Delaware (State or other jurisdiction of incorporation) 4 Parkway North, Suite 400 Deerfield, IL (Address of principal executive offices) | 001-32597 (Commission File Number) | 20-2697511 (I.R.S. Employer Identification No.) 60015 (Zip Code) |
Exhibit No. | Description of Exhibit | |
Date: | February 14, 2018 | CF INDUSTRIES HOLDINGS, INC. | |||
By: | /s/ Dennis P. Kelleher | ||||
Name: | Dennis P. Kelleher | ||||
Title: | Senior Vice President and Chief Financial Officer |
4 Parkway North, Suite 400 | ||||
Deerfield, IL 60015 | ||||
www.cfindustries.com |
• | Net earnings of $465 million, or $1.98 per diluted share, which includes a net income tax benefit of $491 million, or $2.09 per diluted share, as a result of the U.S. Tax Cuts and Jobs Act |
• | Adjusted net loss(1) of $3 million or $0.02 per diluted share(1) |
• | EBITDA(2) of $224 million; adjusted EBITDA(2) of $260 million |
• | Sales volume of approximately 5.3 million tons, five percent higher than previous quarterly record |
• | Reduced long-term debt by $1.1 billion, lowering annualized interest payments by $76 million |
• | Net earnings of $358 million, or $1.53 per diluted share, which includes a net income tax benefit of $491 million, or $2.10 per diluted share, as a result of the U.S. Tax Cuts and Jobs Act |
• | Adjusted net loss(1) of $59 million or $0.25 per diluted share(1) |
• | EBITDA(2) of $856 million; adjusted EBITDA(2) of $969 million |
• | Year-end 12-month rolling average recordable incident rate at lowest level in company’s history |
• | Record production volume of 10.3 million tons of gross ammonia |
• | Record sales volumes of approximately 20 million product tons |
(1) | See reconciliations of 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) | EBITDA is defined as net earnings (loss) 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. |
For additional information: | |
Media | Investors |
Chris Close | Martin Jarosick |
Director, Corporate Communications | Vice President, Investor Relations |
847-405-2542 - cclose@cfindustries.com | 847-405-2045 - mjarosick@cfindustries.com |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions, except per share and per MMBtu amounts) | |||||||||||||||
Net sales | $ | 1,099 | $ | 867 | $ | 4,130 | $ | 3,685 | |||||||
Cost of sales | 956 | 773 | 3,700 | 2,845 | |||||||||||
Gross margin | $ | 143 | $ | 94 | $ | 430 | $ | 840 | |||||||
Gross margin percentage | 13.0 | % | 10.8 | % | 10.4 | % | 22.8 | % | |||||||
Net earnings (loss) attributable to common stockholders | $ | 465 | $ | (320 | ) | $ | 358 | $ | (277 | ) | |||||
Adjusted net (loss) earnings(1) | $ | (3 | ) | $ | (90 | ) | $ | (59 | ) | $ | 109 | ||||
Net earnings (loss) per diluted share | $ | 1.98 | $ | (1.38 | ) | $ | 1.53 | $ | (1.19 | ) | |||||
Adjusted net (loss) earnings per diluted share(1) | $ | (0.02 | ) | $ | (0.39 | ) | $ | (0.25 | ) | $ | 0.47 | ||||
EBITDA(1) | $ | 224 | $ | (135 | ) | $ | 856 | $ | 395 | ||||||
Adjusted EBITDA(1) | $ | 260 | $ | 133 | $ | 969 | $ | 858 | |||||||
Tons of product sold (000s) | 5,284 | 4,683 | 19,952 | 16,957 | |||||||||||
Supplemental data (per MMBtu): | |||||||||||||||
Natural gas costs in cost of sales(2) | $ | 3.11 | $ | 3.18 | $ | 3.33 | $ | 2.61 | |||||||
Realized derivatives loss in cost of sales(3) | 0.13 | 0.06 | 0.07 | 0.46 | |||||||||||
Cost of natural gas in cost of sales | $ | 3.24 | $ | 3.24 | $ | 3.40 | $ | 3.07 | |||||||
Average daily market price of natural gas (per MMBtu): | |||||||||||||||
Henry Hub | $ | 2.87 | $ | 2.99 | $ | 2.96 | $ | 2.48 | |||||||
National Balancing Point UK | $ | 6.92 | $ | 5.69 | $ | 5.80 | $ | 4.66 | |||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | $ | (3 | ) | $ | (91 | ) | $ | 61 | $ | (260 | ) | ||||
Depreciation and amortization | $ | 235 | $ | 203 | $ | 883 | $ | 678 | |||||||
Capital expenditures | $ | 183 | $ | 392 | $ | 473 | $ | 2,211 | |||||||
Production volume by product tons (000s): | |||||||||||||||
Ammonia(4) | 2,642 | 2,326 | 10,295 | 8,307 | |||||||||||
Granular urea | 1,122 | 914 | 4,451 | 3,368 | |||||||||||
UAN (32%) | 1,892 | 1,795 | 6,914 | 6,698 | |||||||||||
AN | 555 | 553 | 2,127 | 1,845 |
(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 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. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Pre-Tax | After-Tax | Pre-Tax | After-Tax | Pre-Tax | After-Tax | Pre-Tax | After-Tax | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Impact of U.S. Tax Cuts and Jobs Act(1) | $ | (491 | ) | $ | (491 | ) | $ | — | $ | — | $ | (491 | ) | $ | (491 | ) | $ | — | $ | — | |||||||
Depreciation and amortization(2) | 235 | 151 | 203 | 128 | 883 | 558 | 678 | 426 | |||||||||||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives(3) | (3 | ) | (1 | ) | (91 | ) | (57 | ) | 61 | 39 | (260 | ) | (163 | ) | |||||||||||||
(Gain) loss on foreign currency transactions including intercompany loans(4)(5) | — | (1 | ) | 7 | 8 | 2 | 1 | 93 | 93 | ||||||||||||||||||
Equity method investment tax contingency accrual(6)(7) | — | — | — | — | 7 | 7 | — | — | |||||||||||||||||||
Strategic venture with CHS: | |||||||||||||||||||||||||||
Noncontrolling interest(8) | 33 | 33 | 26 | 26 | 73 | 73 | 93 | 93 | |||||||||||||||||||
Loss on embedded derivative(4)(9) | — | 1 | 1 | 1 | 4 | 3 | 23 | 14 | |||||||||||||||||||
Loss on debt extinguishment | 53 | 33 | 167 | 105 | 53 | 33 | 167 | 105 | |||||||||||||||||||
Debt and revolver amendment fees(10) | — | — | 14 | 8 | — | — | 18 | 11 | |||||||||||||||||||
Capacity expansion project expenses(4) | — | — | 14 | 9 | — | — | 73 | 46 | |||||||||||||||||||
Start-up costs Donaldsonville / Port Neal expansion plants(3) | — | — | 34 | 21 | — | — | 52 | 32 | |||||||||||||||||||
Transaction costs and termination agreement with OCI: | |||||||||||||||||||||||||||
Transaction costs(11) | — | — | — | — | — | — | 179 | 96 | |||||||||||||||||||
Financing costs related to bridge loan commitment fee(12) | — | — | — | — | — | — | 28 | 18 | |||||||||||||||||||
Impairment of equity method investment in PLNL(7) | — | — | 134 | 134 | — | — | 134 | 134 | |||||||||||||||||||
Gain on sale of equity method investment(7) | (14 | ) | (9 | ) | — | — | (14 | ) | (9 | ) | — | — | |||||||||||||||
Total Impact of Significant Items | $ | (187 | ) | $ | (284 | ) | $ | 509 | $ | 383 | $ | 578 | $ | 214 | $ | 1,278 | $ | 905 |
(1) | Included in income tax benefit in our consolidated statements of operations. |
(2) | Included primarily in cost of sales and selling, general and administrative expenses in our consolidated statements of operations. |
(3) | Included in cost of sales in our consolidated statements of operations. |
(4) | Included in other operating—net in our consolidated statements of operations. |
(5) | Primarily relates to the unrealized foreign currency exchange rate impact on intercompany debt that has not been permanently invested. |
(6) | Represents an accrual on the books of Point Lisas Nitrogen Ltd. (PLNL), the company's Trinidad joint venture, for a disputed tax assessment. Amount reflects the company's 50 percent equity interest in PLNL. |
(7) | Included in equity in earnings (losses) of operating affiliates in our consolidated statements of operations. |
(8) | Included in net earnings attributable to noncontrolling interests in our consolidated statements of operations. |
(9) | Represents the loss on the embedded derivative included within the terms of the company's strategic venture with CHS. |
(10) | Included primarily in interest expense in our consolidated statements of operations. |
(11) | Transaction costs relate to costs of various consulting and legal services associated with the company's proposed combination with certain businesses of OCI N.V. (OCI) and the company's strategic venture with CHS. |
(12) | Included in interest expense in our consolidated statements of operations. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 344 | $ | 211 | $ | 1,209 | $ | 981 | |||||||
Cost of sales | 300 | 210 | 1,071 | 715 | |||||||||||
Gross margin | $ | 44 | $ | 1 | $ | 138 | $ | 266 | |||||||
Gross margin percentage | 12.8 | % | 0.5 | % | 11.4 | % | 27.1 | % | |||||||
Sales volume by product tons (000s) | 1,207 | 762 | 4,105 | 2,874 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 991 | 626 | 3,367 | 2,358 | |||||||||||
Average selling price per product ton | $ | 285 | $ | 277 | $ | 295 | $ | 341 | |||||||
Average selling price per nutrient ton(1) | 347 | 337 | 359 | 416 | |||||||||||
Gross margin per product ton | $ | 36 | $ | 1 | $ | 34 | $ | 93 | |||||||
Gross margin per nutrient ton(1) | 44 | 2 | 41 | 113 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 44 | $ | 1 | $ | 138 | $ | 266 | |||||||
Depreciation and amortization | 53 | 37 | 183 | 96 | |||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | — | (30 | ) | 20 | (85 | ) | |||||||||
Adjusted gross margin | $ | 97 | $ | 8 | $ | 341 | $ | 277 | |||||||
Adjusted gross margin as a percent of net sales | 28.2 | % | 3.8 | % | 28.2 | % | 28.2 | % |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
(2) | Adjusted gross margin and adjusted gross margin as a percent of net sales are non-GAAP financial measures. Adjusted gross margin is defined as gross margin excluding depreciation and amortization and unrealized net mark-to-market (gain) loss on natural gas derivatives. The company has presented adjusted gross margin and adjusted gross margin 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. A reconciliation of adjusted gross margin and adjusted gross margin as a percent of net sales 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. |
• | Ammonia sales volume increased for the fourth quarter of 2017 compared to the fourth quarter of 2016 due to additional production volume from the company's Donaldsonville and Port Neal Nitrogen Complexes and increased demand for fall agricultural applications. |
• | Ammonia average selling prices increased primarily due to the impact of a tighter global nitrogen supply and demand balance. Additionally, ammonia selling prices benefited from the commencement of delivery under a long-term supply agreement. |
• | Ammonia gross margin per ton increased in the fourth quarter of 2017 compared to the fourth quarter of 2016 due to the absence of start-up expenses incurred in the fourth quarter of 2016 associated with the new Port Neal ammonia plant, production efficiencies due to increased volumes and higher average selling prices. These were partially offset by a $30 million lower unrealized mark-to-market gain on natural gas derivatives compared to the prior year period and an increase in realized natural gas costs. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 246 | $ | 189 | $ | 971 | $ | 831 | |||||||
Cost of sales | 188 | 139 | 856 | 584 | |||||||||||
Gross margin | $ | 58 | $ | 50 | $ | 115 | $ | 247 | |||||||
Gross margin percentage | 23.6 | % | 26.5 | % | 11.8 | % | 29.7 | % | |||||||
Sales volume by product tons (000s) | 1,008 | 883 | 4,357 | 3,597 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 463 | 406 | 2,004 | 1,654 | |||||||||||
Average selling price per product ton | $ | 244 | $ | 214 | $ | 223 | $ | 231 | |||||||
Average selling price per nutrient ton(1) | 531 | 466 | 485 | 502 | |||||||||||
Gross margin per product ton | $ | 58 | $ | 57 | $ | 26 | $ | 69 | |||||||
Gross margin per nutrient ton(1) | 125 | 123 | 57 | 149 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 58 | $ | 50 | $ | 115 | $ | 247 | |||||||
Depreciation and amortization | 59 | 37 | 246 | 112 | |||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (1 | ) | (23 | ) | 16 | (67 | ) | ||||||||
Adjusted gross margin | $ | 116 | $ | 64 | $ | 377 | $ | 292 | |||||||
Adjusted gross margin as a percent of net sales | 47.2 | % | 33.9 | % | 38.8 | % | 35.1 | % |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
(2) | Adjusted gross margin and adjusted gross margin as a percent of net sales are non-GAAP financial measures. Adjusted gross margin is defined as gross margin excluding depreciation and amortization and unrealized net mark-to-market (gain) loss on natural gas derivatives. The company has presented adjusted gross margin and adjusted gross margin 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. A reconciliation of adjusted gross margin and adjusted gross margin as a percent of net sales 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. |
• | Granular urea sales volume increased for the quarter primarily due to additional production volume from the company's Port Neal Nitrogen Complex. |
• | Granular urea average selling price per ton increased primarily due to the impact of a tighter global nitrogen supply and demand balance. |
• | Granular urea gross margin per ton was relatively unchanged as higher average selling prices and production efficiencies due to increased volumes were partially offset by a $1 million unrealized net mark-to-market gain on natural gas derivatives compared to a $23 million gain in the prior year period; an increase in depreciation primarily associated with the new Port Neal urea plant; and, to a lesser extent, higher realized natural gas costs. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 288 | $ | 305 | $ | 1,134 | $ | 1,196 | |||||||
Cost of sales | 272 | 274 | 1,055 | 920 | |||||||||||
Gross margin | $ | 16 | $ | 31 | $ | 79 | $ | 276 | |||||||
Gross margin percentage | 5.6 | % | 10.2 | % | 7.0 | % | 23.1 | % | |||||||
Sales volume by product tons (000s) | 1,920 | 2,047 | 7,093 | 6,681 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 606 | 648 | 2,242 | 2,109 | |||||||||||
Average selling price per product ton | $ | 150 | $ | 149 | $ | 160 | $ | 179 | |||||||
Average selling price per nutrient ton(1) | 475 | 471 | 506 | 567 | |||||||||||
Gross margin per product ton | $ | 8 | $ | 15 | $ | 11 | $ | 41 | |||||||
Gross margin per nutrient ton(1) | 26 | 48 | 35 | 131 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 16 | $ | 31 | $ | 79 | $ | 276 | |||||||
Depreciation and amortization | 73 | 72 | 265 | 247 | |||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | — | (29 | ) | 19 | (81 | ) | |||||||||
Adjusted gross margin | $ | 89 | $ | 74 | $ | 363 | $ | 442 | |||||||
Adjusted gross margin as a percent of net sales | 30.9 | % | 24.3 | % | 32.0 | % | 37.0 | % |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
(2) | Adjusted gross margin and adjusted gross margin as a percent of net sales are non-GAAP financial measures. Adjusted gross margin is defined as gross margin excluding depreciation and amortization and unrealized net mark-to-market (gain) loss on natural gas derivatives. The company has presented adjusted gross margin and adjusted gross margin 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. A reconciliation of adjusted gross margin and adjusted gross margin as a percent of net sales 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. |
• | UAN sales volume decreased in the fourth quarter of 2017 due to lower export sales than in the prior year period. |
• | UAN average selling price per ton was relatively unchanged. |
• | UAN gross margin per ton decreased in the fourth quarter of 2017 compared to the fourth quarter of 2016 due to a $29 million lower unrealized net mark-to-market gain compared to the prior year period and, to a lesser extent, an increase in realized natural gas costs partially offset by cost reduction initiatives. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 125 | $ | 93 | $ | 497 | $ | 411 | |||||||
Cost of sales | 115 | 93 | 446 | 409 | |||||||||||
Gross margin | $ | 10 | $ | — | $ | 51 | $ | 2 | |||||||
Gross margin percentage | 8.0 | % | — | % | 10.3 | % | 0.5 | % | |||||||
Sales volume by product tons (000s) | 576 | 541 | 2,353 | 2,151 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 194 | 181 | 793 | 726 | |||||||||||
Average selling price per product ton | $ | 217 | $ | 172 | $ | 211 | $ | 191 | |||||||
Average selling price per nutrient ton(1) | 644 | 514 | 627 | 566 | |||||||||||
Gross margin per product ton | $ | 17 | $ | — | $ | 22 | $ | 1 | |||||||
Gross margin per nutrient ton(1) | 52 | — | 64 | 3 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 10 | $ | — | $ | 51 | $ | 2 | |||||||
Depreciation and amortization | 21 | 21 | 85 | 93 | |||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (1 | ) | (3 | ) | 2 | (10 | ) | ||||||||
Adjusted gross margin | $ | 30 | $ | 18 | $ | 138 | $ | 85 | |||||||
Adjusted gross margin as a percent of net sales | 24.0 | % | 19.4 | % | 27.8 | % | 20.7 | % |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
(2) | Adjusted gross margin and adjusted gross margin as a percent of net sales are non-GAAP financial measures. Adjusted gross margin is defined as gross margin excluding depreciation and amortization and unrealized net mark-to-market (gain) loss on natural gas derivatives. The company has presented adjusted gross margin and adjusted gross margin 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. A reconciliation of adjusted gross margin and adjusted gross margin as a percent of net sales 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. |
• | AN sales volume increased in the fourth quarter of 2017 compared to the fourth quarter of 2016 due to increased demand for both agricultural and industrial applications. |
• | AN average selling price per ton increased in the fourth quarter of 2017 compared to the fourth quarter of 2016 due to the impact of a tighter global nitrogen supply and demand balance and the effect of a long-term AN supply agreement that commenced in 2017. |
• | AN gross margin per ton increased due to higher average selling prices partially offset by a $1 million unrealized mark-to-market gain on natural gas derivatives compared to a $3 million mark-to-market gain on natural gas derivatives in the prior year period and an increase in realized natural gas costs. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions, except per ton amounts) | |||||||||||||||
Net sales | $ | 96 | $ | 69 | $ | 319 | $ | 266 | |||||||
Cost of sales | 81 | 57 | 272 | 217 | |||||||||||
Gross margin | $ | 15 | $ | 12 | $ | 47 | $ | 49 | |||||||
Gross margin percentage | 15.6 | % | 17.4 | % | 14.7 | % | 18.4 | % | |||||||
Sales volume by product tons (000s) | 573 | 450 | 2,044 | 1,654 | |||||||||||
Sales volume by nutrient tons (000s)(1) | 112 | 87 | 397 | 317 | |||||||||||
Average selling price per product ton | $ | 168 | $ | 153 | $ | 156 | $ | 161 | |||||||
Average selling price per nutrient ton(1) | 857 | 793 | 804 | 839 | |||||||||||
Gross margin per product ton | $ | 26 | $ | 27 | $ | 23 | $ | 30 | |||||||
Gross margin per nutrient ton(1) | 134 | 138 | 118 | 155 | |||||||||||
Adjusted gross margin(2): | |||||||||||||||
Gross margin | $ | 15 | $ | 12 | $ | 47 | $ | 49 | |||||||
Depreciation and amortization | 17 | 12 | 57 | 46 | |||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (1 | ) | (6 | ) | 4 | (17 | ) | ||||||||
Adjusted gross margin | $ | 31 | $ | 18 | $ | 108 | $ | 78 | |||||||
Adjusted gross margin as a percent of net sales | 32.3 | % | 26.1 | % | 33.9 | % | 29.3 | % |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
(2) | Adjusted gross margin and adjusted gross margin as a percent of net sales are non-GAAP financial measures. Adjusted gross margin is defined as gross margin excluding depreciation and amortization and unrealized net mark-to-market (gain) loss on natural gas derivatives. The company has presented adjusted gross margin and adjusted gross margin 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. A reconciliation of adjusted gross margin and adjusted gross margin as a percent of net sales 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. |
• | Other segment volume increased in the fourth quarter of 2017 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 increased primarily due to the impact of a tighter global nitrogen supply and demand balance. |
• | Other segment gross margin per ton was relatively unchanged as higher average selling prices were partially offset by a $1 million unrealized mark-to-market gain on natural gas derivatives compared to a $6 million mark-to-market gain on natural gas derivatives in the prior year period, higher depreciation related to the new DEF unit at Donaldsonville and an increase in realized natural gas costs. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions, except per share amounts) | |||||||||||||||
Net sales | $ | 1,099 | $ | 867 | $ | 4,130 | $ | 3,685 | |||||||
Cost of sales | 956 | 773 | 3,700 | 2,845 | |||||||||||
Gross margin | 143 | 94 | 430 | 840 | |||||||||||
Selling, general and administrative expenses | 52 | 33 | 192 | 174 | |||||||||||
Transaction costs | — | — | — | 179 | |||||||||||
Other operating—net | 4 | 27 | 18 | 208 | |||||||||||
Total other operating costs and expenses | 56 | 60 | 210 | 561 | |||||||||||
Equity in earnings (losses) of operating affiliates | 17 | (134 | ) | 9 | (145 | ) | |||||||||
Operating earnings (loss) | 104 | (100 | ) | 229 | 134 | ||||||||||
Interest expense | 74 | 70 | 315 | 200 | |||||||||||
Interest income | (4 | ) | (1 | ) | (12 | ) | (5 | ) | |||||||
Loss on debt extinguishment | 53 | 167 | 53 | 167 | |||||||||||
Other non-operating—net | (2 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||
Loss before income taxes | (17 | ) | (335 | ) | (125 | ) | (226 | ) | |||||||
Income tax benefit | (520 | ) | (47 | ) | (575 | ) | (68 | ) | |||||||
Net earnings (loss) | 503 | (288 | ) | 450 | (158 | ) | |||||||||
Less: Net earnings attributable to noncontrolling interests | 38 | 32 | 92 | 119 | |||||||||||
Net earnings (loss) attributable to common stockholders | $ | 465 | $ | (320 | ) | $ | 358 | $ | (277 | ) | |||||
Net earnings (loss) per share attributable to common stockholders: | |||||||||||||||
Basic | $ | 1.99 | $ | (1.38 | ) | $ | 1.53 | $ | (1.19 | ) | |||||
Diluted | $ | 1.98 | $ | (1.38 | ) | $ | 1.53 | $ | (1.19 | ) | |||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 233.5 | 233.1 | 233.5 | 233.1 | |||||||||||
Diluted | 234.1 | 233.1 | 233.9 | 233.1 |
December 31, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 835 | $ | 1,164 | |||
Restricted cash | — | 5 | |||||
Accounts receivable—net | 307 | 236 | |||||
Inventories | 275 | 339 | |||||
Prepaid income taxes | 33 | 841 | |||||
Other current assets | 15 | 70 | |||||
Total current assets | 1,465 | 2,655 | |||||
Property, plant and equipment—net | 9,175 | 9,652 | |||||
Investments in affiliates | 108 | 139 | |||||
Goodwill | 2,371 | 2,345 | |||||
Other assets | 344 | 340 | |||||
Total assets | $ | 13,463 | $ | 15,131 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 472 | $ | 638 | |||
Income taxes payable | 2 | 1 | |||||
Customer advances | 89 | 42 | |||||
Other current liabilities | 17 | 5 | |||||
Total current liabilities | 580 | 686 | |||||
Long-term debt | 4,692 | 5,778 | |||||
Deferred income taxes | 1,047 | 1,630 | |||||
Other liabilities | 460 | 545 | |||||
Equity: | |||||||
Stockholders' equity | 3,579 | 3,348 | |||||
Noncontrolling interests | 3,105 | 3,144 | |||||
Total equity | 6,684 | 6,492 | |||||
Total liabilities and equity | $ | 13,463 | $ | 15,131 |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Operating Activities: | |||||||||||||||
Net earnings (loss) | $ | 503 | $ | (288 | ) | $ | 450 | $ | (158 | ) | |||||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 235 | 203 | 883 | 678 | |||||||||||
Deferred income taxes | (547 | ) | 9 | (601 | ) | 739 | |||||||||
Stock-based compensation expense | 4 | 4 | 17 | 19 | |||||||||||
Unrealized net (gain) loss on natural gas derivatives | (3 | ) | (91 | ) | 61 | (260 | ) | ||||||||
Loss on embedded derivative | — | 1 | 4 | 23 | |||||||||||
Impairment of equity method investment in PLNL | — | 134 | — | 134 | |||||||||||
Gain on sale of equity method investment | (14 | ) | — | (14 | ) | — | |||||||||
Loss on debt extinguishment | 53 | 167 | 53 | 167 | |||||||||||
Loss on disposal of property, plant and equipment | — | 2 | 3 | 10 | |||||||||||
Undistributed (earnings) losses of affiliates—net of taxes | (4 | ) | 9 | 3 | 9 | ||||||||||
Changes in: | |||||||||||||||
Accounts receivable—net | (28 | ) | (37 | ) | (57 | ) | 18 | ||||||||
Inventories | 28 | (3 | ) | 40 | (7 | ) | |||||||||
Accrued and prepaid income taxes | 5 | (11 | ) | 809 | (676 | ) | |||||||||
Accounts payable and accrued expenses | (6 | ) | (11 | ) | (1 | ) | (18 | ) | |||||||
Customer advances | (3 | ) | (45 | ) | 48 | (120 | ) | ||||||||
Other—net | 7 | (17 | ) | (67 | ) | 59 | |||||||||
Net cash provided by operating activities | 230 | 26 | 1,631 | 617 | |||||||||||
Investing Activities: | |||||||||||||||
Additions to property, plant and equipment | (183 | ) | (392 | ) | (473 | ) | (2,211 | ) | |||||||
Proceeds from sale of property, plant and equipment | 7 | 6 | 20 | 14 | |||||||||||
Distributions received from unconsolidated affiliates | 2 | — | 14 | — | |||||||||||
Proceeds from sale of auction rate securities | — | — | 9 | — | |||||||||||
Proceeds from sale of equity method investment | 16 | — | 16 | — | |||||||||||
Withdrawals from restricted cash funds | — | 2 | 5 | 18 | |||||||||||
Other—net | 1 | (2 | ) | 1 | 2 | ||||||||||
Net cash used in investing activities | (157 | ) | (386 | ) | (408 | ) | (2,177 | ) | |||||||
Financing Activities: | |||||||||||||||
Proceeds from long-term borrowings | — | 1,244 | — | 1,244 | |||||||||||
Payments of long-term borrowings | (1,148 | ) | (1,170 | ) | (1,148 | ) | (1,170 | ) | |||||||
Proceeds from short-term borrowings | — | — | — | 150 | |||||||||||
Payments of short-term borrowings | — | — | — | (150 | ) | ||||||||||
Payment to CHS related to credit provision | (5 | ) | (5 | ) | (5 | ) | (5 | ) | |||||||
Financing fees | — | (20 | ) | (1 | ) | (31 | ) | ||||||||
Dividends paid on common stock | (70 | ) | (71 | ) | (280 | ) | (280 | ) | |||||||
Issuance of noncontrolling interest in CFN | — | — | — | 2,800 | |||||||||||
Distributions to noncontrolling interests | (6 | ) | (8 | ) | (131 | ) | (119 | ) | |||||||
Issuances of common stock under employee stock plans | — | — | 1 | — | |||||||||||
Net cash (used in) provided by financing activities | (1,229 | ) | (30 | ) | (1,564 | ) | 2,439 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (1 | ) | — | 12 | (1 | ) | |||||||||
(Decrease) increase in cash and cash equivalents | (1,157 | ) | (390 | ) | (329 | ) | 878 | ||||||||
Cash and cash equivalents at beginning of period | 1,992 | 1,554 | 1,164 | 286 | |||||||||||
Cash and cash equivalents at end of period | $ | 835 | $ | 1,164 | $ | 835 | $ | 1,164 |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Net earnings (loss) attributable to common stockholders | $ | 465 | $ | (320 | ) | $ | 358 | $ | (277 | ) | |||||
Interest expense—net | 70 | 69 | 303 | 195 | |||||||||||
Income tax benefit | (520 | ) | (47 | ) | (575 | ) | (68 | ) | |||||||
Depreciation and amortization | 235 | 203 | 883 | 678 | |||||||||||
Less other adjustments: | |||||||||||||||
Depreciation and amortization in noncontrolling interests | (23 | ) | (23 | ) | (101 | ) | (78 | ) | |||||||
Loan fee amortization(1) | (3 | ) | (17 | ) | (12 | ) | (55 | ) | |||||||
EBITDA | 224 | (135 | ) | 856 | 395 | ||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (3 | ) | (91 | ) | 61 | (260 | ) | ||||||||
Loss on foreign currency transactions including intercompany loans(2) | — | 7 | 2 | 93 | |||||||||||
Equity method investment tax contingency accrual(3) | — | — | 7 | — | |||||||||||
Loss on embedded derivative(4) | — | 1 | 4 | 23 | |||||||||||
Loss on debt extinguishment | 53 | 167 | 53 | 167 | |||||||||||
Private Senior Notes amendment arrangement fees | — | — | — | 2 | |||||||||||
Capacity expansion project expenses | — | 14 | — | 73 | |||||||||||
Start-up costs Donaldsonville ammonia | — | — | — | 18 | |||||||||||
Start-up costs Port Neal ammonia and urea | — | 34 | — | 34 | |||||||||||
Loss on foreign currency derivatives | — | 2 | — | — | |||||||||||
Transaction costs(5) | — | — | — | 179 | |||||||||||
Impairment of equity method investment in PLNL | — | 134 | — | 134 | |||||||||||
Gain on sale of equity method investment | (14 | ) | — | (14 | ) | — | |||||||||
Total adjustments | 36 | 268 | 113 | 463 | |||||||||||
Adjusted EBITDA | $ | 260 | $ | 133 | $ | 969 | $ | 858 | |||||||
Net sales | $ | 1,099 | $ | 867 | $ | 4,130 | $ | 3,685 | |||||||
Tons of product sold (000s) | 5,284 | 4,683 | 19,952 | 16,957 | |||||||||||
Net earnings (loss) as a percent of net sales | 42.3 | % | (36.9 | )% | 8.7 | % | (7.5 | )% | |||||||
Net earnings (loss) per ton | $ | 88.00 | $ | (68.33 | ) | $ | 17.94 | $ | (16.34 | ) | |||||
EBITDA as a percent of net sales | 20.4 | % | (15.6 | )% | 20.7 | % | 10.7 | % | |||||||
EBITDA per ton | $ | 42.39 | $ | (28.83 | ) | $ | 42.90 | $ | 23.29 | ||||||
Adjusted EBITDA as a percent of net sales | 23.7 | % | 15.3 | % | 23.5 | % | 23.3 | % | |||||||
Adjusted EBITDA per ton | $ | 49.21 | $ | 28.40 | $ | 48.57 | $ | 50.60 |
(1) | Loan fee amortization is included in both interest expense-net and depreciation and amortization. |
(2) | Loss on foreign currency transactions including intercompany loans primarily relates to the unrealized foreign currency exchange rate impact on intercompany debt that has not been permanently invested. |
(3) | Represents an accrual on the books of Point Lisas Nitrogen Ltd. (PLNL), the company's Trinidad joint venture, for a disputed tax assessment. Amount reflects the company's 50 percent equity interest in PLNL. This is included in equity in losses of operating affiliates in our consolidated statements of operations. |
(4) | Represents the loss on the embedded derivative included within the terms of the company's strategic venture with CHS. |
(5) | Transaction costs relate to 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. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Net earnings (loss) attributable to common stockholders | $ | 465 | $ | (320 | ) | $ | 358 | $ | (277 | ) | |||||
Impact of U.S. Tax Cuts and Jobs Act | (491 | ) | — | (491 | ) | — | |||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (3 | ) | (91 | ) | 61 | (260 | ) | ||||||||
Loss on foreign currency transactions including intercompany loans(1) | — | 7 | 2 | 93 | |||||||||||
Equity method investment tax contingency accrual(2) | — | — | 7 | — | |||||||||||
Loss on embedded derivative(3) | — | 1 | 4 | 23 | |||||||||||
Loss on debt extinguishment | 53 | 167 | 53 | 167 | |||||||||||
Financing costs related to Private Senior Notes and Senior Secured Notes(4) | — | 10 | — | 10 | |||||||||||
Revolver amendment fees(4) | — | 4 | — | 6 | |||||||||||
Private Senior Notes amendment arrangement fees | — | — | — | 2 | |||||||||||
Capacity expansion project expenses | — | 14 | — | 73 | |||||||||||
Start-up costs Donaldsonville ammonia | — | — | — | 18 | |||||||||||
Start-up costs Port Neal ammonia and urea | — | 34 | — | 34 | |||||||||||
Loss on foreign currency derivatives | — | 2 | — | — | |||||||||||
Transaction costs(5) | — | — | — | 179 | |||||||||||
Financing costs related to bridge loan commitment fee(4) | — | — | — | 28 | |||||||||||
Impairment of equity method investment in PLNL | — | 134 | — | 134 | |||||||||||
Gain on sale of equity method investment | (14 | ) | — | (14 | ) | — | |||||||||
Income tax adjustments(6) | (13 | ) | (52 | ) | (39 | ) | (121 | ) | |||||||
Total adjustments | (468 | ) | 230 | (417 | ) | 386 | |||||||||
Adjusted net (loss) earnings | $ | (3 | ) | $ | (90 | ) | $ | (59 | ) | $ | 109 |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net earnings (loss) per diluted share attributable to common stockholders | $ | 1.98 | $ | (1.38 | ) | $ | 1.53 | $ | (1.19 | ) | |||||
Impact of U.S. Tax Cuts and Jobs Act | (2.09 | ) | — | (2.10 | ) | — | |||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (0.01 | ) | (0.39 | ) | 0.26 | (1.12 | ) | ||||||||
Loss on foreign currency transactions including intercompany loans(1) | — | 0.03 | 0.01 | 0.40 | |||||||||||
Equity method investment tax contingency accrual(2) | — | — | 0.03 | — | |||||||||||
Loss on embedded derivative(3) | — | — | 0.02 | 0.10 | |||||||||||
Loss on debt extinguishment | 0.23 | 0.72 | 0.23 | 0.72 | |||||||||||
Financing costs related to Private Senior Notes and Senior Secured Notes(4) | — | 0.04 | — | 0.04 | |||||||||||
Revolver amendment fees(4) | — | 0.02 | — | 0.03 | |||||||||||
Private Senior Notes amendment arrangement fees | — | — | — | 0.01 | |||||||||||
Capacity expansion project expenses | — | 0.06 | — | 0.31 | |||||||||||
Start-up costs Donaldsonville ammonia | — | — | — | 0.08 | |||||||||||
Start-up costs Port Neal ammonia and urea | — | 0.14 | — | 0.14 | |||||||||||
Loss on foreign currency derivatives | — | 0.01 | — | — | |||||||||||
Transaction costs(5) | — | — | — | 0.77 | |||||||||||
Financing costs related to bridge loan commitment fee(4) | — | — | — | 0.12 | |||||||||||
Impairment of equity method investment in PLNL | — | 0.57 | — | 0.57 | |||||||||||
Gain on sale of equity method investment | (0.06 | ) | — | (0.06 | ) | — | |||||||||
Income tax adjustments(6) | (0.07 | ) | (0.21 | ) | (0.17 | ) | (0.51 | ) | |||||||
Total adjustments | (2.00 | ) | 0.99 | (1.78 | ) | 1.66 | |||||||||
Adjusted net (loss) earnings per diluted share | $ | (0.02 | ) | $ | (0.39 | ) | $ | (0.25 | ) | $ | 0.47 |
(1) | Loss on foreign currency transactions including intercompany loans primarily relates to the unrealized foreign currency exchange rate impact on intercompany debt that has not been permanently invested. |
(2) | Represents an accrual on the books of Point Lisas Nitrogen Ltd. (PLNL), the company's Trinidad joint venture, for a disputed tax assessment. Amount reflects the company's 50 percent equity interest in PLNL. This is included in equity in earnings (losses) of operating affiliates in our consolidated statements of operations. |
(3) | Represents the loss on the embedded derivative included within the terms of the company's strategic venture with CHS. |
(4) | Not included in the calculation of EBITDA. |
(5) | Transaction costs relate to 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. |
(6) | Represents the adjustment to the GAAP basis tax provision reflecting the tax impact of the other non-GAAP adjustments. |
Three months ended December 31, | Year ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Cost of sales | $ | 956 | $ | 773 | $ | 3,700 | $ | 2,845 | |||||||
Natural gas costs(1) | 309 | 246 | 1,194 | 761 | |||||||||||
Realized net losses on natural gas derivatives(2) | 13 | 5 | 26 | 133 | |||||||||||
Unrealized net mark-to-market (gain) loss on natural gas derivatives | (3 | ) | (91 | ) | 61 | (260 | ) | ||||||||
Depreciation and amortization | 223 | 181 | 836 | 597 | |||||||||||
Start-up costs Donaldsonville ammonia | — | — | — | 18 | |||||||||||
Start-up costs Port Neal ammonia and urea | — | 34 | — | 34 | |||||||||||
Total adjustments | 542 | 375 | 2,117 | 1,283 | |||||||||||
Controllable cost of sales | $ | 414 | $ | 398 | $ | 1,583 | $ | 1,562 | |||||||
Tons of product sold (000s) | 5,284 | 4,683 | 19,952 | 16,957 | |||||||||||
Cost of sales per ton | $ | 180.92 | $ | 165.07 | $ | 185.45 | $ | 167.78 | |||||||
Increase in cost of sales per ton | 10 | % | 11 | % | |||||||||||
Controllable cost of sales per ton | $ | 78.35 | $ | 84.99 | $ | 79.34 | $ | 92.12 | |||||||
Decrease in controllable cost of sales per ton | (8 | )% | (14 | )% |
(1) | 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. |
(2) | 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. |
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