CF Industries Holdings, Inc. Reports Second Quarter Net Earnings of $42.6 Million, or $0.77 Per Common Share; Net Sales Increased 6 Percent as Improved Pricing Offset Volume Decline; Performance Approached Strong Q2 2005 Levels.LONG GROVE Long Grove may refer to:
--Net sales increased to $664.8 million. --Volume reflected smaller-than-anticipated decline in corn acreage and apparent reduction in fertilizer fertilizer, organic or inorganic material containing one or more of the nutrients—mainly nitrogen, phosphorus, and potassium, and other essential elements required for plant growth. application rates. --Gross margins saw significant quarter-on-quarter increase in phosphate phosphate, salt or ester of phosphoric acid, H3PO4. Because phosphoric acid is tribasic (having three replaceable hydrogen atoms), it forms monophosphate, diphosphate, and triphosphate salts in which one, two, or three of the hydrogens of the and smaller improvement in nitrogen nitrogen (nī`trəjən), gaseous chemical element; symbol N; at. no. 7; at. wt. 14.0067; m.p. −209.86°C;; b.p. −195.8°C;; density 1.25 grams per liter at STP; valence principally −3, +3, or +5. . Nitrogen gross margin benefited from a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustment on derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. . --Natural gas costs, although higher than in 2005's second quarter, declined significantly during the period. --First half net income of $18.0 million was down substantially from 2005's first half, reflecting the company's first quarter 2006 net loss. --Financial position and liquidity remain strong. --Third quarter outlook reflects good forward order volume and potential for moderating natural gas prices. CF Industries Holdings, Inc. (NYSE NYSE See: New York Stock Exchange :CF) today reported net earnings of $42.6 million, or 77 cents per common share, for the second quarter of 2006. The earnings, driven by improved pricing for the company's nitrogen and phosphate fertilizers, compare to net earnings of $42.9 million, or 78 cents 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, in 2005's second quarter. During the second quarter of 2006, 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 totaled $664.8 million, up 6 percent from $626.7 million during the second quarter of 2005. "CF Industries' strong second quarter earnings clearly indicate that the disruptions that 2005's Gulf Coast hurricanes and resulting high natural gas prices brought to the U.S. fertilizer market have worked their way through the system. The spring season did see some reductions in corn acreage and an apparent reduction in fertilizer application rates. However, high operating rates Operating rate The percentage of total production capacity of a company, industry, or country that is being used. operating rate The portion of capacity at which a business operates. , falling natural gas prices, and improved product pricing helped us achieve second quarter results that approached our strong second quarter 2005 performance," commented Stephen Stephen, 1097?–1154, king of England (1135–54). The son of Stephen, count of Blois and Chartres, and Adela, daughter of William I of England, he was brought up by his uncle, Henry I of England, who presented him with estates in England and France and R. Wilson Wilson, city (1990 pop. 36,930), seat of Wilson co., E N.C., in a rich agricultural region; inc. 1849. It is a commercial and industrial center with a large tobacco market. Manufactures include textile goods (especially clothing), metal products, and processed foods. , chairman and chief executive officer of CF Industries Holdings, Inc. However, as the company reported in its first quarter results release, an unusually early spring planting season in 2005 pulled forward into March some sales that would have occurred in the second quarter in a more typical year, affecting the quarter-on-quarter comparison. "Admittedly, pricing - especially for our nitrogen products - did decline from high first quarter 2006 levels, but that reduction was more than offset by lower natural gas costs," Wilson noted. With positive margins available across all products, the company's nitrogen and phosphate fertilizer manufacturing complexes operated near capacity throughout all of the second quarter. In contrast to the previous two quarters, the company significantly reduced purchases of nitrogen fertilizer, using limited purchases primarily to supplement production. First Half Comparisons For the first half of 2006, CF Industries reported net earnings of $18.0 million, or 33 cents per common share. In 2005's first half, the company earned $65.2 million, or $1.18 per common share on a pro forma basis. Net sales for 2006's first half totaled $1,065.3 million, down 2 percent from the $1,086.0 million registered in 2005's strong first half. "The negative comparison reflects the $24.6 million loss in this year's first quarter, when reduced demand due to uncertainty in the market, high natural gas costs, high purchased product costs, and other factors negatively affected performance," Wilson explained. "We ended the first half financially strong. Our financial position improved compared to the first quarter, driven by strong second quarter earnings and the liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of inventory built in advance of the season," he added. Nitrogen Fertilizer Business Nitrogen net sales for the second quarter totaled $536.2 million, up 8 percent from the $496.0 million in 2005's second quarter. Higher selling prices for all nitrogen products, especially ammonia ammonia, chemical compound, NH3, colorless gas that is about one half as dense as air at ordinary temperatures and pressures. It has a characteristic pungent, penetrating odor. , more than offset a decline in product volume. Nitrogen sales volume for the second quarter was 2.0 million tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. , down 4 percent from 2.1 million tons in the second quarter of 2005. The gross margin on nitrogen sales was $90.0 million, compared to $87.6 million in 2005's second quarter. The increase was primarily the result of higher product selling prices. Nitrogen margins in the current quarter were also impacted by an $11.7 million favorable mark-to-market adjustment on natural gas derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. contracts. There was no adjustment in 2005's second quarter, when the company utilized hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). . "We entered the second quarter facing some uncertainty in the nitrogen fertilizer market due to concerns that high natural gas-driven fertilizer prices would negatively affect farmers' planting decisions and fertilizer application rates," Wilson pointed out. "However, actual planted corn acreage proved greater than initial United States Department of Agriculture United States Department of Agriculture (USDA), n.pr established in 1862, USDA is responsible for the safety of meat, poultry, and egg products. It conducts ongoing research in areas from human nutrition to new crop technologies and also helps ensure open crop intentions reports had suggested. Application rates, while off from last spring's levels, were apparently down by less than some forecasters had anticipated," Wilson added. Nitrogen fertilizer 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 1.0 million tons during the quarter, representing 49 percent of total nitrogen volume. In 2005's second quarter, the company sold 1.4 million tons, or 66 percent, of its nitrogen on a forward basis. Phosphate Fertilizer Business For the quarter, phosphate fertilizer net sales totaled $128.6 million, down slightly from $130.7 million in 2005's second quarter. Although product volume was lower during the quarter, average price realizations increased compared to the prior year's quarter. Phosphate sales volume totaled 554,000 tons for the second quarter, down 10 percent from 616,000 tons in last year's second quarter. The gross margin on phosphate sales was $11.2 million, up 40 percent from $8.0 million in 2005's second quarter. The increase was the result of higher selling prices for 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), the company's primary phosphate fertilizer products. "Lower volumes, primarily to export markets, were more than offset by stronger prices in our phosphate business, as overall domestic supply and demand remained in a good balance," Wilson commented. Phosphate forward sales forward sales npl → ventas fpl a término were 51,000 tons, or 9 percent of total segment sales. This compares to 179,000 tons, or 29 percent of total phosphate sales, in 2005's second quarter. Liquidity and Financial Position At June June: see month. 30, 2006, the company's cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments totaled $228.0 million, and its $250.0 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, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $164.5 million in credit was available. The decline in available credit from the $250.0 million at March 31, 2006 is primarily due to the seasonal decline in inventory levels. The company had negative net debt (i.e., net cash) of $153.5 million at June 30, 2006 compared to negative net debt of $80.9 million at December December: see month. 31, 2005. Compared to the December total, the increase was primarily due to a seasonal reduction in the company's liability for customer advances related to its FPP. (Net debt is defined as debt, less cash and cash equivalents and short term-investments, plus customer advances.) Outlook "We entered July July: see month. with strong forward order volume for the quarter in both nitrogen and phosphate, although it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have important to keep in mind that the third quarter typically sees lower demand than the second quarter," CF Industries' Wilson explained. "Looking forward through the quarter, we see a number of positive factors, including futures markets futures market, a commodity exchange where contracts for the future delivery of grain, livestock, and precious metals are bought and sold. Speculation in futures serves to protect both the developers and the users of the commodities from unfavorable and unpredictable that indicate the potential for continued moderation of natural gas prices, assuming no major hurricane-related disruptions; improved pricing for corn and other crops; improved export demand for phosphate products; and a recent reduction in nitrogen fertilizer imports," he noted. Longer-term positives include the prospect for increased corn acreage, driven by expanding ethanol ethanol (ĕth`ənōl') or ethyl alcohol, CH3CH2OH, a colorless liquid with characteristic odor and taste; commonly called grain alcohol or simply alcohol. production and other factors; the potential for increased natural gas exploration in the U.S. Outer Continental Shelf In the federal United States, the Outer Continental Shelf (OCS) consists of the submerged lands, subsoil, and seabed, lying between the seaward extent of the States' jurisdiction and the seaward extent of Federal jurisdiction. ; and the prospect of reduced grain stocks going into the next fertilizer year. "Of course, any outlook has to be tempered by the possibility of near-term near-term adj. Of, for, or involving a short period of time in the near future. weather-related disruptions and related volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in natural gas prices, as well as factors that could negatively affect crop conditions. Longer term, there is the impact of new capacity coming online in low natural gas-cost regions," he added. As of July 26, 2006, forward bookings for the third quarter totaled approximately 523,000 tons, compared to approximately 1.0 million tons at that point in time for the third quarter of 2005. As of July 26, 2006, forward bookings for the remainder of 2006, including the third quarter, totaled approximately 1.0 million tons, compared to approximately 1.8 million tons a year ago. The company's nitrogen and phosphate operations remain at capacity levels, with the exception of normal maintenance activities. However, future rates are dependent upon demand, competitive conditions, and maintenance activity. Conference Call CF Industries will hold a conference call to discuss its second quarter results at 10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , July 28, 2006. Information on accessing the call is posted on 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. 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 Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of ; 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 Mid·west or Middle West A region of the north-central United States around the Great Lakes and the upper Mississippi Valley. It is generally considered to include Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, Kansas, and 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 (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. and related reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. 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 pre-IPO An offering of a company's shares prior to the firm's initial public offering. Investing in a pre-IPO tends to be very risky, in part because the planned IPO may never take place. financial information. Note Regarding Non-GAAP Financial Measures The company reports its financial results in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " 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 our 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 With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. cost of North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. natural gas; the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. 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
Hazards is an independent, union-friendly magazine based in Sheffield, England, which has won major international awards. against which we may not be fully insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. ; 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 terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. ; 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.
CF Industries Holdings, Inc.
Selected Financial Information
Results of Operations
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
(in millions, except per
share amounts) 2006 2005 2006 2005
---------- ---------- ---------- ----------
Net sales $664.8 $626.7 $1,065.3 $1,086.0
Cost of sales 563.6 531.1 986.8 935.1
---------- ---------- ---------- ----------
Gross margin 101.2 95.6 78.5 150.9
Selling, general and
administrative 14.3 14.3 27.3 25.3
Other operating - net 1.6 1.7 3.1 2.5
---------- ---------- ---------- ----------
Operating earnings 85.3 79.6 48.1 123.1
Interest expense (income)
- net (1.3) 1.0 (3.5) 2.8
Minority interest 16.4 7.5 22.3 12.4
Other non-operating - net (0.1) (0.1) (0.2) (0.1)
---------- ---------- ---------- ----------
Earnings before income
taxes 70.3 71.2 29.5 108.0
Income tax provision 27.7 28.3 11.5 42.8
---------- ---------- ---------- ----------
Net earnings $42.6 $42.9 $18.0 $65.2
========== ========== ========== ==========
Basic and diluted
weighted average
common shares outstanding 55.0 55.0
Basic and diluted net
earnings per share $0.77 $0.33
CF Industries Holdings, Inc.
Selected Financial Information
Summarized Balance Sheets
June 30, December 31, June 30,
(in millions) 2006 2005 2005
------------ ------------ ------------
Assets
Current assets:
Cash and cash equivalents $24.7 $37.4 $79.4
Short-term investments 203.3 179.3 430.9
Accounts receivable 85.0 52.8 88.2
Inventories 202.6 251.1 140.3
Deferred income taxes - - 27.5
Other 25.2 55.5 28.4
------------ ------------ ------------
Total current assets 540.8 576.1 794.7
Investments in unconsolidated
subsidiaries - - 18.7
Property, plant and equipment -
net 608.4 630.1 626.0
Deferred income taxes - - 46.9
Asset retirement obligation
escrow account 11.2 - -
Other assets 21.6 21.9 16.9
------------ ------------ ------------
Total assets $1,182.0 $1,228.1 $1,503.2
============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
expenses $148.1 $171.6 $152.4
Customer advances 70.1 131.6 130.0
Deferred income taxes 9.1 5.8 -
Current portion of long-term
debt - - 19.9
Other 26.5 32.1 10.8
------------ ------------ ------------
Total current liabilities 253.8 341.1 313.1
Notes payable 4.4 4.2 4.0
Long-term debt - - 226.4
Deferred income taxes 7.3 8.4 -
Other noncurrent liabilities 106.1 104.9 81.8
Minority interest 37.4 13.6 24.9
Stockholders' equity 773.0 755.9 853.0
------------ ------------ ------------
Total liabilities and
stockholders' equity $1,182.0 $1,228.1 $1,503.2
============ ============ ============
CF Industries Holdings, Inc.
Selected Financial Information
Statements of Cash Flows
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
(in millions) 2006 2005 2006 2005
-------- -------- -------- --------
Operating Activities:
Net earnings $42.6 $42.9 $18.0 $65.2
Adjustments to reconcile net
earnings to net cash
provided by operating
activities
Minority interest 16.4 7.5 22.3 12.4
Depreciation, depletion and
amortization 24.9 26.6 47.4 53.2
Deferred income taxes 18.6 23.6 4.6 33.5
Stock compensation expense 1.8 - 3.6 -
Unrealized loss (gain) on
derivatives (11.7) - 8.3 -
Equity in earnings of
unconsolidated subsidiaries - (0.1) - (0.1)
Changes in:
Accounts receivable (12.1) (31.6) (28.9) (48.8)
Margin deposits 19.4 7.1 9.7 21.9
Inventories 129.8 115.4 49.5 100.8
Accounts payable and
accrued expenses (7.1) (10.2) (22.8) (16.5)
Product exchanges - net (2.9) (2.6) 11.7 (8.9)
Customer advances - net (175.8) (105.6) (61.5) (81.5)
Other - net 0.5 (3.9) 1.0 1.8
-------- -------- -------- --------
Net cash provided by
operating activities 44.4 69.1 62.9 133.0
-------- -------- -------- --------
Investing Activities:
Additions to property, plant
and equipment - net (11.7) (16.4) (23.2) (33.2)
Purchases of short-term
investments (198.9) (165.2) (323.9) (320.7)
Sales and maturities of short-
term investments 153.2 157.9 299.9 259.1
Deposit to asset retirement
obligation escrow account - - (11.1) -
-------- -------- -------- --------
Net cash used in investing
activities (57.4) (23.7) (58.3) (94.8)
-------- -------- -------- --------
Financing Activities:
Payments of long-term debt - (7.8) - (8.5)
Distributions to minority
interest - - (15.1) -
Dividends paid on common stock (1.1) - (2.2) -
-------- -------- -------- --------
Net cash used in financing
activities (1.1) (7.8) (17.3) (8.5)
-------- -------- -------- --------
Effect of exchange rate changes
on cash and cash equivalents 0.1 (0.3) - (0.3)
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents (14.0) 37.3 (12.7) 29.4
Cash and cash equivalents at
beginning of period 38.7 42.1 37.4 50.0
-------- -------- -------- --------
Cash and cash equivalents at end
of period $24.7 $79.4 $24.7 $79.4
======== ======== ======== ========
CF Industries Holdings, Inc.
Selected Financial Information
Segment Data
Nitrogen Fertilizer Business
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
(in millions) 2006 2005 2006 2005
-------- -------- -------- --------
Net sales $536.2 $496.0 $822.0 $853.3
Cost of sales 446.2 408.4 764.9 718.9
-------- -------- -------- --------
Gross margin $90.0 $87.6 $57.1 $134.4
======== ======== ======== ========
Gross margin percentage 16.8% 17.7% 6.9% 15.8%
Tons of product sold
(in thousands) 2,028 2,121 3,185 3,781
Sales volumes by product
(in thousands)
Ammonia 516 571 646 887
Urea 780 679 1,362 1,428
UAN 700 841 1,142 1,431
Other nitrogen fertilizers 32 30 35 35
Average selling prices
(dollars per ton)
Ammonia $420 $326 $408 $310
Urea 252 248 261 242
UAN 170 165 175 161
Cost of natural gas (per MMBtu)(1)
Donaldsonville $7.12 $6.77 $7.82 $6.89
Medicine Hat 6.98 5.76 7.22 5.84
Average daily market price of
natural gas (per MMBtu)
Henry Hub (Louisiana) $6.52 $6.94 $7.14 $6.67
AECO (Alberta) 5.36 5.93 5.97 5.76
Depreciation and amortization $16.0 $18.1 $28.9 $36.6
Capital expenditures $4.2 $11.8 $8.5 $19.3
Production volume by product
(in thousands)
Ammonia (2)(3) 852 846 1,503 1,676
Granular urea (2) 653 608 1,117 1,231
UAN (28%) 586 684 993 1,371
(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, including amounts subsequently upgraded
on-site into urea and/or UAN.
CF Industries Holdings, Inc.
Selected Financial Information
Segment Data
Phosphate Fertilizer Business
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
(in millions) 2006 2005 2006 2005
-------- -------- -------- --------
Net sales $128.6 $130.7 $243.3 $232.7
Cost of sales 117.4 122.7 221.9 216.2
-------- -------- -------- --------
Gross margin $11.2 $8.0 $21.4 $16.5
======== ======== ======== ========
Gross margin percentage 8.7% 6.1% 8.8% 7.1%
Tons of product sold
(in thousands) 554 616 1,043 1,103
Sales volumes by product
(in thousands)
DAP 452 503 862 890
MAP 102 113 181 213
Domestic vs. export sales of DAP/MAP
(in thousands)
Domestic 369 383 745 717
Export 185 233 298 386
Average selling prices
(dollars per ton)
DAP $232 $210 $233 $210
MAP 232 221 235 217
Depreciation, depletion, and
amortization $8.4 $7.8 $17.4 $15.2
Capital expenditures $7.5 $4.4 $14.9 $13.9
Production volume by product
(in thousands)
Hardee Phosphate Rock Mine
Phosphate rock 969 800 1,867 1,591
Plant City Phosphate Fertilizer
Complex
Sulfuric Acid 652 665 1,309 1,240
Phosphoric acid as P2O5 (1) 262 264 513 477
DAP/MAP 527 525 1,030 948
(1) P2O5 is the basic measure of the nutrient content in phosphate
fertilizer products.
CF Industries Holdings, Inc.
Selected Financial Information
Reconciliation of Non-GAAP Disclosure Items
Reconciliation of net earnings to EBITDA:
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ---------------
(in millions) 2006 2005 2006 2005
------- ------- ------- -------
Net earnings $42.6 $42.9 $18.0 $65.2
Interest expense (income) - net (1.3) 1.0 (3.5) 2.8
Income tax provision 27.7 28.3 11.5 42.8
Depreciation, depletion and
amortization 24.9 26.6 47.4 53.2
Less: Loan fee amortization (a) (0.1) (0.1) (0.3) (0.5)
------- ------- ------- -------
EBITDA $93.8 $98.7 $73.1 $163.5
======= ======= ======= =======
(a) To adjust for amount included in both interest and amortization.
EBITDA is defined as net earnings (loss) plus interest expense
(income)--net, income tax expense (benefit) 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.
CF Industries Holdings, Inc.
Selected Financial Information
Reconciliation of Non-GAAP Disclosure Items
Reconciliation of cash provided by operating activities
to adjusted free cash flow:
Three Months Six Months
Ended Ended
June 30, 2006 June 30, 2006
----------------- -----------------
(in millions) 2006 2005 2006 2005
-------- -------- -------- --------
Net cash provided by operating
activities $44.4 $69.1 $62.9 $133.0
Less:
Customer advances - net (175.8) (105.6) (61.5) (81.5)
Other changes in working
capital 127.1 78.1 19.2 48.5
Capital expenditures 11.7 16.4 23.2 33.2
Distributions to minority
interest - - 15.1 -
Dividends paid on common stock 1.1 - 2.2 -
-------- -------- -------- --------
Adjusted free cash flow $80.3 $80.2 $64.7 $132.8
======== ======== ======== ========
Adjusted free cash flow is defined as net cash provided by
operating activities less: customer advances - net, changes in working
capital (accounts receivable, 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 long-term 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.
Reconciliation of debt to net debt (cash):
June 30, December 31, June 30,
(in millions) 2006 2005 2005
------------ ------------ ------------
Total debt $4.4 $4.2 $250.3
Less: cash, cash equivalents
and short-term investments 228.0 216.7 510.3
Plus: customer advances 70.1 131.6 130.0
------------ ------------ ------------
Net debt (cash) $(153.5) $(80.9) $(130.0)
============ ============ ============
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 contractual obligations of Canadian
Fertilizers Limited to distribute its earnings to its minority
interest holder. We use net debt (cash) in the evaluation of our
capital structure.
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