Item 1. FINANCIAL STATEMENTS.

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Item 1. FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)
Net sales	$	1,362	$	847	$	3,998	$	3,022
Cost of sales	922		764		2,766		2,401
Gross margin	440		83		1,232		621
Selling, general and administrative expenses	52		49		167		154

Goodwill impairment	259		—		259		—
Long-lived and intangible asset impairment	236		—		236		—

Other operating—net	5		(4)		7		8
Total other operating costs and expenses	552		45		669		162

Equity in earnings of operating affiliate	15		2		37		8
Operating (loss) earnings	(97)		40		600		467
Interest expense	46		48		140		141
Interest income	—		—		—		(18)
Loss on debt extinguishment	13		—		19		—
Other non-operating—net	(19)		1		(17)		(2)
(Loss) earnings before income taxes	(137)		(9)		458		346
Income tax (benefit) provision	(46)		(13)		57		33

Net (loss) earnings	(91)		4		401		313
Less: Net earnings attributable to noncontrolling interest	94		32		189		83
Net (loss) earnings attributable to common stockholders	$	(185)	$	(28)	$	212	$	230
Net (loss) earnings per share attributable to common stockholders:
Basic	$	(0.86)	$	(0.13)	$	0.99	$	1.07
Diluted	$	(0.86)	$	(0.13)	$	0.98	$	1.07
Weighted-average common shares outstanding:
Basic	214.9		213.9		215.3		215.0
Diluted	214.9		213.9		216.4		215.3
Dividends declared per common share	$	0.30	$	0.30	$	0.90	$	0.90

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in millions)
Net (loss) earnings	$	(91)	$	4	$	401	$	313
Other comprehensive (loss) income:
Foreign currency translation adjustment—net of taxes	(26)		41		(2)		(30)


Defined benefit plans—net of taxes	6		(3)		6		8
	(20)		38		4		(22)
Comprehensive (loss) income	(111)		42		405		291
Less: Comprehensive income attributable to noncontrolling interest	94		32		189		83
Comprehensive (loss) income attributable to common stockholders	$	(205)	$	10	$	216	$	208

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	September 30, 2021		December 31, 2020
	(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	757	$	683

Accounts receivable—net	386		265
Inventories	418		287

Prepaid income taxes	201		97
Other current assets	52		35
Total current assets	1,814		1,367
Property, plant and equipment—net	7,210		7,632
Investment in affiliate	92		80
Goodwill	2,116		2,374
Operating lease right-of-use assets	261		259
Other assets	273		311
Total assets	$	11,766	$	12,023
Liabilities and Equity
Current liabilities:

Accounts payable and accrued expenses	$	537	$	424
Income taxes payable	1		—
Customer advances	375		130
Current operating lease liabilities	93		88
Current maturities of long-term debt	—		249
Other current liabilities	9		15
Total current liabilities	1,015		906
Long-term debt, net of current maturities	3,465		3,712
Deferred income taxes	1,160		1,184
Operating lease liabilities	175		174
Other liabilities	337		444
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, 2021—215,296,025 shares issued and 2020—214,057,701 shares issued	2		2
Paid-in capital	1,370		1,317
Retained earnings	1,933		1,927
Treasury stock—at cost, 2021—1,100,921 shares and 2020—102,843 shares	(51)		(4)
Accumulated other comprehensive loss	(316)		(320)
Total stockholders’ equity	2,938		2,922
Noncontrolling interest	2,676		2,681
Total equity	5,614		5,603
Total liabilities and equity	$	11,766	$	12,023

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Common Stockholders
	$0.01 Par Value Common Stock		Treasury Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	(in millions, except per share amounts)
Balance as of June 30, 2021	$	2	$	—	$	1,357	$	2,183	$	(296)	$	3,246	$	2,712	$	5,958
Net (loss) earnings	—		—		—		(185)		—		(185)		94		(91)
Other comprehensive loss	—		—		—		—		(20)		(20)		—		(20)
Purchases of treasury stock	—		(50)		—		—		—		(50)		—		(50)

Acquisition of treasury stock under employee stock plans	—		(1)		—		—		—		(1)		—		(1)
Issuance of $0.01 par value common stock under employee stock plans	—		—		6		—		—		6		—		6

Stock-based compensation expense	—		—		7		—		—		7		—		7

Cash dividends ($0.30 per share)	—		—		—		(65)		—		(65)		—		(65)



Distribution declared to noncontrolling interest	—		—		—		—		—		—		(130)		(130)

Balance as of September 30, 2021	$	2	$	(51)	$	1,370	$	1,933	$	(316)	$	2,938	$	2,676	$	5,614

Balance as of December 31, 2020	$	2	$	(4)	$	1,317	$	1,927	$	(320)	$	2,922	$	2,681	$	5,603
Net earnings	—		—		—		212		—		212		189		401
Other comprehensive income	—		—		—		—		4		4		—		4
Purchases of treasury stock	—		(50)		—		—		—		(50)		—		(50)
Retirement of treasury stock	—		13		(2)		(11)		—		—		—		—
Acquisition of treasury stock under employee stock plans	—		(11)		—		—		—		(11)		—		(11)
Issuance of $0.01 par value common stock under employee stock plans	—		1		32		—		—		33		—		33

Stock-based compensation expense	—		—		23		—		—		23		—		23

Cash dividends ($0.90 per share)	—		—		—		(195)		—		(195)		—		(195)



Distributions declared to noncontrolling interest	—		—		—		—		—		—		(194)		(194)

Balance as of September 30, 2021	$	2	$	(51)	$	1,370	$	1,933	$	(316)	$	2,938	$	2,676	$	5,614

(Continued)

CONSOLIDATED STATEMENTS OF EQUITY

(Continued) (Unaudited)


	Common Stockholders
	$0.01 Par Value Common Stock		Treasury Stock		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	(in millions, except per share amounts)
Balance as of June 30, 2020	$	2	$	—	$	1,300	$	1,997	$	(426)	$	2,873	$	2,703	$	5,576


Net (loss) earnings	—		—		—		(28)		—		(28)		32		4
Other comprehensive income	—		—		—		—		38		38		—		38


Acquisition of treasury stock under employee stock plans	—		(1)		—		—		—		(1)		—		(1)
Issuance of $0.01 par value common stock under employee stock plans	—		—		1		—		—		1		—		1

Stock-based compensation expense	—		—		7		—		—		7		—		7

Cash dividends ($0.30 per share)	—		—		—		(64)		—		(64)		—		(64)



Distribution declared to noncontrolling interest	—		—		—		—		—		—		(86)		(86)

Balance as of September 30, 2020	$	2	$	(1)	$	1,308	$	1,905	$	(388)	$	2,826	$	2,649	$	5,475

Balance as of December 31, 2019	$	2	$	—	$	1,303	$	1,958	$	(366)	$	2,897	$	2,740	$	5,637


Net earnings	—		—		—		230		—		230		83		313
Other comprehensive loss	—		—		—		—		(22)		(22)		—		(22)
Purchases of treasury stock	—		(100)		—		—		—		(100)		—		(100)
Retirement of treasury stock	—		107		(17)		(90)		—		—		—		—
Acquisition of treasury stock under employee stock plans	—		(10)		—		—		—		(10)		—		(10)
Issuance of $0.01 par value common stock under employee stock plans	—		2		2		—		—		4		—		4

Stock-based compensation expense	—		—		20		—		—		20		—		20

Cash dividends ($0.90 per share)	—		—		—		(193)		—		(193)		—		(193)



Distributions declared to noncontrolling interest	—		—		—		—		—		—		(174)		(174)

Balance as of September 30, 2020	$	2	$	(1)	$	1,308	$	1,905	$	(388)	$	2,826	$	2,649	$	5,475

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
	2021		2020
	(in millions)
Operating Activities:
Net earnings	$	401	$	313
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	650		662
Deferred income taxes	(25)		(74)
Stock-based compensation expense	23		20

Loss on debt extinguishment	19		—
Unrealized net gain on natural gas derivatives	(18)		(12)
Unrealized loss on embedded derivative	2		2
Goodwill impairment	259		—
Long-lived and intangible asset impairment	236		—
Gain on sale of EU carbon credits	(20)		—
Loss on disposal of property, plant and equipment	3		14
Undistributed earnings of affiliate—net of taxes	(15)		(2)
Changes in:
Accounts receivable—net	(115)		7
Inventories	(120)		29
Accrued and prepaid income taxes	(132)		50
Accounts payable and accrued expenses	69		(42)
Customer advances	245		25
Other—net	(69)		(51)
Net cash provided by operating activities	1,393		941
Investing Activities:
Additions to property, plant and equipment	(382)		(206)
Proceeds from sale of property, plant and equipment	—		2


Distribution received from unconsolidated affiliate	—		1
Insurance proceeds for property, plant and equipment	—		2
Purchase of investments held in nonqualified employee benefit trust	(13)		—
Proceeds from sale of investments held in nonqualified employee benefit trust	13		—
Purchase of U.K. emission credits	(10)		—
Proceeds from sale of EU emission credits	10		—
Other—net	(1)		—
Net cash used in investing activities	(383)		(201)
Financing Activities:

Proceeds from short-term borrowings	—		500
Repayments of short-term borrowings	—		(500)
Payments of long-term borrowings	(518)		—

Dividends paid on common stock	(195)		(193)

Distributions to noncontrolling interest	(194)		(174)
Purchases of treasury stock	(50)		(100)
Proceeds from issuances of common stock under employee stock plans	32		4
Cash paid for shares withheld for taxes	(11)		(10)

Net cash used in financing activities	(936)		(473)
Effect of exchange rate changes on cash and cash equivalents	—		(1)
Increase in cash and cash equivalents	74		266
Cash and cash equivalents at beginning of period	683		287
Cash and cash equivalents at end of period	$	757	$	553

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Background and Basis of Presentation

Our mission is to provide clean energy to feed and fuel the world sustainably. With our employees focused on safe and reliable operations, environmental stewardship, and disciplined capital and corporate management, we are on a path to decarbonize our ammonia production network – the world’s largest – to enable green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities. Our nine manufacturing complexes in the United States, Canada and the United Kingdom, an extensive storage, transportation and distribution network in North America, and logistics capabilities enabling a global reach underpin 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.

The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2020, in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting. In the opinion of management, these statements reflect all adjustments, consisting only of normal and recurring adjustments, that are necessary for the fair representation of the information for the periods presented. The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Operating results for any period presented apply to that period only and are not necessarily indicative of results for any future period.

The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 24, 2021. The preparation of the unaudited interim consolidated financial statements requires us to make use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited consolidated financial statements and the reported 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 carbon credits required to meet environmental regulations, the cost of customer incentives, the cost to fulfill contractual commitments to our customers, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax and valuation reserves, allowances for doubtful accounts receivable, the measurement of the fair values of investments for which markets are not active, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the valuation of stock-based compensation awards granted to employees.

CF INDUSTRIES HOLDINGS, INC.

2. Revenue Recognition

We track our revenue by product and by geography. See Note 17—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 the three and nine months ended September 30, 2021 and 2020:


	Ammonia		Granular Urea		UAN		AN		Other		Total
	(in millions)

Three months ended September 30, 2021
North America	$	279	$	386	$	324	$	48	$	94	$	1,131
Europe and other	65		—		66		70		30		231

Total revenue	$	344	$	386	$	390	$	118	$	124	$	1,362
Three months ended September 30, 2020
North America	$	116	$	222	$	221	$	41	$	56	$	656
Europe and other	49		27		27		68		20		191
Total revenue	$	165	$	249	$	248	$	109	$	76	$	847

Nine months ended September 30, 2021
North America	$	878	$	1,218	$	949	$	144	$	263	$	3,452
Europe and other	131		—		107		215		93		546

Total revenue	$	1,009	$	1,218	$	1,056	$	359	$	356	$	3,998
Nine months ended September 30, 2020
North America	$	614	$	865	$	739	$	138	$	171	$	2,527
Europe and other	108		50		52		205		80		495
Total revenue	$	722	$	915	$	791	$	343	$	251	$	3,022

As of September 30, 2021 and December 31, 2020, we had $375 million and $130 million, respectively, in customer advances on our consolidated balance sheets. During the nine months ended September 30, 2021 and 2020, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

We offer cash incentives to certain customers generally based on the volume of their purchases over the fertilizer year ending June 30. Our cash incentives do not provide an option to the customer for additional product. The balances of customer incentives accrued as of September 30, 2021 and December 31, 2020 were not material.

From time to time, we will enter the marketplace to purchase product in order to satisfy obligations under contracts with our customers. 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 Point Lisas Nitrogen Limited (PLNL), reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices. During the nine months ended September 30, 2021, in addition to products purchased from PLNL, we recognized $68 million of revenue from sales of granular urea, which we purchased in order to satisfy obligations under contracts with our customers due to lower production experienced as a result of Winter Storm Uri. For the nine months ended September 30, 2020, other than products purchased from PLNL, products purchased in the marketplace in order to satisfy obligations under contracts with our customers were not material.

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 September 30, 2021, 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 $898 million. We expect to recognize approximately 13% of these performance obligations as revenue in the remainder of 2021, approximately 59% as revenue during 2022 and 2023, approximately 24% as revenue during 2024 and 2025, and the remainder thereafter. Subject to the terms and conditions of the applicable contracts, if these customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under these contracts, in the aggregate, is approximately $181 million as of September 30, 2021. Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially fulfilled at December 31, 2020 were satisfied in 2021.

CF INDUSTRIES HOLDINGS, INC.

3. United Kingdom Energy Crisis and Impairment Charges

During the third quarter of 2021, the United Kingdom experienced an energy crisis that included a substantial increase in the price of natural gas. In the first half of 2021, natural gas prices had increased to levels that were considered high compared to historical prices, and prices then more than doubled within the third quarter of 2021. On September 15, 2021, we announced the halt of operations at both our Ince and Billingham manufacturing facilities in the United Kingdom due to negative profitability driven by the high cost of natural gas. The halt of operations at our U.K. plants impacted the availability of certain products in the United Kingdom, including carbon dioxide, which is a byproduct of ammonia production. Due to the critical nature of carbon dioxide to certain industries in the United Kingdom, on September 21, 2021, we entered into an interim agreement with the U.K. government. Under the terms of the agreement, the U.K. government agreed to cover the costs to restart the ammonia plant at Billingham and to offset losses incurred from production for a 21-day period. As a result, we resumed production of ammonia at the Billingham facility in order to produce carbon dioxide for the United Kingdom. While the interim agreement was in place, we entered into carbon dioxide pricing and offtake agreements with our customers, which have an initial term through January 31, 2022. The amount of financial support that will be provided by the U.K. government for the September 2021 period of the interim agreement is not expected to be material to our results of operations. As of the filing of this report, production continues to be idled at our Ince facility.

Impairment Charges

The U.K. energy crisis necessitated an evaluation of the goodwill and long-lived assets, including definite-lived intangible assets, of our U.K. operations to determine if their fair value had declined to below their carrying value. We performed the impairment evaluations on the U.K. ammonia, U.K. AN and U.K. Other asset groups’ long-lived assets, including definite-lived intangible assets, and the U.K. ammonia, U.K. AN and U.K. Other reporting units’ goodwill as of September 30, 2021. Based on these analyses, we concluded that a decline in the fair value had occurred and we recognized impairment charges of $495 million in the third quarter of 2021, consisting of a goodwill impairment charge of $259 million and long-lived and intangible asset impairment charges of $236 million.

The valuation of our asset groups and reporting units requires significant judgment in evaluating recent indicators of market activity and estimating future cash flows, discount rates, and other factors. Expected cash flows used in both the goodwill and long-lived asset impairment tests include assumptions about product selling prices and natural gas costs, as well as estimates of future production and sales volumes, operating rates, operating expenses, inflation, discount rates, tax rates and capital spending. These assumptions include the time it could take for the U.K. energy crisis to be resolved.

For purposes of our goodwill impairment analysis, we estimated the fair value of the reporting units using the income approach, which incorporated the estimated future cash flows and a terminal value discounted to their present value using an appropriate risk-adjusted discount rate from the perspective of a market participant. The estimated future cash flows were based on our internal forecasts, updated for recent events. These estimated future cash flows went beyond the specific operating plans, using a terminal value calculation, which incorporated historical and forecasted trends and an estimate of long-term future growth rates. The future growth rates were based on our view of the long-term outlook for each reporting unit. The discount rates utilized in the income approach, for our goodwill impairment test, and to discount the cash flows in calculating the long-lived asset impairment were derived using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. The discount rates are commensurate with the risks and uncertainties inherent in the business and in the United Kingdom and our cash flow forecasts, updated for recent events. The discount rate utilized in the determination of fair value of our asset groups for the long-lived asset impairment test was 11.25%. The fair value of our property, plant and equipment utilized in the long-lived asset impairment analysis was estimated using the indirect method of the cost approach by determining the reproduction cost new of the assets and applying an appropriate inutility adjustment for certain assets in an idled state. Additional assumptions utilized in the long-lived asset impairment analysis were royalty rates and attrition rates in estimating the fair value of our definite-lived intangible assets, consisting of trade names and customer relationships, for which we used the relief from royalty method of the income approach and the multi-period excess earnings method, respectively. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in our forecasts.

Of the factors discussed above, the assumptions for product selling prices and natural gas costs included in the expected cash flows utilized in both the long-lived asset and goodwill impairment tests, and the discount rates utilized in the income approach, for our goodwill impairment test, and to discount the cash flows in calculating the long-lived asset impairment, are more sensitive than others. Assuming that all other assumptions utilized in our expected cash flows and the other inputs used in our long-lived asset and goodwill impairment tests remain unchanged, a change in each of these three inputs would have the following effect on the amount of long-lived asset and goodwill impairment recognized in the three months ended September 30, 2021:

CF INDUSTRIES HOLDINGS, INC.


	Increase/(Decrease) in				Increase/(Decrease) in
	Long-lived Asset Impairment				Goodwill Impairment
Assumption	(in millions)






	+$5.00		-$5.00		+$5.00		-$5.00

Average Selling Price per Product Ton	$	(87)	$	8	$	(20)	$	25



	+$0.50		-$0.50		+$0.50		-$0.50

Natural Gas Cost per MMBtu(1)	$	7	$	(33)	$	20	$	(53)

	+50 bps		-50 bps		+50 bps		-50 bps

Discount Rate	$	1	$	(1)	$	14	$	(22)

(1)The sensitivity impact of a $0.50/MMBtu increase or decrease in the cost of natural gas includes any corresponding impact to selling prices from contractually stipulated sales provisions.

As of September 30, 2021, after the recognition of the $495 million of impairment charges noted above, the goodwill related to our U.K. operations was approximately $26 million, and the remaining long-lived assets related to our U.K. operations were approximately $450 million, primarily consisting of property, plant and equipment. For further information see Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets.

4. Net (Loss) Earnings Per Share

Net (loss) earnings per share were computed as follows:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in millions, except per share amounts)
Net (loss) earnings attributable to common stockholders	$	(185)	$	(28)	$	212	$	230
Basic (loss) earnings per common share:
Weighted-average common shares outstanding	214.9		213.9		215.3		215.0
Net (loss) earnings attributable to common stockholders	$	(0.86)	$	(0.13)	$	0.99	$	1.07
Diluted (loss) earnings per common share:
Weighted-average common shares outstanding	214.9		213.9		215.3		215.0
Dilutive common shares—stock-based awards	—		—		1.1		0.3
Diluted weighted-average shares outstanding	214.9		213.9		216.4		215.3
Net (loss) earnings attributable to common stockholders	$	(0.86)	$	(0.13)	$	0.98	$	1.07

Diluted 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 3.5 million and 1.2 million in the three and nine months ended September 30, 2021, respectively, and 3.1 million and 3.3 million in the three and nine months ended September 30, 2020, respectively.

CF INDUSTRIES HOLDINGS, INC.

5. Inventories

Inventories consist of the following:


	September 30, 2021		December 31, 2020
	(in millions)
Finished goods	$	370	$	246
Raw materials, spare parts and supplies	48		41
Total inventories	$	418	$	287

6. Property, Plant and Equipment—Net

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


	September 30, 2021		December 31, 2020
	(in millions)
Land	$	68	$	68
Machinery and equipment(1)	12,696		12,539
Buildings and improvements(1)	908		895
Construction in progress(1)	195		275
Property, plant and equipment(2)	13,867		13,777
Less: Accumulated depreciation and amortization	6,657		6,145
Property, plant and equipment—net	$	7,210	$	7,632

(1)As of September 30, 2021, machinery and equipment, buildings and improvements, and construction in progress include impairment charges recorded in the three months ended September 30, 2021 of $169 million, $5 million and $8 million, respectively.

(2)As of September 30, 2021 and December 31, 2020, we had property, plant and equipment that was accrued but unpaid of approximately $78 million and $43 million, respectively. As of September 30, 2020 and December 31, 2019, we had property, plant and equipment that was accrued but unpaid of approximately $73 million and $42 million, respectively.

Depreciation and amortization related to property, plant and equipment was $198 million and $637 million for the three and nine months ended September 30, 2021, respectively, and $207 million and $650 million for the three and nine months ended September 30, 2020, respectively.

Asset impairment—During the third quarter of 2021, in light of the unprecedented increase in natural gas prices in the United Kingdom and its estimated impact on our U.K. operations, we identified a triggering event indicating possible impairment of the long-lived assets related to our U.K. manufacturing facilities within our ammonia, AN and Other segments, including property, plant, and equipment, and performed a recoverability test on the U.K. ammonia, U.K. AN and U.K. Other asset groups’ long-lived assets as of September 30, 2021. Our assets groups are the same as our reporting units. The recoverability tests were based on forecasts of undiscounted cash flows within each of our U.K. asset groups. The results of the recoverability tests indicated that the long-lived assets within our U.K. ammonia, U.K. AN and U.K. Other asset groups were not fully recoverable, and, as a result, long-lived asset impairment charges of $236 million were recorded, representing the excess of the carrying value of the asset groups over its fair value. That impairment was allocated to each of the underlying assets reducing them to their fair value, of which $182 million was allocated to property, plant and equipment. See Note 3—United Kingdom Energy Crisis and Impairment Charges and Note 7—Goodwill and Other Intangible Assets for additional information. As a result of the long-lived asset impairment charges, long-lived assets on our consolidated balance sheet as of September 30, 2021 include $450 million related to the U.K. asset groups, which primarily consists of approximately $390 million of property, plant and equipment.

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

CF INDUSTRIES HOLDINGS, INC.

capitalized plant turnaround costs:


	Nine months ended September 30,
	2021		2020
	(in millions)
Net capitalized turnaround costs:
Beginning balance	$	226	$	246
Additions	215		68
Depreciation	(84)		(77)
Effect of exchange rate changes	—		(2)
Ending balance	$	357	$	235

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.

7. Goodwill and Other Intangible Assets

Goodwill

The following table shows the carrying amount of goodwill by reportable segment as of September 30, 2021 and December 31, 2020:


	Ammonia		Granular Urea		UAN		AN		Other		Total
	(in millions)
Balance as of December 31, 2020	$	587	$	828	$	576	$	310	$	73	$	2,374
Impairment losses	(4)		—		—		(233)		(22)		(259)
Effect of exchange rate changes	—		—		—		—		1		1
Balance as of September 30, 2021	$	583	$	828	$	576	$	77	$	52	$	2,116

Goodwill is not amortized, but is reviewed for impairment annually in the fourth quarter and when circumstances or other events indicate that impairment may have occurred. During the third quarter of 2021, in light of the unprecedented increase in natural gas prices in the United Kingdom and its estimated impact on our U.K. operations, we identified a triggering event indicating possible impairment of goodwill within our U.K. ammonia, U.K. AN and U.K. Other reporting units.

Due to the triggering event identified above, we performed an interim quantitative goodwill impairment analysis as of September 30, 2021 for our U.K. ammonia, U.K. AN and U.K. Other reporting units. We estimated the fair value of the reporting units using the income approach described in Note 3—United Kingdom Energy Crisis and Impairment Charges. Based on the evaluation performed, we determined that the carrying value of all three reporting units exceeded their fair value, which resulted in a goodwill impairment charge totaling $259 million in the third quarter of 2021. The goodwill impairment was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value.

As a result of the goodwill impairment charge, goodwill on our consolidated balance sheet as of September 30, 2021 includes $5 million related to the U.K. ammonia reporting unit, $8 million related to the U.K. AN reporting unit and $13 million related to the U.K. Other reporting unit, which are included in the ammonia, AN and Other reportable segments, respectively. As a result of the goodwill impairment, all three U.K. reporting units were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the September 30, 2021 impairment test date.

CF INDUSTRIES HOLDINGS, INC.

Other Intangible Assets

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:


	September 30, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
	(in millions)

Customer relationships	$	84	$	(58)	$	26	$	133	$	(52)	$	81
Trade names	31		(10)		21		32		(9)		23
U.K. carbon credits	19		—		19		—		—		—
Total intangible assets	$	134	$	(68)	$	66	$	165	$	(61)	$	104

(1)As of September 30, 2021, the gross carrying amount for customer relationships and trade names include impairment charges recorded in the three months ended September 30, 2021 of $49 million and $1 million, respectively.

Our customer relationships and trade names are being amortized over a weighted-average life of approximately 20 years. The U.K. carbon credits are being amortized based on units of production. Amortization expense of our identifiable intangible assets was $2 million and $6 million for the three and nine months ended September 30, 2021, respectively, and $2 million and $6 million for the three and nine months ended September 30, 2020, 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 the remainder of 2021 and each of the five succeeding fiscal years is as follows:


	Estimated Amortization Expense
	(in millions)
Remainder of 2021	$	1
2022	7
2023	15
2024	9
2025	4
2026	4

As a result of the triggering event described above, we also performed a recoverability test on our long-lived assets within the U.K. ammonia, U.K. AN and U.K. Other asset groups, including our definite-lived intangible assets, as of September 30, 2021. The recoverability test was based on forecasts of undiscounted cash flows, as described in Note 3—United Kingdom Energy Crisis and Impairment Charges. The results of the recoverability test indicated that the long-lived assets within our U.K. ammonia, U.K. AN and U.K. Other asset groups were not fully recoverable, and, as a result, long-lived asset impairment charges, inclusive of the definite-lived intangible assets, of $236 million were recorded, representing the excess of the carrying value of the asset groups over its fair value. That impairment was allocated to each of the underlying assets reducing them to their fair value, of which $50 million was allocated to definite-lived intangible assets. See Note 3—United Kingdom Energy Crisis and Impairment Charges and Note 6—Property, Plant and Equipment—Net for additional information. As a result of the long-lived asset impairment charges, long-lived assets on our consolidated balance sheet as of September 30, 2021 include $450 million related to the U.K. asset groups, including approximately $30 million of customer relationships and trade names.

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 September 30, 2021, the total carrying value of our equity method investment in PLNL was $92 million, $40 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 $30 million and $93 million for the three and nine months ended September 30, 2021, respectively, and $14 million and $37 million for the three and nine months ended September 30, 2020, respectively.

9. Fair Value Measurements

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


	September 30, 2021
	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Cash	$	52	$	—	$	—	$	52
Cash equivalents:
U.S. and Canadian government obligations	649		—		—		649
Other debt securities	56		—		—		56
Total cash and cash equivalents	$	757	$	—	$	—	$	757

Nonqualified employee benefit trusts	17		3		—		20


	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

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.

CF INDUSTRIES HOLDINGS, INC.

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 September 30, 2021 and December 31, 2020 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:


	September 30, 2021
	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	$	705	$	705	$	—	$	—

Nonqualified employee benefit trusts	20		20		—		—
Derivative assets	15		—		15		—
Derivative liabilities	(3)		—		(3)		—
Embedded derivative liability	(20)		—		(20)		—


	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)		—

Cash Equivalents

As of September 30, 2021 and December 31, 2020, 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 use are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter 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 13—Derivative Financial Instruments for additional information.

CF INDUSTRIES HOLDINGS, INC.

Embedded Derivative Liability

Under the terms of our strategic venture with CHS Inc. (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 September 30, 2021 and December 31, 2020, the embedded derivative liability was $20 million and $18 million, respectively. Included in other operating—net in our consolidated statement of operations for each of the nine-month periods ended September 30, 2021 and 2020 was a net loss of $2 million.

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 14—Noncontrolling Interest for additional information regarding our strategic venture with CHS.

Financial Instruments

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


	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Long-term debt, including current maturities	$	3,465	$	4,165	$	3,961	$	4,731

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. See Note 3—United Kingdom Energy Crisis and Impairment Charges for additional information on the fair values and unobservable inputs utilized in the impairment evaluations performed as of September 30, 2021 for the long-lived assets, including definite-lived intangible assets, and goodwill related to our U.K. operations.

CF INDUSTRIES HOLDINGS, INC.

10. Income Taxes

For the three months ended September 30, 2021, we recorded an income tax benefit of $46 million on a pre-tax loss of $137 million, or an effective tax rate of 34.3%, compared to an income tax benefit of $13 million on a pre-tax loss of $9 million, or an effective tax rate of 155.0%, for the three months ended September 30, 2020.

For the three months ended September 30, 2021, we did not record an income tax benefit related to the goodwill impairment described in Note 3—United Kingdom Energy Crisis and Impairment Charges, above, as the impairment is non-deductible for income tax purposes. In addition, as a result of the effective settlement of the U.S. federal income tax audit for the 2012-2016 tax years, we reversed an accrual for unrecognized tax benefits and recognized a discrete income tax benefit of approximately $15 million.

For the nine months ended September 30, 2021, we recorded an income tax provision of $57 million on pre-tax income of $458 million, or an effective tax rate of 12.3%, compared to an income tax provision of $33 million on pre-tax income of $346 million, or an effective tax rate of 9.4%, for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, we did not record an income tax benefit related to the goodwill impairment described in Note 3—United Kingdom Energy Crisis and Impairment Charges, above, as the impairment is non-deductible for income tax purposes. In addition, our income tax provision includes a $36 million benefit reflecting the impact of agreement on certain issues related to U.S. federal income tax audits, including the reversal of an accrual for unrecognized tax benefits, as described above. For the nine months ended September 30, 2020, our income tax provision includes a $25 million benefit related to the settlement of certain U.S. and foreign income tax audits, which primarily related to the settlement of the audit of the Terra amended tax returns, which is further described below.

Our effective tax rate is also impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax (benefit) provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended September 30, 2021 of 34.3%, which is based on a pre-tax loss of $137 million, including $94 million of earnings attributable to the noncontrolling interest, would be 14.0 percentage points lower if based on pre-tax loss exclusive of the $94 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended September 30, 2020 of 155.0%, which is based on a pre-tax loss of $9 million, including $32 million of earnings attributable to the noncontrolling interest, would be 121.6 percentage points lower if based on pre-tax loss exclusive of the $32 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the nine months ended September 30, 2021 of 12.3%, which is based on pre-tax income of $458 million, including $189 million attributable to the noncontrolling interest, would be 8.7 percentage points higher if based on pre-tax income exclusive of the $189 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the nine months ended September 30, 2020 of 9.4%, which is based on pre-tax income of $346 million, including $83 million attributable to the noncontrolling interest, would be 3.0 percentage points higher if based on pre-tax income exclusive of the $83 million of earnings attributable to the noncontrolling interest. See Note 14—Noncontrolling Interest for additional information.

During the third quarter of 2020, as a result of an intercompany transaction with a foreign affiliate, we recognized a capital loss, which we will carry forward, and for which we recorded a deferred tax asset of approximately $90 million. However, as the foreign affiliate has operations that do not normally generate capital gains and no practical plans to do so in the future, we established a full valuation allowance of approximately $90 million against the deferred tax asset. As a result, there was no net impact on our income tax provision.

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 2013, the Internal Revenue Service (IRS) commenced an examination of the U.S. tax aspects of the Amended Tax Returns.

In the second quarter of 2020, we received IRS notices indicating the amount of tax and interest to be refunded and received with respect to the income tax and withholding tax returns. As a result, we recognized $16 million of interest income ($13 million, net of tax) and $19 million of additional income tax benefit. In addition, in the second quarter of 2020, we received U.S. Federal income tax refunds, including interest, of $108 million relating to these matters. In July 2020, we received an additional $2 million, which finalized these matters with the IRS.

CF INDUSTRIES HOLDINGS, INC.

In 2017, we made a Voluntary Disclosures Program filing with the Canada Revenue Agency (CRA) with respect to the Canadian tax aspects of the amended returns and paid additional Canadian taxes due. In late 2020, the CRA settled with us the voluntary disclosure matter, and, in the first quarter of 2021, we received approximately $20 million of withholding tax refunds, including interest, from the CRA. These amounts were previously recorded in our consolidated balance sheet as of December 31, 2020.

11. Interest Expense

Details of interest expense are as follows:


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	(in millions)
Interest on borrowings(1)	$	43	$	46	$	133	$	139
Fees on financing agreements(1)	3		2		7		6
Interest on tax liabilities(2)	—		—		—		(4)

Total interest expense	$	46	$	48	$	140	$	141

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

(2)Interest on tax liabilities for the nine months ended September 30, 2020 consists of a reduction in interest accrued on the reserve for unrecognized tax benefits.

12. Financing Agreements

Revolving Credit Agreement

We have a senior unsecured revolving credit agreement (the Revolving Credit Agreement), which 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.

As of September 30, 2021, 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 September 30, 2021 or December 31, 2020, or during the nine months ended September 30, 2021. Maximum borrowings under the Revolving Credit Agreement during the nine months ended September 30, 2020 were $500 million. The weighted-average annual interest rate of borrowings under the Revolving Credit Agreement during the nine months ended September 30, 2020 was 2.05%. Borrowings under the Revolving Credit Agreement as of March 31, 2020 were repaid in full in April 2020.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of September 30, 2021, 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 up to $250 million of letters of credit. As of September 30, 2021, approximately $229 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 September 30, 2021 and December 31, 2020 consisted of the following debt securities issued by CF Industries:


	Effective Interest Rate		September 30, 2021						December 31, 2020
		Principal			Carrying Amount(1)			Principal			Carrying Amount(1)
			(in millions)
Public Senior Notes:


3.450% due June 2023	3.562%		$	500		$	499		$	750		$	748
5.150% due March 2034	5.279%		750			741			750			741
4.950% due June 2043	5.031%		750			742			750			742
5.375% due March 2044	5.465%		750			742			750			741
Senior Secured Notes:
3.400% due December 2021	3.782%		—			—			250			249
4.500% due December 2026(2)	4.759%		750			741			750			740
Total long-term debt			$	3,500		$	3,465		$	4,000		$	3,961



Less: Current maturities of long-term debt			—			—			250			249
Long-term debt, net of current maturities			$	3,500		$	3,465		$	3,750		$	3,712

(1)Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $8 million and $9 million as of September 30, 2021 and December 31, 2020, respectively, and total deferred debt issuance costs were $27 million and $30 million as of September 30, 2021 and December 31, 2020, respectively.

(2)Effective August 23, 2021, these notes are no longer secured, in accordance with the terms of the applicable indenture.

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 indenture governing the 4.500% senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes are guaranteed on a senior secured basis by CF Holdings. Until August 23, 2021, the 2026 Notes were guaranteed by certain subsidiaries of CF Industries. The requirement for subsidiary guarantees of the 2026 Notes was eliminated, and all subsidiary guarantees were automatically released, as a result of an investment grade rating event under the terms of the indenture governing the 2026 Notes on August 23, 2021.

On March 20, 2021, we redeemed in full all of the remaining $250 million outstanding principal amount of the 3.400% senior secured notes due December 2021 (the 2021 Notes), in accordance with the optional redemption provisions in the indenture governing the 2021 Notes. The total aggregate redemption price paid on the 2021 Notes in connection with the redemption was $258 million, including accrued interest. As a result, we recognized a loss on debt extinguishment of $6 million, primarily consisting of a premium paid on the early redemption of the notes.

On September 10, 2021, we redeemed $250 million principal amount, representing one-third of the $750 million principal amount outstanding prior to such redemption, of the 3.450% senior notes due 2023 (2023 Notes), in accordance with the optional redemption provisions in the indenture governing the 2023 Notes. The total aggregate redemption price paid on the 2023 Notes was approximately $265 million, including accrued interest. As a result, we recognized a loss on debt extinguishment of $13 million, primarily consisting of a premium paid on the early redemption of the notes.

Interest on the Public Senior Notes and the 2026 Notes is payable semiannually, and the Public Senior Notes and the 2026 Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.

CF INDUSTRIES HOLDINGS, INC.

13. Derivative Financial Instruments

We 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 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 over-the-counter 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 September 30, 2021, we had natural gas derivative contracts covering certain periods through March 2022.

As of September 30, 2021, our open natural gas derivative contracts consisted of natural gas basis swaps and options for 20.7 million MMBtus. As of December 31, 2020, we had open natural gas derivative contracts consisting of natural gas fixed price swaps and basis swaps for 34.1 million MMBtus of natural gas. For the nine months ended September 30, 2021, we used derivatives to cover approximately 9% 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
		Three months ended September 30,				Nine months ended September 30,
	Location	2021		2020		2021		2020
		(in millions)


Unrealized net gains on natural gas derivatives	Cost of sales	$	12	$	—	$	18	$	12
Realized net losses on natural gas derivatives	Cost of sales	—		—		(3)		(16)
Gain on net settlement of natural gas derivatives due to Winter Storm Uri	Cost of sales	—		—		112		—
Net derivative gains (losses)		$	12	$	—	$	127	$	(4)

Gain on net settlement of natural gas derivatives due to Winter Storm Uri

We also enter into supply agreements to facilitate the availability of natural gas to operate our plants. When we purchase natural gas under these agreements, we intend to take physical delivery for use in our plants. Certain of these supply agreements allow us to fix the price of the deliveries for the following month using an agreed upon first of month price. We utilize the Normal Purchase Normal Sales (NPNS) derivative scope exception for these fixed price contracts and therefore, we do not account for them as derivatives.

In February 2021, the central portion of the United States experienced extreme and unprecedented cold weather due to the impact of Winter Storm Uri. Certain natural gas suppliers and natural gas pipelines 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 extreme cold temperatures. Due to these unprecedented factors, several states declared a state of emergency and natural gas was redirected for residential usage. We net settled certain natural gas contracts with our suppliers and received prevailing market prices, which were in excess of our cost. We no longer qualified for the NPNS derivative scope exception for the natural gas that was net settled with our suppliers due to the impact of Winter Storm Uri. As a result, we recognized a gain of $112 million from the net settlement of these natural gas contracts, which is reflected in cost of sales in our consolidated statement of operations for the nine months ended September 30, 2021.

CF INDUSTRIES HOLDINGS, INC.

The fair values of derivatives on our consolidated balance sheets are shown below. As of September 30, 2021 and December 31, 2020, 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	September 30, 2021		December 31, 2020		Balance Sheet Location	September 30, 2021		December 31, 2020
		(in millions)					(in millions)


Natural gas derivatives	Other current assets	$	15	$	1	Other current liabilities	$	(3)	$	(7)

Most of our International Swaps and Derivatives Association (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. As of September 30, 2021 and December 31, 2020, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $6 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. 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. As of September 30, 2021 and December 31, 2020, we had no cash collateral on deposit with counterparties for derivative contracts.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of September 30, 2021 and December 31, 2020:


	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)
September 30, 2021
Total derivative assets	$	15		$	—		$	—		$	15
Total derivative liabilities	(3)			—			—			(3)
Net derivative assets	$	12		$	—		$	—		$	12
December 31, 2020
Total derivative assets	$	1		$	—		$	—		$	1
Total derivative liabilities	(7)			—			—			(7)
Net derivative liabilities	$	(6)		$	—		$	—		$	(6)

(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.

14. Noncontrolling Interest

We have a strategic venture with CHS under which they own 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 interest in our consolidated financial statements.

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



	2021		2020

	(in millions)
Noncontrolling interest:
Balance as of January 1	$	2,681	$	2,740

Earnings attributable to noncontrolling interest	189		83
Declaration of distributions payable	(194)		(174)


Balance as of September 30	$	2,676	$	2,649
Distributions payable to noncontrolling interest:
Balance as of January 1	$	—	$	—
Declaration of distributions payable	194		174
Distributions to noncontrolling interest	(194)		(174)

Balance as of September 30	$	—	$	—

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.

CF INDUSTRIES HOLDINGS, INC.

15. Stockholders’ Equity

Treasury Stock

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). Repurchases under the 2019 Share Repurchase Program may be made from time to time in the open market, through privately negotiated transactions, block transactions or otherwise. The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors. See Note 18—Subsequent Event for additional information.

Since the 2019 Share Repurchase Program was announced in February 2019, we have repurchased approximately 11.3 million shares for $487 million, consisting of:

1.1 million shares repurchased during the third quarter of 2021 for $50 million,
2.6 million shares repurchased during the first quarter of 2020 for $100 million, and
7.6 million shares repurchased during 2019 for $337 million.

At September 30, 2021, we held 1,100,921 shares of treasury stock.

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 on Derivatives		Defined Benefit Plans		Accumulated Other Comprehensive Income (Loss)
	(in millions)
Balance as of December 31, 2019	$	(188)	$	5	$	(183)	$	(366)


Gain arising during the period	—		—		1		1
Reclassification to earnings(1)	—		—		5		5

Effect of exchange rate changes and deferred taxes	(30)		—		2		(28)
Balance as of September 30, 2020	$	(218)	$	5	$	(175)	$	(388)

Balance as of December 31, 2020	$	(144)	$	4	$	(180)	$	(320)


Loss arising during the period	—		—		(4)		(4)

Reclassification to earnings(1)	—		—		9		9

Effect of exchange rate changes and deferred taxes	(2)		—		1		(1)
Balance as of September 30, 2021	$	(146)	$	4	$	(174)	$	(316)

(1)Reclassifications out of accumulated other comprehensive loss to earnings during the three and nine months ended September 30, 2021 and 2020 were not material.

CF INDUSTRIES HOLDINGS, INC.

16. Contingencies

Litigation

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. Nearly all of the cases, including all wrongful death and personal injury claims, have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance. The remaining subrogation and statutory indemnification claims total approximately $37 million, before prejudgment interest, and are in various stages of discovery and pre-trial proceedings. The remaining claims are expected to be set for trial in 2022. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the remaining 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, we expect any potential loss to be fully indemnified by insurance and 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 the Comprehensive Environmental Response, Compensation, and Liability Act 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 intended to undertake a natural resource damage assessment for 18 former phosphate mines and three former processing facilities in southeast Idaho, which includes the Georgetown Canyon former mine and processing facility. In June 2021, we received another notice from the U.S. Department of the Interior that the natural resource damage trustees were commencing a ‘subsequent’ phase of the natural resource damage assessment, but no further details were provided with respect to said assessment. Because the former mine site is still in the remedial investigation and 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.

17. 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 the three and nine months ended September 30, 2021 and 2020 are presented in the tables below.



	Ammonia(1)		Granular Urea(2)		UAN(2)		AN(2)		Other(2)		Consolidated
	(in millions)
Three months ended September 30, 2021
Net sales	$	344	$	386	$	390	$	118	$	124	$	1,362
Cost of sales	262		200		233		122		105		922
Gross margin	$	82	$	186	$	157	$	(4)	$	19	440
Total other operating costs and expenses(3)											552
Equity in earnings of operating affiliate											15
Operating loss											$	(97)

Three months ended September 30, 2020
Net sales	$	165	$	249	$	248	$	109	$	76	$	847
Cost of sales	174		183		237		96		74		764
Gross margin	$	(9)	$	66	$	11	$	13	$	2	83
Total other operating costs and expenses											45
Equity in earnings of operating affiliate											2
Operating earnings											$	40

Nine months ended September 30, 2021
Net sales	$	1,009	$	1,218	$	1,056	$	359	$	356	$	3,998
Cost of sales	675		705		759		337		290		2,766
Gross margin	$	334	$	513	$	297	$	22	$	66	1,232
Total other operating costs and expenses(3)											669
Equity in earnings of operating affiliate											37
Operating earnings											$	600
Nine months ended September 30, 2020
Net sales	$	722	$	915	$	791	$	343	$	251	$	3,022
Cost of sales	609		612		675		290		215		2,401
Gross margin	$	113	$	303	$	116	$	53	$	36	621
Total other operating costs and expenses											162

Equity in earnings of operating affiliate											8
Operating earnings											$	467

(1)Cost of sales and gross margin for the ammonia segment in the nine months ended September 30, 2021, include a $112 million gain on the net settlement of certain natural gas contracts with our suppliers. See Note 13—Derivative Financial Instruments for additional information.

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

(3)Total other operating costs and expenses in the three and nine months ended September 30, 2021 includes goodwill, long-lived and intangible asset impairment charges of $495 million.

CF INDUSTRIES HOLDINGS, INC.

18. Subsequent Event

On November 3, 2021, the Board authorized the repurchase of up to $1.5 billion of CF Holdings common stock from January 1, 2022 through December 31, 2024 (the 2021 Share Repurchase Program). Repurchases under the 2021 Share Repurchase Program may be made from time to time in the open market, through privately negotiated transactions, block transactions or otherwise. The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors. See Note 15—Stockholders’ Equity for information related to the 2019 Share Repurchase Program, which expires on December 31, 2021.

CF INDUSTRIES HOLDINGS, INC.

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