CF工業控股 (CF) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for your patience and welcome to the fourth quarter 2006 CF Industries earnings conference call. My name is Bill and I'll be conference coordinator for today. [OPERATOR INSTRUCTIONS]

I would now like to turn today's call over to your host for the presentation, Mr. Charles Nekvasil, Director of Investor Relations. Please proceed, sir.

Thank you, Bill. Good morning, ladies and gentlemen, and thank you for joining us on this conference call for CF Industries Holdings, Inc. I'm Chuck Nekvasil, Director of Public and Investor relations, and with me are Steve Wilson, our Chairman and Chief Executive Officer, Ernie Thomas, our Senior Vice President and Chief Financial Officer, and Dave Pruett, our Senior Vice President Operations. Yesterday afternoon, CF Industries Holdings, Inc. released its fourth quarter results. As you read our news release posted on the Investor Relations section of our website at www.cfindustries.com and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of Federal securities laws.

All statements in this call other than those relating to historical information or current condition may be considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements.

These risks and uncertainties include those spelled out in the Safe Harbor statement included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties.

Now let me introduce Steve Wilson, our Chairman and Chief Executive Officer. Steve?

Thanks, Chuck, and thank you all for joining us this morning.

Yesterday afternoon CF Industries announced fourth quarter net earnings of $8 million, or $0.14 per common share. That compares to a net loss of $12.8 million, or $0.23 per common share, in 2005's fourth quarter. For the full year we reported net income of $33.3 million, or $0.60 per common share, which compares to a net loss of $39 million, or $0.71 per share, on a pro forma basis in 2005.

The fourth quarter to fourth quarter comparison reflects the impact of 2005's hurricanes, when historically high natural gas prices led to significant market disruptions. The full year comparison reflects items related to our August 2005 IPO. In our news release you'll find reconciliations of certain non-GAAP disclosure items to help you understand how those IPO related adjustments affected reported performance.

In light of the significantly different external conditions we saw during the two fourth quarters, I won't spend a great deal of time going over the comparisons. But briefly, as you'd expect, we enjoyed sizeable volume increases in both nitrogen and phosphate segments. Nitrogen volume was up nearly 19% and phosphate was a bit stronger with a 20% increase.

Average selling prices were lower in both segments, slightly lower in phosphate and significantly lower in nitrogen where prices reflected the effect of more moderate natural gas prices. The increased volume more than offset lower average selling prices in both segments, leading to a 7% increase in nitrogen sales and a 16% increase in phosphates sales compared to 2005's fourth quarter.

Fourth quarter performance in nitrogen included a negative mark-to-market adjustment of $9.4 million compared to the negative adjustment of $9.3 million in 2005's fourth quarter. While the mark-to-market effects of the two year's fourth quarters were comparable, adjustment for asset retirement obligations, or AROs, and Bartow's demolition costs were $9.5 million higher in the 2006 fourth quarter. These adjustments are detailed in the news release and Ernie Thomas will discuss them further in just a moment.

In some respects, you can look at fourth quarter 2006 as two separate periods. The quarter's first two months saw typical fall application volume for both nitrogen and phosphate. October was a bit slower than usual due to weather conditions in some regions, but November came back with good ammonia and phosphate movement.

However, natural gas prices remained persistently high relative to market fundamentals at the start of December. Some customers, recognizing this apparent disconnect, stayed on the sidelines, anticipating declining natural gas and declining nitrogen prices.

Natural gas prices did, in fact, decline significantly through December as a result of the milder than usual weather. However, due to strong international demand and other factors, nitrogen prices actually rose, in effect decoupling North American prices from natural gas costs. At that point, many customers recognized that significantly reduced imports, especially of urea, might tighten available U.S. supply.

Those customers then realized that the likely strengthening of nitrogen prices into the spring suggested that the buying opportunity was now. So in December we experienced a surge in orders just as nitrogen prices rose and natural gas costs fell, thereby locking in attractive margins on a sizable amount of forward business.

Before I turn this call over to Ernie Thomas to provide added detail on the quarter and full-year numbers, I'd like to note several accomplishments of which we're particularly proud. We have a long history of outstanding safety performance at CF Industries. In 2006 we believe for the first time in our history we completed an entire year without a single lost time accident at any of our locations.

Ten of our company-operated distribution facilities now have continuous records of more than 30 years without a lost time accident. And our ammonia terminal in Aurora, Nebraska recently passed 42 years without an LTA and it is still adding to that record.

Those of you who have spent time in industrial settings know that these sorts of achievements don't just happen. They're indications of individual attention throughout the organization. So safety is an important objective in its own right and I believe it's good business.

Now Ernie will discuss the financials.

Thanks, Steve. Good morning and thanks for joining us on this call.

As Steve mentioned earlier, our performance in the fourth quarter was in sharp contrast to our 2005 fourth quarter performance. And we are pleased to be able to conclude the year on a positive note.

Our financial highlights for the quarter were as follows. Total revenues for the fourth quarter increased by 9.3% against 2005 to $506 million. Total tons shipped increased by 19.1% as our nitrogen shipments increased by 18.7% and our phosphate shipments increased by 20.4%.

We're also pleased to report that our total nitrogen production was up by nearly 90% for the quarter to 2.2 million tons. We were able to operate at near capacity levels in the current period compared to approximately 50% of capacity in 2005.

Our average realized gas costs were down sharply in the quarter by 17.6% at Donaldsonville and by 25.7% in Medicine Hat. Our mark-to-market losses were $9.4 million for the quarter, essentially flat against corresponding adjustments of $9.3 million in 2005.

Despite the difficult conditions at the beginning of the year, our net cash position improved to $219 million compared to $81 million at the end of 2005 for an improvement of $138 million for the 12 months.

As Steve mentioned, the fourth quarter charges for AROs and demolition costs were $9.5 million higher this year than the charges for these items in last year's fourth quarter. That $9.5 million increase includes $8.2 million related to Bartow, which is reflected in other operating expense. The remaining $1.3 million of the increase is reflected in cost of sales.

Our net earnings for the quarter were $8 million versus a net loss of $12.8 million last year. In response to improved market conditions, our gross margin for the quarter rose to $42.9 million compared to just $2.3 million a year ago.

Lower natural gas costs, reduced costs for purchased products, and higher volume together more than offset the effect of lower nitrogen selling prices. More specifically, our nitrogen selling prices decreased revenues by $32.3 million in the period, while phosphate prices increased revenues by $3.9 million.

Improved production rates in our nitrogen business resulted in a reduced need to purchase products and a savings of $33.7 million in cost penalties compared to 2005. Increased sales volume in the current period improved our gross margin by $10.9 million. Our realized gas costs declined by $22.1 million in the quarter versus 2005, reflecting lower prices both at Henry Hub and at [ACO].

Our SG&A costs for the quarter were flat against the prior year at $14 million. Cash flow from operations totaled $40.3 million for the quarter versus a negative $85.2 million a year ago. Inventory decreased by $39 million and customer advances decreased by $46.1 million, reflecting increased shipments during a strong fall season for all products and the effect of lower nitrogen prices.

Our adjusted free cash flow, which does not include changes in customer advances or in other working capital items, totaled $38.7 million for the quarter compared to a negative $6.4 million for the fourth quarter of 2005.

Capital expenditures for the year were $59.3 million, well below our guidance of 70 to $80 million, due primarily to delays in timing. We expect this shortfall to carry over into 2007 and, as a result, we expect our capital spend to be in the range of $90 million to $110 million for full year of 2007.

Our financial position and liquidity continue to be strong. As of December 31, 2006 we had cash and short-term investments of $325.6 million and we have $176.4 million in credit available under our senior credit facility, which was undrawn. Earlier this week we declared our regular quarterly dividend of $0.02 per share payable on February 28th.

In summary, despite the difficult start to the year, we are pleased with our performance in the fourth quarter and believe that we are heading into 2007 with a lot of positive momentum. We improved our overall financial position significantly during 2006 and are well positioned to deliver strong performance in the coming spring season.

Steve?

Thanks, Ernie.

Obviously there's a lot of optimism going into 2007 spring planting season, especially in the Corn Belt, where most of our distribution facilities are located. At the macro level, we started with low worldwide grain stocks, and not just for corn but also for wheat. World nitrogen markets remained strong and China has not emerged, as some had feared, as a renewed export force. In fact, they have reinstituted their 30% tax on urea exports.

New capacity continues to come online but some has been delayed and the market has done a good job so far of absorbing what has come on. In the fourth quarter, robust world markets and relatively high ocean freight rates significantly reduced the attractiveness of the U.S. market to offshore urea producers and we have seen only moderate import volumes so far this quarter.

Higher natural gas costs in some countries suggested changing global landscape, benefiting North American nitrogen producers. We all recognize the strong additional demand for corn to feed the rapidly growing ethanol industry, as well as to meet renewed grain export opportunities.

This demand, which forecasters suggest could well drive corn acreage up to more than 87 million acres, is also expected to be coupled with a return to normal fertilizer application rates, itself a significant boost to overall [NPK] demand.

And let's not overlook the strong outlook for phosphates. Supply is tight with limited producer inventories. These low inventories, coupled with good U.S. and global demand, have led to further strengthening of the market during the last three or four weeks.

We entered 2007 well situated to capitalize on this expected demand in nitrogen and phosphate. We have a strong order backlog under our forward pricing program and otherwise. We expect our nitrogen and phosphate complexes to operate at full capacity, other than normal maintenance, throughout the first quarter.

As I noted earlier, we've booked much of our spring season orders at attractive margins in December's falling gas cost and rising fertilizer price environment. So while we must always be cognizant of the risks that weather and other uncertainties can present in this commodity industry, I'm optimistic that we will deliver strong first quarter results, continuing the uptrend that began in fourth quarter 2006.

We are well insulated from the very recent cold weather-induced uptick in natural gas costs because we've already taken favorable gas positions in support of our forward sales.

With that, I'll open the call to your questions. Bill, please explain the Q&A procedures.

Thank you very much, sir. [OPERATOR INSTRUCTIONS]

Our first question comes from the line of Steve Byrne of Merrill Lynch. Please proceed,

Hi. Thank you. Steve, I was hoping you could give a bit of an update on your growth and acquisition strategies and in particular comment on a couple of items. It wouldn't surprise me if [Mosaic] would be willing to sell [Fas Ferco] and probably the Saskatchewan government would want to do as well. Is that -- is that an asset that you would be interested in?

And then secondly, is the rising natural gas price environment throughout the former Soviet Union, does that put a floor under prices going forward and increase the potential return that you might get from a Trinidad project?

Well, that's -- good morning, Steve. In terms of our strategic objectives of growth and diversification, we're working hard on a number of initiatives and it wouldn't be appropriate for me to comment on any specific ones. Obviously, valuations in this industry are pretty high at the present time but we know the assets that we might be interested given the opportunity.

With respect to kind of the global natural gas situation, we've seen what the Russians are doing with their asset, their big reserves of natural gas. They're certainly using those as economic weapons and some would say as political weapons, and so they've been raising the price paid by former Soviet republics for their gas supply and that's increased the cost profile for a lot of producers and actually relieves some pressure on North American nitrogen producers.

That kind of development really makes the decisions that we have to make more complicated because it has increased the competitiveness of North American assets, or some might say decreased the un-competitiveness of North American assets. So the decisions that we're looking at with respect to Trinidad and with respect to [Petco] are a little more complicated than they were, let's say, six months to a year ago.

And even just a very recent development is there's a group of countries, including Russia, Iran and Qatar that are getting together on March 9th looking at forming the gas equivalent of OPEC, which again would have a positive effect on our profile going forward. So we have a lot of activity in this whole area. We hope to move some projects forward in quick fashion, but we have nothing specific to announce at this point.

Thank you.

Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Brian Yu with Citigroup. Please proceed.

Hey, Steve. Quick question on your inventories, which uncharacteristically declined in the fourth quarter. Any product availability concerns surrounding this?

No. Good morning, Brian. We're very comfortable with where we are. We certainly have a good look into what our customer demand pattern will be in the spring. It's robust. And we're doing, as we always do, positioning inventory appropriately, preparing for what we hope would be a normal spring moving from south to north as the weather improves.

And we're comfortable with our position so long as we don't have something strange happen. Some delays or acceleration in the season might put a little stress here and there but we don't anticipate anything significant.

Okay. And you commented on a surge essentially for pricing order flows when we initially saw the divergence between nitrogen and natural gas prices. Could you perhaps put it in kind of -- wrap any kind of numbers around that in terms of how much of your 1.9 million tons at [our part of the] FPP program as of February 6 may have been locked in during that period of time?

Well, we -- a lot of it came in during that time. I don't have specific numbers on that. But I will give you a little bit of a flavor for the situation that we are looking at, particularly on the gas side. On the 30th of November the cash cost of gas at Henry Hub was $8.32. By the end of December it was $5.51, so that's a decline of $2.81.

And if we move out, say, to look at the February future, on the 30th of November that was $8.89 and by the 29th of December it was $6.29, so that's a $2.60 decline. We viewed that as an opportunity, both on the gas side and on the FPP side, as nitrogen prices moved up and we think we did a reasonably good job of exploiting that opportunity.

Great. Thanks.

Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Mike Judd of Greenwich Consultants. Please proceed.

Good morning. Thanks for taking my question. Just a couple of real quick things here. What tax rate should we be using for '07?

You should plan on 39%. We had a few discrete items in the fourth quarter that reduced it, but plan on 39.

Okay. And I'm sorry, I missed what you said about CapEx for '07.

90 to 110.

Okay, great. And just one last thing here. In terms of selling less or having less booked material, I guess, could you comment on how that -- what impact that has on pricing going forward? I imagine it's a positive variant, but maybe just provide a little bit more detail for those of us who are new?

We actually -- we don't have less booked business, we have more. And just to put it in context, we have about 50% -- we had about last Monday or Tuesday when we took this snapshot we had about 50% more forward business on our books than we did a year ago. Roughly the same amount we had two years ago.

So it's a substantial improvement over last year and the reason for that is last fall we had the impact of the hurricanes, we had extremely high natural gas costs and the nitrogen prices did not reflect fully those gas costs. So we didn't -- we did not attract a lot of business with positive margins during that period.

And the implication on pricing?

For -- help me a little bit, Mike.

For having more forward business booked.

Well, what we do in our shop here is every day we're looking at what the market will provide in terms of opportunity for pushing up prices. We look in our own cost profile and our own order book and we look for opportunities to take advantage of what the market is telling us and what our order position is. And we'll actually look transaction by transaction, customer by customer. We've been obviously more aggressive on our forward pricing than we have been for quite a while.

Great. Great. Thanks a lot for the help.

Thanks, Mike.

Thank you very much, sir. [OPERATOR INSTRUCTIONS].

Your next question comes from the line of Bob Goldberg of Scopus Asset Management. Please proceed.

Good morning, Bob.

Good morning. A couple of questions on the ARO and demolition costs. Are those typically a 4Q adjustment item or accrual item or do they recur during various points of the year? I'm just trying to understand from a modeling perspective.

Bob, we have booked these in the fourth quarter in the last couple of years but this is -- this is pretty much a continuous process. And if I may, let me take a minute and describe what we have here. These are future obligations for closure and remediation in Florida, principally related to our Bartow plant and stack but not limited to that. These are very complex issues.

This is the first time we've ever closed a facility like that and we're closing it under regulations that are complicated and they have changed over time. The physical activities are complicated and are affected by various factors, not the least of which is rainfall. And we put on top of that a rather complex set of accounting rules.

So on a periodic basis, and most of this is annual, we review the entire situation; we look at the scope of the work, we look at the status of our work in light of the regulations and we revise our estimates for closure and remediation.

And then we have to look at the timing of our expenditures, we look at -- we have an independent engineer look at it because that's required in the regulations, and then we calculate the future value of the -- present value of the future expenditures, all according to the accounting rules.

The increase in the liability this year is due to the increased scope of work, some changes in estimates and timing and we have the normal amortization and accretion of the liability. This change over a long period of time could really be positive or negative. It's been negative in the last couple of years.

And what really counts here, at least in my view, is what's the cash going out the door to pay for these things over time. And we have seen some bringing forward of these expenditures into the nearby years. So we're focused on trying to do what we can to make sure we have the management handle on the scope of this so that we have a little scope peek in the future, if possible.

But we have a lot of uncontrollable factors here and we manage those as best we can. We would like to certainly not have lumps of this. We'll be monitoring this on a rather continuous process.

But when there are lumps, they will typically be in the fourth quarter of each year? That's when you will --?

Well, if we're on our current schedule looking at them annually, it could show up then, it may show up then.

I'm just trying to understand because the fourth quarter was $0.14 but you had about roughly, what, $0.22 of charges related to this?

, Well, Bob, one of the important factors here is this is tied to a calendar set by the state in terms of the regulations.

No, I understand. I just mean when looking at the first quarter, you're really starting from more like a $0.35 or $0.36 level rather than a $0.14 level.

Well --

If you're looking operationally I mean.

Oh, I see. You're doing an adjustment there. You have to do your own work in terms of what you think is one-time or nonrecurring or --

I just meant it's not going to -- it's not going to happen -- you're not going to have another charge in the first quarter.

No, we are not. But this is not an unusual item. These are recurring items that we have.

I understand. And lastly on the phosphate market, can you just talk about your ability to take advantage of these very tight sold-out [marking additions] we're seeing domestically?

Well, we certainly like being in the phosphate business today. We're in business, we're taking orders, we're managing the relationship between our export orders through PhosChem and our domestic business and it's an interesting challenge to decide on a day-to-day basis which business is best. We attempt to optimize. We probably don't quite get there, but I think the outcomes have been pretty good.

We know you're going to see margin improvement in the nitrogen business, you basically stated that, but are we going to see margin improvement in the phosphate business over the course of the next couple of quarters?

Well, phosphate prices are -- phosphate prices are moving -- have been moving up aggressively. If you look at the trade publications, you can track that. And as far as our own situation goes, the forward position that we have in place with respect to phosphate is relatively small so that suggests an opportunistic positioning for our business if prices stay firm or move up from here.

Okay. Thank you.

Thanks, Bob.

Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of [John Kraus] of Anchorage Capital. Please proceed.

Thanks. Steve, you mentioned a number of factors that are improving the competitiveness of North American nitrogen and I was just wondering what the return on capital now is to build a new plant in North America because you sort of mentioned the raising gas costs in the world, making it more difficult there, and we're sort of facing a tight market even with high prices and no new builds announced in the last two years and I'm just trying to understand where does the capacity come? Is it economical to build it now?

Well, John, the fact that you asked that question is wonderful. We have a big file here of projects we looked at for building domestic capacity back in the mid-'90s. We haven't dusted those off yet. We have a favorable situation today. But these projects take a very long time to conceptualize, to run the economics and so forth. This is -- we've had a relatively quick turn here. Before we would look at something like that, we'd have to see indications of sustainability over a pretty long period of time.

Capital costs for nitrogen plants and other industrial complexes are historically high. And that's one of the reasons that we've been looking for alternatives in Trinidad for new construction. I'd be surprised if there's an appetite out there for investing in new Greenfield nitrogen capacity in North America just yet.

In that case, does the focus then shift to consolidation and are there sort of values from gaining scale in the market?

Well, that's a possibility. This is an industry that has undergone consolidation in the past and I expect the consultation is not finished.

Okay. Thank you.

Thank you very much, sir. [OPERATOR INSTRUCTIONS].

Our next question comes from the line of David Silver of JPMorgan. Please proceed.

Good morning, David.

Yes, hi. Good morning. I guess I would start, I have a couple of questions maybe that haven't been asked yet. One was I was hoping maybe you could follow up on your comments that maybe you made to Steve regarding Trinidad. So that's a project that you've been pursuing for some time. In the past you talked about an end of '06 kind of timeline for a decision.

And I know there's a number of parties that you have to work with there and there are some issues with capital costs. So can you kind of put your thinking on your Trinidad project into context and in particular if anything has changed in your thinking over the last three to six months?

In general, David, I'd say that nothing has changed in our thinking. Our partnership has in hand a term sheet for a gas contract which is attractive to us and one that we would like to take advantage of. As we talked about last quarter, we are looking at ways to get the capital costs down or manage it to an acceptable level so that we get a return that would justify a rather large investment. And that work is ongoing and really at this point we're not in a position to report any change in it.

Okay. I was hoping to follow up maybe on a question that Bob asked earlier about. And I guess this would be your phosphate marketing. So we've heard from the folks at Mosaic that they pre-sold during their last quarter, they pre-sold very aggressively, and they kind of indicated to us that they weren't able to capture kind of the full market movement that had occurred since, let's say, January 1st.

Now, in my own mind I'm just assuming that they're largely competing against you guys for the domestic business. So should we kind of think about your phosphate business in terms of very strong in a quarter or two but maybe there's a little bit of lag in your realizations in the first quarter?

Well, we actually have fairly modest levels of FPP business in phosphate and so I would say that we might be a little more current with respect to phosphate pricing than we are with respect to nitrogen pricing. And so if I -- on a relative basis less lag.

And...

Less lag in phosphate to nitrogen.

Okay, very good. And last question, this is more kind of an FPP and your philosophy of using that kind of question, but I think I'm probably not alone, we're all trying to figure out just how quickly your realizations are going to rise over the next couple of quarters.

Can you talk about -- I kind of view the FPP as kind of a newer kind of tool that you're still maybe kind of tinkering with. And this is the first -- I think is the most positive or most optimistic or strongest demand environment that you've had since you initiated the FPP program.

So I guess the question would be from your perspective, how does CF optimize the use or the value of this FPP program that you have in this kind of very kind of lucrative or very kind of bullish market?

In other words, you guys have some goals with your FPP program, but your customers have maybe different goals and from your perspective they have to make the order, you can't force them to book any business under the terms of the FPP. So could you maybe just talk about that and if there have been any changes in your philosophy there?

Sure. I would characterize our FPP program as being either maturing or mature because it'll be four years old this summer. And when we introduced it in the summer of '03 and as it began to take effect, we actually were learning to do this in an improving environment.

So our first experience with this was in a rising price environment, although we implemented this clearly as a risk management tool, not as a tool by which to maximize our margin. Now we're seeing the downside of it. We've managed our way through that situation and we're now moving in the other direction.

We look at our whole approach to margin management as a dynamic one. While we do have -- certainly there's a mathematical element to this, it is not done in a rote formulaic way. We have -- always have our eye on the marketplace. We have the best judgment -- we put to bear the best judgment we can about the direction of pricing and in a rising price environment, we will test the limits of where the market might be going.

And some days we'll price an offering so aggressively that our customers don't think it's in the market and so they'll pass. And the next day we might tinker with it a little bit and we find that point. And given the overall situation, one in which we have solid or expanding margins, we'll be -- we'll certainly be more aggressive than we were in a declining market where it's mostly a defensive tool. So we think we can use it on offense and defense.

Yes, that was kind of the issue I was wanting to hear about, so thank you for the comments.

Thank you very much, sir. [OPERATOR INSTRUCTIONS].

And we do have a follow-up from David Silver, JPMorgan. Please proceed.

Boy, I'm back on. Ernie, I was just wondering if you could follow up with a little detail on your CapEx number and in particular if you could give us some detail on where the discretionary portion of that 90 to $110 million figure for next year falls?

By location you mean?

By --

Are you talking about--?

Project is fine or where you're directing the discretionary portion of your capital budget to. So where should we think about your priorities for using discretionary capital over the next year?

It's mainly for projects approved in 2006 but I can get back with you later, David, with more detail. I don't have that with me right now, how that lines up. I can do that offline.

Okay, that's fine. Thank you.

Yes.

Thank you very much, sir. [OPERATOR INSTRUCTIONS].

We do have a follow-up from the line of Bob Goldberg at Scopus Asset Management. Please proceed.

Yes, hi again. I just wanted to follow up on the issue with natural gas. Steve, you said you'd be able to take advantage of the decline in natural gas from the end of November to the end of December and lock in some gas via the forward purchasing program through at least the, sounded like the end of February.

Looks like you sold about a little bit over 3 million tons in the first half of '06 of nitrogen products and your forward purchasing program right now is about 1.9 million. Is it fair to assume that you've locked in something like a half to two-thirds of your natural gas costs via the FPP program for the first quarter, first-half?

I think that's reasonable. I don't have the numbers in front of me, but I think you're probably in the ballpark.

So would you -- would you expect a decline in your natural gas costs 4Q to 1Q or flattish or how should we think about that?

4Q to 1Q. Bob, we may have to get back to you on that. We don't really look at our situation that way because what we're managing is our fertilizer margin.

Sure.

We took advantage of declining gas costs to lock in -- to lock in margin. And, boy, we had a lot of volatility in gas costs in the fourth quarter so I hesitate to hazard a guess on that, 4Q versus first quarter I don't know.

Okay. And for current sales, I imagine you'd be -- those would be more spot oriented, you'd be seeing the benefit of those maybe towards the end of the first quarter into the second quarter?

Well, our order book's pretty full and as you get into the spring -- further into the spring there's more open capacity available for us to sell. So I think the answer is yes.

Great. Thanks again.

Thank you very much, sir. [OPERATOR INSTRUCTIONS].

Bill, if there are no more questions, I'd just like to mention one last thing before we wrap up the call.

We do not have any further questions in queue, sir.

Okay. Several weeks ago we went live with a new website for CF Industries, providing a great deal of additional information about our products, processes, and facilities.

And Mr. Nekvasil feels quite proud of that, as I am. If you haven't visited www.cfindustries.com in a few months, I think you'll find the improvements we've made very informative.

As always, thanks for your continued interest in CF Industries and we look forward to talking with you in the future.

Thank you very much, sir. Thank you, ladies and gentlemen, for your participation in today's conference call. This concludes the presentation and you may now disconnect. Have a good day.