CF Industries Holdings, Inc. [CF] Filings

10-Q 1 cf-20210930.htm 10-Q cf-20210930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM			10-Q


(Mark One)
☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021





OR
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001-32597

CF INDUSTRIES HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

20-2697511

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

4 Parkway North, Suite 400

60015

Deerfield,

Illinois

(Zip Code)

(Address of principal executive offices)

(847) 405-2400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

common stock, par value $0.01 per share

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

214,475,440 shares of the registrant’s common stock, par value $0.01 per share, were outstanding at November 1, 2021.

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CF INDUSTRIES HOLDINGS, INC.

TABLE OF CONTENTS


PART I.	Financial Information
	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Operations	1
		Consolidated Statements of Comprehensive (Loss) Income	2
		Consolidated Balance Sheets	3
		Consolidated Statements of Equity	4
		Consolidated Statements of Cash Flows	5
		Notes to Unaudited Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
	Item 4.	Controls and Procedures	60
PART II.	Other Information
	Item 1.	Legal Proceedings	60

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
	Item 6.	Exhibits	61

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CF INDUSTRIES HOLDINGS, INC.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)
Net sales	$	1,362	$	847	$	3,998	$	3,022
Cost of sales	922		764		2,766		2,401
Gross margin	440		83		1,232		621
Selling, general and administrative expenses	52		49		167		154

Goodwill impairment	259		—		259		—
Long-lived and intangible asset impairment	236		—		236		—

Other operating—net	5		(4)		7		8
Total other operating costs and expenses	552		45		669		162

Equity in earnings of operating affiliate	15		2		37		8
Operating (loss) earnings	(97)		40		600		467
Interest expense	46		48		140		141
Interest income	—		—		—		(18)
Loss on debt extinguishment	13		—		19		—
Other non-operating—net	(19)		1		(17)		(2)
(Loss) earnings before income taxes	(137)		(9)		458		346
Income tax (benefit) provision	(46)		(13)		57		33

Net (loss) earnings	(91)		4		401		313
Less: Net earnings attributable to noncontrolling interest	94		32		189		83
Net (loss) earnings attributable to common stockholders	$	(185)	$	(28)	$	212	$	230
Net (loss) earnings per share attributable to common stockholders:
Basic	$	(0.86)	$	(0.13)	$	0.99	$	1.07
Diluted	$	(0.86)	$	(0.13)	$	0.98	$	1.07
Weighted-average common shares outstanding:
Basic	214.9		213.9		215.3		215.0
Diluted	214.9		213.9		216.4		215.3
Dividends declared per common share	$	0.30	$	0.30	$	0.90	$	0.90

See accompanying Notes to Unaudited Consolidated Financial Statements.

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CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in millions)
Net (loss) earnings	$	(91)	$	4	$	401	$	313
Other comprehensive (loss) income:
Foreign currency translation adjustment—net of taxes	(26)		41		(2)		(30)


Defined benefit plans—net of taxes	6		(3)		6		8
	(20)		38		4		(22)
Comprehensive (loss) income	(111)		42		405		291
Less: Comprehensive income attributable to noncontrolling interest	94		32		189		83
Comprehensive (loss) income attributable to common stockholders	$	(205)	$	10	$	216	$	208

See accompanying Notes to Unaudited Consolidated Financial Statements.

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CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	September 30, 2021		December 31, 2020
	(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	757	$	683

Accounts receivable—net	386		265
Inventories	418		287

Prepaid income taxes	201		97
Other current assets	52		35
Total current assets	1,814		1,367
Property, plant and equipment—net	7,210		7,632
Investment in affiliate	92		80
Goodwill	2,116		2,374
Operating lease right-of-use assets	261		259
Other assets	273		311
Total assets	$	11,766	$	12,023
Liabilities and Equity
Current liabilities:

Accounts payable and accrued expenses	$	537	$	424
Income taxes payable	1		—
Customer advances	375		130
Current operating lease liabilities	93		88
Current maturities of long-term debt	—		249
Other current liabilities	9		15
Total current liabilities	1,015		906
Long-term debt, net of current maturities	3,465		3,712
Deferred income taxes	1,160		1,184
Operating lease liabilities	175		174
Other liabilities	337		444
Equity:
Stockholders’ equity:
Preferred stock—$0.01 par value, 50,000,000 shares authorized	—		—
Common stock—$0.01 par value, 500,000,000 shares authorized, 2021—215,296,025 shares issued and 2020—214,057,701 shares issued	2		2
Paid-in capital	1,370		1,317
Retained earnings	1,933		1,927
Treasury stock—at cost, 2021—1,100,921 shares and 2020—102,843 shares	(51)		(4)
Accumulated other comprehensive loss	(316)		(320)
Total stockholders’ equity	2,938		2,922
Noncontrolling interest	2,676		2,681
Total equity	5,614		5,603
Total liabilities and equity	$	11,766	$	12,023

See accompanying Notes to Unaudited Consolidated Financial Statements.

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CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Common Stockholders
	$0.01 Par Value Common Stock		Treasury Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	(in millions, except per share amounts)
Balance as of June 30, 2021	$	2	$	—	$	1,357	$	2,183	$	(296)	$	3,246	$	2,712	$	5,958
Net (loss) earnings	—		—		—		(185)		—		(185)		94		(91)
Other comprehensive loss	—		—		—		—		(20)		(20)		—		(20)
Purchases of treasury stock	—		(50)		—		—		—		(50)		—		(50)

Acquisition of treasury stock under employee stock plans	—		(1)		—		—		—		(1)		—		(1)
Issuance of $0.01 par value common stock under employee stock plans	—		—		6		—		—		6		—		6

Stock-based compensation expense	—		—		7		—		—		7		—		7

Cash dividends ($0.30 per share)	—		—		—		(65)		—		(65)		—		(65)



Distribution declared to noncontrolling interest	—		—		—		—		—		—		(130)		(130)

Balance as of September 30, 2021	$	2	$	(51)	$	1,370	$	1,933	$	(316)	$	2,938	$	2,676	$	5,614

Balance as of December 31, 2020	$	2	$	(4)	$	1,317	$	1,927	$	(320)	$	2,922	$	2,681	$	5,603
Net earnings	—		—		—		212		—		212		189		401
Other comprehensive income	—		—		—		—		4		4		—		4
Purchases of treasury stock	—		(50)		—		—		—		(50)		—		(50)
Retirement of treasury stock	—		13		(2)		(11)		—		—		—		—
Acquisition of treasury stock under employee stock plans	—		(11)		—		—		—		(11)		—		(11)
Issuance of $0.01 par value common stock under employee stock plans	—		1		32		—		—		33		—		33

Stock-based compensation expense	—		—		23		—		—		23		—		23

Cash dividends ($0.90 per share)	—		—		—		(195)		—		(195)		—		(195)



Distributions declared to noncontrolling interest	—		—		—		—		—		—		(194)		(194)

Balance as of September 30, 2021	$	2	$	(51)	$	1,370	$	1,933	$	(316)	$	2,938	$	2,676	$	5,614

(Continued)

CONSOLIDATED STATEMENTS OF EQUITY

(Continued) (Unaudited)


	Common Stockholders
	$0.01 Par Value Common Stock		Treasury Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	(in millions, except per share amounts)
Balance as of June 30, 2020	$	2	$	—	$	1,300	$	1,997	$	(426)	$	2,873	$	2,703	$	5,576


Net (loss) earnings	—		—		—		(28)		—		(28)		32		4
Other comprehensive income	—		—		—		—		38		38		—		38


Acquisition of treasury stock under employee stock plans	—		(1)		—		—		—		(1)		—		(1)
Issuance of $0.01 par value common stock under employee stock plans	—		—		1		—		—		1		—		1

Stock-based compensation expense	—		—		7		—		—		7		—		7

Cash dividends ($0.30 per share)	—		—		—		(64)		—		(64)		—		(64)



Distribution declared to noncontrolling interest	—		—		—		—		—		—		(86)		(86)

Balance as of September 30, 2020	$	2	$	(1)	$	1,308	$	1,905	$	(388)	$	2,826	$	2,649	$	5,475

Balance as of December 31, 2019	$	2	$	—	$	1,303	$	1,958	$	(366)	$	2,897	$	2,740	$	5,637


Net earnings	—		—		—		230		—		230		83		313
Other comprehensive loss	—		—		—		—		(22)		(22)		—		(22)
Purchases of treasury stock	—		(100)		—		—		—		(100)		—		(100)
Retirement of treasury stock	—		107		(17)		(90)		—		—		—		—
Acquisition of treasury stock under employee stock plans	—		(10)		—		—		—		(10)		—		(10)
Issuance of $0.01 par value common stock under employee stock plans	—		2		2		—		—		4		—		4

Stock-based compensation expense	—		—		20		—		—		20		—		20

Cash dividends ($0.90 per share)	—		—		—		(193)		—		(193)		—		(193)



Distributions declared to noncontrolling interest	—		—		—		—		—		—		(174)		(174)

Balance as of September 30, 2020	$	2	$	(1)	$	1,308	$	1,905	$	(388)	$	2,826	$	2,649	$	5,475

See accompanying Notes to Unaudited Consolidated Financial Statements.

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CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net earnings	$	401	$	313
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	650		662
Deferred income taxes	(25)		(74)
Stock-based compensation expense	23		20

Loss on debt extinguishment	19		—
Unrealized net gain on natural gas derivatives	(18)		(12)
Unrealized loss on embedded derivative	2		2
Goodwill impairment	259		—
Long-lived and intangible asset impairment	236		—
Gain on sale of EU carbon credits	(20)		—
Loss on disposal of property, plant and equipment	3		14
Undistributed earnings of affiliate—net of taxes	(15)		(2)
Changes in:
Accounts receivable—net	(115)		7
Inventories	(120)		29
Accrued and prepaid income taxes	(132)		50
Accounts payable and accrued expenses	69		(42)
Customer advances	245		25
Other—net	(69)		(51)
Net cash provided by operating activities	1,393		941
Investing Activities:
Additions to property, plant and equipment	(382)		(206)
Proceeds from sale of property, plant and equipment	—		2


Distribution received from unconsolidated affiliate	—		1
Insurance proceeds for property, plant and equipment	—		2
Purchase of investments held in nonqualified employee benefit trust	(13)		—
Proceeds from sale of investments held in nonqualified employee benefit trust	13		—
Purchase of U.K. emission credits	(10)		—
Proceeds from sale of EU emission credits	10		—
Other—net	(1)		—
Net cash used in investing activities	(383)		(201)
Financing Activities:

Proceeds from short-term borrowings	—		500
Repayments of short-term borrowings	—		(500)
Payments of long-term borrowings	(518)		—

Dividends paid on common stock	(195)		(193)

Distributions to noncontrolling interest	(194)		(174)
Purchases of treasury stock	(50)		(100)
Proceeds from issuances of common stock under employee stock plans	32		4
Cash paid for shares withheld for taxes	(11)		(10)

Net cash used in financing activities	(936)		(473)
Effect of exchange rate changes on cash and cash equivalents	—		(1)
Increase in cash and cash equivalents	74		266
Cash and cash equivalents at beginning of period	683		287
Cash and cash equivalents at end of period	$	757	$	553

See accompanying Notes to Unaudited Consolidated Financial Statements.

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CF INDUSTRIES HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Background and Basis of Presentation

Our mission is to provide clean energy to feed and fuel the world sustainably. With our employees focused on safe and reliable operations, environmental stewardship, and disciplined capital and corporate management, we are on a path to decarbonize our ammonia production network – the world’s largest – to enable green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities. Our nine manufacturing complexes in the United States, Canada and the United Kingdom, an extensive storage, transportation and distribution network in North America, and logistics capabilities enabling a global reach underpin our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy. Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users. Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen. Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

All references to “CF Holdings,” “the Company,” “we,” “us” and “our” refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to “CF Industries” refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc.

The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2020, in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting. In the opinion of management, these statements reflect all adjustments, consisting only of normal and recurring adjustments, that are necessary for the fair representation of the information for the periods presented. The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Operating results for any period presented apply to that period only and are not necessarily indicative of results for any future period.

The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 24, 2021. The preparation of the unaudited interim consolidated financial statements requires us to make use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited consolidated financial statements and the reported revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of carbon credits required to meet environmental regulations, the cost of customer incentives, the cost to fulfill contractual commitments to our customers, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax and valuation reserves, allowances for doubtful accounts receivable, the measurement of the fair values of investments for which markets are not active, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the valuation of stock-based compensation awards granted to employees.

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CF INDUSTRIES HOLDINGS, INC.

2. Revenue Recognition

We track our revenue by product and by geography. See Note 17—Segment Disclosures for our revenue by reportable segment, which are ammonia, granular urea, UAN, AN and Other. The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and nine months ended September 30, 2021 and 2020:


	Ammonia		Granular Urea		UAN		AN		Other		Total
	(in millions)

Three months ended September 30, 2021
North America	$	279	$	386	$	324	$	48	$	94	$	1,131
Europe and other	65		—		66		70		30		231

Total revenue	$	344	$	386	$	390	$	118	$	124	$	1,362
Three months ended September 30, 2020
North America	$	116	$	222	$	221	$	41	$	56	$	656
Europe and other	49		27		27		68		20		191
Total revenue	$	165	$	249	$	248	$	109	$	76	$	847

Nine months ended September 30, 2021
North America	$	878	$	1,218	$	949	$	144	$	263	$	3,452
Europe and other	131