01—Abstract
Summary
Summary of the 10-K filed February 27, 2013. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. reported net sales of $6.10 billiona and net earnings attributable to common stockholders of $1.85 billion for 2012, up from $1.54 billion in 2011.
Diluted earnings per share rose to $28.59b from $21.98, aided by higher nitrogen segment margins and a lower average share count after share repurchases. Gross margin rose $217.7 million to $3.11 billion, driven by the nitrogen segment (gross margin up $350.4 million to $2.91 billion), partially offset by a $132.7 million decline in phosphate gross margin to $199.7 million on lower average selling prices. The company's 2012 results were affected by a fourth-quarter amendment to CFL selling prices, effective retroactively to January 1, 2012, which reduced net sales by $129.7 million with no effect on net earnings attributable to common stockholders.
Cash flow from operations was $2.38 billionc, and cash and cash equivalents ended the year at $2.27 billion. Total debt was $1.6 billion, consisting of $800 million senior notes due 2018 and $800 million due 2020, with $491.0 million available under the revolving credit facility. Looking forward, the company announced plans in November 2012 to invest $3.8 billion in new ammonia and urea/UAN capacity at Donaldsonville, Louisiana and Port Neal, Iowa, scheduled to be on-stream by 2016, and expects 2013 capital spending of $1.4 billion to $1.7 billion.
It also agreed to acquire the 34% of Canadian Fertilizers Limited held by Viterra for C$0.9 billiond, subject to regulatory approval, which would give it 100% ownership of CFL. Key risks include natural gas price volatility, cyclical fertilizer demand, global competition, and permitting risk for the expansion projects.
02—Key points
Key Highlights
- Net earnings attributable to common stockholders of $1,848.7 million in 2012, compared with $1,539.2 million in 2011
- Diluted EPS of $28.59 in 2012, up from $21.98 in 2011, reflecting higher earnings and fewer average shares after buybacks
- Net sales of $6,104.0 million, essentially flat versus $6,097.9 million in 2011; nitrogen net sales rose $84.5 million while phosphate net sales fell $78.4 million
- Nitrogen segment gross margin increased $350.4 million to $2,913.6 million; phosphate gross margin fell $132.7 million to $199.7 million
- Cash flow from operations of $2,375.6 million, cash and cash equivalents of $2,274.9 million at year-end, and $1,605.0 million total debt
- Announced $3.8 billion expansion of Donaldsonville and Port Neal capacity, scheduled for completion by 2016, and a C$0.9 billion agreement to acquire Viterra's 34% interest in CFL
- Board authorized a new $3.0 billion share repurchase program through December 31, 2016; no repurchases were made under it in 2012
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, CF Industries Holdings kept $0.30.
- Revenue$6.10B100.0%
- Cost of revenue−$2.99B49.0%
- Gross profit$3.11B51.0%
- Operating costs−$153.9M2.5%
- Operating income$2.96B48.5%
- Interest, other & tax−$1.11B18.2%
- Net income$1.85B30.3%
Where FY2012 revenue went
$6.10B- Cost of revenue: $2.99B, 49% of revenue
- Net income: $1.85B, 30% of revenue
- Interest, other & tax: $1.11B, 18% of revenue
- SG&A: $151.8M, 2.5% of revenue
Kept 30% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 27, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $6.10B$6.10B | +0.1% |
| Cost of Revenue | $2.99B$3.20B | −6.6% |
| Gross Profit | $3.11B$2.90B | +7.5% |
| SG&A Expenses | $151.80M$130.00M | +16.8% |
| Operating Income | $2.96B$2.79B | +6.1% |
| Interest Expense | $135.30M$147.20M | −8.1% |
| Net Income | $1.85B$1.54B | +20.1% |
| EPS (Basic) | $28.94$22.18 | +30.5% |
| EPS (Diluted) | $28.59$21.98 | +30.1% |
| Shares Outstanding (Basic) | 63.90M69.40M | −7.9% |
| Shares Outstanding (Diluted) | 64.70M70.00M | −7.6% |
05—Questions
Frequently Asked Questions
How did CF Industries perform financially in 2012?
Net earnings attributable to common stockholders were $1,848.7 million, or $28.59 per diluted share, versus $1,539.2 million, or $21.98 per diluted share, in 2011. Net sales were $6,104.0 million, roughly unchanged from 2011, as nitrogen gains offset phosphate declines.
What drove the increase in gross margin?
Gross margin rose $217.7 million to $3,113.3 million. The nitrogen segment improved on higher average selling prices, unrealized mark-to-market gains on natural gas derivatives versus losses in 2011, and lower realized natural gas costs. Phosphate gross margin fell 40% on lower average selling prices.
What is the CFL selling price modification and how does it affect comparability?
In the fourth quarter of 2012, selling prices CFL charges Viterra and CF Industries were changed to production cost plus an agreed margin, effective January 1, 2012. This reduced net sales and gross margin by $129.7 million in the fourth quarter, with no impact on net earnings attributable to common stockholders. The company presents as-adjusted 2011 figures for comparison.
What major capital projects and financing commitments were announced?
The Board authorized $3.8 billion for new ammonia and urea/UAN plants at Donaldsonville, Louisiana and new ammonia and urea plants at Port Neal, Iowa, all scheduled on-stream by 2016. The company expects to finance them with cash, operating cash flow and borrowings, and projects 2013 capital spending of $1.4 billion to $1.7 billion. Separately, it agreed to acquire Viterra's 34% CFL interest for C$0.9 billion, subject to Canadian regulatory approval.
What are the main risks investors should consider?
Key risks include volatility in North American natural gas prices, the cyclical nature of fertilizer demand, intense global competition including from government-subsidized producers, possible delays or cost overruns on the expansion projects, environmental and Florida numeric nutrient regulation that could raise costs, and dependence on a limited number of key facilities.
06—Continue