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| CF > SEC Filings for CF > Form 10-Q on 4-May-2012 | All Recent SEC Filings |
4-May-2012
Quarterly Report
You should read the following discussion and analysis in conjunction with our annual consolidated financial statements and related notes, which were included in our 2011 Annual Report on Form 10-K filed with the SEC on February 27, 2012, as well as Item 1, Financial Statements, in this Form 10-Q. All references to "CF Holdings," "we," "us" and "our" refer to CF Industries Holdings, Inc. and its subsidiaries, including CF Industries, Inc., except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. The following is an outline of the discussion and analysis included herein:
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º Overview of CF Holdings
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º Our Company
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º Financial Executive Summary
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º Results of Consolidated Operations
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º First Quarter of 2012 Compared to the First Quarter of 2011
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º Operating Results by Business Segment
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º Liquidity and Capital Resources
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º Off-Balance Sheet Arrangements
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º Critical Accounting Policies and Estimates
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º Recent Accounting Pronouncements
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º Forward Looking Statements
Overview of CF Holdings
Our Company
We are one of the largest manufacturers and distributors of nitrogen and phosphate fertilizer products in the world. Our operations are organized into two business segments-the nitrogen segment and the phosphate segment. Our principal customers are cooperatives and independent fertilizer distributors. Our principal fertilizer products in the nitrogen segment are ammonia, granular urea, urea ammonium nitrate solution, or UAN, and ammonium nitrate, or AN. Our other nitrogen products include urea liquor, diesel exhaust fluid, or DEF, and aqua ammonia, which are sold primarily to our industrial customers. Our principal fertilizer products in the phosphate segment are diammonium phosphate, or DAP, and monoammonium phosphate, or MAP.
Our core market and distribution facilities are concentrated in the midwestern United States and other major agricultural areas of the U.S. and Canada. We also export nitrogen fertilizer products from our Donaldsonville, Louisiana manufacturing facilities and phosphate fertilizer products from our Florida phosphate operations.
Our principal assets include:
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º five nitrogen fertilizer manufacturing facilities in Port Neal, Iowa,
Courtright, Ontario, Yazoo City, Mississippi, Woodward, Oklahoma, and
the largest nitrogen fertilizer complex in North America, located in
Donaldsonville, Louisiana;
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º a 75% interest in Terra Nitrogen Company, L.P. (TNCLP), a publicly
traded limited partnership of which we are the sole general partner
and the majority limited partner and which, through its
subsidiary Terra Nitrogen, Limited Partnership (TNLP), operates a nitrogen fertilizer manufacturing facility in Verdigris, Oklahoma;
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º a 66% economic interest in the largest nitrogen fertilizer complex in
Canada (which we operate in Medicine Hat, Alberta through Canadian
Fertilizers Limited (CFL), a consolidated variable interest entity);
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º one of the largest integrated ammonium phosphate fertilizer complexes
in the United States in Plant City, Florida;
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º the most-recently constructed phosphate rock mine and associated
beneficiation plant in the United States in Hardee County, Florida;
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º an extensive system of terminals and associated transportation
equipment located primarily in the midwestern United States; and
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º joint venture investments that we account for under the equity method,
which consist of:
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º a 50% interest in GrowHow UK Limited (GrowHow), a nitrogen
products production joint venture located in the United Kingdom
and serving the British agricultural and industrial markets;
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º a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia
production joint venture located in the Republic of Trinidad and
Tobago; and
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º a 50% interest in KEYTRADE AG (Keytrade), a global fertilizer
trading company headquartered near Zurich, Switzerland.
Financial Executive Summary
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º We reported net earnings attributable to common stockholders of
$368.4 million in the first quarter of 2012 compared to net earnings
of $282.0 million in the same quarter of 2011. Our results for the
first quarter of 2012 included a $55.9 million pre-tax unrealized
mark-to-market loss ($34.7 million after tax) on natural gas
derivatives.
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º The net earnings attributable to common stockholders of $282.0 million
in the first quarter of 2011 included $19.9 million ($12.3 million
after tax) of accelerated amortization of debt issuance costs
recognized in interest expense upon repayment of the senior secured
term loan related to the Terra acquisition, a $32.5 million
($20.0 million after tax) gain on the sale of four dry-product
warehouses, $2.1 million ($1.3 million after tax) of restructuring and
integration costs associated with the Terra acquisition and a
$0.7 million pre-tax unrealized mark-to-market gain ($0.4 million
after tax) on natural gas derivatives.
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º Our gross margin increased $186.8 million to $711.8 million in the
first quarter of 2012 from $525.0 million in the same quarter of 2011
due primarily to higher average selling prices and sales volume in the
nitrogen segment, partially offset by a decrease in gross margin,
driven primarily by lower average selling prices and higher sulfur and
ammonia costs in the phosphate segment.
º •
º Our net sales increased $353.6 million, or 30%, to $1,527.6 million in
the first quarter of 2012 from $1,174.0 million in the first quarter
of the prior year. The increase in net sales was due primarily to
higher nitrogen and phosphate fertilizer sales volumes and higher
average nitrogen fertilizer selling prices, partially offset by lower
average phosphate fertilizer selling prices. Total sales volume
(measured in short tons) in the first quarter of 2012 increased 13%
from the prior year period as increases in ammonia, granular urea and
phosphate fertilizer sales volumes were partially offset by a decrease
in UAN sales volume.
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º Cash flow from operations in the first three months of 2012 compared
to the same period of 2011 decreased $68.0 million to $603.2 million,
due primarily to greater cash investments in working capital, which
offset the impact of improved net earnings.
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º We paid cash dividends of $26.2 million and $7.1 million in the first
three months of 2012 and 2011, respectively. The increase is due
primarily to an increase in the quarterly dividend to $0.40 per common
share from $0.10 per common share, which occurred in the third quarter
of 2011.
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