01—Abstract
Summary
Summary of the 10-K filed February 27, 2014. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. is one of the largest manufacturers and distributors of nitrogen and phosphate fertilizers in the world, organized into a nitrogen segment and a phosphate segment.
In 2013, net sales fell 10% to $5.47 billiona and net earnings attributable to common stockholders declined 21% to $1.46 billion, reflecting weak global fertilizer prices driven by Chinese nitrogen exports and weaker Indian phosphate demand, plus higher natural gas costs. Diluted EPS was $24.74, down from $28.59. Gross margin fell $593.1 million, or 19%, to $2.52 billion, with the phosphate segment hit hardest.
In October 2013 the company agreed to sell its Florida phosphate mining and manufacturing business to The Mosaic Company for approximately $1.4 billionb in cash, with closing expected in the first half of 2014 after the U.S. Department of Justice terminated its HSR waiting period in January 2014. CF also agreed to supply ammonia to Mosaic under two agreements. Meanwhile, the company is investing $3.8 billion in capacity expansions at Donaldsonville, Louisiana and Port Neal, Iowa, expected on-stream by 2016, and expects 2014 capital expenditures of roughly $2.5 billion.
Total debt rose to $3.10 billionc after a $1.5 billion senior notes issuance in May 2013, and the company repurchased 7.3 million shares for $1.4 billion in 2013 under a $3.0 billion program. Cash and cash equivalents were $1.71 billion at year-end 2013, down from $2.27 billion, and operating cash flow fell to $1.47 billion from $2.38 billion, largely due to lower customer advances and higher working capital needs. The company acquired the remaining 34% noncontrolling interest in Canadian Fertilizers Limited for $918.7 million in cash during 2013.
02—Key points
Key Highlights
- Net sales declined 10% to $5.47 billion in 2013, with nitrogen segment net sales down 8% and phosphate segment net sales down 21%.
- Net earnings attributable to common stockholders fell 21% to $1.46 billion; diluted EPS was $24.74 versus $28.59 in 2012.
- Gross margin decreased $593.1 million, or 19%, to $2.52 billion, driven by lower average selling prices and higher natural gas costs.
- Agreed in October 2013 to sell the phosphate mining and manufacturing business to Mosaic for about $1.4 billion in cash; closing expected in the first half of 2014.
- Capacity expansion projects at Donaldsonville and Port Neal authorized at $3.8 billion, with $0.7 billion spent through 2013 and completion expected by 2016.
- Total debt rose to $3.10 billion from $1.60 billion after $1.5 billion of senior notes issued in May 2013; $995.1 million was available under the revolving credit facility.
- Repurchased 7.3 million shares for $1.4 billion in 2013, representing 12% of shares outstanding at the end of 2012; dividends declared per share rose to $2.20 from $1.60.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, CF Industries Holdings kept $0.27.
- Revenue$5.47B100.0%
- Cost of revenue−$2.95B54.0%
- Gross profit$2.52B46.0%
- Operating costs−$108.5M2.0%
- Operating income$2.41B44.1%
- Interest, other & tax−$947.1M17.3%
- Net income$1.46B26.8%
Where FY2013 revenue went
$5.47B- Cost of revenue: $2.95B, 54% of revenue
- Net income: $1.46B, 27% of revenue
- Interest, other & tax: $947.1M, 17% of revenue
- SG&A: $166.0M, 3.0% of revenue
Kept 27% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 27, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $5.47B$6.10B | −10.3% |
| Cost of Revenue | $2.95B$2.99B | −1.2% |
| Gross Profit | $2.52B$3.11B | −19.1% |
| SG&A Expenses | $166.00M$151.80M | +9.4% |
| Operating Income | $2.41B$2.96B | −18.5% |
| Interest Expense | $152.20M$135.30M | +12.5% |
| Net Income | $1.46B$1.85B | −20.8% |
| EPS (Basic) | $4.97$28.94 | −82.8% |
| EPS (Diluted) | $4.95$28.59 | −82.7% |
| Shares Outstanding (Basic) | 294.40M63.90M | +360.7% |
| Shares Outstanding (Diluted) | 296.00M64.70M | +357.5% |
05—Questions
Frequently Asked Questions
Why did CF Industries' earnings decline in 2013?
The filing attributes the decline to weakness in global fertilizer markets. Higher exports from Chinese producers weighed on nitrogen prices, weaker Indian demand pressured phosphate prices, and an 8% increase in realized natural gas costs contributed. Nitrogen average selling prices fell 8% and phosphate average selling prices fell 13%.
What is the status of the phosphate business sale to Mosaic?
CF entered into a definitive agreement in October 2013 to sell its phosphate mining and manufacturing business in Florida for about $1.4 billion in cash, subject to adjustment. In January 2014 the U.S. Department of Justice closed its HSR Act review and terminated the waiting period. The sale is expected to close in the first half of 2014, and the business is classified as held for sale at December 31, 2013.
How is CF funding its major capacity expansion projects?
The filing says the company expects to finance the $3.8 billion Donaldsonville and Port Neal expansions through available cash and securities, cash generated from operations, and borrowings. It plans to raise up to $1.5 billion of long-term debt in 2014, and expects proceeds from the phosphate sale to contribute to funding. Expansion spending of about $2.0 billion is expected during 2014.
What did CF do with its capital in 2013?
CF repurchased 7.3 million common shares for $1.4 billion, acquired the noncontrolling interest in Canadian Fertilizers Limited for $918.7 million in cash, and paid $129.1 million in common dividends. Capital expenditures totaled $823.8 million. In 2014 the company repurchased an additional 1.2 million shares for $294.9 million.
What are the main risks the filing highlights for investors?
Key risks include volatile North American natural gas prices, the cyclical and globally commoditized nature of fertilizer products, intense competition from state-subsidized foreign producers, weather and seasonality, dependence on a limited number of key facilities, environmental and permitting requirements (including phosphogypsum stack closure and Florida nutrient criteria), and the risk that the Mosaic transaction is delayed or does not close. The company also cites the April 2013 West, Texas fire and explosion, for which it has been named a defendant in lawsuits.
06—Continue