CF Industries Holdings, Inc. Reports Net Income of $8.0 Million, or $0.14 per Common Share, for Fourth Quarter 2006 as Net Sales Exceed $500 Million.Increased Sales and Volumes, Plus Lower Input Costs, Produced Significant Improvement Over 2005's Fourth Quarter Loss LONG GROVE Long Grove may refer to:
* Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight increased 9 percent over fourth quarter 2005 to $506.2 million, as higher volumes more than offset lower average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. * Fall season brought increased demand in both nitrogen and phosphate * Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before of $10.9 million included effects of $9.4 million in mark-to-market losses on derivatives and a charge of $20.3 million for adjustments to asset retirement obligations (AROs) and demolition costs primarily related to the closed Bartow, Florida Bartow is a city located in the U.S. State of Florida in Central Florida east of the Tampa Bay area. The population was 15,340 at the 2000 census. According to the U.S Census estimates of 2005, the city had a population of 16,278. [2] It is the county seat of Polk County. complex, equivalent to a combined $0.33 per share on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. . Quarter on quarter, mark-to-market losses were comparable; ARO and demolition adjustments were $9.5 million higher than fourth quarter 2005 * For 2006, net sales rose 2 percent to exceed $1.9 billion * Full-year net income of $33.3 million compared to net loss of $39.0 million in 2005; loss in 2005 due primarily to IPO-related items * Financial position and liquidity improved further * Favorable 2007 crop prospects and moderating natural gas prices should support capacity operations and improved margins for first quarter 2007 CF Industries Holdings, Inc. (NYSE NYSE See: New York Stock Exchange : CF) today reported net income of $8.0 million, or $0.14 per common share, for the fourth quarter of 2006. The earnings, driven primarily by increased sales volume and improved nitrogen margins, compare to a net loss of $12.8 million, or $0.23 per common share, in 2005's fourth quarter. Net sales in 2006 exceeded $1.9 billion, a 2 percent increase over the 2005 total. Gross margin for 2006 was $147.2 million, down from $209.2 million in 2005. For 2006, the company reported net income of $33.3 million, or $0.60 per common share. In 2005, the company's reported net loss was $39.0 million, or $0.71 per common share on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, due primarily to items related to the company's Initial Public Offering (IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ), which took place in August of that year. "2006 ended on a strong note for CF Industries. The prospect of significantly higher demand for major crops such as corn and wheat in 2007, coupled with low international grain stockpiles, is expected to produce a sizeable increase in U.S. planted acreage during the coming spring season. We believe this optimism, reflected in today's high Today's High The intra-day high trading price. Notes: In other words, this is the highest price that a stock traded at during the course of the day. More often than not this is higher than the closing price. See also: Today's Low U.S. farm level prices for corn and wheat and even higher futures Higher Futures, established in 2006, is the Lifelong Learning Network (LLN) for South Yorkshire, North Derbyshire and North Nottinghamshire. It is one of many LLNs operating in each region across the country. prices, helped to produce a strong nitrogen and phosphate fall fertilizer application season, especially in November," commented Stephen R. Wilson, chairman and chief executive officer, CF Industries Holdings, Inc. "The fall application season, coupled with sizeable inventory-fill orders for urea ammonium nitrate ammonium nitrate, chemical compound, NH4NO3, that exists as colorless, rhombohedral crystals at room temperature but changes to monoclinic crystals when heated above 32°C;. (UAN UAN - User Action Notation. A notation from VPI for representation of activity in a graphical user interface. [H. Hartson et al, ACM Trans on Info Sys, July 1990]. ) solution, led to our 9 percent increase in sales, compared to the fourth quarter of 2005," Wilson added. Quarter-on-Quarter Comparison Fourth quarter 2006 market conditions were in stark contrast to those in 2005's fourth quarter. In 2005, in the aftermath of Gulf Coast hurricanes, U.S. nitrogen fertilizer producers faced historically high natural gas prices, pushing production costs and, subsequently, nitrogen fertilizer prices to levels that discouraged some growers from making normal nitrogen purchases. In the year-ago quarter, CF Industries significantly reduced operating levels and increased purchases of nitrogen products. The improved fourth quarter 2006 results included higher sales volumes, lower effective natural gas costs, and near-capacity operating rates. Negative mark-to-market adjustments on natural gas derivatives of $9.4 million in fourth quarter 2006 were essentially the same as the 2005 fourth quarter charge of $9.3 million. The 2006 fourth quarter $20.3 million charge associated with AROs and demolition costs primarily related to the company's closed Bartow, Florida phosphate complex was $9.5 million higher than the ARO charge recorded in the fourth quarter of 2005. Year-on-Year Comparison "In some respects, the two years were mirror images," Wilson noted, explaining that, "in 2005, the year started strongly but fourth quarter performance was negatively impacted by higher production costs and the lower demand that followed the Gulf Coast hurricanes." In 2006, the year's first quarter continued to be negatively impacted by what the CF Industries CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. referred to as a "hurricane hangover." However, by the second quarter, moderating natural gas costs led to improved nitrogen margins, helping return the company to profitability that continued through the year's second half. (For reconciliations of the full-year results, including the effects of IPO-related and other items, see the attached reconciliation of net earnings to adjusted net earnings.) Nitrogen Fertilizer Business Nitrogen fertilizer net sales for the fourth quarter totaled $384.7 million, up 7 percent from $358.2 million in the 2005 fourth quarter. In the 2006 quarter, increased sales volumes for the company's nitrogen products more than offset lower average selling prices. Sales volume for the quarter totaled 1.747 million tons, up nearly 19 percent from the 1.472 million tons sold in 2005's fourth quarter. During the quarter, the gross margin on nitrogen fertilizer sales was $31.8 million, including the negative mark-to-market adjustment on natural gas derivatives of $9.4 million. This result was up substantially from a negative $6.4 million in the year-earlier period, which also included a negative mark-to-market adjustment of $9.3 million. The improvement reflected significantly improved sales volumes, substantially reduced input costs (primarily lower natural gas prices), higher capacity utilization rates Capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion. , and a substantial reduction in product purchases. "Fourth quarter 2006 nitrogen performance represented a major turnaround from last year's fourth quarter," CF Industries' Wilson commented. "Demand for corn has increased significantly due to the growing ethanol industry. We had a strong fall ammonia application season, as farmers prepared fields for upcoming spring planting to take advantage of anticipated high prices for both corn and wheat," he added. The company's nitrogen complexes operated at near-capacity levels during the fourth quarter. Nitrogen sales under the company's forward pricing Forward pricing Practice mandated by the SEC that open-end investment companies establish all incoming buy and sell orders on the next net asset valuation of fund shares. forward pricing program (FPP FPP Florida Professional Photographers FPP First Past the Post FPP Farmland Protection Program (now Farm and Ranch Lands Protection Program) FPP First Person Perspective FPP Floating Point Processor FPP Focal Plane Package ) were 770,000 tons during the quarter, representing 44 percent of nitrogen fertilizer volume. This compares to 1.1 million tons, or 77 percent of total nitrogen volume, in the fourth quarter of 2005. For calendar year 2006, total nitrogen sales were $1.47 billion, essentially flat with total 2005 nitrogen sales. Volume was 6.3 million tons, down modestly from 6.4 million tons in 2005. Gross margin was $98.5 million, down substantially from $172.9 million in 2005, due primarily to difficult market conditions in the 2006 first quarter. Phosphate Fertilizer Business Fourth quarter phosphate fertilizer sales totaled $121.5 million, up 16 percent from $104.8 million in 2005's fourth quarter. Sales volume was 537,000 tons, up 20 percent from the 446,000 tons sold in fourth quarter 2005. Good demand for fall application in the Midwest Corn Belt Corn Belt, major agricultural region of the U.S. Midwest where corn acreage once exceeded that of any other crop. It is now commonly called the Feed Grains and Livestock Belt. and increased export demand were the primary factors behind the increased volumes, more than offsetting modest quarter-on-quarter declines in average selling prices for both diammonium phosphate Diammonium phosphate (DAP) (chemical formula (NH4)2HPO4 ) is one of a series of water-soluble ammonium phosphate salts which can be produced when ammonia reacts with phosphoric acid. DAP is used as a fertilizer and a fire retardant. (DAP) and monoammonium phosphate (MAP). Fourth quarter phosphate gross margin was $11.1 million, compared to $8.7 million in the year-earlier quarter. The increase resulted primarily from higher volume but also reflected lower input costs, which together more than offset lower average selling prices in the 2006 fourth quarter. These results included a charge to increase AROs by $3.4 million and $2.1 million in fourth quarters 2006 and 2005, respectively. The company's Plant City, Florida Plant City is a city in Hillsborough County, Florida, approximately midway between Brandon and Lakeland along Interstate 4. The population was 29,915 at the 2000 census. As of 2004, the population recorded by the U.S. Census Bureau is 30,906 [1]. phosphate complex operated at near-capacity during the fourth quarter. Phosphate FPP sales totaled 64,000 tons, or 12 percent of total phosphate segment sales. In 2005's fourth quarter, phosphate FPP sales totaled approximately 175,000 tons, or 40 percent of total phosphate sales. For calendar year 2006, total phosphate sales were $482.3 million, up 10 percent from $438.7 million in 2005; volume was almost 2.1 million tons, up from 2.0 million tons in 2005; and gross margin totaled $48.7 million, up substantially from the $36.3 million reported in 2005. Liquidity and Financial Position At December 31, 2006, the company's gross cash and short-term investments were $325.6 million, and its $250 million senior secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility was undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely . Under the facility's borrowing base formula, there was approximately $176.4 million in credit available to the company at December 31, 2006. At December 31, 2006, the company's current liability for customer advances was $102.7 million. The company had negative net debt (i.e., net cash) of $218.7 million, compared to negative net debt of $80.9 million at December 31, 2005. (Net debt is defined as debt, less cash and cash equivalents and short-term investments, plus customer advances.) Other Developments During the fourth quarter of 2006, CF Industries marked a number of important milestones, including: * Important Safety Milestones: CF Industries completed 2006 without a single classified lost-time accident. In addition, ten of its company-operated distribution facilities have continuous records of more than 30 years without a lost-time accident. * Production Records: phosphate operations achieved annual rock and sulfuric acid sulfuric acid, chemical compound, H2SO4, colorless, odorless, extremely corrosive, oily liquid. It is sometimes called oil of vitriol. Concentrated Sulfuric Acid production records for CF Industries, as well as the second highest phosphoric acid phosphoric acid, any one of three chemical compounds made up of phosphorus, oxygen, and hydrogen (see acids and bases). The most common, orthophosphoric acid, H3PO4, is usually simply called phosphoric acid. production level. * Natural Gas Exploration Legislation: the December 20, 2006 signing of federal legislation including S. 3711, the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east Energy Security Act of 2006, opened substantial new areas to natural gas and oil exploration. Wilson has termed this legislation "an important step toward remedying high and volatile natural gas prices that have plagued American agriculture, consumers, and industry in recent years," but he has cautioned that "there is still more Congress can and should do to assure an economical, stable supply of this vital fuel and feedstock." Outlook "The year 2007 is shaping up as a very good one for major segments of American agriculture. With our extensive presence in the U.S. Corn Belt, we're poised to take advantage of the market opportunity. We entered the year with strong first quarter order levels," Wilson noted. "As we neared the end of 2006, we saw the market's recognition of strong spring planting intentions. This robust demand prompted a surge in order flow during a period of declining gas costs and rising fertilizer prices, permitting us to lock in attractive margins on those forward orders," he added. The outlook for corn acreage this spring remains bullish. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the latest Doane Agricultural Services forecast, corn acreage is projected to increase to 87.1 million this spring to meet the surge in corn demand for ethanol production. This represents a sizeable increase from 78.3 million acres last spring. "However, I believe that the strength we're seeing in North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. fertilizer demand is more than just an 'ethanol play,'" the CF Industries executive explained. Fueling additional growth in corn acreage are historically low grain inventories worldwide, creating potential opportunities for increased corn exports. "The demand picture for wheat is strong, too, with low stocks and recent drought conditions "Drought Conditions" is episode 126 of The West Wing. Plot Senator Rafferty, a new presidential candidate garnered much media attention with a ground-breaking speech about health care. in many wheat-growing regions pushing up both projected U.S. planted acreage and crop prices," Wilson added. "On the manufacturing cost side of the equation, late 2006 saw a welcome moderation in North American natural gas prices. At the same time, rising natural gas prices in a number of fertilizer exporting nations, including the Ukraine, Belarus, and Romania, coupled with relatively high ocean freight rates, have made fertilizer imports from these countries less competitive in the U.S. market," he noted. The CF Industries executive cautioned that any forecasts for the spring planting season must be tempered by the potential for poor spring weather that could delay or reduce plantings, greater import penetration, higher natural gas costs, and other factors. FPP Update As of February 6, 2007, FPP bookings for all of 2007 stood at more than 1.9 million tons, up from nearly 1.4 million tons at the comparable point last year. Dividend Payment On February 7, 2007, CF Industries Holdings, Inc. reported that its Board of Directors had approved payment of the regular quarterly dividend of $0.02 per share, payable February 28, 2007, to stockholders of record on February 20, 2007. Conference Call CF Industries will hold a conference call to discuss fourth quarter and full year results at 10:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Friday, February 9, 2007. Investors can access the call through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the company's Web site at www.cfindustries.com, as well as find call-in information there. Company Information CF Industries Holdings, Inc., headquartered in Long Grove, Illinois Long Grove is an affluent village located in Lake County, Illinois. As of the 2005 census, the village had a total population of 7,633. The village has strict building ordinances to preserve its "country atmosphere. , is the holding company for the operations of CF Industries, Inc. CF Industries, Inc. is a major producer and distributor of nitrogen and phosphate fertilizer products. CF Industries operates world-scale nitrogen fertilizer plants in Donaldsonville, Louisiana The city of Donaldsonville is the parish seat of Ascension Parish in the US state of Louisiana, and is located on the west bank of the Mississippi River. The population was 7,605 at the 2000 census. and Medicine Hat, Alberta Medicine Hat, known to locals as "The Hat", is a city located in the southeastern part of the province of Alberta, Canada. It is situated on the Trans-Canada Highway, the eastern terminus of the Crowsnest Highway, and the South Saskatchewan River. , Canada; conducts phosphate mining and manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. in Central Florida
Central Florida is the central region of the United States state of Florida, on the East Coast. ; and distributes fertilizer products through a system of terminals, warehouses, and associated transportation equipment located primarily in the midwestern United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Note Regarding Use of Pro Forma Information The company's August 2005 IPO and related reorganization transaction did not change the nature of CF Industries' business or operations. As a result, the company believes that current and historical financial statements are comparable. Accordingly, financial statements are presented on a historical basis, with weighted-average shares outstanding and earnings (loss) per share information presented on a pro forma basis with respect to pre-IPO financial information. Note Regarding Non-GAAP Financial Measures The company reports its financial results in accordance with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Management believes that certain non-GAAP financial measures provide additional meaningful information regarding the company's performance, liquidity, financial strength and capital structure. The non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, the non-GAAP financial measures included in this earnings release may not be comparable to similarly titled measures of other companies. Reconciliations of the non-GAAP financial measures to GAAP are provided in tables accompanying this news release. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Certain statements contained in this release may constitute "forward-looking statements" within the meaning of federal securities laws. All statements in this release, other than those relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc historical information or current condition, are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. These risks and uncertainties include: the relatively expensive and volatile cost of North American natural gas; the cyclical nature of our business; our history of losses; the nature of our products as global commodities; intense global competition in the consolidating markets in which we operate; conditions in the U.S. agricultural industry; weather conditions; our inability to accurately predict seasonal demand for our products; the concentration of our sales with CF Industries' pre-IPO owners and other large customers; the impact of changing market conditions on our forward pricing program; the significant risks and hazards against which we may not be fully insured; unanticipated consequences related to future expansion of our business; our inability to expand our business, including that due to the significant resources that could be required; potential liabilities and expenditures related to environmental and health and safety laws and regulations; our inability to obtain or maintain required permits and governmental approvals; acts of terrorism; difficulties in securing the raw materials we use; changes in global fertilizer supply and demand; loss of key members of management; inability to meet financial reporting and other reporting requirements as a public company; and the other risks and uncertainties included from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking statements. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (1) Includes gas purchases and realized gains and losses on derivatives. (2) Total production at Donaldsonville and Medicine Hat, including the 34% interest of Westco, our joint venture partner in Canadian Fertilizers Limited. (3) Gross ammonia production Because of its many uses, ammonia is one of the most highly-produced inorganic chemicals. There are literally dozens of large-scale ammonia production plants worldwide. The worldwide production in 2004 was 109,000,000 metric tons.[1] China produced 28. , including amounts subsequently upgraded on-site into urea and/or UAN. [TABLE OMITTED] (1) P2O P2O Person to Organization 5 is the basic measure of the nutrient content in phosphate fertilizer products. [TABLE OMITTED] In accordance with U.S. generally accepted accounting principles (GAAP), reported net earnings includes the after-tax impacts of unusual items and non-recurring items. We believe that by adjusting reported net earnings to exclude the effects of these items, the resulting earnings are on a basis more comparable with other periods presented. Adjusted net earnings is not a recognized term under GAAP, and does not purport to be an alternative to net income, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. or any other performance measures derived in accordance with GAAP. [TABLE OMITTED] EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become is defined as net earnings (loss) plus interest expense (income)--net, income tax provision (benefit) including taxes on the cumulative effect of a change in accounting principle and depreciation, depletion and amortization. We have presented EBITDA because our management believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates by using EBITDA. EBITDA includes the after-tax impacts of unusual and non-recurring items. We believe that by adjusting EBITDA to exclude the effects of these items, the resulting EBITDA are on a basis more comparable with other periods presented. [TABLE OMITTED] Adjusted free cash flow is defined as net cash provided by operating activities less: customer advances - net, changes in working capital (accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , margin deposits, inventories, accounts payable and accrued expenses, and product exchanges - net), capital expenditures, distributions to minority interest, and dividends paid on common stock. We believe that adjusting principally for the swings in non-cash operating working capital items due to seasonality, additions to property, plant and equipment, and distributions to owners assists in the assessment of liquidity and financial strength. We use adjusted free cash flow as a supplemental financial measure in the evaluation of liquidity and financial strength. [TABLE OMITTED] Net debt (cash) is defined as total debt minus cash, cash equivalents and short-term investments, plus customer advances. We include customer advances in this calculation to reflect the liability associated with our obligations to supply fertilizer in the future, which offsets cash received in the form of customer advances. Net debt (cash) does not include Canadian Fertilizers Limited's distributions of earnings to its minority interest holder. We use net debt (cash) in the evaluation of our capital structure. |
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