Market Overview

CF Industries Holdings, Inc. Reports First Half 2018 Net Earnings of $211 Million, EBITDA of $772 Million

Share:

Late Spring Application Season Drives Record Quarterly Sales Volume

Company Announces $500 Million Share Repurchase Authorization,
Reaffirms Commitment to Repay $500 Million Public Senior Notes Due 2020

CF Industries Holdings, Inc. (NYSE:CF), a leading global fertilizer and
chemical company, today announced results for its first half and second
quarter ended June 30, 2018.

Highlights

  • First half net earnings of $211 million, or $0.90 per diluted share;
    EBITDA(1) of $772 million; adjusted EBITDA(1) of
    $764 million
  • Second quarter net earnings of $148 million, or $0.63 per diluted
    share; EBITDA of $470 million; adjusted EBITDA of $468 million
  • First half 2018 sales volumes slightly exceed first half 2017; record
    5.5 million tons in second quarter
  • Subsequent to quarter end, the Board of Directors authorized a $500
    million share repurchase program through June 30, 2020, and the
    company reaffirmed its commitment to repay the remaining $500 million
    of Public Senior Notes on or before the May 2020 maturity

Overview of Results

CF Industries Holdings, Inc., today announced second quarter 2018 net
earnings attributable to common stockholders of $148 million, or $0.63
per diluted share; EBITDA of $470 million; and adjusted EBITDA of
$468 million. These results compare to second quarter 2017 net earnings
attributable to common stockholders of $3 million, or $0.01 per diluted
share; EBITDA of $275 million; and adjusted EBITDA of $303 million.

For the first six months of 2018, net earnings attributable to common
stockholders were $211 million, or $0.90 per diluted share; EBITDA was
$772 million; and adjusted EBITDA was $764 million. These results
compare to the first six months of 2017 net loss attributable to common
stockholders of $20 million, or a $0.09 loss per diluted share; EBITDA
of $493 million; and adjusted EBITDA of $575 million.

"Our unmatched logistics capability allowed us to fully capitalize on
the weather-delayed application season once it finally appeared in the
second quarter, enabling us to ship a record 5.5 million product tons,"
said Tony Will, president and chief executive officer, CF Industries
Holdings, Inc.

"The story of the first half of 2018 was that of lower North American
gas costs and higher nitrogen prices, driving a 33 percent increase in
adjusted EBITDA over last year," commented Will. "As we look forward, we
expect our cash generation to grow due to a tightening nitrogen supply
and demand balance, supported by higher energy costs in other regions of
the world. As a result, we will begin returning excess cash to
shareholders through our new share repurchase authorization while
keeping our commitment to strengthen our balance sheet through debt
repayment."

_______________________________________________________________________
(1)   EBITDA is defined as net earnings (loss) attributable to common
stockholders plus interest expense-net, income taxes and
depreciation and amortization. See reconciliations of EBITDA and
adjusted EBITDA to the most directly comparable GAAP measures in the
tables accompanying this release.
 

Manufacturing Operations

CF Industries' manufacturing network continued operating safely and
efficiently. As of June 30, 2018, the 12-month rolling average
recordable incident rate was 0.64 incidents per 200,000 work hours, well
below industry averages. Gross ammonia production during the second
quarter of 2018 was approximately 2.5 million tons, and for the first
half of 2018 was approximately 5.0 million tons.

Sales Overview

Net sales in the second quarter of 2018 were $1,300 million compared to
$1,124 million in the same period last year due to higher average
selling prices across all segments and higher sales volumes across most
segments. Net sales in the first half of 2018 were $2,257 million
compared to $2,161 million in the same period last year primarily due to
higher average selling prices across all segments.

Total sales volume for the second quarter was higher compared to the
second quarter of 2017 due to carry-over demand from the first quarter
into the second quarter as a result of unfavorable weather earlier in
the year delaying the spring application season. Total sales volumes for
the first six months of 2018 were similar to the first six months of
2017. This reflects the fact that the company's extensive system of
production, storage and transportation assets is set up to accommodate
changes in the timing of fertilizer applications due to weather and
other developments.

Average selling prices for the second quarter and first half of 2018
were higher year-over-year across all segments as higher energy prices
in other producing regions and enforcement of environmental regulations
in China reduced global nitrogen production, tightening the global
nitrogen supply and demand balance.

For the first six months of 2018, the company's average selling price
for ammonia was $333 per ton compared to $324 per ton in the first six
months of 2017. The average selling price for urea was $258 per ton in
the first half of 2018 compared to $228 per ton in the first half of
2017, and the average selling price for UAN was $178 per ton in the
first half of 2018 compared to $173 per ton in the first half of 2017.

Cost of sales in the first half of 2018 decreased compared to the first
six months of 2017 driven by lower realized gas costs. The company also
recorded an unrealized net mark-to-market gain on natural gas
derivatives of $8 million in the first half of 2018 compared to an
unrealized net mark-to-market loss on natural gas derivatives of $71
million in the first half of 2017. These were partially offset by higher
costs related to plant turnarounds and disruptions.

In the first half of 2018, the average cost of natural gas reflected in
the company's cost of sales was $3.11 per MMBtu, which includes a
realized loss of $0.03 per MMBtu on natural gas hedges. This compares to
the average cost of natural gas in cost of sales of $3.51 per MMBtu for
the first half of 2017, which includes a realized loss of $0.01 per
MMBtu on natural gas hedges. During the first half of 2018, the average
price of natural gas at Henry Hub in North America was $2.92 per MMBtu,
and the average price of natural gas at the National Balancing Point in
the United Kingdom was $7.77 per MMBtu.

The company did not enter into any additional natural gas NYMEX
hedges in the second quarter of 2018.

Market Overview

Increased production costs, particularly for producers in Europe and
China, have raised and flattened the upper half of the global cost
curve, supporting higher prices. In Europe, the price of natural gas per
MMBtu at the Dutch TTF natural gas hub was 53 percent higher in June
2018 compared to June 2017. The TTF forward curve suggests continued
increases in the price of natural gas in Europe into 2019. Several
ammonia and urea plants in Ukraine and Central Europe were idled during
the second quarter as a result of the high energy costs, with additional
facilities in Europe remaining in operation by using imported ammonia.

Similarly, Chinese urea producers face higher coal prices, with the
price per metric ton of anthracite coal 32 percent higher in May 2018
compared to May 2017. Additionally, enforcement of environmental
regulations in China continues to result in temporary and permanent
capacity closures. As a result, Chinese urea production available for
export has declined dramatically. China exported approximately 710,000
metric tons of urea from January through June 2018, a 74 percent
decrease from the same period in the prior year.

The company expects demand in Brazil and India will also support global
nitrogen prices through the end of the year. Brazilian urea imports in
the second half of 2018 are forecasted to rise year-over-year to make up
for 25 percent lower imports in the first half of 2018 compared to the
prior year period and for the anticipated loss of production from the
announced closure of two Petrobras urea plants in August 2018.
Additionally, India's most recent urea tender closed August 1.

Longer-term, CF expects the global supply and demand balance will
tighten further, with net global urea supply growth expected to be well
below the historical nitrogen demand annual growth rate of approximately
two percent. The company projects 4.3 million metric tons of nameplate
urea capacity to start-up in 2018. This new capacity will be more than
offset by a projected 7.1 million metric tons of nameplate urea capacity
closures during the year in Brazil, China and Kuwait.

Over the next few years, global nitrogen supply could be further
constrained. The company believes that the factors driving higher
production costs in Europe and China will persist. If the upper half of
the global cost curve stays higher and flatter for longer, many
producers will continue to struggle with profitability even in the
current nitrogen price environment. Over time, this should lead to lower
production and more permanent closures than the company projects today.
Additionally, United States sanctions on Iran, which exports 3-4 million
metric tons of urea annually, may further reduce global nitrogen supply
as Iranian producers could lose access to technical expertise,
replacement parts for current plants and resources to support new
construction.

Capital Expenditures

Capital expenditures in 2018 for new activity are estimated to be in the
range of approximately $400 to $450 million, which takes into account a
higher number of scheduled plant turnarounds in the second half of 2018
compared to 2017.

Liquidity

As of June 30, 2018, the company had cash and cash equivalents of $728
million on the balance sheet, had no borrowings outstanding under its
$750 million revolving credit facility and was in compliance with all
applicable covenant requirements under its debt instruments.

The company's cash and cash equivalents reflect the impact of its
purchase on April 2, 2018, of all of the publicly traded common units of
Terra Nitrogen Company, L.P. (TNCLP) for $388 million.

Subsequent to the end of the second quarter, the Board of Directors
authorized a $500 million share repurchase program through June 30,
2020. The company also reaffirmed its previously stated commitment to
repay the remaining $500 million of Public Senior Notes on or before the
May 2020 maturity.

PLNL Settlement Income

In May 2018, The National Gas Company of Trinidad and Tobago Limited
(NGC) and Point Lisas Nitrogen Limited (PLNL), in which CF has a 50
percent ownership interest, reached a settlement of an arbitration
proceeding regarding PLNL's claims for damages due to natural gas supply
curtailments over several years in the past. The net impact of the
settlement reached between NGC and PLNL that is recognized in the
consolidated statements of operations for the three and six months ended
June 30, 2018 was an increase in equity in earnings of operating
affiliates of approximately $19 million after tax.

CHS Inc. Distribution

On July 31, 2018, the Board of Managers of CF Industries Nitrogen, LLC
(CFN) approved a semi-annual distribution payment to CHS Inc. (CHS) of
$79 million for the distribution period ended June 30, 2018. The
distribution was paid on July 31, 2018.

 

Consolidated Results

 
    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(dollars in millions, except per share
and per MMBtu amounts)
Net sales $ 1,300 $ 1,124 $ 2,257 $ 2,161
Cost of sales 988   951   1,755   1,881  
Gross margin $ 312   $ 173   $ 502   $ 280  
Gross margin percentage 24.0 % 15.4 % 22.2 % 13.0 %
 
Net earnings (loss) attributable to common stockholders $ 148 $ 3 $ 211 $ (20 )
Net earnings (loss) per diluted share $ 0.63 $ 0.01 $ 0.90 $ (0.09 )
 
EBITDA(1) $ 470 $ 275 $ 772 $ 493
Adjusted EBITDA(1) $ 468 $ 303 $ 764 $ 575
 
Tons of product sold (000s) 5,538 5,046 9,841 9,791
 
Supplemental data (per MMBtu):
Natural gas costs in cost of sales(2) $ 2.92 $ 3.35 $ 3.08 $ 3.50
Realized derivatives loss in cost of sales(3) 0.03   0.04   0.03   0.01  
Cost of natural gas in cost of sales $ 2.95 $ 3.39 $ 3.11 $ 3.51
 
Average daily market price of natural gas (per MMBtu):
Henry Hub $ 2.82 $ 3.05 $ 2.92 $ 3.02
National Balancing Point UK $ 7.34 $ 4.85 $ 7.77 $ 5.43
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives $ (5 ) $ 18 $ (8 ) $ 71
Depreciation and amortization $ 241 $ 217 $ 434 $ 422
Capital expenditures $ 77 $ 91 $ 145 $ 185
 
Production volume by product tons (000s):
Ammonia(4) 2,460 2,656 4,968 5,164
Granular urea 1,228 1,236 2,379 2,238
UAN (32%) 1,557 1,722 3,362 3,539
AN 423 459 881 1,001
_______________________________________________________________________________
(1)   See reconciliations of EBITDA and adjusted EBITDA to the most
directly comparable GAAP measures in the tables accompanying this
release.
(2) Includes the cost of natural gas that is included in cost of sales
during the period under the first-in, first-out inventory cost
method.
(3) Includes realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
(4) Gross ammonia production including amounts subsequently upgraded
into other products.
 

Segment Results

Ammonia Segment

CF Industries' ammonia segment produces anhydrous ammonia (ammonia),
which is the company's most concentrated form of nitrogen, containing 82
percent nitrogen. The results of the ammonia segment consist of sales of
ammonia to external customers. In addition, ammonia is the "basic"
nitrogen form that the company upgrades into other nitrogen products
such as urea, UAN and AN.

    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(dollars in millions,
except per ton amounts)
Net sales $ 374 $ 389 $ 586 $ 671
Cost of sales 272   302   460   567  
Gross margin $ 102   $ 87   $ 126   $ 104  
Gross margin percentage 27.3 % 22.4 % 21.5 % 15.5 %
 
Sales volume by product tons (000s) 1,094 1,152 1,758 2,072
Sales volume by nutrient tons (000s)(1) 898 945 1,442 1,699
 
Average selling price per product ton $ 342 $ 338 $ 333 $ 324
Average selling price per nutrient ton(1) 416 412 406 395
 
Adjusted gross margin(2):
Gross margin $ 102 $ 87 $ 126 $ 104
Depreciation and amortization 52 49 77 93
Unrealized net mark-to-market (gain) loss on natural gas derivatives (1 ) 6   (2 ) 23  
Adjusted gross margin $ 153   $ 142   $ 201   $ 220  
Adjusted gross margin as a percent of net sales 40.9 % 36.5 % 34.3 % 32.8 %
 
Gross margin per product ton $ 93 $ 76 $ 72 $ 50
Gross margin per nutrient ton(1) 114 92 87 61
Adjusted gross margin per product ton 140 123 114 106
Adjusted gross margin per nutrient ton(1) 170 150 139 129

_______________________________________________________________________________

(1)   Nutrient tons represent the tons of nitrogen within the product tons.
(2) Adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient ton
are non-GAAP financial measures. Adjusted gross margin is defined as
gross margin excluding depreciation and amortization and unrealized
net mark-to-market (gain) loss on natural gas derivatives. The
company has presented adjusted gross margin, adjusted gross margin
as a percent of net sales and adjusted gross margin per product ton
and per nutrient ton because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance. A
reconciliation of adjusted gross margin, adjusted gross margin as a
percent of net sales and adjusted gross margin per product ton and
per nutrient ton to gross margin, the most directly comparable GAAP
measure, is provided in the table above. See "Note Regarding
Non-GAAP Financial Measures" in this release.
 

Comparison of 2018 to 2017 first half and second quarter periods:

  • Ammonia sales volume decreased for the first half and second quarter
    of 2018 compared to 2017. Strong ammonia movement in the fourth
    quarter of 2017, which resulted in 2018 beginning inventory being
    lower than at the beginning of 2017, coupled with lower production
    volume in 2018, meant there was less ammonia available for sale.
  • Ammonia average selling prices improved slightly in 2018 compared to
    2017.
  • Ammonia adjusted gross margin per ton increased for the first half and
    second quarter of 2018 compared to 2017 due to lower realized gas
    costs and higher average selling prices, partially offset by higher
    costs related to plant turnarounds and disruptions.

Granular Urea Segment

CF Industries' granular urea segment produces granular urea, which
contains 46 percent nitrogen. Produced from ammonia and carbon dioxide,
it has the highest nitrogen content of any of the company's solid
nitrogen products.

    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(dollars in millions,
except per ton amounts)
Net sales $ 360 $ 259 $ 624 $ 497
Cost of sales 255   234   444   447  
Gross margin $ 105   $ 25   $ 180   $ 50  
Gross margin percentage 29.2 % 9.7 % 28.8 % 10.1 %
 
Sales volume by product tons (000s) 1,434 1,221 2,416 2,179
Sales volume by nutrient tons (000s)(1) 659 561 1,111 1,002
 
Average selling price per product ton $ 251 $ 212 $ 258 $ 228
Average selling price per nutrient ton(1) 546 462 562 496
 
Adjusted gross margin(2):
Gross margin $ 105 $ 25 $ 180 $ 50
Depreciation and amortization 81 67 140 120
Unrealized net mark-to-market (gain) loss on natural gas derivatives (1 ) 5   (2 ) 19  
Adjusted gross margin $ 185   $ 97   $ 318   $ 189  
Adjusted gross margin as a percent of net sales 51.4 % 37.5 % 51.0 % 38.0 %
 
Gross margin per product ton $ 73 $ 20 $ 75 $ 23
Gross margin per nutrient ton(1) 159 45 162 50
Adjusted gross margin per product ton 129 79 132 87
Adjusted gross margin per nutrient ton(1) 281 173 286 189
_______________________________________________________________________________
(1)   Nutrient tons represent the tons of nitrogen within the product tons.
(2) Adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient ton
are non-GAAP financial measures. Adjusted gross margin is defined as
gross margin excluding depreciation and amortization and unrealized
net mark-to-market (gain) loss on natural gas derivatives. The
company has presented adjusted gross margin, adjusted gross margin
as a percent of net sales and adjusted gross margin per product ton
and per nutrient ton because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance. A
reconciliation of adjusted gross margin, adjusted gross margin as a
percent of net sales and adjusted gross margin per product ton and
per nutrient ton to gross margin, the most directly comparable GAAP
measure, is provided in the table above. See "Note Regarding
Non-GAAP Financial Measures" in this release.
 

Comparison of 2018 to 2017 first half and second quarter periods:

  • Granular urea sales volume increased for the first half of 2018
    compared to the first half of 2017 due to additional production from
    the company's Port Neal Nitrogen Complex and higher inventories
    entering the year. Second quarter volume increase in 2018 was due to
    carry-over demand from the first quarter into the second quarter as a
    result of unfavorable weather early in 2018.
  • Granular urea adjusted gross margin per ton increased for the first
    half and second quarter of 2018 compared to 2017 due to higher average
    selling prices and lower realized gas costs.

UAN Segment

CF Industries' UAN segment produces urea ammonium nitrate solution
(UAN). UAN is a liquid product with nitrogen content that typically
ranges from 28 percent to 32 percent and is produced by combining urea
and ammonium nitrate in solution.

    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(dollars in millions,
except per ton amounts)
Net sales $ 339 $ 286 $ 622 $ 603
Cost of sales 258   248   488   529  
Gross margin $ 81   $ 38   $ 134   $ 74  
Gross margin percentage 23.9 % 13.3 % 21.5 % 12.3 %
 
Sales volume by product tons (000s) 1,820 1,631 3,489 3,480
Sales volume by nutrient tons (000s)(1) 575 516 1,102 1,100
 
Average selling price per product ton $ 186 $ 175 $ 178 $ 173
Average selling price per nutrient ton(1) 590 554 564 548
 
Adjusted gross margin(2):
Gross margin $ 81 $ 38 $ 134 $ 74
Depreciation and amortization 72 56 135 121
Unrealized net mark-to-market (gain) loss on natural gas derivatives (2 ) 5   (3 ) 21  
Adjusted gross margin $ 151   $ 99   $ 266   $ 216  
Adjusted gross margin as a percent of net sales 44.5 % 34.6 % 42.8 % 35.8 %
 
Gross margin per product ton $ 45 $ 23 $ 38 $ 21
Gross margin per nutrient ton(1) 141 74 122 67
Adjusted gross margin per product ton 83 61 76 62
Adjusted gross margin per nutrient ton(1) 263 192 241 196
_______________________________________________________________________________
(1)   Nutrient tons represent the tons of nitrogen within the product tons.
(2) Adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient ton
are non-GAAP financial measures. Adjusted gross margin is defined as
gross margin excluding depreciation and amortization and unrealized
net mark-to-market (gain) loss on natural gas derivatives. The
company has presented adjusted gross margin, adjusted gross margin
as a percent of net sales and adjusted gross margin per product ton
and per nutrient ton because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance. A
reconciliation of adjusted gross margin, adjusted gross margin as a
percent of net sales and adjusted gross margin per product ton and
per nutrient ton to gross margin, the most directly comparable GAAP
measure, is provided in the table above. See "Note Regarding
Non-GAAP Financial Measures" in this release.
 

Comparison of 2018 to 2017 first half and second quarter periods:

  • UAN sales volume in the first half of 2018 was essentially unchanged
    compared to the first half of 2017 and volumes increased in the second
    quarter of 2018 due to carry-over demand from the first quarter into
    the second quarter as a result of unfavorable weather early in 2018.
  • UAN adjusted gross margin per ton increased for the first half and
    second quarter of 2018 compared to 2017 due to higher average selling
    prices and lower realized gas costs.

AN Segment

CF Industries' AN segment produces ammonium nitrate (AN). AN is used as
a nitrogen fertilizer with nitrogen content between 29 percent to 35
percent, and also is used by industrial customers for commercial
explosives and blasting systems. AN is produced at the company's Yazoo
City, Mississippi; Billingham, United Kingdom; and Ince, United Kingdom,
complexes.

    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(dollars in millions,
except per ton amounts)
Net sales $ 124 $ 112 $ 224 $ 237
Cost of sales 117   102   191   208  
Gross margin $ 7   $ 10   $ 33   $ 29  
Gross margin percentage 5.6 % 8.9 % 14.7 % 12.2 %
 
Sales volume by product tons (000s) 568 539 985 1,107
Sales volume by nutrient tons (000s)(1) 193 183 333 374
 
Average selling price per product ton $ 218 $ 208 $ 227 $ 214
Average selling price per nutrient ton(1) 642 612 673 634
 
Adjusted gross margin(2):
Gross margin $ 7 $ 10 $ 33 $ 29
Depreciation and amortization 14 21 32 40
Unrealized net mark-to-market loss on natural gas derivatives   1     3  
Adjusted gross margin $ 21   $ 32   $ 65   $ 72  
Adjusted gross margin as a percent of net sales 16.9 % 28.6 % 29.0 % 30.4 %
 
Gross margin per product ton $ 12 $ 19 $ 34 $ 26
Gross margin per nutrient ton(1) 36 55 99 78
Adjusted gross margin per product ton 37 59 66 65
Adjusted gross margin per nutrient ton(1) 109 175 195 193
_______________________________________________________________________________
(1)   Nutrient tons represent the tons of nitrogen within the product tons.
(2) Adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient ton
are non-GAAP financial measures. Adjusted gross margin is defined as
gross margin excluding depreciation and amortization and unrealized
net mark-to-market loss on natural gas derivatives. The company has
presented adjusted gross margin, adjusted gross margin as a percent
of net sales and adjusted gross margin per product ton and per
nutrient ton because management uses these measures, and believes
they are useful to investors, as supplemental financial measures in
the comparison of year-over-year performance. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient ton
to gross margin, the most directly comparable GAAP measure, is
provided in the table above. See "Note Regarding Non-GAAP Financial
Measures" in this release.
 

Comparison of 2018 to 2017 first half and second quarter periods:

  • AN sales volume decreased in the first half of 2018 compared to the
    first half of 2017 due to lower production volumes resulting in less
    AN available for sale.
  • AN adjusted gross margin per ton was unchanged in the first half of
    2018 compared to the first half of 2017 and decreased in the second
    quarter of 2018 compared to the second quarter of 2017 primarily due
    to higher gas costs in the United Kingdom and higher maintenance and
    utility costs partially offset by higher average selling prices.

Other Segment

CF Industries' Other segment includes diesel exhaust fluid (DEF), urea
liquor, nitric acid and compound fertilizer products (NPKs).

    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(dollars in millions,
except per ton amounts)
Net sales $ 103 $ 78 $ 201 $ 153
Cost of sales 86   65   172   130  
Gross margin $ 17   $ 13   $ 29   $ 23  
Gross margin percentage 16.5 % 16.7 % 14.4 % 15.0 %
 
Sales volume by product tons (000s) 622 503 1,193 953
Sales volume by nutrient tons (000s)(1) 122 100 233 188
 
Average selling price per product ton $ 166 $ 155 $ 168 $ 161
Average selling price per nutrient ton(1) 844 780 863 814
 
Adjusted gross margin(2):
Gross margin $ 17 $ 13 $ 29 $ 23
Depreciation and amortization 14 13 31 25
Unrealized net mark-to-market (gain) loss on natural gas derivatives (1 ) 1   (1 ) 5  
Adjusted gross margin $ 30   $ 27   $ 59   $ 53  
Adjusted gross margin as a percent of net sales 29.1 % 34.6 % 29.4 % 34.6 %
 
Gross margin per product ton $ 27 $ 26 $ 24 $ 24
Gross margin per nutrient ton(1) 139 130 124 122
Adjusted gross margin per product ton 48 54 49 56
Adjusted gross margin per nutrient ton(1) 246 270 253 282
_______________________________________________________________________________
(1)   Nutrient tons represent the tons of nitrogen within the product tons.
(2) Adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient ton
are non-GAAP financial measures. Adjusted gross margin is defined as
gross margin excluding depreciation and amortization and unrealized
net mark-to-market (gain) loss on natural gas derivatives. The
company has presented adjusted gross margin, adjusted gross margin
as a percent of net sales and adjusted gross margin per product ton
and per nutrient ton because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance. A
reconciliation of adjusted gross margin, adjusted gross margin as a
percent of net sales and adjusted gross margin per product ton and
per nutrient ton to gross margin, the most directly comparable GAAP
measure, is provided in the table above. See "Note Regarding
Non-GAAP Financial Measures" in this release.
 

Comparison of 2018 to 2017 first half and second quarter periods:

  • Other segment volume increased in the first half and second quarter of
    2018 compared to 2017 due primarily to higher year-over-year sales of
    nitric acid and DEF.
  • Other segment adjusted gross margin per ton decreased in the first
    half and second quarter of 2018 compared to 2017 primarily due to
    higher gas costs in the United Kingdom partially offset by higher
    average selling prices.

Dividend Payment

On July 11, 2018, CF Industries' Board of Directors declared a quarterly
dividend of $0.30 per common share. The dividend will be paid on
August 31, 2018 to stockholders of record as of August 15, 2018.

Conference Call

CF Industries will hold a conference call to discuss its second quarter
2018 results at 9:00 a.m. ET on Thursday, August 2, 2018. This
conference call will include discussion of CF Industries' business
environment and outlook. Investors can access the call and find dial-in
information on the Investor Relations section of the company's website
at www.cfindustries.com.

About CF Industries Holdings, Inc.

CF Industries is a leading global fertilizer and chemical company with
outstanding operational capabilities and a highly cost-advantaged
production and distribution platform. Our 3,000 employees operate
world-class manufacturing complexes in Canada, the United Kingdom and
the United States. We serve our customers in North America through an
unparalleled production, storage, transportation and distribution
network. We also reach a global customer base with exports from our
Donaldsonville, Louisiana, plant, the world's largest and most flexible
nitrogen complex. Additionally, we move product to international
destinations from our Verdigris, Oklahoma, facility; our Yazoo City,
Mississippi, facility; our Billingham and Ince facilities in the United
Kingdom; and from a joint venture ammonia facility in the Republic of
Trinidad and Tobago in which we own a 50 percent interest. CF Industries
routinely posts investor announcements and additional information on the
company's website at www.cfindustries.com
and encourages those interested in the company to check there frequently.

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). Management believes
that EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted
EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net
sales, and, on a segment basis, adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per product
ton and per nutrient ton, which are non-GAAP financial measures, provide
additional meaningful information regarding the company's performance
and financial strength. 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, EBITDA, EBITDA per ton, EBITDA as
a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton,
adjusted EBITDA as a percent of net sales, adjusted gross margin,
adjusted gross margin as a percent of net sales and adjusted gross
margin per product ton and per nutrient ton, included in this release
may not be comparable to similarly titled measures of other companies.
Reconciliations of EBITDA, EBITDA per ton, EBITDA as a percent of net
sales, adjusted EBITDA, adjusted EBITDA per ton, and adjusted EBITDA as
a percent of net sales to the most directly comparable GAAP measures are
provided in the tables accompanying this release under "CF Industries
Holdings, Inc.-Selected Financial Information-Non-GAAP Disclosure
Items." Reconciliations of adjusted gross margin, adjusted gross margin
as a percent of net sales and adjusted gross margin per product ton and
per nutrient ton to the most directly comparable GAAP measures are
provided in the segment tables included in this release.

Safe Harbor Statement

All statements in this communication by CF Industries Holdings, Inc.
(together with its subsidiaries, the "Company"), other than those
relating to historical facts, are forward-looking statements.
Forward-looking statements can generally be identified by their use of
terms such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" or "would" and
similar terms and phrases, including references to assumptions.
Forward-looking statements are not guarantees of future performance and
are subject to a number of assumptions, risks and uncertainties, many of
which are beyond the Company's control, which could cause actual results
to differ materially from such statements. These statements may include,
but are not limited to, statements about strategic plans and statements
about future financial and operating results.

Important factors that could cause actual results to differ materially
from those in the forward-looking statements include, among others, the
cyclical nature of the Company's business and the agricultural sector;
the global commodity nature of the Company's fertilizer products, the
impact of global supply and demand on the Company's selling prices, and
the intense global competition from other fertilizer producers;
conditions in the U.S. and European agricultural industry; the
volatility of natural gas prices in North America and Europe;
difficulties in securing the supply and delivery of raw materials,
increases in their costs or delays or interruptions in their delivery;
reliance on third party providers of transportation services and
equipment; the significant risks and hazards involved in producing and
handling the Company's products against which the Company may not be
fully insured; the Company's ability to manage its indebtedness;
operating and financial restrictions imposed on the Company by the
agreements governing the Company's senior secured indebtedness; risks
associated with the Company's incurrence of additional indebtedness; the
Company's ability to maintain compliance with covenants under the
agreements governing its indebtedness; downgrades of the Company's
credit ratings; risks associated with cyber security; weather
conditions; risks associated with changes in tax laws and disagreements
with taxing authorities; the Company's reliance on a limited number of
key facilities; potential liabilities and expenditures related to
environmental, health and safety laws and regulations and permitting
requirements; future regulatory restrictions and requirements related to
greenhouse gas emissions; risks associated with expansions of the
Company's business, including unanticipated adverse consequences and the
significant resources that could be required; the seasonality of the
fertilizer business; the impact of changing market conditions on the
Company's forward sales programs; risks involving derivatives and the
effectiveness of the Company's risk measurement and hedging activities;
risks associated with the operation or management of the strategic
venture with CHS (the "CHS Strategic Venture"), risks and uncertainties
relating to the market prices of the fertilizer products that are the
subject of the supply agreement with CHS over the life of the supply
agreement, and the risk that any challenges related to the CHS Strategic
Venture will harm the Company's other business relationships; risks
associated with the Company's Point Lisas Nitrogen Limited joint
venture; acts of terrorism and regulations to combat terrorism; risks
associated with international operations; and deterioration of global
market and economic conditions.

More detailed information about factors that may affect the Company's
performance and could cause actual results to differ materially from
those in any forward-looking statements may be found in CF Industries
Holdings, Inc.'s filings with the Securities and Exchange Commission,
including CF Industries Holdings, Inc.'s most recent annual and
quarterly reports on Form 10-K and Form 10-Q, which are available in the
Investor Relations section of the Company's web site. Forward-looking
statements are given only as of the date of this communication and the
Company disclaims any obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.

 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(in millions, except per share amounts)
Net sales $ 1,300 $ 1,124 $ 2,257 $ 2,161
Cost of sales 988   951   1,755   1,881  
Gross margin 312   173   502   280  
Selling, general and administrative expenses 53 49 110 95
Other operating—net 3   10   (18 ) 16  
Total other operating costs and expenses 56 59 92 111
Equity in earnings (losses) of operating affiliates 18   (6 ) 25   (3 )
Operating earnings 274 108 435 166
Interest expense 61 80 121 160
Interest income (2 ) (2 ) (5 ) (3 )
Other non-operating—net (3 ) 1   (4 ) 2  
Earnings before income taxes 218 29 323 7
Income tax provision (benefit) 44   5   61   (8 )
Net earnings 174 24 262 15
Less: Net earnings attributable to noncontrolling interests 26   21   51   35  
Net earnings (loss) attributable to common stockholders $ 148   $ 3   $ 211   $ (20 )
 
Net earnings (loss) per share attributable to common stockholders:
Basic $ 0.63   $ 0.01   $ 0.90   $ (0.09 )
Diluted $ 0.63   $ 0.01   $ 0.90   $ (0.09 )
Weighted-average common shares outstanding:
Basic 234.0   233.5   233.9   233.2  
Diluted 234.9   233.7   234.8   233.2  
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    (unaudited)    
June 30, December 31,
2018 2017
(in millions)
Assets
Current assets:
Cash and cash equivalents $ 728 $ 835
Accounts receivable—net 338 307
Inventories 257 275
Prepaid income taxes 1 33
Other current assets 24   15
Total current assets 1,348 1,465
Property, plant and equipment—net 8,841 9,175
Investment in affiliate 94 108
Goodwill 2,364 2,371
Other assets 340   344
Total assets $ 12,987   $ 13,463
 
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 429 $ 472
Income taxes payable 23 2
Customer advances 21 89
Other current liabilities 9   17
Total current liabilities 482   580
Long-term debt 4,695 4,692
Deferred income taxes 1,051 1,047
Other liabilities 437 460
Equity:
Stockholders' equity 3,556 3,579
Noncontrolling interests 2,766   3,105
Total equity 6,322   6,684
Total liabilities and equity $ 12,987   $ 13,463
 
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(in millions)
Operating Activities:
Net earnings $ 174 $ 24 $ 262 $ 15
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 241 217 434 422
Deferred income taxes (27 ) 8 2 (8 )
Stock-based compensation expense 5 4 11 8
Unrealized net (gain) loss on natural gas derivatives (5 ) 18 (8 ) 71
Unrealized loss on embedded derivative 1 2 1 3
Loss on disposal of property, plant and equipment 1
Undistributed losses (earnings) of affiliates—net of taxes 11 (3 ) 6
Changes in:
Accounts receivable—net (95 ) (26 ) (34 ) (35 )
Inventories 118 25 21 10
Accrued and prepaid income taxes 66 811 52 806
Accounts payable and accrued expenses (22 ) (17 ) (46 ) (12 )
Customer advances (133 ) (179 ) (68 ) (37 )
Other—net (7 ) (67 ) (26 ) (63 )
Net cash provided by operating activities 316   831   598   1,187  
Investing Activities:
Additions to property, plant and equipment (77 ) (91 ) (145 ) (185 )
Proceeds from sale of property, plant and equipment 8 4 16 12
Distributions received from unconsolidated affiliates 6 6 10 6
Proceeds from sale of auction rate securities 9 9
Other—net     1    
Net cash used in investing activities (63 ) (72 ) (118 ) (158 )
Financing Activities:
Financing fees 1
Dividends paid on common stock (70 ) (70 ) (140 ) (140 )
Acquisition of noncontrolling interests in TNCLP (388 ) (388 )
Distributions to noncontrolling interests (5 ) (59 ) (59 )
Issuances of common stock under employee stock plans 2 4
Shares withheld for taxes     (1 )  
Net cash used in financing activities (456 ) (75 ) (583 ) (199 )
Effect of exchange rate changes on cash and cash equivalents (5 ) 5   (4 ) 6  
(Decrease) increase in cash, cash equivalents and restricted cash (208 ) 689 (107 ) 836
Cash, cash equivalents and restricted cash at beginning of period 936   1,316   835   1,169  
Cash, cash equivalents and restricted cash at end of period $ 728   $ 2,005   $ 728   $ 2,005  
 

CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL
INFORMATION

NON-GAAP DISCLOSURE ITEMS

Reconciliation of net earnings (loss) attributable to common
stockholders, net earnings (loss) attributable to common stockholders
per ton and net earnings (loss) attributable to common stockholders as a
percent of net sales (GAAP measures) to EBITDA, EBITDA per ton, EBITDA
as a percent of net sales, adjusted EBITDA, adjusted EBITDA per ton and
adjusted EBITDA as a percent of net sales (non-GAAP measures), as
applicable:

EBITDA is defined as net earnings (loss) attributable to common
stockholders plus interest expense—net, income taxes and depreciation
and amortization. Other adjustments include the elimination of loan fee
amortization that is included in both interest and amortization, and the
portion of depreciation that is included in noncontrolling interests.

The company has presented EBITDA, EBITDA per ton and EBITDA as a percent
of net sales because management uses these measures to track performance
and believes that they are frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in
the industry.

Adjusted EBITDA is defined as EBITDA adjusted with the selected items
included in EBITDA as summarized in the table below. The company has
presented adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA
as a percent of net sales because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance.

    Three months ended     Six months ended
June 30, June 30,
2018   2017 2018   2017
(in millions)
Net earnings $ 174 $ 24 $ 262 $ 15
Less: Net earnings attributable to noncontrolling interests (26 ) (21 ) (51 ) (35 )
Net earnings (loss) attributable to common stockholders 148   3   211   (20 )
Interest expense—net 59 78 116 157
Income tax provision (benefit) 44 5 61 (8 )
Depreciation and amortization 241 217 434 422
Less other adjustments:
Depreciation and amortization in noncontrolling interests(1) (20 ) (25 ) (46 ) (52 )
Loan fee amortization(2) (2 ) (3 ) (4 ) (6 )
EBITDA 470   275   772   493  
Unrealized net mark-to-market (gain) loss on natural gas derivatives (5 ) 18 (8 ) 71
Loss (gain) on foreign currency transactions including intercompany
loans(3)
2 1 (3 ) 1
Costs related to acquisition of TNCLP units 2
Equity method investment tax contingency accrual(4) 7 7
Unrealized loss on embedded derivative(5) 1   2   1   3  
Total adjustments (2 ) 28   (8 ) 82  
Adjusted EBITDA $ 468   $ 303   $ 764   $ 575  
 
Net sales $ 1,300 $ 1,124 $ 2,257 $ 2,161
Tons of product sold (000s) 5,538 5,046 9,841 9,791
 
Net earnings (loss) attributable to common stockholders as a
percent of net sales
11.4 % 0.3 % 9.3 % (0.9 )%
Net earnings (loss) attributable to common stockholders per ton $ 26.72 $ 0.59 $ 21.44 $ (2.04 )
EBITDA as a percent of net sales 36.2 % 24.5 % 34.2 % 22.8 %
EBITDA per ton $ 84.87 $ 54.50 $ 78.45 $ 50.35
Adjusted EBITDA as a percent of net sales 36.0 % 27.0 % 33.9 % 26.6 %
Adjusted EBITDA per ton $ 84.51 $ 60.05 $ 77.63 $ 58.73
_______________________________________________________________________________
(1)   For the three months ended June 30, 2018, amount relates only to
CFN, as we purchased the remaining publicly traded common units of
TNCLP on April 2, 2018. For the six months ended June 30, 2018,
amount includes $42 million related to CFN and $4 million related to
TNCLP.
(2) Loan fee amortization is included in both interest expense—net and
depreciation and amortization.
(3) Loss (gain) on foreign currency transactions primarily relates to
the unrealized foreign currency exchange rate impact on intercompany
debt that has not been permanently invested and is included in other
operating—net in our consolidated statements of operations.
(4) Represents an accrual recorded in the three months ended June 30,
2017 on the books of PLNL, the company's Trinidad joint venture, for
a disputed tax assessment. Amount reflects the company's 50 percent
equity interest in PLNL. This is included in equity in earnings
(losses) of operating affiliates in our consolidated statements of
operations.
(5) Represents the change in fair value on the embedded derivative
included within the terms of the company's strategic venture with
CHS.
 

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