CF Industries Holdings Inc (CF) — Q1 2015 Earnings Call Transcript

Good morning and thanks for joining us on this conference call for CF Industries Holdings, Inc. I'm Dan Swenson, Treasurer. And with me are Tony Will, our President and Chief Executive Officer; Dennis Kelleher, our Senior Vice President and Chief Financial Officer; Bert Frost, our Senior Vice President of Sales, Distribution and Market Development; and Chris Bohn, our Senior Vice President of Supply Chain. CF Industries Holdings, Inc. reported its first quarter 2015 results yesterday afternoon, as did Terra Nitrogen Company, L.P. On this call, we'll review the CF Industries results in detail and discuss our outlook, referring to several of the slides that are posted on our website. At the end of the call, we'll host a question-and-answer session. As you review the news releases posted on the Investor Relations section of our website at cfindustries.com and as you listen to this conference call, please recognize that they contain forward-looking statements as defined by federal securities laws. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including those detailed on slide two of this webcast presentation and from time to time in the company's Securities and Exchange Commission filings. These forward-looking statements are made as of today, and the company assumes no obligation to update any forward-looking statements. Now let me introduce Tony Will, our President and CEO.

Thanks, Dan, and good morning, everyone. Yesterday, we posted our financial results for the first quarter, in which we generated $486 million of EBITDA and $4.79 in earnings per diluted share. Our first quarter was about three things: great operations, a strong order book, and cash deployment. This enabled us to deliver roughly $500 million in EBITDA, even in a quarter characterized by cold wet weather, which delayed applications; and abundant nitrogen imports, which put pressure on prices. The global cost curve continues to demonstrate its reliability, and CF Industries continues to deliver significant cash flows. Now let me provide a little more color on our execution this quarter. We had a strong operating quarter, with our ammonia plants running at a system-wide capacity utilization rate of 99%, even with a major turnaround at our Verdigris, Oklahoma facility. While delivering strong production numbers, importantly, we ran our business safely, achieving an all-time record safety performance with our 12-month reportable incident rate falling to 1.1, its lowest level ever and well below the industry average of 2.8. We had a strong order book coming into 2015, which enabled us to realize attractive average prices for our products relative to market conditions. Our average ammonia price was 15% higher than last year, due to a tighter market in our decision to forego some less-attractive sales in the middle of winter in order to have the inventory available for spot sales in spring. Our UAN prices were relatively unchanged as, again, we held back from less-attractive winter and early spring sales, choosing instead to wait for the application season demand to emerge. And while our urea prices were lower on a year-over-year basis, we were pleased with the decision we made in the fourth quarter to lock in forward sales at prices that were very favorable compared to how the market developed in the first quarter. We continue to have a cost advantage from low prices of North American natural gas. Although the weather was not as cold as last year's record-setting winter, natural gas prices have continued a downward trend. With production growth and an abundant level of gas reserves, both spot prices in the NYMEX forward strip are well below where they were this time last year. Accordingly, we have decided to lock in 50% of our total gas needs at these low prices through the end of the year and have hedges in place for roughly 15% of our gas requirements for the period January to October of 2016. Dennis will provide additional color on our gas hedging in a moment. Work is progressing well on our expansion projects at Donaldsonville and Port Neal. Our urea plant at Donaldsonville is expected to begin production during the third quarter of this year. The structural steel and vessel installations are essentially complete, along with over 70% of the piping. The vast majority of steel for the UAN plant has been erected and the piping is well underway. We are confident of a fourth quarter start-up target for that plant. Work on the projects continues to be in line with our last cost projection of $4.2 billion, plus or minus a few percentage points. Additionally, we invested in share repurchases during the quarter. We became more comfortable with the projected timing and levels of our cash outflows for the balance of the year on the expansion projects. This allowed us to comfortably restart our share repurchases, which was timely, given that our share price had dropped below $300, even further below our view of intrinsic value. We repurchased 812,000 shares during the quarter and an additional 493,000 shares subsequent to the end of the quarter. Additionally, we increased our revolving credit facility from $1 billion to $1.5 billion, providing us further liquidity. As indicated on slide 12 of the deck, these repurchases have contributed to an increase in our nitrogen capacity per 1,000 shares, which was about 53 tons prior to the Terra acquisition and stands at 143 tons today. By the middle of 2016, including the production from the expansion projects, this will increase to 180 tons, with additional upside from potential future share repurchases. Now let me hand the call over to Bert to walk through our sales results for the quarter. Bert?

Thanks, Tony. We are pleased with our sales results for the first quarter of 2015, as it showed the benefit of how we manage our business depending on varying market conditions. Our ammonia segment had lower sales volume when compared to the first quarter in 2014. Since we had lower inventory available coming into the quarter, we decided to maintain some of it across the seasonally weak months of January and February. That decision benefited us in April, as we saw strong demand emerge. We were actively shipping ammonia to customers during that time period. Although our sales volumes decreased, we had significantly stronger average sales prices this year, due to the industry having a tighter North American inventory balance than in the first quarter of 2014. We sold a significant amount of ammonia into this market and as a result, we realized an average price of $542 per short ton this year compared to $472 last year. Our urea volume increased in 2015 compared to 2014. We believed prices were attractive early in the quarter, so we took advantage of available inventory and sold it during a time of favorable pricing conditions. Throughout the quarter, urea prices declined at the U.S. Gulf in association with high global supply and a notable increase in Chinese exports. In response, we used our logistical assets to move products to regions we felt offered the most attractive pricing opportunities. The strong order book we had coming into the quarter and the decisions we made about when and where to sell our products allowed us to realize an average urea price of $344 per short ton. Our UAN segment had sales volume that was slightly lower than the prior-year period, as we had fewer attractive sales opportunities where product was readily available. Our average realized price was in line with last year, as the UAN market was relatively stable and traded at strong unit-level premiums to urea. As we look to the second quarter, we are enthused about our prospects. Shipments have been brisk during the past several weeks, as farmers progressed with field work. Ammonia demand has been strong, as farmers seek to make up for a shortfall in fall 2014 ammonia application. Pricing conditions have been attractive in association with this strong demand. The urea markets saw a reduction in global prices from January through April, due to continued high production and exports from China. With U.S. Gulf prices trading down to an average of $280 per ton at the end of March, we believe a significant number of marginal producers, especially in China, are not able to cover their cash costs. This view held true, as shown in the April Indian urea tender, where Chinese producers did not offer supply at prices they deemed too low. Urea pricing recovered somewhat after the tender, moving up to $300, maybe even to $325 per short ton in NOLA by early May. We believe that the cost curve continues to hold and observe that occasionally, prices will dip below the theoretical floor, similar to what we saw in October of 2013. And then, when those marginal producers slow down shipments, it creates the condition for a price recovery. UAN shipments should be robust this spring, due to good overall nitrogen demand. With deferred fall ammonia applications and the relatively tight ammonia market, we expect that UAN will be the product of choice for farmers' nitrogen needs. However, the decline in prices in the urea market is expected to weigh on UAN prices as well. We entered the second quarter with a favorable order book, and we'll continue to take new orders as we progress through the quarter and into the fill season. We normally don't speak to the second half of the year on our first quarter call, but I will make the observation that with the start-up of our new urea and UAN plants in Donaldsonville, we will have less net ammonia available for sale in Q3 and Q4. This will allow us to make decisions with our customer and sales mix to ensure we are realizing the highest value available for our ammonia inventory. As always, we will balance our production mix based on product prices in order to maximize our earnings. Now let me turn the call over to Dennis.

Thanks, Bert. We had a good operating quarter, as evidenced by our 43.6% nitrogen product segment combined gross margin, $486 million of EBITDA and $4.79 of diluted earnings per share. A few discrete items impacted the year-over-year comparability of our EBITDA. These include the losses we had on foreign currency derivatives this year compared to the gains we had on those items last year. Largely offsetting these was the swing from a mark-to-market unrealized loss on gas derivatives last year to an unrealized gain this year. Our ammonia segment cost of sales is reflective of the price of natural gas that we purchased and used in the fourth quarter to produce ammonia inventory that was sold in the first quarter, as represented on slide six. Our reported ammonia segment gross margin percentage was also negatively affected by ammonia that we purchased at market prices from our Trinidad joint venture, and then resold to Mosaic at similar market-based prices. We had a full quarter of these sales in 2015 compared to only a partial quarter in the prior-year period. The profit from the production of this ammonia continues to reside in the equity and earnings of operating affiliates line of our income statement. In the first quarter, we had realized losses on gas hedges of $33 million. These hedges were entered into during the third quarter of 2014 when gas prices were near $4 per MMBtu. However, as gas production increased and spot and NYMEX prices decreased, we benefited, as the first-of-month settlement prices dropped to around $2.50 per MMBtu at the beginning of April and May. We believe North American gas producers have exceptional efficiencies and are driving innovations to continue increasing their production capacity while decreasing their costs. However, as Tony mentioned, we also believe that the current gas price environment presents a good opportunity to take some cost risk off the table for the rest of 2015. In accordance with this view, we decided to hedge 50% of our total gas needs for April through December, with 4.2 million MMBtus per month or about 20% of our needs hedged with collars between $2.30 and $3.20 per MMBtu and 6.5 million MMBtus per month or about 30% of our needs swapped at $2.86 per MMBtu. Additionally, we believe the forward curve out into 2016 also looks compelling at this time. We have chosen to hedge about 4 million MMBtus per month for January through October of 2016 with an average strike price of $3.04 per MMBtu. We continue to monitor and evaluate the gas market and will look at appropriate additional opportunities to hedge our gas exposure. The decline in our gas costs has been coincident with the decline in oil-based energy costs worldwide. Oil prices have since stabilized around $65 per barrel Brent. While the decline in oil prices is providing some cost relief to producers buying gas on oil in contracts, these producers are not the marginal production for urea. That continues to be Chinese producers using anthracite coal, which at recent mine mouth average prices of about $130 per metric ton, has been relatively stable. Our capital expenditures during the quarter totaled $445 million, with $318 million spent on the expansion projects. And as Tony highlighted, as of May 1, we have repurchased about 1.3 million shares since the beginning of the year. We returned $377 million to shareholders through these repurchases and further increased our nitrogen capacity to about 143 tons per 1,000 shares. With that, Tony will provide some closing remarks before we open the call to Q&A.

Thanks, Dennis. We delivered strong results in the first quarter, despite difficult weather and market conditions. And we are well positioned for another strong quarter in Q2. The global cost curve continues to provide an accurate model of how the industry operates, and North America is clearly the advantaged location for nitrogen production. We are executing well, and our business is producing reliable, sustainable cash flows. We are delivering on our strategy to increase cash flow per share by increasing nitrogen capacity per share, which will see a dramatic increase as we bring on our new capacity additions beginning in Q3 of this year. Although our shares have dramatically outperformed all of our peers, as shown on slide 13, given the substantial growth in nitrogen capacity per share we are about to experience, there is still an awful lot of runway left for us. Finally, I would like to congratulate and thank our operating team and the plants and distribution facilities for keeping their eyes on the tasks at hand and keeping themselves and each other safe. It is a great accomplishment to work safely while running our facilities as hard as we are. Keep up the great work. With that, we will now open the line to answer your questions.

Thank you and good morning, everyone. Can I just ask you, as you think about what's happened with Chinese exports this year and the change in the tariff policy or the lack of a seasonality to it, right, so it's flat all year long. Do you envision, one, that exports will decelerate as we move through the year? And two, just as we saw probably weaker pricing in the first quarter as a result of an increased amount of exports, if we see fewer exports year-over-year in later periods – and I'm thinking maybe during fill season – do you think we'll have less of a sort of a price decline during seasonally weak periods of time? I hope that makes sense.

Good morning, Vincent. This is Bert. And so it's been an interesting development over the last several years as the Chinese exports have consistently ramped up, peaking last year, we believe. And then the changes that are taking place within China relative to the tariff change, electricity costs, freight costs, and then currency issues. And so when I look at what could happen in the coming months with exports being stable, with 4.4 million tons coming out in the first quarter, I would expect it to be a little more stable and probably less. Well, with their lack of participation in the tender and then now trying to set a price floor, it looks like there's probably more ratable nature taking place within the Chinese production community. And so in terms of fewer exports or in the later periods and supporting a fill price, I think you're spot on. I think from what the expectation was probably in March, which was the floor of the market to what fill will be to probably what reality will be in Q3, will be at a higher level.

Okay. And if I could just ask you, I picked up from one of the trade publications that maybe some of the rainy weather near Donaldsonville had maybe pushed back the start time of the urea facility. Is that correct or incorrect?

Well, good morning, Vincent. Obviously, when it's really wet in Donaldsonville, it's hard to get as much progress as we'd like. But we are still absolutely committed to a Q3 start-up, and there's nothing out there that would suggest anything different than that to us today. It might have moved it a week or two later in the quarter than what we had originally desired. It doesn't change the overall sort of rough timing of a Q3 start.

Okay. Great to hear and great job on the execution. It's really great. Thanks.

Yes. Thank you. Bert, a question on your forward order book. You mention that your book is well priced and certainly above some of the lows that we saw in New Orleans. I think you mentioned $280 short ton NOLA on urea. We've obviously seen a nice rebound in pricing. I think there's a barge yesterday at $335. So how does your book compare to current spot prices? Is it reflective of those current spot prices? And it sounds like you positioned yourselves that you got a lot of inventory to take advantage of the spot uptick.

Yeah. So probably not going to give exact numbers, but we're pleased with that order book because as I mentioned in my prepared remarks that we did stay out of the market and kind of set on the sidelines during the market lows. And we've seen, I think, an unexpected, relative to the industry and where inventory was positioned, a nice price increase. And so the price that you quoted, $335 is reasonable for a spot barge in May. And we're even seeing positive pricing out into June and into late June. And so how does our book compare and with the current market? I think favorably. And we do have inventory, and we're selling into this market and anticipate it to continue probably through June and a little bit later, especially into Indiana and some of the pivot areas through UAN.

Okay. Just a follow-up for Tony on share repurchases. Last quarter you were a little hesitant to repurchase shares until you felt better about the expansions, which – or at least that's what you said on the call. But as you felt better about the completion, does that mean we can look forward to an acceleration of share repurchase? Or are there any other constraints such as debt levels and ratings that would cause you to hold off on the rate of share repurchase in the current quarter and the balance of the year?

Good morning, Don. So as you know, the latest repurchase authorization that we're operating under was put in place last July, and it was for $1 billion that runs through 2016. We've got about $250 million left on that authorization today. And we're going to go ahead and continue to make as rapid a progress on that as we can, given threading the needle on the issues that you talked about, which is maintaining appropriate liquidity and kind of getting through the discussions with the agencies. As Dennis mentioned last call and we continue to be focused on, we'd love to go ahead and take out some additional debt associated with the new cash flow that's coming on stream with the expansion projects and put that to work at share prices that are woefully low right now and vacuum up as many of those as we can. So we haven't changed our strategy with respect to that.

Yes. Hi. Good morning.

Good morning, P.J.

Last quarter and even this quarter, you talked about stability in Chinese anthracite coal prices. But the data I've looked at year-to-date, I think anthracite coal is down 10%. Thermal coal is down even more. So maybe there's a difference in data. But what do you think is the cash cost of anthracite coal – urea cash cost of anthracite coal-based producers? Thank you.

Yeah. P.J., this is Dennis. We're looking at about $130 at a mine mouth cost right now. And if you look at the slide, I believe it is on page – just grab it here for you – look at the slide on page 10, okay? What it shows there is it's about – it says $132 per ton. It takes approximately 30 MMBtus to 35 MMBtus per ton or MMBtus per ton of urea of anthracite coal to make it. And our view is that at the transport cost from mine mouth to the plant is probably, on average, around $15 per ton. So if you look at the mathematics there and you add all that up plus the transport to the coast, it's probably going to come in around $310 per short ton NOLA would be the cost of Chinese producers at the current coal prices that we see.

Okay. Thank you. That's very helpful – go ahead. Sorry.

No. Go ahead.

Yeah. So my second question was, you guys make a lot of money by making these in-market decisions about when to sell ammonia, urea, UAN and what to sell, the basis difference and all that stuff. That expertise allows you to make more money than you would otherwise make. How do you make those decisions? Is that institutionalized, the process, or is that just Bert making all the calls?

That's why Bert gets the big money. No. So Bert and his team – and I'll turn it over to him just momentarily here – but we take a very analytical approach to understanding where the market sits. So we try to understand all the factors that go into it: what cash costs are in other parts of the world, what import levels look like coming into the U.S., what demand centers there are outside the U.S. to soak up some of those tons that are moving around the globe, what producer and downstream inventory positions are, and how many acres are going to be planted and what demand looks like and how we see it developing. So Bert and his team take all of that information and put together their view of demand and where they think prices will settle, and then they build the book around and take our positions based on that information. And it just turned out to be prophetic in that approach. It's easier for me to compliment you than to have to do it yourself.

Very nice. I think we have a very good team. The team is united around many of the same issues, and we have a process that's been developed over the years where it's a quantitative view of the market. The market is an international market. It's not a market share issue. It's not a North America market, but we're playing in a world market and the team is broad. We have people all around the world through KEYTRADE and as well as with our domestic team with different levels of experiences. But it starts with supply and demand. And then you work your way through from distribution to the international markets to storage assets and distribution capabilities, with different modes and freight options and arbitrages that are available. And then you have to bring in the whole customer dynamic of psychology and thinking around risk and reward as well as timing with what they're thinking, acres. The last one is probably our production options. We have many different products or legs of the stool that our company stands on with urea, ammonia, UAN, ammonium nitrate, and DEF. When you look at the production mixes, that gives us a lot of optionality, and we're building even more advantages into the company with these new production plants. When you put that all out before you and have those types of choices, it allows us to be successful. We enjoy the position that we have.

Thank you for the detailed color. Thanks.

Yes. Thanks. Good morning, everyone. Maybe first question for Dennis on the gas hedging going a bit further out on the gas hedges, both in 2015 and 2016, than has been the recent experience. And maybe at a higher-level walkthrough kind of the institutional approach to gas hedging. And is it just a market view on the natural gas market or the risk approach on your cost base? Walk us through the considerations you make when you step further out on the hedging.

Adam, I'm going to go ahead and ask Chris Bohn, who's with us on the call today, who handles all of our gas procurement and supply logistics to address that one.

Yeah. Good morning, Adam. As far as our philosophy on natural gas hedging, it really hasn't changed. We believe that there's still very strong North American natural gas fundamentals, and that's due to the immense resource space we have and then the declining production costs that we're seeing specifically over the last six months. If you recall, our strategy is really underpinned by two points. One is to mitigate risk. A lot of the hedging we did last year was to mitigate the weather risk when we saw some of those drastic spikes. Additionally, it was to lock in attractive prices. I would say that's really where, given the strong fundamentals and the flattening of the curve, where we're participating today. The positions we have in place for 2015, we feel very comfortable with where we're participating all the way down to $2.30 for 70% of our production requirements. So that's great. Looking out into 2016, we just saw some very attractive rates at the $3.04 and decided to move into those.

Okay. That's very helpful. And then maybe a second question on UAN. I think earlier this spring, you saw a pretty wide kind of price disparity on an N equivalent basis between UAN and urea. That since narrowed somewhat. Maybe talk about what you're seeing with customers, if that price spread has really driven some switching between the products and how you think about that premium moving forward.

Yeah. So the spread that we saw was driven by a couple of different issues, and ammonia stayed fairly steady from Q4 into Q1 and now through Q2. It was urea that we saw a worldwide drop, and again, as we mentioned earlier, driven by the excess of Chinese exports and the imports that arrived into North America. UAN, with the fill programs that we've put in place and then the subsequent sales, I'd say blocks that we did in Q4 and into Q1, we're able to sustain the price level of UAN. We believe in UAN. It has a pretty positive future, not only for this year but in future years, just because it's such a great product and its versatility agronomically. We believe that the retail as well as the farmers segment will continue to be attracted to that because of the advantages it offers to the farmer. They're willing to pay more for it. Yes, it has narrowed for two reasons. UAN has come off a little bit as we've gone through Q2; and urea has come up. But the premiums in the market on the retail level to the farmer have stayed pretty consistent. It's really on the NOLA and the inferior production or the producer to the retail and wholesale segment that was pretty wide. Regarding switching – and we talk about this each year – we haven't seen a lot. As I mentioned, we probably will not hit the record ammonia level that we did last year, just due to the fact or the impact of less inventory available to sell. That being said, ammonia, even at a price spread to urea and UAN has been a positive six months or at least, now we're in the fifth month – but a positive two quarters. I think we're going to see that for both urea and UAN also as we go forward.

Alright. Great. I appreciate the color. Thanks.

Thank you very much for taking my call. You started the year with lower ammonia inventories, and you mentioned the first half should be lower in terms of deliveries versus the first half of 2014. But given the recent price action in Midwest ammonia and also strong April plantings and some key anhydrous states, can you just give any color on how you're positioned to further benefit from your production versatility, specifically, versus urea?

Well, Chris, I'll give you just some high level and then I'll ask Bert to further opine on topics that I missed. If you go into the segment results, even though there's great performance that we've had on our ammonia business this year, our profitability per nutrient ton is better on the upgraded products than it is on ammonia. To the extent that we can upgrade ammonia into urea and then further upgrade it into UAN, every time we upgrade ammonia, we get more margin for those same molecules of nitrogen. So that's a better decision for us. In some ways, us continuing to run our upgraded plants as hard as we can has a double benefit. The first one is we get more margin on the products that we're upgrading to. The second one is it means that you don't get sloppy in terms of the total amount of ammonia that's out there, which means that's it's a tighter ammonia market. The prices then are that much higher on ammonia as well. So it's kind of the gift that keeps on giving. Bert, do you have any other...

I think relative to the issue or specific to ammonia, this year, we had just a great run in terms of how it began in the South, and then we had some weather issues. However, the Western Corn Belt kicked off with Nebraska running very, very hard. Then as it moved east into Iowa and Illinois, that's when the North started kicking off in North Dakota and Canada, which is still going very well. It allowed us, for the distribution assets for that incremental ton, to get it in the market and focus. This is where our supply team did a great job, and the distribution team running 24/7, putting the product in some specific terminals with the pipes and our barges and having product available. That was probably one of the key success factors for this period.

Perfect. And just my second question would be just when you look at the volatility of Eastern European supply over the last, let's say, 12 months or so, can you just address your own in-house views on some of the oil and contracts there, the timing of it, potential new agreement as it pertains to ammonia? I understand, obviously, only a handful of these producers use those types of contracts, but just any color there would be appreciated. Thank you.

A lot of those contracts, Chris, are somewhere in the six to nine months long, a few of them a little bit longer than that. The other issue around deepwater ammonia or NOLA ammonia, that's relevant for us, I guess, and largely only in two ways. While occasionally, we will do an export ammonia cargo that then has to compete on the deepwater ammonia market, generally, the places where it really comes into play is the price at which we buy ammonia out of Trinidad and the turnaround and the price at which we sell it to Mosaic in Tampa. The deepwater ammonia price doesn't really affect the in-market ammonia price too much because there's no availability, really, for traders to be able to move ammonia up and into the Corn Belt because they don't have the storage assets. So it doesn't affect really our ammonia business that much, other than on the industrial side. However, Dennis...

Yeah, Chris. The other thing is just looking at nitrogen more broadly and thinking about urea. If you look at slide nine in our deck, it has our updated version of the cost curve for urea. You will notice about that versus prior cost curves that we showed when oil prices were at $100 a barrel is that some of the smaller columns related to Eastern Europe and Western European production have moved left from where they had been before to reflect the effect of reduced oil prices on the ability to produce. But when you step away from those movements, you'll see that, A), those columns are not very thick on the graph; and, B), at the end of the day, the marginal producer still is the anthracite coal producer in China. That sort of remains unchanged. As we think about oil prices and the effect that they really had in our business, the answer to that is not very much.

Perfect. Thank you very much.

Hi. This is Carl Chen stepping in for Ben. Thank you for taking my question. I just wanted to circle back with regards to your expectation for the spring. How much of the Q4 pent-up demand do you expect to be shifted into the spring of this year? And looking forward, how should we think about the summer fill program given the limited producer inventory?

Okay. The expectation for the first half is very positive. We're projecting 89 million to 90 million acres of corn, and we're seeing healthy applications. Above 180 pounds per acre for corn, and you're seeing possibly some switching in the southeast. It's been very wet in that area, but that corn acreage area is pretty small. Positive rice acres coming in. The expectation for us in terms of how the rest of the quarter, Q2, will progress is that we believe inventories will come out of the quarter low for all products. We think the industry will be in the same position as well as the wholesale and retail sector. That will set up a positive start to the fill season. We don't really anticipate a fill season for urea. We've never really done that. It's more as the market progresses, and as we've mentioned earlier, it's more of an internationally driven area. Ammonia, as I mentioned in my remarks, we are bringing on the production in Q3 and Q4 for the expansions in Donaldsonville. The excess ammonia or the extra ammonia that we would have put out into a fill program probably will not be put out or the degree that we have in the past. We will prepare for Q4. For fill, then, focused on the last product, would be UAN. Traditionally, we've had very successful fill programs that are driven by the need to logistically move the product into place with our retail customer base. We're working with them. We'll start probably working on that in June with an expected later period start. We think it'll go well.

Great. Thank you.

Good morning, everybody. Dan, congratulations again on the new title.

Thank you.

Sure thing. Couple questions for you. First, if we're going to hover around this 89 million-acre level of corn planting here in the U.S. and that effectively caps the total demand for nitrogen here. What steps do you need to take, do you think, to maintain your edge in distribution that we've talked about, if this really becomes a matter of market share, excluding your expansions? Are there any partnerships or tie-ups or other asset investments that you're going to need to do, particularly, if we get competitors' projects in the Midwest starting up in 2017, 2018?

Good morning, Matthew. Couple of things: even after all of the capacity projects that are in flight come on stream, the most notable of those are our two projects. North America will continue to import about 20% of our total nitrogen requirements. Really, what we're doing is, for the most part, kicking out the majority of imported products. We will periodically do an export cargo here or there, but North America will continue to be an import-driven marketplace for the foreseeable future. We have entered into, as you said, a couple of longer-term, more partnership kinds of relationships with companies like Mosaic for ammonia and Orica on ammonium nitrate supply. Those are things that we continue to evaluate and look at. But day in and day out, we don't see in the near term there being a dramatic change in the way that we go to market and the way that we do business. We also have the largest, most expensive distribution asset base in North America. We intend to continue to leverage that to full effect. Bert, do you have any other sort of thoughts?

Yeah. I think going back to – even if acres have been capped and, actually, over the last five years, we've seen a fairly narrow band of corn acres from 90 million to 98 million. Even in the 98 million year, not all of that was planted. I'd say we're probably in a 90 million to 95 million-acre band. We've effectively been capped. So where that goes then is our product mix and where we take our products, how we move our products, what product we're producing, the growth of DEF and the whole industrial side has been positive to CF. How we've moved our contracts with the Mosaic contract and the Orica contract moving to some long-term contracts that secure the liability of some of our ammonia as well as ammonium nitrate movement. As Tony mentioned, just how we seamlessly move products through the market, how we can store and bridge different markets maximizes our efficiency. And the last two things are our people. We think we have a great team that works with our customers to be able to move our products. You mentioned distribution. Some of our industry colleagues have focused on gaining distribution in different markets in Brazil or India or different places. At this point, we're not looking at that, but we have great relationships around the world and we'll continue to move our products.

Matthew, one other thing is global demand for nitrogen is growing at about 2% per year. A lot of that, at least with respect to the U.S., is going to be on the industrial side, in particular, DEF. There are few other places where that will continue to grow as well. Even though nitrogen from an ag-application perspective may be relatively constant, there are other places that we're looking to, to be able to move that product into. It's nice to be participating in a market with pretty sustained overall growth characteristics on a global basis, and that's a good dynamic to be in.

Thanks, John. Let me follow up with this: How many tons of product are you currently selling into the non-ag market? I noticed your mention of good sales into the emissions abatement market, and I was wondering if that's a short-term bump from the new MATS standards or if it's something else that should continue.

I mean think about it as kind of two-thirds, one-third, in rough order of magnitude. It's about two-thirds into the ag market and about one-third into the industrial and other kinds of application. Now embedded in industrial, we would put the ammonia contract with Mosaic. We'd put the ammonium nitrate contract with Orica. Those are clearly non-ag-related sorts of contracts. So you bundle all that together. It's about a third of our business.

Thanks very much.

Thank you. That concludes our first quarter earnings call. If you should have any additional questions, please feel welcome to contact me. Thank you for your time this morning.