Full year 2016 results include a realized loss on natural gas hedges of $133 million, compared to a realized loss on natural gas hedges of $70 million for the full year 2015.

The company expects to receive tax refunds of approximately $800 million due to the carryback of certain federal and state tax losses from the 2016 tax year to prior periods. These tax losses are primarily related to accelerated tax depreciation of the capacity expansion projects that were placed in service in 2016. The cash refunds related to this tax loss carryback are expected to be received in the third quarter of 2017.

During the fourth quarter, the company completed the issuance of $1.25 billion of senior secured notes. The proceeds were used primarily to fund the prepayment of the $1.0 billion principal amount of CF Industries, Inc.'s senior notes due 2022, 2025 and 2027, plus a related make-whole amount of approximately $170 million.

CF Industries has completed a review of its equity method investment in PLNL, the company's 50 percent interest in an ammonia production joint venture located in the Republic of Trinidad and Tobago. This review assessed the recoverability of the company's carrying value of the investment. During the fourth quarter of 2016, the company recognized an impairment charge of $134 million relating to its investment in PLNL due to projected longer-term challenges with gas availability and potential price increases from the government-controlled gas supplier.

Manufacturing Operations

CF Industries' manufacturing network operated safely and efficiently during the fourth quarter of 2016. As of December 31, 2016, CF Industries' 12-month rolling average recordable incident rate was 1.16 incidents per 200,000 work hours, well below industry averages. Ammonia utilization rate during the quarter across the manufacturing network was 99 percent.

During the fourth quarter, the company completed its capacity expansion projects as the new ammonia and urea plants at the Port Neal Nitrogen Complex were successfully commissioned and started-up. Both new plants are producing on-spec product for sale.

“Our expansion projects are complete, and the company's production capacity is now 25 percent greater on a nutrient ton basis than it was this time last year," said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. "With our cash generation capability strengthened significantly as a result, and the structural advantages of being the low cost producer in an import-dependent region, we believe CF is the best-positioned company to benefit both from the improving market in the first half of 2017 and from the sustained recovery we see ahead for the sector over the next several years."

Sales Overview

Net sales in the fourth quarter of 2016 decreased to $867 million from $1,115 million in the same period last year due to lower average selling prices across all segments. Excess global nitrogen supply continued to pressure prices as it had throughout 2016. The average selling price for ammonia was $277 per ton in the fourth quarter of 2016 compared to $458 per ton in the fourth quarter of 2015. Similarly, the average selling price for urea was $214 per ton in the fourth quarter of 2016 compared to $275 per ton in the fourth quarter of 2015, and the average selling price for UAN was $149 per ton in the fourth quarter of 2016 compared to $230 per ton in the fourth quarter of 2015.

Sales volume for the quarter increased compared to the fourth quarter of 2015, partially offsetting the decrease in average prices. Greater volumes were available for sale due to the company's completed capacity expansion projects. Additionally, exports of UAN and ammonia were significantly higher year-over-year as the company continues to develop a global portfolio of customers in order to optimize the overall business.

Cost of sales decreased in the fourth quarter of 2016 compared to the fourth quarter of 2015 due primarily to an unrealized net mark-to-market gain on natural gas derivatives of $91 million in the fourth quarter of 2016 compared to an unrealized net mark-to-market loss on natural gas derivatives of $97 million in the fourth quarter of 2015. This was partially offset by the impact of higher volumes in 2016, $34 million in start-up costs related to the new Port Neal ammonia and urea plants, and an increase of $43 million in depreciation related to the capacity expansion projects compared to the fourth quarter of 2015.

In the fourth quarter of 2016, the average cost of natural gas reflected in cost of sales for the company was $3.24 per MMBtu, which includes a realized loss of $0.06 per MMBtu on natural gas hedges, totaling $5 million. This compares to the average cost of natural gas in cost of sales of $3.23 per MMBtu for the fourth quarter of 2015, which included a realized loss of $0.41 per MMBtu on natural gas hedges totaling $30 million. During the fourth quarter of 2016, the average price of natural gas at Henry Hub in North America was $2.99 per MMBtu, and the average price of natural gas at the National Balancing Point in the United Kingdom was $5.69 per MMBtu.

The company did not enter into any additional natural gas hedges in the fourth quarter of 2016.

Outlook

Global nitrogen prices rose during the fourth quarter of 2016. U.S. prices also increased, but remained below international parity. The average U.S. Gulf urea barge price was approximately $180 per ton at the start of the fourth quarter and increased to approximately $240 per ton by the end of the quarter. The average U.S. Gulf UAN barge price was approximately $130 per ton at the start of the fourth quarter and increased to $153 per ton by the end of the quarter.

A decline in Chinese urea exports, from more than one million tonnes per month in the first quarter of 2016 to an average of approximately 470,000 tonnes per month in the fourth quarter, has been a key driver of increased global nitrogen prices. Rising costs for marginal producers in China, including significantly higher coal costs compared to the middle of 2016 along with reduced urea subsidies, and concerns over pollution and air quality drove urea operating rates, according to published reports, down to approximately 50 percent in that country during the fourth quarter. At these operating rates, Chinese demand for urea is expected to exceed available domestic supply during the spring. Chinese manufacturers will need to increase urea production, or purchasers will need to import urea, in order to meet seasonal domestic needs. As a result, CF expects global prices will be supported through the first half of the year due to limited Chinese export availability. For the full year 2017, Chinese urea exports are expected to decline from 8.9 million tonnes in 2016 to an anticipated range of approximately 5-6 million tonnes.

Higher hydrocarbon feedstock costs compared to the lows of early and mid-2016 are also supporting higher nitrogen prices. Higher oil prices have led to increased prices for contract gas in Europe. The strengthened Russian ruble has led to higher U.S. dollar gas prices in that country.

Import activity into North America during the fourth quarter of 2016 was lower than the fourth quarter of 2015 driven in part by regional prices that were below international parity. Additionally, the impact of the new North American capacity brought online during 2016 and expectations for the startup of additional new capacity in the region lowered the perceived economic incentive for North American purchasers to import product.

CF Industries expects North American demand for nitrogen in 2017 to be relatively unchanged compared to 2016. In the United States, the company forecasts 89.5 million acres of corn planted and fewer than 50 million acres of wheat planted, while in Canada lower grain planting is anticipated to be largely offset by increased canola plantings. As a result, total North American nitrogen fertilizer demand is projected to be roughly 16 million nutrient tons for full year 2017. Based on this, approximately 7 million nutrient tons of imported nitrogen will be required to meet North American agricultural and industrial demand for the full year 2017.

The company expects nitrogen prices in North America during the first half of 2017 to continue to improve into the second quarter, driven by the same factors currently supporting the higher global prices. As additional nitrogen capacity comes online globally during 2017, including a significant increase in North America, market price uncertainty exists for the second half of the year before a more sustained global nitrogen price recovery is expected to begin in 2018.

Capital Expenditures

New capital expenditures for 2017 are estimated to be in the range of approximately $400 to $450 million for sustaining and other, a level that continues the company's commitment to safe, reliable and compliant operations. Actual cash expenditures will also reflect amounts accrued but not paid in 2016. At December 31, 2016, approximately $225 million was accrued related to activities in 2016.

Liquidity

As of December 31, 2016, the company had a balance of cash and cash equivalents of $1.16 billion, had no borrowings outstanding under its revolving credit facility and was in compliance with all applicable covenant requirements under its debt instruments.

CHS Inc. Distribution

On January 31, 2017, the Board of Managers of CF Industries Nitrogen, LLC approved a semi-annual distribution payment to CHS Inc. of $48 million for the distribution period ended December 31, 2016. The distribution was paid on January 31, 2017. The total distribution approved pertaining to 2016 was approximately $128 million.

       

Consolidated Results

 
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(dollars in millions, except per share

and per MMBtu amounts)

Net sales $ 867 $ 1,115 $ 3,685 $ 4,308
Cost of sales 773   835   2,845   2,761  
Gross margin $ 94   $ 280   $ 840   $ 1,547  
 
Gross margin percentage 10.8 % 25.1 % 22.8 % 35.9 %
 
Net (loss) earnings attributable to common stockholders $ (320 ) $ 27 $ (277 ) $ 700
Adjusted net (loss) earnings (1) $ (90 ) $ 168 $ 109 $ 896
 
Net (loss) earnings per diluted share $ (1.38 ) $ 0.11 $ (1.19 ) $ 2.96
Adjusted net (loss) earnings per diluted share(1) $ (0.39 ) $ 0.72 $ 0.47 $ 3.79
 
EBITDA(1) $ (135 ) $ 254 $ 395 $ 1,666
Adjusted EBITDA(1) $ 133 $ 445 $ 858 $ 1,975
 
Tons of product sold (000s) 4,683 3,982 16,957 13,718
 
Supplemental data (per MMBtu):
Natural gas costs in cost of sales(2) $ 3.18 $ 2.82 $ 2.61 $ 3.00
Realized derivatives loss in cost of sales(3) 0.06   0.41   0.46   0.28  
Cost of natural gas in cost of sales $ 3.24 $ 3.23 $ 3.07 $ 3.28
 
Average daily market price of natural gas (per MMBtu):
Henry Hub $ 2.99 $ 2.09 $ 2.48 $ 2.61
National Balancing Point UK $ 5.69 $ 5.58 $ 4.66 $ 6.53
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (91 ) $ 97 $ (260 ) $ 176
 
Capital expenditures $ 392 $ 678 $ 2,211 $ 2,469
 
Production volume by product tons (000s):
Ammonia(4) 2,326 2,098 8,307 7,673
Granular urea 914 758 3,368 2,520
UAN (32%) 1,795 1,602 6,698 5,888
AN 553 487 1,845 1,283

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(1)   See reconciliations of EBITDA, adjusted EBITDA, adjusted net (loss) earnings and adjusted net (loss) earnings per diluted share to the most directly comparable GAAP measures in the tables accompanying this release.
(2) Includes the cost of natural gas that is included in cost of sales during the period under the first-in, first-out inventory cost method.
(3) Includes the 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.
 

During the years ended December 31, 2016 and 2015, certain significant items impacted our financial results. The following table outlines these significant items and how they impacted the comparability of our financial results during these periods. For the quarter and year ended December 31, 2016, we reported a net loss attributable to common stockholders of $320 million and $277 million, respectively. For the quarter and year ended December 31, 2015, we reported net earnings attributable to common stockholders of $27 million and $700 million, respectively. Positive amounts in the table below are costs or expenses incurred, while negative amounts are income recognized in the periods presented.

    Three months ended   Twelve months ended
December 31,   December 31,
2016   2015 2016   2015
Pre-Tax   After-Tax Pre-Tax   After-Tax Pre-Tax   After-Tax Pre-Tax   After-Tax
(in millions)
Capacity Expansion Projects:
Expansion project depreciation (1) $ 56   $ 35 $ 13   $ 8 $ 116   $ 73 $ 13   $ 8
Start-up costs - Donaldsonville / Port Neal expansion plants (1) 34 21 52 32
Expansion project expenses (2) 14 9 15 9 73 46 51 32
Loss on foreign currency derivatives (2) 2 1 3 2 22 13
Strategic Venture with CHS:
Noncontrolling interest (7) 26 26 93 93
Loss on embedded derivative liability (2) 1 1 23 14
Debt Restructuring:
Loss on debt extinguishment 167 105 167 105
Debt and revolver amendment fees (3) 14 8 16 10
Private Senior Notes amendment arrangement fees (4) 2 1
CF Fertilisers UK Acquisition:
Gain on remeasurement of CF Fertilisers UK investment (5) (94 ) (94 )
Equity Method Investments:
Impairment of equity method investment in PLNL (6) 134 134 62 62 134 134 62 62
Loss on sale of equity method investments (5) 43 31
Transaction Costs and Termination of Agreement with OCI:
Transaction costs 20 12 179 96 57 37
Financing costs related to bridge loan commitment fee (3) 28 18 6 4
Other items:
Unrealized net mark-to-market (gain) loss on natural gas derivatives (1) (91 ) (57 ) 97 61 (260 ) (163 ) 176 111
Loss (gain) on foreign currency transactions including intercompany loans (2)   7       8     (6 )     (5 )   93       93     (8 )      
Total Impact of Significant Items $ 364     $ 291   $ 204     $ 149   $ 716     $ 552   $ 328     $ 204  

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(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) Included in interest expense in our consolidated statements of operations.
(4) Included in selling, general and administrative expenses in our consolidated statements of operations.
(5) Included in equity in earnings of non-operating affiliates in our consolidated statements of operations.
(6) Included in equity in (losses) earnings of operating affiliates in our consolidated statements of operations.
(7) Included in net earnings attributable to noncontrolling interests in our consolidated statements of operations.
       
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
Subtotals of Amounts Above by Line Item in    
the Consolidated Statements of Operations:
Cost of sales $ (1 ) $ 110 $ (92 ) $ 189
Selling, general and administrative expenses 2
Transaction costs 20 179 57
Other operating—net 24 12 189 65
Equity in (losses) earnings of operating affiliates 134 62 134 62
Interest expense 14 44 6
Loss on debt extinguishment 167 167
Equity in earnings of non-operating affiliates—net of taxes (51 )
Net earnings attributable to noncontrolling interests 26     93    
Total Impact of Significant Items $ 364   $ 204   $ 716   $ 328  
 

Segment Results

Ammonia Segment

CF Industries’ ammonia segment produces anhydrous ammonia (ammonia), which is the company’s most concentrated nitrogen fertilizer, 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 product that the company upgrades into other nitrogen fertilizers such as urea, UAN, and AN.

     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(dollars in millions,

except per ton amounts)

Net sales $ 211 $ 375 $ 981 $ 1,523
Cost of sales 210   249   715   884  
Gross margin $ 1   $ 126   $ 266   $ 639  
 
Gross margin percentage 0.5 % 33.6 % 27.1 % 42.0 %
 
Sales volume by product tons (000s) 762 819 2,874 2,995
Sales volume by nutrient tons (000s)(1) 626 671 2,358 2,456
 
Average selling price per product ton $ 277 $ 458 $ 341 $ 509
Average selling price per nutrient ton(1) 337 560 416 620
 
Gross margin per product ton $ 1 $ 154 $ 93 $ 213
Gross margin per nutrient ton(1) 2 188 113 260
 
Depreciation and amortization $ 37 $ 20 $ 96 $ 95
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (30 ) $ 22 $ (85 ) $ 40

_______________________________________________________________________________

(1)   Nutrient tons represent the tons of nitrogen within the product tons.
 

Comparison of 2016 to 2015 fourth quarter periods:

  • Ammonia sales volume decreased for the fourth quarter of 2016 compared to the fourth quarter of 2015 as unfavorable weather and economic considerations, including declining year-over-year farmer disposable income and futures prices favoring soybeans over corn, led many farmers to delay ammonia application and planting decisions until spring. The decrease was partially offset by a significant increase in export sales.
  • Ammonia average selling prices decreased primarily due to excess global nitrogen supply. Additionally, the company's ammonia sales during the quarter included a higher proportion of lower-priced industrial and export sales compared to the prior year.
  • Ammonia gross margin per ton decreased in the fourth quarter of 2016 due to lower average selling prices, $32 million of start-up costs associated with the new Port Neal ammonia plant, and a $17 million increase in depreciation primarily related to the new Donaldsonville and Port Neal ammonia plants. The decrease was partially offset by a $30 million unrealized net mark-to-market gain on natural gas derivatives in the fourth quarter of 2016 compared to a $22 million unrealized net mark-to-market loss on natural gas derivatives in the fourth quarter of 2015.

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 fertilizers.

     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(dollars in millions,

except per ton amounts)

Net sales $ 189 $ 194 $ 831 $ 788
Cost of sales 139   145   584   469  
Gross margin $ 50   $ 49   $ 247   $ 319  
 
Gross margin percentage 26.5 % 25.2 % 29.7 % 40.4 %
 
Sales volume by product tons (000s) 883 705 3,597 2,460
Sales volume by nutrient tons (000s)(1) 406 325 1,654 1,132
 
Average selling price per product ton $ 214 $ 275 $ 231 $ 320
Average selling price per nutrient ton(1) 466 597 502 696
 
Gross margin per product ton $ 57 $ 69 $ 69 $ 129
Gross margin per nutrient ton(1) 123 150 149 281
 
Depreciation and amortization $ 37 $ 20 $ 112 $ 51
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (23 ) $ 26 $ (67 ) $ 47

_______________________________________________________________________________

(1)   Nutrient tons represent the tons of nitrogen within the product tons.
 

Comparison of 2016 to 2015 fourth quarter periods:

  • Granular urea sales volume increased for the quarter primarily due to additional volume available for sale from the new urea capacity at the company's Donaldsonville Nitrogen Complex.
  • Granular urea average selling price per ton decreased due to excess global nitrogen supply.
  • Granular urea gross margin per ton decreased due to lower average selling prices, a $17 million increase in depreciation and amortization primarily associated with the new Donaldsonville and Port Neal urea plants and $2 million in start-up costs associated with the new Port Neal urea plant, offset by a $23 million unrealized net mark-to-market gain on natural gas derivatives in the fourth quarter of 2016 compared to a $26 million unrealized net mark-to-market loss on natural gas derivatives in the fourth quarter of 2015.

UAN Segment

CF Industries’ UAN segment produces urea ammonium nitrate solution (UAN). UAN is a liquid fertilizer 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 Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(dollars in millions,

except per ton amounts)

Net sales $ 305 $ 368 $ 1,196 $ 1,480
Cost of sales 274   277   920   955  
Gross margin $ 31   $ 91   $ 276   $ 525  
 
Gross margin percentage 10.2 % 24.8 % 23.1 % 35.5 %
 
Sales volume by product tons (000s) 2,047 1,599 6,681 5,865
Sales volume by nutrient tons (000s)(1) 648 507 2,109 1,854
 
Average selling price per product ton $ 149 $ 230 $ 179 $ 252
Average selling price per nutrient ton(1) 471 724 567 798
 
Gross margin per product ton $ 15 $ 57 $ 41 $ 90
Gross margin per nutrient ton(1) 48 180 131 283
 
Depreciation and amortization $ 72 $ 52 $ 247 $ 192
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (29 ) $ 40 $ (81 ) $ 73

_______________________________________________________________________________

(1)   Nutrient tons represent the tons of nitrogen within the product tons.
 

Comparison of 2016 to 2015 fourth quarter periods:

  • UAN sales volume increased in the fourth quarter of 2016 due to additional volume available for sale from the new UAN capacity at the company's Donaldsonville Nitrogen Complex. During the quarter, customers built UAN inventories in preparation for spring after having delayed purchases earlier in the year. The company also exported a significant amount of UAN during the quarter.
  • UAN average selling price per ton decreased due to excess global nitrogen supply. Additionally, the company's UAN sales during the quarter included a higher proportion of lower-priced export sales compared to the prior year.
  • UAN gross margin per ton decreased due to lower average selling prices and a $20 million increase in depreciation and amortization primarily associated with the new Donaldsonville UAN plant, partially offset by a $29 million unrealized net mark-to-market gain on natural gas derivatives in the fourth quarter of 2016 compared to a $40 million unrealized net mark-to-market loss on natural gas derivatives in the fourth quarter of 2015.

AN Segment

CF Industries' AN segment produces ammonium nitrate (AN). AN is used as a nitrogen fertilizer with nitrogen content between 29% to 35%, 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 Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(dollars in millions,

except per ton amounts)

Net sales $ 93 $ 115 $ 411 $ 294
Cost of sales 93   112   409   291  
Gross margin $   $ 3   $ 2   $ 3  
 
Gross margin percentage % 3.0 % 0.5 % 1.1 %
 
Sales volume by product tons (000s) 541 495 2,151 1,290
Sales volume by nutrient tons (000s)(1) 181 166 726 437
 
Average selling price per product ton $ 172 $ 233 $ 191 $ 228
Average selling price per nutrient ton(1) 514 693 566 673
 
Gross margin per product ton $ $ 7 $ 1 $ 2
Gross margin per nutrient ton(1) 20 3 7
 
Depreciation and amortization $ 21 $ 22 $ 93 $ 66
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (3 ) $ 9 $ (10 ) $ 16

_______________________________________________________________________________

(1)   Nutrient tons represent the tons of nitrogen within the product tons.
 

Comparison of 2016 to 2015 fourth quarter periods:

  • AN sales volume was higher compared to the fourth quarter of 2015. Agricultural AN sales in the United Kingdom increased as farmers purchased AN early driven by lower nitrogen prices, improving crop prices and higher European Union support payments. AN sales volumes in North America also increased due to additional production volume of industrial AN at the company's Yazoo City Nitrogen Complex.
  • AN average selling price per ton decreased primarily due to excess global nitrogen supply.
  • AN gross margin per ton decreased primarily due to lower selling prices, which were partially offset by a $3 million unrealized net mark-to-market gain on natural gas derivatives in the fourth quarter of 2016 compared to a $9 million unrealized net mark-to-market loss on natural gas derivatives in the fourth quarter of 2015.

Other Segment

CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea liquor, nitric acid and compound fertilizer products (NPKs).

     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(dollars in millions,

except per ton amounts)

Net sales $ 69 $ 63 $ 266 $ 223
Cost of sales 57   52   217   162  
Gross margin $ 12   $ 11   $ 49   $ 61  
 
Gross margin percentage 17.4 % 16.8 % 18.4 % 27.2 %
 
Sales volume by product tons (000s) 450 364 1,654 1,108
Sales volume by nutrient tons (000s)(1) 87 71 317 215
 
Average selling price per product ton $ 153 $ 175 $ 161 $ 202
Average selling price per nutrient ton(1) 793 899 839 1,040
 
Gross margin per product ton $ 27 $ 29 $ 30 $ 55
Gross margin per nutrient ton(1) 138 151 155 283
 
Depreciation and amortization $ 12 $ 9 $ 46 $ 35
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (6 ) $ $ (17 ) $

_______________________________________________________________________________

(1)   Nutrient tons represent the tons of nitrogen within the product tons.
 

Comparison of 2016 to 2015 fourth quarter periods:

  • Other segment volume was higher due primarily to higher year-over-year sales of DEF as the company continues to grow its North American DEF business.
  • Other segment average selling price per ton decreased due to excess global nitrogen supply.
  • Other segment gross margin per ton decreased primarily due to lower average selling prices partially offset by a $6 million unrealized net mark-to-market gain on natural gas derivatives in the fourth quarter of 2016.

Dividend Payment

On February 8, 2017, CF Industries’ Board of Directors declared a quarterly dividend of $0.30 per common share. The dividend will be paid on February 28, 2017 to stockholders of record as of February 17, 2017.

Conference Call

CF Industries will hold a conference call to discuss its fourth quarter 2016 results at 9:00 a.m. ET on Thursday, February 16, 2017. 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 Holdings, Inc., headquartered in Deerfield, Illinois, through its subsidiaries is a global leader in the manufacturing and distribution of nitrogen products, serving both agricultural and industrial customers. CF Industries operates world-class nitrogen manufacturing complexes in the central United States, Canada and the United Kingdom, and distributes plant nutrients through a system of terminals, warehouses, and associated transportation equipment located primarily in the Midwestern United States. The company also owns a 50 percent interest in an ammonia facility in The Republic of Trinidad and Tobago. CF Industries routinely posts investor announcements and additional information on the company’s website at www.cfindustries.com and encourages those interested in the company to check there frequently.

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net sales, adjusted net (loss) earnings, and adjusted net (loss) earnings per diluted share, which are non-GAAP financial measures, provide additional meaningful information regarding the company's performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net sales, adjusted net (loss) earnings, and adjusted net (loss) earnings per diluted share included in this release may not be comparable to similarly titled measures of other companies. Reconciliations of EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net sales, adjusted net (loss) earnings, and adjusted net (loss) earnings per diluted share 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.”

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 agricultural sector; the global commodity nature of the Company’s fertilizer products, the impact of global supply and demand on the Company’s selling prices, 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 and its subsidiaries by the Company's senior secured revolving credit agreement; 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 the Company’s ability to utilize its tax net operating losses and other tax assets, including the risk that the use of such tax benefits is limited by an “ownership change” (as defined under the Internal Revenue Code and related Internal Revenue Service pronouncements); risks associated with changes in tax laws and disagreements with taxing authorities; risks associated with expansions of the Company’s business, including unanticipated adverse consequences and the significant resources that could be required; 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; 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; the Company’s reliance on a limited number of key facilities; risks associated with the operation or management of the strategic venture with CHS Inc. (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 Inc. 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

     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(in millions, except per share amounts)
Net sales $ 867 $ 1,115 $ 3,685 $ 4,308
Cost of sales 773   835   2,845   2,761  
Gross margin 94   280   840   1,547  
Selling, general and administrative expenses 33 50 174 170
Transaction costs 20 179 57
Other operating—net 27   18   208   92  
Total other operating costs and expenses 60 88 561 319
Equity in (losses) earnings of operating affiliates (134 ) (55 ) (145 ) (35 )
Operating (loss) earnings (100 ) 137 134 1,193
Interest expense 70 40 200 133
Interest income (1 ) (1 ) (5 ) (2 )
Loss on debt extinguishment 167 167
Other non-operating—net (1 ) (1 ) (2 ) 4  
(Loss) earnings before income taxes and equity in earnings of non-operating affiliates (335 ) 99 (226 ) 1,058
Income tax (benefit) provision (47 ) 63 (68 ) 396
Equity in earnings of non-operating affiliates—net of taxes       72  
Net (loss) earnings (288 ) 36 (158 ) 734
Less: Net earnings attributable to noncontrolling interests 32   9   119   34  
Net (loss) earnings attributable to common stockholders $ (320 ) $ 27   $ (277 ) $ 700  
 
Net (loss) earnings per share attributable to common stockholders:
Basic $ (1.38 ) $ 0.11   $ (1.19 ) $ 2.97  
Diluted $ (1.38 ) $ 0.11   $ (1.19 ) $ 2.96  
 
Weighted-average common shares outstanding:
Basic 233.1   233.1   233.1   235.3  
Diluted 233.1   233.8   233.1   236.1  
 

CF INDUSTRIES HOLDINGS, INC.

SELECTED FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS

       
December 31, December 31,
2016 2015
(in millions)
Assets
Current assets:
Cash and cash equivalents $ 1,164 $ 286
Restricted cash 5 23
Accounts receivable—net 236 267
Inventories 339 321
Prepaid income taxes 841 185
Other current assets 70   45
Total current assets 2,655 1,127
Property, plant and equipment—net 9,652 8,539
Investments in affiliates 139 298
Goodwill 2,345 2,390
Other assets 340   329
Total assets $ 15,131   $ 12,683
 
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 638 $ 918
Income taxes payable 1 5
Customer advances 42 162
Other current liabilities 5   130
Total current liabilities 686   1,215
Long-term debt 5,778 5,537
Deferred income taxes 1,630 916
Other liabilities 545 628
Equity:
Stockholders' equity 3,348 4,035
Noncontrolling interests 3,144   352
Total equity 6,492   4,387
Total liabilities and equity $ 15,131   $ 12,683
 

CF INDUSTRIES HOLDINGS, INC.

SELECTED FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(in millions)
Operating Activities:
Net (loss) earnings $ (288 ) $ 36 $ (158 ) $ 734
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization 203 132 678 480
Deferred income taxes 9 84 739 78
Stock-based compensation expense 4 4 19 17
Unrealized net (gain) loss on natural gas and foreign currency derivatives (91 ) 93 (260 ) 163
Loss on embedded derivative 1 23
Gain on re-measurement of CF Fertilisers UK investment (94 )
Impairment of equity method investment in PLNL 134 62 134 62
Loss on sale of equity method investments 43
Loss on extinguishment of debt 167 167
Loss on disposal of property, plant and equipment 2 3 10 21
Undistributed earnings of affiliates—net of taxes 9 (1 ) 9 (3 )
Changes in:
Accounts receivable—net (37 ) (20 ) 18 (4 )
Inventories (3 ) 1 (7 ) (71 )
Accrued and prepaid income taxes (11 ) (79 ) (676 ) (148 )
Accounts payable and accrued expenses (11 ) 10 (18 ) 42
Customer advances (45 ) (220 ) (120 ) (164 )
Other—net (17 ) 28   59   51  
Net cash provided by operating activities 26   133   617   1,207  
Investing Activities:
Additions to property, plant and equipment (392 ) (678 ) (2,211 ) (2,469 )
Proceeds from sale of property, plant and equipment 6 3 14 12
Proceeds from sale of equity method investment 13
Purchase of CF Fertilisers UK, net of cash acquired 2 (552 )
Withdrawals from restricted cash funds 2 3 18 63
Other—net (2 ) (7 ) 2   (43 )
Net cash used in investing activities (386 ) (677 ) (2,177 ) (2,976 )
Financing Activities:
Proceeds from long-term borrowings 1,244 1,244 1,000
Payments of long-term borrowings (1,170 ) (1,170 )
Proceeds from short-term borrowings 150 367
Payments of short-term borrowings (150 ) (367 )
Payment to CHS related to credit provision (5 ) (5 )
Financing fees (20 ) (19 ) (31 ) (47 )
Dividends paid on common stock (71 ) (70 ) (280 ) (282 )
Issuance of noncontrolling interest in CFN 2,800
Distributions to noncontrolling interests (8 ) (13 ) (119 ) (45 )
Purchases of treasury stock (556 )
Issuances of common stock under employee stock plans 8
Shares withheld for taxes       (1 )
Net cash (used in) provided by financing activities (30 ) (102 ) 2,439   77  
Effect of exchange rate changes on cash and cash equivalents   (11 ) (1 ) (19 )
(Decrease) increase in cash and cash equivalents (390 ) (657 ) 878 (1,711 )
Cash and cash equivalents at beginning of period 1,554   943   286   1,997  
Cash and cash equivalents at end of period $ 1,164   $ 286   $ 1,164   $ 286  
 

CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
NON-GAAP DISCLOSURE ITEMS

Reconciliation of net (loss) earnings, net (loss) earnings per ton and net (loss) earnings as a percent of net sales (GAAP measures) to EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA as a percent of net sales (non-GAAP measures), as applicable:

EBITDA is defined as net (loss) earnings attributable to common stockholders plus interest expense (income)-net, income taxes, and depreciation and amortization. Other adjustments include the elimination of loan fee amortization that is included in both interest and amortization, and the portion of depreciation that is included in noncontrolling interests. The company has presented EBITDA, EBITDA per ton and EBITDA as a percent of net sales because management uses these measures to track performance and believes that they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry.

Adjusted EBITDA is defined as EBITDA adjusted with the selected items included in EBITDA as summarized in the table below. The company has presented adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA as a percent of net sales because management uses these measures, and believes they are useful to investors, as supplemental financial measures in the comparison of year-over-year performance.

     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(in millions)
Tons of product sold (000s) 4,683 3,982 16,957 13,718
Net sales $ 867 $ 1,115 $ 3,685 $ 4,308
 
Net (loss) earnings attributable to common stockholders $ (320 ) $ 27 $ (277 ) $ 700
Interest expense (income)—net 69 39 195 131
Income tax (benefit) provision(1) (47 ) 63 (68 ) 385
Depreciation and amortization 203 132 678 480
Less: other adjustments (40 ) (7 ) (133 ) (30 )
EBITDA (135 ) 254   395   1,666  
Net (loss) earnings per ton $ (68.33 ) $ 6.78 $ (16.34 ) $ 51.03
Net (loss) earnings as a percent of net sales (36.9 )% 2.4 % (7.5 )% 16.2 %
EBITDA per ton $ (28.83 ) $ 63.79 $ 23.29 $ 121.45
EBITDA as a percent of net sales (15.6 )% 22.8 % 10.7 % 38.7 %
 
Start-up costs Donaldsonville ammonia 18
Start-up costs Port Neal ammonia and urea 34 34
Expansion project expenses 14 15 73 51
Loss on foreign currency derivatives 2 3 22
Loss on debt extinguishment 167 167
Private Senior Notes amendment arrangement fees 2
Gain on remeasurement of CF Fertilisers UK investment (94 )
Impairment of equity method investment in PLNL 134 62 134 62
Loss on sale of equity method investments 43
Transaction costs(2) 20 179 57
Unrealized net mark-to-market (gain) loss on natural gas derivatives (91 ) 97 (260 ) 176
Loss on embedded derivative(3) 1 23
Loss (gain) on foreign currency transactions(4) 7   (6 ) 93   (8 )
Total adjustments 268   191   463   309  
 
Adjusted EBITDA $ 133   $ 445   $ 858   $ 1,975  
Adjusted EBITDA per ton $ 28.40 $ 111.75 $ 50.60 $ 143.97
Adjusted EBITDA as a percent of net sales 15.3 % 39.9 % 23.3 % 45.8 %

_______________________________________________________________________________

(1)   Includes the tax benefit of $11 million on loss on sale of non-operating equity method investment for the twelve months ended December 31, 2015.
(2) Transaction costs include the $150 million termination fee paid by the company to OCI in the second quarter of 2016 as a result of the termination of the combination agreement with OCI and costs of various consulting and legal services associated with the company's proposed combination with certain businesses of OCI and the company's strategic venture with CHS.
(3) Represents the loss in 2016 on the embedded derivative included within the terms of the company's strategic venture with CHS.
(4) Loss (gain) on foreign currency transactions primarily relates to the unrealized foreign currency exchange rate impact on intercompany debt that has not been permanently invested.
 

Reconciliation of net (loss) earnings attributable to common stockholders and net (loss) earnings per diluted share attributable to common stockholders (GAAP measures) to adjusted net (loss) earnings and adjusted net (loss) earnings per diluted share (non-GAAP measures), as applicable:

Adjusted net (loss) earnings is defined as net (loss) earnings attributable to common stockholders adjusted with the impacts of the selected items included in net (loss) earnings as summarized in the table below. The company has presented adjusted net (loss) earnings and adjusted net (loss) earnings per diluted share 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 Twelve months ended
December 31, December 31,
2016   2015 2016   2015
(in millions)
Net (loss) earnings attributable to common stockholders $ (320 ) $ 27 $ (277 ) $ 700
Start-up costs Donaldsonville ammonia 18
Start-up costs Port Neal ammonia and urea 34 34
Expansion project expenses 14 15 73 51
Loss on foreign currency derivatives 2 3 22
Loss on debt extinguishment 167 167
Financing costs related to Private Senior Notes and Senior Secured Notes(1) 10 10
Revolver amendment fees(1) 4 6
Private Senior Notes amendment arrangement fees 2
Gain on remeasurement of CF Fertilisers UK investment (94 )
Impairment of equity method investment in PLNL 134 62 134 62
Loss on sale of equity method investments 43
Transaction costs(2) 20 179 57
Financing costs related to bridge loan commitment fee(1) 28 6
Unrealized net mark-to-market (gain) loss on natural gas derivatives (91 ) 97 (260 ) 176
Loss on embedded derivative(3) 1 23
Loss (gain) on foreign currency transactions(4) 7 (6 ) 93 (8 )
Income tax adjustments(5) (52 ) (50 ) (121 ) (119 )
Total adjustments 230   141   386   196  
Adjusted net (loss) earnings $ (90 ) $ 168   $ 109   $ 896  
     
Three months ended Twelve months ended
December 31, December 31,
2016   2015 2016   2015
Net (loss) earnings per diluted share attributable to common stockholders $ (1.38 ) $ 0.11 $ (1.19 ) $ 2.96
Start-up costs Donaldsonville ammonia 0.08
Start-up costs Port Neal ammonia and urea 0.14 0.14
Expansion project expenses 0.06 0.06 0.31 0.22
Loss on foreign currency derivatives 0.01 0.01 0.09
Loss on debt extinguishment 0.72 0.72
Financing costs related to Private Senior Notes and Senior Secured Notes(1) 0.04 0.04
Revolver amendment fees(1) 0.02 0.03
Private Senior Notes amendment arrangement fees 0.01
Gain on remeasurement of CF Fertilisers UK investment (0.40 )
Impairment of equity method investment in PLNL 0.57 0.26 0.57 0.26
Loss on sale of equity method investments 0.18
Transaction costs(2) 0.08 0.77 0.24
Financing costs related to bridge loan commitment fee(1) 0.12 0.02
Unrealized net mark-to-market (gain) loss on natural gas derivatives (0.39 ) 0.42 (1.12 ) 0.75
Loss on embedded derivative(3) 0.10
Loss (gain) on foreign currency transactions(4) 0.03 (0.02 ) 0.40 (0.03 )
Income tax adjustments(5) (0.21 ) (0.20 ) (0.51 ) (0.50 )
Total adjustments 0.99   0.61   1.66   0.83  
Adjusted net (loss) earnings per diluted share $ (0.39 ) $ 0.72   $ 0.47   $ 3.79  

_______________________________________________________________________________

(1)   Not included in the calculation of EBITDA.
(2) Transaction costs include the $150 million termination fee paid by CF Holdings to OCI in the second quarter of 2016 as a result of the termination of the combination agreement with OCI and costs of various consulting and legal services associated with the company's proposed combination with certain businesses of OCI and the company's strategic venture with CHS.
(3) Represents the loss in 2016 on the embedded derivative included within the terms of the company's strategic venture with CHS.
(4) Loss (gain) on foreign currency transactions primarily relates to the unrealized foreign currency exchange rate impact on intercompany debt that has not been permanently invested.
(5) Represents the adjustment to the GAAP basis tax provision reflecting the tax impact of the other non-GAAP adjustments. The income tax adjustments for the twelve months ended December 31, 2016 also include the tax impact of certain transaction costs that were capitalized in prior tax periods and that are now deductible as a result of the termination of the combination agreement with OCI.

Contacts

CF Industries Holdings, Inc.
Media
Chris Close
Director, Corporate Communications
847-405-2542
cclose@cfindustries.com
or
Investors
Martin Jarosick
Vice President, Investor Relations
847-405-2045
mjarosick@cfindustries.com

Release Summary

CF Industries Holdings, Inc. Reports Fourth Quarter Net Loss of $320 Million and EBITDA Loss of $135 Million; Adjusted Net Loss of $90 Million and Adjusted EBITDA of $133 Million

Contacts

CF Industries Holdings, Inc.
Media
Chris Close
Director, Corporate Communications
847-405-2542
cclose@cfindustries.com
or
Investors
Martin Jarosick
Vice President, Investor Relations
847-405-2045
mjarosick@cfindustries.com