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Item 1A. Risk Factors

2021-02-24 compared with 2020-02-24 · 253 added, 280 removed, 275 unchanged (66% of the section changed)

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Historically, selling prices for our products have fluctuated in response to periodic changes in supply and demand conditions.

Demand for nitrogen is affected by planted acreage, crop selection and fertilizer application rates, driven by population growth or changes in dietary habits and non-food use of crops, such as production of ethanol and other biofuels among other things.

Demand for nitrogen is affected by planted acreage, crop selection and fertilizer application rates, driven by population growth, gross domestic product growth, changes in dietary habits and non-food use of crops, such as production of ethanol and other biofuels among other things.

Demand also includes industrial uses of nitrogen, for example chemical manufacturing and emissions reductants such as diesel exhaust fluid (DEF).

Supply is affected by available capacity and operating rates, raw material costs and availability, government policies and global trade.

Supply is affected by available capacity and operating rates, raw material costs and availability, energy prices, government policies and global trade.

Periods of strong demand, high capacity utilization and increasing operating margins tend to stimulate global investment in production capacity.

In the last several years, fertilizer producers, including CF Holdings, have built new production facilities or expanded capacity of existing production assets, or announced plans to do so.

In recent years, fertilizer producers, including CF Holdings, have built new production facilities or expanded capacity of existing production assets, or announced plans to do so.

The construction of new nitrogen fertilizer manufacturing capacity in the industry, plus improvements to increase output from the existing production assets, increase nitrogen supply availability and affect the balance of supply and demand.

In recent years, global nitrogen fertilizer capacity has increased faster than global nitrogen fertilizer demand, creating a surplus of global nitrogen fertilizer capacity, which led to lower nitrogen fertilizer selling prices in 2016 and 2017.

In certain years, global nitrogen fertilizer capacity has increased faster than global nitrogen fertilizer demand, creating a surplus of global nitrogen fertilizer capacity, which led to lower nitrogen fertilizer selling prices in 2016 and 2017.

For example, in the two-year period ended December 31, 2017, additional production capacity came on line and, at the same time, the average selling price for our products declined 34%, from $314 per ton in 2015 to $207 per ton in 2017.

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Significant price fluctuations we experience could be symptoms of an oversupplied market in transition as new capacity ramps up, and production slows down or shuts down in high cost regions.

Similarly, lower energy prices can spur increases in production in high cost regions, which would result in increased supply and pressure on selling prices.

Additionally, trade flows adjust as imports into different regions of the world also impact the local supply and demand balances.

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In 2016 and 2017, our financial performance, credit ratings and the trading price for our common stock were negatively impacted by the lower selling prices resulting from the global oversupply of nitrogen fertilizer;

While the average selling price for our products has increased 3% in 2019 to $235 per ton compared to $229 per ton in 2018 , the period of time that these oversupply conditions can persist and the degree to which they will impact our business, financial condition, results of operations and cash flows is uncertain.

Our products are global commodities, and we face intense global competition from other fertilizer producers.

while in 2018 and 2019, we experienced increases in the average selling price for our products.

In 2020, the average selling price for our products decreased 14% to $203 per ton compared to $235 per ton in 2019.

The period of time that these oversupply conditions can persist and the degree to which they will impact our business, financial condition, results of operations and cash flows are uncertain.

Our nitrogen products are global commodities, and we face intense global competition from other producers.

We are subject to intense price competition from our competitors.

Most fertilizers are global commodities, with little or no product differentiation, and customers make their purchasing decisions principally on the basis of delivered price and, to a lesser extent, customer service and product quality.

Most fertilizers and related nitrogen products that we produce, such as industrial grade ammonium nitrate and DEF, are global commodities, with little or no product differentiation, and customers make their purchasing decisions principally on the basis of delivered price and, to a lesser extent, customer service and product quality.

As a consequence, conditions in the international market for nitrogen products significantly influence our operating results.

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Some of our competitors have greater total resources and are less dependent on earnings from fertilizer sales, which make them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities.

Furthermore, certain governments, in some cases as owners of some of our competitors, may be willing to accept lower prices and profitability on their products or subsidize production or consumption in order to support domestic employment or other political or social goals.

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Our competitive position could suffer to the extent we are not able to expand our own resources, either through investments in new or existing operations or through acquisitions, joint ventures or partnerships.

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As a result, the domestic nitrogen industry in China is operating at less than full capacity.

If Chinese government policy, devaluation of the Chinese renminbi, the relaxation of Chinese environmental standards or decreases in

CF INDUSTRIES HOLDINGS, INC.

Chinese producers’ underlying costs such as the price of Chinese coal encourage increased production capacity utilization, any resulting export volume could adversely affect the balance between global supply and demand and may put downward pressure on global fertilizer prices, which could materially adversely affect our business, financial condition, results of operations and cash flows.

If Chinese government policy, devaluation of the Chinese renminbi, the relaxation of Chinese environmental standards or decreases in Chinese producers’ underlying costs such as the price of Chinese coal encourage increased production capacity utilization, any resulting export volume could adversely affect the balance between global supply and demand and may put downward pressure on global fertilizer prices, which could materially adversely affect our business, financial condition, results of operations and cash flows.

Our competitors in Russia continue to benefit from non-market pricing of natural gas, allowing continued exports from the region, and have significant nitrogen fertilizer export capacity.

The 2016 revocations of U.S.

antidumping measures on solid urea and fertilizer grade ammonium nitrate from Russia has allowed for increases in imports from that country in recent years.

antidumping measures on solid urea and fertilizer grade ammonium nitrate from Russia have allowed for increases in imports from that country into the United States in recent years.

We also face competition from other fertilizer producers in the Middle East, Europe, Latin America and Africa, who, depending on market conditions, fluctuating input prices, geographic location and freight economics, may take actions at times with respect to price or selling volumes that adversely affect our business, financial condition, results of operations and cash flows.

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North America, where we manufacture and sell most of our products, is one of the largest and most liquid nitrogen trading regions in the world.

As a result, other manufacturers, traders and other market participants can move nitrogen products to North America when there is uncertainty over the supply and demand balance in other regions or when duties, tariffs or quotas impact prices or trade flows in other regions.

As a result, other manufacturers, traders and other market participants can move nitrogen products to North America when there is uncertainty associated with the supply and demand balance in other regions or when duties, tariffs or quotas impact prices or trade flows in other regions.

As a result, duties, tariffs and quotas can lead to uncertainty in the global marketplace and impact the supply and demand balance in many regions, which could adversely affect our business, financial condition, results of operations and cash flows.

In April 2019, the European Commission (the Commission) published a regulation imposing provisional anti-dumping duties on imports to the European Union of UAN manufactured in Russia, the Republic of Trinidad and Tobago and the United States.

The regulation included a rate of 22.6% for the provisional anti-dumping duty applicable to imports of UAN manufactured in the United States.

In July 2019, the Commission announced its intention to impose definitive anti-dumping measures in the form of fixed duty rates.

On October 9, 2019, the European Commission (the Commission) imposed definitive anti-dumping duties on imports to the European Union of UAN manufactured in Russia, the Republic of Trinidad and Tobago and the United States.

For imports of UAN manufactured in the United States, the fixed duty rate is €29.48 per metric ton (or €26.74 per ton).

On October 8, 2019, the Commission confirmed this duty in a regulation imposing definitive measures, which became effective beginning October 9, 2019 for an initial five-year period, after which the measures may be renewed by the Commission.

The impact of this duty on the international market for nitrogen products, in the near and long term, is uncertain.

The duties will remain in place for an initial five-year period, after which the measures may be renewed by the Commission.

The long term impact of this duty on the international market for nitrogen products is uncertain.

A decline in agricultural production or limitations on the use of our products for agricultural purposes could materially adversely affect the demand for our products.

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Governmental policies, including farm and biofuel subsidies, commodity support programs and tariffs, as well as the prices of fertilizer products, may also directly or indirectly influence the number of acres planted, the mix of crops planted and the use of fertilizers for particular agricultural applications.

Ethanol production in the United States contributes significantly to corn demand, due in part to federal legislation mandating use of renewable fuels.

Ethanol production in the United States contributes significantly to corn demand, representing approximately 35% of total U.S.

corn demand, due in part to federal legislation mandating use of renewable fuels.

An increase in ethanol production has led to an increase in the amount of corn grown in the United States and to increased fertilizer usage on both corn and other crops that have also benefited from improved farm economics.

While the current Renewable Fuel Standard encourages continued high levels of corn-based ethanol production, various interested parties have called to eliminate or reduce the renewable fuel mandate, or to eliminate or reduce corn-based ethanol as part of the renewable fuel mandate.

Other factors that drive the ethanol market include the prices of ethanol, gasoline and corn.

Lower gasoline prices and fewer aggregate miles, driven by increased automobile fuel efficiency or the continued expansion of electric

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vehicles, may put pressure on ethanol prices that could result in reduced profitability and lower production for the ethanol industry.

This could have an adverse effect on corn-based ethanol production, planted corn acreage and fertilizer demand.

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Widespread adoption of emerging application technologies or alternative farming techniques could disrupt traditional application practices, affecting the volume or types of products used and timing of applications.

In addition, from time to time various state

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legislatures have considered limitations on the use and application of chemical fertilizers due to concerns about the impact of these products on the environment.

In addition, from time to time various foreign government and U.S.

state legislatures have considered limitations on the use and application of chemical fertilizers due to concerns about the impact of these products on the environment.

For example, the United Kingdom is currently consulting with stakeholders and reviewing proposals to limit emissions from solid urea fertilizers, including a potential ban on urea fertilizers.

While CF Fertilisers UK Limited does not sell solid urea fertilizer in the United Kingdom, other jurisdictions may consider limits on fertilizer use, such as the European Union, which announced its Farm to Fork and Biodiversity Strategies.

Any reduction in the demand for chemical fertilizer products, including as a result of technological developments and/or limitations on the use and application of chemical fertilizers, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our business is dependent on natural gas, the prices of which are subject to volatility.

Nitrogen from the atmosphere and hydrogen from natural gas, coal or other carbon energy feedstocks, are the fundamental building blocks of nitrogen fertilizers.

Nitrogen from the atmosphere and hydrogen from natural gas, coal and other carbon energy feedstocks, or from the electrolysis of water, are the fundamental building blocks of nitrogen fertilizers.

Energy feedstock costs comprise a significant portion of the total production cost of nitrogen products and, relative to the industry’s marginal producers that set the global price of nitrogen, generally determine profitability for nitrogen producers.

Our manufacturing processes utilize natural gas as the principal raw material used in our production of nitrogen fertilizers.

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As a result, North American natural gas comprises a significant portion of the total production cost of our products.

In recent years, the cost of North American natural gas for the production of nitrogen fertilizers has been significantly lower than the energy costs of the industry’s marginal nitrogen producers.

Changes in the supply of and demand for natural gas can lead to extended periods of higher natural gas prices.

If high natural gas prices were to persist in North America and significantly erode our favorable energy cost differentials relative to the marginal nitrogen producers, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The price of natural gas in North America has been volatile in recent years.

During 2019 , the daily closing price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, reached a low of $1.82 per MMBtu on three consecutive days in December 2019 and a high of $4.12 per MMBtu on March 5, 2019 .

During the three-year period ended December 31, 2019 , the daily closing price at the Henry Hub reached a low of $1.82 per MMBtu on three consecutive days in December 2019 and a high of $6.88 per MMBtu on January 4, 2018 .

During 2020, the daily closing price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, reached a low of $1.34 per MMBtu on September 22, 2020 and three consecutive days in October and a high of $3.08 per MMBtu on October 27, 2020.

During the three-year period ended December 31, 2020, the daily closing price at the Henry Hub reached a low of $1.34 per MMBtu on September 22, 2020 and three consecutive days in October 2020 and a high of $6.88 per MMBtu on January 4, 2018.

We also have manufacturing facilities located in the United Kingdom.

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The major natural gas trading point for the United Kingdom is the National Balancing Point (NBP).

During 2019 , the daily closing price at NBP reached a low of $2.36 per MMBtu on September 4, 2019 and a high of $7.91 per MMBtu on January 17, 2019 .

During the three-year period ended December 31, 2019 , the daily closing price at NBP reached a low of $2.36 per MMBtu on September 4, 2019 and a high of $31.74 per MMBtu on March 2, 2018 .

Changes in the supply of and demand for natural gas can lead to extended periods of higher natural gas prices.

If high prices were to persist, especially during a period of low fertilizer selling prices, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

During 2020, the daily closing price at NBP reached a low of $1.04 per MMBtu on May 22, 2020 and a high of $7.71 per MMBtu on December 30, 2020.

During the three-year period ended December 31, 2020, the daily closing price at NBP reached a low of $1.04 per MMBtu on May 22, 2020 and a high of $31.74 per MMBtu on March 2, 2018.

The price of natural gas in North America and worldwide has been volatile in recent years and has declined on average due in part to the development of significant natural gas reserves, including shale gas, and the rapid improvement in shale gas extraction techniques, such as hydraulic fracturing and horizontal drilling.

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Increased demand for natural gas, particularly in the Gulf Coast Region, due to increased industrial demand and increased natural gas exports, could result in increased natural gas prices.

If such reduced production, increased demand or changes in basis were to occur, or if other developments adversely impact the supply/demand balance for natural gas in North America or elsewhere, natural gas prices could rise, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If such reduced production, increased demand or changes in basis were to occur, or if other developments adversely impact the

CF INDUSTRIES HOLDINGS, INC.

supply and demand balance for natural gas in North America or elsewhere, natural gas prices could rise, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Adverse weather conditions may decrease demand for our fertilizer products, increase the cost of natural gas or materially disrupt our operations.

Weather conditions that delay or disrupt field work during the planting, growing, harvesting or application periods may cause agricultural customers to use different forms of nitrogen fertilizer, which may adversely affect demand for the forms that we sell or may impede farmers from applying our fertilizers until the following application period, resulting in lower seasonal demand for our products.

Adverse weather conditions during or following harvest may delay or eliminate opportunities to apply fertilizer in the fall.

Weather can also have an adverse effect on crop yields, which could lower the income of growers and impair their ability to purchase fertilizer from our customers.

Adverse weather conditions could also impact transportation of fertilizer, which could disrupt our ability to deliver our products to customers on a timely basis.

Our quarterly financial results can vary significantly from one year to the next due to weather-related shifts in fertilizer applications, planting schedules and purchasing patterns.

Over the longer-term, changes in weather patterns may shift the periods of demand for products and even the regions to which our products are distributed, which could require us to evolve our distribution system.

In addition, we use the North American waterway system extensively to ship products from some of our manufacturing facilities to our distribution facilities and our customers, and we also export nitrogen fertilizer products via seagoing vessels from deep-water docking facilities at certain of our manufacturing sites.

Therefore, persistent significant changes in river or ocean water levels (either up or down, such as a result of flooding or drought for example), may require changes to our operating and distribution activities and/or significant capital improvements to our facilities.

Weather conditions or, in certain cases, weather forecasts, also can disrupt our operations and can affect the price of natural gas, the principal raw material used to make our nitrogen fertilizer products.

Colder and/or longer than normal winters and warmer than normal summers increase the demand for natural gas for power generation and for residential and industrial use, which can increase the cost and/or decrease the availability of natural gas.

In addition, adverse weather events can not only cause loss of power at our facilities disrupting our operations, but also can impact the supply of natural gas and utilities and cause prices to rise.

Our operating results fluctuate due to seasonality.

Our inability to predict future seasonal fertilizer demand accurately could result in our having excess inventory, potentially at costs in excess of market value.

The fertilizer business is seasonal.

The degree of seasonality of our business can change significantly from year to year due to conditions in the agricultural industry and other factors.

The strongest demand for our products in North America occurs during the spring planting season, with a second period of strong demand following the fall harvest.

In contrast, we and other fertilizer producers generally manufacture and distribute products throughout the year.

As a result, we and/or our customers generally build inventories during the low demand periods of the year to ensure timely product availability during the peak sales seasons.

Seasonality is greatest for ammonia due to the short application seasons and the limited ability of our customers and their customers to store significant quantities of this product.

The seasonality of fertilizer demand generally results in our sales volumes and net sales being the highest during the spring and our working capital requirements being the highest just prior to the start of the spring planting season.

If seasonal demand is less than we expect, we may be left with excess inventory that will have to be stored (in which case our results of operations would be negatively affected by any related increased storage costs) or liquidated (in which case the selling price could be below our production, procurement and storage costs).

The risks associated with excess inventory and product shortages are exacerbated by the volatility of nitrogen fertilizer prices and the relatively brief periods during which farmers can apply nitrogen fertilizers.

If prices for our products rapidly decrease, we may be subject to inventory write-downs, adversely affecting our operating results.

A change in the volume of products that our customers purchase on a forward basis, or the percentage of our sales volume that is sold to our customers on a forward basis, could increase our exposure to fluctuations in our profit margins and materially adversely affect our business, financial condition, results of operations and cash flows.

We offer our customers the opportunity to purchase products from us on a forward basis at prices and delivery dates we propose.

Under our forward sales programs, customers generally make an initial cash down payment at the time of order and pay the remaining portion of the contract sales value in advance of the shipment date.

Forward sales improve our liquidity by reducing our working capital needs due to the cash payments received from customers in advance of shipment of the product

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and allow us to improve our production scheduling and planning and the utilization of our manufacturing and distribution assets.

Any cash payments received in advance from customers in connection with forward sales are reflected on our consolidated balance sheets as a current liability until the related orders are shipped, which can take up to several months.

We believe the ability to purchase products on a forward basis is most appealing to our customers during periods of generally increasing prices for nitrogen fertilizers.

Our customers may be less willing or even unwilling to purchase products on a forward basis during periods of generally decreasing or stable prices or during periods of relatively high fertilizer prices due to the expectation of lower prices in the future or limited capital resources.

In periods of rising fertilizer prices, selling our nitrogen fertilizers on a forward basis may result in lower profit margins than if we had not sold fertilizer on a forward basis.

Conversely, in periods of declining fertilizer prices, selling our nitrogen fertilizers on a forward basis may result in higher profit margins than if we had not sold fertilizer on a forward basis.

In addition, fixing the selling prices of our products, often months in advance of their ultimate delivery to customers, typically causes our reported selling prices and margins to differ from spot market prices and margins available at the time of shipment.

Operational Risks

Our operations are dependent upon raw materials provided by third parties, and any delay or interruption in the delivery of raw materials may adversely affect our business.

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Any delay or interruption in the delivery of natural gas or other raw materials, even for a limited period, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Our transportation and distribution activities rely on third party providers and are subject to environmental, safety and regulatory oversight.

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We rely on natural gas pipelines to transport raw materials to our manufacturing facilities.

In addition, we rely on railroad, truck, pipeline, barge and vessel companies, to coordinate and deliver finished products to our distribution system and to ship finished products to our customers.

In addition, we rely on railroad, barge, truck, vessel and pipeline companies to coordinate and deliver finished products to our distribution system and to ship finished products to our customers.

We also lease rail cars in order to ship raw materials and finished products.

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Additionally, due to the aging infrastructure of certain rail lines, bridges, roadways, pipelines, river locks, and equipment that our third party service providers utilize, we may experience delays in both the receipt of raw materials or the shipment of finished product while repairs, maintenance or replacement activities are conducted.

Also, certain third party service providers, such as railroads, have experienced periodic service delays or shutdowns due to capacity constraints in their systems, operational and maintenance difficulties, weather or safety-related embargoes and delays, and other events, which could impact the shipping of our products and cause disruption in our supply chain.

For example, in September 2019, the portion of the Magellan Midstream Partners LP (Magellan) ammonia pipeline that connects to our Verdigris, Oklahoma complex was permanently shut down, resulting in the loss of future distribution of Verdigris ammonia production through this pipeline.

In addition, we expect that the portion of the Magellan ammonia pipeline that connects to our Port Neal, Iowa complex will permanently shut down in March 2020, which will result in the loss of future distribution of Port Neal ammonia production through this pipeline.

Also, certain third party service providers, such as railroads, have experienced periodic service delays or shutdowns due to capacity constraints in their systems, operational and maintenance difficulties, blockades, weather or safety-related embargoes and delays, and other events, which could impact the shipping of our products and cause disruption in our supply chain.

These transportation operations, equipment and services are also subject to environmental, safety, and regulatory oversight.

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In addition, increases in our transportation costs, or changes in such costs relative to transportation costs incurred by our competitors, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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In the United States and Canada, the railroad industry continues various efforts to limit the railroads’ potential liability stemming from the transportation of Toxic Inhalation Hazard materials, such as the anhydrous ammonia we transport to and from our manufacturing and distribution facilities.

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Restrictions on service, increases in transportation costs, or changes in such costs relative to transportation costs incurred by our competitors, and any railroad industry initiatives that may impact our ability to transport our products, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to risks relating to our information technology systems, and any technology disruption or cybersecurity incident could negatively affect our operations.

We rely on internal and third-party information technology and computer control systems in many aspects of our business, including internal and external communications, the management of our accounting, financial and supply chain functions and plant operations.

If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to our confidential business information due to a security breach.

In addition, our information technology systems may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate.

Security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, business partners, customers or suppliers, and may subject us to legal liability.

As with most large systems, our information technology systems have in the past been, and in the future likely will be, subject to computer viruses, malicious codes, unauthorized access and other cyber attacks, and we expect the sophistication and frequency of such attacks to continue to increase.

To date, we are not aware of any significant impact on our operations or financial results from such attempts;

however, unauthorized access could disrupt our business operations, result in the loss of assets, and have a material adverse effect on our business, financial condition, or results of operations.

Any of the attacks, breaches or other disruptions or damage described above could:

interrupt our operations at one or more sites;

delay production and shipments;

result in the theft of our and our customers’ intellectual property and trade secrets;

damage customer and business partner relationships and our reputation;

result in legal claims and proceedings, liability and penalties under privacy or other laws, or increased costs for security and remediation;

or raise concerns regarding our accounting for transactions.

Each of these consequences could adversely affect our business, reputation and our financial statements.

Our business involves the use, storage, and transmission of information about our employees, customers, and suppliers.

The protection of such information, as well as our proprietary information, is critical to us.

The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and constantly changing requirements.

We have established policies and procedures to help protect the security and privacy of this information.

Breaches of our security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential data about us or our employees, customers or suppliers, including the potential loss or disclosure of such information or data as a result of fraud, trickery, or other forms of deception, could expose us or our employees, customers, suppliers or other individuals affected to a risk of loss or misuse of this information, which could ultimately result in litigation and potential legal and financial liability.

These events could also damage our reputation or otherwise harm our business.

We are reliant on a limited number of key facilities.

Our nitrogen fertilizer operations are located at nine separate nitrogen complexes, the largest of which is the Donaldsonville complex, which represented approximately 40% of our ammonia production capacity as of December 31, 2020.

The suspension of operations at any of these complexes could adversely affect our ability to produce our products and fulfill our commitments, and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Operational disruptions could occur for many reasons, including natural disasters, weather, unplanned maintenance and other manufacturing problems, disease, strikes or other labor unrest or transportation interruptions.

For example, our

CF INDUSTRIES HOLDINGS, INC.

Donaldsonville complex is located in an area of the United States that experiences a relatively high level of hurricane or high wind activity and several of our complexes are located in areas that experience severe weather.

Such storms, depending on their severity and location, have the potential not only to damage our facilities and disrupt our operations, but also to affect adversely the shipping and distribution of our products.

Moreover, our facilities may be subject to failure of equipment that may be difficult to replace or have long delivery lead times, due in part to a limited number of suppliers, and could result in operational disruptions.

Acts of terrorism and regulations to combat terrorism could negatively affect our business.

Like other companies with major industrial facilities, we may be targets of terrorist activities.

Many of our plants and facilities store significant quantities of ammonia and other materials that can be dangerous if mishandled.

Any damage to infrastructure facilities, such as electric generation, transmission and distribution facilities, or injury to employees, who could be direct targets or indirect casualties of an act of terrorism, may affect our operations.

Any disruption of our ability to produce or distribute our products could result in a significant decrease in revenues and significant additional costs to replace, repair or insure our assets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Due to concerns related to terrorism or the potential use of certain fertilizers as explosives, we are subject to various security laws and regulations.

In the United States, these security laws include the Maritime Transportation Security Act of 2002 and the Chemical Facilities Anti-Terrorism Standards regulation.

In addition, President Obama issued in 2013 Executive Order 13650 Improving Chemical Facility Safety and Security to improve chemical facility safety in coordination with owners and operators.

Governmental entities could implement new or impose more stringent regulations affecting the security of our plants, terminals and warehouses or the transportation and use of fertilizers.

These regulations could result in higher operating costs or limitations on the sale of our products and could result in significant unanticipated costs, lower revenues and reduced profit margins.

We manufacture and sell certain nitrogen products that can be used as explosives.

It is possible that governmental entities in the United States or elsewhere could impose additional limitations on the use, sale or distribution of nitrogen products, thereby limiting our ability to manufacture or sell those products, or that illicit use of our products could result in liability for us.

We are subject to risks associated with international operations.

Our international business operations are subject to numerous risks and uncertainties, including difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations;

unexpected changes in regulatory environments;

currency fluctuations;

tax rates that may exceed those in the United States;

earnings that may be subject to withholding requirements;

and the imposition of tariffs, exchange controls or other restrictions.

Changes in governmental trade policies can lead to the imposition of new taxes, levies, duties, tariffs or quotas affecting agricultural commodities, fertilizer or industrial products.

These can alter costs, trade flows, access to supplies or demand, and regional balances for our products.

Our principal reporting currency is the U.S.

dollar and our business operations and investments outside the United States increase our risk related to fluctuations in foreign currency exchange rates.

The main currencies to which we are exposed, besides the U.S.

dollar, are the Canadian dollar, the British pound and the euro.

These exposures may change over time as business practices evolve and economic conditions change.

We may selectively reduce some foreign currency exchange rate risk by, among other things, requiring contracted purchases of our products to be settled in, or indexed to, the U.S.

dollar or a currency freely convertible into U.S.

dollars, or hedging through foreign currency derivatives.

These efforts, however, may not be effective and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to anti-corruption laws and regulations and economic sanctions programs in various jurisdictions, including the U.S.

Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act of 2010, the Canadian Corruption of Foreign Public Officials Act, and economic sanctions programs administered by the United Nations, the European Union and the Office of Foreign Assets Control of the U.S.

Department of the Treasury, and regulations set forth under the Comprehensive Iran Accountability Divestment Act.

As a result of doing business internationally, we are exposed to a risk of violating anti-corruption laws and sanctions regulations applicable in those countries where we, our partners or agents operate.

Violations of anti-corruption and sanctions laws and regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal fines and imprisonment.

The violation of applicable laws by our employees, consultants, agents or partners could subject us to penalties and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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We are subject to antitrust and competition laws in various countries throughout the world.

We cannot predict how these laws or their interpretation, administration and enforcement will change over time.

Changes in antitrust laws globally, or in their interpretation, administration or enforcement, may limit our existing or future operations and growth.

Financial Risks

Our operations and the production and handling of our products involve significant risks and hazards.

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Some of these hazards can cause bodily injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations for an extended period of time and/or the imposition of civil or criminal penalties and liabilities.

CF INDUSTRIES HOLDINGS, INC.

We maintain property, business interruption, casualty and liability insurance policies, but we are not fully insured against all potential hazards and risks incident to our business.

If we were to incur significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to various self-retentions, deductibles and limits under these insurance policies.

We are subject to various self-insured retentions, deductibles and limits under these insurance policies.

The policies also contain exclusions and conditions that could have a material adverse impact on our ability to receive indemnification thereunder.

Our policies are generally renewed annually.

As a result of market conditions, our premiums, self-retentions and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.

As a result of market conditions, our premiums, self-insured retentions and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.

In addition, significantly increased costs could lead us to decide to reduce, or possibly eliminate, coverage.

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The Court granted in part and denied in part the CF Entities’ Motions for Summary Judgment in August 2015.

Over two hundred cases have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance.

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 was reset for trial beginning on September 14, 2020 .

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 outbreak of 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 increased focus on the risks associated with fertilizers as a result of the incident could impact the regulatory environment and requirements applicable to fertilizer manufacturing and storage facilities.

CF INDUSTRIES HOLDINGS, INC.

Our substantial indebtedness could adversely affect our cash flow, prevent us from fulfilling our obligations and impair our ability to pursue or achieve other business objectives.

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• restrict our ability to pay dividends on our common stock or utilize excess cash to repurchase shares of our common stock;

CF INDUSTRIES HOLDINGS, INC.

• limit our ability to borrow additional monies in the future to fund working capital, capital expenditures and other general corporate purposes;

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Any noncompliance by us with the covenants under our debt agreements and instruments could result in an event of default under those debt agreements and instruments.

An event of default under an agreement or instrument governing any of our indebtedness may allow our creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.

An event of default under an agreement or instrument governing any of our indebtedness may allow our creditors to accelerate the

CF INDUSTRIES HOLDINGS, INC.

related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.

If our lenders or holders of our debt securities accelerate the repayment of borrowings, we may be forced to liquidate certain assets to repay all or part of our indebtedness, which could materially and adversely impair our business operations.

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Potential future downgrades of our credit ratings could adversely affect our access to capital, cause vendors to change their credit terms for doing business with us, and could otherwise have a material adverse effect on us.

As of February 18, 2020 , our corporate credit rating by S&P Global Ratings is BB+ with a positive outlook;

As of February 16, 2021, our corporate credit rating by S&P Global Ratings is BB+ with a stable outlook;

our corporate credit rating by Moody’s Investor Services, Inc.

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and our corporate credit rating with Fitch Ratings, Inc.

is BB+ with a positive outlook.

is BB+ with a stable outlook.

These ratings and our current credit condition affect, among other things, our ability to access new capital, especially debt, as well as the payment terms that vendors are willing to provide us.

Negative changes in these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt, and could cause vendors to shorten our payment terms, require us to pay in advance for materials or services, or provide letters of credit, security, or other credit enhancements in order to do business with us.