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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
____________
Date of Report (Date of earliest event reported): February 13, 2019
CF Industries Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation)

4 Parkway North, Suite 400
Deerfield, IL
(Address of principal
executive offices)
001-32597
(Commission File Number)
20-2697511
(IRS Employer
Identification No.)

60015
(Zip Code)

Registrant’s telephone number, including area code (847) 405-2400
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    o

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. o




Item 2.02.    Results of Operations and Financial Condition.
On February 13, 2019, CF Industries Holdings, Inc. issued a press release announcing its results for the quarter and year ended December 31, 2018. The press release is attached hereto as Exhibit 99.1.

The information set forth herein, including the exhibit attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.


Item 9.01.    Financial Statements and Exhibits.
(d)    Exhibits.
Exhibit No.
Description of Exhibit
 


2



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
Date:
February 13, 2019
 
CF INDUSTRIES HOLDINGS, INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Dennis P. Kelleher
 
 
 
Name:
 
Dennis P. Kelleher
 
 
 
Title:
 
Senior Vice President and Chief Financial Officer


3
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


396733496_cfindustriesa58.jpg
 
 
 
 
4 Parkway North, Suite 400
 
 
 
 
Deerfield, IL 60015
 
 
 
 
www.cfindustries.com
CF Industries Holdings, Inc. Reports Full Year 2018
Net Earnings of $290 Million, EBITDA of $1.4 Billion
Completed $500 Million Share Repurchase Authorization
Announces New $1 Billion Share Repurchase Authorization
Strong Nitrogen Demand Outlook in North America for First Half of 2019

DEERFIELD, IL—February 13, 2019—CF Industries Holdings, Inc. (NYSE: CF), a leading global fertilizer and chemical company, today announced results for its fourth quarter and year ended December 31, 2018.

Fourth Quarter Highlights
Fourth quarter net earnings of $49 million, or $0.21 per diluted share; EBITDA(1) of $349 million; adjusted EBITDA(1) of $341 million
Completed $500 million share repurchase authorization, which reduced common shares outstanding as of the beginning of 2018 by nearly five percent
Subsequent to quarter end, the Board of Directors authorized a $1 billion share repurchase program through 2021

Full Year Highlights
Full year net earnings of $290 million, or $1.24 per diluted share; EBITDA of $1,429 million; adjusted EBITDA of $1,403 million
12-month rolling average recordable incident rate at 0.60 incidents per 200,000 work hours
Returned $780 million to shareholders through $500 million in share repurchases and $280 million in dividend payments
Completed purchase of all publicly traded common units of Terra Nitrogen Company, L.P. on April 2, 2018

Overview of Results

CF Industries Holdings, Inc. today announced fourth quarter and full year 2018 net earnings attributable to common stockholders of $49 million, or $0.21 per diluted share, and $290 million, or $1.24 per diluted share, respectively. These results are not directly comparable to 2017 results given the impact on the 2017 periods from the U.S. Tax Cut and Jobs Act. Fourth quarter and full year 2017 net earnings attributable to common stockholders were $465 million, or $1.98 per diluted share(2), and $358 million, or $1.53 per diluted share(2), respectively.

The company announced fourth quarter and full year 2018 EBITDA of $349 million and $1,429 million, respectively; and fourth quarter and full year 2018 adjusted EBITDA of $341 million and $1,403 million, respectively. These results are directly comparable to 2017 results as they were not impacted by the U.S. Tax Cut and Jobs Act. Fourth quarter and full year 2017 EBITDA were $224 million and $856 million, respectively; and fourth quarter and full year 2017 adjusted EBITDA were $260 million and $969 million, respectively.

"We delivered strong results in 2018, as higher global nitrogen prices and lower natural gas costs drove a 45 percent increase in adjusted EBITDA compared to 2017," said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “With strong nitrogen demand anticipated in North America during the first half of 2019, our in-region production and extensive transportation and distribution network position us well to build on our 2018 performance.

“Longer-term, our outlook remains positive: we are positioned at the low end of the global cost curve due to our access to low-cost North American natural gas, we continue to operate exceptionally well and we expect the global nitrogen supply and demand balance to continue to tighten."

    1    



_______________________________________________________________________

(1) 
EBITDA is defined as net earnings 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.
(2) 
Fourth quarter and full year 2017 net earnings attributable to common stockholders included a $491 million income tax benefit from the impact of the U.S. Tax Cuts and Jobs Act, which impacted diluted net earnings per share attributable to common stockholders by $2.09 and $2.10 for the fourth quarter and full year 2017, respectively.

Operations Overview

CF Industries continued operating safely and efficiently during 2018. As of December 31, 2018, the company's 12-month rolling average recordable incident rate was 0.60 incidents per 200,000 work hours despite increased turnaround and maintenance activity compared to 2017.

Sales Overview

Net sales in the fourth quarter of 2018 were $1,132 million and for the full year 2018 were $4,429 million compared to $1,099 million and $4,130 million in the same periods last year. The increases were due primarily to higher average selling prices across all segments.

Total sales volumes for the fourth quarter and full year were lower compared to the same periods in 2017 as lower ammonia and ammonium nitrate sales volume was partially offset by higher granular urea sales volume.

Average selling prices for the fourth quarter and full year 2018 were higher year-over-year across all segments as higher energy costs in Asia and Europe, along with continued enforcement of environmental regulations in China, resulted in lower production in these regions, tightening the global supply and demand balance.

Cost of sales for the full year 2018 decreased compared to the full year 2017 driven by lower sales volume and lower realized gas costs partially offset by higher costs related to plant turnarounds and maintenance. The company also recorded an unrealized net mark-to-market gain on natural gas derivatives of $13 million for the full year 2018 compared to an unrealized net mark-to-market loss on natural gas derivatives of $61 million for the full year 2017.

For the full year 2018, the average cost of natural gas reflected in the company's cost of sales was $3.16 per MMBtu, which included a realized loss of $0.01 per MMBtu on natural gas hedges. This compares to the average cost of natural gas in cost of sales of $3.40 per MMBtu for the full year 2017, which included a realized loss of $0.07 per MMBtu on natural gas hedges. During 2018, the average price of natural gas at Henry Hub in North America was $3.12 per MMBtu, and the average price of natural gas at the National Balancing Point in the United Kingdom was $8.07 per MMBtu.

Market Overview

Global nitrogen prices reached in-year highs early in the fourth quarter of 2018, and then declined through the end of the year and into 2019 due to seasonally low demand in the Northern Hemisphere and moderating energy prices in Asia and Europe. As demand in the Northern Hemisphere begins to materialize, industry fundamentals should be supportive of global nitrogen prices in the first half of 2019.

In North America, the company expects strong nitrogen fertilizer demand during the first half of 2019. Corn and wheat plantings in the United States are projected to increase by four million and one million acres, respectively, compared to 2018. Additionally, unfavorable weather limited fall ammonia applications in the Midwest United States, suggesting a nitrogen deficit in many areas that will need to be made up by applications of ammonia or upgraded products during the first half of 2019.

India and Brazil, two of the largest urea-importing regions in the world, will continue to be key global demand centers. Urea imports into India and Brazil in 2018 totaled 6.3 million metric tons and 5.5 million metric tons, respectively. The company expects total Indian and Brazilian urea import requirements to be in a similar range in 2019.


    2    



The company projects net global urea production capacity to increase by 3.5 million metric tons during 2019, below the historical nitrogen demand growth rate of two percent. However, 1.2 million metric tons of this new urea production capacity in Iran that is included in the company’s projection is at risk of delay due to United States sanctions on Iran.

China's role in globally traded urea continued to shrink in 2018, with exports totaling approximately 2.4 million metric tons. Published reports suggest this volume may include substantial re-exports of Iranian urea. Chinese urea exports are expected to be in a similar volume range in 2019 due to continued firm energy prices and tighter environmental restrictions.

The company continues to monitor the impact of sanctions on Iran. Urea from Iranian producers is available at a significant discount to global prices with few regions of the world open to purchasing from that country due to sanctions. Iranian producers will face additional challenges should the sanctions continue due to the loss of access to technical expertise, replacement parts for current plants and resources to support new construction.

Longer-term, industry and energy market fundamentals are expected to continue to support the global nitrogen cost curve at higher levels. Net global urea supply growth through 2022 is projected to fall short of the historical nitrogen demand annual growth rate of approximately two percent, further tightening the global supply and demand balance.

Capital Expenditures

Capital expenditures in 2019 are projected to be $400-$450 million.

Liquidity

As of December 31, 2018, the company had cash and cash equivalents of $682 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.

During the fourth quarter, the company repurchased 9.1 million shares for $409 million. As of December 31, 2018, the company had repurchased 10.9 million shares for $500 million, completing the share repurchase program authorized by the Board of Directors in August 2018.

Subsequent to the end of the quarter, the Board of Directors authorized a new $1 billion share repurchase program through 2021.

CHS Inc. Distribution

On January 31, 2019, the Board of Managers of CF Industries Nitrogen, LLC (CFN) approved a semi-annual distribution payment to CHS Inc. (CHS) of $86 million for the distribution period ended December 31, 2018. The distribution was paid on January 31, 2019. The total distribution to CHS pertaining to 2018 was approximately $165 million.

    3    



Consolidated Results
 
Three months ended 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(dollars in millions, except per share
and per MMBtu amounts)
Net sales
$
1,132

 
$
1,099

 
$
4,429

 
$
4,130

Cost of sales
890

 
956

 
3,512

 
3,696

Gross margin
$
242

 
$
143

 
$
917

 
$
434

Gross margin percentage
21.4
%
 
13.0
%
 
20.7
%
 
10.5
%
 
 
 
 
 
 
 
 
Net earnings attributable to common stockholders
$
49

 
$
465

 
$
290

 
$
358

Net earnings per diluted share
$
0.21

 
$
1.98

 
$
1.24

 
$
1.53

 
 
 
 
 
 
 
 
EBITDA(1)
$
349

 
$
224

 
$
1,429

 
$
856

Adjusted EBITDA(1)
$
341

 
$
260

 
$
1,403

 
$
969

 
 
 
 
 
 
 
 
Tons of product sold (000s)
4,723

 
5,284

 
19,329

 
19,952

 
 
 
 
 
 
 
 
Supplemental data (per MMBtu):
 
 
 
 
 
 
 
Natural gas costs in cost of sales(2)
$
3.30

 
$
3.11

 
$
3.15

 
$
3.33

Realized derivatives (gain) loss in cost of sales(3)
(0.06
)
 
0.13

 
0.01

 
0.07

Cost of natural gas in cost of sales
$
3.24

 
$
3.24

 
$
3.16

 
$
3.40

 
 
 
 
 
 
 
 
Average daily market price of natural gas (per MMBtu):
 
 
 
 
 
 
 
Henry Hub
$
3.74

 
$
2.87

 
$
3.12

 
$
2.96

National Balancing Point UK
$
8.35

 
$
6.92

 
$
8.07

 
$
5.80

 
 
 
 
 
 
 
 
Unrealized net mark-to-market (gain) loss on natural gas derivatives
$
(2
)
 
$
(3
)
 
$
(13
)
 
$
61

Depreciation and amortization
$
221

 
$
235

 
$
888

 
$
883

Capital expenditures
$
144

 
$
183

 
$
422

 
$
473

 
 
 
 
 
 
 
 
Production volume by product tons (000s):
 
 
 
 
 
 
 
Ammonia(4)
2,381

 
2,642

 
9,805

 
10,295

Granular urea
1,162

 
1,122

 
4,837

 
4,451

UAN (32%)
1,946

 
1,892

 
6,903

 
6,914

AN
376

 
555

 
1,731

 
2,127

_______________________________________________________________________________
(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 and related transportation 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.

    4    



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 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(dollars in millions,
except per ton amounts)
Net sales
$
250

 
$
344

 
$
1,028

 
$
1,209

Cost of sales
226

 
300

 
867

 
1,070

Gross margin
$
24

 
$
44

 
$
161

 
$
139

Gross margin percentage
9.6
%
 
12.8
%
 
15.7
%
 
11.5
%
 
 
 
 
 
 
 
 
Sales volume by product tons (000s)
720

 
1,207

 
3,135

 
4,105

Sales volume by nutrient tons (000s)(1)
590

 
991

 
2,571

 
3,367

 
 
 
 
 
 
 
 
Average selling price per product ton
$
347

 
$
285

 
$
328

 
$
295

Average selling price per nutrient ton(1)
424

 
347

 
400

 
359

 
 
 
 
 
 
 
 
Adjusted gross margin(2):
 
 
 
 
 
 
 
Gross margin
$
24

 
$
44

 
$
161

 
$
139

Depreciation and amortization
45

 
53

 
155

 
183

Unrealized net mark-to-market (gain) loss on natural gas derivatives
(1
)
 

 
(4
)
 
20

Adjusted gross margin
$
68

 
$
97

 
$
312

 
$
342

Adjusted gross margin as a percent of net sales
27.2
%
 
28.2
%
 
30.4
%
 
28.3
%
 
 
 
 
 
 
 
 
Gross margin per product ton
$
33

 
$
36

 
$
51

 
$
34

Gross margin per nutrient ton(1)
41

 
44

 
63

 
41

Adjusted gross margin per product ton
94

 
80

 
100

 
83

Adjusted gross margin per nutrient ton(1)
115

 
98

 
121

 
102

_______________________________________________________________________________
(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 full year and fourth quarter periods:

Ammonia sales volume decreased for the full year and fourth quarter of 2018 compared to 2017 due to cold and wet weather in the Midwestern United States that reduced demand for fall ammonia applications and due to reduced production volumes as more plant turnarounds and maintenance year-over-year lowered the volume of ammonia available for sale.

    5    



Ammonia average selling prices improved in 2018 compared to 2017 as higher energy costs in Asia and Europe, along with continued enforcement of environmental regulations in China, resulted in lower production in these regions, tightening the global supply and demand balance.
Ammonia adjusted gross margin per ton increased for the full year and fourth quarter of 2018 compared to 2017 due to higher average selling prices partially offset by higher costs related to plant turnarounds and maintenance.

    6    



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 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(dollars in millions,
except per ton amounts)
Net sales
$
345

 
$
246

 
$
1,322

 
$
971

Cost of sales
207

 
188

 
889

 
855

Gross margin
$
138

 
$
58

 
$
433

 
$
116

Gross margin percentage
40.0
%
 
23.6
%
 
32.8
%
 
11.9
%
 
 
 
 
 
 
 
 
Sales volume by product tons (000s)
1,119

 
1,008

 
4,898

 
4,357

Sales volume by nutrient tons (000s)(1)
515

 
463

 
2,253

 
2,004

 
 
 
 
 
 
 
 
Average selling price per product ton
$
308

 
$
244

 
$
270

 
$
223

Average selling price per nutrient ton(1)
670

 
531

 
587

 
485

 
 
 
 
 
 
 
 
Adjusted gross margin(2):
 
 
 
 
 
 
 
Gross margin
$
138

 
$
58

 
$
433

 
$
116

Depreciation and amortization
62

 
59

 
276

 
246

Unrealized net mark-to-market (gain) loss on natural gas derivatives
(1
)
 
(1
)
 
(4
)
 
16

Adjusted gross margin
$
199

 
$
116

 
$
705

 
$
378

Adjusted gross margin as a percent of net sales
57.7
%
 
47.2
%
 
53.3
%
 
38.9
%
 
 
 
 
 
 
 
 
Gross margin per product ton
$
123

 
$
58

 
$
88

 
$
27

Gross margin per nutrient ton(1)
268

 
125

 
192

 
58

Adjusted gross margin per product ton
178

 
115

 
144

 
87

Adjusted gross margin per nutrient ton(1)
386

 
251

 
313

 
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 full year and fourth quarter periods:

Granular urea sales volume increased for the full year and fourth quarter of 2018 compared to 2017 due to higher year-over-year production.
Urea average selling prices improved in 2018 compared to 2017 as higher energy costs in Asia and Europe, along with continued enforcement of environmental regulations in China, resulted in lower production in these regions, tightening the global supply and demand balance.
Granular urea adjusted gross margin per ton increased for the full year and fourth quarter of 2018 compared to 2017 due primarily to higher average selling prices.

    7    



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 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(dollars in millions,
except per ton amounts)
Net sales
$
342

 
$
288

 
$
1,234

 
$
1,134

Cost of sales
276

 
272

 
1,007

 
1,053

Gross margin
$
66

 
$
16

 
$
227

 
$
81

Gross margin percentage
19.3
%
 
5.6
%
 
18.4
%
 
7.1
%
 
 
 
 
 
 
 
 
Sales volume by product tons (000s)
1,933

 
1,920

 
7,042

 
7,093

Sales volume by nutrient tons (000s)(1)
610

 
606

 
2,225

 
2,242

 
 
 
 
 
 
 
 
Average selling price per product ton
$
177

 
$
150

 
$
175

 
$
160

Average selling price per nutrient ton(1)
561

 
475

 
555

 
506

 
 
 
 
 
 
 
 
Adjusted gross margin(2):
 
 
 
 
 
 
 
Gross margin
$
66

 
$
16

 
$
227

 
$
81

Depreciation and amortization
70

 
73

 
270

 
265

Unrealized net mark-to-market (gain) loss on natural gas derivatives

 

 
(4
)
 
19

Adjusted gross margin
$
136

 
$
89

 
$
493

 
$
365

Adjusted gross margin as a percent of net sales
39.8
%
 
30.9
%
 
40.0
%
 
32.2
%
 
 
 
 
 
 
 
 
Gross margin per product ton
$
34

 
$
8

 
$
32

 
$
11

Gross margin per nutrient ton(1)
108

 
26

 
102

 
36

Adjusted gross margin per product ton
70

 
46

 
70

 
51

Adjusted gross margin per nutrient ton(1)
223

 
147

 
222

 
163

_______________________________________________________________________________
(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 full year and fourth quarter periods:

UAN sales volume for the full year and fourth quarter of 2018 was essentially unchanged compared to 2017.
UAN average selling prices improved in 2018 compared to 2017 as higher energy costs in Europe resulted in lower production in this region, tightening the global supply and demand balance.
UAN adjusted gross margin per ton increased for the full year and fourth quarter of 2018 compared to 2017 due primarily to higher average selling prices.

    8    



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 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(dollars in millions,
except per ton amounts)
Net sales
$
97

 
$
125

 
$
460

 
$
497

Cost of sales
94

 
115

 
414

 
446

Gross margin
$
3

 
$
10

 
$
46

 
$
51

Gross margin percentage
3.1
%
 
8.0
%
 
10.0
%
 
10.3
%
 
 
 
 
 
 
 
 
Sales volume by product tons (000s)
416

 
576

 
2,002

 
2,353

Sales volume by nutrient tons (000s)(1)
141

 
194

 
676

 
793

 
 
 
 
 
 
 
 
Average selling price per product ton
$
233

 
$
217

 
$
230

 
$
211

Average selling price per nutrient ton(1)
688

 
644

 
680

 
627

 
 
 
 
 
 
 
 
Adjusted gross margin(2):
 
 
 
 
 
 
 
Gross margin
$
3

 
$
10

 
$
46

 
$
51

Depreciation and amortization
18

 
21

 
85

 
85

Unrealized net mark-to-market (gain) loss on natural gas derivatives

 
(1
)
 

 
2

Adjusted gross margin
$
21

 
$
30

 
$
131

 
$
138

Adjusted gross margin as a percent of net sales
21.6
%
 
24.0
%
 
28.5
%
 
27.8
%
 
 
 
 
 
 
 
 
Gross margin per product ton
$
7

 
$
17

 
$
23

 
$
22

Gross margin per nutrient ton(1)
21

 
52

 
68

 
64

Adjusted gross margin per product ton
50

 
52

 
65

 
59

Adjusted gross margin per nutrient ton(1)
149

 
155

 
194

 
174

_______________________________________________________________________________
(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 full year and fourth quarter periods:

AN sales volume decreased for the full year and fourth quarter of 2018 compared to 2017 due to lower production volumes resulting in less AN available for sale.
AN average selling prices improved in 2018 compared to 2017 as higher energy costs in Asia and Europe resulted in lower production in these regions, tightening the global supply and demand balance.
AN adjusted gross margin per ton was higher for the full year 2018 due to higher average selling prices partially offset by higher gas costs in the United Kingdom. AN adjusted gross margin per ton was lower for

    9    



the fourth quarter of 2018 compared to 2017 as higher average selling prices were more than offset by higher gas costs in the United Kingdom and higher costs related to plant turnarounds and maintenance.

    10    



Other Segment

CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea liquor, nitric acid and compound fertilizer products (NPKs).
 
Three months ended 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(dollars in millions,
except per ton amounts)
Net sales
$
98

 
$
96

 
$
385

 
$
319

Cost of sales
87

 
81

 
335

 
272

Gross margin
$
11

 
$
15

 
$
50

 
$
47

Gross margin percentage
11.2
%
 
15.6
%
 
13.0
%
 
14.7
%
 
 
 
 
 
 
 
 
Sales volume by product tons (000s)
535

 
573

 
2,252

 
2,044

Sales volume by nutrient tons (000s)(1)
104

 
112

 
439

 
397

 
 
 
 
 
 
 
 
Average selling price per product ton
$
183

 
$
168

 
$
171

 
$
156

Average selling price per nutrient ton(1)
942

 
857

 
877

 
804

 
 
 
 
 
 
 
 
Adjusted gross margin(2):
 
 
 
 
 
 
 
Gross margin
$
11

 
$
15

 
$
50

 
$
47

Depreciation and amortization
18

 
17

 
67

 
57

Unrealized net mark-to-market (gain) loss on natural gas derivatives

 
(1
)
 
(1
)
 
4

Adjusted gross margin
$
29

 
$
31

 
$
116

 
$
108

Adjusted gross margin as a percent of net sales
29.6
%
 
32.3
%
 
30.1
%
 
33.9
%
 
 
 
 
 
 
 
 
Gross margin per product ton
$
21

 
$
26

 
$
22

 
$
23

Gross margin per nutrient ton(1)
106

 
134

 
114

 
118

Adjusted gross margin per product ton
54

 
54

 
52

 
53

Adjusted gross margin per nutrient ton(1)
279

 
277

 
264

 
272

_______________________________________________________________________________
(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 full year and fourth quarter periods:

Other segment volume increased for the full year 2018 compared to 2017 due primarily to higher sales of DEF and nitric acid. Other segment volume decreased for the fourth quarter of 2018 compared to 2017 due to lower production volumes of compound fertilizer products as a result of plant turnarounds and maintenance, reducing product available for sale.
Other average selling prices improved in 2018 compared to 2017 as higher energy costs in Asia and Europe resulted in lower production in these regions, tightening the global supply and demand balance.
Other segment adjusted gross margin per ton was essentially unchanged for the full year and fourth quarter of 2018.

    11    



Dividend Payment

On February 5, 2019, CF Industries’ Board of Directors declared a quarterly dividend of $0.30 per common share. The dividend will be paid on February 28, 2019 to stockholders of record as of February 15, 2019.

Conference Call

CF Industries will hold a conference call to discuss its fourth quarter 2018 results at 9:00 a.m. ET on Thursday, February 14, 2019. 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 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 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

    12    



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.

For additional information:
 
Media
Investors
Chris Close
Martin Jarosick
Director, Corporate Communications
Vice President, Investor Relations
847-405-2542 - cclose@cfindustries.com
847-405-2045 - mjarosick@cfindustries.com



    13    




CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three months ended 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(in millions, except per share amounts)
Net sales
$
1,132

 
$
1,099

 
$
4,429

 
$
4,130

Cost of sales
890

 
956

 
3,512

 
3,696

Gross margin
242

 
143

 
917

 
434

Selling, general and administrative expenses
51

 
51

 
214

 
191

Other operating—net
2

 
4

 
(27
)
 
18

Total other operating costs and expenses
53

 
55

 
187

 
209

Equity in earnings of operating affiliates
6

 
17

 
36

 
9

Operating earnings
195

 
105

 
766

 
234

Interest expense
61

 
74

 
241

 
315

Interest income
(4
)
 
(4
)
 
(13
)
 
(12
)
Loss on debt extinguishment

 
53

 

 
53

Other non-operating—net
(3
)
 
(1
)
 
(9
)
 
3

Earnings (loss) before income taxes
141

 
(17
)
 
547

 
(125
)
Income tax provision (benefit)
46

 
(520
)
 
119

 
(575
)
Net earnings
95

 
503

 
428

 
450

Less: Net earnings attributable to noncontrolling interests
46

 
38

 
138

 
92

Net earnings attributable to common stockholders
$
49

 
$
465

 
$
290

 
$
358

 
 
 
 
 
 
 
 
Net earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic
$
0.21

 
$
1.99

 
$
1.25

 
$
1.53

Diluted
$
0.21

 
$
1.98

 
$
1.24

 
$
1.53

Weighted-average common shares outstanding:
 
 
 
 
 

 
 

Basic
229.1

 
233.5

 
232.6

 
233.5

Diluted
230.6

 
234.1

 
233.8

 
233.9



    14    



CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS

 
December 31, 2018
 
December 31, 2017
 
(in millions)
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
682

 
$
835

Accounts receivable—net
235

 
307

Inventories
309

 
275

Prepaid income taxes
28

 
33

Other current assets
20

 
15

Total current assets
1,274

 
1,465

Property, plant and equipment—net
8,623

 
9,175

Investment in affiliate
93

 
108

Goodwill
2,353

 
2,371

Other assets
318

 
344

Total assets
$
12,661

 
$
13,463

 
 
 
 
Liabilities and Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
545

 
$
472

Income taxes payable
5

 
2

Customer advances
149

 
89

Other current liabilities
6

 
17

Total current liabilities
705

 
580

Long-term debt
4,698

 
4,692

Deferred income taxes
1,117

 
1,047

Other liabilities
410

 
460

Equity:
 

 
 

Stockholders' equity
2,958

 
3,579

Noncontrolling interests
2,773

 
3,105

Total equity
5,731

 
6,684

Total liabilities and equity
$
12,661

 
$
13,463



    15    



CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three months ended 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Operating Activities:
 
 
 
 
 
 
 
Net earnings
$
95

 
$
503

 
$
428

 
$
450

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
 

 
 

Depreciation and amortization
221

 
235

 
888

 
883

Deferred income taxes
41

 
(547
)
 
78

 
(601
)
Stock-based compensation expense
5

 
4

 
22

 
17

Unrealized net (gain) loss on natural gas derivatives
(2
)
 
(3
)
 
(13
)
 
61

(Gain) loss on embedded derivative
(1
)
 

 
1

 
4

Gain on sale of equity method investment

 
(14
)
 

 
(14
)
Loss on debt extinguishment

 
53

 

 
53

Loss on disposal of property, plant and equipment
7

 

 
6

 
3

Undistributed losses (earnings) of affiliates—net of taxes
2

 
(4
)
 
(3
)
 
3

Changes in:
 

 
 

 
 

 
 

Accounts receivable—net
37

 
(28
)
 
68

 
(57
)
Inventories
(49
)
 
28

 
(52
)
 
40

Accrued and prepaid income taxes
(5
)
 
5

 
8

 
809

Accounts payable and accrued expenses
70

 
(6
)
 
44

 
(1
)
Customer advances
(165
)
 
(3
)
 
59

 
48

Other—net
(2
)
 
7

 
(37
)
 
(67
)
Net cash provided by operating activities
254

 
230

 
1,497

 
1,631

Investing Activities:
 

 
 

 
 

 
 

Additions to property, plant and equipment
(144
)
 
(183
)
 
(422
)
 
(473
)
Proceeds from sale of property, plant and equipment
7

 
7

 
26

 
20

Distributions received from unconsolidated affiliates

 
2

 
10

 
14

Proceeds from sale of auction rate securities

 

 

 
9

Proceeds from sale of equity method investment

 
16

 

 
16

Insurance proceeds

 

 
10

 

Other—net

 
1

 
1

 
1

Net cash used in investing activities
(137
)
 
(157
)
 
(375
)
 
(413
)
Financing Activities:
 

 
 

 
 

 
 

Payments of long-term borrowings

 
(1,148
)
 

 
(1,148
)
Payment to CHS related to credit provision
(5
)
 
(5
)
 
(5
)
 
(5
)
Financing fees

 

 
1

 
(1
)
Dividends paid on common stock
(70
)
 
(70
)
 
(280
)
 
(280
)
Acquisition of noncontrolling interests in TNCLP

 

 
(388
)
 

Distributions to noncontrolling interests

 
(6
)
 
(139
)
 
(131
)
Purchases of treasury stock
(380
)
 

 
(467
)
 

Issuances of common stock under employee stock plans
2

 

 
12

 
1

Shares withheld for taxes
(3
)
 

 
(4
)
 

Net cash used in financing activities
(456
)
 
(1,229
)
 
(1,270
)
 
(1,564
)
Effect of exchange rate changes on cash and cash equivalents
(1
)
 
(1
)
 
(5
)
 
12

Decrease in cash, cash equivalents and restricted cash
(340
)
 
(1,157
)
 
(153
)
 
(334
)
Cash, cash equivalents and restricted cash at beginning of period
1,022

 
1,992

 
835

 
1,169

Cash, cash equivalents and restricted cash at end of period
$
682

 
$
835

 
$
682

 
$
835


    16    



CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
NON-GAAP DISCLOSURE ITEMS

Reconciliation of net earnings attributable to common stockholders, net earnings attributable to common stockholders per ton and net earnings 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 attributable to common stockholders plus interest expensenet, 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.

    17    



 
Three months ended 
 December 31,
 
Year ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Net earnings
$
95

 
$
503

 
$
428

 
$
450

Less: Net earnings attributable to noncontrolling interests
(46
)
 
(38
)
 
(138
)
 
(92
)
Net earnings attributable to common stockholders
49

 
465

 
290

 
358

Interest expense—net
57

 
70

 
228

 
303

Income tax provision (benefit)
46

 
(520
)
 
119

 
(575
)
Depreciation and amortization
221

 
235

 
888

 
883

Less other adjustments:
 
 
 
 
 
 
 
Depreciation and amortization in noncontrolling interests(1)
(21
)
 
(23
)
 
(87
)
 
(101
)
Loan fee amortization(2)
(3
)
 
(3
)
 
(9
)
 
(12
)
EBITDA
349

 
224

 
1,429

 
856

Unrealized net mark-to-market (gain) loss on natural gas derivatives
(2
)
 
(3
)
 
(13
)
 
61

(Gain) loss on foreign currency transactions including intercompany loans(3)
(6
)
 

 
(5
)
 
2

Insurance proceeds(4)

 

 
(10
)
 

Costs related to acquisition of TNCLP units

 

 
2

 

Equity method investment tax contingency accrual(5)

 

 

 
7

Loss on embedded derivative(6)

 

 

 
4

Loss on debt extinguishment

 
53

 

 
53

Gain on sale of equity method investment

 
(14
)
 

 
(14
)
Total adjustments
(8
)

36


(26
)

113

Adjusted EBITDA
$
341


$
260


$
1,403


$
969

 
 
 
 
 
 
 
 
Net sales
$
1,132

 
$
1,099

 
$
4,429

 
$
4,130

Tons of product sold (000s)
4,723

 
5,284

 
19,329

 
19,952

 
 
 
 
 
 
 
 
Net earnings attributable to common stockholders as a percent of net sales
4.3
%

42.3
%

6.5
%

8.7
%
Net earnings attributable to common stockholders per ton
$
10.37


$
88.00


$
15.00


$
17.94

EBITDA as a percent of net sales
30.8
%

20.4
%

32.3
%

20.7
%
EBITDA per ton
$
73.89


$
42.39


$
73.93


$
42.90

Adjusted EBITDA as a percent of net sales
30.1
%

23.7
%

31.7
%

23.5
%
Adjusted EBITDA per ton
$
72.20


$
49.21


$
72.59


$
48.57

_______________________________________________________________________________
(1) 
For the three months ended December 31, 2018, amount relates only to CFN, as we purchased the remaining publicly traded common units of TNCLP on April 2, 2018. For the twelve months ended December 31, 2018, amount includes $83 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) 
(Gain) loss 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 proceeds related to a property insurance claim at one of our nitrogen complexes.
(5) 
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 of operating affiliates in our consolidated statements of operations.
(6) 
Represents the loss on the embedded derivative included within the terms of the company's strategic venture with CHS.

    18    
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