CF Industries Holdings, Inc. Reports Third Quarter Net Earnings of $7.3 Million, or $0.13 Per Common Share.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 Total $378.0 Million, Up 5% Over 2005's Third Quarter, As Volumes Increase In Nitrogen And Phosphate LONG GROVE Long Grove may refer to:
* Net sales increased over third quarter 2005, as higher volumes in nitrogen and phosphate offset lower nitrogen prices. * Gross margin of $25.8 million included mark-to-market losses on derivatives of $13.0 million, equivalent to $0.14 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. . * Natural gas costs declined from 2005 Third Quarter and 2006 Second Quarter. * Financial position and liquidity remain strong. * Company announces approximately $21 million in capital projects to increase natural gas efficiency at Donaldsonville nitrogen complex and increase capacity at 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. * Authorization to mine and reclaim Hardee County phosphate reserves extended. * Conditions suggest increased demand in key Midwestern agricultural markets through next spring. CF Industries Holdings, Inc. (NYSE NYSE See: New York Stock Exchange :CF) today reported net earnings of $7.3 million, or 13 cents per common share, for the third quarter of 2006. In 2005's third quarter, the company reported a net loss of $91.4 million, or $1.66 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. The 2005 third quarter loss was primarily the result of unusual items related to the company's August 2005 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. ). Third quarter 2006 net sales totaled $378.0 million, up 5 percent from $359.4 million in the year-earlier third quarter. "This was a good quarter, with both net sales and product volume up from third quarter 2005 levels," explained Stephen R. Wilson, chairman and chief executive officer, CF Industries Holdings, Inc. "The quarter was notable for what did - and for what didn't - happen. We did see natural gas prices fall from second quarter levels, as gas storage totals in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. pushed to near-record highs. This contributed to reduced cash production costs for us and to continued moderation in fertilizer prices," he explained. "But perhaps more importantly, we didn't see a repeat of 2005's hurricane season Hurricane season refers to a period in a year when hurricanes usually form. For more information see: Tropical cyclone#Times of formation. For a lists of past seasons, see:
Quarter-on-Quarter Comparison CF Industries' third quarter results included an unfavorable $13.0 million pre-tax non-cash adjustment to cost of sales for marking natural gas derivatives to market, as well as pre-tax realized losses on derivatives of $1.7 million. The $13.0 million adjustment relates to derivatives largely associated with nitrogen fertilizer orders that will be shipped in subsequent periods. It compares to $14.1 million in pre-tax gains on natural gas derivatives reflected in third quarter 2005 cost of sales, when the company still applied 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). , primarily due to forward gas positions terminated in that quarter pursuant to reductions in operating levels in last year's fourth quarter. Third quarter 2005 results also included a number of unusual and non-recurring items related to the company's IPO, including a $28.3 million loss on extinguishment of pre-IPO term debt, a $1.9 million charge related to termination of a previous long-term incentive plan for the company's senior management, and $2.9 million of IPO-related expenses. The company also recorded a $99.9 million charge to income tax expense in the third quarter of 2005 to establish a valuation allowance against net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. generated when the company operated as a cooperative for tax purposes. Nitrogen Fertilizer Business Nitrogen net sales for the third quarter totaled $260.5 million, comparable to the $258.3 million in 2005's third quarter. Increased urea and 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;. solution (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]. ) volumes helped offset reduced average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. for the company's nitrogen products. Total nitrogen sales volume was 1,378,000 tons, up 17 percent from 1,176,000 tons in the comparable 2005 quarter. The gross margin on nitrogen sales was $9.6 million, compared to $45.0 million in 2005's third quarter. The current quarter's nitrogen margin was affected by reduced prices, as well as a $13.0 million unfavorable mark-to-market adjustment. The gross margin in 2005's third quarter, a period when CF Industries utilized hedge accounting, included $14.1 million in gains on natural gas derivatives. As noted above, these gains were primarily due to forward positions terminated during the quarter. "In the third quarter, which typically has lower seasonal demand, the nitrogen fertilizer market saw some customers hesitant to make commitments in a falling fertilizer price environment. Despite this, we successfully maintained good volumes for the period," Wilson noted, adding that, "The quarter's lower average selling prices for nitrogen products reflected market conditions and the seasonal demand pattern, as well as the effect of falling natural gas prices." 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 380,000 tons during the quarter, representing 28 percent of nitrogen fertilizer volume. This rate of FPP sales compares to 797,000 tons, or 68 percent of nitrogen volume, in 2005's third quarter. "The decline in FPP orders was understandable, as some customers deferred purchases in expectation of lower nitrogen prices closer to the time of shipment. Of course, from CF Industries' perspective, declining production costs made these sales attractive, and total volume was actually up from last year's third quarter," Wilson explained. Other than downtime for normal maintenance activities, the company's nitrogen complexes operated at near-capacity levels during the third quarter, with product purchases made to augment, rather than replace, production. Phosphate Fertilizer Business Third quarter phosphate fertilizer sales totaled $117.5 million, up 16 percent from $101.1 million in 2005's third quarter. Product volumes and average selling prices both increased, compared to the year-earlier quarter. Sales volume was 510,000 tons, up 11 percent from 460,000 tons in 2005's third quarter. The gross margin on phosphate sales, primarily reflecting improved pricing and higher volume, was $16.2 million, up 47 percent from $11.0 million in 2005's third quarter. "The quarter-on-quarter improvement was impressive, as the phosphate market maintained the good pricing and volume levels we had seen earlier in 2006," Wilson noted. Phosphate forward sales forward sales npl → ventas fpl a término totaled 54,000 tons, or 11 percent of total segment sales. In 2005's third quarter, phosphate fertilizer sales under the FPP were 229,000 tons, or 50 percent of total phosphate fertilizer sales. "In phosphate, as in nitrogen, pricing has encouraged some customers to defer commitments until closer to the time of shipment," Wilson explained. The company's phosphate complex operated at capacity levels during the third quarter. Liquidity and Financial Position At September 30, 2006, the company's gross cash and short-term investments totaled $305.4 million, and the company's $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 $199.6 million in available credit. At September 30, 2006, the company's current liability for customer advances was $148.8 million. The company had negative net debt (i.e., net cash) of $152.2 million compared to negative net debt of $129.9 million at September 30, 2005. (Net debt is defined as debt, less cash and cash equivalents and short-term investments, plus customer advances.) Other Developments CF Industries also announced several other recent developments, including: * The company's Board of Directors has authorized two capital projects, together totaling approximately $21 million. One project will improve the natural gas efficiency of two of the four ammonia plants at the company's 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. nitrogen complex. The company expects to complete the upgrade of one ammonia plant in 2007 and the other in 2008. The other project is an increase in capacity at the company's Plant City, Florida phosphate complex. The 15-month project is scheduled to begin later this year and is designed to increase overall complex capacity by more than 80,000 tons of 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) annually. It should also enhance operational flexibility, increasing the complex's ability to shift production from DAP to monoammonium phosphate (MAP). "These capital projects are examples of our focus on continuous improvement in our operations," Wilson noted. * The company has received an extension of its Florida phosphate mine's local development authorization from the Hardee County Board of Commissioners, extending the termination date termination date, n See expiration date. from December of 2011 to December of 2029. This will allow it to mine the currently permitted phosphate rock phosphate rock n. Any of various rocks composed largely of phosphate minerals, especially apatite, used as fertilizer and as a source of phosphorous compounds. reserves and then reclaim affected land. The extension will permit CF Industries to mine an additional 11 years of reserves (at current operating rates) beyond the original 2011 termination date. * CF Industries continues to advance its work with respect to its future direction. "We've established growth and diversification as our strategic priorities. In this global industry, we must increase our size and diversify our sources of cash flow in order to become less dependent on the relationship between nitrogen fertilizer prices and North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. natural gas costs," he noted. "Our initiatives to address these priorities generally will be natural extensions of our core competencies and may include organic initiatives, merger and acquisition activity, joint ventures, and other strategic actions," Wilson added. Outlook "Today, the fundamentals of the domestic fertilizer market appear reasonably strong for the fourth quarter - and at least through spring," Wilson noted. "Looking at the fourth quarter, natural gas prices are moderate by recent standards, and crop prices are trending upward. At the same time, nitrogen price levels in international markets have discouraged increased imports in our domestic markets," he explained. The CF Industries Chief Executive Officer noted, however, that fourth quarter demand will be affected by weather conditions and customers' perceptions of future prices. "We've seen some hesitancy hes·i·tan·cy n. An involuntary delay or inability in starting the urinary stream. by wholesalers and retailers to build inventory in a market that has experienced fertilizer price volatility," he added. "Looking ahead to 2007, we're optimistic that growing demand for corn and other crops, pushed by increasing ethanol production and low worldwide grain stocks, could lead to improved crop prices, increased corn acreage, and higher fertilizer application rates," Wilson said. As of October 25, 2006, forward bookings for the fourth quarter totaled approximately 908,000 tons, compared to nearly 1.2 million tons at a comparable point last year. The company's nitrogen and phosphate operations are expected to remain at capacity levels during the fourth quarter, 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 third quarter results at 10:00 a.m. ET on Friday, October 27, 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 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 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 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] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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