500000050000000.510.280.50false--12-31Q3201900013244040.300.900.300.900.010.010.015000000005000000002338009032193753060.037820.035620.047590.050310.052790.054650.075290.0340.03450.0450.04950.05150.053750.071250.0340.03450.0450.04950.05150.053750.07125P3YP1YP1YP1Y00.010.01500000005000000010982408
0001324404
2019-01-01
2019-09-30
0001324404
2019-10-28
0001324404
2019-07-01
2019-09-30
0001324404
2018-07-01
2018-09-30
0001324404
2018-01-01
2018-09-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-07-01
2019-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2018-12-31
0001324404
2018-12-31
0001324404
2019-09-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-12-31
0001324404
us-gaap:NoncontrollingInterestMember
2018-12-31
0001324404
us-gaap:TreasuryStockMember
2018-12-31
0001324404
us-gaap:CommonStockMember
2018-12-31
0001324404
us-gaap:RetainedEarningsMember
2018-12-31
0001324404
us-gaap:ParentMember
2018-12-31
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2017-12-31
0001324404
us-gaap:TreasuryStockMember
2018-01-01
2018-09-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-07-01
2018-09-30
0001324404
us-gaap:TreasuryStockMember
2018-07-01
2018-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2018-07-01
2018-09-30
0001324404
us-gaap:ParentMember
2018-07-01
2018-09-30
0001324404
us-gaap:CommonStockMember
2018-06-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2018-01-01
2018-09-30
0001324404
us-gaap:RetainedEarningsMember
2018-07-01
2018-09-30
0001324404
us-gaap:NoncontrollingInterestMember
2018-09-30
0001324404
us-gaap:NoncontrollingInterestMember
2018-01-01
2018-09-30
0001324404
us-gaap:CommonStockMember
2018-07-01
2018-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2018-06-30
0001324404
us-gaap:RetainedEarningsMember
2018-01-01
2018-09-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-01-01
2018-09-30
0001324404
us-gaap:ParentMember
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:CommonStockMember
2017-12-31
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2017-12-31
0001324404
us-gaap:RetainedEarningsMember
2017-12-31
0001324404
us-gaap:ParentMember
2018-01-01
2018-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
2017-12-31
0001324404
us-gaap:AdditionalPaidInCapitalMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:TreasuryStockMember
2017-12-31
0001324404
us-gaap:CommonStockMember
2018-01-01
2018-09-30
0001324404
2018-06-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:CommonStockMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2017-12-31
0001324404
us-gaap:TreasuryStockMember
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:RetainedEarningsMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:ParentMember
2017-12-31
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-06-30
0001324404
us-gaap:CommonStockMember
2017-12-31
0001324404
us-gaap:NoncontrollingInterestMember
2018-07-01
2018-09-30
0001324404
us-gaap:ParentMember
2018-06-30
0001324404
us-gaap:ParentMember
2017-12-31
0001324404
us-gaap:TreasuryStockMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:RetainedEarningsMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201409Member
2017-12-31
0001324404
us-gaap:NoncontrollingInterestMember
2017-12-31
0001324404
us-gaap:CommonStockMember
2018-09-30
0001324404
us-gaap:NoncontrollingInterestMember
2018-06-30
0001324404
us-gaap:RetainedEarningsMember
2018-06-30
0001324404
us-gaap:RetainedEarningsMember
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:NoncontrollingInterestMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:NoncontrollingInterestMember
2017-12-31
0001324404
2017-12-31
0001324404
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:AdditionalPaidInCapitalMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:ParentMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:TreasuryStockMember
2017-12-31
0001324404
us-gaap:AccountingStandardsUpdate201409Member
us-gaap:AdditionalPaidInCapitalMember
2017-12-31
0001324404
us-gaap:TreasuryStockMember
2018-06-30
0001324404
us-gaap:CommonStockMember
2019-01-01
2019-09-30
0001324404
us-gaap:CommonStockMember
2019-09-30
0001324404
us-gaap:CommonStockMember
2019-07-01
2019-09-30
0001324404
us-gaap:TreasuryStockMember
2019-01-01
2019-09-30
0001324404
us-gaap:ParentMember
2019-09-30
0001324404
us-gaap:NoncontrollingInterestMember
2019-07-01
2019-09-30
0001324404
us-gaap:ParentMember
2019-07-01
2019-09-30
0001324404
us-gaap:ParentMember
2019-01-01
2019-09-30
0001324404
us-gaap:RetainedEarningsMember
2019-07-01
2019-09-30
0001324404
us-gaap:NoncontrollingInterestMember
2019-01-01
2019-09-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-01-01
2019-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2019-07-01
2019-09-30
0001324404
us-gaap:RetainedEarningsMember
2019-01-01
2019-09-30
0001324404
us-gaap:TreasuryStockMember
2019-07-01
2019-09-30
0001324404
us-gaap:RetainedEarningsMember
2019-06-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-09-30
0001324404
us-gaap:NoncontrollingInterestMember
2019-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2019-01-01
2019-09-30
0001324404
us-gaap:TreasuryStockMember
2019-06-30
0001324404
2019-06-30
0001324404
us-gaap:NoncontrollingInterestMember
2019-06-30
0001324404
us-gaap:TreasuryStockMember
2019-09-30
0001324404
us-gaap:RetainedEarningsMember
2019-09-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2019-06-30
0001324404
us-gaap:ParentMember
2019-06-30
0001324404
us-gaap:CommonStockMember
2019-06-30
0001324404
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-06-30
0001324404
us-gaap:AdditionalPaidInCapitalMember
2019-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:OperatingEquityMethodInvestmentMember
2019-09-30
0001324404
2022-01-01
2019-09-30
0001324404
2020-01-01
2019-09-30
0001324404
2019-10-01
2019-09-30
0001324404
srt:NorthAmericaMember
2018-01-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:UreaMember
2018-01-01
2018-09-30
0001324404
cf:EuropeandOtherMember
us-gaap:AllOtherSegmentsMember
2019-01-01
2019-09-30
0001324404
cf:UreaMember
2018-01-01
2018-09-30
0001324404
cf:UANMember
2018-01-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:UANMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
2018-01-01
2018-09-30
0001324404
cf:UANMember
2019-01-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniaMember
2018-01-01
2018-09-30
0001324404
cf:EuropeandOtherMember
cf:UreaMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:UANMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:UreaMember
2018-01-01
2018-09-30
0001324404
us-gaap:AllOtherSegmentsMember
2018-01-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniumNitrateSegmentMember
2019-01-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:UreaMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniaMember
2019-01-01
2019-09-30
0001324404
cf:AmmoniaMember
2019-01-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:UANMember
2018-01-01
2018-09-30
0001324404
srt:NorthAmericaMember
2019-01-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniaMember
2019-01-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniumNitrateSegmentMember
2018-01-01
2018-09-30
0001324404
cf:EuropeandOtherMember
2019-01-01
2019-09-30
0001324404
srt:NorthAmericaMember
us-gaap:AllOtherSegmentsMember
2018-01-01
2018-09-30
0001324404
cf:AmmoniaMember
2018-01-01
2018-09-30
0001324404
cf:UreaMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniaMember
2018-01-01
2018-09-30
0001324404
cf:AmmoniumNitrateSegmentMember
2018-01-01
2018-09-30
0001324404
cf:EuropeandOtherMember
cf:UANMember
2018-01-01
2018-09-30
0001324404
srt:NorthAmericaMember
us-gaap:AllOtherSegmentsMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
us-gaap:AllOtherSegmentsMember
2018-01-01
2018-09-30
0001324404
cf:AmmoniumNitrateSegmentMember
2019-01-01
2019-09-30
0001324404
us-gaap:AllOtherSegmentsMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniumNitrateSegmentMember
2019-01-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniumNitrateSegmentMember
2018-01-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:UreaMember
2019-07-01
2019-09-30
0001324404
us-gaap:AllOtherSegmentsMember
2019-07-01
2019-09-30
0001324404
cf:UreaMember
2019-07-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniumNitrateSegmentMember
2019-07-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniumNitrateSegmentMember
2019-07-01
2019-09-30
0001324404
cf:AmmoniaMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniumNitrateSegmentMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
cf:UANMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:UreaMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
us-gaap:AllOtherSegmentsMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
2019-07-01
2019-09-30
0001324404
cf:UreaMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniaMember
2019-07-01
2019-09-30
0001324404
us-gaap:AllOtherSegmentsMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
cf:UANMember
2019-07-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:UreaMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
cf:UANMember
2018-07-01
2018-09-30
0001324404
srt:NorthAmericaMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
cf:UreaMember
2019-07-01
2019-09-30
0001324404
cf:UANMember
2018-07-01
2018-09-30
0001324404
cf:UANMember
2019-07-01
2019-09-30
0001324404
cf:AmmoniumNitrateSegmentMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
2019-07-01
2019-09-30
0001324404
srt:NorthAmericaMember
us-gaap:AllOtherSegmentsMember
2019-07-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniaMember
2018-07-01
2018-09-30
0001324404
cf:AmmoniaMember
2019-07-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:UANMember
2019-07-01
2019-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniumNitrateSegmentMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
us-gaap:AllOtherSegmentsMember
2019-07-01
2019-09-30
0001324404
cf:AmmoniumNitrateSegmentMember
2019-07-01
2019-09-30
0001324404
cf:EuropeandOtherMember
us-gaap:AllOtherSegmentsMember
2018-07-01
2018-09-30
0001324404
cf:EuropeandOtherMember
cf:AmmoniaMember
2019-07-01
2019-09-30
0001324404
srt:NorthAmericaMember
cf:AmmoniaMember
2018-07-01
2018-09-30
0001324404
2023-01-01
2019-09-30
0001324404
2021-01-01
2019-09-30
0001324404
us-gaap:BuildingAndBuildingImprovementsMember
2018-12-31
0001324404
us-gaap:MachineryAndEquipmentMember
2019-09-30
0001324404
us-gaap:BuildingAndBuildingImprovementsMember
2019-09-30
0001324404
us-gaap:LandMember
2019-09-30
0001324404
us-gaap:MachineryAndEquipmentMember
2018-12-31
0001324404
us-gaap:LandMember
2018-12-31
0001324404
us-gaap:ConstructionInProgressMember
2019-09-30
0001324404
us-gaap:ConstructionInProgressMember
2018-12-31
0001324404
us-gaap:MachineryAndEquipmentMember
2018-09-30
0001324404
us-gaap:MachineryAndEquipmentMember
2019-01-01
2019-09-30
0001324404
us-gaap:MachineryAndEquipmentMember
2018-01-01
2018-09-30
0001324404
us-gaap:MachineryAndEquipmentMember
2017-12-31
0001324404
2018-01-01
2018-12-31
0001324404
2019-04-01
2019-06-30
0001324404
2017-01-01
2017-12-31
0001324404
cf:UANMember
2019-09-30
0001324404
cf:AmmoniumNitrateSegmentMember
2019-09-30
0001324404
cf:OtherProductsMember
2019-01-01
2019-09-30
0001324404
cf:OtherProductsMember
2019-09-30
0001324404
cf:AmmoniaMember
2019-09-30
0001324404
cf:AmmoniaMember
2018-12-31
0001324404
cf:AmmoniumNitrateSegmentMember
2018-12-31
0001324404
cf:UANMember
2018-12-31
0001324404
cf:OtherProductsMember
2018-12-31
0001324404
cf:UreaMember
2018-12-31
0001324404
cf:UreaMember
2019-09-30
0001324404
us-gaap:TradeNamesMember
2018-12-31
0001324404
us-gaap:CustomerRelationshipsMember
2018-12-31
0001324404
us-gaap:CustomerRelationshipsMember
2019-09-30
0001324404
us-gaap:TrademarksMember
2019-09-30
0001324404
us-gaap:TradeNamesMember
2019-09-30
0001324404
us-gaap:TrademarksMember
2018-12-31
0001324404
srt:MaximumMember
us-gaap:PropertyPlantAndEquipmentMember
cf:OperatingEquityMethodInvestmentMember
2019-01-01
2019-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:TheBoardofInlandRevenueMember
cf:OperatingEquityMethodInvestmentMember
2019-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:OperatingEquityMethodInvestmentMember
2018-01-01
2018-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:OperatingEquityMethodInvestmentMember
2018-07-01
2018-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:OperatingEquityMethodInvestmentMember
2019-01-01
2019-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:TheBoardofInlandRevenueMember
cf:OperatingEquityMethodInvestmentMember
2019-01-01
2019-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:TheBoardofInlandRevenueMember
cf:OperatingEquityMethodInvestmentMember
2018-01-01
2018-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:OperatingEquityMethodInvestmentMember
2019-07-01
2019-09-30
0001324404
cf:PointLisasNitrogenLimitedMember
cf:TheBoardofInlandRevenueMember
2019-09-30
0001324404
us-gaap:TrustForBenefitOfEmployeesMember
2018-12-31
0001324404
us-gaap:OtherDebtSecuritiesMember
2018-12-31
0001324404
us-gaap:USGovernmentDebtSecuritiesMember
2018-12-31
0001324404
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2018-12-31
0001324404
us-gaap:FairValueInputsLevel1Member
us-gaap:FairValueMeasurementsRecurringMember
2018-12-31
0001324404
us-gaap:FairValueInputsLevel3Member
us-gaap:FairValueMeasurementsRecurringMember
2018-12-31
0001324404
us-gaap:FairValueMeasurementsRecurringMember
2018-12-31
0001324404
us-gaap:FairValueMeasurementsRecurringMember
2019-09-30
0001324404
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-09-30
0001324404
us-gaap:FairValueInputsLevel3Member
us-gaap:FairValueMeasurementsRecurringMember
2019-09-30
0001324404
us-gaap:FairValueInputsLevel1Member
us-gaap:FairValueMeasurementsRecurringMember
2019-09-30
0001324404
2018-10-01
2018-12-31
0001324404
us-gaap:USGovernmentDebtSecuritiesMember
2019-09-30
0001324404
us-gaap:TrustForBenefitOfEmployeesMember
2019-09-30
0001324404
us-gaap:OtherDebtSecuritiesMember
2019-09-30
0001324404
us-gaap:CarryingReportedAmountFairValueDisclosureMember
2018-12-31
0001324404
us-gaap:EstimateOfFairValueFairValueDisclosureMember
2019-09-30
0001324404
us-gaap:CarryingReportedAmountFairValueDisclosureMember
2019-09-30
0001324404
us-gaap:EstimateOfFairValueFairValueDisclosureMember
2018-12-31
0001324404
2016-10-01
2016-12-31
0001324404
2017-10-01
2017-12-31
0001324404
stpr:LA
us-gaap:StateAndLocalJurisdictionMember
2019-01-01
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes4.500PercentDue2026Member
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes4.950PercentDue2043Member
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes5.375PercentDue2044Member
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes5.375PercentDue2044Member
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:UnsecuredSeniorNotes7.125PercentDue2020Member
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.450PercentDue2023Member
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes5.150PercentDue2034Member
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:UnsecuredSeniorNotes7.125PercentDue2020Member
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.400PercentDue2021MemberMember
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes5.150PercentDue2034Member
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes4.500PercentDue2026Member
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes4.950PercentDue2043Member
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.400PercentDue2021MemberMember
us-gaap:SeniorNotesMember
2018-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.450PercentDue2023Member
us-gaap:SeniorNotesMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.400PercentDue2021MemberMember
us-gaap:SeniorNotesMember
2016-11-21
0001324404
srt:SubsidiariesMember
2019-09-30
0001324404
srt:SubsidiariesMember
us-gaap:LetterOfCreditMember
cf:July2016CreditAgreementAmendmentMember
us-gaap:LineOfCreditMember
2016-07-29
0001324404
srt:SubsidiariesMember
cf:SeniorCreditAgreementMember
2019-09-30
0001324404
srt:SubsidiariesMember
us-gaap:RevolvingCreditFacilityMember
cf:AmendmentNo.3totheThirdAmendedandRestatedRevolvingCreditAgreementMember
us-gaap:LineOfCreditMember
2016-10-31
0001324404
srt:SubsidiariesMember
2018-12-31
0001324404
us-gaap:LetterOfCreditMember
us-gaap:LineOfCreditMember
2019-09-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes4.500PercentDue2026Member
us-gaap:SeniorNotesMember
2016-11-21
0001324404
srt:SubsidiariesMember
cf:SeniorCreditAgreementMember
2018-12-31
0001324404
srt:MaximumMember
2019-09-30
0001324404
srt:MaximumMember
us-gaap:RailroadTransportationEquipmentMember
2019-09-30
0001324404
srt:MaximumMember
us-gaap:MaritimeEquipmentMember
2019-09-30
0001324404
srt:MaximumMember
srt:WarehouseMember
2019-09-30
0001324404
srt:MinimumMember
us-gaap:RailroadTransportationEquipmentMember
2019-09-30
0001324404
srt:MinimumMember
2019-09-30
0001324404
srt:MinimumMember
srt:WarehouseMember
2019-09-30
0001324404
srt:MinimumMember
us-gaap:MaritimeEquipmentMember
2019-09-30
0001324404
cf:CFIndustriesNitrogenLLCMember
2018-01-01
2018-09-30
0001324404
cf:CFIndustriesNitrogenLLCMember
2017-12-31
0001324404
cf:CFIndustriesNitrogenLLCMember
2019-09-30
0001324404
srt:PartnershipInterestMember
2018-09-30
0001324404
srt:PartnershipInterestMember
2017-12-31
0001324404
cf:CFIndustriesNitrogenLLCMember
2019-01-01
2019-09-30
0001324404
srt:PartnershipInterestMember
2018-01-01
2018-09-30
0001324404
cf:CFIndustriesNitrogenLLCMember
2018-09-30
0001324404
cf:CFIndustriesNitrogenLLCMember
2018-12-31
0001324404
srt:PartnershipInterestMember
2018-04-01
0001324404
cf:TerraNitrogenGPIncMember
cf:TerraNitrogenCompanyLPMember
2018-04-02
0001324404
cf:TerraNitrogenGPIncMember
cf:TerraNitrogenCompanyLPMember
2018-02-07
0001324404
cf:CFIndustriesNitrogenLLCMember
cf:CHSInc.Member
2016-02-01
0001324404
cf:TerraNitrogenGPIncMember
cf:TerraNitrogenCompanyLPMember
2018-04-02
2018-04-02
0001324404
us-gaap:AccumulatedTranslationAdjustmentMember
2018-01-01
2018-09-30
0001324404
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-09-30
0001324404
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2018-01-01
2018-09-30
0001324404
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-01-01
2019-09-30
0001324404
us-gaap:AccumulatedTranslationAdjustmentMember
2019-01-01
2019-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:AccumulatedTranslationAdjustmentMember
2017-12-31
0001324404
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2017-12-31
0001324404
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2019-01-01
2019-09-30
0001324404
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-01-01
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2017-12-31
0001324404
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2017-12-31
0001324404
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2017-12-31
0001324404
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2019-09-30
0001324404
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2019-01-01
2019-09-30
0001324404
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-01-01
2018-09-30
0001324404
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-12-31
0001324404
us-gaap:AccumulatedTranslationAdjustmentMember
2018-09-30
0001324404
us-gaap:AccountingStandardsUpdate201601Member
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2017-12-31
0001324404
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-09-30
0001324404
us-gaap:AccumulatedTranslationAdjustmentMember
2017-12-31
0001324404
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2019-09-30
0001324404
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-12-31
0001324404
us-gaap:AccumulatedTranslationAdjustmentMember
2018-12-31
0001324404
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2017-12-31
0001324404
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2018-12-31
0001324404
us-gaap:AccumulatedTranslationAdjustmentMember
2019-09-30
0001324404
us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember
2018-09-30
0001324404
2018-08-01
0001324404
2019-02-13
0001324404
2019-01-01
2019-03-31
0001324404
us-gaap:PendingLitigationMember
2015-04-17
2015-04-17
0001324404
us-gaap:SettledLitigationMember
2019-01-01
2019-09-30
0001324404
us-gaap:PendingLitigationMember
2013-04-17
2013-04-17
0001324404
stpr:ID
2015-01-01
2015-12-31
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniaMember
2018-07-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniaMember
2019-07-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:OtherProductsMember
2018-07-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UANMember
2019-07-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniumNitrateSegmentMember
2018-07-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniumNitrateSegmentMember
2019-07-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UreaMember
2019-07-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UANMember
2018-07-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UreaMember
2018-07-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:OtherProductsMember
2019-07-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UreaMember
2019-01-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UANMember
2018-01-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UreaMember
2018-01-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniaMember
2019-01-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:OtherProductsMember
2018-01-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniumNitrateSegmentMember
2018-01-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniaMember
2018-01-01
2018-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:UANMember
2019-01-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:OtherProductsMember
2019-01-01
2019-09-30
0001324404
us-gaap:OperatingSegmentsMember
cf:AmmoniumNitrateSegmentMember
2019-01-01
2019-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2018-01-01
2018-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-01-01
2018-09-30
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-01-01
2018-09-30
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-01-01
2018-09-30
0001324404
srt:ConsolidationEliminationsMember
2018-01-01
2018-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-09-30
0001324404
srt:ConsolidationEliminationsMember
2019-09-30
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-09-30
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2019-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-01-01
2019-09-30
0001324404
srt:ConsolidationEliminationsMember
2019-01-01
2019-09-30
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-01-01
2019-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2019-01-01
2019-09-30
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-01-01
2019-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-07-01
2019-09-30
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-07-01
2019-09-30
0001324404
srt:ConsolidationEliminationsMember
2019-07-01
2019-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2019-07-01
2019-09-30
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2019-07-01
2019-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2018-07-01
2018-09-30
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-07-01
2018-09-30
0001324404
srt:ConsolidationEliminationsMember
2018-07-01
2018-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-07-01
2018-09-30
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-07-01
2018-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-12-31
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-12-31
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-12-31
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2018-12-31
0001324404
srt:ConsolidationEliminationsMember
2018-12-31
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2017-12-31
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2017-12-31
0001324404
srt:GuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2018-09-30
0001324404
srt:ReportableLegalEntitiesMember
2018-01-01
2018-09-30
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-09-30
0001324404
srt:ConsolidationEliminationsMember
2018-09-30
0001324404
srt:NonGuarantorSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-09-30
0001324404
srt:ConsolidationEliminationsMember
2017-12-31
0001324404
cf:AllOtherSubsidiariesMember
srt:ReportableLegalEntitiesMember
2018-01-01
2018-09-30
0001324404
srt:ParentCompanyMember
srt:ReportableLegalEntitiesMember
2017-12-31
0001324404
srt:SubsidiariesMember
srt:ReportableLegalEntitiesMember
2017-12-31
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.400PercentDue2021MemberMember
us-gaap:SeniorNotesMember
us-gaap:SubsequentEventMember
2019-10-30
2019-10-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.400PercentDue2021MemberMember
us-gaap:SeniorNotesMember
us-gaap:SubsequentEventMember
2019-10-30
0001324404
srt:SubsidiariesMember
cf:SeniorNotes3.400PercentDue2021MemberMember
us-gaap:SeniorNotesMember
us-gaap:SubsequentEventMember
2019-10-28
0001324404
srt:SubsidiariesMember
cf:UnsecuredSeniorNotes7.125PercentDue2020Member
us-gaap:SeniorNotesMember
us-gaap:SubsequentEventMember
2019-10-09
0001324404
srt:SubsidiariesMember
cf:UnsecuredSeniorNotes7.125PercentDue2020Member
us-gaap:SeniorNotesMember
us-gaap:SubsequentEventMember
2019-10-28
xbrli:pure
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
cf:Insurance_company
cf:mine
cf:People
utreg:T
cf:Litigation_case
cf:Plaintiff
cf:Entity
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
|
| | | |
(Mark One) | | | |
☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2019 |
| | | |
OR |
☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission file number 001-32597
CF INDUSTRIES HOLDINGS, INC.
(Exact name of registrant as specified in its charter) |
| | | | | | | |
Delaware | | | | | 20-2697511 |
(State or other jurisdiction of incorporation or organization) | | | | | (I.R.S. Employer Identification No.) |
| | | | | | | |
4 Parkway North, Suite 400
| | | | | 60015 |
Deerfield, | Illinois | | | | | (Zip Code) |
(Address of principal executive offices) | | | | | |
(847) 405-2400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
| | | | |
Title of each class | | Trading symbol(s) | | Name of each exchange on which registered |
common stock, par value $0.01 per share | | CF | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. |
| | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
217,431,811 shares of the registrant’s common stock, par value $0.01 per share, were outstanding at October 28, 2019.
CF INDUSTRIES HOLDINGS, INC.
TABLE OF CONTENTS
CF INDUSTRIES HOLDINGS, INC.
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (in millions, except per share amounts) |
Net sales | $ | 1,038 |
| | $ | 1,040 |
| | $ | 3,541 |
| | $ | 3,297 |
|
Cost of sales | 810 |
| | 867 |
| | 2,594 |
| | 2,622 |
|
Gross margin | 228 |
| | 173 |
| | 947 |
| | 675 |
|
Selling, general and administrative expenses | 56 |
| | 53 |
| | 176 |
| | 163 |
|
Other operating—net | (30 | ) | | (11 | ) | | (63 | ) | | (29 | ) |
Total other operating costs and expenses | 26 |
| | 42 |
| | 113 |
| | 134 |
|
Equity in (losses) earnings of operating affiliate | (14 | ) | | 5 |
| | (6 | ) | | 30 |
|
Operating earnings | 188 |
| | 136 |
| | 828 |
| | 571 |
|
Interest expense | 63 |
| | 59 |
| | 182 |
| | 180 |
|
Interest income | (4 | ) | | (4 | ) | | (12 | ) | | (9 | ) |
Other non-operating—net | (4 | ) | | (2 | ) | | (7 | ) | | (6 | ) |
Earnings before income taxes | 133 |
| | 83 |
| | 665 |
| | 406 |
|
Income tax provision | 19 |
| | 12 |
| | 113 |
| | 73 |
|
Net earnings | 114 |
| | 71 |
| | 552 |
| | 333 |
|
Less: Net earnings attributable to noncontrolling interests | 49 |
| | 41 |
| | 114 |
| | 92 |
|
Net earnings attributable to common stockholders | $ | 65 |
| | $ | 30 |
| | $ | 438 |
| | $ | 241 |
|
Net earnings per share attributable to common stockholders: | |
| | |
| | |
| | |
|
Basic | $ | 0.29 |
| | $ | 0.13 |
| | $ | 1.98 |
| | $ | 1.03 |
|
Diluted | $ | 0.29 |
| | $ | 0.13 |
| | $ | 1.97 |
| | $ | 1.03 |
|
Weighted-average common shares outstanding: | | | | | |
| | |
|
Basic | 219.0 |
| | 233.5 |
| | 221.2 |
| | 233.8 |
|
Diluted | 220.7 |
| | 235.2 |
| | 222.5 |
| | 234.9 |
|
Dividends declared per common share | $ | 0.30 |
| | $ | 0.30 |
| | $ | 0.90 |
| | $ | 0.90 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (in millions) |
Net earnings | $ | 114 |
| | $ | 71 |
| | $ | 552 |
| | $ | 333 |
|
Other comprehensive (loss) income: | |
| | |
| | |
| | |
|
Foreign currency translation adjustment—net of taxes | (32 | ) | | — |
| | (8 | ) | | (50 | ) |
Unrealized loss on securities—net of taxes | — |
| | — |
| | — |
| | (1 | ) |
Defined benefit plans—net of taxes | 2 |
| | 1 |
| | 5 |
| | 7 |
|
| (30 | ) | | 1 |
| | (3 | ) | | (44 | ) |
Comprehensive income | 84 |
| | 72 |
| | 549 |
| | 289 |
|
Less: Comprehensive income attributable to noncontrolling interests | 49 |
| | 41 |
| | 114 |
| | 92 |
|
Comprehensive income attributable to common stockholders | $ | 35 |
| | $ | 31 |
| | $ | 435 |
| | $ | 197 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
|
| | | | | | | |
| (Unaudited) | | |
| September 30, 2019 | | December 31, 2018 |
| (in millions, except share and per share amounts) |
Assets | |
| | |
|
Current assets: | |
| | |
|
Cash and cash equivalents | $ | 1,019 |
| | $ | 682 |
|
Accounts receivable—net | 311 |
| | 235 |
|
Inventories | 296 |
| | 309 |
|
Prepaid income taxes | 17 |
| | 28 |
|
Other current assets | 26 |
| | 20 |
|
Total current assets | 1,669 |
| | 1,274 |
|
Property, plant and equipment—net | 8,247 |
| | 8,623 |
|
Investment in affiliate | 87 |
| | 93 |
|
Goodwill | 2,344 |
| | 2,353 |
|
Operating lease right-of-use assets | 264 |
| | — |
|
Other assets | 291 |
| | 318 |
|
Total assets | $ | 12,902 |
| | $ | 12,661 |
|
Liabilities and Equity | |
| | |
|
Current liabilities: | |
| | |
|
Accounts payable and accrued expenses | $ | 459 |
| | $ | 545 |
|
Income taxes payable | 7 |
| | 5 |
|
Customer advances | 184 |
| | 149 |
|
Current operating lease liabilities | 87 |
| | — |
|
Current maturities of long-term debt | 499 |
| | — |
|
Other current liabilities | 9 |
| | 6 |
|
Total current liabilities | 1,245 |
| | 705 |
|
Long-term debt, net of current maturities | 4,204 |
| | 4,698 |
|
Deferred income taxes | 1,235 |
| | 1,117 |
|
Operating lease liabilities | 181 |
| | — |
|
Other liabilities | 356 |
| | 410 |
|
Equity: | |
| | |
|
Stockholders’ equity: | |
| | |
|
Preferred stock—$0.01 par value, 50,000,000 shares authorized | — |
| | — |
|
Common stock—$0.01 par value, 500,000,000 shares authorized, 2019—219,375,306 shares issued and 2018—233,800,903 shares issued | 2 |
| | 2 |
|
Paid-in capital | 1,317 |
| | 1,368 |
|
Retained earnings | 2,109 |
| | 2,463 |
|
Treasury stock—at cost, 2019—1,534,045 shares and 2018—10,982,408 shares | (74 | ) | | (504 | ) |
Accumulated other comprehensive loss | (374 | ) | | (371 | ) |
Total stockholders’ equity | 2,980 |
| | 2,958 |
|
Noncontrolling interest | 2,701 |
| | 2,773 |
|
Total equity | 5,681 |
| | 5,731 |
|
Total liabilities and equity | $ | 12,902 |
| | $ | 12,661 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stockholders | | | | |
| $0.01 Par Value Common Stock | | Treasury Stock | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Stockholders’ Equity | | Noncontrolling Interest | | Total Equity |
| (in millions, except per share amounts) |
Balance as of June 30, 2019 | $ | 2 |
| | $ | (2 | ) | | $ | 1,299 |
| | $ | 2,111 |
| | $ | (344 | ) | | $ | 3,066 |
| | $ | 2,752 |
| | $ | 5,818 |
|
Net earnings | — |
| | — |
| | — |
| | 65 |
| | — |
| | 65 |
| | 49 |
| | 114 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (30 | ) | | (30 | ) | | — |
| | (30 | ) |
Purchases of treasury stock | — |
| | (72 | ) | | — |
| | — |
| | — |
| | (72 | ) | | — |
| | (72 | ) |
Issuance of $0.01 par value common stock under employee stock plans | — |
| | — |
| | 11 |
| | — |
| | — |
| | 11 |
| | — |
| | 11 |
|
Stock-based compensation expense | — |
| | — |
| | 7 |
| | — |
| | — |
| | 7 |
| | — |
| | 7 |
|
Cash dividends ($0.30 per share) | — |
| | — |
| | — |
| | (67 | ) | | — |
| | (67 | ) | | — |
| | (67 | ) |
Distribution declared to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (100 | ) | | (100 | ) |
Balance as of September 30, 2019 | $ | 2 |
| | $ | (74 | ) | | $ | 1,317 |
| | $ | 2,109 |
| | $ | (374 | ) | | $ | 2,980 |
| | $ | 2,701 |
| | $ | 5,681 |
|
| | | | | | | | | | | | | | | |
Balance as of December 31, 2018 | $ | 2 |
| | $ | (504 | ) | | $ | 1,368 |
| | $ | 2,463 |
| | $ | (371 | ) | | $ | 2,958 |
| | $ | 2,773 |
| | $ | 5,731 |
|
Net earnings | — |
| | — |
| | — |
| | 438 |
| | — |
| | 438 |
| | 114 |
| | 552 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | | — |
| | (3 | ) |
Purchases of treasury stock | — |
| | (250 | ) | | — |
| | — |
| | — |
| | (250 | ) | | — |
| | (250 | ) |
Retirement of treasury stock | — |
| | 682 |
| | (90 | ) | | (592 | ) | | — |
| | — |
| | — |
| | — |
|
Acquisition of treasury stock under employee stock plans | — |
| | (4 | ) | | — |
| | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Issuance of $0.01 par value common stock under employee stock plans | — |
| | 2 |
| | 15 |
| | — |
| | — |
| | 17 |
| | — |
| | 17 |
|
Stock-based compensation expense | — |
| | — |
| | 24 |
| | — |
| | — |
| | 24 |
| | — |
| | 24 |
|
Cash dividends ($0.90 per share) | — |
| | — |
| | — |
| | (200 | ) | | — |
| | (200 | ) | | — |
| | (200 | ) |
Distribution declared to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (186 | ) | | (186 | ) |
Balance as of September 30, 2019 | $ | 2 |
| | $ | (74 | ) | | $ | 1,317 |
| | $ | 2,109 |
| | $ | (374 | ) | | $ | 2,980 |
| | $ | 2,701 |
| | $ | 5,681 |
|
(Continued)
CONSOLIDATED STATEMENTS OF EQUITY
(Continued) (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stockholders | | | | |
| $0.01 Par Value Common Stock | | Treasury Stock | | Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
| (in millions, except per share amounts) |
Balance as of June 30, 2018 | $ | 2 |
| | $ | — |
| | $ | 1,349 |
| | $ | 2,514 |
| | $ | (309 | ) | | $ | 3,556 |
| | $ | 2,766 |
| | $ | 6,322 |
|
Net earnings | — |
| | — |
| | — |
| | 30 |
| | — |
| | 30 |
| | 41 |
| | 71 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 1 |
| | 1 |
| | — |
| | 1 |
|
Purchases of treasury stock | — |
| | (91 | ) | | — |
| | — |
| | — |
| | (91 | ) | | — |
| | (91 | ) |
Acquisition of treasury stock under employee stock plans | — |
| | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Issuance of $0.01 par value common stock under employee stock plans | — |
| | — |
| | 6 |
| | — |
| | — |
| | 6 |
| | — |
| | 6 |
|
Stock-based compensation expense | — |
| | — |
| | 5 |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
|
Cash dividends ($0.30 per share) | — |
| | — |
| | — |
| | (70 | ) | | — |
| | (70 | ) | | — |
| | (70 | ) |
Distribution declared to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (80 | ) | | (80 | ) |
Balance as of September 30, 2018 | $ | 2 |
| | $ | (92 | ) | | $ | 1,360 |
| | $ | 2,474 |
| | $ | (308 | ) | | $ | 3,436 |
| | $ | 2,727 |
| | $ | 6,163 |
|
| | | | | | | | | | | | | | | |
Balance as of December 31, 2017 | $ | 2 |
| | $ | — |
| | $ | 1,397 |
| | $ | 2,443 |
| | $ | (263 | ) | | $ | 3,579 |
| | $ | 3,105 |
| | $ | 6,684 |
|
Adoption of ASU No. 2014-09 | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) | | — |
| | (1 | ) |
Adoption of ASU No. 2016-01 | — |
| | — |
| | — |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
|
Net earnings | — |
| | — |
| | — |
| | 241 |
| | — |
| | 241 |
| | 92 |
| | 333 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (44 | ) | | (44 | ) | | — |
| | (44 | ) |
Purchases of treasury stock | — |
| | (91 | ) | | — |
| | — |
| | — |
| | (91 | ) | | — |
| | (91 | ) |
Acquisition of treasury stock under employee stock plans | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | (2 | ) | | — |
| | (2 | ) |
Issuance of $0.01 par value common stock under employee stock plans | — |
| | — |
| | 10 |
| | — |
| | — |
| | 10 |
| | — |
| | 10 |
|
Stock-based compensation expense | — |
| | — |
| | 16 |
| | — |
| | — |
| | 16 |
| | — |
| | 16 |
|
Cash dividends ($0.90 per share) | — |
| | — |
| | — |
| | (210 | ) | | — |
| | (210 | ) | | — |
| | (210 | ) |
Acquisition of noncontrolling interests in TNCLP | — |
| | — |
| | (62 | ) | | — |
| | — |
| | (62 | ) | | (331 | ) | | (393 | ) |
Distribution declared to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (139 | ) | | (139 | ) |
Balance as of September 30, 2018 | $ | 2 |
| | $ | (92 | ) | | $ | 1,360 |
| | $ | 2,474 |
| | $ | (308 | ) | | $ | 3,436 |
| | $ | 2,727 |
| | $ | 6,163 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| | | | | | | |
| Nine months ended September 30, |
| 2019 | | 2018 |
| (in millions) |
Operating Activities: | |
| | |
|
Net earnings | $ | 552 |
| | $ | 333 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: | |
| | |
|
Depreciation and amortization | 663 |
| | 667 |
|
Deferred income taxes | 116 |
| | 37 |
|
Stock-based compensation expense | 24 |
| | 17 |
|
Unrealized net loss (gain) on natural gas derivatives | 3 |
| | (11 | ) |
Unrealized loss on embedded derivative | 3 |
| | 2 |
|
Gain on disposal of property, plant and equipment | (43 | ) | | (1 | ) |
Undistributed losses (earnings) of affiliate—net of taxes | 3 |
| | (5 | ) |
Changes in: | |
| | |
|
Accounts receivable—net | (79 | ) | | 31 |
|
Inventories | 17 |
| | (3 | ) |
Accrued and prepaid income taxes | 12 |
| | 13 |
|
Accounts payable and accrued expenses | (67 | ) | | (26 | ) |
Customer advances | 35 |
| | 224 |
|
Other—net | (36 | ) | | (35 | ) |
Net cash provided by operating activities | 1,203 |
| | 1,243 |
|
Investing Activities: | |
| | |
|
Additions to property, plant and equipment | (297 | ) | | (278 | ) |
Proceeds from sale of property, plant and equipment | 71 |
| | 19 |
|
Distributions received from unconsolidated affiliate | — |
| | 10 |
|
Insurance proceeds for property, plant and equipment | 15 |
| | 10 |
|
Other—net | — |
| | 1 |
|
Net cash used in investing activities | (211 | ) | | (238 | ) |
Financing Activities: | |
| | |
|
Financing fees | — |
| | 1 |
|
Dividends paid on common stock | (200 | ) | | (210 | ) |
Acquisition of noncontrolling interests in TNCLP | — |
| | (388 | ) |
Distributions to noncontrolling interests | (186 | ) | | (139 | ) |
Purchases of treasury stock | (280 | ) | | (87 | ) |
Issuances of common stock under employee stock plans | 17 |
| | 10 |
|
Shares withheld for taxes | (4 | ) | | (1 | ) |
Net cash used in financing activities | (653 | ) | | (814 | ) |
Effect of exchange rate changes on cash and cash equivalents | (2 | ) | | (4 | ) |
Increase in cash and cash equivalents | 337 |
| | 187 |
|
Cash and cash equivalents at beginning of period | 682 |
| | 835 |
|
Cash and cash equivalents at end of period | $ | 1,019 |
| | $ | 1,022 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
CF INDUSTRIES HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Background and Basis of Presentation
We are a leading global fertilizer and chemical company. Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States. Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers, farmers and industrial users. Our principal nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. We serve our customers in North America through our production, storage, transportation and distribution network. We also reach a global customer base with exports from our Donaldsonville, Louisiana, plant, the world’s largest and most flexible nitrogen complex. Additionally, we move product to international destinations from our Verdigris, Oklahoma, facility, our Yazoo City, Mississippi, facility, our Billingham and Ince facilities in the United Kingdom, and from a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a 50 percent interest.
All references to “CF Holdings,” “the Company,” “we,” “us” and “our” refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to “CF Industries” refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc.
The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2018, in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting. In the opinion of management, these statements reflect all adjustments, consisting only of normal and recurring adjustments, that are necessary for the fair representation of the information for the periods presented. The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Operating results for any period presented apply to that period only and are not necessarily indicative of results for any future period.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our 2018 Annual Report on Form 10-K filed with the SEC on February 22, 2019. The preparation of the unaudited interim consolidated financial statements requires us to make use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited consolidated financial statements and the reported revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of customer incentives, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax and valuation reserves, allowances for doubtful accounts receivable, the measurement of the fair values of investments for which markets are not active, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the assumptions used in the valuation of stock-based compensation awards granted to employees.
CF INDUSTRIES HOLDINGS, INC.
2. New Accounting Standards
Recently Adopted Pronouncements
On January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements in ASC Topic 840, Leases. This ASU requires lessees to recognize the rights and obligations resulting from virtually all leases (other than leases that meet the definition of a short-term lease) on their balance sheets as right-of-use assets with corresponding lease liabilities. Extensive quantitative and qualitative disclosures, including significant judgments made by management, are required to provide greater insight into the extent of income and expense recognized and expected to be recognized from existing contracts. We elected the optional transition method provided under ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides the option to adopt ASU No. 2016-02 as of the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative effect adjustment we recognized in the opening balance of retained earnings as of January 1, 2019 was not material. In addition, we elected the package of practical expedients permitted under the transition guidance within ASU No. 2016-02, which allows us to carry forward the historical lease determination, lease classification, and assessment of initial direct costs. See Note 13—Leases for additional information.
On January 1, 2019, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships in order to better portray the economic results of an entity’s risk management activities in its financial statements. The adoption of this ASU had no effect on our consolidated financial statements.
Recently Issued Pronouncements
In August 2018, the Financial Accounting Standards Board issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU does not affect the accounting for the service element of a hosting arrangement that is a service contract. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2019 and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. We plan to adopt this ASU prospectively. We do not expect that our adoption of this ASU on January 1, 2020 will have a material impact on our consolidated financial statements. However, this guidance could have an effect on future financial results if significant new software involving a cloud computing agreement is implemented. In this case, a certain portion of the implementation costs could be deferred and expensed over the term of the cloud computing arrangement.
CF INDUSTRIES HOLDINGS, INC.
3. Revenue Recognition
We track our revenue by product and by geography. See Note 17—Segment Disclosures for our revenue by reportable segment, which are ammonia, granular urea, UAN, AN and Other. The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and nine months ended September 30, 2019 and 2018:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Ammonia | | Granular Urea | | UAN | | AN | | Other | | Total |
| (in millions) |
Three months ended September 30, 2019 | |
| | |
| | |
| | | | |
| | |
|
North America | $ | 152 |
| | $ | 289 |
| | $ | 278 |
| | $ | 41 |
| | $ | 63 |
| | $ | 823 |
|
Europe and other | 35 |
| | 38 |
| | 31 |
| | 95 |
| | 16 |
| | 215 |
|
Total revenue | $ | 187 |
| | $ | 327 |
| | $ | 309 |
| | $ | 136 |
| | $ | 79 |
| | $ | 1,038 |
|
Three months ended September 30, 2018 | | | | | | | | | |
| | |
|
North America | $ | 148 |
| | $ | 292 |
| | $ | 214 |
| | $ | 45 |
| | $ | 61 |
| | $ | 760 |
|
Europe and other | 44 |
| | 61 |
| | 56 |
| | 94 |
| | 25 |
| | 280 |
|
Total revenue | $ | 192 |
| | $ | 353 |
| | $ | 270 |
| | $ | 139 |
| | $ | 86 |
| | $ | 1,040 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Ammonia | | Granular Urea | | UAN | | AN | | Other | | Total |
| (in millions) |
Nine months ended September 30, 2019 | |
| | |
| | |
| | | | |
| | |
|
North America | $ | 755 |
| | $ | 1,037 |
| | $ | 866 |
| | $ | 141 |
| | $ | 190 |
| | $ | 2,989 |
|
Europe and other | 92 |
| | 66 |
| | 68 |
| | 248 |
| | 78 |
| | 552 |
|
Total revenue | $ | 847 |
| | $ | 1,103 |
| | $ | 934 |
| | $ | 389 |
| | $ | 268 |
| | $ | 3,541 |
|
Nine months ended September 30, 2018 | | | | | | | | | |
| | |
|
North America | $ | 665 |
| | $ | 901 |
| | $ | 750 |
| | $ | 139 |
| | $ | 184 |
| | $ | 2,639 |
|
Europe and other | 113 |
| | 76 |
| | 142 |
| | 224 |
| | 103 |
| | 658 |
|
Total revenue | $ | 778 |
| | $ | 977 |
| | $ | 892 |
| | $ | 363 |
| | $ | 287 |
| | $ | 3,297 |
|
As of September 30, 2019 and December 31, 2018, we had $184 million and $149 million, respectively, in customer advances on our consolidated balance sheets. The increase in the balance of customer advances was due primarily to customer forward purchases in the third quarter of 2019. During the nine months ended September 30, 2019 and 2018, substantially all of our customer advances that were recorded at the beginning of each respective period were recognized as revenue.
We offer cash incentives to certain customers based on the volume of their purchases over a certain period. These incentives do not provide an option to the customer for additional product. The balances of customer incentives accrued at September 30, 2019 and December 31, 2018 were not material.
We have certain customer contracts with performance obligations where if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, which may vary based upon the terms and conditions of the applicable contract. As of September 30, 2019, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $1.2 billion. We expect to recognize approximately 7% of these performance obligations as revenue in the remainder of 2019, approximately 51% as revenue during 2020 and 2021, approximately 28% as revenue during 2022 and 2023, and the remainder thereafter. If these customers do not fulfill their contractual obligations under such contracts, the legally enforceable minimum amount that they would pay to us under these contracts, in the aggregate, is approximately $300 million as of September 30, 2019. Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially filled at December 31, 2018 will be satisfied in 2019.
CF INDUSTRIES HOLDINGS, INC.
4. Net Earnings Per Share
Net earnings per share were computed as follows:
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (in millions, except per share amounts) |
Net earnings attributable to common stockholders | $ | 65 |
| | $ | 30 |
| | $ | 438 |
| | $ | 241 |
|
Basic earnings per common share: | |
| | |
| | |
| | |
|
Weighted-average common shares outstanding | 219.0 |
| | 233.5 |
| | 221.2 |
| | 233.8 |
|
Net earnings attributable to common stockholders | $ | 0.29 |
| | $ | 0.13 |
| | $ | 1.98 |
| | $ | 1.03 |
|
Diluted earnings per common share: | |
| | |
| | |
| | |
|
Weighted-average common shares outstanding | 219.0 |
| | 233.5 |
| | 221.2 |
| | 233.8 |
|
Dilutive common shares—stock options | 1.7 |
| | 1.7 |
| | 1.3 |
| | 1.1 |
|
Diluted weighted-average shares outstanding | 220.7 |
| | 235.2 |
| | 222.5 |
| | 234.9 |
|
Net earnings attributable to common stockholders | $ | 0.29 |
| | $ | 0.13 |
| | $ | 1.97 |
| | $ | 1.03 |
|
In the computation of diluted earnings per common share, potentially dilutive stock options are excluded if the effect of their inclusion is anti-dilutive. Shares for anti-dilutive stock options not included in the computation of diluted earnings per common share were 1.4 million and 1.5 million for the three and nine months ended September 30, 2019, respectively, and 1.5 million and 1.8 million for the three and nine months ended September 30, 2018, respectively.
5. Inventories
Inventories consist of the following: |
| | | | | | | |
| September 30, 2019 | | December 31, 2018 |
| (in millions) |
Finished goods | $ | 253 |
| | $ | 272 |
|
Raw materials, spare parts and supplies | 43 |
| | 37 |
|
Total inventories | $ | 296 |
| | $ | 309 |
|
CF INDUSTRIES HOLDINGS, INC.
6. Property, Plant and Equipment—Net
Property, plant and equipment—net consists of the following:
|
| | | | | | | |
| September 30, 2019 | | December 31, 2018 |
| (in millions) |
Land | $ | 69 |
| | $ | 69 |
|
Machinery and equipment | 12,176 |
| | 12,127 |
|
Buildings and improvements | 887 |
| | 886 |
|
Construction in progress | 249 |
| | 225 |
|
Property, plant and equipment(1) | 13,381 |
| | 13,307 |
|
Less: Accumulated depreciation and amortization | 5,134 |
| | 4,684 |
|
Property, plant and equipment—net | $ | 8,247 |
| | $ | 8,623 |
|
_______________________________________________________________________________
| |
(1) | As of September 30, 2019 and December 31, 2018, we had property, plant and equipment that was accrued but unpaid of approximately $61 million and $48 million, respectively. As of September 30, 2018 and December 31, 2017, we had property, plant and equipment that was accrued but unpaid of $66 million and $46 million, respectively. |
During the first quarter of 2019, we entered into an agreement to sell our Pine Bend dry bulk storage and logistics facility in Minnesota. In April 2019, we completed the sale, received proceeds of $55 million and recognized a pre-tax gain of $45 million. The gain is reflected in other operating—net in our consolidated statement of operations for the nine months ended September 30, 2019.
Depreciation and amortization related to property, plant and equipment was $218 million and $648 million for the three and nine months ended September 30, 2019, respectively, and $227 million and $648 million for the three and nine months ended September 30, 2018, respectively.
Plant turnarounds—Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds. The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred. The following is a summary of capitalized plant turnaround costs:
|
| | | | | | | |
| Nine months ended September 30, |
| 2019 | | 2018 |
| (in millions) |
Net capitalized turnaround costs: | |
| | |
|
Beginning balance | $ | 252 |
| | $ | 208 |
|
Additions | 94 |
| | 95 |
|
Depreciation | (85 | ) | | (83 | ) |
Effect of exchange rate changes | — |
| | 1 |
|
Ending balance | $ | 261 |
| | $ | 221 |
|
Scheduled replacements and overhauls of plant machinery and equipment include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors, heat exchangers and the replacement of catalysts when a full plant shutdown occurs. Scheduled inspections are also conducted during full plant shutdowns, including required safety inspections which entail the disassembly of various components such as steam boilers, pressure vessels and other equipment requiring safety certifications. Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.
CF INDUSTRIES HOLDINGS, INC.
7. Goodwill and Other Intangible Assets
The following table shows the carrying amount of goodwill by reportable segment as of September 30, 2019 and December 31, 2018: |
| | | | | | | | | | | | | | | | | | | | | | | |
| Ammonia | | Granular Urea | | UAN | | AN | | Other | | Total |
| (in millions) |
Balance as of December 31, 2018 | $ | 586 |
| | $ | 828 |
| | $ | 576 |
| | $ | 292 |
| | $ | 71 |
| | $ | 2,353 |
|
Effect of exchange rate changes | (1 | ) | | — |
| | — |
| | (7 | ) | | (1 | ) | | (9 | ) |
Balance as of September 30, 2019 | $ | 585 |
| | $ | 828 |
| | $ | 576 |
| | $ | 285 |
| | $ | 70 |
| | $ | 2,344 |
|
All of our identifiable intangible assets have definite lives and are presented in other assets on our consolidated balance sheets at gross carrying amount, net of accumulated amortization, as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2019 | | December 31, 2018 |
| Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net |
| (in millions) |
Customer relationships | $ | 125 |
| | $ | (42 | ) | | $ | 83 |
| | $ | 127 |
| | $ | (37 | ) | | $ | 90 |
|
TerraCair brand | — |
| | — |
| | — |
| | 10 |
| | (10 | ) | | — |
|
Trade names | 29 |
| | (6 | ) | | 23 |
| | 30 |
| | (5 | ) | | 25 |
|
Total intangible assets | $ | 154 |
| | $ | (48 | ) | | $ | 106 |
| | $ | 167 |
| | $ | (52 | ) | | $ | 115 |
|
Our intangible assets are being amortized over a weighted-average life of approximately 20 years. Amortization expense of our identifiable intangible assets was $2 million and $6 million for the three and nine months ended September 30, 2019, respectively, and $1 million and $6 million for the three and nine months ended September 30, 2018, respectively. The gross carrying amount and accumulated amortization of our intangible assets are also impacted by the effect of exchange rate changes. Total estimated amortization expense for the remainder of 2019 and each of the five succeeding fiscal years is as follows:
|
| | | |
| Estimated Amortization Expense |
| (in millions) |
Remainder of 2019 | $ | 2 |
|
2020 | 8 |
|
2021 | 8 |
|
2022 | 8 |
|
2023 | 8 |
|
2024 | 8 |
|
8. Equity Method Investment
We have a 50% ownership interest in Point Lisas Nitrogen Limited (PLNL), which operates an ammonia production facility in the Republic of Trinidad and Tobago. We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the ammonia segment.
As of September 30, 2019, the total carrying value of our equity method investment in PLNL was $87 million, $46 million more than our share of PLNL’s book value. The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment. The increased basis for property, plant and equipment is being amortized over a remaining period of approximately 14 years. Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of this basis difference.
We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices. Our ammonia purchases from PLNL totaled $12 million and $46 million
CF INDUSTRIES HOLDINGS, INC.
for the three and nine months ended September 30, 2019, respectively, and $21 million and $59 million for the three and nine months ended September 30, 2018, respectively.
The Trinidadian tax authority (the Board of Inland Revenue) issued a proposed tax assessment against PLNL with respect to tax years 2011 and 2012 in the amount of approximately $12 million. The proposed assessment asserts that PLNL should have withheld tax on dividends paid to its Trinidadian owners. Statutory interest and penalties related to the proposed assessment with respect to tax years 2011 and 2012, bring the proposed assessment to an aggregate amount of approximately $22 million. As we own a 50% interest in PLNL, our effective share of any assessment that is determined to be a liability of PLNL would be 50%, which would be reflected as a reduction in our equity in earnings of PLNL. During the third quarter of 2019, the Trinidadian government offered a tax amnesty period, which provided taxpayers the opportunity to pay any prior year tax obligations and avoid accumulated interest or penalties. During the tax amnesty period, PLNL evaluated the proposed assessment, including considering the outcome of certain recent legal cases involving other taxpayers. As a result of this evaluation, PLNL paid withholding tax to the Board of Inland Revenue under the amnesty program for tax years 2011 to the current period, and recognized a charge for $32 million. Our 50% share of PLNL’s tax charge is $16 million, which reduced our equity in earnings of operating affiliate for the three and nine months ended September 30, 2019.
PLNL operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by The National Gas Company of Trinidad and Tobago Limited (NGC). PLNL experienced past curtailments in the supply of natural gas from NGC, which reduced historical ammonia production at PLNL. The NGC Contract had an initial expiration date of September 2018 and was extended on the same terms until September 2023. Any NGC commitment to supply gas beyond 2023 will be based on new agreements. In May 2018, the NGC and PLNL reached a settlement of an arbitration proceeding regarding PLNL’s claims for damages due to the natural gas supply curtailments. The net after-tax impact of the settlement reached between NGC and PLNL that is recognized in our consolidated statement of operations for the nine months ended September 30, 2018 was an increase in our equity in earnings of operating affiliate of approximately $19 million.
9. Fair Value Measurements
Our cash and cash equivalents and other investments consist of the following:
|
| | | | | | | | | | | | | | | |
| September 30, 2019 |
| Cost Basis | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (in millions) |
Cash | $ | 99 |
| | $ | — |
| | $ | — |
| | $ | 99 |
|
Cash equivalents: | | | | | | | |
U.S. and Canadian government obligations | 899 |
| | — |
| | — |
| | 899 |
|
Other debt securities | 21 |
| | — |
| | — |
| | 21 |
|
Total cash and cash equivalents | $ | 1,019 |
| | $ | — |
| | $ | — |
| | $ | 1,019 |
|
Nonqualified employee benefit trusts | 17 |
| | 2 |
| | — |
| | 19 |
|
|
| | | | | | | | | | | | | | | |
| December 31, 2018 |
| Cost Basis | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| (in millions) |
Cash | $ | 34 |
| | $ | — |
| | $ | — |
| | $ | 34 |
|
Cash equivalents: | | | | | | | |
U.S. and Canadian government obligations | 623 |
| | — |
| | — |
| | 623 |
|
Other debt securities | 25 |
| | — |
| | — |
| | 25 |
|
Total cash and cash equivalents | $ | 682 |
| | $ | — |
| | $ | — |
| | $ | 682 |
|
Nonqualified employee benefit trusts | 17 |
| | 2 |
| | — |
| | 19 |
|
Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.
CF INDUSTRIES HOLDINGS, INC.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present assets and liabilities included in our consolidated balance sheets as of September 30, 2019 and December 31, 2018 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:
|
| | | | | | | | | | | | | | | |
| September 30, 2019 |
| Total Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (in millions) |
Cash equivalents | $ | 920 |
| | $ | 920 |
| | $ | — |
| | $ | — |
|
Nonqualified employee benefit trusts | 19 |
| | 19 |
| | — |
| | — |
|
Embedded derivative liability | (24 | ) | | — |
| | (24 | ) | | — |
|
|
| | | | | | | | | | | | | | | |
| December 31, 2018 |
| Total Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (in millions) |
Cash equivalents | $ | 648 |
| | $ | 648 |
| | $ | — |
| | $ | — |
|
Nonqualified employee benefit trusts | 19 |
| | 19 |
| | — |
| | — |
|
Embedded derivative liability | (21 | ) | | — |
| | (21 | ) | | — |
|
Cash Equivalents
As of September 30, 2019 and December 31, 2018, our cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities.
Nonqualified Employee Benefit Trusts
We maintain trusts associated with certain nonqualified supplemental pension plans. The fair values of the trust assets are based on daily quoted prices in an active market, which represents the net asset values of the shares held in the trusts, and are included on our consolidated balance sheets in other assets. Debt securities are accounted for as available-for-sale securities. Changes in the fair value of equity securities in the trust assets are recognized through earnings.
Embedded Derivative Liability
Under the terms of our strategic venture with CHS Inc. (CHS), if our credit rating as determined by two of three specified credit rating agencies is below certain levels, we are required to make a non-refundable yearly payment of $5 million to CHS. Since our credit ratings were below certain levels in 2016, 2017 and 2018, we made a payment of $5 million to CHS in the fourth quarter of each year. These payments will continue on a yearly basis until the earlier of the date that our credit rating is upgraded to or above certain levels by two of the three specified credit rating agencies or February 1, 2026. This obligation is recognized on our consolidated balance sheets as an embedded derivative. As of September 30, 2019 and December 31, 2018, the embedded derivative liability of $24 million and $21 million, respectively, is included in other current liabilities and other liabilities on our consolidated balance sheets. Included in other operating—net in our consolidated statement of operations for the nine months ended September 30, 2019 and 2018 is a net loss of $3 million and $2 million, respectively.
The inputs into the fair value measurement include the probability of future upgrades and downgrades of our credit rating based on historical credit rating movements of other public companies and the discount rates to be applied to potential annual payments based on applicable credit spreads of other public companies at different credit rating levels. Based on these inputs, our fair value measurement is classified as Level 2.
See Note 14—Noncontrolling Interests for additional information regarding our strategic venture with CHS.
CF INDUSTRIES HOLDINGS, INC.
Financial Instruments
The carrying amount and estimated fair value of our financial instruments are as follows:
|
| | | | | | | | | | | | | | | |
| September 30, 2019 | | December 31, 2018 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| (in millions) |
Long-term debt | $ | 4,703 |
| | $ | 4,893 |
| | $ | 4,698 |
| | $ | 4,265 |
|
The fair value of our long-term debt was based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs and value drivers are observable and, as a result, they are classified as Level 2 inputs.
The carrying amounts of cash and cash equivalents, as well as instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment. The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets. Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.
10. Income Taxes
For the three months ended September 30, 2019, we recorded an income tax provision of $19 million on pre-tax income of $133 million, or an effective tax rate of 14.6%, compared to an income tax provision of $12 million on pre-tax income of $83 million, or an effective tax rate of 15.3%, for the three months ended September 30, 2018.
For the nine months ended September 30, 2019, our income tax provision includes an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana complex.
Our effective tax rate is also impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended September 30, 2019 of 14.6%, which is based on pre-tax income of $133 million, would be 23.1% exclusive of the earnings attributable to the noncontrolling interest of $49 million. Our effective tax rate for the three months ended September 30, 2018 of 15.3%, which is based on pre-tax income of $83 million, would be 29.4% exclusive of the earnings attributable to the noncontrolling interest of $41 million. See Note 14—Noncontrolling Interests for additional information.
CF INDUSTRIES HOLDINGS, INC.
11. Interest Expense
Details of interest expense are as follows:
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| (in millions) |
Interest on borrowings(1) | $ | 57 |
| | $ | 57 |
| | $ | 171 |
| | $ | 171 |
|
Fees on financing agreements(1) | 4 |
| | 3 |
| | 10 |
| | 10 |
|
Interest on tax liabilities | 3 |
| | (1 | ) | | 3 |
| | — |
|
Interest capitalized | (1 | ) | | — |
| | (2 | ) | | (1 | ) |
Total interest expense | $ | 63 |
| | $ | 59 |
| | $ | 182 |
| | $ | 180 |
|
_______________________________________________________________________________
| |
(1) | See Note 12—Financing Agreements for additional information. |
12. Financing Agreements
Revolving Credit Agreement
We have a senior secured revolving credit agreement (the Revolving Credit Agreement) providing for a revolving credit facility of up to $750 million with a maturity of September 18, 2020. The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million. Borrowings under the Revolving Credit Agreement may be used for working capital and general corporate purposes. CF Industries, the borrower under the Revolving Credit Agreement, may also designate as borrowers one or more wholly owned subsidiaries that are organized in the United States or any state thereof or the District of Columbia.
Borrowings under the Revolving Credit Agreement may be denominated in U.S. dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin, and the borrowers are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.
The guarantors under the Revolving Credit Agreement are currently comprised of CF Holdings and CF Holdings’ wholly owned subsidiaries CF Industries Enterprises, LLC (CFE), CF Industries Sales, LLC (CFS), CF USA Holdings, LLC (CF USA) and CF Industries Distribution Facilities, LLC (CFIDF).
As of September 30, 2019, we had excess borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit. There were no borrowings outstanding under the Revolving Credit Agreement as of September 30, 2019 or December 31, 2018, or during the nine months ended September 30, 2019.
The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of September 30, 2019, we were in compliance with all covenants under the Revolving Credit Agreement.
Letters of Credit
In addition to the letter of credit capacity under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue letters of credit up to $145 million (reflecting an increase of $20 million in January 2019). As of September 30, 2019, approximately $128 million of letters of credit were outstanding under this agreement.
CF INDUSTRIES HOLDINGS, INC.
Senior Notes
Long-term debt, including current maturities of long-term debt, presented on our consolidated balance sheets as of September 30, 2019 and December 31, 2018 consisted of the following Public Senior Notes (unsecured) and Senior Secured Notes issued by CF Industries:
|
| | | | | | | | | | | | | | | | | |
| Effective Interest Rate | | September 30, 2019 | | December 31, 2018 |
| | Principal | | Carrying Amount (1) | | Principal | | Carrying Amount (1) |
| | | (in millions) |
Public Senior Notes: | | | | | | | | | |
7.125% due May 2020 | 7.529% | | $ | 500 |
| | $ | 499 |
| | $ | 500 |
| | $ | 497 |
|
3.450% due June 2023 | 3.562% | | 750 |
| | 747 |
| | 750 |
| | 747 |
|
5.150% due March 2034 | 5.279% | | 750 |
| | 740 |
| | 750 |
| | 740 |
|
4.950% due June 2043 | 5.031% | | 750 |
| | 742 |
| | 750 |
| | 741 |
|
5.375% due March 2044 | 5.465% | | 750 |
| | 741 |
| | 750 |
| | 741 |
|
Senior Secured Notes: | | | | | | | | | |
3.400% due December 2021 | 3.782% | | 500 |
| | 496 |
| | 500 |
| | 495 |
|
4.500% due December 2026 | 4.759% | | 750 |
| | 738 |
| | 750 |
| | 737 |
|
Total long-term debt | | | $ | 4,750 |
| | $ | 4,703 |
| | $ | 4,750 |
| | $ | 4,698 |
|
Less: Current maturities of long-term debt | | | 500 |
| | 499 |
| | — |
| | — |
|
Long-term debt, net of current maturities | | | $ | 4,250 |
| | $ | 4,204 |
| | $ | 4,750 |
| | $ | 4,698 |
|
_______________________________________________________________________________ | |
(1) | Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $10 million and $11 million as of September 30, 2019 and December 31, 2018, respectively, and total deferred debt issuance costs were $37 million and $41 million as of September 30, 2019 and December 31, 2018, respectively. |
Under the indentures (including the applicable supplemental indentures) governing the senior notes due 2020, 2023, 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes is guaranteed by CF Holdings and CF Holdings’ wholly owned subsidiaries CFE, CFS, CF USA and CFIDF. CFE, CFS, CF USA and CFIDF became subsidiary guarantors of the Public Senior Notes as a result of their becoming guarantors under the Revolving Credit Agreement. Interest on the Public Senior Notes is payable semiannually, and the Public Senior Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.
See Note 19—Subsequent Events for additional information regarding the 7.125% senior notes due May 2020.
On November 21, 2016, CF Industries issued $500 million aggregate principal amount of 3.400% senior secured notes due 2021 (the 2021 Notes) and $750 million aggregate principal amount of 4.500% senior secured notes due 2026 (the 2026 Notes, and together with the 2021 Notes, the Senior Secured Notes). CF Holdings and the subsidiary guarantors of the Public Senior Notes are also guarantors of the Senior Secured Notes. Interest on the Senior Secured Notes is payable semiannually on December 1 and June 1, and the Senior Secured Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.
CF INDUSTRIES HOLDINGS, INC.
13. Leases
Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate the present value represents our secured incremental borrowing rate and is calculated based on the treasury yield curve commensurate with the term of each lease, and a spread representative of our secured borrowing costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
For operating leases, rental payments, including rent holidays, leasehold incentives, and scheduled rent increases are expensed on a straight-line basis. For finance leases, if any, ROU assets are amortized over the lease term on a straight-line basis and interest expense is recognized using the effective interest method and based on the lease liability at period end. Leasehold improvements are amortized over the shorter of the depreciable lives of the corresponding fixed assets or the lease term including any applicable renewals. We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheet.
We have operating leases for certain property and equipment under various noncancelable agreements, the most significant of which are rail car leases and barge tow charters for the distribution of our products. The rail car leases currently have minimum terms ranging from one to eleven years and the barge tow charter commitments range from one to seven years. Our rail car leases and barge tow charters commonly contain provisions for automatic annual renewal that can extend the lease term unless canceled by either party. We also have operating leases for terminal and warehouse storage for our distribution system, some of which contain minimum throughput requirements. The storage agreements contain minimum terms generally ranging from one to five years and commonly contain provisions for automatic annual renewal thereafter unless canceled by either party. The renewal provisions for our rail car leases, barge tow charters and terminal and warehouse storage agreements are not reasonably certain to be exercised. For all rail car leases, barge tow charters, and terminal and warehouse storage agreements, we have made an accounting policy election to not separate lease and non-lease components, such as operating costs and maintenance, due to sufficient data not being available. As a result, the non-lease components are included in the ROU assets and lease liabilities on our balance sheet.
The components of lease costs were as follows: |
| | | | | | | |
| Three months ended September 30, 2019 | | Nine months ended September 30, 2019 |
| (in millions) |
Operating lease cost | $ | 24 |
| | $ | 71 |
|
Short-term lease cost | 6 |
| | 20 |
|
Variable lease cost | 1 |
| | 1 |
|
Total lease cost | $ | 31 |
| | $ | 92 |
|
Supplemental cash flow information related to leases was as follows: |
| | | |
| Nine months ended September 30, 2019 |
| (in millions) |
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities | $ | 66 |
|
ROU assets obtained in exchange for operating lease obligations | 36 |
|
Supplemental balance sheet information related to leases was as follows: |
| | | |
| September 30, 2019 |
| (in millions) |
Operating lease ROU assets | $ | 264 |
|
| |
Current operating lease liabilities | $ | 87 |
|
Operating lease liabilities | 181 |
|
Total operating lease liabilities | $ | 268 |
|
CF INDUSTRIES HOLDINGS, INC.
|
| | |
| September 30, 2019 |
Operating leases | |
Weighted average remaining lease term | 5 years |
|
Weighted average discount rate(1) | 4.9 | % |
_______________________________________________________________________________
| |
(1) | Upon adoption of the new lease accounting standard, discount rates used for existing leases were established at January 1, 2019. See Note 2—New Accounting Standards. |
The following table reconciles the undiscounted cash flows for our operating leases to the operating lease liabilities recorded on our consolidated balance sheet as of September 30, 2019. |
| | | |
| Operating lease payments |
| (in millions) |
Remainder of 2019 | $ | 22 |
|
2020 | 86 |
|
2021 | 65 |
|
2022 | 42 |
|
2023 | 29 |
|
Thereafter | 57 |
|
Total lease payments | 301 |
|
Less: imputed interest | (33 | ) |
Total operating lease liabilities | 268 |
|
Less: Current operating lease liabilities | (87 | ) |
Long-term operating lease liabilities | $ | 181 |
|
As of September 30, 2019, we have entered into additional leases that had not yet commenced and therefore have been excluded from total operating lease liabilities as of that date. These leases will commence in the fourth quarter of 2019 or fiscal year 2020 with future minimum payments of $34 million and lease terms ranging from three to ten years.
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, the future minimum lease payments for operating leases having initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018 were as follows: |
| | | |
| Operating lease payments |
| (in millions) |
2019 | $ | 93 |
|
2020 | 80 |
|
2021 | 59 |
|
2022 | 41 |
|
2023 | 28 |
|
Thereafter | 62 |
|
Total lease payments | $ | 363 |
|
CF INDUSTRIES HOLDINGS, INC.
14. Noncontrolling Interests
A reconciliation of the beginning and ending balances of noncontrolling interests and distributions payable to noncontrolling interests in our consolidated balance sheets is provided below.
|
| | | | | | | | | | | | | | | |
| 2019 | | 2018 |
| CFN | | CFN | | TNCLP | | Total |
| (in millions) |
Noncontrolling interests: | | | | | |
| | |
Balance as of January 1 | $ | 2,773 |
| | $ | 2,772 |
| | $ | 333 |
| | $ | 3,105 |
|
Earnings attributable to noncontrolling interests | 114 |
| | 84 |
| | 8 |
| | 92 |
|
Declaration of distributions payable | (186 | ) | | (129 | ) | | (10 | ) | | (139 | ) |
Purchase of the TNCLP Public Units | — |
|
| — |
| | (331 | ) | | (331 | ) |
Balance as of September 30 | $ | 2,701 |
| | $ | 2,727 |
| | $ | — |
| | $ | 2,727 |
|
Distributions payable to noncontrolling interests: | | | | | |
| | |
Balance as of January 1 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Declaration of distributions payable | 186 |
| | 129 |
| | 10 |
| | 139 |
|
Distributions to noncontrolling interests | (186 | ) | | (129 | ) | | (10 | ) | | (139 | ) |
Balance as of September 30 | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
CF Industries Nitrogen, LLC (CFN)
We have a strategic venture with CHS under which they own an equity interest in CFN, a subsidiary of CF Holdings, which represents approximately 11% of the membership interests of CFN. We own the remaining membership interests. Under the terms of CFN’s limited liability company agreement, each member’s interest will reflect, over time, the impact of the profitability of CFN, any member contributions made to CFN and withdrawals and distributions received from CFN. For financial reporting purposes, the assets, liabilities and earnings of the strategic venture are consolidated into our financial statements. CHS’ interest in the strategic venture is recorded in noncontrolling interests in our consolidated financial statements. CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. As a result of its equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN. We are also entitled to semi-annual cash distributions from CFN. The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts. Additionally, under the terms of the strategic venture, we recognized an embedded derivative related to our credit rating. See Note 9—Fair Value Measurements for additional information.
Terra Nitrogen Company, L.P. (TNCLP)
On February 7, 2018, we announced that, in accordance with the terms of TNCLP’s First Amended and Restated Agreement of Limited Partnership (as amended by Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership, the TNCLP Agreement of Limited Partnership), Terra Nitrogen GP Inc. (TNGP), the sole general partner of TNCLP and an indirect wholly owned subsidiary of CF Holdings, elected to exercise its right to purchase all of the 4,612,562 publicly traded common units of TNCLP (the TNCLP Public Units). On April 2, 2018, TNGP completed its purchase of the TNCLP Public Units (the Purchase) for an aggregate cash purchase price of $388 million, at which time we recognized a reduction in paid-in capital of $62 million; a deferred tax liability of $5 million; and the removal of the TNCLP noncontrolling interests, as shown in the table above. Upon completion of the Purchase, CF Holdings owned, through its subsidiaries, 100 percent of the general and limited partnership interests of TNCLP.
CF INDUSTRIES HOLDINGS, INC.
Prior to April 2, 2018, TNCLP was a master limited partnership that owned a nitrogen fertilizer manufacturing facility in Verdigris, Oklahoma. We owned approximately 75.3% of TNCLP through general and limited partnership interests and outside investors owned the remaining approximately 24.7% of the limited partnership interests. For financial reporting purposes, the assets, liabilities and earnings of the partnership were consolidated into our financial statements. The outside investors’ limited partnership interests in TNCLP were recorded in noncontrolling interests in our consolidated financial statements. The noncontrolling interest represented the noncontrolling unitholders’ interest (prior to the Purchase) in the earnings and equity of TNCLP. Affiliates of CF Industries were required to purchase all of TNCLP’s fertilizer products at market prices as defined in the Amendment to the General and Administrative Services and Product Offtake Agreement, dated September 28, 2010.
Prior to April 2, 2018, TNCLP made cash distributions to the general and limited partners based on formulas defined within the TNCLP Agreement of Limited Partnership. Cash available for distribution (Available Cash) was defined in the TNCLP Agreement of Limited Partnership generally as all cash receipts less all cash disbursements, less certain reserves (including reserves for future operating and capital needs) established as the general partner determined in its reasonable discretion to be necessary or appropriate. Changes in working capital affected Available Cash, as increases in the amount of cash invested in working capital items (such as increases in receivables or inventory and decreases in accounts payable) reduced Available Cash, while declines in the amount of cash invested in working capital items increased Available Cash. Cash distributions to the limited partners and general partner varied depending on the extent to which the cumulative distributions exceeded certain target threshold levels set forth in the TNCLP Agreement of Limited Partnership.
15. Stockholders’ Equity
Treasury Stock
On August 1, 2018, our Board of Directors (the Board) authorized the repurchase of up to $500 million of CF Holdings common stock through June 30, 2020 (the 2018 Share Repurchase Program). In 2018, we completed the 2018 Share Repurchase Program with the repurchase of 10.9 million shares for $500 million, of which $33 million was accrued and unpaid at December 31, 2018. In February 2019, we retired all 10.9 million shares that were repurchased under the 2018 Share Repurchase Program.
On February 13, 2019, the Board authorized the repurchase of up to $1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program). Repurchases under the 2019 Share Repurchase Program may be made from time to time in the open market, through privately negotiated transactions, block transactions or otherwise. The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors. In the nine months ended September 30, 2019, we repurchased approximately 5.7 million shares for $250 million, of which $2 million was accrued and unpaid at September 30, 2019. In June 2019, we retired approximately 4.2 million shares that were repurchased under the 2019 Share Repurchase Program. At September 30, 2019, we held 1,534,045 shares of treasury stock.
CF INDUSTRIES HOLDINGS, INC.
Accumulated Other Comprehensive Income (Loss)
Changes to accumulated other comprehensive income (loss) are as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Unrealized Gain (Loss) on Securities | | Unrealized Gain on Derivatives | | Defined Benefit Plans | | Accumulated Other Comprehensive Income (Loss) |
| (in millions) |
Balance as of December 31, 2017 | $ | (145 | ) | | $ | 1 |
| | $ | 4 |
| | $ | (123 | ) | | $ | (263 | ) |
Adoption of ASU 2016-01 | — |
| | (1 | ) | | — |
| | — |
| | (1 | ) |
Unrealized loss | — |
| | (1 | ) | | — |
| | — |
| | (1 | ) |
Gain arising during the period | — |
| | — |
| | — |
| | 5 |
| | 5 |
|
Reclassification to earnings(1) | — |
| | — |
| | — |
| | 1 |
| | 1 |
|
Effect of exchange rate changes and deferred taxes | (50 | ) | | — |
| | — |
| | 1 |
| | (49 | ) |
Balance as of September 30, 2018 | $ | (195 | ) | | $ | (1 | ) | | $ | 4 |
| | $ | (116 | ) | | $ | (308 | ) |
| | | | | | | | | |
Balance as of December 31, 2018 | $ | (250 | ) | | $ | — |
| | $ | 5 |
| | $ | (126 | ) | | $ | (371 | ) |
Gain arising during the period | — |
| | — |
| | — |
| | 5 |
| | 5 |
|
Reclassification to earnings(1) | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Effect of exchange rate changes and deferred taxes | (8 | ) | | — |
| | — |
| | 1 |
| | (7 | ) |
Balance as of September 30, 2019 | $ | (258 | ) | | $ | — |
| | $ | 5 |
| | $ | (121 | ) | | $ | (374 | ) |
____________________________________________________________________________ | |
(1) | Reclassifications out of accumulated other comprehensive income (loss) to earnings during the three and nine months ended September 30, 2019 and 2018 were not material. |
CF INDUSTRIES HOLDINGS, INC.
16. Contingencies
Litigation
West Fertilizer Co.
On April 17, 2013, there was a fire and explosion at the West Fertilizer Co. fertilizer storage and distribution facility in West, Texas. According to published reports, 15 people were killed and approximately 200 people were injured in the incident, and the fire and explosion damaged or destroyed a number of homes and buildings around the facility. Various subsidiaries of CF Industries Holdings, Inc. (the CF Entities) were named as defendants along with other companies in lawsuits filed in 2013, 2014 and 2015 in the District Court of McLennan County, Texas by the City of West, individual residents of the County and other parties seeking recovery for damages allegedly sustained as a result of the explosion. The cases were consolidated for discovery and pretrial proceedings in the District Court of McLennan County under the caption “In re: West Explosion Cases.” The two-year statute of limitations expired on April 17, 2015. As of that date, over 400 plaintiffs had filed claims, including at least 9 entities, 325 individuals, and 80 insurance companies. Plaintiffs allege various theories of negligence, strict liability, and breach of warranty under Texas law. Although we do not own or operate the facility or directly sell our products to West Fertilizer Co., products that the CF Entities manufactured and sold to others were delivered to the facility and may have been stored at the West facility at the time of the incident.
The Court granted in part and denied in part the CF Entities’ Motions for Summary Judgment in August 2015. Over two hundred cases have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. The next group of cases was reset for trial beginning on January 21, 2020. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits. The Company cannot provide a range of reasonably possible loss due to the lack of damages discovery for many of the remaining claims and the uncertain nature of this litigation, including uncertainties around the potential allocation of responsibility by a jury to other defendants or responsible third parties. The recognition of a potential loss in the future in the West Fertilizer Co. litigation could negatively affect our results in the period of recognition. However, based upon currently available information, including available insurance coverage, we do not believe that this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Other Litigation
From time to time, we are subject to ordinary, routine legal proceedings related to the usual conduct of our business, including proceedings regarding public utility and transportation rates, environmental matters, taxes and permits relating to the operations of our various plants and facilities. Based on the information available as of the date of this filing, we believe that the ultimate outcome of these routine matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Environmental
From time to time, we receive notices from governmental agencies or third parties alleging that we are a potentially responsible party at certain cleanup sites under CERCLA or other environmental cleanup laws. In 2011, we received a notice from the Idaho Department of Environmental Quality (IDEQ) that alleged that we were a potentially responsible party for the cleanup of a former phosphate mine site we owned in the late 1950s and early 1960s located in Georgetown Canyon, Idaho. The current property owner and a former mining contractor received similar notices for the site. In 2014, we and the current property owner entered into a Consent Order with IDEQ and the U.S. Forest Service to conduct a remedial investigation and feasibility study of the site. In 2015, we and several other parties received a notice that the U.S. Department of the Interior and other trustees intend to undertake a natural resource damage assessment for 17 former phosphate mines in southeast Idaho, one of which is the former Georgetown Canyon mine. We are not able to estimate at this time our potential liability, if any, with respect to the cleanup of the site or a possible claim for natural resource damages. However, based on currently available information, we do not expect the remedial or financial obligations to which we may be subject involving this or other cleanup sites will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
CF INDUSTRIES HOLDINGS, INC.
17. Segment Disclosures
Our reportable segments consist of ammonia, granular urea, UAN, AN and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting of selling, general and administrative expenses and other operating—net) and non-operating expenses (interest and income taxes) are centrally managed and are not included in the measurement of segment profitability reviewed by management.
Our assets, with the exception of goodwill, are not monitored by or reported to our chief operating decision maker by segment; therefore, we do not present total assets by segment. Goodwill by segment is presented in Note 7—Goodwill and Other Intangible Assets.
Segment data for sales, cost of sales and gross margin for the three and nine months ended September 30, 2019 and 2018 are presented in the tables below.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Ammonia | | Granular Urea(1) | | UAN(1) | | AN(1) | | Other(1) | | Consolidated |
| (in millions) |
Three months ended September 30, 2019 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 187 |
| | $ | 327 |
| | $ | 309 |
| | $ | 136 |
| | $ | 79 |
| | $ | 1,038 |
|
Cost of sales | 188 |
| | 207 |
| | 250 |
| | 100 |
| | 65 |
| | 810 |
|
Gross margin | $ | (1 | ) | | $ | 120 |
| | $ | 59 |
| | $ | 36 |
| | $ | 14 |
| | 228 |
|
Total other operating costs and expenses | |
| | |
| | |
| | | | |
| | 26 |
|
Equity in losses of operating affiliate | |
| | |
| | |
| | | | |
| | (14 | ) |
Operating earnings | |
| | |
| | |
| | | | |
| | $ | 188 |
|
Three months ended September 30, 2018 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 192 |
| | $ | 353 |
| | $ | 270 |
| | $ | 139 |
| | $ | 86 |
| | $ | 1,040 |
|
Cost of sales | 181 |
| | 238 |
| | 243 |
| | 129 |
| | 76 |
| | 867 |
|
Gross margin | $ | 11 |
| | $ | 115 |
| | $ | 27 |
| | $ | 10 |
| | $ | 10 |
| | 173 |
|
Total other operating costs and expenses | |
| | |
| | |
| | | | |
| | 42 |
|
Equity in earnings of operating affiliate | |
| | |
| | |
| | | | |
| | 5 |
|
Operating earnings | |
| | |
| | |
| | | | |
| | $ | 136 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Ammonia | | Granular Urea(1) | | UAN(1) | | AN(1) | | Other(1) | | Consolidated |
| (in millions) |
Nine months ended September 30, 2019 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 847 |
| | $ | 1,103 |
| | $ | 934 |
| | $ | 389 |
| | $ | 268 |
| | $ | 3,541 |
|
Cost of sales | 654 |
| | 686 |
| | 722 |
| | 308 |
| | 224 |
| | 2,594 |
|
Gross margin | $ | 193 |
| | $ | 417 |
| | $ | 212 |
| | $ | 81 |
| | $ | 44 |
| | 947 |
|
Total other operating costs and expenses | |
| | |
| | |
| | | | |
| | 113 |
|
Equity in losses of operating affiliate | |
| | |
| | |
| | | | |
| | (6 | ) |
Operating earnings | |
| | |
| | |
| | | | |
| | $ | 828 |
|
| | | | | | | | | | | |
Nine months ended September 30, 2018 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 778 |
| | $ | 977 |
| | $ | 892 |
| | $ | 363 |
| | $ | 287 |
| | $ | 3,297 |
|
Cost of sales | 641 |
| | 682 |
| | 731 |
| | 320 |
| | 248 |
| | 2,622 |
|
Gross margin | $ | 137 |
| | $ | 295 |
| | $ | 161 |
| | $ | 43 |
| | $ | 39 |
| | 675 |
|
Total other operating costs and expenses | |
| | |
| | |
| | | | |
| | 134 |
|
Equity in earnings of operating affiliate | |
| | |
| | |
| | | | |
| | 30 |
|
Operating earnings | |
| | |
| | |
| | | | |
| | $ | 571 |
|
_______________________________________________________________________________ | |
(1) | The cost of the products that are upgraded into other products is transferred at cost into the upgraded product results. |
CF INDUSTRIES HOLDINGS, INC.
18. Condensed Consolidating Financial Statements
The following condensed consolidating financial information is presented in accordance with SEC Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of guaranteed securities registered or being registered, and relates to (i) the senior notes due 2020, 2023, 2034, 2043 and 2044 (described in Note 12—Financing Agreements and referred to in this report as the Public Senior Notes) issued by CF Industries, Inc. (CF Industries), a 100% owned subsidiary of CF Industries Holdings, Inc. (Parent), and guarantees of the Public Senior Notes by Parent and by CFE, CFS, CF USA and CFIDF (the Subsidiary Guarantors), which are 100% owned subsidiaries of Parent, and (ii) debt securities of CF Industries (Other Debt Securities), and guarantees thereof by Parent and the Subsidiary Guarantors, that may be offered and sold from time to time under registration statements that may be filed by Parent, CF Industries and the Subsidiary Guarantors with the SEC.
In the event that a subsidiary of Parent, other than CF Industries, becomes a borrower or a guarantor under the Revolving Credit Agreement (or any renewal, replacement or refinancing thereof), such subsidiary would be required to become a guarantor of the Public Senior Notes, provided that such requirement will no longer apply with respect to the Public Senior Notes due 2023, 2034, 2043 and 2044 following the repayment of the Public Senior Notes due 2020 or the subsidiaries of Parent, other than CF Industries, otherwise becoming no longer subject to such a requirement to guarantee the Public Senior Notes due 2020. The Subsidiary Guarantors became guarantors of the Public Senior Notes as a result of this requirement.
All of the guarantees of the Public Senior Notes are, and we have assumed for purposes of this presentation of condensed consolidating financial information that the guarantees of any Other Debt Securities would be, full and unconditional (as such term is defined in SEC Regulation S-X Rule 3-10(h)) and joint and several. The guarantee of a Subsidiary Guarantor will be automatically released with respect to a series of the Public Senior Notes (1) upon the release, discharge or termination of such Subsidiary Guarantor’s guarantee of the Revolving Credit Agreement (or any renewal, replacement or refinancing thereof), (2) upon legal defeasance with respect to the Public Senior Notes of such series or satisfaction and discharge of the indenture with respect to such series of Public Senior Notes or (3) in the case of the Public Senior Notes due 2023, 2034, 2043 and 2044, upon the discharge, termination or release of, or the release of such Subsidiary Guarantor from its obligations under, such Subsidiary Guarantor’s guarantee of the Public Senior Notes due 2020, including, without limitation, any such discharge, termination or release as a result of retirement, discharge or legal or covenant defeasance of, or satisfaction and discharge of the supplemental indenture governing, the Public Senior Notes due 2020.
For purposes of the presentation of condensed consolidating financial information, the subsidiaries of Parent other than CF Industries and the Subsidiary Guarantors are referred to as the Non-Guarantors.
Presented below are condensed consolidating statements of operations and statements of comprehensive income for Parent, CF Industries, the Subsidiary Guarantors and the Non-Guarantors for the three and nine months ended September 30, 2019 and 2018, condensed consolidating statements of cash flows for Parent, CF Industries, the Subsidiary Guarantors and the Non-Guarantors for the nine months ended September 30, 2019 and 2018, and condensed consolidating balance sheets for Parent, CF Industries, the Subsidiary Guarantors and the Non-Guarantors as of September 30, 2019 and December 31, 2018. The condensed consolidating financial information presented below is not necessarily indicative of the financial position, results of operations, comprehensive income or cash flows of Parent, CF Industries, the Subsidiary Guarantors or the Non-Guarantors on a stand-alone basis.
In these condensed consolidating financial statements, investments in subsidiaries are presented under the equity method, in which our investments are recorded at cost and adjusted for our ownership share of a subsidiary’s cumulative results of operations, distributions and other equity changes, and the eliminating entries reflect primarily intercompany transactions such as sales, accounts receivable and accounts payable and the elimination of equity investments and earnings of subsidiaries. As of September 30, 2019, two of our consolidated entities have made elections to be taxed as partnerships for U.S. federal income tax purposes and are included in the Non-Guarantors column. Due to the partnership tax treatment, these subsidiaries do not record taxes on their financial statements. The tax provision pertaining to the income of these partnerships, plus applicable deferred tax balances are reflected on the financial statements of the parent company owner that is included in the Subsidiary Guarantors column in the following financial information. Liabilities related to benefit plan obligations are reflected on the legal entity that funds the obligation, while the benefit plan expense is included on the legal entity to which the employee provides services.
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Statement of Operations
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2019 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net sales | $ | — |
| | $ | 68 |
| | $ | 807 |
| | $ | 886 |
| | $ | (723 | ) | | $ | 1,038 |
|
Cost of sales | — |
| | 53 |
| | 781 |
| | 689 |
| | (713 | ) | | 810 |
|
Gross margin | — |
| | 15 |
| | 26 |
| | 197 |
| | (10 | ) | | 228 |
|
Selling, general and administrative expenses | 1 |
| | — |
| | 45 |
| | 20 |
| | (10 | ) | | 56 |
|
Other operating—net | — |
| | 1 |
| | (29 | ) | | (2 | ) | | — |
| | (30 | ) |
Total other operating costs and expenses | 1 |
| | 1 |
| | 16 |
| | 18 |
| | (10 | ) | | 26 |
|
Equity in losses of operating affiliates | — |
| | (1 | ) | | — |
| | (13 | ) | | — |
| | (14 | ) |
Operating (loss) earnings | (1 | ) | | 13 |
| | 10 |
| | 166 |
| | — |
| | 188 |
|
Interest expense | 2 |
| | 63 |
| | 1 |
| | 1 |
| | (4 | ) | | 63 |
|
Interest expense—mandatorily redeemable preferred shares | — |
| | — |
| | — |
| | 1 |
| | (1 | ) | | — |
|
Interest income | — |
| | (1 | ) | | (5 | ) | | (3 | ) | | 5 |
| | (4 | ) |
Net earnings of wholly owned subsidiaries | (67 | ) | | (106 | ) | | (109 | ) | | — |
| | 282 |
| | — |
|
Other non-operating—net | — |
| | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Earnings before income taxes | 64 |
| | 57 |
| | 123 |
| | 171 |
| | (282 | ) | | 133 |
|
Income tax (benefit) provision | — |
| | (10 | ) | | 25 |
| | 4 |
| | — |
| | 19 |
|
Net earnings | 64 |
| | 67 |
| | 98 |
| | 167 |
| | (282 | ) | | 114 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| | — |
| | — |
| | 49 |
| | — |
| | 49 |
|
Net earnings attributable to common stockholders | $ | 64 |
| | $ | 67 |
| | $ | 98 |
| | $ | 118 |
| | $ | (282 | ) | | $ | 65 |
|
Condensed Consolidating Statement of Comprehensive Income |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2019 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net earnings | $ | 64 |
| | $ | 67 |
| | $ | 98 |
| | $ | 167 |
| | $ | (282 | ) | | $ | 114 |
|
Other comprehensive loss | (30 | ) | | (30 | ) | | (82 | ) | | (29 | ) | | 141 |
| | (30 | ) |
Comprehensive income | 34 |
| | 37 |
| | 16 |
| | 138 |
| | (141 | ) | | 84 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | — |
| | 49 |
| | — |
| | 49 |
|
Comprehensive income attributable to common stockholders | $ | 34 |
| | $ | 37 |
| | $ | 16 |
| | $ | 89 |
| | $ | (141 | ) | | $ | 35 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Statement of Operations
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2019 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net sales | $ | — |
| | $ | 254 |
| | $ | 2,808 |
| | $ | 2,825 |
| | $ | (2,346 | ) | | $ | 3,541 |
|
Cost of sales | — |
| | 210 |
| | 2,549 |
| | 2,167 |
| | (2,332 | ) | | 2,594 |
|
Gross margin | — |
| | 44 |
| | 259 |
| | 658 |
| | (14 | ) | | 947 |
|
Selling, general and administrative expenses | 3 |
| | (1 | ) | | 130 |
| | 58 |
| | (14 | ) | | 176 |
|
Other operating—net | — |
| | 5 |
| | (68 | ) | | — |
| | — |
| | (63 | ) |
Total other operating costs and expenses | 3 |
| | 4 |
| | 62 |
| | 58 |
| | (14 | ) | | 113 |
|
Equity in losses of operating affiliates | — |
| | — |
| | — |
| | (6 | ) | | — |
| | (6 | ) |
Operating (loss) earnings | (3 | ) | | 40 |
| | 197 |
| | 594 |
| | — |
| | 828 |
|
Interest expense | 3 |
| | 186 |
| | 2 |
| | 2 |
| | (11 | ) | | 182 |
|
Interest expense—mandatorily redeemable preferred shares | — |
| | — |
| | — |
| | 3 |
| | (3 | ) | | — |
|
Interest income | (1 | ) | | (1 | ) | | (13 | ) | | (11 | ) | | 14 |
| | (12 | ) |
Net earnings of wholly owned subsidiaries | (442 | ) | | (557 | ) | | (485 | ) | | — |
| | 1,484 |
| | — |
|
Other non-operating—net | — |
| | — |
| | (1 | ) | | (6 | ) | | — |
| | (7 | ) |
Earnings before income taxes | 437 |
| | 412 |
| | 694 |
| | 606 |
| | (1,484 | ) | | 665 |
|
Income tax (benefit) provision | (1 | ) | | (30 | ) | | 159 |
| | (15 | ) | | — |
| | 113 |
|
Net earnings | 438 |
| | 442 |
| | 535 |
| | 621 |
| | (1,484 | ) | | 552 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| | — |
| | — |
| | 114 |
| | — |
| | 114 |
|
Net earnings attributable to common stockholders | $ | 438 |
| | $ | 442 |
| | $ | 535 |
| | $ | 507 |
| | $ | (1,484 | ) | | $ | 438 |
|
Condensed Consolidating Statement of Comprehensive Income
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2019 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net earnings | $ | 438 |
| | $ | 442 |
| | $ | 535 |
| | $ | 621 |
| | $ | (1,484 | ) | | $ | 552 |
|
Other comprehensive loss | (2 | ) | | (2 | ) | | (60 | ) | | (5 | ) | | 66 |
| | (3 | ) |
Comprehensive income | 436 |
| | 440 |
| | 475 |
| | 616 |
| | (1,418 | ) | | 549 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | — |
| | 114 |
| | — |
| | 114 |
|
Comprehensive income attributable to common stockholders | $ | 436 |
| | $ | 440 |
| | $ | 475 |
| | $ | 502 |
| | $ | (1,418 | ) | | $ | 435 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Statement of Operations
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2018 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net sales | $ | — |
| | $ | 69 |
| | $ | 788 |
| | $ | 885 |
| | $ | (702 | ) | | $ | 1,040 |
|
Cost of sales | — |
| | 56 |
| | 763 |
| | 750 |
| | (702 | ) | | 867 |
|
Gross margin | — |
| | 13 |
| | 25 |
| | 135 |
| | — |
| | 173 |
|
Selling, general and administrative expenses | 2 |
| | (2 | ) | | 37 |
| | 16 |
| | — |
| | 53 |
|
Other operating—net | — |
| | (4 | ) | | 2 |
| | (9 | ) | | — |
| | (11 | ) |
Total other operating costs and expenses | 2 |
| | (6 | ) | | 39 |
| | 7 |
| | — |
| | 42 |
|
Equity in earnings of operating affiliate | — |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
|
Operating (loss) earnings | (2 | ) | | 19 |
| | (14 | ) | | 133 |
| | — |
| | 136 |
|
Interest expense | — |
| | 60 |
| | 3 |
| | 1 |
| | (5 | ) | | 59 |
|
Interest income | (1 | ) | | (1 | ) | | (2 | ) | | (5 | ) | | 5 |
| | (4 | ) |
Net earnings of wholly owned subsidiaries | (31 | ) | | (63 | ) | | (99 | ) | | — |
| | 193 |
| | — |
|
Other non-operating—net | — |
| | — |
| | (1 | ) | | (1 | ) | | — |
| | (2 | ) |
Earnings before income taxes | 30 |
| | 23 |
| | 85 |
| | 138 |
| | (193 | ) | | 83 |
|
Income tax (benefit) provision | — |
| | (8 | ) | | 20 |
| | — |
| | — |
| | 12 |
|
Net earnings | 30 |
| | 31 |
| | 65 |
| | 138 |
| | (193 | ) | | 71 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| | — |
| | — |
| | 41 |
| | — |
| | 41 |
|
Net earnings attributable to common stockholders | $ | 30 |
| | $ | 31 |
| | $ | 65 |
| | $ | 97 |
| | $ | (193 | ) | | $ | 30 |
|
Condensed Consolidating Statement of Comprehensive Income
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2018 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net earnings | $ | 30 |
| | $ | 31 |
| | $ | 65 |
| | $ | 138 |
| | $ | (193 | ) | | $ | 71 |
|
Other comprehensive income (loss) | 1 |
| | 1 |
| | 4 |
| | (1 | ) | | (4 | ) | | 1 |
|
Comprehensive income | 31 |
| | 32 |
| | 69 |
| | 137 |
| | (197 | ) | | 72 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | — |
| | 41 |
| | — |
| | 41 |
|
Comprehensive income attributable to common stockholders | $ | 31 |
| | $ | 32 |
| | $ | 69 |
| | $ | 96 |
| | $ | (197 | ) | | $ | 31 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Statement of Operations
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2018 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net sales | $ | — |
| | $ | 259 |
| | $ | 2,563 |
| | $ | 2,688 |
| | $ | (2,213 | ) | | $ | 3,297 |
|
Cost of sales | — |
| | 215 |
| | 2,401 |
| | 2,211 |
| | (2,205 | ) | | 2,622 |
|
Gross margin | — |
| | 44 |
| | 162 |
| | 477 |
| | (8 | ) | | 675 |
|
Selling, general and administrative expenses | 3 |
| | 1 |
| | 109 |
| | 58 |
| | (8 | ) | | 163 |
|
Other operating—net | — |
| | (12 | ) | | — |
| | (17 | ) | | — |
| | (29 | ) |
Total other operating costs and expenses | 3 |
| | (11 | ) | | 109 |
| | 41 |
| | (8 | ) | | 134 |
|
Equity in earnings of operating affiliate | — |
| | 2 |
| | — |
| | 28 |
| | — |
| | 30 |
|
Operating (loss) earnings | (3 | ) | | 57 |
| | 53 |
| | 464 |
| | — |
| | 571 |
|
Interest expense | — |
| | 183 |
| | 13 |
| | 4 |
| | (20 | ) | | 180 |
|
Interest income | (2 | ) | | (4 | ) | | (7 | ) | | (16 | ) | | 20 |
| | (9 | ) |
Net earnings of wholly owned subsidiaries | (242 | ) | | (338 | ) | | (373 | ) | | — |
| | 953 |
| | — |
|
Other non-operating—net | — |
| | — |
| | (1 | ) | | (5 | ) | | — |
| | (6 | ) |
Earnings before income taxes | 241 |
| | 216 |
| | 421 |
| | 481 |
| | (953 | ) | | 406 |
|
Income tax (benefit) provision | — |
| | (26 | ) | | 93 |
| | 6 |
| | — |
| | 73 |
|
Net earnings | 241 |
| | 242 |
| | 328 |
| | 475 |
| | (953 | ) | | 333 |
|
Less: Net earnings attributable to noncontrolling interests | — |
| | — |
| | — |
| | 92 |
| | — |
| | 92 |
|
Net earnings attributable to common stockholders | $ | 241 |
| | $ | 242 |
| | $ | 328 |
| | $ | 383 |
| | $ | (953 | ) | | $ | 241 |
|
Condensed Consolidating Statement of Comprehensive Income |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2018 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non-Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Net earnings | $ | 241 |
| | $ | 242 |
| | $ | 328 |
| | $ | 475 |
| | $ | (953 | ) | | $ | 333 |
|
Other comprehensive loss | (45 | ) | | (45 | ) | | (30 | ) | | (48 | ) | | 124 |
| | (44 | ) |
Comprehensive income | 196 |
| | 197 |
| | 298 |
| | 427 |
| | (829 | ) | | 289 |
|
Less: Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | — |
| | 92 |
| | — |
| | 92 |
|
Comprehensive income attributable to common stockholders | $ | 196 |
| | $ | 197 |
| | $ | 298 |
| | $ | 335 |
| | $ | (829 | ) | | $ | 197 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Balance Sheet
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2019 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations and Reclassifications | | Consolidated |
| (in millions) |
Assets | |
| | |
| | | | |
| | |
| | |
|
Current assets: | |
| | |
| | | | |
| | |
| | |
|
Cash and cash equivalents | $ | 39 |
| | $ | 263 |
| | $ | 194 |
| | $ | 523 |
| | $ | — |
| | $ | 1,019 |
|
Accounts and notes receivable—net | 139 |
| | 481 |
| | 1,446 |
| | 680 |
| | (2,435 | ) | | 311 |
|
Inventories | — |
| | — |
| | 154 |
| | 142 |
| | — |
| | 296 |
|
Prepaid income taxes | — |
| | — |
| | 17 |
| | — |
| | — |
| | 17 |
|
Other current assets | — |
| | — |
| | 19 |
| | 7 |
| | — |
| | 26 |
|
Total current assets | 178 |
| | 744 |
| | 1,830 |
| | 1,352 |
| | (2,435 | ) | | 1,669 |
|
Property, plant and equipment—net | — |
| | — |
| | 109 |
| | 8,138 |
| | — |
| | 8,247 |
|
Investments in affiliates | 3,844 |
| | 6,008 |
| | 6,285 |
| | 87 |
| | (16,137 | ) | | 87 |
|
Goodwill | — |
| | 2,063 |
| | — |
| | 281 |
| | — |
| | 2,344 |
|
Operating lease right-of-use assets | — |
| | — |
| | 259 |
| | 5 |
| | — |
| | 264 |
|
Other assets | — |
| | 3 |
| | 137 |
| | 321 |
| | (170 | ) | | 291 |
|
Total assets | $ | 4,022 |
| | $ | 8,818 |
| | $ | 8,620 |
| | $ | 10,184 |
| | $ | (18,742 | ) | | $ | 12,902 |
|
Liabilities and Equity | |
| | |
| | | | |
| | |
| | |
|
Current liabilities: | |
| | |
| | | | |
| | |
| | |
|
Accounts and notes payable and accrued expenses | $ | 1,042 |
| | $ | 256 |
| | $ | 1,259 |
| | $ | 337 |
| | $ | (2,435 | ) | | $ | 459 |
|
Income taxes payable | — |
| | — |
| | — |
| | 7 |
| | — |
| | 7 |
|
Customer advances | — |
| | — |
| | 184 |
| | — |
| | — |
| | 184 |
|
Current operating lease liabilities | — |
| | — |
| | 85 |
| | 2 |
| | — |
| | 87 |
|
Current maturities of long-term debt | — |
| | 499 |
| | — |
| | — |
| | — |
| | 499 |
|
Other current liabilities | — |
| | — |
| | 9 |
| | — |
| | — |
| | 9 |
|
Total current liabilities | 1,042 |
| | 755 |
| | 1,537 |
| | 346 |
| | (2,435 | ) | | 1,245 |
|
Long-term debt, net of current maturities | — |
| | 4,204 |
| | 44 |
| | 123 |
| | (167 | ) | | 4,204 |
|
Dividends payable—mandatorily redeemable preferred shares | — |
| | — |
| | — |
| | 3 |
| | (3 | ) | | — |
|
Deferred income taxes | — |
| | — |
| | 1,085 |
| | 150 |
| | — |
| | 1,235 |
|
Operating lease liabilities | — |
| | — |
| | 178 |
| | 3 |
| | — |
| | 181 |
|
Other liabilities | — |
| | 15 |
| | 203 |
| | 138 |
| | — |
| | 356 |
|
Equity: | |
| | |
| | | | |
| | |
| | |
|
Stockholders’ equity: | |
| | |
| | | | |
| | |
| | |
|
Preferred stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Common stock | 2 |
| | — |
| | — |
| | 4,839 |
| | (4,839 | ) | | 2 |
|
Paid-in capital | 1,317 |
| | 1,799 |
| | 5,244 |
| | 1,091 |
| | (8,134 | ) | | 1,317 |
|
Retained earnings | 2,109 |
| | 2,419 |
| | 674 |
| | 1,111 |
| | (4,204 | ) | | 2,109 |
|
Treasury stock | (74 | ) | | — |
| | — |
| | — |
| | — |
| | (74 | ) |
Accumulated other comprehensive loss | (374 | ) | | (374 | ) | | (337 | ) | | (329 | ) | | 1,040 |
| | (374 | ) |
Total stockholders’ equity | 2,980 |
| | 3,844 |
| | 5,581 |
| | 6,712 |
| | (16,137 | ) | | 2,980 |
|
Noncontrolling interests | — |
| | — |
| | (8 | ) | | 2,709 |
| | — |
| | 2,701 |
|
Total equity | 2,980 |
| | 3,844 |
| | 5,573 |
| | 9,421 |
| | (16,137 | ) | | 5,681 |
|
Total liabilities and equity | $ | 4,022 |
| | $ | 8,818 |
| | $ | 8,620 |
| | $ | 10,184 |
| | $ | (18,742 | ) | | $ | 12,902 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Balance Sheet
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations and Reclassifications | | Consolidated |
| (in millions) |
Assets | |
| | |
| | | | |
| | |
| | |
|
Current assets: | |
| | |
| | | | |
| | |
| | |
|
Cash and cash equivalents | $ | 36 |
| | $ | 27 |
| | $ | 65 |
| | $ | 554 |
| | $ | — |
| | $ | 682 |
|
Accounts and notes receivable—net | 135 |
| | 500 |
| | 1,203 |
| | 911 |
| | (2,514 | ) | | 235 |
|
Inventories | — |
| | 4 |
| | 142 |
| | 163 |
| | — |
| | 309 |
|
Prepaid income taxes | — |
| | — |
| | 24 |
| | 4 |
| | — |
| | 28 |
|
Other current assets | — |
| | — |
| | 15 |
| | 5 |
| | — |
| | 20 |
|
Total current assets | 171 |
| | 531 |
| | 1,449 |
| | 1,637 |
| | (2,514 | ) | | 1,274 |
|
Property, plant and equipment—net | — |
| | — |
| | 118 |
| | 8,505 |
| | — |
| | 8,623 |
|
Investments in affiliates | 3,656 |
| | 8,208 |
| | 6,857 |
| | 94 |
| | (18,722 | ) | | 93 |
|
Goodwill | — |
| | — |
| | 2,064 |
| | 289 |
| | — |
| | 2,353 |
|
Other assets | — |
| | 4 |
| | 126 |
| | 320 |
| | (132 | ) | | 318 |
|
Total assets | $ | 3,827 |
| | $ | 8,743 |
| | $ | 10,614 |
| | $ | 10,845 |
| | $ | (21,368 | ) | | $ | 12,661 |
|
Liabilities and Equity | |
| | |
| | | | |
| | |
| | |
|
Current liabilities: | |
| | |
| | | | |
| | |
| | |
|
Accounts and notes payable and accrued expenses | $ | 870 |
| | $ | 374 |
| | $ | 1,429 |
| | $ | 386 |
| | $ | (2,514 | ) | | $ | 545 |
|
Income taxes payable | — |
| | — |
| | 5 |
| | — |
| | — |
| | 5 |
|
Customer advances | — |
| | — |
| | 149 |
| | — |
| | — |
| | 149 |
|
Other current liabilities | — |
| | — |
| | 6 |
| | — |
| | — |
| | 6 |
|
Total current liabilities | 870 |
| | 374 |
| | 1,589 |
| | 386 |
| | (2,514 | ) | | 705 |
|
Long-term debt | — |
| | 4,698 |
| | 43 |
| | 89 |
| | (132 | ) | | 4,698 |
|
Deferred income taxes | — |
| | — |
| | 960 |
| | 157 |
| | — |
| | 1,117 |
|
Other liabilities | — |
| | 15 |
| | 232 |
| | 163 |
| | — |
| | 410 |
|
Equity: | |
| | |
| | | | |
| | |
| | |
|
Stockholders’ equity: | |
| | |
| | | | |
| | |
| | |
|
Preferred stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Common stock | 2 |
| | — |
| | — |
| | 5,363 |
| | (5,363 | ) | | 2 |
|
Paid-in capital | 1,368 |
| | 1,799 |
| | 9,070 |
| | 1,265 |
| | (12,134 | ) | | 1,368 |
|
Retained earnings | 2,463 |
| | 2,229 |
| | (995 | ) | | 965 |
| | (2,199 | ) | | 2,463 |
|
Treasury stock | (504 | ) | | — |
| | — |
| | — |
| | — |
| | (504 | ) |
Accumulated other comprehensive loss | (372 | ) | | (372 | ) | | (277 | ) | | (324 | ) | | 974 |
| | (371 | ) |
Total stockholders’ equity | 2,957 |
| | 3,656 |
| | 7,798 |
| | 7,269 |
| | (18,722 | ) | | 2,958 |
|
Noncontrolling interests | — |
| | — |
| | (8 | ) | | 2,781 |
| | — |
| | 2,773 |
|
Total equity | 2,957 |
| | 3,656 |
| | 7,790 |
| | 10,050 |
| | (18,722 | ) | | 5,731 |
|
Total liabilities and equity | $ | 3,827 |
| | $ | 8,743 |
| | $ | 10,614 |
| | $ | 10,845 |
| | $ | (21,368 | ) | | $ | 12,661 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Statement of Cash Flows
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2019 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Operating Activities: | |
| | |
| | | | |
| | |
| | |
|
Net earnings | $ | 438 |
| | $ | 442 |
| | $ | 535 |
| | $ | 621 |
| | $ | (1,484 | ) | | $ | 552 |
|
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | |
| | |
| | |
| | |
| | |
| | |
|
Depreciation and amortization | — |
| | 7 |
| | 18 |
| | 638 |
| | — |
| | 663 |
|
Deferred income taxes | — |
| | — |
| | 124 |
| | (8 | ) | | — |
| | 116 |
|
Stock-based compensation expense | 24 |
| | — |
| | — |
| | — |
| | — |
| | 24 |
|
Unrealized net loss on natural gas derivatives | — |
| | — |
| | 3 |
| | — |
| | — |
| | 3 |
|
Unrealized loss on embedded derivative | — |
| | — |
| | 3 |
| | — |
| | — |
| | 3 |
|
Gain on disposal of property, plant and equipment | — |
| | — |
| | (45 | ) | | 2 |
| | — |
| | (43 | ) |
Undistributed earnings of affiliates—net | (442 | ) | | (557 | ) | | (485 | ) | | 3 |
| | 1,484 |
| | 3 |
|
Changes in: | |
| | |
| | | | |
| | |
| | |
|
Intercompany accounts receivable/accounts payable—net | — |
| | 34 |
| | (81 | ) | | 47 |
| | — |
| | — |
|
Accounts receivable—net | — |
| | 8 |
| | (84 | ) | | (3 | ) | | — |
| | (79 | ) |
Inventories | — |
| | 4 |
| | (12 | ) | | 25 |
| | — |
| | 17 |
|
Accrued and prepaid income taxes | (1 | ) | | (30 | ) | | 15 |
| | 28 |
| | — |
| | 12 |
|
Accounts and notes payable and accrued expenses | — |
| | 8 |
| | (33 | ) | | (42 | ) | | — |
| | (67 | ) |
Customer advances | — |
| | — |
| | 35 |
| | — |
| | — |
| | 35 |
|
Other—net | — |
| | — |
| | (1 | ) | | (35 | ) | | — |
| | (36 | ) |
Net cash provided by (used in) operating activities | 19 |
| | (84 | ) | | (8 | ) | | 1,276 |
| | — |
| | 1,203 |
|
Investing Activities: | |
| | |
| | | | |
| | |
| | |
|
Additions to property, plant and equipment | — |
| | — |
| | (11 | ) | | (286 | ) | | — |
| | (297 | ) |
Proceeds from sale of property, plant and equipment | — |
| | — |
| | 56 |
| | 15 |
| | — |
| | 71 |
|
Distributions received from unconsolidated affiliates | — |
| | 543 |
| | 414 |
| | (957 | ) | | — |
| | — |
|
Insurance proceeds for property, plant and equipment | — |
| | — |
| | — |
| | 15 |
| | — |
| | 15 |
|
Net cash provided by (used in) investing activities | — |
| | 543 |
| | 459 |
| | (1,213 | ) | | — |
| | (211 | ) |
Financing Activities: | |
| | |
| | | | |
| | |
| | |
|
Long-term debt—net | — |
| | — |
| | (39 | ) | | 39 |
| | — |
| | — |
|
Short-term debt—net | 199 |
| | 29 |
| | (283 | ) | | 55 |
| | — |
| | — |
|
Dividends paid on common stock | (200 | ) | | (252 | ) | | — |
| | — |
| | 252 |
| | (200 | ) |
Dividends to/from affiliates | 252 |
| | — |
| | — |
| | — |
| | (252 | ) | | — |
|
Distribution to noncontrolling interest | — |
| | — |
| | — |
| | (186 | ) | | — |
| | (186 | ) |
Purchases of treasury stock | (280 | ) | | — |
| | — |
| | — |
| | — |
| | (280 | ) |
Issuances of common stock under employee stock plans | 17 |
| | — |
| | — |
| | — |
| | — |
| | 17 |
|
Shares withheld for taxes | (4 | ) | | — |
| | — |
| | — |
| | — |
| | (4 | ) |
Net cash provided by (used in) financing activities | (16 | ) | | (223 | ) | | (322 | ) | | (92 | ) | | — |
| | (653 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| | — |
| | — |
| | (2 | ) | | — |
| | (2 | ) |
Increase (decrease) in cash and cash equivalents | 3 |
| | 236 |
| | 129 |
| | (31 | ) | | — |
| | 337 |
|
Cash and cash equivalents at beginning of period | 36 |
| | 27 |
| | 65 |
| | 554 |
| | — |
| | 682 |
|
Cash and cash equivalents at end of period | $ | 39 |
| | $ | 263 |
| | $ | 194 |
| | $ | 523 |
| | $ | — |
| | $ | 1,019 |
|
CF INDUSTRIES HOLDINGS, INC.
Condensed Consolidating Statement of Cash Flows
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2018 |
| Parent | | CF Industries | | Subsidiary Guarantors | | Non- Guarantors | | Eliminations | | Consolidated |
| (in millions) |
Operating Activities: | |
| | |
| | | | |
| | |
| | |
|
Net earnings | $ | 241 |
| | $ | 242 |
| | $ | 328 |
| | $ | 475 |
| | $ | (953 | ) | | $ | 333 |
|
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: | |
| | |
| | |
| | |
| | |
| | |
|
Depreciation and amortization | — |
| | 6 |
| | 17 |
| | 644 |
| | — |
| | 667 |
|
Deferred income taxes | — |
| | — |
| | 41 |
| | (4 | ) | | — |
| | 37 |
|
Stock-based compensation expense | 16 |
| | — |
| | — |
| | 1 |
| | — |
| | 17 |
|
Unrealized net gain on natural gas derivatives | — |
| | — |
| | (7 | ) | | (4 | ) | | — |
| | (11 | ) |
Unrealized loss on embedded derivative | — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
|
Gain on disposal of property, plant and equipment | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Undistributed earnings of affiliates—net | (242 | ) | | (338 | ) | | (373 | ) | | (5 | ) | | 953 |
| | (5 | ) |
Changes in: | |
| | |
| | | | |
| | |
| | |
|
Intercompany accounts receivable/accounts payable—net | (17 | ) | | (89 | ) | | 97 |
| | 9 |
| | — |
| | — |
|
Accounts receivable—net | — |
| | (6 | ) | | 48 |
| | (11 | ) | | — |
| | 31 |
|
Inventories | — |
| | 4 |
| | (14 | ) | | 7 |
| | — |
| | (3 | ) |
Accrued and prepaid income taxes | — |
| | (26 | ) | | 47 |
| | (8 | ) | | — |
| | 13 |
|
Accounts and notes payable and accrued expenses | — |
| | (1 | ) | | (7 | ) | | (18 | ) | | — |
| | (26 | ) |
Customer advances | — |
| | — |
| | 224 |
| | — |
| | — |
| | 224 |
|
Other—net | — |
| | — |
| | (1 | ) | | (34 | ) | | — |
| | (35 | ) |
Net cash (used in) provided by operating activities | (2 | ) | | (208 | ) | | 402 |
| | 1,051 |
| | — |
| | 1,243 |
|
Investing Activities: | |
| | |
| | | | |
| | |
| | |
|
Additions to property, plant and equipment | — |
| | — |
| | (11 | ) | | (267 | ) | | — |
| | (278 | ) |
Proceeds from sale of property, plant and equipment | — |
| | — |
| | — |
| | 19 |
| | — |
| | 19 |
|
Distributions received from unconsolidated affiliates | — |
| | 200 |
| | 306 |
| | (496 | ) | | — |
| | 10 |
|
Insurance proceeds for property, plant and equipment | — |
| | — |
| | — |
| | 10 |
| | — |
| | 10 |
|
Investments in consolidated subs - capital contributions | — |
| | (31 | ) | | (415 | ) | | 446 |
| | — |
| | — |
|
Other—net | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
Net cash provided by (used in) investing activities | — |
| | 169 |
| | (120 | ) | | (287 | ) | | — |
| | (238 | ) |
Financing Activities: | |
| | |
| | | | |
| | |
| | |
|
Long-term debt—net | — |
| | — |
| | 178 |
| | (178 | ) | | — |
| | — |
|
Short-term debt—net | 233 |
| | 175 |
| | (438 | ) | | 30 |
| | — |
| | — |
|
Financing fees | — |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
Dividends paid on common stock | (210 | ) | | (110 | ) | | — |
| | (49 | ) | | 159 |
| | (210 | ) |
Dividends to/from affiliates | 110 |
| | — |
| | 49 |
| | — |
| | (159 | ) | | — |
|
Acquisition of noncontrolling interest in TNCLP | — |
| | — |
| | — |
| | (388 | ) | | — |
| | (388 | ) |
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | (139 | ) | | — |
| | (139 | ) |
Purchases of treasury stock | (87 | ) | | — |
| | — |
| | — |
| | — |
| | (87 | ) |
Issuances of common stock under employee stock plans | 10 |
| | — |
| | — |
| | — |
| | — |
| | 10 |
|
Shares withheld for taxes | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) |
Net cash provided by (used in) financing activities | 55 |
| | 66 |
| | (211 | ) | | (724 | ) | | — |
| | (814 | ) |
Effect of exchange rate changes on cash and cash equivalents | — |
| | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Increase in cash and cash equivalents | 53 |
| | 27 |
| | 71 |
| | 36 |
| | — |
| | 187 |
|
Cash and cash equivalents at beginning of period | — |
| | 15 |
| | 388 |
| | 432 |
| | — |
| | 835 |
|
Cash and cash equivalents at end of period | $ | 53 |
| | $ | 42 |
| | $ | 459 |
| | $ | 468 |
| | $ | — |
| | $ | 1,022 |
|
CF INDUSTRIES HOLDINGS, INC.
19. Subsequent Events
On October 9, 2019, we announced that our wholly owned subsidiary CF Industries has elected to redeem in full all of the $500 million outstanding principal amount of the 7.125% senior notes due May 2020 (the 2020 Notes), in accordance with the optional redemption provisions provided in the indenture governing the 2020 Notes. We estimate, based on market interest rates on October 28, 2019, the total amount for the redemption of the 2020 Notes will be approximately $513 million, including accrued interest. The 2020 Notes will be redeemed on November 13, 2019 and will be funded with cash on hand.
On October 30, 2019, we announced that CF Industries has elected to redeem on December 13, 2019, $250 million principal amount, representing 50% of the currently outstanding $500 million principal amount, of the 2021 Notes, in accordance with the optional redemption provisions provided in the indenture governing the 2021 Notes. We estimate, based on market interest rates on October 28, 2019, the total amount for the partial redemption of the 2021 Notes will be approximately $257 million, including accrued interest. The partial redemption of the 2021 Notes will be funded with cash on hand.
See Note 12—Financing Agreements for additional information.
CF INDUSTRIES HOLDINGS, INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis in conjunction with our annual consolidated financial statements and related notes, which were included in our 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2019, as well as Item 1. Financial Statements, in this Form 10-Q. All references to “CF Holdings,” “we,” “us,” “our” and “the Company” refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to “CF Industries” refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc. References to tons refer to short-tons. Notes referenced in this discussion and analysis refer to the notes to our unaudited interim consolidated financial statements that are found in the preceding section: Item 1. Financial Statements. The following is an outline of the discussion and analysis included herein:
| |
• | Items Affecting Comparability of Results |
| |
• | Financial Executive Summary |
| |
• | Results of Consolidated Operations |
| |
• | Third Quarter of 2019 Compared to Third Quarter of 2018 |
| |
• | Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018 |
| |
• | Operating Results by Business Segment |
| |
• | Liquidity and Capital Resources |
| |
• | Off-Balance Sheet Arrangements |
| |
• | Critical Accounting Policies and Estimates |
| |
• | Recent Accounting Pronouncements |
| |
• | Forward-Looking Statements |
Overview of CF Holdings
Our Company
We are a leading global fertilizer and chemical company. Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States. Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers, farmers and industrial users. Our principal nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. We serve our customers in North America through our production, storage, transportation and distribution network. We also reach a global customer base with exports from our Donaldsonville, Louisiana, plant, the world’s largest and most flexible nitrogen complex. Additionally, we move product to international destinations from our Verdigris, Oklahoma, facility, our Yazoo City, Mississippi, facility, our Billingham and Ince facilities in the United Kingdom, and from a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a 50 percent interest.
Our principal assets as of September 30, 2019 include:
| |
• | five U.S. nitrogen fertilizer manufacturing facilities located in Donaldsonville, Louisiana (the largest nitrogen fertilizer complex in the world); Port Neal, Iowa; Yazoo City, Mississippi; Verdigris, Oklahoma; and Woodward, Oklahoma. These facilities are owned by CF Industries Nitrogen, LLC (CFN), of which we own approximately 89% and CHS Inc. (CHS) owns the remainder. See Note 14—Noncontrolling Interests for additional information on our strategic venture with CHS; |
| |
• | two Canadian nitrogen fertilizer manufacturing facilities located in Medicine Hat, Alberta (the largest nitrogen fertilizer complex in Canada) and Courtright, Ontario; |
| |
• | two United Kingdom nitrogen manufacturing facilities located in Billingham and Ince; |
CF INDUSTRIES HOLDINGS, INC.
| |
• | an extensive system of terminals and associated transportation equipment located primarily in the Midwestern United States; and |
| |
• | a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia production joint venture located in the Republic of Trinidad and Tobago that we account for under the equity method. |
Market Conditions
Sales Volume
Sales volume for our products in both the first nine months of 2019 and 2018 was 14.6 million product tons. Persistent cold and wet weather across most of North America early in 2019 delayed spring planting activity and fertilizer applications. In addition, high water levels impacted shipping and logistics on inland rivers and delayed certain barge shipments, which caused delays in certain customers taking delivery of fertilizer and other customers delaying purchases. As a result, the spring application season extended into the third quarter of 2019 with some shipments that would typically occur in the second quarter being delayed into the third quarter. Additionally, planned maintenance activity at our plants reduced production levels in the third quarter of 2019, reducing inventory availability.
Sales volume for both the three months ended September 30, 2019 and September 30, 2018 was 4.8 million product tons. Sales volumes of UAN and ammonia increased as a result of the extended application season. Partially offsetting these increases was a decline in sales volumes of granular urea, due primarily to lower supply availability as a result of planned maintenance activity, and AN, as a result of a delayed harvest in the United Kingdom in the third quarter of 2019, which affected the timing of fertilizer purchases.
Selling Prices
The U.S. Gulf is a major global fertilizer pricing point due to the volume of nitrogen fertilizer that trades there. In 2018, higher energy costs in Asia and Europe, along with continued enforcement of environmental regulations in China, resulted in lower nitrogen production in these regions. In addition, plant outages impacted the nitrogen supply and demand balance. These factors collectively drove global nitrogen prices higher in the latter half of 2018.
Upon entering the first quarter of 2019, our average selling prices were higher than the first quarter of 2018, driven by the impact of a tighter global nitrogen supply and demand balance experienced throughout late 2018. During the first half of 2019, our average selling prices for all fertilizer products remained strong due to the limited supply of fertilizer as high water levels and flooding impacted shipping and logistics on inland rivers and limited access for imports. As we entered the third quarter of 2019, the fertilizer application season extended due to the late planting, resulting in continued in-season prompt sales being made, which favorably impacted our third quarter selling prices. However, as the third quarter continued, lower global energy prices resulted in higher nitrogen industry operating rates, which increased fertilizer supply. This factor, in conjunction with the seasonally slow third quarter period, led to weakness in selling prices as the third quarter ended.
The average selling price for our products for the third quarter of 2019 was $218 per ton compared to $263 per ton in the second quarter of 2019. The decline from the second quarter reflected weakness in pricing due to the seasonally slow third quarter selling period and higher global nitrogen supply availability.
The average selling price for our products for both third quarters of 2019 and 2018 was $218 per ton reflecting the net impact of higher average selling prices for our granular urea, AN and UAN segments as a result of the extended application season, and lower average selling prices for our ammonia and Other segments.
The average selling price for our products for the nine months ended September 30, 2019 was $243 per ton compared to $226 per ton for the nine months ended September 30, 2018, an increase of 8%, which resulted in an increase in net sales of approximately $215 million.
Natural Gas Prices
Natural gas is the principal raw material used to produce nitrogen fertilizers. We use natural gas both as a chemical feedstock and as a fuel to produce nitrogen products. Natural gas is a significant cost component of manufactured nitrogen products, representing approximately 40% of our production costs.
CF INDUSTRIES HOLDINGS, INC.
Because most of our nitrogen fertilizer manufacturing facilities are located in the United States and Canada, the price of natural gas in North America directly impacts a substantial portion of our operating expenses. Due to increases in natural gas production resulting from the rise in production from shale gas formations, natural gas prices in North America have declined over the last decade, but are subject to volatility. The average daily market price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, for the three months ended September 30, 2019 was $2.33 per MMBtu compared to $2.90 per MMBtu for the three months ended September 30, 2018, a decrease of 20%. The average daily market price at the Henry Hub for the nine months ended September 30, 2019 was $2.57 per MMBtu compared to $2.91 per MMBtu for the nine months ended September 30, 2018, a decrease of 12%.
We also have manufacturing facilities located in the United Kingdom. These facilities are subject to fluctuations associated with the price of natural gas in Europe. The major natural gas trading point for the United Kingdom is the National Balancing Point (NBP). The average daily market price at NBP for the three months ended September 30, 2019 was $3.42 per MMBtu compared to $8.40 per MMBtu for the three months ended September 30, 2018, a decrease of 59%. The average daily market price at NBP for the nine months ended September 30, 2019 was $4.56 per MMBtu compared to $7.98 per MMBtu for the nine months ended September 30, 2018, a decrease of 43%. The price of natural gas in the United Kingdom has declined as a result of increased production and availability of liquefied natural gas in the global market due to higher gas exports from exporting nations, including the United States.
Natural gas costs in cost of sales, including the impact of realized natural gas derivatives, decreased 30% from $3.19 per MMBtu in the three months ended September 30, 2018, to $2.24 per MMBtu in the three months ended September 30, 2019, which resulted in an increase in gross margin of approximately $77 million. Natural gas costs in cost of sales, including the impact of realized natural gas derivatives, decreased 9% from $3.14 per MMBtu in the nine months ended September 30, 2018, to $2.86 per MMBtu in the nine months ended September 30, 2019, which resulted in an increase in gross margin of approximately $69 million.
Items Affecting Comparability of Results
In addition to the impact of market conditions discussed above, certain items impacted the comparability of our financial results during the three and nine months ended September 30, 2019 and 2018. The following table and related discussion outline these items and how they impacted the comparability of our financial results during these periods. During the three months ended September 30, 2019 and 2018, we reported net earnings attributable to common stockholders of $65 million and $30 million, respectively. During the nine months ended September 30, 2019 and 2018, we reported net earnings attributable to common stockholders of $438 million and $241 million, respectively.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| Pre-Tax | After-Tax | | Pre-Tax | After-Tax | | Pre-Tax | After-Tax | | Pre-Tax | After-Tax |
| (in millions) |
Unrealized net mark-to-market loss (gain) on natural gas derivatives(1) | $ | 2 |
| $ | 2 |
| | $ | (3 | ) | $ | (2 | ) | | $ | 3 |
| $ | 3 |
| | $ | (11 | ) | $ | (8 | ) |
Losses on foreign currency transactions, including intercompany loans(2) | 5 |
| 4 |
| | 4 |
| 3 |
| | 12 |
| 9 |
| | 1 |
| 1 |
|
Gain on sale of Pine Bend facility(2) | — |
| — |
| | — |
| — |
| | (45 | ) | (35 | ) | | — |
| — |
|
Insurance proceeds(2) | (37 | ) | (29 | ) | | (10 | ) | (8 | ) | | (37 | ) | (29 | ) | | (10 | ) | (8 | ) |
Louisiana incentive tax credit(3) | — |
| — |
|
| — |
| — |
|
| — |
| (30 | ) | | — |
| — |
|
Costs related to the acquisition of TNCLP Public Units(4) | — |
| — |
| | — |
| — |
| | — |
| — |
| | 2 |
| 1 |
|
Earnings attributable to noncontrolling interests - TNCLP(5) | — |
| — |
| | — |
| — |
| | — |
| — |
| | 8 |
| 8 |
|
PLNL withholding tax charge(6) | 16 |
| 16 |
| | — |
| — |
| | 16 |
| 16 |
| | — |
| — |
|
PLNL settlement income(6) | — |
| — |
| | — |
| — |
| | — |
| — |
| | (19 | ) | (19 | ) |
______________________________________________________________________________ | |
(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 income tax provision in our consolidated statement of operations. |
| |
(4) | Included in selling, general and administrative expenses in our consolidated statement of operations. |
| |
(5) | Included in net earnings attributable to noncontrolling interests in our consolidated statements of operations. |
| |
(6) | Included in equity in (losses) earnings of operating affiliate in our consolidated statements of operations. |
CF INDUSTRIES HOLDINGS, INC.
The following describes these items, identified in the table above, that impacted the comparability of our financial results for the three and nine months ended September 30, 2019 and 2018. Descriptions of items below that refer to amounts in the table above refer to the pre-tax amounts.
Unrealized net mark-to-market loss (gain) on natural gas derivatives
Natural gas is the largest and most volatile single component of the manufacturing cost for nitrogen-based products. At certain times, we have managed the risk of changes in natural gas prices through the use of derivative financial instruments. The derivatives that we may use for this purpose are primarily natural gas fixed price swaps, natural gas basis swaps and natural gas options. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. This can result in volatility in reported earnings due to the unrealized mark-to-market adjustments that occur from changes in the value of the derivatives, which is reflected in cost of sales in our consolidated statements of operations. In the three months ended September 30, 2019 and 2018, we recognized an unrealized net mark-to-market loss (gain) of $2 million and $(3) million, respectively. In the nine months ended September 30, 2019 and 2018, we recognized an unrealized net mark-to-market loss (gain) of $3 million and $(11) million, respectively.
Losses on foreign currency transactions, including intercompany loans
In the three and nine months ended September 30, 2019, we recognized losses of $5 million and $12 million, respectively, from the impact of changes in foreign currency exchange rates on primarily British pound and Canadian dollar denominated intercompany loans that were not permanently invested.
Gain on sale of Pine Bend facility
During the first quarter of 2019, we entered into an agreement to sell our Pine Bend dry bulk storage and logistics facility in Minnesota. In April of 2019, we completed the sale, received proceeds of $55 million and recognized a pre-tax gain of $45 million. The gain is reflected in other operating—net in our consolidated statement of operations for the nine months ended September 30, 2019.
Insurance proceeds
In the three months ended September 30, 2019 and 2018, we recognized income of $37 million and $10 million, respectively, related to insurance claims at one of our nitrogen complexes. The $37 million of income in 2019 consisted of $22 million related to business interruption insurance proceeds and $15 million related to property insurance proceeds. The $10 million of income in 2018 is related to property insurance proceeds. These proceeds are reflected in other operating—net in our consolidated statements of operations.
Louisiana incentive tax credit
For the nine months ended September 30, 2019, our income tax provision includes an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana complex.
Acquisition of the Terra Nitrogen Company, L.P. (TNCLP) Public Units
In the first quarter of 2018, we announced that, in accordance with the terms of TNCLP’s First Amended and Restated Agreement of Limited Partnership (as amended by Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership, the TNCLP Agreement of Limited Partnership), Terra Nitrogen GP Inc. (TNGP), the sole general partner of TNCLP and an indirect wholly owned subsidiary of CF Holdings, elected to exercise its right to purchase all of the 4,612,562 publicly traded common units of TNCLP (the TNCLP Public Units). TNGP completed its purchase of the TNCLP Public Units on April 2, 2018 (the Purchase) for an aggregate cash purchase price of $388 million. We funded the Purchase with cash on hand. Upon completion of the Purchase, CF Holdings owned, through its subsidiaries, 100 percent of the general and limited partnership interests of TNCLP.
In the nine months ended September 30, 2018, we incurred $2 million of costs for various legal services associated with the acquisition of the TNCLP Public Units. These costs are reflected in selling, general and administrative expenses in our consolidated statement of operations.
Beginning in the second quarter of 2018, as a result of the April 2, 2018 acquisition of the TNCLP Public Units, there are no longer earnings attributable to noncontrolling interests in TNCLP. In the nine months ended September 30, 2018, earnings attributable to noncontrolling interests in TNCLP was $8 million.
CF INDUSTRIES HOLDINGS, INC.
PLNL withholding tax charge
The Trinidadian tax authority (the Board of Inland Revenue) issued a proposed tax assessment against PLNL, our joint venture in the Republic of Trinidad and Tobago, with respect to tax years 2011 and 2012 in the amount of approximately $12 million. The proposed assessment asserts that PLNL should have withheld tax on dividends paid to its Trinidadian owners. Statutory interest and penalties related to the proposed assessment with respect to tax years 2011 and 2012, bring the proposed assessment to an aggregate amount of approximately $22 million. As we own a 50% interest in PLNL, our effective share of any assessment that is determined to be a liability of PLNL would be 50%, which would be reflected as a reduction in our equity in earnings of PLNL. During the third quarter of 2019, the Trinidadian government offered a tax amnesty period that provided taxpayers the opportunity to pay any prior year tax obligations and avoid accumulated interest or penalties. During the tax amnesty period, PLNL evaluated the proposed assessment, including considering the outcome of certain recent legal cases involving other taxpayers. As a result of this evaluation, PLNL paid withholding tax to the Board of Inland Revenue under the amnesty program for tax years 2011 to the current period, and recognized a charge for $32 million. Our 50% share of PLNL’s tax charge is $16 million, which reduced our equity in earnings of operating affiliate for the three and nine months ended September 30, 2019.
PLNL settlement income
PLNL operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by The National Gas Company of Trinidad and Tobago Limited (NGC). PLNL experienced past curtailments in the supply of natural gas, which reduced historical ammonia production at PLNL. The NGC Contract had an initial expiration date of September 2018 and was extended on the same terms until September 2023. Any NGC commitment to supply gas beyond 2023 will be based on new agreements. In May 2018, the NGC and PLNL reached a settlement of an arbitration proceeding regarding PLNL’s claims for damages due to natural gas supply curtailments. The net after-tax impact of the settlement reached between NGC and PLNL that is recognized in our consolidated statement of operations for the nine months ended September 30, 2018 was an increase in our equity in earnings of operating affiliate of approximately $19 million.
Financial Executive Summary
We reported net earnings attributable to common stockholders of $65 million for the three months ended September 30, 2019 compared to $30 million for the three months ended September 30, 2018, or an increase in net earnings of 117%, or $35 million. Diluted net earnings per share attributable to common stockholders increased 123%, or $0.16 per share to $0.29 in the third quarter of 2019 compared to $0.13 in the third quarter of 2018. The increase in net earnings of $35 million was due primarily to the following:
| |
• | Gross margin increased by $55 million in the third quarter of 2019 to $228 million as compared to $173 million in the third quarter of 2018. The increase in gross margin was primarily driven by a decrease in natural gas costs, partially offset by higher shipping and distribution costs and higher costs related to plant turnaround and maintenance activity. |
| |
• | In the third quarter of 2019, we recognized $27 million of additional income from insurance proceeds as compared to the third quarter of 2018. This is more fully described in the section above titled “Items Affecting Comparability of Results.” |
| |
• | In the three months ended September 30, 2019, we recognized a decrease of $16 million in our equity in earnings of operating affiliate, representing our 50% share of PLNL’s charge related to a tax withholding matter for tax years 2011 to the current period. This is more fully described in the section above titled “Items Affecting Comparability of Results.” |
| |
• | Our income tax provision increased by $7 million in the third quarter of 2019 to $19 million as compared to $12 million in the third quarter of 2018 due to higher earnings before income taxes. |
On February 13, 2019, our Board of Directors (the Board) authorized the repurchase of up to $1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program). Under the 2019 Share Repurchase Program, in the third quarter of 2019, we repurchased approximately 1.5 million shares for $72 million and in the nine months ended September 30, 2019, we repurchased a total of 5.7 million shares for $250 million. In the second half of 2018, we repurchased 10.9 million shares for $500 million under the 2018 Share Repurchase Program. See discussion under “Liquidity and Capital Resources—Share Repurchase Programs,” below, for further information.
CF INDUSTRIES HOLDINGS, INC.
Results of Consolidated Operations
The following table presents our consolidated results of operations and supplemental data: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 v. 2018 | | 2019 | | 2018 | | 2019 v. 2018 |
| (in millions, except as noted) |
Net sales | $ | 1,038 |
| | $ | 1,040 |
| | $ | (2 | ) | | — | % | | $ | 3,541 |
| | $ | 3,297 |
| | $ | 244 |
| | 7 | % |
Cost of sales | 810 |
| | 867 |
| | (57 | ) | | (7 | )% | | 2,594 |
| | 2,622 |
| | (28 | ) | | (1 | )% |
Gross margin | 228 |
| | 173 |
| | 55 |
| | 32 | % | | 947 |
| | 675 |
| | 272 |
| | 40 | % |
Gross margin percentage | 22.0 | % | | 16.6 | % | | 5.4 | % | | | | 26.7 | % | | 20.5 | % | | 6.2 | % | | |
Selling, general and administrative expenses | 56 |
| | 53 |
| | 3 |
| | 6 | % | | 176 |
| | 163 |
| | 13 |
| | 8 | % |
Other operating—net | (30 | ) | | (11 | ) | | (19 | ) | | (173 | )% | | (63 | ) | | (29 | ) | | (34 | ) | | (117 | )% |
Total other operating costs and expenses | 26 |
| | 42 |
| | (16 | ) | | (38 | )% | | 113 |
| | 134 |
| | (21 | ) | | (16 | )% |
Equity in (losses) earnings of operating affiliate | (14 | ) | | 5 |
| | (19 | ) | | N/M |
| | (6 | ) | | 30 |
| | (36 | ) | | N/M |
|
Operating earnings | 188 |
| | 136 |
| | 52 |
| | 38 | % | | 828 |
| | 571 |
| | 257 |
| | 45 | % |
Interest expense—net | 59 |
| | 55 |
| | 4 |
| | 7 | % | | 170 |
| | 171 |
| | (1 | ) | | (1 | )% |
Other non-operating—net | (4 | ) | | (2 | ) | | (2 | ) | | (100 | )% | | (7 | ) | | (6 | ) | | (1 | ) | | (17 | )% |
Earnings before income taxes | 133 |
| | 83 |
| | 50 |
| | 60 | % | | 665 |
| | 406 |
| | 259 |
| | 64 | % |
Income tax provision | 19 |
| | 12 |
| | 7 |
| | 58 | % | | 113 |
| | 73 |
| | 40 |
| | 55 | % |
Net earnings | 114 |
| | 71 |
| | 43 |
| | 61 | % | | 552 |
| | 333 |
| | 219 |
| | 66 | % |
Less: Net earnings attributable to noncontrolling interests | 49 |
| | 41 |
| | 8 |
| | 20 | % | | 114 |
| | 92 |
| | 22 |
| | 24 | % |
Net earnings attributable to common stockholders | $ | 65 |
| | $ | 30 |
| | $ | 35 |
| | 117 | % | | $ | 438 |
| | $ | 241 |
| | $ | 197 |
| | 82 | % |
Diluted net earnings per share attributable to common stockholders | $ | 0.29 |
| | $ | 0.13 |
| | $ | 0.16 |
| | 123 | % | | $ | 1.97 |
| | $ | 1.03 |
| | $ | 0.94 |
| | 91 | % |
Diluted weighted-average common shares outstanding | 220.7 |
| | 235.2 |
| | (14.5 | ) | | (6 | )% | | 222.5 |
| | 234.9 |
| | (12.4 | ) | | (5 | )% |
Dividends declared per common share | $ | 0.30 |
| | $ | 0.30 |
| | $ | — |
| | — | % | | $ | 0.90 |
| | $ | 0.90 |
| | $ | — |
| | — | % |
Natural gas supplemental data (per MMBtu) | | | | | | | | | | | | | | | |
Natural gas costs in cost of sales(1) | $ | 2.24 |
| | $ | 3.16 |
| | $ | (0.92 | ) | | (29 | )% | | $ | 2.87 |
| | $ | 3.11 |
| | $ | (0.24 | ) | | (8 | )% |
Realized derivatives loss (gain) in cost of sales(2) | — |
| | 0.03 |
| | (0.03 | ) | | (100 | )% | | (0.01 | ) | | 0.03 |
| | (0.04 | ) | | N/M |
|
Cost of natural gas in cost of sales | $ | 2.24 |
| | $ | 3.19 |
| | $ | (0.95 | ) | | (30 | )% | | $ | 2.86 |
| | $ | 3.14 |
| | $ | (0.28 | ) | | (9 | )% |
Average daily market price of natural gas Henry Hub (Louisiana) | $ | 2.33 |
| | $ | 2.90 |
| | $ | (0.57 | ) | | (20 | )% | | $ | 2.57 |
| | $ | 2.91 |
| | $ | (0.34 | ) | | (12 | )% |
Average daily market price of natural gas National Balancing Point (UK) | $ | 3.42 |
| | $ | 8.40 |
| | $ | (4.98 | ) | | (59 | )% | | $ | 4.56 |
| | $ | 7.98 |
| | $ | (3.42 | ) | | (43 | )% |
Unrealized net mark-to-market loss (gain) on natural gas derivatives | $ | 2 |
| | $ | (3 | ) | | $ | 5 |
| | N/M |
| | $ | 3 |
| | $ | (11 | ) | | $ | 14 |
| | N/M |
|
Depreciation and amortization | $ | 223 |
| | $ | 233 |
| | $ | (10 | ) | | (4 | )% | | $ | 663 |
| | $ | 667 |
| | $ | (4 | ) | | (1 | )% |
Capital expenditures | $ | 143 |
| | $ | 133 |
| | $ | 10 |
| | 8 | % | | $ | 297 |
| | $ | 278 |
| | $ | 19 |
| | 7 | % |
Sales volume by product tons (000s) | 4,752 |
| | 4,765 |
| | (13 | ) | | — | % | | 14,555 |
| | 14,606 |
| | (51 | ) | | — | % |
Production volume by product tons (000s): | | | | | | | | | | | | | | | |
Ammonia(3) | 2,336 |
| | 2,456 |
| | (120 | ) | | (5 | )% | | 7,564 |
| | 7,424 |
| | 140 |
| | 2 | % |
Granular urea | 1,206 |
| | 1,296 |
| | (90 | ) | | (7 | )% | | 3,836 |
| | 3,675 |
| | 161 |
| | 4 | % |
UAN (32%) | 1,584 |
| | 1,595 |
| | (11 | ) | | (1 | )% | | 4,810 |
| | 4,957 |
| | (147 | ) | | (3 | )% |
AN | 552 |
| | 474 |
| | 78 |
| | 16 | % | | 1,585 |
| | 1,355 |
| | 230 |
| | 17 | % |
___________________________________________________________________________ N/M—Not Meaningful
| |
(1) | Includes the cost of natural gas and related transportation that is included in cost of sales during the period under the first-in, first-out inventory cost method. |
| |
(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. |
| |
(3) | Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN. |
CF INDUSTRIES HOLDINGS, INC.
Third Quarter of 2019 Compared to Third Quarter of 2018
Net Sales
Our total net sales were essentially unchanged at $1.04 billion in the third quarter of 2019 compared to the third quarter of 2018. Average selling prices were also $218 per ton in both quarters. Our total sales volume of 4.8 million product tons in the third quarter of 2019 was essentially unchanged compared to the third quarter of 2018, as higher sales volumes in our UAN and ammonia segments were partially offset by lower sales volumes in our granular urea and AN segments.
Cost of Sales
Our total cost of sales decreased $57 million, or 7%, from the third quarter of 2018 to the third quarter of 2019. The decrease in our cost of sales was due primarily to lower realized natural gas costs, including the impact of realized derivatives, partially offset by the impact of higher shipping and distribution costs and higher costs related to plant turnaround and maintenance activity. Cost of sales averaged $170 per ton in the third quarter of 2019, a 7% decrease from $182 per ton in the same quarter of 2018. Natural gas costs, including the impact of realized derivatives, decreased 30% from $3.19 per MMBtu in the third quarter of 2018 to $2.24 per MMBtu in the third quarter of 2019.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $3 million to $56 million in the third quarter of 2019 as compared to $53 million in the comparable period of 2018. The increase was due primarily to the costs for certain corporate office initiatives.
Other Operating—Net
Other operating—net was $30 million of income in the third quarter of 2019 compared to $11 million of income in the comparable period of 2018. The $30 million of income in the third quarter of 2019 was due primarily to the recognition of insurance proceeds of $37 million related to an insurance claim at one of our nitrogen complexes, of which $22 million related to business interruption insurance proceeds and $15 million related to property insurance proceeds. The $11 million of income in the third quarter of 2018 primarily includes insurance proceeds of $10 million related to a property insurance claim at one of our nitrogen complexes.
Equity in (Losses) Earnings of Operating Affiliate
Equity in losses of operating affiliate was $14 million in the third quarter of 2019 compared to earnings of $5 million in the third quarter of 2018. The loss in the third quarter of 2019 includes approximately $16 million related to a withholding tax charge recognized by PLNL regarding a multi-year tax dispute. See “Items Affecting Comparability of Results—PLNL withholding tax charge,” above, for additional information.
Interest Expense—Net
Net interest expense was $59 million in the third quarter of 2019 compared to $55 million in the third quarter of 2018, reflecting higher interest on tax liabilities.
Income Taxes
For the three months ended September 30, 2019, we recorded an income tax provision of $19 million on pre-tax income of $133 million, or an effective tax rate of 14.6%, compared to an income tax provision of $12 million on pre-tax income of $83 million, or an effective tax rate of 15.3%, for the three months ended September 30, 2018.
Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CFN, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended September 30, 2019 of 14.6%, which is based on pre-tax income of $133 million, would be 23.1% exclusive of the earnings attributable to the noncontrolling interest of $49 million. Our effective tax rate for the three months ended September 30, 2018 of 15.3%, which is based on pre-tax income of $83 million, would be 29.4% exclusive of the earnings attributable to the noncontrolling interest of $41 million. See Note 10—Income Taxes and Note 14—Noncontrolling Interests for additional information.
CF INDUSTRIES HOLDINGS, INC.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests increased $8 million in the third quarter of 2019 compared to the third quarter of 2018 due to higher earnings from CFN primarily driven by higher average selling prices due to the impact of a tighter global nitrogen supply and demand balance and lower realized natural gas costs.
Diluted Net Earnings Per Share Attributable to Common Stockholders
Net earnings per share attributable to common stockholders increased $0.16 to $0.29 per diluted share in the third quarter of 2019 from $0.13 per diluted share in the third quarter of 2018. This increase reflects higher gross margin due primarily to lower realized natural gas costs and a 6% reduction in diluted weighted-average common shares outstanding due to repurchases made under our share repurchase programs.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net Sales
Our total net sales increased $244 million, or 7%, to $3.54 billion in the first nine months of 2019 as compared to $3.30 billion in the first nine months of 2018 due primarily to an 8% increase in average selling prices, which increased net sales by $215 million.
Average selling prices were $243 per ton in the first nine months of 2019, or 8% higher, as compared to $226 per ton in the first nine months of 2018 due to higher average selling prices across all major products, driven by the impact of a tighter global nitrogen supply and demand balance.
Our total sales volume of 14.6 million product tons in the first nine months of 2019 was essentially unchanged compared to the first nine months of 2018, as higher sales volume in our ammonia and granular urea segments were partially offset by lower sales volumes in our UAN and Other segments.
Cost of Sales
Our total cost of sales decreased $28 million, or 1%, from the first nine months of 2018 to the first nine months of 2019. The decline in our cost of sales was due primarily to lower realized natural gas costs, including the impact of realized derivatives, partially offset by the impact of higher shipping costs and higher costs related to plant turnaround and maintenance activity. Cost of sales per ton averaged $178 per ton in the first nine months of 2019, a 1% decrease from $180 per ton in the same period of 2018. Natural gas costs, including the impact of realized derivatives, decreased 9% from $3.14 per MMBtu in the first nine months of 2018 to $2.86 in the first nine months of 2019.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $13 million to $176 million in the first nine months of 2019 as compared to $163 million in the comparable period of 2018. The increase was due primarily to certain equity award modifications and costs related to certain corporate office initiatives.
Other Operating—Net
Other operating—net was $63 million of income in the first nine months of 2019 compared to $29 million of income in the comparable period of 2018. The income in the first nine months of 2019 was due primarily to the $45 million pre-tax gain recognized on the sale of the Pine Bend facility and insurance proceeds of $37 million, partially offset by foreign currency transaction losses. The income in the first nine months of 2018 was due to a combination of changes in legal reserves, insurance proceeds of $10 million and a gain of $5 million due to the recovery of certain precious metals used in the manufacturing process.
Equity in (Losses) Earnings of Operating Affiliates
Equity in losses of operating affiliates was $6 million in the first nine months of 2019 compared to $30 million of earnings in the first nine months of 2018. The loss in the first nine months of 2019 includes approximately $16 million related to a withholding tax charge recognized by PLNL regarding a multi-year tax dispute. See “Items Affecting Comparability of Results—PLNL withholding tax charge,” above, for additional information.
CF INDUSTRIES HOLDINGS, INC.
Earnings in the first nine months of 2018 includes approximately $19 million related to the net after-tax impact of a settlement reached between NGC and PLNL of an arbitration proceeding regarding PLNL’s claims for damages due to historical natural gas supply curtailments. See “Items Affecting Comparability of Results—PLNL settlement income,” above, for additional information.
Interest Expense—Net
Net interest expense was $170 million in the first nine months of 2019 compared to $171 million in the first nine months of 2018.
Income Taxes
For the nine months ended September 30, 2019, we recorded an income tax provision of $113 million on pre-tax income of $665 million, or an effective tax rate of 17.1%, compared to an income tax provision of $73 million on pre-tax income of $406 million, or an effective tax rate of 18.1%, for the nine months ended September 30, 2018.
For the nine months ended September 30, 2019, our income tax provision includes an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana complex.
Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CFN, and in the first quarter of 2018 by earnings attributable to the noncontrolling interests in TNCLP, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interests. Our effective tax rate for the nine months ended September 30, 2019 of 17.1%, which is based on pre-tax income of $665 million, would be 20.6% exclusive of the earnings attributable to the noncontrolling interest of $114 million. Our effective tax rate for the nine months ended September 30, 2018 of 18.1%, which is based on pre-tax income of $406 million, would be 23.3% exclusive of the earnings attributable to the noncontrolling interests of $92 million.
On April 2, 2018, we acquired the TNCLP Public Units. Our effective tax rate in the first nine months of 2018 was impacted by a $20 million reduction to our deferred tax liability as a result of the change in our effective state income tax rate as a result of the implementation of legal entity structure changes related to the acquisition.
See Note 10—Income Taxes and Note 14—Noncontrolling Interests for additional information.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests increased $22 million in the first nine months of 2019 compared to the first nine months of 2018 due to higher earnings from CFN driven by higher average selling prices due to the impact of a tighter global nitrogen supply and demand balance and lower realized natural gas costs, partially offset by the reduction in noncontrolling interests due to the April 2, 2018 purchase of the noncontrolling interests in TNCLP. In the nine months ended September 30, 2018, earnings attributable to noncontrolling interests in TNCLP was $8 million.
Diluted Net Earnings Per Share Attributable to Common Stockholders
Net earnings per share attributable to common stockholders increased $0.94 to $1.97 per diluted share in the first nine months of 2019 from $1.03 per diluted share in the first nine months of 2018. This increase is due primarily to higher gross margin driven by higher selling prices due to the impact of a tighter global nitrogen supply and demand balance and lower realized natural gas costs, and a 5% reduction in diluted weighted-average common shares outstanding due to repurchases made under our share repurchase programs.
CF INDUSTRIES HOLDINGS, INC.
Operating Results by Business Segment
Our reportable segments consist of ammonia, granular urea, UAN, AN and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting of selling, general and administrative expenses and other operating—net) and non-operating expenses (interest and income taxes), are centrally managed and are not included in the measurement of segment profitability reviewed by management. The following table presents summary operating results by business segment:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Ammonia | | Granular Urea(1) | | UAN(1) | | AN(1) | | Other(1) | | Consolidated |
| (in millions, except percentages) |
Three months ended September 30, 2019 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 187 |
| | $ | 327 |
| | $ | 309 |
| | $ | 136 |
| | $ | 79 |
| | $ | 1,038 |
|
Cost of sales | 188 |
| | 207 |
| | 250 |
| | 100 |
| | 65 |
| | 810 |
|
Gross margin | $ | (1 | ) | | $ | 120 |
| | $ | 59 |
| | $ | 36 |
| | $ | 14 |
| | $ | 228 |
|
Gross margin percentage | (0.5 | )% | | 36.7 | % | | 19.1 | % | | 26.5 | % | | 17.7 | % | | 22.0 | % |
Three months ended September 30, 2018 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 192 |
| | $ | 353 |
| | $ | 270 |
| | $ | 139 |
| | $ | 86 |
| | $ | 1,040 |
|
Cost of sales | 181 |
| | 238 |
| | 243 |
| | 129 |
| | 76 |
| | 867 |
|
Gross margin | $ | 11 |
| | $ | 115 |
| | $ | 27 |
| | $ | 10 |
| | $ | 10 |
| | $ | 173 |
|
Gross margin percentage | 5.7 | % | | 32.6 | % | | 10.0 | % | | 7.2 | % | | 11.6 | % | | 16.6 | % |
Nine months ended September 30, 2019 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 847 |
| | $ | 1,103 |
| | $ | 934 |
| | $ | 389 |
| | $ | 268 |
| | $ | 3,541 |
|
Cost of sales | 654 |
| | 686 |
| | 722 |
| | 308 |
| | 224 |
| | 2,594 |
|
Gross margin | $ | 193 |
| | $ | 417 |
| | $ | 212 |
| | $ | 81 |
| | $ | 44 |
| | $ | 947 |
|
Gross margin percentage | 22.8 | % | | 37.8 | % | | 22.7 | % | | 20.8 | % | | 16.4 | % | | 26.7 | % |
Nine months ended September 30, 2018 | |
| | |
| | |
| | | | |
| | |
|
Net sales | $ | 778 |
| | $ | 977 |
| | $ | 892 |
| | $ | 363 |
| | $ | 287 |
| | $ | 3,297 |
|
Cost of sales | 641 |
| | 682 |
| | 731 |
| | 320 |
| | 248 |
| | 2,622 |
|
Gross margin | $ | 137 |
| | $ | 295 |
| | $ | 161 |
| | $ | 43 |
| | $ | 39 |
| | $ | 675 |
|
Gross margin percentage | 17.6 | % | | 30.2 | % | | 18.0 | % | | 11.8 | % | | 13.6 | % | | 20.5 | % |
_______________________________________________________________________________
| |
(1) | The cost of products that are upgraded into other products is transferred at cost into the upgraded product results. |
CF INDUSTRIES HOLDINGS, INC.
Ammonia Segment
Our ammonia segment produces anhydrous ammonia (ammonia), which is our most concentrated nitrogen fertilizer as it contains 82% nitrogen. The results of our ammonia segment consist of sales of ammonia to external customers. In addition, ammonia is the “basic” nitrogen product that we upgrade into other nitrogen products such as granular urea, UAN and AN. We produce ammonia at all of our nitrogen manufacturing complexes.
The following table presents summary operating data for our ammonia segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 v. 2018 | | 2019 | | 2018 | | 2019 v. 2018 |
| (dollars in millions, except per ton amounts) |
Net sales | $ | 187 |
| | $ | 192 |
| | $ | (5 | ) | | (3 | )% | | $ | 847 |
| | $ | 778 |
| | $ | 69 |
| | 9 | % |
Cost of sales | 188 |
| | 181 |
| | 7 |
| | 4 | % | | 654 |
| | 641 |
| | 13 |
| | 2 | % |
Gross margin | $ | (1 | ) | | $ | 11 |
| | $ | (12 | ) | | N/M |
| | $ | 193 |
| | $ | 137 |
| | $ | 56 |
| | 41 | % |
Gross margin percentage | (0.5 | )% | | 5.7 | % | | (6.2 | )% | | | | 22.8 | % | | 17.6 | % | | 5.2 | % | | |
Sales volume by product tons (000s) | 720 |
| | 657 |
| | 63 |
| | 10 | % | | 2,548 |
| | 2,415 |
| | 133 |
| | 6 | % |
Sales volume by nutrient tons (000s)(1) | 590 |
| | 539 |
| | 51 |
| | 9 | % | | 2,089 |
| | 1,981 |
| | 108 |
| | 5 | % |
Average selling price per product ton | $ | 260 |
| | $ | 292 |
| | $ | (32 | ) | | (11 | )% | | $ | 332 |
| | $ | 322 |
| | $ | 10 |
| | 3 | % |
Average selling price per nutrient ton(1) | $ | 317 |
| | $ | 356 |
| | $ | (39 | ) | | (11 | )% | | $ | 405 |
| | $ | 393 |
| | $ | 12 |
| | 3 | % |
Gross margin per product ton | $ | (1 | ) | | $ | 17 |
| | $ | (18 | ) | | N/M |
| | $ | 76 |
| | $ | 57 |
| | $ | 19 |
| | 33 | % |
Gross margin per nutrient ton(1) | $ | (2 | ) | | $ | 20 |
| | $ | (22 | ) | | N/M |
| | $ | 92 |
| | $ | 69 |
| | $ | 23 |
| | 33 | % |
Depreciation and amortization | $ | 41 |
| | $ | 33 |
| | $ | 8 |
| | 24 | % | | $ | 123 |
| | $ | 110 |
| | $ | 13 |
| | 12 | % |
Unrealized net mark-to-market loss (gain) on natural gas derivatives | $ | 1 |
| | $ | (1 | ) | | $ | 2 |
| | N/M |
| | $ | 1 |
| | $ | (3 | ) | | $ | 4 |
| | N/M |
|
_______________________________________________________________________________N/M—Not Meaningful
| |
(1) | Ammonia represents 82% nitrogen content. Nutrient tons represent the equivalent tons of nitrogen within the product tons. |
Third Quarter of 2019 Compared to Third Quarter of 2018
Net Sales. Net sales in our ammonia segment decreased by $5 million, or 3%, in the third quarter of 2019 from the third quarter of 2018 due primarily to a 11% decrease in average selling prices, partially offset by a 10% increase in sales volume. Average selling prices decreased to $260 per ton in the third quarter of 2019 compared to $292 in the comparable period of 2018 due primarily to increased supply as a result of lower global energy prices and higher global operating rates, which has increased the global supply of ammonia. Sales volume was higher due to higher inventory levels entering the quarter.
Cost of Sales. Cost of sales in our ammonia segment averaged $261 per ton in the third quarter of 2019, a 5% decrease from $275 per ton in the comparable period of 2018. The decrease is due primarily to lower realized natural gas costs, partially offset by the impact of higher shipping and distribution costs.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net Sales. Net sales in our ammonia segment increased by $69 million, or 9%, in the nine months ended September 30, 2019 from the nine months ended September 30, 2018 due primarily to a 6% increase in sales volume and a 3% increase in average selling prices. Sales volume was higher due to greater supply availability due to increased production. The increase in average selling prices was due to the impact of a tighter nitrogen supply and demand balance earlier in the year.
Cost of Sales. Cost of sales in our ammonia segment averaged $256 per ton in the nine months ended September 30, 2019, a 3% decrease from $265 per ton in the comparable period of 2018 due primarily to the impact of lower realized natural gas costs.
CF INDUSTRIES HOLDINGS, INC.
Granular Urea Segment
Our granular urea segment produces granular urea, which contains 46% nitrogen. Produced from ammonia and carbon dioxide, it has the highest nitrogen content of any of our solid nitrogen fertilizers. Granular urea is produced at our Donaldsonville, Louisiana; Medicine Hat, Alberta; and Port Neal, Iowa, nitrogen complexes.
The following table presents summary operating data for our granular urea segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 v. 2018 | | 2019 | | 2018 | | 2019 v. 2018 |
| (dollars in millions, except per ton amounts) |
Net sales | $ | 327 |
| | $ | 353 |
| | $ | (26 | ) | | (7 | )% | | $ | 1,103 |
| | $ | 977 |
| | $ | 126 |
| | 13 | % |
Cost of sales | 207 |
| | 238 |
| | (31 | ) | | (13 | )% | | 686 |
| | 682 |
| | 4 |
| | 1 | % |
Gross margin | $ | 120 |
| | $ | 115 |
| | $ | 5 |
| | 4 | % | | $ | 417 |
| | $ | 295 |
| | $ | 122 |
| | 41 | % |
Gross margin percentage | 36.7 | % | | 32.6 | % | | 4.1 | % | | | | 37.8 | % | | 30.2 | % | | 7.6 | % | | |
Sales volume by product tons (000s) | 1,200 |
| | 1,363 |
| | (163 | ) | | (12 | )% | | 3,880 |
| | 3,779 |
| | 101 |
| | 3 | % |
Sales volume by nutrient tons (000s)(1) | 552 |
| | 627 |
| | (75 | ) | | (12 | )% | | 1,785 |
| | 1,738 |
| | 47 |
| | 3 | % |
Average selling price per product ton | $ | 273 |
| | $ | 259 |
| | $ | 14 |
| | 5 | % | | $ | 284 |
| | $ | 259 |
| | $ | 25 |
| | 10 | % |
Average selling price per nutrient ton(1) | $ | 592 |
| | $ | 563 |
| | $ | 29 |
| | 5 | % | | $ | 618 |
| | $ | 562 |
| | $ | 56 |
| | 10 | % |
Gross margin per product ton | $ | 100 |
| | $ | 84 |
| | $ | 16 |
| | 19 | % | | $ | 107 |
| | $ | 78 |
| | $ | 29 |
| | 37 | % |
Gross margin per nutrient ton(1) | $ | 217 |
| | $ | 183 |
| | $ | 34 |
| | 19 | % | | $ | 234 |
| | $ | 170 |
| | $ | 64 |
| | 38 | % |
Depreciation and amortization | $ | 66 |
| | $ | 74 |
| | $ | (8 | ) | | (11 | )% | | $ | 211 |
| | $ | 214 |
| | $ | (3 | ) | | (1 | )% |
Unrealized net mark-to-market (gain) loss on natural gas derivatives | $ | — |
| | $ | (1 | ) | | $ | 1 |
| | 100 | % | | $ | 1 |
| | $ | (3 | ) | | $ | 4 |
| | N/M |
|
_______________________________________________________________________________N/M—Not Meaningful
| |
(1) | Granular urea represents 46% nitrogen content. Nutrient tons represent the tons of nitrogen within the product tons. |
Third Quarter of 2019 Compared to Third Quarter of 2018
Net Sales. Net sales in our granular urea segment decreased $26 million, or 7%, in the third quarter of 2019 from the third quarter of 2018 due primarily to a 12% decrease in sales volume, partially offset by a 5% increase in average selling prices. Sales volume was lower due to lower supply availability as a result of both lower beginning inventory and lower production due to planned maintenance activity. Average selling prices increased to $273 per ton in the third quarter of 2019 compared to $259 per ton in the comparable period of 2018. The increase was due primarily to the impact of a tighter global nitrogen supply and demand balance and the extended application season.
Cost of Sales. Cost of sales in our granular urea segment averaged $173 per ton in the third quarter of 2019, a 1% decrease from $175 per ton in the comparable period of 2018, driven by lower realized natural gas costs, partially offset by higher costs related to planned maintenance activity.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net Sales. Net sales in our granular urea segment increased $126 million, or 13%, in the nine months ended September 30, 2019 from the nine months ended September 30, 2018 due primarily to a 10% increase in average selling prices and a 3% increase in sales volume. Average selling prices increased to $284 per ton in the nine months ended September 30, 2019 compared to $259 per ton in the comparable period of 2018. The increase was due primarily to the impact of a tighter global nitrogen supply and demand balance and the impact high water levels and flooding had on the shipping and logistics on inland rivers, including limiting access to the U.S. Gulf for imports, during the spring application season. Sales volume was higher due to greater supply availability as a result of our decision to increase granular urea production in the nine months ended September 30, 2019.
Cost of Sales. Cost of sales in our granular urea segment averaged $177 per ton in the nine months ended September 30, 2019, a 2% decrease from $181 per ton in the comparable period of 2018. The decrease was due primarily to lower realized natural gas costs and higher plant efficiencies.
CF INDUSTRIES HOLDINGS, INC.
UAN Segment
Our UAN segment produces urea ammonium nitrate solution (UAN). UAN, a liquid fertilizer product with a nitrogen content that typically ranges from 28% to 32%, is produced by combining urea and ammonium nitrate. UAN is produced at our nitrogen complexes in Courtright, Ontario; Donaldsonville, Louisiana; Port Neal, Iowa; Verdigris, Oklahoma; Woodward, Oklahoma; and Yazoo City, Mississippi.
The following table presents summary operating data for our UAN segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 v. 2018 | | 2019 | | 2018 | | 2019 v. 2018 |
| (dollars in millions, except per ton amounts) |
Net sales | $ | 309 |
| | $ | 270 |
| | $ | 39 |
| | 14 | % | | $ | 934 |
| | $ | 892 |
| | $ | 42 |
| | 5 | % |
Cost of sales | 250 |
| | 243 |
| | 7 |
| | 3 | % | | 722 |
| | 731 |
| | (9 | ) | | (1 | )% |
Gross margin | $ | 59 |
| | $ | 27 |
| | $ | 32 |
| | 119 | % | | $ | 212 |
| | $ | 161 |
| | $ | 51 |
| | 32 | % |
Gross margin percentage | 19.1 | % | | 10.0 | % | | 9.1 | % | | | | 22.7 | % | | 18.0 | % | | 4.7 | % | | |
Sales volume by product tons (000s) | 1,741 |
| | 1,620 |
| | 121 |
| | 7 | % | | 4,880 |
| | 5,109 |
| | (229 | ) | | (4 | )% |
Sales volume by nutrient tons (000s)(1) | 550 |
| | 513 |
| | 37 |
| | 7 | % | | 1,537 |
| | 1,615 |
| | (78 | ) | | (5 | )% |
Average selling price per product ton | $ | 177 |
| | $ | 167 |
| | $ | 10 |
| | 6 | % | | $ | 191 |
| | $ | 175 |
| | $ | 16 |
| | 9 | % |
Average selling price per nutrient ton(1) | $ | 562 |
| | $ | 526 |
| | $ | 36 |
| | 7 | % | | $ | 608 |
| | $ | 552 |
| | $ | 56 |
| | 10 | % |
Gross margin per product ton | $ | 34 |
| | $ | 17 |
| | $ | 17 |
| | 100 | % | | $ | 43 |
| | $ | 32 |
| | $ | 11 |
| | 34 | % |
Gross margin per nutrient ton(1) | $ | 107 |
| | $ | 53 |
| | $ | 54 |
| | 102 | % | | $ | 138 |
| | $ | 100 |
| | $ | 38 |
| | 38 | % |
Depreciation and amortization | $ | 66 |
| | $ | 65 |
| | $ | 1 |
| | 2 | % | | $ | 183 |
| | $ | 200 |
| | $ | (17 | ) | | (9 | )% |
Unrealized net mark-to-market loss (gain) on natural gas derivatives | $ | 1 |
| | $ | (1 | ) | | $ | 2 |
| | N/M |
| | $ | 1 |
| | $ | (4 | ) | | $ | 5 |
| | N/M |
|
_______________________________________________________________________________
N/M—Not Meaningful
| |
(1) | UAN represents between 28% and 32% of nitrogen content, depending on the concentration specified by the customer. Nutrient tons represent the tons of nitrogen within the product tons. |
Third Quarter of 2019 Compared to Third Quarter of 2018
Net Sales. Net sales in our UAN segment increased $39 million, or 14%, in the third quarter of 2019 from the third quarter of 2018 due primarily to a 6% increase in average selling prices and a 7% increase in sales volume. Average selling prices were $177 per ton in the third quarter of 2019 compared to $167 per ton in the comparable period of 2018 due primarily to the impact of a tighter global nitrogen supply and demand balance and the extended application season resulting from the late planting in spring 2019. The increase in sales volume was due primarily to the extended application season.
Cost of Sales. Cost of sales in our UAN segment averaged $143 per ton in the third quarter of 2019, a 5% decrease from $150 per ton in the third quarter of 2018, primarily driven by lower realized natural gas costs, partially offset by higher costs related to maintenance activity.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net Sales. Net sales in our UAN segment increased $42 million, or 5%, in the nine months ended September 30, 2019 from the nine months ended September 30, 2018 due to a 9% increase in average selling prices, partially offset by a 4% decline in sales volume. Average selling prices increased to $191 per ton in the nine months ended September 30, 2019 compared to $175 per ton in the comparable period of 2018, due primarily to the impact of a tighter global nitrogen supply and demand balance, the impact high water levels and flooding had on the shipping and logistics on inland rivers and an extended application season. The decrease in sales volume was due primarily to lower production due to the focus on granular urea production in 2019 and the impact of lower exports to Europe.
In April 2019, the European Commission (the Commission) published a regulation imposing provisional anti-dumping duties on imports to the European Union of UAN manufactured in Russia, Trinidad and Tobago and the United States. The regulation included a rate of 22.6% for the provisional anti-dumping duty applicable to imports of UAN manufactured in the United States. In July 2019, the Commission announced its intention to impose definitive anti-dumping measures in the form of fixed duty rates. For imports of UAN manufactured in the United States, the fixed duty rate is €29.48 per metric ton. On October 8, 2019, the Commission confirmed this duty in a regulation imposing definitive measures, which became effective beginning October 9, 2019 for an initial five-year period, after which the measures may be renewed by the Commission.
CF INDUSTRIES HOLDINGS, INC.
Cost of Sales. Cost of sales in our UAN segment averaged $148 per ton in the nine months ended September 30, 2019, a 3% increase from $143 per ton in the comparable period of 2018. The increase was due primarily to higher costs related to maintenance activity and higher freight costs due to the mix of transportation modes.
AN Segment
Our AN segment produces ammonium nitrate (AN). AN is a nitrogen-based product with a nitrogen content between 29% and 35%. AN is used as nitrogen fertilizer and is also used by industrial customers for commercial explosives and blasting systems. AN is produced at our nitrogen complexes in Yazoo City, Mississippi and Ince and Billingham, United Kingdom.
The following table presents summary operating data for our AN segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 v. 2018 | | 2019 | | 2018 | | 2019 v. 2018 |
| (dollars in millions, except per ton amounts) |
Net sales | $ | 136 |
| | $ | 139 |
| | $ | (3 | ) | | (2 | )% | | $ | 389 |
| | $ | 363 |
| | $ | 26 |
| | 7 | % |
Cost of sales | 100 |
| | 129 |
| | (29 | ) | | (22 | )% | | 308 |
| | 320 |
| | (12 | ) | | (4 | )% |
Gross margin | $ | 36 |
| | $ | 10 |
| | $ | 26 |
| | N/M |
| | $ | 81 |
| | $ | 43 |
| | $ | 38 |
| | 88 | % |
Gross margin percentage | 26.5 | % | | 7.2 | % | | 19.3 | % | | | | 20.8 | % | | 11.8 | % | | 9.0 | % | | |
Sales volume by product tons (000s) | 561 |
| | 601 |
| | (40 | ) | | (7 | )% | | 1,590 |
| | 1,586 |
| | 4 |
| | — | % |
Sales volume by nutrient tons (000s)(1) | 188 |
| | 202 |
| | (14 | ) | | (7 | )% | | 533 |
| | 535 |
| | (2 | ) | | — | % |
Average selling price per product ton | $ | 242 |
| | $ | 231 |
| | $ | 11 |
| | 5 | % | | $ | 245 |
| | $ | 229 |
| | $ | 16 |
| | 7 | % |
Average selling price per nutrient ton(1) | $ | 723 |
| | $ | 688 |
| | $ | 35 |
| | 5 | % | | $ | 730 |
| | $ | 679 |
| | $ | 51 |
| | 8 | % |
Gross margin per product ton | $ | 64 |
| | $ | 17 |
| | $ | 47 |
| | N/M |
| | $ | 51 |
| | $ | 27 |
| | $ | 24 |
| | 89 | % |
Gross margin per nutrient ton(1) | $ | 191 |
| | $ | 50 |
| | $ | 141 |
| | N/M |
| | $ | 152 |
| | $ | 80 |
| | $ | 72 |
| | 90 | % |
Depreciation and amortization | $ | 24 |
| | $ | 35 |
| | $ | (11 | ) | | (31 | )% | | $ | 67 |
| | $ | 67 |
| | $ | — |
| | — | % |
Unrealized net mark-to-market (gain) loss on natural gas derivatives | $ | — |
| | $ | — |
| | $ | — |
| | — | % | | $ | — |
| | $ | — |
| | $ | — |
| | — | % |
_______________________________________________________________________________
N/M—Not Meaningful
| |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
Third Quarter of 2019 Compared to Third Quarter of 2018
Net Sales. Net sales in our AN segment decreased $3 million, or 2%, in the third quarter of 2019 from the third quarter of 2018 due to a 7% decrease in sales volume, partially offset by a 5% increase in average selling prices. Sales volume declined due primarily to lower sales volumes in the United Kingdom as a result of a delayed harvest in the third quarter of 2019, which affected the timing of fertilizer purchases. Average selling prices increased to $242 per ton in the third quarter of 2019 compared to $231 per ton in the third quarter of 2018 due primarily to the impact of a tighter global nitrogen supply and demand balance.
Cost of Sales. Cost of sales in our AN segment averaged $178 per ton in the third quarter of 2019, a 17% decrease from $214 per ton in the comparable period of 2018. The decrease was due primarily to lower realized natural gas costs.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net Sales. Net sales in our AN segment increased $26 million, or 7%, in the nine months ended September 30, 2019 from the nine months ended September 30, 2018 due primarily to a 7% increase in average selling prices. Average selling prices increased to $245 per ton in the nine months ended September 30, 2019 compared to $229 per ton in the comparable period of 2018 due primarily to the impact of a tighter global nitrogen supply and demand balance.
Cost of Sales. Cost of sales in our AN segment averaged $194 per ton in the nine months ended September 30, 2019, a 4% decrease from $202 per ton in the comparable period of 2018. The decrease was due primarily to lower realized natural gas costs.
CF INDUSTRIES HOLDINGS, INC.
Other Segment
Our Other segment primarily includes the following products:
| |
• | Diesel exhaust fluid (DEF) is an aqueous urea solution typically made with 32.5% high-purity urea and 67.5% deionized water. |
| |
• | Urea liquor is a liquid product that we sell in concentrations of 40%, 50% and 70% urea as a chemical intermediate. |
| |
• | Nitric acid is a nitrogen-based product with a nitrogen content of 22.2%. |
| |
• | Compound fertilizer products (NPKs) are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. |
The following table presents summary operating data for our Other segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2019 | | 2018 | | 2019 v. 2018 | | 2019 | | 2018 | | 2019 v. 2018 |
| (dollars in millions, except per ton amounts) |
Net sales | $ | 79 |
| | $ | 86 |
| | $ | (7 | ) | | (8 | )% | | $ | 268 |
| | $ | 287 |
| | $ | (19 | ) | | (7 | )% |
Cost of sales | 65 |
| | 76 |
| | (11 | ) | | (14 | )% | | 224 |
| | 248 |
| | (24 | ) | | (10 | )% |
Gross margin | $ | 14 |
| | $ | 10 |
| | $ | 4 |
| | 40 | % | | $ | 44 |
| | $ | 39 |
| | $ | 5 |
| | 13 | % |
Gross margin percentage | 17.7 | % | | 11.6 | % | | 6.1 | % | | | | 16.4 | % | | 13.6 | % | | 2.8 | % | | |
Sales volume by product tons (000s) | 530 |
| | 524 |
| | 6 |
| | 1 | % | | 1,657 |
| | 1,717 |
| | (60 | ) | | (3 | )% |
Sales volume by nutrient tons (000s)(1) | 103 |
| | 102 |
| | 1 |
| | 1 | % | | 327 |
| | 335 |
| | (8 | ) | | (2 | )% |
Average selling price per product ton | $ | 149 |
| | $ | 164 |
| | $ | (15 | ) | | (9 | )% | | $ | 162 |
| | $ | 167 |
| | $ | (5 | ) | | (3 | )% |
Average selling price per nutrient ton(1) | $ | 767 |
| | $ | 843 |
| | $ | (76 | ) | | (9 | )% | | $ | 820 |
| | $ | 857 |
| | $ | (37 | ) | | (4 | )% |
Gross margin per product ton | $ | 26 |
| | $ | 19 |
| | $ | 7 |
| | 37 | % | | $ | 27 |
| | $ | 23 |
| | $ | 4 |
| | 17 | % |
Gross margin per nutrient ton(1) | $ | 136 |
| | $ | 98 |
| | $ | 38 |
| | 39 | % | | $ | 135 |
| | $ | 116 |
| | $ | 19 |
| | 16 | % |
Depreciation and amortization | $ | 18 |
| | $ | 18 |
| | $ | — |
| | — | % | | $ | 54 |
| | $ | 49 |
| | $ | 5 |
| | 10 | % |
Unrealized net mark-to-market gain on natural gas derivatives | $ | — |
| | $ | — |
| | $ | — |
| | — | % | | $ | — |
| | $ | (1 | ) | | $ | 1 |
| | 100 | % |
_______________________________________________________________________________
| |
(1) | Nutrient tons represent the tons of nitrogen within the product tons. |
Third Quarter of 2019 Compared to Third Quarter of 2018
Net Sales. Net sales in our Other segment decreased by $7 million, or 8%, in the third quarter of 2019 from the third quarter of 2018 due to a 9% decrease in average selling prices, partially offset by a 1% increase in sales volume. The decrease in average selling prices is due primarily to the mix of products sold.
Cost of Sales. Cost of sales in our Other segment averaged $123 per ton in the third quarter of 2019, a 15% decrease from $145 per ton in the comparable period of 2018 due primarily to lower realized natural gas costs.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net Sales. Net sales in our Other segment decreased by $19 million, or 7%, in the nine months ended September 30, 2019 from the nine months ended September 30, 2018 due to a 3% decrease in average selling prices and a 3% decrease in sales volume. The decrease in average selling prices is due primarily to the mix of products sold. The decrease in sales volume was due primarily to lower NPK and nitric acid sales volume, partially offset by higher DEF sales volume.
Cost of Sales. Cost of sales in our Other segment averaged $135 per ton in the nine months ended September 30, 2019, a 6% decrease from $144 per ton in the comparable period of 2018 due primarily to lower realized natural gas costs, partially offset by higher freight costs.
CF INDUSTRIES HOLDINGS, INC.
Liquidity and Capital Resources
Our primary uses of cash are generally for operating costs, working capital, capital expenditures, debt service, investments, taxes, share repurchases and dividends. Our working capital requirements are affected by several factors, including demand for our products, selling prices, raw material costs, freight costs and seasonal factors inherent in the business. Generally, our primary source of cash is cash from operations, which includes cash generated by customer advances. We may also from time to time access the capital markets or engage in borrowings under our credit agreement.
During the nine months ended September 30, 2019, we repurchased approximately 5.7 million shares of CF Holdings common stock for $250 million. See discussion under “Share Repurchase Programs,” below, for further information.
On October 9, 2019, we announced that our wholly owned subsidiary CF Industries has elected to redeem in full, on November 13, 2019, all of the $500 million outstanding principal amount of the 7.125% senior notes due May 2020 (the 2020 Notes), in accordance with the optional redemption provisions provided in the indenture governing the 2020 Notes. On October 30, 2019, we announced that CF Industries has elected to redeem on December 13, 2019, $250 million principal amount, representing 50% of the currently outstanding $500 million principal amount, of the 3.400% senior secured notes due December 2021 (the 2021 Notes), in accordance with the optional redemption provisions provided in the indenture governing the 2021 Notes. See discussion under “Debt,” below, for further information.
At September 30, 2019, we were in compliance with all applicable covenant requirements under our Revolving Credit Agreement, Public Senior Notes and Senior Secured Notes. There were no borrowings outstanding under the Revolving Credit Agreement as of September 30, 2019 or December 31, 2018, or during the nine months ended September 30, 2019. See discussion under “Debt,” below, for further information.
Our cash and cash equivalents balance was $1.02 billion and $682 million as of September 30, 2019 and December 31, 2018, respectively.
Cash Equivalents
Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less. Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.
Share Repurchase Programs
On August 1, 2018, the Board authorized the repurchase of up to $500 million of CF Holdings common stock through June 30, 2020 (the 2018 Share Repurchase Program). In 2018, we completed the 2018 Share Repurchase Program with the repurchase of 10.9 million shares for $500 million, of which $33 million was accrued and unpaid at December 31, 2018. In February 2019, we retired all 10.9 million shares that were repurchased under the 2018 Share Repurchase Program.
On February 13, 2019, the Board authorized the repurchase of up to $1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program). Repurchases under the 2019 Share Repurchase Program may be made from time to time in the open market, through privately negotiated transactions, block transactions or otherwise. The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors. During the nine months ended September 30, 2019, we repurchased approximately 5.7 million shares for $250 million, of which $2 million was accrued and unpaid at September 30, 2019. In June 2019, we retired approximately 4.2 million shares that were repurchased under the 2019 Share Repurchase Program. At September 30, 2019, we held 1,534,045 shares of treasury stock.
Capital Spending
We make capital expenditures to sustain our asset base, increase our capacity, improve plant efficiency and comply with various environmental, health and safety requirements. Capital expenditures totaled $297 million in the first nine months of 2019 compared to $278 million in the first nine months of 2018.
CF INDUSTRIES HOLDINGS, INC.
Capital expenditures in 2019 are estimated to be approximately $425 million. Planned capital expenditures are subject to change due to delays in regulatory approvals or permitting, unanticipated increases in cost, changes in scope and completion time, performance of third parties, delays in the receipt of equipment, adverse weather, defects in materials and workmanship, labor or material shortages, transportation constraints, acceleration or delays in the timing of the work and other unforeseen difficulties.
Debt
Revolving Credit Agreement
We have a senior secured revolving credit agreement (the Revolving Credit Agreement) providing for a revolving credit facility of up to $750 million with a maturity of September 18, 2020. The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million. Borrowings under the Revolving Credit Agreement may be used for working capital and general corporate purposes. CF Industries is the borrower under the Revolving Credit Agreement and may also designate as borrowers one or more wholly owned subsidiaries that are organized in the United States or any state thereof, or the District of Columbia.
Borrowings under the Revolving Credit Agreement may be denominated in U.S. dollars, Canadian dollars, euro and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin, and the borrowers are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.
The guarantors under the Revolving Credit Agreement are currently comprised of CF Holdings and CF Holdings’ wholly owned subsidiaries CF Industries Enterprises, LLC (CFE), CF Industries Sales, LLC (CFS), CF USA Holdings, LLC (CF USA) and CF Industries Distribution Facilities, LLC (CFIDF).
As of September 30, 2019, we had excess borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit. In addition, there were no borrowings outstanding under the Revolving Credit Agreement as of September 30, 2019 or December 31, 2018, or during the nine months ended September 30, 2019.
The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of September 30, 2019, we were in compliance with all covenants under the Revolving Credit Agreement.
Letters of Credit
In addition to the letter of credit capacity under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue letters of credit up to $145 million (reflecting an increase of $20 million in January 2019). As of September 30, 2019, approximately $128 million of letters of credit were outstanding under this agreement.
CF INDUSTRIES HOLDINGS, INC.
Senior Notes
Long-term debt, including current maturities of long-term debt, presented on our consolidated balance sheets as of September 30, 2019 and December 31, 2018 consisted of the following Public Senior Notes (unsecured) and Senior Secured Notes issued by CF Industries:
|
| | | | | | | | | | | | | | | | | |
| Effective Interest Rate | | September 30, 2019 | | December 31, 2018 |
| | Principal | | Carrying Amount (1) | | Principal | | Carrying Amount (1) |
| | | (in millions) |
Public Senior Notes: | | | | | | | | | |
7.125% due May 2020 | 7.529% | | $ | 500 |
| | $ | 499 |
| | $ | 500 |
| | $ | 497 |
|
3.450% due June 2023 | 3.562% | | 750 |
| | 747 |
| | 750 |
| | 747 |
|
5.150% due March 2034 | 5.279% | | 750 |
| | 740 |
| | 750 |
| | 740 |
|
4.950% due June 2043 | 5.031% | | 750 |
| | 742 |
| | 750 |
| | 741 |
|
5.375% due March 2044 | 5.465% | | 750 |
| | 741 |
| | 750 |
| | 741 |
|
Senior Secured Notes: | | | | | | | | | |
3.400% due December 2021 | 3.782% | | 500 |
| | 496 |
| | 500 |
| | 495 |
|
4.500% due December 2026 | 4.759% | | 750 |
| | 738 |
| | 750 |
| | 737 |
|
Total long-term debt | | | $ | 4,750 |
| | $ | 4,703 |
| | $ | 4,750 |
| | $ | 4,698 |
|
Less: Current maturities of long-term debt | | | 500 |
| | 499 |
| | — |
| | — |
|
Long-term debt, net of current maturities | | | $ | 4,250 |
| | $ | 4,204 |
| | $ | 4,750 |
| | $ | 4,698 |
|
_______________________________________________________________________________
| |
(1) | Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $10 million and $11 million as of September 30, 2019 and December 31, 2018, respectively, and total deferred debt issuance costs were $37 million and $41 million as of September 30, 2019 and December 31, 2018, respectively. |
Under the indentures (including the applicable supplemental indentures) governing our senior notes due 2020, 2023, 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes is guaranteed by CF Holdings and CF Holdings’ wholly owned subsidiaries CFE, CFS, CF USA and CFIDF. CFE, CFS, CF USA and CFIDF became subsidiary guarantors of the Public Senior Notes as a result of their becoming guarantors under the Revolving Credit Agreement. Interest on the Public Senior Notes is payable semiannually, and the Public Senior Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.
On October 9, 2019, we announced that CF Industries has elected to redeem in full all of the $500 million outstanding principal amount of the 2020 Notes in accordance with the optional redemption provisions provided in the indenture governing the 2020 Notes. We estimate, based on market interest rates on October 28, 2019, the total amount for the redemption of the 2020 Notes will be approximately $513 million, including accrued interest. The 2020 Notes will be redeemed on November 13, 2019 and will be funded with cash on hand. See Note 12—Financing Agreements for additional information.
On November 21, 2016, CF Industries issued $500 million aggregate principal amount of 3.400% senior secured notes due 2021 (the 2021 Notes) and $750 million aggregate principal amount of 4.500% senior secured notes due 2026 (the 2026 Notes, and together with the 2021 Notes, the Senior Secured Notes). CF Holdings and the subsidiary guarantors of the Public Senior Notes are also guarantors of the Senior Secured Notes. Interest on the Senior Secured Notes is payable semiannually on December 1 and June 1, and the Senior Secured Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.
On October 30, 2019, we announced that CF Industries has elected to redeem on December 13, 2019, $250 million principal amount, representing 50% of the currently outstanding $500 million principal amount, of the 2021 Notes, in accordance with the optional redemption provisions provided in the indenture governing the 2021 Notes. We estimate, based on market interest rates on October 28, 2019, the total amount for the partial redemption of the 2021 Notes will be approximately $257 million, including accrued interest. The partial redemption of the 2021 Notes will be funded with cash on hand. See Note 12—Financing Agreements for additional information.
CF INDUSTRIES HOLDINGS, INC.
Forward Sales and Customer Advances
We offer our customers the opportunity to purchase products from us on a forward basis at prices and on delivery dates we propose. Therefore, our reported fertilizer selling prices and margins may differ from market spot prices and margins available at the time of shipment.
Customer advances, which typically represent a portion of the contract’s value, are received shortly after the contract is executed, with any remaining unpaid amount generally being collected by the time control transfers to the customer, thereby reducing or eliminating the accounts receivable related to such sales. Any cash payments received in advance from customers in connection with forward sales contracts are reflected on our consolidated balance sheets as a current liability until control transfers and revenue is recognized. As of September 30, 2019 and December 31, 2018, we had $184 million and $149 million, respectively, in customer advances on our consolidated balance sheets.
While customer advances are generally a significant source of liquidity, the level of forward sales contracts is affected by many factors including current market conditions and our customers’ outlook of future market fundamentals. During periods of declining prices, customers tend to delay purchasing fertilizer in anticipation that prices in the future will be lower than the current prices. If the level of sales under our forward sales programs were to decrease in the future, our cash received from customer advances would likely decrease and our accounts receivable balances would likely increase. Additionally, borrowing under the Revolving Credit Agreement could become necessary. Due to the volatility inherent in our business and changing customer expectations, we cannot estimate the amount of future forward sales activity.
Under our forward sales programs, a customer may delay delivery of an order due to weather conditions or other factors. These delays generally subject the customer to potential charges for storage or may be grounds for termination of the contract by us. Such a delay in scheduled shipment or termination of a forward sales contract due to a customer’s inability or unwillingness to perform may negatively impact our reported sales.
Derivative Financial Instruments
We may use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future. Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based fertilizers. From time to time, we also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates. Volatility in reported quarterly earnings can result from the unrealized mark-to-market adjustments in the value of the derivatives. As of September 30, 2019, our open derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 38.7 million MMBtus. As of December 31, 2018, we had open derivative contracts for 6.6 million MMBtus of natural gas basis swaps.
Defined Benefit Pension Plans
We contributed $55 million to our pension plans during the nine months ended September 30, 2019. Over the remainder of 2019, we expect to contribute an additional $6 million to our pension plans, or a total of approximately $61 million for the full year 2019.
Distribution to Noncontrolling Interest in CFN
On July 31, 2019, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2019 in accordance with CFN’s limited liability company agreement. On July 31, 2019, CFN distributed $100 million to CHS for the distribution period ended June 30, 2019. The estimate of the partnership distribution earned by CHS, but not yet declared, for the third quarter of 2019 is approximately $49 million.
Cash Flows
Operating Activities
Net cash provided by operating activities during the first nine months of 2019 was $1.20 billion, a decrease of $40 million as compared to $1.24 billion in the first nine months of 2018. This decrease was due primarily to changes in working capital, partially offset by an increase in cash earnings generated by the business. The changes in working capital primarily include customer advances, as fewer customers prepaid their purchases in the third quarter of 2019. In addition, accounts receivable collections were lower in 2019. Cash earnings from the business increased as net earnings in the first nine months of 2019 increased by $219 million as compared to the first nine months of 2018.
CF INDUSTRIES HOLDINGS, INC.
Investing Activities
Net cash used in investing activities was $211 million in the first nine months of 2019 as compared to $238 million in the first nine months of 2018. During the first nine months of 2019, capital expenditures totaled $297 million compared to $278 million in the first nine months of 2018. Net cash used in investing activities in the first nine months of 2019 included proceeds of $55 million related to the sale of our Pine Bend facility and $15 million related to property insurance proceeds received. Net cash used in investing activities in the first nine months of 2018 included $10 million related to property insurance proceeds received.
Financing Activities
Net cash used in financing activities was $653 million in the first nine months of 2019 compared to $814 million in the same period of 2018. Dividends paid on common stock during the nine months ended September 30, 2019 and 2018 were $200 million and $210 million, respectively. The decrease in dividends was due to lower shares outstanding as a result of shares repurchased under our share repurchase programs in 2018 and 2019. In the first nine months of 2019, we spent $280 million to repurchase shares of common stock, which included approximately $33 million related to shares repurchased in late 2018 that were paid for in 2019. In the first nine months of 2019, we repurchased approximately 5.7 million shares for approximately $250 million, of which $2 million was accrued and not yet settled at September 30, 2019. Distributions to noncontrolling interests totaled $186 million in the first nine months of 2019 as compared to $139 million in the first nine months of 2018. Net cash used in financing activities in the first nine months of 2018 included $388 million related to our acquisition of all of the outstanding publicly traded common units of TNCLP.
Sale of Pine Bend Facility
In March of 2019, we entered into an agreement to sell our Pine Bend dry bulk storage and logistics facility located in Minnesota. In April of 2019, we completed the sale, received proceeds of $55 million and recognized a pre-tax gain of $45 million. The gain is reflected in other operating—net in our consolidated statement of operations for the nine months ended September 30, 2019.
Contractual Obligations
As of September 30, 2019, there have been no material changes outside the ordinary course of business to our contractual obligations as described in our 2018 Annual Report on Form 10-K filed with the SEC on February 22, 2019.
On October 9, 2019, we announced that CF Industries has elected to redeem in full all of the $500 million outstanding principal amount of the 2020 Notes in accordance with the optional redemption provisions provided in the indenture governing the 2020 Notes. On October 30, 2019, we announced that CF Industries has elected to redeem $250 million principal amount, representing 50% of the currently outstanding $500 million principal amount, of the 2021 Notes, in accordance with the optional redemption provisions provided in the indenture governing the 2021 Notes. See discussion under “Debt,” above, for further information.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. See “Recent Accounting Pronouncements,” below, for a discussion of our January 1, 2019 adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).
Critical Accounting Policies and Estimates
There were no changes to our significant accounting policies or estimates during the first nine months of 2019.
Recent Accounting Pronouncements
See Note 2—New Accounting Standards for a discussion of recent accounting pronouncements, including our January 1, 2019 adoption of ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize the rights and obligations resulting from virtually all leases (other than leases that meet the definition of a short-term lease) on their balance sheets as right-of-use assets with corresponding lease liabilities.
CF INDUSTRIES HOLDINGS, INC.
FORWARD-LOOKING STATEMENTS
From time to time, in this Quarterly Report on Form 10-Q as well as in other written reports and oral statements, we make forward-looking statements that are not statements of historical fact and may involve a number of risks and uncertainties. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our prospects, future developments and business strategies. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” or “would” and similar terms and phrases, including references to assumptions, to identify forward-looking statements in this document. These forward-looking statements are made based on currently available competitive, financial and economic data, our current expectations, estimates, forecasts and projections about the industries and markets in which we operate and management’s beliefs and assumptions concerning future events affecting us. These statements are not guarantees of future performance and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, our actual results may differ materially from what is expressed in or implied by any forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this document. Additionally, we do not undertake any responsibility to provide updates regarding the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this document.
Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” in Item 1A in our 2018 Annual Report on Form 10-K filed with the SEC on February 22, 2019. Such factors include, among others:
| |
• | the cyclical nature of our business and the impact of global supply and demand on our selling prices; |
| |
• | the global commodity nature of our fertilizer products, the conditions in the international market for nitrogen products, 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 our products against which we may not be fully insured; |
| |
• | our ability to manage our indebtedness; |
| |
• | operating and financial restrictions imposed on us by the agreements governing our senior secured indebtedness; |
| |
• | risks associated with our incurrence of additional indebtedness; |
| |
• | our ability to maintain compliance with covenants under the agreements governing our indebtedness; |
| |
• | downgrades of our credit ratings; |
| |
• | risks associated with cyber security; |
| |
• | risks associated with changes in tax laws and disagreements with taxing authorities; |
| |
• | our reliance on a limited number of key facilities; |
| |
• | potential liabilities and expenditures related to environmental, health and safety laws and regulations and permitting requirements; |
| |
• | future regulatory restrictions and requirements related to greenhouse gas emissions; |
| |
• | risks associated with expansions of our business, including unanticipated adverse consequences and the significant resources that could be required; |
| |
• | the seasonality of the fertilizer business; |
| |
• | the impact of changing market conditions on our forward sales programs; |
| |
• | risks involving derivatives and the effectiveness of our risk measurement and hedging activities; |
| |
• | risks associated with the operation or management of the CHS strategic venture, risks and uncertainties relating to the market prices of the fertilizer products that are the subject of our supply agreement with CHS over the life of the supply agreement, and the risk that any challenges related to the CHS strategic venture will harm our other business relationships; |
| |
• | risks associated with our PLNL joint venture; |
| |
• | acts of terrorism and regulations to combat terrorism; |
| |
• | risks associated with international operations; and |
| |
• | deterioration of global market and economic conditions. |
CF INDUSTRIES HOLDINGS, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to the impact of changes in commodity prices, interest rates and foreign currency exchange rates.
Commodity Prices
Our net sales, cash flows and estimates of future cash flows related to nitrogen-based fertilizers are sensitive to changes in fertilizer prices as well as changes in the prices of natural gas and other raw materials unless these costs have been fixed or hedged. A $1.00 per MMBtu change in the price of natural gas would change the cost to produce a ton of ammonia, granular urea, UAN (32%), and AN by approximately $33, $22, $16 and $16, respectively.
Natural gas is the largest and most volatile component of the manufacturing cost for nitrogen-based fertilizers. We manage the risk of changes in natural gas prices primarily with the use of derivative financial instruments. The derivative instruments that we use are primarily natural gas fixed price swaps, natural gas basis swaps and natural gas options. These derivatives settle using primarily NYMEX futures price indexes, which represent the basis for fair value at any given time. The contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods. As of September 30, 2019, we had natural gas fixed price swaps, basis swaps and options covering certain periods through March 2020.
As of September 30, 2019 and December 31, 2018, we had open derivative contracts for 38.7 MMBtus and 6.6 MMBtus, respectively. A $1.00 per MMBtu increase in the forward curve prices of natural gas at September 30, 2019 would result in a favorable change in the fair value of these derivative positions of $33 million, and a $1.00 per MMBtu decrease in the forward curve prices of natural gas would change their fair value unfavorably by $35 million.
From time to time we may purchase nitrogen products on the open market to augment or replace production at our facilities.
Interest Rates
As of September 30, 2019, we had seven series of senior notes totaling $4.75 billion of principal outstanding with maturity dates of May 1, 2020, December 1, 2021, June 1, 2023, December 1, 2026, March 15, 2034, June 1, 2043 and March 15, 2044. The senior notes have fixed interest rates. As of September 30, 2019, the carrying value and fair value of our senior notes was approximately $4.70 billion and $4.89 billion, respectively.
Borrowings under the Revolving Credit Agreement bear current market rates of interest and we are subject to interest rate risk on such borrowings. There were no borrowings outstanding under the Revolving Credit Agreement as of September 30, 2019 or December 31, 2018, or during the nine months ended September 30, 2019.
Foreign Currency Exchange Rates
We are directly exposed to changes in the value of the Canadian dollar, the British pound and the euro. We generally do not maintain any exchange rate derivatives or hedges related to these currencies.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in (i) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
CF INDUSTRIES HOLDINGS, INC.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
West Fertilizer Co.
On April 17, 2013, there was a fire and explosion at the West Fertilizer Co. fertilizer storage and distribution facility in West, Texas. According to published reports, 15 people were killed and approximately 200 people were injured in the incident, and the fire and explosion damaged or destroyed a number of homes and buildings around the facility. Various subsidiaries of CF Industries Holdings, Inc. (the CF Entities) were named as defendants along with other companies in lawsuits filed in 2013, 2014 and 2015 in the District Court of McLennan County, Texas by the City of West, individual residents of the County and other parties seeking recovery for damages allegedly sustained as a result of the explosion. The cases were consolidated for discovery and pretrial proceedings in the District Court of McLennan County under the caption “In re: West Explosion Cases.” The two-year statute of limitations expired on April 17, 2015. As of that date, over 400 plaintiffs had filed claims, including at least 9 entities, 325 individuals, and 80 insurance companies. Plaintiffs allege various theories of negligence, strict liability, and breach of warranty under Texas law. Although we do not own or operate the facility or directly sell our products to West Fertilizer Co., products that the CF Entities manufactured and sold to others were delivered to the facility and may have been stored at the West facility at the time of the incident.
The Court granted in part and denied in part the CF Entities’ Motions for Summary Judgment in August 2015. Over two hundred cases have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. The next group of cases was reset for trial beginning on January 21, 2020. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits. The Company cannot provide a range of reasonably possible loss due to the lack of damages discovery for many of the remaining claims and the uncertain nature of this litigation, including uncertainties around the potential allocation of responsibility by a jury to other defendants or responsible third parties. The recognition of a potential loss in the future in the West Fertilizer Co. litigation could negatively affect our results in the period of recognition. However, based upon currently available information, including available insurance coverage, we do not believe that this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following table sets forth stock repurchases, on a trade date basis, for each of the three months of the quarter ended September 30, 2019.
|
| | | | | | | | | | | | | |
| Issuer Purchases of Equity Securities |
Period | Total number of shares (or units) purchased | | Average price paid per share (or unit)(1) | | Total number of shares (or units) purchased as part of publicly announced plans or programs(2) | | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (in thousands)(2) |
July 1, 2019 - July 31, 2019 | 638,411 |
| (3) | $ | 46.34 |
| | 638,131 |
| | $ | 792,390 |
|
August 1, 2019 - August 31, 2019 | 448,342 |
|
| 49.07 |
| | 448,342 |
| | 770,391 |
|
September 1, 2019 - September 30, 2019 | 404,684 |
|
| 49.38 |
| | 404,684 |
| | 750,406 |
|
Total | 1,491,437 |
| | $ | 47.99 |
| | 1,491,157 |
| | |
|
_______________________________________________________________________________
| |
(1) | Average price paid per share of CF Industries Holdings, Inc. (CF Holdings) common stock repurchased under the 2019 Stock Repurchase Program, as defined below, is the execution price, excluding commissions paid to brokers. |
| |
(2) | On February 13, 2019, our Board of Directors authorized management to repurchase CF Holdings common stock for a total expenditure of up to $1 billion through December 31, 2021 (the 2019 Stock Repurchase Program). This program is discussed in Note 15—Stockholders’ Equity, in the notes to the unaudited consolidated financial statements included in Part I. |
| |
(3) | Includes 280 shares withheld to pay employee tax obligations upon the lapse of restrictions on restricted stock units. |
ITEM 6. EXHIBITS. |
| | |
A list of exhibits filed with this Report on Form 10-Q (or incorporated by reference to exhibits previously filed or furnished) is provided in the Exhibit Index on page 57 of this report. |
CF INDUSTRIES HOLDINGS, INC.
EXHIBIT INDEX
|
| | |
Exhibit No. | Description |
|
| |
|
| |
|
| |
|
| |
|
| |
101 |
| The following financial information from CF Industries Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL (eXtensible Business Reporting Language): (1) Consolidated Statements of Operations, (2) Consolidated Statements of Comprehensive Income, (3) Consolidated Balance Sheets, (4) Consolidated Statements of Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to Unaudited Consolidated Financial Statements |
104 |
| Cover Page Interactive Data File (included in Exhibit 101)
|
CF INDUSTRIES HOLDINGS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| | | |
| | CF INDUSTRIES HOLDINGS, INC. |
| Date: October 31, 2019 | By: | /s/ W. ANTHONY WILL |
| | | W. Anthony Will President and Chief Executive Officer (Principal Executive Officer) |
| Date: October 31, 2019 | By: | /s/ CHRISTOPHER D. BOHN |
| | | Christopher D. Bohn Senior Vice President and Chief Financial Officer (Principal Financial Officer) |