Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

CF Industries Holdings, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of CF Industries Holdings, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for Leases as of January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

CF INDUSTRIES HOLDINGS, INC.

Evaluation of the measurement of projected benefit obligations

As discussed in Note 11 to the consolidated financial statements, the Company’s projected benefit obligation (PBO) associated with its pension plans established in North America and the United Kingdom were $884 million and $643 million as of December 31, 2020, respectively. The Company’s PBO represents an actuarially determined estimate of the present value of the future benefit payments attributed to past service under its pension plans to the beneficiaries of those plans. Determining the PBO requires the Company to make assumptions, including the selection of a discount rate for both the North American and United Kingdom plans and an adjusted retail price index (RPI) for the United Kingdom plans. The selected discount rate and RPI are then applied to these future benefit payments in determining the present value of those obligations as of December 31, 2020.

We identified the evaluation of the Company’s measurement of the PBO to be a critical audit matter. Specialized skills were needed to evaluate the assumptions regarding the discount rates utilized in the measurement of the PBO for both the North American and United Kingdom plans and the adjusted RPI utilized in the measurement of the PBO for the Company’s United Kingdom plans. In addition, a high degree of auditor judgment was required regarding the evaluation of these discount rates and the adjusted RPI, as minor changes to these assumptions could have a significant impact on the PBO.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s pension accounting process, including controls related to the determination of discount rates and adjusted RPI assumptions utilized in determining the Company’s PBO for both the North American and United Kingdom pension plans. We involved actuarial professionals with specialized skills and knowledge, who evaluated the Company’s PBO by evaluating the Company’s actuary reports. Specifically, as it relates to the selected discount rates and adjusted RPI assumptions, the actuarial professionals:

–developed an understanding and assessed the methods used by the Company’s actuaries to develop the discount rates and adjusted RPI

–evaluated the relevance and reliability of information used by the Company’s actuaries in the development of the discount rates and the adjusted RPI

–evaluated the North American discount rates’ period over period change using market trends based on published yield curves and indices

–recalculated the Company’s single equivalent discount rate using the PBO cash flows and the Company’s actuaries’ proprietary yield curve for the North American discount rates

–independently developed a single equivalent discount rate using the PBO cash flows and publicly available yield curves for the North American pension plans, and compared that to the Company’s selected discount rates for North America

–developed discount rates using publicly available yield curves for the United Kingdom, adjusted for the assessment of the timing of payments expected to be made to beneficiaries under the Company’s pension plans, and compared those to the Company’s selected discount rates for the United Kingdom

–developed an inflationary factor using published spot rate projection based on the assessment of the timing of payments expected to be made to beneficiaries under the Company’s pension plans within the United Kingdom, and compared that to the Company’s adjusted RPI.

(signed) KPMG LLP

We have served as the Company’s auditor since 1983.

Chicago, Illinois

February 24, 2021

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

			Year ended December 31,
			2020						2019						2018
			(in millions, except per share amounts)
Net sales			$	4,124					$	4,590					$	4,429
Cost of sales			3,323						3,416						3,512
Gross margin			801						1,174						917
Selling, general and administrative expenses			206						239						214
Other operating—net			(17)						(73)						(27)
Total other operating costs and expenses			189						166						187
Equity in earnings (loss) of operating affiliate			11						(5)						36
Operating earnings			623						1,003						766
Interest expense			179						237						241
Interest income			(18)						(20)						(13)
Loss on debt extinguishment			—						21						—
Other non-operating—net			(1)						(7)						(9)
Earnings before income taxes			463						772						547
Income tax provision			31						126						119
Net earnings			432						646						428
Less: Net earnings attributable to noncontrolling interests			115						153						138
Net earnings attributable to common stockholders			$	317					$	493					$	290
Net earnings per share attributable to common stockholders:
Basic			$	1.48					$	2.24					$	1.25
Diluted			$	1.47					$	2.23					$	1.24
Weighted-average common shares outstanding:
Basic			214.9						220.2						232.6
Diluted			215.2						221.6						233.8

See Accompanying Notes to Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			Year ended December 31,
			2020						2019						2018
			(in millions)
Net earnings			$	432					$	646					$	428
Other comprehensive income (loss):
Foreign currency translation adjustment—net of taxes			44						62						(105)
Derivatives—net of taxes			(1)						—						—
Defined benefit plans—net of taxes			3						(57)						8
			46						5						(97)
Comprehensive income			478						651						331
Less: Comprehensive income attributable to noncontrolling interests			115						153						138
Comprehensive income attributable to common stockholders			$	363					$	498					$	193

See Accompanying Notes to Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

			December 31,
			2020						2019
			(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents			$	683					$	287
Accounts receivable—net			265						242
Inventories			287						351
Prepaid income taxes			97						71
Other current assets			35						23
Total current assets			1,367						974
Property, plant and equipment—net			7,632						8,170
Investment in affiliate			80						88
Goodwill			2,374						2,365
Operating lease right-of-use assets			259						280
Other assets			311						295
Total assets			$	12,023					$	12,172
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses			$	424					$	437
Income taxes payable			—						1
Customer advances			130						119
Current operating lease liabilities			88						90
Current maturities of long-term debt			249						—
Other current liabilities			15						18
Total current liabilities			906						665
Long-term debt			3,712						3,957
Deferred income taxes			1,184						1,246
Operating lease liabilities			174						193
Other liabilities			444						474
Equity:
Stockholders’ equity:
Preferred stock—$0.01 par value, 50,000,000 shares authorized			—						—
Common stock—$0.01 par value, 500,000,000 shares authorized, 2020—214,057,701 shares issued and 2019—216,023,826 shares issued			2						2
Paid-in capital			1,317						1,303
Retained earnings			1,927						1,958
Treasury stock—at cost, 2020—102,843 shares and 2019—0 shares			(4)						—
Accumulated other comprehensive loss			(320)						(366)
Total stockholders’ equity			2,922						2,897
Noncontrolling interest			2,681						2,740
Total equity			5,603						5,637
Total liabilities and equity			$	12,023					$	12,172

See Accompanying Notes to Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

			Common Stockholders
			$0.01 Par Value Common Stock						Treasury Stock						Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity						Noncontrolling Interests						Total Equity
			(in millions)
Balance as of December 31, 2017			$	2					$	—					$	1,397					$	2,443					$	(263)					$	3,579					$	3,105					$	6,684
Adoption of ASU No. 2016-01			—						—						—						1						(1)						—						—						—
Adoption of ASU No. 2014-09			—						—						—						(1)						—						(1)						—						(1)
Adoption of ASU No. 2018-02			—						—						—						10						(10)						—						—						—
Net earnings			—						—						—						290						—						290						138						428
Other comprehensive loss			—						—						—						—						(97)						(97)						—						(97)
Purchases of treasury stock			—						(500)						—						—						—						(500)						—						(500)
Issuance of $0.01 par value common stock under employee stock plans			—						(4)						12						—						—						8						—						8
Stock-based compensation expense			—						—						21						—						—						21						—						21
Cash dividends ($1.20 per share)			—						—						—						(280)						—						(280)						—						(280)
Acquisition of noncontrolling interests in TNCLP			—						—						(62)						—						—						(62)						(331)						(393)
Distributions declared to noncontrolling interests			—						—						—						—						—						—						(139)						(139)
Balance as of December 31, 2018			$	2					$	(504)					$	1,368					$	2,463					$	(371)					$	2,958					$	2,773					$	5,731
Net earnings			—						—						—						493						—						493						153						646
Other comprehensive income			—						—						—						—						5						5						—						5
Purchases of treasury stock			—						(337)						—						—						—						(337)						—						(337)
Retirement of treasury stock			—						843						(110)						(733)						—						—						—						—
Acquisition of treasury stock under employee stock plans			—						(4)						—						—						—						(4)						—						(4)
Issuance of $0.01 par value common stock under employee stock plans			—						2						17						—						—						19						—						19
Stock-based compensation expense			—						—						28						—						—						28						—						28
Cash dividends ($1.20 per share)			—						—						—						(265)						—						(265)						—						(265)
Distributions declared to noncontrolling interest			—						—						—						—						—						—						(186)						(186)
Balance as of December 31, 2019			$	2					$	—					$	1,303					$	1,958					$	(366)					$	2,897					$	2,740					$	5,637
Net earnings			—						—						—						317						—						317						115						432
Other comprehensive income			—						—						—						—						46						46						—						46
Purchases of treasury stock			—						(100)						—						—						—						(100)						—						(100)
Retirement of treasury stock			—						107						(17)						(90)						—						—						—						—
Acquisition of treasury stock under employee stock plans			—						(13)						—						—						—						(13)						—						(13)
Issuance of $0.01 par value common stock under employee stock plans			—						2						6						—						—						8						—						8
Stock-based compensation expense			—						—						25						—						—						25						—						25
Cash dividends ($1.20 per share)			—						—						—						(258)						—						(258)						—						(258)
Distributions declared to noncontrolling interest			—						—						—						—						—						—						(174)						(174)
Balance as of December 31, 2020			$	2					$	(4)					$	1,317					$	1,927					$	(320)					$	2,922					$	2,681					$	5,603

See Accompanying Notes to Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Year ended December 31,
			2020						2019						2018
			(in millions)
Operating Activities:
Net earnings			$	432					$	646					$	428
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			892						875						888
Deferred income taxes			(74)						149						78
Stock-based compensation expense			25						28						22
Unrealized net (gain) loss on natural gas derivatives			(6)						14						(13)
Loss on embedded derivative			3						4						1
Loss on debt extinguishment			—						21						—
Loss (gain) on disposal of property, plant and equipment			15						(40)						6
Undistributed (earnings) losses of affiliate—net of taxes			(1)						2						(3)
Changes in:
Accounts receivable—net			(19)						(6)						68
Inventories			27						(26)						(52)
Accrued and prepaid income taxes			8						22						8
Accounts payable and accrued expenses			(15)						(72)						44
Customer advances			11						(30)						59
Other—net			(67)						(82)						(37)
Net cash provided by operating activities			1,231						1,505						1,497
Investing Activities:
Additions to property, plant and equipment			(309)						(404)						(422)
Proceeds from sale of property, plant and equipment			2						70						26
Distributions received from unconsolidated affiliate			6						—						10
Insurance proceeds for property, plant and equipment			2						15						10
Other—net			—						—						1
Net cash used in investing activities			(299)						(319)						(375)
Financing Activities:
Payments of long-term borrowings			—						(769)						—
Proceeds from short-term borrowings			500						—						—
Repayments of short-term borrowings			(500)						—						—
Payment to CHS related to credit provision			(5)						(5)						(5)
Financing fees			—						(3)						1
Purchases of treasury stock			(100)						(370)						(467)
Dividends paid on common stock			(258)						(265)						(280)
Acquisition of noncontrolling interests in TNCLP			—						—						(388)
Distributions to noncontrolling interests			(174)						(186)						(139)
Proceeds from issuances of common stock under employee stock plans			5						19						12
Shares withheld for taxes			(10)						(4)						(4)
Net cash used in financing activities			(542)						(1,583)						(1,270)
Effect of exchange rate changes on cash and cash equivalents			6						2						(5)
Increase (decrease) in cash and cash equivalents			396						(395)						(153)
Cash and cash equivalents at beginning of period			287						682						835
Cash and cash equivalents at end of period			$	683					$	287					$	682

See Accompanying Notes to Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Background and Basis of Presentation

We are a leading global manufacturer of hydrogen and nitrogen products for clean energy, fertilizer, emissions abatement, and other industrial applications. We operate nitrogen manufacturing complexes in the United States, Canada and the United Kingdom, which are among the most cost-advantaged, efficient and flexible in the world, and an extensive storage, transportation and distribution network in North America. Our 3,000 employees focus on safe and reliable operations, environmental stewardship and disciplined capital and corporate management, driving our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy. Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users. Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen. Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

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

Our principal assets as of December 31, 2020 include:

• five U.S. nitrogen manufacturing facilities located in Donaldsonville, Louisiana; Port Neal, Iowa; Yazoo City, Mississippi; Verdigris, Oklahoma; and Woodward, Oklahoma. These facilities are wholly owned directly or indirectly by CF Industries Nitrogen, LLC (CFN), of which we own approximately 89% and CHS Inc. (CHS) owns the remainder. See Note 17—Noncontrolling Interests for additional information on our strategic venture with CHS;

• two Canadian nitrogen manufacturing facilities, located in Medicine Hat, Alberta and Courtright, Ontario;

• two United Kingdom nitrogen manufacturing facilities, located in Billingham and Ince;

• an extensive system of terminals and associated transportation equipment located primarily in the Midwestern United States; and

• a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia production joint venture located in the Republic of Trinidad and Tobago that we account for under the equity method.

2. Summary of Significant Accounting Policies

Consolidation and Noncontrolling Interests

The consolidated financial statements of CF Holdings include the accounts of CF Industries and all majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

In 2018, we announced that Terra Nitrogen GP Inc. (TNGP), the sole general partner of Terra Nitrogen Company, L.P. (TNCLP) and an indirect wholly owned subsidiary of CF Holdings, elected to exercise its right to purchase all of the 4,612,562 publicly traded common units of TNCLP (the TNCLP Public Units). On April 2, 2018, TNGP completed its purchase of the TNCLP Public Units (the Purchase) for an aggregate cash purchase price of $388 million. Upon completion of the Purchase, we owned, through our subsidiaries, 100% of the general and limited partnership interests of TNCLP. Prior to the purchase of the TNCLP Public Units, we owned approximately 75.3% of TNCLP through general and limited partnership interests and outside investors owned the remaining approximately 24.7% of the limited partnership, and we consolidated TNCLP into our financial statements. The outside investors’ limited partnership interests in the partnership were included in noncontrolling interests in our consolidated financial statements prior to our purchase of the TNCLP Public Units.

We own approximately 89% of the membership interests in CFN and consolidate CFN in our financial statements. CHS’ minority equity interest in CFN is included in noncontrolling interests in our consolidated financial statements.

See Note 17—Noncontrolling Interests for additional information.

CF INDUSTRIES HOLDINGS, INC.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income taxes, allowances for doubtful accounts receivable, the determination of the benefit obligation and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

Revenue Recognition

We follow a five-step model for revenue recognition. The five steps are: (1) identification of the contract(s) with the customer, (2) identification of the performance obligation(s) in the contract(s), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation(s), and (5) recognition of revenue when (or as) each performance obligation is satisfied. Control of our products transfers to our customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, our products, which occurs at the later of when title or risk of loss transfers to the customer. Control generally transfers to the customer at a point in time upon loading of our product onto transportation equipment or delivery to a customer destination. Revenue from forward sales programs is recognized on the same basis as other sales regardless of when the customer advances are received.

In situations where we have agreed to arrange delivery of the product to the customer’s intended destination and control of the product transfers upon loading of our product, we have elected to not identify delivery of the product as a performance obligation. We account for freight income associated with the delivery of these products as freight revenue, since this activity fulfills our obligation to transfer the product to the customer. Shipping and handling costs incurred by us are included in cost of sales.

We offer cash incentives to certain customers based on the volume of their purchases over a certain period. Customer incentives are reported as a reduction in net sales.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value.

Investments

Short-term investments and noncurrent investments are accounted for primarily as available-for-sale securities reported at fair value. Changes in the fair value of available-for-sale debt securities are recognized in other comprehensive income. Changes in the fair value of available-for-sale equity securities are recognized through earnings. The carrying values of short-term investments approximate fair values because of the short maturities and the highly liquid nature of these investments.

Inventories

Inventories are reported at the lower of cost and net realizable value with cost determined on a first-in, first-out and average cost basis. Inventory includes the cost of materials, production labor and production overhead. Inventory at warehouses and terminals also includes distribution costs to move inventory to the distribution facilities. Net realizable value is reviewed at least quarterly. Fixed production costs related to idle capacity are not included in the cost of inventory but are charged directly to cost of sales in the period incurred.

Investment in Unconsolidated Affiliate

The equity method of accounting is used for our investment in an affiliate that we do not consolidate, but over which we have the ability to exercise significant influence. Our equity method investment for which the results are included in operating earnings consists of our 50% ownership interest in PLNL, which operates an ammonia production facility in the Republic of Trinidad and Tobago. Our share of the net earnings from this investment is reported as an element of earnings from operations because PLNL’s operations provide additional production and are integrated with our supply chain and sales activities in the ammonia segment. See Note 8—Equity Method Investment for additional information.

CF INDUSTRIES HOLDINGS, INC.

Profits resulting from sales or purchases with equity method investees are eliminated until realized by the investee or investor, respectively. Investments in affiliates are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. If circumstances indicate that the fair value of an investment in an affiliate is less than its carrying value, and the reduction in value is other than temporary, the reduction in value would be recognized immediately in earnings.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method and are recorded over the estimated useful life of the property, plant and equipment. Useful lives are as follows:

			Years
Mobile and office equipment			3 to 10
Production facilities and related assets			2 to 30
Land improvements			10 to 30
Buildings			10 to 40

We periodically review the useful lives assigned to our property, plant and equipment and we change the estimates to reflect the results of those reviews.

Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds. Plant turnarounds are accounted for under the deferral method, as opposed to the direct expense or built-in overhaul methods. Under the deferral method, expenditures related to turnarounds are capitalized in property, plant and equipment when incurred and amortized to production costs on a straight-line basis over the period benefited, which is until the next scheduled turnaround in up to five years. If the direct expense method were used, all turnaround costs would be expensed as incurred. Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized. Turnaround costs are classified as investing activities in our consolidated statements of cash flows. See Note 6—Property, Plant and Equipment—Net for additional information.

Recoverability of Long-Lived Assets

We review property, plant and equipment and other long-lived assets in order to assess recoverability based on expected future undiscounted cash flows whenever events or circumstances indicate that the carrying value may not be recoverable. If the sum of the expected future net cash flows is less than the carrying value, an impairment loss would be recognized. The impairment loss is measured as the amount by which the carrying value exceeds the fair value of the asset.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the amounts assigned to the assets acquired and liabilities assumed. Goodwill is not amortized, but is reviewed for impairment annually or more frequently if certain impairment conditions arise. We perform our annual goodwill impairment review in the fourth quarter of each year at the reporting unit level. Our evaluation can begin with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value. If after performing the qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, then no further analysis is necessary. However, if the results of the qualitative test are unclear, we perform a quantitative test, which involves comparing the fair value of a reporting unit with its carrying amount, including goodwill. We use an income-based valuation method, determining the present value of future cash flows, to estimate the fair value of a reporting unit. If the fair value of a reporting unit exceeds its positive carrying amount, goodwill of the reporting unit is considered not impaired, and no further analysis is necessary. If the fair value of the reporting unit is less than its carrying amount, goodwill impairment would be recognized equal to the amount of the carrying value in excess of the reporting unit’s fair value, limited to the total amount of goodwill allocated to the reporting unit.

Our intangible assets are presented in other assets on our consolidated balance sheets. See Note 7—Goodwill and Other Intangible Assets for additional information regarding our goodwill and other intangible assets.

CF INDUSTRIES HOLDINGS, INC.

Leases

Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate the present value represents our secured incremental borrowing rate and is calculated based on the treasury yield curve commensurate with the term of each lease, and a spread representative of our secured borrowing costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Leases may be classified as either operating leases or finance leases. We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheet. For finance leases, if any, ROU assets are amortized over the lease term on a straight-line basis and interest expense is recognized using the effective interest method and based on the lease liability at period end. For operating leases, rental payments, including rent holidays, leasehold incentives, and scheduled rent increases are expensed on a straight-line basis. Leasehold improvements are amortized over the shorter of the depreciable lives of the corresponding fixed assets or the lease term including any applicable renewals. For our rail car leases, barge tow charters, and terminal and warehouse storage agreements, we have made an accounting policy election to not separate lease and non-lease components, such as operating costs and maintenance, due to sufficient data not being available. As a result, the non-lease components are included in the ROU assets and lease liabilities on our consolidated balance sheet. See Note 24—Leases for additional information.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are projected to be recovered or settled. Realization of deferred tax assets is dependent on our ability to generate sufficient taxable income of an appropriate character in future periods. A valuation allowance is established if it is determined to be more likely than not that a deferred tax asset will not be realized. Significant judgment is applied in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets.

We record our tax expense for Global Intangible Low-Taxed Income (GILTI) as an expense in the period in which incurred and as such do not record a deferred tax liability for taxes that may be due in future periods.

Interest and penalties related to unrecognized tax benefits are reported as interest expense and income tax expense, respectively.

See Note 10—Income Taxes for additional information.

Customer Advances

Customer advances represent cash received from customers following acceptance of orders under our forward sales programs. Under such advances, the customer prepays a portion of the value of the sales contract prior to obtaining control of the product, thereby reducing or eliminating accounts receivable from customers. Revenue is recognized when the customer obtains control of the product.

Derivative Financial Instruments

Natural gas is the principal raw material used to produce nitrogen-based products. We manage the risk of changes in natural gas prices primarily through the use of derivative financial instruments. The derivative instruments that we may use are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter (OTC) markets. The derivatives reference primarily a NYMEX futures price index, which represent the basis for fair value at any given time. These derivatives are traded in months forward and settlements are scheduled to coincide with anticipated gas purchases during those future periods. We do not use derivatives for trading purposes and are not a party to any leveraged derivatives.

Derivative financial instruments are accounted for at fair value and recognized as current or noncurrent assets and liabilities on our consolidated balance sheets. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. As a result, changes in fair value of these contracts are recognized in earnings. The fair values of derivative instruments and any related cash collateral are reported on a gross basis rather than on a net basis. Cash flows related to natural gas derivatives are reported as operating activities.

See Note 15—Derivative Financial Instruments for additional information.

CF INDUSTRIES HOLDINGS, INC.

Debt Issuance Costs

Costs associated with the issuance of debt are recorded on the balance sheet as a direct deduction from the carrying amount of the related debt liability. Costs associated with entering into revolving credit facilities are recorded as an asset in noncurrent assets. All debt issuance costs are amortized over the term of the related debt using the effective interest rate method. Debt issuance discounts are netted against the related debt and are amortized over the term of the debt using the effective interest method. See Note 12—Financing Agreements for additional information.

Environmental

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations are expensed. Expenditures that increase the capacity or extend the useful life of an asset, improve the safety or efficiency of the operations, or mitigate or prevent future environmental contamination are capitalized. Liabilities are recorded when it is probable that an obligation has been incurred and the costs can be reasonably estimated. Environmental liabilities are not discounted.

Emission Credits

Emission credits may be generated by or granted to the Company through emissions trading systems or other regulatory programs. From time to time, we may also purchase emission credits. We have elected to account for emission credits using the intangible asset model. Under this model, emission credits that are purchased are measured at their cost basis and tested for impairment annually. We do not recognize any internally generated emission credits under the intangible asset model until a monetary transaction occurs, such as a sale of the emission credits. If a facility exceeds regulatory emissions allowance levels and offsetting credits are not held by us, our obligation is recognized as an operating expense and a liability at the fair value of the emissions allowance deficit.

Stock-based Compensation

We grant stock-based compensation awards under our equity and incentive plans. The awards that have been granted to date are nonqualified stock options, restricted stock awards, restricted stock units and performance restricted stock units. The cost of employee services received in exchange for the awards is measured based on the fair value of the award on the grant date and is recognized as expense on a straight-line basis over the period during which the employee is required to provide the services. We have elected to recognize equity award forfeitures as they occur in determining the compensation cost to be recognized in each period. See Note 19—Stock-based Compensation for additional information.

Treasury Stock

We periodically retire treasury shares acquired through repurchases of our common stock and return those shares to the status of authorized but unissued. We account for treasury stock transactions under the cost method. For each reacquisition of common stock, the number of shares and the acquisition price for those shares is added to the treasury stock count and total value. When treasury shares are retired, we allocate the excess of the repurchase price over the par value of shares acquired to both retained earnings and paid-in capital. The portion allocated to paid-in capital is determined by applying the average paid-in capital per share, and the remaining portion is recorded to retained earnings.

Litigation

From time to time, we are subject to ordinary, routine legal proceedings related to the usual conduct of our business. We may also be involved in proceedings regarding public utility and transportation rates, environmental matters, taxes and permits relating to the operations of our various plants and facilities. Accruals for such contingencies are recorded to the extent management concludes their occurrence is probable and the financial impact of an adverse outcome is reasonably estimable. Legal fees are recognized as incurred and are not included in accruals for contingencies. Disclosure for specific legal contingencies is provided if the likelihood of occurrence is at least reasonably possible and the exposure is considered material to the consolidated financial statements.

In making determinations of likely outcomes of litigation matters, many factors are considered. These factors include, but are not limited to, history, scientific and other evidence, and the specifics and status of each matter. If the assessment of various factors changes, the estimates may change. Predicting the outcome of claims and litigation, and estimating related costs and exposure, involves substantial uncertainties that could cause actual costs to vary materially from estimates and accruals.

Foreign Currency Translation

We translate the financial statements of our foreign subsidiaries with non-U.S. dollar functional currencies using period-end exchange rates for assets and liabilities and weighted-average exchange rates for each period for revenues and expenses.

CF INDUSTRIES HOLDINGS, INC.

The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) within stockholders’ equity.

Foreign currency-denominated assets and liabilities are remeasured into U.S. dollars at exchange rates existing at the respective balance sheet dates. Gains and losses resulting from these foreign currency transactions are included in other operating—net on our consolidated statements of operations. Gains and losses resulting from intercompany foreign currency transactions that are of a long-term investment nature, if any, are reported in other comprehensive income.

3. New Accounting Standards

Recently Adopted Pronouncements

On January 1, 2020, we adopted Accounting Standards Update (ASU) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This ASU does not affect the accounting for the service element of a hosting arrangement that is a service contract. We adopted this ASU prospectively. The adoption of this ASU did not have a material impact on our consolidated financial statements; however, it could have an effect on future financial results if significant new software involving a cloud computing agreement is implemented. In this case, a certain portion of the implementation costs would be deferred and expensed over the term of the cloud computing arrangement.

On January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements in ASC Topic 840, Leases. This ASU requires lessees to recognize the rights and obligations resulting from virtually all leases (other than leases that meet the definition of a short-term lease) on their balance sheets as right-of-use assets with corresponding lease liabilities. Extensive quantitative and qualitative disclosures, including significant judgments made by management, are required to provide greater insight into the extent of income and expense recognized and expected to be recognized from existing contracts. We elected the optional transition method provided under ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides the option to adopt ASU No. 2016-02 as of the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative effect adjustment we recognized in the opening balance of retained earnings as of January 1, 2019 was not material. In addition, we elected the package of practical expedients permitted under the transition guidance within ASU No. 2016-02, which allows us to carry forward the historical lease determination, lease classification, and assessment of initial direct costs. See Note 24—Leases for additional information.

Recently Issued Pronouncement

In December 2019, the Financial Accounting Standards Board issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU adds new guidance to simplify accounting for income taxes, changes the accounting for certain income tax transactions and makes minor improvements to the codification. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We do not expect our adoption of this ASU on January 1, 2021 will have a material effect on our consolidated financial statements.

4. Revenue Recognition

Our performance obligations under a customer contract correspond to each shipment of product that we make to our customer under the contract. As a result, each contract may have more than one performance obligation based on the number of products ordered, the quantity of product to be shipped and the mode of shipment requested by the customer. When we enter into a contract with a customer, we are obligated to provide the product in that contract during a mutually agreed upon time period. Depending on the terms of the contract, either we or the customer arranges delivery of the product to the customer’s intended destination. When we arrange delivery of the product and control of the product transfers upon loading, we recognize freight revenue, which was not material for 2020, 2019 or 2018.

Certain of our contracts require us to supply products on a continuous basis to the customer. We recognize revenue on these contracts based on the quantity of products transferred to the customer during the period. For 2020, 2019 and 2018, the total amount of revenue for these contracts was $44 million, $55 million and $85 million, respectively.

From time to time, we will enter the marketplace to purchase product in order to satisfy the obligations of our customer contracts. When we purchase product for this purpose, we are the principal in the transaction and recognize revenue on a gross basis. As discussed in Note 8—Equity Method Investment, we have transactions in the normal course of business with PLNL, reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices. Other than products

CF INDUSTRIES HOLDINGS, INC.

purchased from PLNL, products purchased in the marketplace in order to satisfy the obligations of our customers were not material during 2020, 2019 or 2018.

Transaction Price

We agree with our customers on the selling price of each transaction. This transaction price is generally based on the product, market conditions, including supply and demand balances, freight arrangements including where control transfers, and customer incentives. In our contracts with customers, we allocate the entire transaction price to the sale of product to the customer, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax we collect concurrently with our revenue-producing activities are excluded from revenue. Returns of our product by our customers are permitted only when the product is not to specification. Returns were not material during 2020, 2019 or 2018.

We offer cash incentives to certain customers that do not provide an option to the customer for additional product. Accrual of these incentives involves the use of estimates, including how much product the customer will purchase and whether the customer will achieve a certain level of purchases within the incentive period. The balances of customer incentives accrued at December 31, 2020 and 2019 were not material.

Revenue Disaggregation

We track our revenue by product and by geography. See Note 21—Segment Disclosures for our revenue by reportable segment, which are ammonia, granular urea, UAN, AN and Other. The following table summarizes our revenue by product and by geography (based on destination of our shipment) for 2020, 2019 and 2018:

			Ammonia						Granular Urea						UAN						AN						Other						Total
			(in millions)
Year ended December 31, 2020
North America			$	874					$	1,183					$	998					$	197					$	235					$	3,487
Europe and other			146						65						65						258						103						637
Total revenue			$	1,020					$	1,248					$	1,063					$	455					$	338					$	4,124
Year ended December 31, 2019
North America			$	948					$	1,269					$	1,176					$	200					$	256					$	3,849
Europe and other			165						73						94						306						103						741
Total revenue			$	1,113					$	1,342					$	1,270					$	506					$	359					$	4,590
Year ended December 31, 2018
North America			$	883					$	1,243					$	1,047					$	186					$	261					$	3,620
Europe and other			145						79						187						274						124						809
Total revenue			$	1,028					$	1,322					$	1,234					$	460					$	385					$	4,429

Accounts Receivable and Customer Advances

Our customers purchase our products through sales on credit or forward sales. Products sold to our customers on credit are recorded as accounts receivable when the customer obtains control of the product. Customers that purchase our products on credit are required to pay in accordance with our customary payment terms, which are generally less than 30 days. For 2020, 2019 and 2018, the amount of customer bad debt expense recognized was immaterial.

For forward sales, the customer prepays a portion of the value of the sales contract prior to obtaining control of the product. These prepayments, when received, are recorded as customer advances and are recognized as revenue when the customer obtains control of the product. Forward sales are customarily offered for periods of less than one year in advance of when the customer obtains control of the product.

As of December 31, 2020 and 2019, we had $130 million and $119 million, respectively, in customer advances on our consolidated balance sheets. The increase in the balance of customer advances was due primarily to an increase in forward contracts amidst an increasing price environment. During 2020, all of our customer advances that were recorded as of December 31, 2019 were recognized as revenue.

CF INDUSTRIES HOLDINGS, INC.

We have certain customer contracts with performance obligations where if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, which may vary based upon the terms and conditions of the applicable contract. As of December 31, 2020, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $867 million. We expect to recognize approximately 31% of these performance obligations as revenue in 2021, approximately 42% as revenue during 2022 and 2023, approximately 23% as revenue during 2024 and 2025, and the remainder thereafter. If these customers do not fulfill their contractual obligations under such contracts, the legally enforceable minimum amount that they would pay to us under these contracts is approximately $212 million as of December 31, 2020. Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially filled at December 31, 2020 will be satisfied in 2021.

All of our contracts require that the period between the payment for goods and the transfer of those goods to the customer occur within normal contractual terms that do not exceed one year; therefore, we have not adjusted the transaction price of any of our contracts to recognize a significant financing component. We have also expensed any incremental costs associated with obtaining a contract that has a duration of less than one year, and there were no costs capitalized during 2020, 2019 or 2018.

5. Net Earnings Per Share

Net earnings per share were computed as follows:

			Year ended December 31,
			2020						2019						2018
			(in millions, except per share amounts)
Net earnings attributable to common stockholders			$	317					$	493					$	290
Basic earnings per common share:
Weighted-average common shares outstanding			214.9						220.2						232.6
Net earnings attributable to common stockholders			$	1.48					$	2.24					$	1.25
Diluted earnings per common share:
Weighted-average common shares outstanding			214.9						220.2						232.6
Dilutive common shares—stock-based awards			0.3						1.4						1.2
Diluted weighted-average shares outstanding			215.2						221.6						233.8
Net earnings attributable to common stockholders			$	1.47					$	2.23					$	1.24

Dilutive earnings per share is calculated using weighted-average common shares outstanding, including the dilutive effect of stock-based awards as determined under the treasury stock method. In the computation of diluted earnings per common share, potentially dilutive stock-based awards are excluded if the effect of their inclusion is anti-dilutive. Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 3.3 million, 1.4 million and 1.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

CF INDUSTRIES HOLDINGS, INC.

6. Property, Plant and Equipment—Net

Property, plant and equipment—net consists of the following:

			December 31,
			2020						2019
			(in millions)
Land			$	68					$	71
Machinery and equipment			12,539						12,338
Buildings and improvements			895						890
Construction in progress			275						236
Property, plant and equipment(1)			13,777						13,535
Less: Accumulated depreciation and amortization			6,145						5,365
Property, plant and equipment—net			$	7,632					$	8,170

---

(1)As of December 31, 2020 and 2019, we had property, plant and equipment that was accrued but unpaid of approximately $43 million and $42 million, respectively.

Depreciation and amortization related to property, plant and equipment was $876 million, $855 million and $865 million in 2020, 2019 and 2018, respectively.

In 2019, we sold our Pine Bend dry bulk storage and logistics facility in Minnesota, received proceeds of $55 million and recognized a pre-tax gain of $45 million. The gain is reflected in other operating—net in our consolidated statement of operations for the year ended December 31, 2019.

Plant turnarounds—Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds. The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred. The following is a summary of capitalized plant turnaround costs:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Net capitalized turnaround costs at beginning of the year			$	246					$	252					$	208
Additions			84						102						156
Depreciation			(104)						(112)						(111)
Effect of exchange rate changes			—						4						(1)
Net capitalized turnaround costs at end of the year			$	226					$	246					$	252

Scheduled replacements and overhauls of plant machinery and equipment include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors, heat exchangers and the replacement of catalysts when a full plant shutdown occurs. Scheduled inspections are also conducted during full plant shutdowns, including required safety inspections which entail the disassembly of various components such as steam boilers, pressure vessels and other equipment requiring safety certifications. Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.

CF INDUSTRIES HOLDINGS, INC.

7. Goodwill and Other Intangible Assets

The following table shows the carrying amount of goodwill by reportable segment as of December 31, 2020 and 2019:

			Ammonia						Granular Urea						UAN						AN						Other						Total
			(in millions)
Balance as of December 31, 2019			$	587					$	828					$	576					$	302					$	72					$	2,365
Effect of exchange rate changes			—						—						—						8						1						9
Balance as of December 31, 2020			$	587					$	828					$	576					$	310					$	73					$	2,374

All of our identifiable intangible assets have definite lives and are presented in other assets on our consolidated balance sheets at gross carrying amount, net of accumulated amortization, as follows:

			December 31, 2020																		December 31, 2019
			Gross Carrying Amount						Accumulated Amortization						Net						Gross Carrying Amount						Accumulated Amortization						Net
			(in millions)
Customer relationships			$	133					$	(52)					$	81					$	131					$	(45)					$	86
Trade names			32						(9)						23						31						(7)						24
Total intangible assets			$	165					$	(61)					$	104					$	162					$	(52)					$	110

Our intangible assets are being amortized over a weighted-average life of approximately 20 years. Amortization expense of our identifiable intangibles was $8 million, $8 million and $7 million for the years ended December 31, 2020, 2019 and 2018, respectively. The gross carrying amount and accumulated amortization of our intangible assets are also impacted by the effect of exchange rate changes. Total estimated amortization expense for each of the five succeeding fiscal years is as follows:

			Estimated Amortization Expense
			(in millions)
2021			$	8
2022			8
2023			8
2024			8
2025			8

CF INDUSTRIES HOLDINGS, INC.

8. Equity Method Investment

We have a 50% ownership interest in PLNL, which operates an ammonia production facility in the Republic of Trinidad and Tobago. We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the ammonia segment.

As of December 31, 2020, the total carrying value of our equity method investment in PLNL was $80 million, $42 million more than our share of PLNL’s book value. The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment. The increased basis for property, plant and equipment is being amortized over a remaining period of approximately 12 years. Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of this basis difference.

We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices. Our ammonia purchases from PLNL totaled $57 million, $69 million and $86 million in 2020, 2019 and 2018, respectively.

The Trinidadian tax authority (the Board of Inland Revenue) issued a proposed tax assessment against PLNL with respect to tax years 2011 and 2012 in the amount of approximately $12 million. The proposed assessment asserted that PLNL should have withheld tax at a higher rate on dividends paid to its Trinidadian owners. The Board of Inland Revenue also would have assessed statutory interest and penalties on the amount of tax owed when a final assessment was issued for the tax years 2011 and 2012. As we own a 50% interest in PLNL, our effective share of any assessment that is determined to be a liability of PLNL would be 50%, which would be reflected as a reduction in our equity in earnings of PLNL.

During the third quarter of 2019, the Trinidadian government offered a tax amnesty period that provided taxpayers the opportunity to pay any prior year tax obligations and avoid accumulated interest or penalties. During the tax amnesty period, PLNL evaluated the proposed assessment, including considering the outcome of certain recent legal cases involving other taxpayers. As a result of this evaluation, in the third quarter of 2019, PLNL paid withholding tax to the Board of Inland Revenue under the amnesty program for tax years back to 2011, and recognized a charge for $32 million in the third quarter of 2019. Our 50% share of PLNL’s tax charge was $16 million, which reduced our equity in earnings of operating affiliate for 2019.

PLNL operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by The National Gas Company of Trinidad and Tobago Limited (NGC). PLNL experienced past curtailments in the supply of natural gas from NGC, which reduced historical ammonia production at PLNL. The NGC Contract had an initial expiration date of September 2018 and was extended on the same terms until September 2023. Any NGC commitment to supply gas beyond 2023 will be based on new agreements. In May 2018, the NGC and PLNL reached a settlement of an arbitration proceeding regarding PLNL’s claims for damages due to natural gas supply curtailments. The net after-tax impact of the settlement reached between NGC and PLNL that was recognized in our consolidated statement of operations for 2018 was an increase in our equity in earnings of operating affiliate of approximately $19 million.

CF INDUSTRIES HOLDINGS, INC.

9. Fair Value Measurements

Our cash and cash equivalents and other investments consist of the following:

			December 31, 2020
			Cost Basis						Unrealized Gains						Unrealized Losses						Fair Value
			(in millions)
Cash			$	108					$	—					$	—					$	108
Cash equivalents:
U.S. and Canadian government obligations			552						—						—						552
Other debt securities			23						—						—						23
Total cash and cash equivalents			$	683					$	—					$	—					$	683
Nonqualified employee benefit trusts			16						3						—						19

			December 31, 2019
			Cost Basis						Unrealized Gains						Unrealized Losses						Fair Value
			(in millions)
Cash			$	59					$	—					$	—					$	59
Cash equivalents:
U.S. and Canadian government obligations			211						—						—						211
Other debt securities			17						—						—						17
Total cash and cash equivalents			$	287					$	—					$	—					$	287
Nonqualified employee benefit trusts			17						2						—						19

Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities included in our consolidated balance sheets as of December 31, 2020 and 2019 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

			December 31, 2020
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash equivalents			$	575					$	575					$	—					$	—
Nonqualified employee benefit trusts			19						19						—						—
Derivative assets			1						—						1						—
Derivative liabilities			(7)						—						(7)						—
Embedded derivative liability			(18)						—						(18)						—

CF INDUSTRIES HOLDINGS, INC.

			December 31, 2019
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash equivalents			$	228					$	228					$	—					$	—
Nonqualified employee benefit trusts			19						19						—						—
Derivative liabilities			(12)						—						(12)						—
Embedded derivative liability			(20)						—						(20)						—

Cash Equivalents

As of December 31, 2020 and 2019, our cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities.

Nonqualified Employee Benefit Trusts

We maintain trusts associated with certain nonqualified supplemental pension plans. The fair values of the trust assets are based on daily quoted prices in an active market, which represents the net asset values of the shares held in the trusts, and are included on our consolidated balance sheets in other assets. Debt securities are accounted for as available-for-sale securities and changes in fair value are reported in other comprehensive income. Changes in the fair value of available-for-sale equity securities in the trust assets are recognized through earnings.

Derivative Instruments

The derivative instruments that we may use are primarily natural gas fixed price swaps, basis swaps and options traded in the OTC markets with multi-national commercial banks, other major financial institutions or large energy companies. The natural gas derivative contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods. The natural gas derivative contracts settle using primarily a NYMEX futures price index. To determine the fair value of these instruments, we use quoted market prices from NYMEX and standard pricing models with inputs derived from or corroborated by observable market data such as forward curves supplied by an industry-recognized independent third party. See Note 15—Derivative Financial Instruments for additional information.

Embedded Derivative Liability

Under the terms of our strategic venture with CHS, if our credit rating as determined by two of three specified credit rating agencies is below certain levels, we are required to make a non-refundable yearly payment of $5 million to CHS. Since 2016, our credit ratings have been below certain levels and, as a result, we made an annual payment of $5 million to CHS in the fourth quarter of each year. These payments will continue on a yearly basis until the earlier of the date that our credit rating is upgraded to or above certain levels by two of the three specified credit rating agencies or February 1, 2026. This obligation is recognized on our consolidated balance sheets as an embedded derivative and is included within other current liabilities and other liabilities. As of December 31, 2020 and 2019, the embedded derivative liability was $18 million and $20 million, respectively. Included in other operating—net in our consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018 is a net loss of $3 million, $4 million and $1 million, respectively.

The inputs into the fair value measurement include the probability of future upgrades and downgrades of our credit rating based on historical credit rating movements of other public companies and the discount rates to be applied to potential annual payments based on applicable credit spreads of other public companies at different credit rating levels. Based on these inputs, our fair value measurement is classified as Level 2.

See Note 17—Noncontrolling Interests for additional information regarding our strategic venture with CHS.

CF INDUSTRIES HOLDINGS, INC.

Financial Instruments

The carrying amounts and estimated fair value of our financial instruments are as follows:

			December 31, 2020												December 31, 2019
			Carrying Amount						Fair Value						Carrying Amount						Fair Value
			(in millions)
Long-term debt, including current maturities			$	3,961					$	4,731					$	3,957					$	4,295

The fair value of our long-term debt was based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs and value drivers are observable and, as a result, they are classified as Level 2 inputs.

The carrying amounts of cash and cash equivalents, as well as instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment. The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets. Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.

We review the carrying value of our goodwill, definite lived intangible assets, and investments in unconsolidated subsidiaries to assess recoverability as part of our annual impairment review in the fourth quarter of each year and more frequently if there is an event that requires reassessment during the year. As part of the assessment process when performing impairment tests, we estimate many factors including future production and sales volumes, selling prices, raw materials costs, operating rates, operating expenses, inflation, discount rates, exchange rates, tax rates and capital spending. The assumptions we make are material estimates that are used in the impairment testing.

CF INDUSTRIES HOLDINGS, INC.

10. Income Taxes

Income Tax Provision

The components of earnings before income taxes and the components of our income tax provision are as follows:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Domestic			$	421					$	679					$	516
Non-U.S.			42						93						31
Earnings before income taxes			$	463					$	772					$	547

Current
Federal			$	106					$	4					$	5
Foreign			6						21						14
State			(7)						(48)						6
			105						(23)						25
Deferred
Federal			(76)						112						85
Foreign			4						—						(10)
State			(2)						37						3
			(74)						149						78
Income tax provision before Tax Reform			31						126						103
Tax Reform - Current
Federal			—						—						19
Foreign			—						—						—
State			—						—						(3)
Income tax provision - Tax Reform			—						—						16
Income tax provision			$	31					$	126					$	119

Terra Amended Tax Returns

We completed the acquisition of Terra Industries Inc. (Terra) in April 2010. After the acquisition, we determined that the manner in which Terra reported the repatriation of cash from foreign affiliates to its U.S. parent for U.S. and foreign income tax purposes was not appropriate. As a result, in 2012 we amended certain tax returns, including Terra’s income and withholding tax returns, back to 1999 (the Amended Tax Returns) and paid additional income and withholding taxes, and related interest and penalties. In early 2013, the Internal Revenue Service (IRS) commenced an examination of the U.S. tax aspects of the Amended Tax Returns. In 2017, we also made a Voluntary Disclosure Filing with the Canadian Revenue Agency (CRA) with respect to the Canadian tax aspects of this matter and paid additional Canadian taxes due.

In early 2019, the IRS completed its examination of the Amended Tax Returns and submitted its audit reports and related refund claims to the Joint Committee on Taxation of the U.S. Congress (the Joint Committee). For purposes of its review, the Joint Committee separated the IRS audit reports into two separate matters: (i) an income tax related matter and (ii) a withholding tax matter. In late 2019, we received notification that the Joint Committee had approved the IRS audit reports and related income tax refunds relating to the income tax related matter. As a result of the approval by the Joint Committee, we recognized in the fourth quarter of 2019 the following amounts in our consolidated statement of operations; (i) $5 million of interest income ($4 million, net of tax); and (ii) a reduction in income tax expense of $10 million as a result of the favorable settlement of certain uncertain tax positions. No income tax refunds were received in 2019 related to the Amended Tax Returns.

In 2020, we received notification that the Joint Committee approved the IRS audit report and related withholding tax refunds relating to the withholding tax matter and we received IRS Notices indicating the amount of tax and interest to be refunded and received with respect to the withholding tax matter and the income tax matter. In addition, the CRA settled with us the Voluntary Disclosure matter.

CF INDUSTRIES HOLDINGS, INC.

In 2020, as a result of these events, we recognized $26 million of interest-related income and $18 million of income tax benefit, which consisted of the following:

• additional income of $26 million ($23 million, net of tax) representing $16 million of interest income related to the U.S. Federal income tax matter and withholding tax matter and a $10 million reversal of previously accrued interest related to the Canadian tax aspects of this matter,

• a reduction in our liabilities for unrecognized tax benefits of $12 million with a corresponding reduction in income tax expense related to the U.S. Federal withholding tax matter, and

• an additional income tax benefit of $9 million related to the U.S. Federal income tax matter and related state amended returns.

In 2020, we received U.S. Federal income tax refunds, including interest, of $110 million relating to the Amended Tax Returns, consisting of $68 million related to the income tax matter and $42 million related to the withholding tax matter, which finalized these matters with the IRS. As a result of the finalization of the income tax matter and the withholding tax matter, all U.S. federal tax years commencing before January 1, 2012 are now closed.

In the first quarter of 2021, we received approximately $20 million of withholding tax refunds, including interest, from the CRA, related to the Voluntary Disclosure Filing. These amounts were previously recorded in our consolidated balance sheet as of December 31, 2020.

Canada Revenue Agency Notices of Reassessment

In 2016, the Canada Revenue Agency (CRA) issued Notices of Reassessment for tax years 2006 through 2009 to one of our Canadian affiliates asserting a disallowance of certain patronage allocations. The tax assessments totaled CAD $174 million (or approximately $137 million), including provincial taxes but excluding any interest or penalties. We filed a Notice of Objection with respect to the Notices of Reassessment with the CRA and Alberta Tax and Revenue Administration and we posted letters of credit in lieu of paying the additional tax liability assessed. In 2018, the matter was accepted for consideration under the bilateral settlement provisions of the US-Canada Tax Treaty (the Treaty) by the United States and Canadian competent authorities and was subject to a two-year period to reach a settlement. The period was subsequently extended, but it expired in February 2021 and the matter is being referred to binding arbitration under the provisions of the Treaty.

While there is uncertainty about the ultimate timing and outcome of this matter, which may be resolved in binding arbitration, we do not expect that resolution of the matter will result in a material net tax liability, because the Company would be entitled to an offsetting U.S. foreign tax credit for any incremental Canadian tax paid. Upon resolution of the matter, interest would be assessed based upon the amount of tax due. Similarly, the Company would be entitled to receive interest on the offsetting reduction in tax due to the foreign tax credit. Due to uncertainty in how each taxing authority would apply their interest calculation rules, we are not able to predict the net amount of interest that we would pay to or receive from the taxing authorities.

Tax Reform

The Tax Cuts and Jobs Act (the “Tax Act” or “Tax Reform”) was enacted on December 22, 2017. Among other provisions, the Tax Act imposed a transition tax liability on taxpayers with undistributed foreign entity earnings. In 2018, we recorded a $16 million increase to the provisional amount of the transition tax liability. The adjustment to the provisional amount was required to properly reflect the inclusion of amounts subject to the transition tax in tax returns where the amounts were to be reported. The adjustment related to changes in (i) the amount of includible income subject to the transition tax; (ii) the computation of the allowable foreign tax credits against the transition tax liability and (iii) the allocation of certain gains and losses to various foreign tax credit baskets. The adjustment to the provisional amount represented an approximate 3 percentage point increase to our effective tax rate for the year ended December 31, 2018.

The Tax Act also provided a new category of income from foreign operations, Global Intangible Low-Taxed Income (GILTI), that was subject to federal income tax beginning in the year ended December 31, 2018. The U.S. tax on foreign earnings in the effective tax rate table below includes our tax on GILTI, which is primarily related to Canadian earnings.

CF INDUSTRIES HOLDINGS, INC.

COVID-19 Tax Legislation

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law. The CARES Act includes, among other things, a five-year net operating loss (NOL) carryback (including a related technical correction to the 2017 Tax Cuts and Jobs Act) for tax losses incurred in tax years 2018 through 2020, a change in interest deduction limitations for tax years 2019 and 2020, increasing the annual interest limitation from 30% to 50% of adjusted taxable income and increased refundability of corporate alternative minimum tax (AMT) credits. These provisions have limited applicability to the Company.

On December 27, 2020, the Consolidated Appropriations Act, 2021 (the CAA) was signed into law. The CAA extends certain provisions of the CARES Act, provides additional funding for others and contains new relief provisions. The tax provisions within this legislation will not have a significant effect on the Company.

We continue to monitor and assess the impact of tax legislation related to COVID-19 in all tax jurisdictions in which we operate.

Effective Tax Rate

Differences in the expected income tax provision based on statutory rates applied to earnings before income taxes and the income tax provision reflected in the consolidated statements of operations are summarized below.

			Year ended December 31,
			2020												2019												2018
			(in millions, except percentages)
Earnings before income taxes			$	463											$	772											$	547
Expected tax provision at U.S. statutory rate of 21%			$	97											$	162											$	115
State income taxes, net of federal			(1)												2												3
Net earnings attributable to noncontrolling interests			(24)												(32)												(29)
Foreign tax rate differential			1												2												—
U.S. tax on foreign earnings			(6)												3												12
Foreign partnership basis difference			(7)												—												—
Valuation allowance			—												—												4
Tax rate change			—												—												(2)
Terra amended tax returns			(24)												(10)												—
Other			(5)												(1)												—
Transition tax liability (Tax Reform)			—												—												16
Income tax provision			$	31											$	126											$	119
Effective tax rate			6.7		%										16.3		%										21.7		%
Income tax provision before Tax Reform(1)			$	31											$	126											$	103
Effective tax rate before Tax Reform			6.7		%										16.3		%										18.7		%

---

(1)Income tax provision before Tax Reform reflects the income tax provision less the Tax Reform impact included in the table above consisting of the transition tax liability.

On April 2, 2018, we acquired the TNCLP Public Units. Our effective tax rate in 2018 was impacted by a $16 million reduction to our deferred tax liability as a result of the change in our effective state income tax rate due to the implementation of legal entity structure changes related to the acquisition. See Note 17—Noncontrolling Interests for additional information.

The foreign tax rate differential is impacted by the inclusion of equity earnings from our equity method investment in PLNL, a foreign operating affiliate, which are included in pre-tax earnings on an after-tax basis. In 2020, the foreign tax rate differential includes $6 million tax expense for the revaluing of deferred taxes due to an enacted rate change in the jurisdiction of a foreign affiliate.

U.S. tax on foreign earnings for the year ended December 31, 2020 is inclusive of the current year tax on global intangible low-tax income (GILTI), benefit from the Section 250 deduction and foreign tax credits, as well as adjustments to prior year amounts for these items recorded upon filing the U.S. federal return in the fourth quarter of 2020.

CF INDUSTRIES HOLDINGS, INC.

Our effective tax rate is impacted by earnings attributable to noncontrolling interests in CFN and, prior to April 2, 2018, TNCLP, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interests. As a result, earnings attributable to the noncontrolling interests of $115 million, $153 million and $138 million in 2020, 2019 and 2018, respectively, which are included in earnings before income taxes, impacted the effective tax rate in all three years. See Note 17—Noncontrolling Interests for additional information.

Deferred Taxes

Deferred tax assets and deferred tax liabilities are as follows:

			December 31,
			2020						2019
			(in millions)
Deferred tax assets:
Net operating loss and capital loss carryforwards			$	194					$	108
Retirement and other employee benefits			69						71
State tax credits			69						72
Operating lease liabilities			61						66
Other			23						61
			416						378
Valuation allowance			(157)						(60)
			259						318
Deferred tax liabilities:
Depreciation and amortization			(204)						(276)
Investments in partnerships			(1,173)						(1,217)
Operating lease right-of-use assets			(60)						(65)
Other			(6)						(6)
			(1,443)						(1,564)
Net deferred tax liability			$	(1,184)					$	(1,246)

We consider the earnings of our United Kingdom subsidiaries to be permanently reinvested. As of December 31, 2020, we would not expect any additional U.S. and foreign income tax that would be due upon repatriation of these accumulated earnings, other than foreign withholding tax, which we have not accrued.

During 2019, as a result of group legal entity reorganizations, foreign net operating loss carryforwards were eliminated, which resulted in a net decrease of $99 million in the net operating loss carryforwards deferred tax asset. We recorded a corresponding reduction in the related valuation allowance of $99 million as these losses were not anticipated to be realized. The valuation allowance activity in the current year is primarily attributable to a capital loss. As a result of an intercompany transaction with a foreign affiliate, we recognized a capital loss which will be carried forward and for which we recorded a deferred tax asset of approximately $90 million. The foreign affiliate operations do not normally generate capital gains and there is no practical plan to do so in the future, therefore, we established a full valuation allowance of approximately $90 million against the deferred tax asset. As of December 31, 2020, our net operating loss and capital loss carryforwards are comprised of state net operating loss carryforwards with expiration dates generally ranging from 2027 to 2037 and foreign capital loss carryforwards, which can be carried forward indefinitely. Our foreign affiliates, including the foreign affiliate described above, have operations that do not normally generate capital gains and have no practical plans to do so in the future. As a result, we have recorded a full valuation allowance against all foreign capital loss carryforwards.

As of December 31, 2020, we have state tax credit carryforwards resulting in a deferred tax asset of $69 million. The state tax credits have expiration dates generally ranging from 2033 to 2040. We have recorded a $27 million valuation allowance on the portion of the state tax credits that are not expected to be realized before they expire based on taxable income projections.

CF INDUSTRIES HOLDINGS, INC.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

			December 31,
			2020						2019
			(in millions)
Unrecognized tax benefits:
Balance as of January 1			$	104					$	126
Additions for tax positions taken during the current year			—						—
Additions for tax positions taken during prior years			—						22
Reductions related to lapsed statutes of limitations			—						—
Reductions related to settlements with tax jurisdictions			(23)						(44)
Balance as of December 31			$	81					$	104

Our effective tax rate would be affected by $37 million if these unrecognized tax benefits were to be recognized in the future.

In 2020, as a result of the settlement and finalization of carryover impacts of the Terra Amended Tax Returns on other tax periods, we reduced our liability for unrecognized tax benefits by $19 million and recorded a corresponding deferred income tax liability. In addition, we reduced our liabilities for unrecognized tax benefits by $4 million with a corresponding reduction in income tax provision.

In 2019, we increased the amount of our unrecognized tax benefits by $22 million. The increase primarily related to an addition for state investment tax credits. In addition, we reduced the amount of our unrecognized tax benefits in 2019 by $44 million. This reduction primarily related to the approval by the Joint Committee of the IRS audit report related to the Terra Amended Tax Returns described above.

We file federal, provincial, state and local income tax returns principally in the United States, Canada and the United Kingdom, as well as in certain other foreign jurisdictions. In general, filed tax returns remain subject to examination by United States tax jurisdictions for years 2012 and thereafter, by Canadian tax jurisdictions for years 2006 and thereafter, and by United Kingdom tax jurisdictions for years 2018 and thereafter. Our income tax liability or transition tax expense could be impacted by the finalization of currently on-going U.S. or foreign income tax audits of prior tax years falling before the date of enactment of the Tax Act or audits by the U.S. or foreign taxing authorities, which change the amount of our total income allocable to and taxed in the United States or a foreign country.

Interest expense and penalties of $(29) million, $4 million, and $1 million were recorded for the years ended December 31, 2020, 2019 and 2018, respectively. Amounts recognized in our consolidated balance sheets for accrued interest and penalties related to income taxes of $4 million and $33 million as of December 31, 2020 and 2019, respectively, are included in other liabilities.

CF INDUSTRIES HOLDINGS, INC.

11. Pension and Other Postretirement Benefits

We maintain five funded pension plans, consisting of three in North America (one U.S. plan and two Canadian plans) and two in the United Kingdom. One of our Canadian plans is closed to new employees and the two United Kingdom plans are closed to new employees and future accruals. The portion of the U.S. plan that is open to new employees is a cash balance plan, which provides benefits based on years of service and interest credits. We also provide group medical insurance benefits to certain retirees in North America. The specific medical benefits provided to retirees vary by group and location.

Our plan assets, benefit obligations, funded status and amounts recognized on our consolidated balance sheets for our North America and United Kingdom plans as of the December 31 measurement date are as follows:

			Pension Plans																								Retiree Medical Plans
			North America												United Kingdom												North America
			December 31,												December 31,												December 31,
			2020						2019						2020						2019						2020						2019
			(in millions)
Change in plan assets
Fair value of plan assets as of January 1			$	790					$	673					$	418					$	383					$	—					$	—
Return on plan assets			96						115						58						19						—						—
Employer contributions			22						38						23						23						4						3
Plan participant contributions			—						—						—						—						1						1
Benefit payments			(66)						(43)						(25)						(23)						(5)						(4)
Foreign currency translation			4						7						17						16						—						—
Fair value of plan assets as of December 31			846						790						491						418						—						—
Change in benefit obligation
Benefit obligation as of January 1			(839)						(742)						(597)						(524)						(37)						(43)
Service cost			(17)						(14)						—						—						—						—
Interest cost			(25)						(30)						(11)						(15)						(1)						(1)
Benefit payments			66						43						25						23						5						4
Foreign currency translation			(4)						(7)						(20)						(22)						—						—
Plan amendments			—						(4)						—						3						—						—
Plan participant contributions			—						—						—						—						(1)						(1)
Change in assumptions and other			(65)						(85)						(40)						(62)						(1)						4
Benefit obligation as of December 31			(884)						(839)						(643)						(597)						(35)						(37)
Funded status as of December 31			$	(38)					$	(49)					$	(152)					$	(179)					$	(35)					$	(37)

In the table above, the line titled “Plan amendments” for 2019 relates to the impact of updates to certain mortality tables for the U.S. plan and a conversion option for pensions in payment for the U.K. plans.

The line titled “Change in assumptions and other” for our North America pension plans primarily reflects the impact of losses due to the decrease in discount rates for 2020 and 2019.

The line titled “Change in assumptions and other” for our U.K. pension plans primarily reflects losses due to the decrease in discount rates for 2020 and 2019. For 2019, the losses from the decrease in discount rates was partially offset by gains due to the decrease in inflation rate assumptions.

The line titled “Benefit payments” includes $22 million of lump sum payments for our U.S. pension plan in December 2020.

CF INDUSTRIES HOLDINGS, INC.

Amounts recognized on the consolidated balance sheets consist of the following:

			Pension Plans																								Retiree Medical Plans
			North America												United Kingdom												North America
			December 31,												December 31,												December 31,
			2020						2019						2020						2019						2020						2019
			(in millions)
Other assets			$	10					$	10					$	—					$	—					$	—					$	—
Accrued expenses			—						—						—						—						(3)						(3)
Other liabilities			(48)						(59)						(152)						(179)						(32)						(34)
			$	(38)					$	(49)					$	(152)					$	(179)					$	(35)					$	(37)

Pre-tax amounts recognized in accumulated other comprehensive loss consist of the following:

			Pension Plans																								Retiree Medical Plans
			North America												United Kingdom												North America
			December 31,												December 31,												December 31,
			2020						2019						2020						2019						2020						2019
			(in millions)
Prior service cost			$	4					$	5					$	1					$	1					$	—					$	—
Net actuarial loss			79						82						129						132						4						2
			$	83					$	87					$	130					$	133					$	4					$	2

Net periodic benefit cost (income) and other amounts recognized in accumulated other comprehensive loss for the years ended December 31 included the following:

			Pension Plans																																				Retiree Medical Plans
			North America																		United Kingdom																		North America
			2020						2019						2018						2020						2019						2018						2020						2019						2018
			(in millions)
Service cost			$	17					$	14					$	15					$	—					$	—					$	—					$	—					$	—					$	—
Interest cost			25						30						28						11						15						14						1						1						2
Expected return on plan assets			(30)						(32)						(31)						(14)						(18)						(17)						—						—						—
Amortization of prior service cost (benefit)			1						—						—						—						—						—						—						(1)						(1)
Amortization of actuarial loss (gain)			3						—						3						3						—						—						(1)						(1)						(1)
Net periodic benefit cost (income)			16						12						15						—						(3)						(3)						—						(1)						—
Net actuarial (gain) loss			(1)						3						3						(4)						60						(3)						1						(4)						(8)
Prior service cost (credit)			—						4						—						—						(3)						5						—						—						—
Amortization of prior service (cost) benefit			(1)						—						—						—						—						—						—						1						1
Amortization of actuarial (loss) gain			(3)						—						(3)						(3)						—						—						1						1						1
Total recognized in accumulated other comprehensive loss			(5)						7						—						(7)						57						2						2						(2)						(6)
Total recognized in net periodic benefit cost (income) and accumulated other comprehensive loss			$	11					$	19					$	15					$	(7)					$	54					$	(1)					$	2					$	(3)					$	(6)

In the table above, the line titled “Prior service cost (credit)” in 2019 relates to plan amendments for updates to certain mortality tables for the U.S. plan and a conversion option for pensions in payment for the U.K. plans.

Service costs are recognized in cost of sales and selling, general and administrative expenses, and other costs are recognized in other non-operating—net on our consolidated statements of operations.

CF INDUSTRIES HOLDINGS, INC.

The accumulated benefit obligation (ABO) in aggregate for the defined benefit pension plans in North America was approximately $834 million and $793 million as of December 31, 2020 and 2019, respectively. The ABO in aggregate for the defined benefit pension plans in the United Kingdom was approximately $643 million and $597 million as of December 31, 2020 and 2019, respectively.

The following table presents aggregated information for those individual defined benefit pension plans that have an ABO in excess of plan assets as of December 31, which excludes two North American defined benefit pension plans that have plan assets in excess of its ABO:

			North America												United Kingdom
			2020						2019						2020						2019
			(in millions)
Accumulated benefit obligation			$	(678)					$	(654)					$	(643)					$	(597)
Fair value of plan assets			667						630						491						418

The following table presents aggregated information for those individual defined benefit pension plans that have a projected benefit obligation (PBO) in excess of plan assets as of December 31, which excludes two North American defined benefit pension plans that have plan assets in excess of its PBO:

			North America												United Kingdom
			2020						2019						2020						2019
			(in millions)
Projected benefit obligation			$	(715)					$	(689)					$	(643)					$	(597)
Fair value of plan assets			667						630						491						418

Our pension funding policy in North America is to contribute amounts sufficient to meet minimum legal funding requirements plus discretionary amounts that we may deem to be appropriate. Actual contributions may vary from estimated amounts depending on changes in assumptions, actual returns on plan assets, changes in regulatory requirements and funding decisions.

In accordance with United Kingdom pension legislation, our United Kingdom pension funding policy is to contribute amounts sufficient to meet the funding level target agreed between the employer and the trustees of the United Kingdom plans. Actual contributions are usually agreed with the plan trustees in connection with each triennial valuation and may vary following each such review depending on changes in assumptions, actual returns on plan assets, changes in regulatory requirements and funding decisions.

We currently estimate that our consolidated pension funding contributions for 2021 will be approximately $6 million for the North America plans and $27 million for the United Kingdom plans.

The expected future benefit payments for our pension and retiree medical plans are as follows:

			Pension Plans												Retiree Medical Plans
			North America						United Kingdom						North America
			(in millions)
2021			$	47					$	27					$	3
2022			47						28						3
2023			48						29						2
2024			48						30						2
2025			49						30						2
2026-2030			251						163						9

CF INDUSTRIES HOLDINGS, INC.

The following assumptions were used in determining the benefit obligations and expense:

			Pension Plans																																																Retiree Medical Plans
			North America																		United Kingdom																											North America
			2020						2019						2018						2020						2019						2018																		2020						2019						2018
Weighted-average discount rate—obligation			2.4		%				3.1		%				4.1		%				1.5		%				2.0		%				2.9		%																2.2		%				3.0		%				4.1		%
Weighted-average discount rate—expense			3.1		%				4.1		%				3.6		%				2.0		%				2.9		%				2.5		%																3.0		%				4.1		%				3.4		%
Weighted-average cash balance interest crediting rate—obligation			3.0		%				3.0		%				3.0		%				n/a						n/a						n/a																		n/a						n/a						n/a
Weighted-average cash balance interest crediting rate—expense			3.0		%				3.0		%				3.0		%				n/a						n/a						n/a																		n/a						n/a						n/a
Weighted-average rate of increase in future compensation			4.2		%				4.2		%				4.3		%				n/a						n/a						n/a																		n/a						n/a						n/a
Weighted-average expected long-term rate of return on assets—expense			4.1		%				4.6		%				4.5		%				3.4		%				4.4		%				4.2		%																n/a						n/a						n/a
Weighted-average retail price index—obligation			n/a						n/a						n/a						3.0		%				3.0		%				3.3		%																n/a						n/a						n/a
Weighted-average retail price index—expense			n/a						n/a						n/a						3.0		%				3.3		%				3.2		%																n/a						n/a						n/a

---

n/a—not applicable

The discount rates for all plans are developed by plan using spot rates derived from a hypothetical yield curve of high quality (AA rated or better) fixed income debt securities as of the year-end measurement date to calculate discounted cash flows (the projected benefit obligation) and solving for a single equivalent discount rate that produces the same projected benefit obligation. In determining our benefit obligation, we use the actuarial present value of the vested benefits to which each eligible employee is currently entitled, based on the employee’s expected date of separation or retirement.

The cash balance interest crediting rate for the U.S. plan is based on the greater of 10-year Treasuries or 3.0%.

For our North America plans, the expected long-term rate of return on assets is based on analysis of historical rates of return achieved by equity and non-equity investments and current market characteristics, adjusted for estimated plan expenses and weighted by target asset allocation percentages. As of January 1, 2021, our weighted-average expected long-term rate of return on assets is 3.2%, which will be used in determining expense for 2021.

For our United Kingdom plans, the expected long-term rate of return on assets is based on the expected long-term performance of the underlying investments, adjusted for investment managers’ fees and estimated plan expenses. As of January 1, 2021, our weighted-average expected long-term rate of return on assets is 3.3%, which will be used in determining expense for 2021.

The retail price index for the United Kingdom plans is developed using the Bank of England implied retail price inflation curve, which is based on the difference between yields on fixed interest government bonds and index-linked government bonds.

For the measurement of the benefit obligation at December 31, 2020 for our primary (U.S.) retiree medical benefit plans, the assumed health care cost trend rates, for pre-65 retirees, start with a 6.3% increase in 2021, followed by a gradual decline in increases to 4.5% for 2030 and thereafter. For post-65 retirees, the assumed health care cost trend rates start with a 7.0% increase in 2021, followed by a gradual decline in increases to 4.5% for 2030 and thereafter. For the measurement of the benefit obligation at December 31, 2019 for our primary (U.S.) retiree medical benefit plans, the assumed health care cost trend rates, for pre-65 retirees, started with a 7.0% increase in 2020, followed by a gradual decline in increases to 4.5% for 2026 and thereafter. For post-65 retirees, the assumed health care cost trend rates started with an 8.3% increase in 2020, followed by a gradual decline in increases to 4.5% for 2026 and thereafter.

The objectives of the investment policies governing the pension plans are to administer the assets of the plans for the benefit of the participants in compliance with all laws and regulations, and to establish an asset mix that provides for diversification and considers the risk of various different asset classes with the purpose of generating favorable investment returns. The investment policies consider circumstances such as participant demographics, time horizon to retirement and liquidity needs, and provide guidelines for asset allocation, planning horizon, general portfolio issues and investment manager evaluation criteria. The investment strategies for the plans, including target asset allocations and investment vehicles, are subject to change within the guidelines of the policies.

CF INDUSTRIES HOLDINGS, INC.

The target asset allocation for our U.S. pension plan is 80% non-equity and 20% equity, which has been determined based on analysis of actual historical rates of return and plan needs and circumstances. The equity investments are tailored to exceed the growth of the benefit obligation and are a combination of U.S. and non-U.S. total stock market index mutual funds. The non-equity investments consist primarily of investments in debt securities and money market instruments that are selected based on investment quality and duration to mitigate volatility of the funded status and annual required contributions. The non-equity investments have a duration profile that is similar to the benefit obligation in order to mitigate the impact of interest rate changes on the funded status. This investment strategy is achieved through the use of mutual funds and individual securities.

The target asset allocation for one of the Canadian plans is 70% non-equity and 30% equity, and 100% non-equity for the other Canadian plan. This investment strategy is achieved through the use of a mutual fund for equity investments and individual securities for non-equity investments. The equity investment is a passively managed portfolio that diversifies assets across multiple securities, economic sectors and countries. The non-equity investments consist primarily of investments in debt securities that are selected based on investment quality and duration to mitigate volatility of the funded status and annual required contributions. The non-equity investments have a duration profile that is similar to the benefit obligation in order to mitigate the impact of interest rate changes on the funded status.

The pension assets in the United Kingdom plans are each administered by a Board of Trustees consisting of employer nominated trustees, member nominated trustees and an independent trustee, with a requirement that member nominated trustees represent at least one-third of each Board of Trustees. It is the responsibility of the trustees to ensure prudent management and investment of the assets in the plans. The trustees meet on a quarterly basis to review and discuss fund performance and other administrative matters.

The trustees’ investment objectives are to hold assets that generate returns sufficient to cover prudently each plan’s liability without exposing the plans to unacceptable risk. This is accomplished through the asset allocation strategy of each plan. For both plans, if the asset allocation moves more than plus or minus 5% from the benchmark allocation, the trustees may decide to amend the asset allocation. At a minimum, the trustees review the investment strategy at every triennial actuarial valuation to ensure that the strategy remains consistent with its funding principles. The trustees may review the strategy more frequently if opportunities arise to reduce risk within the investments without jeopardizing the funding position.

Assets of the United Kingdom plans are invested in externally managed pooled funds. The assets are allocated between a growth portfolio and a matching portfolio. The growth portfolio seeks a return premium on investments across multiple asset classes. Growth portfolio funds may include, among others, traditional equities and bonds, growth fixed income, hedged funds, and may use derivatives. The matching portfolio seeks to align asset changes with changes in liability due to interest and discount rate. Matching portfolio funds are composed of corporate bonds, U.K. gilts and liability-driven investment funds and generally invest in fixed income debt securities including government bonds, gilts, gilt repurchase agreements, swaps and investment grade corporate bonds and may use derivatives. The target asset allocation for one of the United Kingdom plans is 55% in the growth portfolio and 45% in the matching portfolio and the other United Kingdom plan is 60% in the growth portfolio (including a legacy holding in an actively managed property fund) and 40% in the matching portfolio.

CF INDUSTRIES HOLDINGS, INC.

The fair values of our pension plan assets as of December 31, 2020 and 2019, by major asset class, are as follows:

			North America
			December 31, 2020
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash and cash equivalents(1)			$	30					$	7					$	23					$	—
Equity mutual funds
Index equity(2)			134						134						—						—
Pooled equity(3)			30						—						30						—
Fixed income
U.S. Treasury bonds and notes(4)			37						37						—						—
Corporate bonds and notes(5)			499						—						499						—
Government and agency securities(6)			110						—						110						—
Other(7)			7						—						7						—
Total assets at fair value by fair value levels			$	847					$	178					$	669					$	—
Accruals and payables—net			(1)
Total assets			$	846

			United Kingdom
			December 31, 2020
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash and cash funds(8)			$	22					$	5					$	17					$	—
Pooled equity funds(9)			118						—						118						—
Pooled diversified funds(10)			55						—						55						—
Debt funds
Pooled U.K. government fixed and index-linked securities funds(11)			73						—						73						—
Pooled global debt funds(12)			88						—						88						—
Pooled liability-driven investment funds (13)			83						—						83						—
Total assets at fair value by fair value levels			$	439					$	5					$	434					$	—
Funds measured at NAV as a practical expedient(14)			52
Total assets			$	491

CF INDUSTRIES HOLDINGS, INC.

			North America
			December 31, 2019
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash and cash equivalents(1)			$	21					$	1					$	20					$	—
Equity mutual funds
Index equity(2)			137						137						—						—
Pooled equity(3)			35						—						35						—
Fixed income
U.S. Treasury bonds and notes(4)			25						25						—						—
Corporate bonds and notes(5)			472						—						472						—
Government and agency securities(6)			93						—						93						—
Other(7)			8						—						8						—
Total assets at fair value by fair value levels			$	791					$	163					$	628					$	—
Accruals and payables—net			(1)
Total assets			$	790

			United Kingdom
			December 31, 2019
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash			$	4					$	4					$	—					$	—
Pooled target return funds(15)			220						—						220						—
Fixed income
Pooled U.K. government index-linked securities funds(16)			32						—						32						—
Pooled global fixed income funds(17)			33						—						33						—
Pooled liability-driven investment funds (13)			84						—						84						—
Total assets at fair value by fair value levels			$	373					$	4					$	369					$	—
Pooled property funds measured at NAV as a practical expedient(14)			45
Total assets			$	418

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(1)Cash and cash equivalents are primarily repurchase agreements and short-term money market funds.

(2)The index equity funds are mutual funds that utilize a passively managed investment approach designed to track specific equity indices. They are valued at quoted market prices in an active market, which represent the net asset values of the shares held by the plan.

(3)The equity pooled mutual funds consist of pooled funds that invest in common stock and other equity securities that are traded on U.S., Canadian, and foreign markets.

(4)U.S. Treasury bonds and notes are valued based on quoted market prices in an active market.

(5)Corporate bonds and notes, including private placement securities, are valued by institutional bond pricing services, which gather information from market sources and integrate credit information, observed market movements and sector news into their pricing applications and models.

(6)Government and agency securities consist of U.S. municipal bonds and Canadian provincial bonds that are valued by institutional bond pricing services, which gather information on current trading activity, market movements, trends, and specific data on specialty issues.

CF INDUSTRIES HOLDINGS, INC.

(7)Other includes primarily mortgage-backed and asset-backed securities, which are valued by institutional pricing services, which gather information from market sources and integrate credit information, observed market movements and sector news into their pricing applications and models.

(8)Cash and cash funds include a cash fund that holds primarily short-dated term money market securities.

(9)Pooled equity funds invest in a broad array of global equity, equity-related securities, a range of diversifiers and may use derivatives for efficient portfolio management. The funds are valued at net asset value (NAV) as determined by the fund managers based on the value of the underlying net assets of the fund.

(10)Pooled diversified funds invest in broad array of asset classes and a range of diversifiers including the use of derivatives. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

(11)Pooled U.K. government fixed and index-linked securities funds invest primarily in Sterling denominated fixed income and inflation-linked fixed income securities issued or guaranteed by the U.K. government and may use derivatives for efficient portfolio management. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

(12)Pooled global debt funds invest in a broad array of debt securities from corporate and government bonds to emerging markets and high-yield fixed and floating rate securities of varying maturities. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

(13)Pooled liability-driven investment funds invest primarily in gilt repurchase agreements, physical United Kingdom government gilts, and derivatives to provide exposure to interest rates, thus hedging this element of risk associated with pension liabilities. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

(14)Funds measured at NAV as a practical expedient in 2020 include two funds of funds with return strategies with exposure to varying asset classes and credit strategies, as well as alternative investment strategies not precluding multi-asset credit strategies, global macro strategies, commodities, fixed income, equities and currency, and in 2020 and 2019, pooled property funds that invest primarily in freehold and leasehold property in the United Kingdom. The funds are valued using NAV as determined by the fund managers based on the value of the underlying assets of the fund.

(15)Pooled target return funds invest in a broad array of asset classes and a range of diversifiers including the use of derivatives. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

(16)Pooled U.K. government index-linked securities funds invest primarily in United Kingdom government index-linked gilt securities. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

(17)Pooled global fixed income funds invest primarily in government bonds, investment grade corporate bonds, high yield and emerging market bonds and can make use of derivatives. The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund.

We have defined contribution plans covering substantially all employees in North America and the United Kingdom. Depending on the specific provisions of each plan, qualified employees receive company contributions based on a percentage of base salary, matching of employee contributions up to specified limits, or a combination of both. In 2020, 2019, and 2018, we recognized expense related to our contributions to the defined contribution plans of $22 million, $20 million, and $18 million, respectively.

In addition to our qualified defined benefit pension plans, we also maintain certain nonqualified supplemental pension plans for highly compensated employees as defined under federal law. The amounts recognized in accrued expenses and other liabilities in our consolidated balance sheets for these plans were $4 million and $16 million, respectively, as of December 31, 2020, and $2 million and $16 million, respectively, as of December 31, 2019. We recognized expense for these plans of $2 million, $1 million, and $1 million in 2020, 2019, and 2018, respectively.

CF INDUSTRIES HOLDINGS, INC.

12. Financing Agreements

Revolving Credit Agreement

On December 5, 2019, CF Holdings and CF Industries entered into a senior secured Fourth Amended and Restated Credit Agreement (the Revolving Credit Agreement), which amended and restated our Third Amended and Restated Revolving Credit Agreement, as previously amended (referred to herein, as in effect from time to time, as the Prior Credit Agreement), that was scheduled to mature September 18, 2020. The Revolving Credit Agreement provides for a revolving credit facility of up to $750 million with a maturity of December 5, 2024. The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million. Borrowings under the Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions, share repurchases and other general corporate purposes.

Borrowings under the Revolving Credit Agreement may be denominated in U.S. dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to, at our option, an applicable eurocurrency rate or base rate plus, in either case, a specified margin. We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

The guarantors under the Revolving Credit Agreement are currently comprised of CF Holdings and CF Holdings’ wholly owned subsidiaries CF Industries Enterprises, LLC (CFE), CF Industries Sales, LLC (CFS), CF USA Holdings, LLC (CF USA) and CF Industries Distribution Facilities, LLC (CFIDF).

As of December 31, 2020, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit. There were no borrowings outstanding under the Revolving Credit Agreement as of December 31, 2020 or 2019, and there were no borrowings outstanding under the Prior Credit Agreement or the Revolving Credit Agreement during 2019. In March 2020, we borrowed $500 million under the Revolving Credit Agreement to ensure we maintained ample financial flexibility in light of the uncertainty in the global markets caused by the COVID-19 pandemic, which we repaid in April 2020. Maximum borrowings under the Revolving Credit Agreement during the year ended December 31, 2020 were $500 million. The weighted-average annual interest rate of borrowings under the Revolving Credit Agreement during the year ended December 31, 2020 was 2.05%.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of December 31, 2020, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue letters of credit up to $250 million (reflecting an increase of $105 million in December 2020). As of December 31, 2020, approximately $125 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Senior Notes

Long-term debt presented on our consolidated balance sheets as of December 31, 2020 and 2019 consisted of the following debt securities issued by CF Industries:

			Effective Interest Rate						December 31, 2020												December 31, 2019
						Principal						Carrying Amount**(1)**						Principal						Carrying Amount**(1)**
									(in millions)
Public Senior Notes:
3.450% due June 2023			3.562%						$	750					$	748					$	750					$	747
5.150% due March 2034			5.279%						750						741						750						740
4.950% due June 2043			5.031%						750						742						750						742
5.375% due March 2044			5.465%						750						741						750						741
Senior Secured Notes:
3.400% due December 2021			3.782%						250						249						250						248
4.500% due December 2026			4.759%						750						740						750						739
Total long-term debt									$	4,000					$	3,961					$	4,000					$	3,957
Less: Current maturities of long-term debt									250						249						—						—
Long-term debt, net of current maturities									$	3,750					$	3,712					$	4,000					$	3,957

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(1)Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $9 million and $10 million as of December 31, 2020 and 2019, respectively, and total deferred debt issuance costs were $30 million and $33 million as of December 31, 2020 and 2019, respectively.

Under the indentures (including the applicable supplemental indentures) governing the senior notes due 2023, 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes is guaranteed by CF Holdings.

Under the terms of the applicable indenture, the 3.400% senior secured notes due December 2021 (the 2021 Notes) and the 4.500% senior secured notes due December 2026 (the 2026 Notes) identified in the table above (together, the Senior Secured Notes) are guaranteed on a senior secured basis, jointly and severally, by CF Holdings and each current and future domestic subsidiary of CF Holdings (other than CF Industries) that from time to time is a borrower, or guarantees indebtedness, under the Revolving Credit Agreement. The requirement for any subsidiary of CF Holdings to guarantee the Senior Secured Notes of a series will apply only until, and the subsidiary guarantees of the Senior Secured Notes of a series will be automatically released upon, CF Holdings having an investment grade corporate rating, with a stable or better outlook, from two of three selected ratings agencies and there being no default or event of default under the applicable indenture. The subsidiary guarantors of the Senior Secured Notes currently consist of CFE, CFS, CF USA and CFIDF.

Subject to certain exceptions, the obligations under each series of Senior Secured Notes and each guarantor’s related guarantee are secured by a first priority security interest in substantially all of the assets of CF Industries, CF Holdings and the subsidiary guarantors, including a pledge by CF USA of its equity interests in CFN and mortgages over certain material fee-owned domestic real properties (the Collateral). The obligations under the Revolving Credit Agreement, together with certain letter of credit, cash management, hedging and similar obligations and future pari passu secured indebtedness, are secured by the Collateral on a pari passu basis with the Senior Secured Notes. The liens on the Collateral securing the obligations under the Senior Secured Notes of a series and the related guarantees will be automatically released and the covenant under the applicable indenture limiting dispositions of Collateral will no longer apply if CF Holdings has an investment grade corporate rating, with a stable or better outlook, from two of three selected ratings agencies and there is no default or event of default under the applicable indenture.

On November 13, 2019, we redeemed in full all of the remaining $500 million outstanding principal amount of the 7.125% senior notes due May 2020 (the 2020 Notes), in accordance with the optional redemption provisions in the indenture governing the 2020 Notes. The total aggregate redemption price paid on the 2020 Notes in connection with the redemption was approximately $512 million, excluding accrued interest. As a result, we recognized a loss on debt extinguishment of $12 million, primarily consisting of premiums paid.

CF INDUSTRIES HOLDINGS, INC.

On December 13, 2019, we redeemed $250 million principal amount, representing 50% of the $500 million principal amount outstanding immediately prior to such redemption, of the 2021 Notes in accordance with the optional redemption provisions in the indenture governing the 2021 Notes. The total aggregate redemption price paid in connection with the redemption was approximately $257 million, excluding accrued interest. As a result, we recognized a loss on debt extinguishment of $9 million, primarily consisting of premiums paid.

On February 17, 2021, we announced that CF Industries elected to redeem in full the entire outstanding $250 million principal amount of the 2021 Notes on March 20, 2021, in accordance with the optional redemption provisions provided in the indenture governing the 2021 Notes. See Note 25—Subsequent Events for additional information.

Interest on the Public Senior Notes and the Senior Secured Notes is payable semiannually, and the Public Senior Notes and Senior Secured Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.

13. Interest Expense

Details of interest expense are as follows:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Interest on borrowings(1)			$	185					$	223					$	228
Fees on financing agreements(1)			8						13						13
Interest on tax liabilities(2)			(14)						3						1
Interest capitalized			—						(2)						(1)
Interest expense			$	179					$	237					$	241

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(1)See Note 12—Financing Agreements for additional information.

(2)Interest on tax liabilities for the year ended December 31, 2020 includes a reduction in interest accrued on the reserve for unrecognized tax benefits.

14. Other Operating—Net

Details of other operating—net are as follows:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Insurance proceeds(1)			$	(37)					$	(37)					$	(10)
Loss (gain) on disposal of property, plant and equipment—net(2)			15						(40)						6
Loss (gain) on foreign currency transactions(3)			5						(1)						(5)
Loss on embedded derivative(4)			3						4						1
Other			(3)						1						(19)
Other operating—net			$	(17)					$	(73)					$	(27)

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(1)Insurance proceeds in 2020 and 2019 relate to property and business interruption insurance claims at one of our nitrogen complexes.

(2)Loss (gain) on disposal of property, plant and equipment—net in 2020 includes $9 million of engineering costs written off upon the cancellation of a project at one of our nitrogen complexes. In 2019, includes the gain on sale of our Pine Bend facility of $45 million. See Note 6—Property, Plant and Equipment—Net for additional information on the sale of our Pine Bend facility.

(3)Loss (gain) on foreign currency transactions consists of foreign currency exchange rate impacts on foreign currency denominated transactions, including the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

(4)Loss on embedded derivative consists of unrealized and realized losses related to a provision of our strategic venture with CHS. See Note 9—Fair Value Measurements for additional information.

CF INDUSTRIES HOLDINGS, INC.

15. Derivative Financial Instruments

We may use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future. Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based products. From time to time, we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates. The derivatives that we may use to reduce our exposure to changes in prices for natural gas are primarily natural gas fixed price swaps, basis swaps and options traded in the OTC markets. These natural gas derivatives settle using primarily a NYMEX futures price index, which represents the basis for fair value at any given time. We enter into natural gas derivative contracts with respect to natural gas to be consumed by us in the future, and settlements of those derivative contracts are scheduled to coincide with our anticipated purchases of natural gas used to manufacture nitrogen products during those future periods. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. As a result, changes in fair value of these contracts are recognized in earnings. As of December 31, 2020, we had natural gas fixed price swaps and basis swaps covering certain periods through March 2022.

As of December 31, 2020, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 34.1 million MMBtus. As of December 31, 2019, we had open natural gas derivative contracts for 41.1 million MMBtus of natural gas fixed price swaps, basis swaps and options. For the year ended December 31, 2020, we used derivatives to cover approximately 19% of our natural gas consumption.

The effect of derivatives in our consolidated statements of operations is shown in the table below.

			Gain (loss) recognized in income
									Year ended December 31,
			Location						2020						2019						2018
									(in millions)
Natural gas derivatives
Unrealized net gains (losses)			Cost of sales						$	6					$	(14)					$	13
Realized net (losses) gains			Cost of sales						(13)						4						(2)
Net derivative (losses) gains									$	(7)					$	(10)					$	11

The fair values of derivatives on our consolidated balance sheets are shown below. As of December 31, 2020 and 2019, none of our derivative instruments were designated as hedging instruments. See Note 9—Fair Value Measurements for additional information on derivative fair values.

			Asset Derivatives																		Liability Derivatives
			Balance Sheet Location						December 31,												Balance Sheet Location						December 31,
						2020						2019									2020						2019
									(in millions)																		(in millions)
Natural gas derivatives			Other current assets						$	1					$	—					Other current liabilities						$	(7)					$	(12)

The counterparties to our derivative contracts are multinational commercial banks, major financial institutions and large energy companies. Our derivative contracts are executed with several counterparties under International Swaps and Derivatives Association (ISDA) agreements. The ISDA agreements are master netting arrangements commonly used for OTC derivatives that mitigate exposure to counterparty credit risk, in part, by creating contractual rights of netting and setoff, the specifics of which vary from agreement to agreement. These rights are described further below:

• Settlement netting generally allows us and our counterparties to net, into a single net payable or receivable, ordinary settlement obligations arising between us under the ISDA agreement on the same day, in the same currency, for the same types of derivative instruments, and through the same pairing of offices.

• Close-out netting rights are provided in the event of a default or other termination event (as defined in the ISDA agreements), including bankruptcy. Depending on the cause of early termination, the non-defaulting party may elect to terminate all or some transactions outstanding under the ISDA agreement. The values of all terminated transactions and certain other payments under the ISDA agreement are netted, resulting in a single net close-out amount payable to or by the non-defaulting party.

• Setoff rights are provided by certain of our ISDA agreements and generally allow a non-defaulting party to elect to set off, against the final net close-out payment, other matured and contingent amounts payable between us and our

CF INDUSTRIES HOLDINGS, INC.

counterparties under the ISDA agreement or otherwise. Typically, these setoff rights arise upon the early termination of all transactions outstanding under an ISDA agreement following a default or specified termination event.

Most of our ISDA agreements contain credit-risk-related contingent features such as cross default provisions. In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades or, under certain ISDA agreements, may require us to collateralize derivatives in a net liability position. The Revolving Credit Agreement, at any time when it is secured, provides a cross collateral feature for those of our derivatives that are with counterparties that are party to, or affiliates of parties to, the Revolving Credit Agreement so that no separate collateral would be required for those counterparties in connection with such derivatives. In the event the Revolving Credit Agreement becomes unsecured, separate collateral could be required in connection with such derivatives. As of December 31, 2020 and 2019, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $6 million and $12 million, respectively, which also approximates the fair value of the maximum amount of additional collateral that may need to be posted or assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. As of December 31, 2020 and 2019, we had no cash collateral on deposit with counterparties for derivative contracts. The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of December 31, 2020 and 2019:

			Amounts presented in consolidated balance sheets**(1)**						Gross amounts not offset in consolidated balance sheets
						Financial instruments						Cash collateral received (pledged)						Net amount
			(in millions)
December 31, 2020
Total derivative assets			$	1					$	—					$	—					$	1
Total derivative liabilities			(7)						—						—						(7)
Net derivative liabilities			$	(6)					$	—					$	—					$	(6)
December 31, 2019
Total derivative assets			$	—					$	—					$	—					$	—
Total derivative liabilities			(12)						—						—						(12)
Net derivative liabilities			$	(12)					$	—					$	—					$	(12)

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(1)We report the fair values of our derivative assets and liabilities on a gross basis on our consolidated balance sheets. As a result, the gross amounts recognized and net amounts presented are the same.

We do not believe the contractually allowed netting, close-out netting or setoff of amounts owed to, or due from, the counterparties to our ISDA agreements would have a material effect on our financial position.

CF INDUSTRIES HOLDINGS, INC.

16. Supplemental Balance Sheet Data

Accounts Receivable—Net

Accounts receivable—net consist of the following:

			December 31,
			2020						2019
			(in millions)
Trade			$	256					$	229
Other			9						13
Accounts receivable—net			$	265					$	242

Inventories

Inventories consist of the following:

			December 31,
			2020						2019
			(in millions)
Finished goods			$	246					$	311
Raw materials, spare parts and supplies			41						40
Total inventories			$	287					$	351

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

			December 31,
			2020						2019
			(in millions)
Accounts payable			$	85					$	78
Accrued natural gas costs			106						88
Payroll and employee-related costs			68						81
Accrued interest			32						32
Other			133						158
Total accounts payable and accrued expenses			$	424					$	437

Payroll and employee-related costs include accrued salaries and wages, vacation, benefits, incentive plans and payroll taxes.

Accrued interest includes interest payable on our outstanding senior notes. See Note 12—Financing Agreements and Note 13—Interest Expense for additional information.

Other includes accrued utilities, property and other taxes, sales incentives and other credits, accrued litigation settlement costs, accrued maintenance and professional services.

Other Current Liabilities

As of December 31, 2020, other current liabilities of $15 million primarily includes $7 million of unrealized loss on natural gas derivatives and $5 million representing the current portion of the unrealized loss on the embedded derivative liability related to our strategic venture with CHS. As of December 31, 2019, other current liabilities of $18 million primarily includes $12 million of unrealized loss on natural gas derivatives and $5 million representing the current portion of the unrealized loss on the embedded derivative liability related to our strategic venture with CHS.

See Note 9—Fair Value Measurements, Note 15—Derivative Financial Instruments and Note 17—Noncontrolling Interests for additional information.

CF INDUSTRIES HOLDINGS, INC.

Other Liabilities

Other liabilities consist of the following:

			December 31,
			2020						2019
			(in millions)
Benefit plans and deferred compensation			$	256					$	298
Tax-related liabilities			155						147
Unrealized loss on embedded derivative			13						15
Other			20						14
Other liabilities			$	444					$	474

Benefit plans and deferred compensation include liabilities for pensions, retiree medical benefits, and the noncurrent portion of incentive plans. See Note 11—Pension and Other Postretirement Benefits for additional information.

17. Noncontrolling Interests

A reconciliation of the beginning and ending balances of noncontrolling interests and distributions payable to the noncontrolling interests on our consolidated balance sheets is provided below.

			Year ended December 31,
			2020																		2019																		2018
			CFN																		CFN																		CFN						TNCLP						Total
																					(in millions)
Noncontrolling interests:
Balance as of January 1			$	2,740																	$	2,773																	$	2,772					$	333					$	3,105
Earnings attributable to noncontrolling interests			115																		153																		130						8						138
Declaration of distributions payable			(174)																		(186)																		(129)						(10)						(139)
Purchase of TNCLP Public Units			—																		—																		—						(331)						(331)
Balance as of December 31			$	2,681																	$	2,740																	$	2,773					$	—					$	2,773
Distributions payable to noncontrolling interests:
Balance as of January 1			$	—																	$	—																	$	—					$	—					$	—
Declaration of distributions payable			174																		186																		129						10						139
Distributions to noncontrolling interests			(174)																		(186)																		(129)						(10)						(139)
Balance as of December 31			$	—																	$	—																	$	—					$	—					$	—

CF INDUSTRIES HOLDINGS, INC.

CF Industries Nitrogen, LLC (CFN)

We have a strategic venture with CHS under which CHS owns an equity interest in CFN, a subsidiary of CF Holdings, which represents approximately 11% of the membership interests of CFN. We own the remaining membership interests. Under the terms of CFN’s limited liability company agreement, each member’s interest will reflect, over time, the impact of the profitability of CFN, any member contributions made to CFN and withdrawals and distributions received from CFN. For financial reporting purposes, the assets, liabilities and earnings of the strategic venture are consolidated into our financial statements. CHS’ interest in the strategic venture is recorded in noncontrolling interests in our consolidated financial statements. CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. As a result of its equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN. We are also entitled to semi-annual cash distributions from CFN. The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts. Additionally, under the terms of the strategic venture, we recognized an embedded derivative related to our credit rating. See Note 9—Fair Value Measurements for additional information.

On January 31, 2021, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended December 31, 2020 in accordance with CFN’s limited liability company agreement. On February 1, 2021, CFN distributed $64 million to CHS for the distribution period ended December 31, 2020.

Terra Nitrogen Company, L.P. (TNCLP)

On February 7, 2018, we announced that, in accordance with the terms of TNCLP’s First Amended and Restated Agreement of Limited Partnership (as amended by Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership, the TNCLP Agreement of Limited Partnership), Terra Nitrogen GP Inc. (TNGP), the sole general partner of TNCLP and an indirect wholly owned subsidiary of CF Holdings, elected to exercise its right to purchase all of the 4,612,562 publicly traded common units of TNCLP (the TNCLP Public Units). On April 2, 2018, TNGP completed its purchase of the TNCLP Public Units (the Purchase) for an aggregate cash purchase price of $388 million, at which time we recognized a reduction in paid-in capital of $62 million; a deferred tax liability of $5 million; and the removal of the TNCLP noncontrolling interests, as shown in the table above. Upon completion of the Purchase, CF Holdings owned, through its subsidiaries, 100 percent of the general and limited partnership interests of TNCLP.

Prior to April 2, 2018, TNCLP was a master limited partnership that owned a nitrogen manufacturing facility in Verdigris, Oklahoma. We owned approximately 75.3% of TNCLP through general and limited partnership interests and outside investors owned the remaining approximately 24.7% of the limited partnership interests. For financial reporting purposes, the assets, liabilities and earnings of the partnership were consolidated into our financial statements. The outside investors’ limited partnership interests in TNCLP were recorded in noncontrolling interests in our consolidated financial statements. The noncontrolling interest represented the noncontrolling unitholders’ interest (prior to the Purchase) in the earnings and equity of TNCLP. Affiliates of CF Industries were required to purchase all of TNCLP’s nitrogen products at market prices as defined in the Amendment to the General and Administrative Services and Product Offtake Agreement, dated September 28, 2010.

Prior to April 2, 2018, TNCLP made cash distributions to the general and limited partners based on formulas defined within the TNCLP Agreement of Limited Partnership. Cash available for distribution (Available Cash) was defined in the TNCLP Agreement of Limited Partnership generally as all cash receipts less all cash disbursements, less certain reserves (including reserves for future operating and capital needs) established as the general partner determined in its reasonable discretion to be necessary or appropriate. Changes in working capital affected Available Cash, as increases in the amount of cash invested in working capital items (such as increases in receivables or inventory and decreases in accounts payable) reduced Available Cash, while declines in the amount of cash invested in working capital items increased Available Cash. Cash distributions to the limited partners and general partner varied depending on the extent to which the cumulative distributions exceeded certain target threshold levels set forth in the TNCLP Agreement of Limited Partnership.

CF INDUSTRIES HOLDINGS, INC.

18. Stockholders’ Equity

Common Stock

Our Board of Directors (the Board) has authorized certain programs to repurchase shares of our common stock. These programs have generally permitted repurchases to be made from time to time in the open market, through privately-negotiated transactions, through block transactions or otherwise. Our management has determined the manner, timing and amount of repurchases under these programs based on the evaluation of market conditions, stock price and other factors.

On August 1, 2018, the Board authorized the repurchase of up to $500 million of CF Holdings common stock through June 30, 2020 (the 2018 Share Repurchase Program). In 2018, we completed the 2018 Share Repurchase Program with the repurchase of 10.9 million shares for $500 million, of which $33 million was accrued and unpaid at December 31, 2018.

On February 13, 2019, the Board authorized the repurchase of up to $1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program). In 2019, we repurchased approximately 7.6 million shares under the 2019 Share Repurchase Program for $337 million. In 2020, we repurchased approximately 2.6 million shares under the 2019 Share Repurchase Program for $100 million.

In 2019, we retired 18.6 million shares of repurchased stock. The retired shares were returned to the status of authorized but unissued shares. As part of the retirements, we reduced our treasury stock, paid-in capital and retained earnings balances for 2019 by $843 million, $110 million and $733 million, respectively. We held no shares in treasury of repurchased stock as of December 31, 2019.

In 2020, we retired 2.8 million shares of repurchased stock. The retired shares were returned to the status of authorized but unissued shares. As part of the retirements, we reduced our treasury stock, paid-in capital and retained earnings balances for 2020 by $107 million, $17 million and $90 million, respectively. As of December 31, 2020, we held 102,843 shares in treasury of repurchased stock.

Changes in common shares outstanding are as follows:

			Year ended December 31,
			2020						2019						2018
Beginning balance			216,023,826						222,818,495						233,287,089
Exercise of stock options			321,465						629,186						462,647
Issuance of restricted stock(1)			552,362						267,165						68,803
Purchase of treasury shares(2)			(2,942,795)						(7,691,020)						(11,000,044)
Ending balance			213,954,858						216,023,826						222,818,495

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(1)Includes shares issued from treasury.

(2)Includes shares withheld to pay employee tax obligations upon the vesting of restricted stock or the exercise of stock options.

Preferred Stock

CF Holdings is authorized to issue 50 million shares of $0.01 par value preferred stock. Our Second Amended and Restated Certificate of Incorporation, as amended, authorizes the Board, without any further stockholder action or approval, to issue these shares in one or more classes or series, and (except in the case of our Series A Junior Participating Preferred Stock, 500,000 shares of which are authorized and the terms of which were specified in the original certificate of incorporation of CF Holdings) to fix the rights, preferences and privileges of the shares of each wholly unissued class or series and any of its qualifications, limitations or restrictions. The Series A Junior Participating Preferred Stock had been established in CF Holdings’ original certificate of incorporation in connection with our former stockholder rights plan that expired in 2015. No shares of preferred stock have been issued.

CF INDUSTRIES HOLDINGS, INC.

Accumulated Other Comprehensive Loss

Changes to accumulated other comprehensive loss and the impact on other comprehensive income (loss) are as follows:

			Foreign Currency Translation Adjustment						Unrealized Gain (Loss) on Securities						Unrealized Gain (Loss) on Derivatives						Defined Benefit Plans						Accumulated Other Comprehensive Loss
			(in millions)
Balance as of December 31, 2017			$	(145)					$	1					$	4					$	(123)					$	(263)
Adoption of ASU 2016-01(1)			—						(1)						—						—						(1)
Adoption of ASU 2018-02(2)			—						—						1						(11)						(10)
Gain arising during the period			—						—						—						3						3
Reclassification to earnings(3)			—						—						—						2						2
Effect of exchange rate changes and deferred taxes			(105)						—						—						3						(102)
Balance as of December 31, 2018			(250)						—						5						(126)						(371)
Loss arising during the period			—						—						—						(62)						(62)
Reclassification to earnings(3)			—						—						—						(2)						(2)
Effect of exchange rate changes and deferred taxes			62						—						—						7						69
Balance as of December 31, 2019			(188)						—						5						(183)						(366)
Gain arising during the period			—						—						—						1						1
Reclassification to earnings(3)			—						—						(1)						6						5
Effect of exchange rate changes and deferred taxes			44						—						—						(4)						40
Balance as of December 31, 2020			$	(144)					$	—					$	4					$	(180)					$	(320)

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(1) On January 1, 2018, we adopted ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changes the income statement impact of equity investments held by an entity. The amendments require the unrealized gains or losses of equity instruments measured at fair value to be recognized in net earnings. Our adoption of this ASU resulted in an increase to opening retained earnings of $1 million representing the cumulative effect of unrealized gains from equity securities from accumulated other comprehensive loss.

(2) In the fourth quarter of 2018, we adopted ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allowed a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. As a result of our adoption of this ASU, we reclassified $10 million of stranded tax effects previously recognized in accumulated other comprehensive loss to retained earnings during the fourth quarter of 2018.

(3) Reclassifications out of accumulated other comprehensive loss to the consolidated statements of operations were not material.

CF INDUSTRIES HOLDINGS, INC.

19. Stock-based Compensation

2014 Equity and Incentive Plan

On May 14, 2014, our shareholders approved the CF Industries Holdings, Inc. 2014 Equity and Incentive Plan (the 2014 Equity and Incentive Plan) which replaced the CF Industries Holdings, Inc. 2009 Equity and Incentive Plan. Under the 2014 Equity and Incentive Plan, we may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards (payable in cash or stock) and other stock-based awards to our officers, employees, consultants and independent contractors (including non-employee directors). The purpose of the 2014 Equity and Incentive Plan is to provide an incentive that is aligned with the interests of our shareholders.

Share Reserve and Individual Award Limits

The maximum number of shares reserved for the grant of awards under the 2014 Equity and Incentive Plan is the sum of (i) 13.9 million and (ii) the number of shares subject to outstanding awards under our predecessor plans to the extent such awards terminate or expire without delivery of shares. For purposes of determining the number of shares of stock available for grant under the 2014 Equity and Incentive Plan, each option or stock appreciation right is counted against the reserve as one share. Each share of stock granted, other than an option or a stock appreciation right, is counted against the reserve as 1.61 shares. If any outstanding award expires or is settled in cash, any unissued shares subject to the award are again available for grant under the 2014 Equity and Incentive Plan. Shares tendered in payment of the exercise price of an option and shares withheld by the Company or otherwise received by the Company to satisfy tax withholding obligations are not available for future grant under the 2014 Equity and Incentive Plan. As of December 31, 2020, we had 6.0 million shares available for future awards under the 2014 Equity and Incentive Plan. The 2014 Equity and Incentive Plan provides that no more than 5.0 million shares underlying awards of stock options and stock appreciation rights may be granted to a participant in any one calendar year.

Restricted Stock Awards, Restricted Stock Units and Performance Restricted Stock Units

The fair value of a restricted stock award (RSA) or a restricted stock unit (RSU) is equal to the number of shares subject to the award multiplied by the closing market price of our common stock on the date of grant. We estimated the fair value of each performance restricted stock unit (PSU) on the date of grant using a Monte Carlo simulation. Generally, RSUs vest in three equal annual installments following the date of grant. PSUs are granted to key employees and generally vest three years from the date of grant subject to the attainment of applicable performance goals during the performance period. The RSAs awarded to non-management members of the Board vest the earlier of one year from the date of the grant or the date of the next annual stockholder meeting. During the vesting period, the holders of the RSAs are entitled to dividends and voting rights. During the vesting period, the holders of the RSUs are paid dividend equivalents in cash to the extent we pay cash dividends. PSUs accrue dividend equivalents to the extent we pay cash dividends on our common stock during the performance and vesting periods. Upon vesting of the PSUs, holders are paid the cash equivalent of the dividends paid during the performance and vesting periods based on the shares of common stock, if any, delivered in settlement of PSUs. Holders of RSUs and PSUs are not entitled to voting rights unless and until the awards have vested.

A summary of restricted stock activity during the year ended December 31, 2020 is presented below.

			Restricted Stock Awards												Restricted Stock Units												Performance Restricted Stock Units
			Shares						Weighted- Average Grant-Date Fair Value						Shares						Weighted- Average Grant-Date Fair Value						Shares						Weighted- Average Grant-Date Fair Value
Outstanding as of December 31, 2019			36,567						$	41.84					693,960						$	40.14					304,834						$	44.42
Granted			50,895						27.51						316,154						45.23						210,869						47.93
Restrictions lapsed (vested)(1)			(36,567)						41.84						(372,855)						38.36						(58,460)						48.68
Forfeited			—						—						(23,165)						44.13						(11,745)						45.97
Outstanding as of December 31, 2020			50,895						27.51						614,094						43.70						445,498						45.72

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(1)For performance restricted stock units, the shares represent the performance restricted stock units granted in 2017, for which the three-year performance period ended December 31, 2019.

The 2020, 2019 and 2018 weighted-average grant date fair value for RSAs was $27.51, $41.84, and $40.40, for RSUs was $45.23, $41.94, and $43.09, and for PSUs was $47.93, $43.09, and $44.59, respectively.

CF INDUSTRIES HOLDINGS, INC.

The actual tax benefit realized from restricted stock vested in each of the years ended December 31, 2020, 2019 and 2018 was $5 million, $3 million and $1 million, respectively. The fair value of restricted stock vested was $22 million, $11 million and $3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Stock Options

Under the 2014 Equity and Incentive Plan and our predecessor plans, we have granted to plan participants nonqualified stock options to purchase shares of our common stock. The exercise price of these options was equal to the market price of our common stock on the date of grant. The contractual life of each option was ten years and generally one-third of the options vested on each of the first three anniversaries of the date of grant. No stock option awards have been granted to plan participants since 2017.

A summary of stock option activity during the year ended December 31, 2020 is presented below:

			Shares						Weighted- Average Exercise Price
Outstanding as of December 31, 2019			5,059,892						$	39.88
Exercised			(321,465)						25.95
Forfeited			(6,527)						30.95
Expired			(162,859)						52.86
Outstanding as of December 31, 2020			4,569,041						40.41
Exercisable as of December 31, 2020			4,569,041						40.41

			Weighted- Average Remaining Contractual Term (years)						Aggregate Intrinsic Value**(1)****(in millions)**
Outstanding as of December 31, 2020			4.2						$	15
Exercisable as of December 31, 2020			4.2						$	15

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(1)The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $38.71 as of December 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date.

Selected amounts pertaining to stock option exercises are as follows:

			2020						2019						2018
			(in millions)
Cash received from stock option exercises			$	8					$	18					$	12
Actual tax benefit realized from stock option exercises			$	1					$	3					$	2
Pre-tax intrinsic value of stock options exercised			$	4					$	12					$	10

Compensation Cost

Compensation cost is recorded primarily in selling, general and administrative expenses. The following table summarizes stock-based compensation costs and related income tax benefits:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Stock-based compensation expense			$	26					$	28					$	21
Income tax benefit			(6)						(6)						(4)
Stock-based compensation expense, net of income taxes			$	20					$	22					$	17

As of December 31, 2020, pre-tax unrecognized compensation cost was $14 million for RSAs and RSUs, which will be recognized over a weighted-average period of 1.7 years, and $7 million for PSUs, which will be recognized over a weighted-average period of 1.3 years.

CF INDUSTRIES HOLDINGS, INC.

Excess tax benefits realized from the vesting of restricted stock or stock option exercises are recognized as an income tax benefit in our consolidated statements of operations and are required to be reported as an operating cash inflow rather than a reduction of taxes paid. The excess tax benefits realized in 2020, 2019 and 2018 were $3 million, $7 million, and $6 million, respectively.

20. Contingencies

West Fertilizer Co.

On April 17, 2013, there was a fire and explosion at the West Fertilizer Co. fertilizer storage and distribution facility in West, Texas. According to published reports, 15 people were killed and approximately 200 people were injured in the incident, and the fire and explosion damaged or destroyed a number of homes and buildings around the facility. Various subsidiaries of CF Industries Holdings, Inc. (the CF Entities) were named as defendants along with other companies in lawsuits filed in 2013, 2014 and 2015 in the District Court of McLennan County, Texas by the City of West, individual residents of the County and other parties seeking recovery for damages allegedly sustained as a result of the explosion. The cases were consolidated for discovery and pretrial proceedings in the District Court of McLennan County under the caption “In re: West Explosion Cases.” The two-year statute of limitations expired on April 17, 2015. As of that date, over 400 plaintiffs had filed claims, including at least 9 entities, 325 individuals, and 80 insurance companies. Plaintiffs allege various theories of negligence, strict liability, and breach of warranty under Texas law. Although we do not own or operate the facility or directly sell our products to West Fertilizer Co., products that the CF Entities manufactured and sold to others were delivered to the facility and may have been stored at the West facility at the time of the incident.

The Court granted in part and denied in part the CF Entities’ Motions for Summary Judgment in August 2015. Over three hundred cases have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. The next group of cases is expected to be set for trial after the Court resumes scheduling civil jury trials currently on hold because of the coronavirus disease 2019 (COVID-19) pandemic. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits. The Company cannot provide a range of reasonably possible loss due to the uncertain nature of this litigation, including uncertainties around the potential allocation of responsibility by a jury to other defendants or responsible third parties. The recognition of a potential loss in the future in the West Fertilizer Co. litigation could negatively affect our results in the period of recognition. However, based upon currently available information, including available insurance coverage, we do not believe that this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Other Litigation

From time to time, we are subject to ordinary, routine legal proceedings related to the usual conduct of our business, including proceedings regarding public utility and transportation rates, environmental matters, taxes and permits relating to the operations of our various plants and facilities. Based on the information available as of the date of this filing, we believe that the ultimate outcome of these routine matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Environmental

From time to time, we receive notices from governmental agencies or third parties alleging that we are a potentially responsible party at certain cleanup sites under CERCLA or other environmental cleanup laws. In 2011, we received a notice from the Idaho Department of Environmental Quality (IDEQ) that alleged that we were a potentially responsible party for the cleanup of a former phosphate mine site we owned in the late 1950s and early 1960s located in Georgetown Canyon, Idaho. The current owner of the property and a former mining contractor received similar notices for the site. In 2014, we and the current property owner entered into a Consent Order with IDEQ and the U.S. Forest Service to conduct a remedial investigation and feasibility study of the site. In 2015, we and several other parties received a notice that the U.S. Department of the Interior and other trustees intend to undertake a natural resource damage assessment for 17 former phosphate mines in southeast Idaho, one of which is the former Georgetown Canyon mine. Because the former mine site is still in the remedial investigation/feasibility study stage, we are not able to estimate at this time our potential liability, if any, with respect to the cleanup of the site or a possible claim for natural resource damages. However, based on the results of the site investigation conducted to date, we do not expect the remedial or financial obligations to which we may be subject involving this or other cleanup sites will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

CF INDUSTRIES HOLDINGS, INC.

21. Segment Disclosures

Our reportable segments consist of ammonia, granular urea, UAN, AN, and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting of selling, general and administrative expenses and other operating—net) and non-operating expenses (interest and income taxes) are centrally managed and are not included in the measurement of segment profitability reviewed by management.

Our assets, with the exception of goodwill, are not monitored by or reported to our chief operating decision maker by segment; therefore, we do not present total assets by segment. Goodwill by segment is presented in Note 7—Goodwill and Other Intangible Assets.

Segment data for sales, cost of sales and gross margin for 2020, 2019 and 2018 are presented in the table below.

			Ammonia						Granular Urea**(1)**						UAN**(1)**						AN**(1)**						Other**(1)**						Consolidated
			(in millions)
Year ended December 31, 2020
Net sales			$	1,020					$	1,248					$	1,063					$	455					$	338					$	4,124
Cost of sales			850						847						949						390						287						3,323
Gross margin			$	170					$	401					$	114					$	65					$	51					801
Total other operating costs and expenses																																	189
Equity in earnings of operating affiliate																																	11
Operating earnings																																	$	623
Year ended December 31, 2019
Net sales			$	1,113					$	1,342					$	1,270					$	506					$	359					$	4,590
Cost of sales			878						861						981						399						297						3,416
Gross margin			$	235					$	481					$	289					$	107					$	62					1,174
Total other operating costs and expenses																																	166
Equity in loss of operating affiliate																																	(5)
Operating earnings																																	$	1,003
Year ended December 31, 2018
Net sales			$	1,028					$	1,322					$	1,234					$	460					$	385					$	4,429
Cost of sales			867						889						1,007						414						335						3,512
Gross margin			$	161					$	433					$	227					$	46					$	50					917
Total other operating costs and expenses																																	187
Equity in earnings of operating affiliate																																	36
Operating earnings																																	$	766

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(1)The cost of ammonia that is upgraded into other products is transferred at cost into the upgraded product results.

Depreciation and amortization by segment for 2020, 2019 and 2018 is as follows:

			Ammonia						Granular Urea						UAN						AN						Other												Corporate						Consolidated
			(in millions)
Depreciation and amortization
Year ended December 31, 2020			$	176					$	270					$	256					$	100					$	68											$	22					$	892
Year ended December 31, 2019			167						264						251						88						72												33						875
Year ended December 31, 2018			155						276						270						85						67												35						888

CF INDUSTRIES HOLDINGS, INC.

Enterprise-wide data by geographic region is as follows:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Sales by geographic region (based on destination of shipments):
United States			$	3,036					$	3,387					$	3,160
Foreign:
Canada			397						410						379
North America, excluding U.S. and Canada			54						53						81
United Kingdom			332						413						425
Other foreign			305						327						384
Total foreign			1,088						1,203						1,269
Consolidated			$	4,124					$	4,590					$	4,429

			December 31,
			2020						2019						2018
			(in millions)
Property, plant and equipment—net by geographic region:
United States			$	6,527					$	6,991					$	7,426
Foreign:
Canada			525						558						544
United Kingdom			580						621						653
Total foreign			1,105						1,179						1,197
Consolidated			$	7,632					$	8,170					$	8,623

Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users. In 2020, 2019 and 2018, CHS accounted for approximately 13%, 15% and 14% of our consolidated net sales, respectively. See Note 17—Noncontrolling Interests for additional information.

22. Supplemental Cash Flow Information

The following provides additional information relating to cash flow activities:

			Year ended December 31,
			2020						2019						2018
			(in millions)
Cash paid during the year for
Interest—net of interest capitalized			$	184					$	228					$	227
Income taxes—net of refunds			111						(41)						7
Supplemental disclosure of noncash investing and financing activities:
Change in capitalized expenditures in accounts payable and accrued expenses			$	1					$	(6)					$	2
Change in accrued share repurchases			—						(33)						33

CF INDUSTRIES HOLDINGS, INC.

23. Asset Retirement Obligations

Asset retirement obligations (AROs) are legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal operation of such assets. AROs are initially recognized as incurred when sufficient information exists to estimate fair value. We have AROs at our nitrogen manufacturing complexes and at our distribution and storage facilities that are conditional upon cessation of operations. These AROs include certain decommissioning activities as well as the removal and disposal of certain chemicals, waste materials, structures, equipment, vessels, piping and storage tanks. Also included are reclamation of land and the closure of certain effluent ponds and/or waste storage areas. The most recent estimate of the aggregate cost of these AROs expressed in 2020 dollars is approximately $115 million. We have not recorded a liability for these conditional AROs as of December 31, 2020 because we do not believe there is currently a reasonable basis for estimating a date or range of dates of cessation of operations at our nitrogen manufacturing facilities or our distribution and storage facilities, which is necessary in order to estimate fair value. In reaching this conclusion, we considered the historical performance of each complex or facility and have taken into account factors such as planned maintenance, asset replacements and upgrades of plant and equipment, which if conducted as in the past, can extend the physical lives of our nitrogen manufacturing facilities and our distribution and storage facilities indefinitely. We also considered the possibility of changes in technology, risk of obsolescence, and availability of raw materials in arriving at our conclusion.

24. Leases

We have operating leases for certain property and equipment under various noncancelable agreements, the most significant of which are rail car leases and barge tow charters for the distribution of our products. The rail car leases currently have minimum terms ranging from one to eleven years and the barge tow charter commitments range from one to six years. Our rail car leases and barge tow charters commonly contain provisions for automatic renewal that can extend the lease term unless canceled by either party. We also have operating leases for terminal and warehouse storage for our distribution system, some of which contain minimum throughput requirements. The storage agreements contain minimum terms generally ranging from one to five years and commonly contain provisions for automatic renewal thereafter unless canceled by either party. The renewal provisions for our rail car leases, barge tow charters and terminal and warehouse storage agreements are not reasonably certain to be exercised.

The components of lease costs were as follows:

			Year ended December 31,
			2020						2019
			(in millions)
Operating lease cost			$	107					$	95
Short-term lease cost			17						26
Variable lease cost			6						4
Total lease cost			$	130					$	125

Total rent expense for cancelable and noncancelable operating leases was $121 million for 2018, which was recorded under the previous lease accounting standard, ASC 840.

Supplemental cash flow information related to leases was as follows:

			Year ended December 31,
			2020						2019
			(in millions)
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities			$	105					$	93
Right-of-use (ROU) assets obtained in exchange for operating lease obligations			80						73

CF INDUSTRIES HOLDINGS, INC.

Supplemental balance sheet information related to leases was as follows:

			December 31,
			2020						2019
			(in millions)
Operating lease ROU assets			$	259					$	280
Current operating lease liabilities			$	88					$	90
Operating lease liabilities			174						193
Total operating lease liabilities			$	262					$	283

			December 31,
			2020						2019
Operating leases
Weighted-average remaining lease term			4 years						5 years
Weighted-average discount rate(1)			4.7		%				4.9		%

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(1)Upon adoption of the new lease accounting standard, discount rates used for existing leases were established at January 1, 2019.

The following table reconciles the undiscounted cash flows for our operating leases to the operating lease liabilities recorded on our consolidated balance sheet as of December 31, 2020.

			Operating lease payments
			(in millions)
2021			$	90
2022			68
2023			47
2024			39
2025			22
Thereafter			24
Total lease payments			290
Less: imputed interest			(28)
Present value of lease liabilities			262
Less: Current operating lease liabilities			(88)
Operating lease liabilities			$	174

As of December 31, 2020, we have entered into additional leases that had not yet commenced and therefore have been excluded from total operating lease liabilities as of that date. These leases will commence in fiscal year 2021 with future minimum payments of $6 million and lease terms of five years.

CF INDUSTRIES HOLDINGS, INC.

25. Subsequent Events

On February 17, 2021, we announced that our wholly owned subsidiary CF Industries, Inc. elected to redeem in full the entire outstanding $250 million principal amount of the 2021 Notes on March 20, 2021, in accordance with the optional redemption provisions provided in the indenture governing the 2021 Notes. Based on market interest rates on February 12, 2021, we estimate that the total amount for the redemption of the 2021 Notes will be approximately $258 million, including accrued interest. See Note 12—Financing Agreements for additional information.

In February 2021, the central portion of the United States experienced extreme and unprecedented cold weather. Certain natural gas suppliers declared force majeure events due to natural gas well freeze offs or frozen equipment. This occurred at the same time as large increases in natural gas demand were occurring due to the cold temperatures. Due to these unprecedented factors, several states declared a state of emergency and natural gas was redirected for residential usage. At certain of our manufacturing locations, we were asked to reduce our natural gas consumption and therefore these plants either operated at reduced rates or temporarily suspended operations. We returned excess natural gas to our suppliers and received prevailing market prices, which were in excess of our cost. During this period of time, we have experienced lower production, but have procured product in order to meet customer obligations. Higher maintenance and repair activity may be necessary as the plants are restarted. At the present time, we do not know the net positive or negative impact of these events on our operations; however, we do not expect it to result in a material impact to our business.

CF INDUSTRIES HOLDINGS, INC.