01—Abstract
Summary
Summary of the 10-K filed February 25, 2016. Cited figures are marked; the original filing is the authoritative source.
CF Industries Holdings, Inc. reported 2015 net sales of $4.31 billiona, down from $4.74 billion in 2014, and net earnings attributable to common stockholders of $699.9 million, or $2.96 diluted EPS, versus $1.39 billion and $5.42 in 2014.
The 2014 figures were boosted by a $750.1 millionb pre-tax gain on the sale of the phosphate business. Gross margin fell to $1.55 billion from $1.78 billion, driven by lower average selling prices (down 8%, per the filing) and a $176.3 million unrealized mark-to-market loss on natural gas derivatives, partly offset by lower physical natural gas costs. Results also absorbed $56.9 million of transaction costs and a $61.9 million impairment of the PLNL joint venture investment.
The company's balance sheet and cash position shifted materially during 2015. Capital expenditures rose to $2.47 billionc as the Donaldsonville, Louisiana and Port Neal, Iowa capacity expansion projects advanced; the Donaldsonville urea plant came online in November 2015, with the remaining plants expected in mid-2016. Cash and equivalents fell to $286.0 million from $1.99 billion, and total debt rose to $5.59 billion.
The company acquired the remaining 50% of CF Fertilisers UK for $570.4 milliond and repurchased 8.9 million shares for $527.2 million. Two pending or recent transactions dominate the outlook.
CF agreed to combine with the ENA Business of OCI N.V., with closing expected in mid-2016 and subject to shareholder and regulatory approvals, and it entered a strategic venture with CHS Inc., which purchased a minority equity interest in CF Industries Nitrogen, LLC for $2.8 billion effective February 1, 2016. The filing also notes that the pending combination carries a $150 million termination fee exposure and that the company expects substantially higher indebtedness after closing.
02—Key points
Key Highlights
- Net sales fell 9% to $4.31 billion in 2015, with average selling prices down 8% and sales volume down 3%, reflecting global oversupply of nitrogen fertilizers.
- Diluted EPS of $2.96 compared with $5.42 in 2014, which included a $750.1 million pre-tax gain on the phosphate business sale.
- Gross margin of $1.55 billion (35.9% margin) declined from $1.78 billion, with lower natural gas costs partially offsetting price and volume declines.
- Capital expenditures of $2.47 billion for capacity expansion projects; Donaldsonville urea plant commissioned in November 2015 and remaining plants expected in mid-2016.
- Total funded debt of $5.59 billion at year-end, against cash of $286.0 million; $1,995.1 million of revolver capacity remained available.
- Pending combination with OCI N.V.'s ENA Business, expected to close mid-2016, with roughly $2 billion of assumed net debt and a $150 million termination fee exposure.
- CHS Inc. acquired a minority stake in CF Industries Nitrogen, LLC for $2.8 billion on February 1, 2016, with CHS entitled to semi-annual profit distributions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, CF Industries Holdings kept $0.16.
- Revenue$4.31B100.0%
- Cost of revenue−$2.76B64.1%
- Gross profit$1.55B35.9%
- Operating costs−$354.0M8.2%
- Operating income$1.19B27.7%
- Interest, other & tax−$493.0M11.4%
- Net income$700.0M16.2%
Where FY2015 revenue went
$4.31B- Cost of revenue: $2.76B, 64% of revenue
- Net income: $700.0M, 16% of revenue
- SG&A: $170.0M, 3.9% of revenue
- Other operating costs: $184.0M, 4.3% of revenue
- Interest, other & tax: $493.0M, 11% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 25, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $4.31B$4.74B | −9.2% |
| Cost of Revenue | $2.76B$2.96B | −6.9% |
| Gross Profit | $1.55B$1.78B | −13.0% |
| SG&A Expenses | $170.00M$152.00M | +11.8% |
| Operating Income | $1.19B$2.37B | −49.6% |
| Interest Expense | $267.00M$238.00M | +12.2% |
| Net Income | $700.00M$1.39B | −49.6% |
| EPS (Basic) | $2.97$5.43 | −45.3% |
| EPS (Diluted) | $2.96$5.42 | −45.4% |
| Shares Outstanding (Basic) | 235.30M255.90M | −8.1% |
| Shares Outstanding (Diluted) | 236.10M256.70M | −8.0% |
05—Questions
Frequently Asked Questions
Why did net earnings decline so sharply in 2015?
Net earnings attributable to common stockholders fell to $699.9 million from $1.39 billion. The 2014 results included a $750.1 million pre-tax gain on the sale of the phosphate business. In 2015, lower average selling prices (down 8%) and a $176.3 million unrealized mark-to-market loss on natural gas derivatives reduced gross margin, partly offset by lower physical natural gas costs.
What are the main risks from the pending OCI combination?
The filing cites risks including delays or failure to close (including CFIUS and antitrust review), business uncertainty and contractual restrictions while pending, a $150 million termination fee that could be payable in certain circumstances, and a $30 million expense reimbursement cap if stockholder approval is not obtained. It also notes that the combined company will carry substantially more indebtedness.
How is the company funding its capacity expansion projects?
The filing states that expansion projects have been financed through cash on hand, cash from operations and borrowings. Estimated aggregate capital expenditures for both projects remain approximately $4.6 billion, of which $3.5 billion had been spent through December 31, 2015. The company expects 2016 capital expenditures of approximately $1.8 billion, including $1.2 billion for the expansion projects.
What is the CHS strategic venture?
CHS purchased a minority equity interest in CF Industries Nitrogen, LLC for $2.8 billion, effective February 1, 2016. CHS may purchase annually up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices, and receives semi-annual profit distributions from CFN based on its purchase volumes.
What capital return actions did the company take in 2015?
The company repurchased 8.9 million shares for $527.2 million, representing 4% of prior year-end shares outstanding, and paid $282.3 million in dividends on common stock. Cash dividends declared were $1.20 per share, up from $1.00 in 2014. Approximately $100 million remained under the 2014 repurchase program as of year-end.
06—Continue