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CF Industries Implements One Year Tax Benefits Plan
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CF Industries Holdings, Inc. (CF - Free Report) declared that its board has embraced a one-year tax benefits preservation plan made in order to preserve the company's ability to use its net operating losses and certain other tax assets. The company anticipates generating a federal tax net operating loss of more than $2 billion in 2016, mainly arising out of accelerated depreciation on its capacity expansion projects.
The purpose of the plan is to conserve the company's capacity to utilize its tax assets to neutralize taxable income, which would be considerably limited if the company experienced an "ownership change" as defined under Section 382 of the Internal Revenue Code and related Internal Revenue Service pronouncements. An ownership change would occur if the company's "5% shareholders," as defined under Section 382, collectively increase their ownership in the company by more than 50 percentage points during the relevant testing period.
Per the plan, CF Industries will issue one Right for each share of its common stock outstanding at the close of business as of Sep 16, 2016. The Rights are not taxable to shareholders and they are not required to take any action to receive the Rights. The Rights will expire on the earliest of the close of business on Sep 5, 2017, the time at which the Rights are redeemed or exchanged under the Plan and the time at which the board decides that the plan is no longer necessary or desirable for the preservation of the tax assets.
According to the plan, if a shareholder becomes a 5% shareholder after the plan is implemented without meeting specific customary exceptions, the Rights would become exercisable and entitle stockholders (other than the 5% shareholder or group) to purchase additional shares of CF Industries at a considerable discount, resulting in considerable dilution in the economic interest and voting power of the 5% shareholder or group. The 5% shareholders existing at the time of adoption of the plan will only cause the Rights to distribute and become exercisable if they achieve an additional 1% of the company's outstanding shares.
CF Industries’ profits tumbled year over year in the second quarter of 2016, hurt by lower selling prices. Adjusted earnings for the quarter missed the Zacks Consensus Estimate. Revenues fell by double digits year over year on lower pricing, but managed to beat expectations. CF Industries is still facing pricing pressure as high supply levels are expected to continue to affect nitrogen prices.
CF Industries currently has a Zacks Rank #5 (Strong Sell). Better-ranked companies in the basic materials space include Innospec Inc. (IOSP - Free Report) , Innophos Holdings Inc and Mitsubishi Chemical Holdings Corporation (MTLHY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
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CF Industries Implements One Year Tax Benefits Plan
CF Industries Holdings, Inc. (CF - Free Report) declared that its board has embraced a one-year tax benefits preservation plan made in order to preserve the company's ability to use its net operating losses and certain other tax assets. The company anticipates generating a federal tax net operating loss of more than $2 billion in 2016, mainly arising out of accelerated depreciation on its capacity expansion projects.
The purpose of the plan is to conserve the company's capacity to utilize its tax assets to neutralize taxable income, which would be considerably limited if the company experienced an "ownership change" as defined under Section 382 of the Internal Revenue Code and related Internal Revenue Service pronouncements. An ownership change would occur if the company's "5% shareholders," as defined under Section 382, collectively increase their ownership in the company by more than 50 percentage points during the relevant testing period.
Per the plan, CF Industries will issue one Right for each share of its common stock outstanding at the close of business as of Sep 16, 2016. The Rights are not taxable to shareholders and they are not required to take any action to receive the Rights. The Rights will expire on the earliest of the close of business on Sep 5, 2017, the time at which the Rights are redeemed or exchanged under the Plan and the time at which the board decides that the plan is no longer necessary or desirable for the preservation of the tax assets.
According to the plan, if a shareholder becomes a 5% shareholder after the plan is implemented without meeting specific customary exceptions, the Rights would become exercisable and entitle stockholders (other than the 5% shareholder or group) to purchase additional shares of CF Industries at a considerable discount, resulting in considerable dilution in the economic interest and voting power of the 5% shareholder or group. The 5% shareholders existing at the time of adoption of the plan will only cause the Rights to distribute and become exercisable if they achieve an additional 1% of the company's outstanding shares.
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CF Industries’ profits tumbled year over year in the second quarter of 2016, hurt by lower selling prices. Adjusted earnings for the quarter missed the Zacks Consensus Estimate. Revenues fell by double digits year over year on lower pricing, but managed to beat expectations. CF Industries is still facing pricing pressure as high supply levels are expected to continue to affect nitrogen prices.
CF Industries currently has a Zacks Rank #5 (Strong Sell).
Better-ranked companies in the basic materials space include Innospec Inc. (IOSP - Free Report) , Innophos Holdings Inc and Mitsubishi Chemical Holdings Corporation (MTLHY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>