01—Abstract
Summary
Summary of the 10-K filed February 27, 2012. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. reported net sales of $6.10 billiona for 2011, up 53.8% from $3.97 billion in 2010, and gross margin of $2.90 billion, up 145.5%.
Net earnings attributable to common stockholders were $1.54 billionb, or $21.98 diluted earnings per share, compared with $349.2 million ($5.34 per share) in 2010. The company is one of the largest nitrogen and phosphate fertilizer producers in the world, with its nitrogen segment generating $5.01 billion of net sales and $2.56 billion of gross margin. Its phosphate segment generated $1.09 billion of net sales and $332.4 million of gross margin.
Average nitrogen fertilizer selling prices rose 38% and phosphate prices rose 36%, with the company citing higher planted acres, global supply constraints and the Terra acquisition as drivers. The 2011 results include an unrealized mark-to-market loss of $77.3 millionc pre-tax on natural gas derivatives, a $34.8 million impairment on the Woodward, Oklahoma methanol plant, and a $32.5 million gain on the sale of four dry product warehouses. Cash flow from operations rose to $2.08 billion, and cash and cash equivalents ended the year at $1.21 billion.
The company repurchased about 6.5 million shares for $1.0 billiond under a $1.5 billion authorization and paid dividends of $1.00 per share for the year. Total debt was $1.62 billion at year end, down from $1.96 billion. The filing also identifies material risks.
These include volatile North American natural gas prices, cyclical industry oversupply, competition from Russian and Ukrainian imports, and an ongoing Clean Air Act NOV at Plant City for which the company cannot estimate penalties. Florida numeric nutrient criteria could make wastewater discharge limits more stringent, and the company has about 13 years of permitted Hardee phosphate rock reserves.
02—Key points
Key Highlights
- Net sales rose 53.8% to $6.10 billion in 2011, driven by higher nitrogen and phosphate selling prices and the Terra acquisition.
- Gross margin increased 145.5% to $2.90 billion; the nitrogen segment contributed $2.56 billion and the phosphate segment $332.4 million.
- Diluted net earnings per share attributable to common stockholders were $21.98, versus $5.34 in 2010.
- Cash flow from operations was $2.08 billion, up from $1.19 billion in 2010, and year-end cash and equivalents were $1.21 billion.
- The company repurchased about 6.5 million shares for $1.0 billion under its $1.5 billion program, and dividends declared rose to $1.00 per share from $0.40.
- Total debt fell to $1.62 billion from $1.96 billion, which included $800 million senior notes due 2018 and $800 million due 2020.
- Key risks include natural gas price volatility, global fertilizer competition, Florida nutrient criteria, and a pending EPA Clean Air Act Notice of Violation at Plant City that cannot yet be quantified.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, CF Industries Holdings kept $0.25.
- Revenue$6.10B100.0%
- Cost of revenue−$3.20B52.5%
- Gross profit$2.90B47.5%
- Operating costs−$105.1M1.7%
- Operating income$2.79B45.8%
- Interest, other & tax−$1.25B20.5%
- Net income$1.54B25.2%
Where FY2011 revenue went
$6.10B- Cost of revenue: $3.20B, 53% of revenue
- Net income: $1.54B, 25% of revenue
- Interest, other & tax: $1.25B, 21% of revenue
- SG&A: $130.0M, 2.1% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 27, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $6.10B$3.96B | +53.8% |
| Cost of Revenue | $3.20B$2.79B | +15.0% |
| Gross Profit | $2.90B$1.18B | +145.5% |
| SG&A Expenses | $130.00M$106.10M | +22.5% |
| Operating Income | $2.79B$895.70M | +211.5% |
| Interest Expense | $147.20M$221.30M | −33.5% |
| Net Income | $1.54B$349.20M | +340.8% |
| EPS (Basic) | $22.18$5.40 | +310.7% |
| EPS (Diluted) | $21.98$5.34 | +311.6% |
| Shares Outstanding (Basic) | 69.40M64.70M | +7.3% |
| Shares Outstanding (Diluted) | 70.00M65.40M | +7.0% |
05—Questions
Frequently Asked Questions
What drove the large increase in 2011 revenue and profit?
The filing attributes the increase to higher average nitrogen and phosphate selling prices, which rose 38% and 36% respectively, along with higher sales volumes and a full year of results from the Terra acquisition. Lower realized natural gas costs also helped, partly offset by a $77.3 million unrealized mark-to-market loss on natural gas derivatives.
How significant is the natural gas exposure?
Natural gas was about 45% of total nitrogen cost of sales in 2011. The company hedged approximately 66% of its 2011 natural gas consumption, and a $1.00 per MMBtu change in forward gas prices would change the pre-tax unrealized mark-to-market position by $156.3 million.
What is the company's capital return and balance sheet position?
The company repurchased about 6.5 million shares for $1.0 billion in 2011 and paid $68.7 million in common dividends. Cash and equivalents were $1.21 billion at year end, and total debt was $1.62 billion, with $491.2 million available under the revolving credit facility.
What regulatory matters could affect future results?
The company faces an EPA Clean Air Act Notice of Violation at its Plant City sulfuric acid plants, which the company says it cannot estimate, and an EPCRA/CERCLA matter it does not expect to be material. Florida's numeric nutrient criteria could impose more stringent wastewater discharge limits, and environmental capital spending is expected to rise to about $79.5 million in 2012.
How much mining capacity remains at the Hardee phosphate complex?
The permitted area contained about 45.9 million tons of recoverable phosphate rock reserves, sufficient for approximately 13 years at current operating rates. The company has begun applying for permits to expand the mining area, which contains an estimated additional 34 million tons and would allow about 10 more years of operations if permits are secured.
06—Continue