What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-24 compared with 2020-02-24 · 583 added, 776 removed, 1191 unchanged (53% of the section changed)

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Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors

To the Stockholders and Board of Directors

CF Industries Holdings, Inc.:

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and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018 , and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2019 , in conformity with U.S.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

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Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for Leases as of January 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842).

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

2016-02, Leases (Topic 842) .

Basis for Opinion

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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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As discussed in Note 11 to the consolidated financial statements, the Company’s projected benefit obligation (PBO) associated with its pension plans established in North America and the United Kingdom were $884 million and $643 million as of December 31, 2020, respectively.

The Company’s PBO represents an actuarially determined estimate of the present value of the future benefit payments under its pension plans to the beneficiaries of those plans.

Determining the PBO requires the Company to make assumptions, including selection of a discount rate for both the North American and United Kingdom plans and an adjusted retail price index (RPI) for the United Kingdom plans.

The Company’s PBO represents an actuarially determined estimate of the present value of the future benefit payments attributed to past service under its pension plans to the beneficiaries of those plans.

Determining the PBO requires the Company to make assumptions, including the selection of a discount rate for both the North American and United Kingdom plans and an adjusted retail price index (RPI) for the United Kingdom plans.

The selected discount rate and RPI are then applied to these future benefit payments in determining the present value of those obligations as of December 31, 2020.

We identified the evaluation of the Company’s measurement of the PBO to be a critical audit matter.

Specialized skills and knowledge were needed to evaluate the assumptions regarding the discount rates utilized in the measurement of the PBO for both the North American and United Kingdom plans and the adjusted RPI utilized in the measurement of the PBO in regards to the United Kingdom plans.

Specialized skills were needed to evaluate the assumptions regarding the discount rates utilized in the measurement of the PBO for both the North American and United Kingdom plans and the adjusted RPI utilized in the measurement of the PBO for the Company’s United Kingdom plans.

In addition, a high degree of auditor judgment was required regarding the evaluation of these discount rates and the adjusted RPI, as minor changes to these assumptions could have a significant impact on the PBO.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s PBO process, including controls related to the determination of discount rates and adjusted RPI assumptions utilized in determining the Company’s PBO.

We involved actuarial professionals with specialized skills and knowledge, who assisted in assessing the Company’s actuaries’ objectivity and actuarial expertise, as well as participating in risk assessment procedures related to the determination of discount rates and RPI.

In addition, these actuarial professionals evaluated the Company’s PBO by evaluating the Company’s actuary reports.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s pension accounting process, including controls related to the determination of discount rates and adjusted RPI assumptions utilized in determining the Company’s PBO for both the North American and United Kingdom pension plans.

We involved actuarial professionals with specialized skills and knowledge, who evaluated the Company’s PBO by evaluating the Company’s actuary reports.

Specifically, as it relates to the selected discount rates and adjusted RPI assumptions, the actuarial professionals:

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

evaluated the sources of information used by the Company’s actuaries in the development of the discount rates and the adjusted RPI;

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

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

evaluated the Company’s independently computed single equivalent discount rate using the PBO cash flows and the Company’s actuary’s proprietary yield curve for the North American discount rates;

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

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

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

After completion of these procedures, we evaluated the overall sufficiency of audit evidence over the measurement of the projected benefit obligation.

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

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

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

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

(signed) KPMG LLP

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Year ended December 31,

2020 2019 2018

(in millions, except per share amounts)

Net sales $ 4,124 $ 4,590 $ 4,429

Cost of sales 3,323 3,416 3,512

Gross margin 801 1,174 917

Selling, general and administrative expenses 206 239 214

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Total other operating costs and expenses 189 166 187

Equity in (loss) earnings of operating affiliates

Equity in earnings (loss) of operating affiliate 11 ( 5 ) 36

Operating earnings 623 1,003 766

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Other non-operating—net ( 1 ) ( 7 ) ( 9 )

Earnings (loss) before income taxes

Income tax provision (benefit)

Earnings before income taxes 463 772 547

Income tax provision 31 126 119

Net earnings 432 646 428

Net earnings attributable to noncontrolling interests 115 153 138

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Net earnings per share attributable to common stockholders:

Basic $ 1.48 $ 2.24 $ 1.25

Diluted $ 1.47 $ 2.23 $ 1.24

Weighted-average common shares outstanding:

Basic 214.9 220.2 232.6

Diluted 215.2 221.6 233.8

See Accompanying Notes to Consolidated Financial Statements.

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Year ended December 31,

2020 2019 2018

(in millions)

Net earnings $ 432 $ 646 $ 428

Other comprehensive income (loss):

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Accounts receivable—net 265 242

Inventories 287 351

Prepaid income taxes 97 71

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Investment in affiliate 80 88

Goodwill 2,374 2,365

Operating lease right-of-use assets 259 280

Other assets 311 295

Total assets $ 12,023 $ 12,172

Liabilities and Equity

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Current operating lease liabilities 88 90

Current maturities of long-term debt 249 —

Other current liabilities 15 18

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Noncontrolling interest 2,681 2,740

Total equity 5,603 5,637

Total liabilities and equity $ 12,023 $ 12,172

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Common Stockholders

Stock Treasury

Stock Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Stockholders’

Noncontrolling

Equity Noncontrolling

Interests Total

(in millions)

Balance as of December 31, 2017 $ 2 $ — $ 1,397 $ 2,443 $ ( 263 ) $ 3,579 $ 3,105 $ 6,684

Other comprehensive income

Issuance of $0.01 par value common stock under employee stock plans

Stock-based compensation expense

Cash dividends ($1.20 per share)

Distributions declared to noncontrolling interests

Balance as of December 31, 2017

Adoption of ASU No.

2016-01 — — — 1 ( 1 ) — — —

Adoption of ASU No.

2014-09 — — — ( 1 ) — ( 1 ) — ( 1 )

Adoption of ASU No.

2018-02 — — — 10 ( 10 ) — — —

Net earnings — — — 290 — 290 138 428

Other comprehensive loss — — — — ( 97 ) ( 97 ) — ( 97 )

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Issuance of $ 0.01 par value common stock under employee stock plans

— ( 4 ) 12 — — 8 — 8

Stock-based compensation expense — — 21 — — 21 — 21

Cash dividends ($ 1.20 per share)

— — — ( 280 ) — ( 280 ) — ( 280 )

Acquisition of noncontrolling interests in TNCLP — — ( 62 ) — — ( 62 ) ( 331 ) ( 393 )

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Balance as of December 31, 2018 $ 2 $ ( 504 ) $ 1,368 $ 2,463 $ ( 371 ) $ 2,958 $ 2,773 $ 5,731

Net earnings — — — 493 — 493 153 646

Other comprehensive income — — — — 5 5 — 5

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Issuance of $ 0.01 par value common stock under employee stock plans

— 2 17 — — 19 — 19

Stock-based compensation expense — — 28 — — 28 — 28

Cash dividends ($ 1.20 per share)

— — — ( 265 ) — ( 265 ) — ( 265 )

Distributions declared to noncontrolling interest — — — — — — ( 186 ) ( 186 )

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

Net earnings — — — 317 — 317 115 432

Other comprehensive income — — — — 46 46 — 46

Purchases of treasury stock — ( 100 ) — — — ( 100 ) — ( 100 )

Retirement of treasury stock — 107 ( 17 ) ( 90 ) — — — —

Acquisition of treasury stock under employee stock plans — ( 13 ) — — — ( 13 ) — ( 13 )

Issuance of $ 0.01 par value common stock under employee stock plans

— 2 6 — — 8 — 8

Stock-based compensation expense — — 25 — — 25 — 25

Cash dividends ($ 1.20 per share)

— — — ( 258 ) — ( 258 ) — ( 258 )

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

Balance as of December 31, 2020 $ 2 $ ( 4 ) $ 1,317 $ 1,927 $ ( 320 ) $ 2,922 $ 2,681 $ 5,603

See Accompanying Notes to Consolidated Financial Statements.

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Year ended December 31,

2020 2019 2018

(in millions)

Operating Activities:

Net earnings $ 432 $ 646 $ 428

Adjustments to reconcile net earnings to net cash provided by operating activities:

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Stock-based compensation expense 25 28 22

Unrealized net loss (gain) on natural gas derivatives

Unrealized net (gain) loss on natural gas derivatives ( 6 ) 14 ( 13 )

Loss on embedded derivative 3 4 1

Gain on sale of equity method investment

Loss on debt extinguishment — 21 —

(Gain) loss on disposal of property, plant and equipment

Undistributed losses (earnings) of affiliates—net of taxes

Loss (gain) on disposal of property, plant and equipment 15 ( 40 ) 6

Undistributed (earnings) losses of affiliate—net of taxes ( 1 ) 2 ( 3 )

Accounts receivable—net ( 19 ) ( 6 ) 68

Inventories 27 ( 26 ) ( 52 )

Accrued and prepaid income taxes 8 22 8

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Customer advances 11 ( 30 ) 59

Other—net ( 67 ) ( 82 ) ( 37 )

Net cash provided by operating activities 1,231 1,505 1,497

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Proceeds from sale of property, plant and equipment 2 70 26

Proceeds from sale of equity method investment

Proceeds from sale of auction rate securities

Distributions received from unconsolidated affiliate 6 — 10

Insurance proceeds for property, plant and equipment 2 15 10

Other—net — — 1

Net cash used in investing activities ( 299 ) ( 319 ) ( 375 )

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Payments of long-term borrowings — ( 769 ) —

Proceeds from short-term borrowings 500 — —

Repayments of short-term borrowings ( 500 ) — —

Payment to CHS related to credit provision ( 5 ) ( 5 ) ( 5 )

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Distributions to noncontrolling interests ( 174 ) ( 186 ) ( 139 )

Issuances of common stock under employee stock plans

Proceeds from issuances of common stock under employee stock plans 5 19 12

Shares withheld for taxes ( 10 ) ( 4 ) ( 4 )

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Effect of exchange rate changes on cash and cash equivalents 6 2 ( 5 )

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Increase (decrease) in cash and cash equivalents 396 ( 395 ) ( 153 )

Cash and cash equivalents at beginning of period 287 682 835

Cash and cash equivalents at end of period $ 683 $ 287 $ 682

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Background and Basis of Presentation

We are a leading global fertilizer and chemical company.

Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States.

Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers, farmers and industrial users.

Our principal nitrogen fertilizer products are anhydrous ammonia (ammonia), granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).

We are a leading global manufacturer of hydrogen and nitrogen products for clean energy, fertilizer, emissions abatement, and other industrial applications.

We operate nitrogen manufacturing complexes in the United States, Canada and the United Kingdom, which are among the most cost-advantaged, efficient and flexible in the world, and an extensive storage, transportation and distribution network in North America.

Our 3,000 employees focus on safe and reliable operations, environmental stewardship and disciplined capital and corporate management, driving our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy.

Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users.

Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen.

Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

We serve our customers in North America through our production, storage, transportation and distribution network.

We also reach a global customer base with exports from our Donaldsonville, Louisiana, facility, the world’s largest and most flexible nitrogen complex.

Additionally, we move product to international destinations from our Verdigris, Oklahoma, facility, our Yazoo City, Mississippi, facility and our Billingham and Ince facilities in the United Kingdom, and from a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a 50 percent interest.

All references to “CF Holdings,” “the Company,” “we,” “us” and “our” refer to CF Industries Holdings, Inc.

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

CF INDUSTRIES HOLDINGS, INC.

Summary of Significant Accounting Policies

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See Note 17—Noncontrolling Interests for additional information.

CF INDUSTRIES HOLDINGS, INC.

Use of Estimates

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GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods presented.

Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income taxes, allowances for doubtful accounts receivable, the determination of the funded status and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income taxes, allowances for doubtful accounts receivable, the determination of the benefit obligation and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

Revenue Recognition

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The five steps are:

(1) identification of the contract(s) with the customer, (2) identification of the performance obligation(s) in the contract(s), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation, and (5) recognition of revenue when (or as) the performance obligation is satisfied.

(1) identification of the contract(s) with the customer, (2) identification of the performance obligation(s) in the contract(s), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation(s), and (5) recognition of revenue when (or as) each performance obligation is satisfied.

Control of our products transfers to our customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, our products, which occurs at the later of when title or risk of loss transfers to the customer.

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Customer incentives are reported as a reduction in net sales.

On January 1, 2018, we adopted Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606), which resulted in a reduction to opening retained earnings of $ 1 million .

Prior to the adoption of ASU No.

2014-09, under Accounting Standards Codification Topic 605, the basic criteria for revenue recognition were:

(1) evidence that a sales arrangement existed, (2) delivery of goods had occurred, (3) the seller’s price to the buyer was fixed or determinable, and (4) collectability was reasonably assured.

We recognized revenue when these criteria had been met, and when title and risk of loss transferred to the customer, which could be at the plant gate, a distribution facility, a supplier location or a customer location.

CF INDUSTRIES HOLDINGS, INC.

Cash and Cash Equivalents

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Short-term investments and noncurrent investments are accounted for primarily as available-for-sale securities reported at fair value.

Prior to January 1, 2018, changes in fair value for available-for-sale debt and equity securities were reported in other comprehensive income.

Beginning in 2018, as a result of our adoption of ASU No.

2016-01 on January 1, 2018, changes in the fair value of available-for-sale equity securities are recognized through earnings.

Changes in the fair value of available-for-sale debt securities are recognized in other comprehensive income.

Changes in the fair value of available-for-sale equity securities are recognized through earnings.

The carrying values of short-term investments approximate fair values because of the short maturities and the highly liquid nature of these investments.

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Investment in Unconsolidated Affiliate

The equity method of accounting is used for investments in affiliates that we do not consolidate, but over which we have the ability to exercise significant influence.

The equity method of accounting is used for our investment in an affiliate that we do not consolidate, but over which we have the ability to exercise significant influence.

Our equity method investment for which the results are included in operating earnings consists of our 50 % ownership interest in PLNL, which operates an ammonia production facility in the Republic of Trinidad and Tobago.

Our share of the net earnings from this investment is reported as an element of earnings from operations because PLNL’s operations provide additional production and are integrated with our supply chain and sales activities in the ammonia segment.

See Note 8—Equity Method Investments for additional information.

See Note 8—Equity Method Investment for additional information.

CF INDUSTRIES HOLDINGS, INC.

Profits resulting from sales or purchases with equity method investees are eliminated until realized by the investee or investor, respectively.

Investments in affiliates are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable.

When circumstances indicate that the fair value of an investment in an affiliate is less than its carrying value, and the reduction in value is other than temporary, the reduction in value is recognized immediately in earnings.

If circumstances indicate that the fair value of an investment in an affiliate is less than its carrying value, and the reduction in value is other than temporary, the reduction in value would be recognized immediately in earnings.

Property, Plant and Equipment

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Useful lives are as follows:

Mobile and office equipment

Production facilities and related assets

Land improvements

Mobile and office equipment 3 to 10

Production facilities and related assets 2 to 30

Land improvements 10 to 30

Buildings 10 to 40

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

CF INDUSTRIES HOLDINGS, INC.

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.

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We review property, plant and equipment and other long-lived assets in order to assess recoverability based on expected future undiscounted cash flows whenever events or circumstances indicate that the carrying value may not be recoverable.

If the sum of the expected future net cash flows is less than the carrying value, an impairment loss is recognized.

If the sum of the expected future net cash flows is less than the carrying value, an impairment loss would be recognized.

The impairment loss is measured as the amount by which the carrying value exceeds the fair value of the asset.

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See Note 7—Goodwill and Other Intangible Assets for additional information regarding our goodwill and other intangible assets.

CF INDUSTRIES HOLDINGS, INC.

Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The discount rate used to calculate the present value represents our secured incremental borrowing rate and is calculated based on the treasury yield curve commensurate with the term of each lease, and a spread representative of our secured borrowing costs.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Leases may be classified as either operating leases or finance leases.

Assets acquired under finance leases, if any, would be amortized over the lease term on a straight-line basis and interest expense would be recognized using the effective interest method based on the lease liability at period end.

We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheet.

For finance leases, if any, ROU assets are amortized over the lease term on a straight-line basis and interest expense is recognized using the effective interest method and based on the lease liability at period end.

For operating leases, rental payments, including rent holidays, leasehold incentives, and scheduled rent increases are expensed on a straight-line basis.

Leasehold improvements are amortized over the shorter of the depreciable lives of the corresponding fixed assets or the lease term including any applicable renewals.

For our rail car leases, barge tow charters, and terminal and warehouse storage agreements, we have made an accounting policy election to not separate lease and non-lease components, such as operating costs and maintenance, due to sufficient data not being available.

As a result, the non-lease components are included in the ROU assets and lease liabilities on our consolidated balance sheet.

See Note 24—Leases for additional information.

Income taxes are accounted for under the asset and liability method.

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Significant judgment is applied in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets.

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

Historically, a deferred income tax liability was recorded for income taxes that would result from the repatriation of the portion of the investment in the Company’s non-U.S.

subsidiaries and joint venture that were considered to not be permanently reinvested.

No deferred income tax liability was recorded for the remainder of our investment in non-U.S.

subsidiaries and joint venture, which we believed to be permanently reinvested.

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

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

See Note 10—Income Taxes for additional information.

CF INDUSTRIES HOLDINGS, INC.

Customer Advances

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See Note 15—Derivative Financial Instruments for additional information.

CF INDUSTRIES HOLDINGS, INC.

Debt Issuance Costs

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Environmental liabilities are not discounted.

Emission Credits

Emission credits may be generated by or granted to the Company through emissions trading systems or other regulatory programs.

From time to time, we may also purchase emission credits.

We have elected to account for emission credits using the intangible asset model.

Under this model, emission credits that are purchased are measured at their cost basis and tested for impairment annually.

We do not recognize any internally generated emission credits under the intangible asset model until a monetary transaction occurs, such as a sale of the emission credits.

If a facility exceeds regulatory emissions allowance levels and offsetting credits are not held by us, our obligation is recognized as an operating expense and a liability at the fair value of the emissions allowance deficit.

Stock-based Compensation

We grant stock-based compensation awards under our equity and incentive plans.

The awards that have been granted to date are nonqualified stock options, restricted stock awards, restricted stock units and performance share units.

The awards that have been granted to date are nonqualified stock options, restricted stock awards, restricted stock units and performance restricted stock units.

The cost of employee services received in exchange for the awards is measured based on the fair value of the award on the grant date and is recognized as expense on a straight-line basis over the period during which the employee is required to provide the services.

We have elected to recognize equity award forfeitures as they occur in determining the compensation cost to be recognized in each period .

See Note 19—Stock-based Compensation for additional information.

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Accruals for such contingencies are recorded to the extent management concludes their occurrence is probable and the financial impact of an adverse outcome is reasonably estimable.

CF INDUSTRIES HOLDINGS, INC.

Legal fees are recognized as incurred and are not included in accruals for contingencies.

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dollar functional currencies using period-end exchange rates for assets and liabilities and weighted-average exchange rates for each period for revenues and expenses.

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

CF INDUSTRIES HOLDINGS, INC.

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

Foreign currency-denominated assets and liabilities are remeasured into U.S.

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Recently Adopted Pronouncements

On January 1, 2020, we adopted Accounting Standards Update (ASU) No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This ASU does not affect the accounting for the service element of a hosting arrangement that is a service contract.

We adopted this ASU prospectively.

The adoption of this ASU did not have a material impact on our consolidated financial statements;

however, it could have an effect on future financial results if significant new software involving a cloud computing agreement is implemented.

In this case, a certain portion of the implementation costs would be deferred and expensed over the term of the cloud computing arrangement.

On January 1, 2019, we adopted ASU No.

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See Note 24—Leases for additional information.

On January 1, 2019, we adopted ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships in order to better portray the economic results of an entity’s risk management activities in its financial statements.

The adoption of this ASU had no effect on our consolidated financial statements.

Recently Issued Pronouncements

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

This ASU does not affect the accounting for the service element of a hosting arrangement that is a service contract.

The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2019 and can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

We plan to adopt this ASU prospectively and do not expect that our adoption of this ASU on January 1, 2020 will have a material impact on our consolidated financial statements.

However, this guidance could have an effect on future financial results if significant new software involving a cloud computing agreement is implemented.

In this case, a certain portion of the implementation costs could be deferred and expensed over the term of the cloud computing arrangement.

In December 2019, the FASB issued ASU No.

Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes.

Recently Issued Pronouncement

In December 2019, the Financial Accounting Standards Board issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU adds new guidance to simplify accounting for income taxes, changes the accounting for certain income tax transactions and makes minor improvements to the codification.

The amendments are effective for fiscal years, and

CF INDUSTRIES HOLDINGS, INC.

interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption of this ASU is permitted.

We are currently evaluating the impact that our adoption of this ASU will have on our consolidated financial statements.

The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

We do not expect our adoption of this ASU on January 1, 2021 will have a material effect on our consolidated financial statements.

Revenue Recognition

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We recognize revenue on these contracts based on the quantity of products transferred to the customer during the period.

For 2019 and 2018 , the total amount of revenue for these contracts was $ 55 million and $ 85 million , respectively.

For 2020, 2019 and 2018, the total amount of revenue for these contracts was $ 44 million, $ 55 million and $ 85 million, respectively.

From time to time, we will enter the marketplace to purchase product in order to satisfy the obligations of our customer contracts.

When we purchase product for this purpose, we are the principal in the transaction and recognize revenue on a gross basis.

As discussed in Note 8—Equity Method Investments , 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.

During 2019 and 2018 , other than products purchased from PLNL, we did not purchase any products in the marketplace in order to satisfy the obligations of our customer contracts.

As discussed in Note 8—Equity Method Investment, we have transactions in the normal course of business with PLNL, reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices.

Other than products

CF INDUSTRIES HOLDINGS, INC.

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

Transaction Price

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Returns of our product by our customers are permitted only when the product is not to specification.

Returns were not material during 2019 and 2018 .

Returns were not material during 2020, 2019 or 2018.

We offer cash incentives to certain customers that do not provide an option to the customer for additional product.

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The following table summarizes our revenue by product and by geography (based on destination of our shipment) for 2020, 2019 and 2018:

Ammonia Granular

Urea UAN AN Other Total

(in millions)

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Total revenue $ 1,113 $ 1,342 $ 1,270 $ 506 $ 359 $ 4,590

CF INDUSTRIES HOLDINGS, INC.

Year ended December 31, 2018

North America $ 883 $ 1,243 $ 1,047 $ 186 $ 261 $ 3,620

Europe and other 145 79 187 274 124 809

Total revenue $ 1,028 $ 1,322 $ 1,234 $ 460 $ 385 $ 4,429

Accounts Receivable and Customer Advances

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As of December 31, 2020 and 2019, we had $ 130 million and $ 119 million, respectively, in customer advances on our consolidated balance sheets.

The decrease in the balance of customer advances was due primarily to lower nitrogen prices and weaker nitrogen demand resulting in a decrease in forward contracts.

The increase in the balance of customer advances was due primarily to an increase in forward contracts amidst an increasing price environment.

During 2020, all of our customer advances that were recorded as of December 31, 2019 were recognized as revenue.

CF INDUSTRIES HOLDINGS, INC.

We have certain customer contracts with performance obligations where if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, which may vary based upon the terms and conditions of the applicable contract.

As of December 31, 2019 , 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 $ 1.1 billion .

We expect to recognize approximately 31% of these performance obligations as revenue in 2020 , approximately 39% as revenue during 2021 and 2022 and approximately 30% as revenue during 2023 and 2024.

As of December 31, 2020, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $ 867 million.

We expect to recognize approximately 31 % of these performance obligations as revenue in 2021, approximately 42 % as revenue during 2022 and 2023, approximately 23 % as revenue during 2024 and 2025, and the remainder thereafter.

If these customers do not fulfill their contractual obligations under such contracts, the legally enforceable minimum amount that they would pay to us under these contracts is approximately $ 212 million as of December 31, 2020.

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therefore, we have not adjusted the transaction price of any of our contracts to recognize a significant financing component.

We have also expensed any incremental costs associated with obtaining a contract that has a duration of less than one year, and there were no costs capitalized during 2019 and 2018 .

We have also expensed any incremental costs associated with obtaining a contract that has a duration of less than one year, and there were no costs capitalized during 2020, 2019 or 2018.

Net Earnings Per Share

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Year ended December 31,

2020 2019 2018

(in millions, except per share amounts)

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Dilutive earnings per share is calculated using weighted-average common shares outstanding, including the dilutive effect of stock-based awards as determined under the treasury stock method.

In the computation of diluted earnings per common share, potentially dilutive stock options are excluded if the effect of their inclusion is anti-dilutive.

Shares for anti-dilutive stock options not included in the computation of diluted earnings per common share were 1.4 million , 1.5 million and 3.7 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

In the computation of diluted earnings per common share, potentially dilutive stock-based awards are excluded if the effect of their inclusion is anti-dilutive.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 3.3 million, 1.4 million and 1.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

CF INDUSTRIES HOLDINGS, INC.

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(in millions)

Land $ 68 $ 71

Machinery and equipment 12,539 12,338

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Property, plant and equipment (1)

13,777 13,535

Accumulated depreciation and amortization 6,145 5,365

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

During the first quarter of 2019, we entered into an agreement to sell our Pine Bend dry bulk storage and logistics facility in Minnesota.

In April 2019, we completed the sale, received proceeds of $ 55 million and recognized a pre-tax gain of $ 45 million .

The gain is reflected in other operating—net in our consolidated statement of operations for the year ended December 31, 2019 .

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

In 2019, we sold our Pine Bend dry bulk storage and logistics facility in Minnesota, received proceeds of $ 55 million and recognized a pre-tax gain of $ 45 million.

The gain is reflected in other operating—net in our consolidated statement of operations for the year ended December 31, 2019.

Plant turnarounds —Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds.

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Year ended December 31,

2020 2019 2018

(in millions)

Net capitalized turnaround costs at beginning of the year $ 246 $ 252 $ 208

Additions 84 102 156

Depreciation ( 104 ) ( 112 ) ( 111 )

Effect of exchange rate changes — 4 ( 1 )

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

Granular Urea

Ammonia Granular Urea UAN AN Other Total

(in millions)

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Amount Accumulated

Amortization Net Gross

Amount Accumulated

Amortization Net

(in millions)

Customer relationships $ 133 $ ( 52 ) $ 81 $ 131 $ ( 45 ) $ 86

TerraCair brand

Trade names 32 ( 9 ) 23 31 ( 7 ) 24

Total intangible assets $ 165 $ ( 61 ) $ 104 $ 162 $ ( 52 ) $ 110

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CF INDUSTRIES HOLDINGS, INC.

Equity Method Investments

Equity Method Investment

We have a 50 % ownership interest in PLNL, which operates an ammonia production facility in the Republic of Trinidad and Tobago.

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During the tax amnesty period, PLNL evaluated the proposed assessment, including considering the outcome of certain recent legal cases involving other taxpayers.

As a result of this evaluation, PLNL paid withholding tax to the Board of Inland Revenue under the amnesty program for tax years 2011 to the current period, and recognized a charge for $ 32 million in the third quarter of 2019.

Our 50 % share of PLNL’s tax charge is $ 16 million , which reduced our equity in earnings of operating affiliate for 2019 .

As a result of this evaluation, in the third quarter of 2019, PLNL paid withholding tax to the Board of Inland Revenue under the amnesty program for tax years back to 2011, and recognized a charge for $ 32 million in the third quarter of 2019.

Our 50 % share of PLNL’s tax charge was $ 16 million, which reduced our equity in earnings of operating affiliate for 2019.

PLNL operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by The National Gas Company of Trinidad and Tobago Limited (NGC).

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In May 2018, the NGC and PLNL reached a settlement of an arbitration proceeding regarding PLNL’s claims for damages due to natural gas supply curtailments.

The net after-tax impact of the settlement reached between NGC and PLNL that is recognized in our consolidated statement of operations for 2018 was an increase in our equity in earnings of operating affiliates of approximately $ 19 million .

The Board of Inland Revenue previously issued a tax assessment against PLNL related to a dispute over whether tax depreciation must be claimed during a tax holiday period that was granted to PLNL under the Trinidadian Fiscal Incentives Act.

The tax holiday was granted as an incentive to construct PLNL’s ammonia plant.

Based on the facts and circumstances of this matter, PLNL recorded a tax contingency accrual in the second quarter of 2017, which reduced our equity in earnings of PLNL for 2017 by approximately $ 7 million reflecting our 50 % ownership interest.

In early 2018, PLNL settled this matter with the Board of Inland Revenue for the amounts accrued.

In the fourth quarter of 2017, we sold our interest in a joint venture that owned a carbon dioxide liquefaction and purification facility and recognized a gain of $ 14 million , which is included in equity in earnings of operating affiliates in our consolidated statement of operations for 2017.

The net after-tax impact of the settlement reached between NGC and PLNL that was recognized in our consolidated statement of operations for 2018 was an increase in our equity in earnings of operating affiliate of approximately $ 19 million.

CF INDUSTRIES HOLDINGS, INC.

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December 31, 2020

Cost Basis Unrealized

Gains Unrealized

Losses Fair Value

(in millions)

Cash $ 108 $ — $ — $ 108

Cash equivalents:

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December 31, 2019

Cost Basis Unrealized

Gains Unrealized

Losses Fair Value

(in millions)

Cash $ 59 $ — $ — $ 59

Cash equivalents:

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December 31, 2020

Total Fair Value

Quoted Prices

Total Fair Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

(in millions)

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Nonqualified employee benefit trusts 19 19 — —

Derivative assets 1 — 1 —

Derivative liabilities ( 7 ) — ( 7 ) —

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December 31, 2019

Total Fair Value

Quoted Prices

Total Fair Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

(in millions)

1 unchanged sentence

Nonqualified employee benefit trusts 19 19 — —

Derivative assets

Derivative liabilities ( 12 ) — ( 12 ) —

Embedded derivative liability ( 20 ) — ( 20 ) —

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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.

Changes in the fair value of equity securities in the trust assets are recognized through earnings.

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 OTC markets with multi-national commercial banks, other major financial institutions or large energy companies.

The derivative instruments that we may use are primarily natural gas fixed price swaps, basis swaps and options traded in the OTC markets with multi-national commercial banks, other major financial institutions or large energy companies.

The natural gas derivative contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods.

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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.

As of December 31, 2019 and 2018 , the embedded derivative liability of $ 20 million and $ 21 million , respectively, is included in other current liabilities and other liabilities on our consolidated balance sheets.

This obligation is recognized on our consolidated balance sheets as an embedded derivative and is included within other current liabilities and other liabilities.

As of December 31, 2020 and 2019, the embedded derivative liability was $ 18 million and $ 20 million, respectively.

Included in other operating—net in our consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018 is a net loss of $ 3 million, $ 4 million and $ 1 million, respectively.

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Amount Fair Value Carrying

Amount Fair Value

(in millions)

Long-term debt

Long-term debt, including current maturities $ 3,961 $ 4,731 $ 3,957 $ 4,295

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

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We review the carrying value of our goodwill, definite lived intangible assets, and investments in unconsolidated subsidiaries to assess recoverability as part of our annual impairment review in the fourth quarter of each year and more frequently if there is an event that requires reassessment during the year.

As part of the assessment process when performing impairment tests, we estimate many factors including future sales volume, selling prices, raw materials costs, operating rates, operating expenses, inflation, discount rates, exchange rates, tax rates and capital spending.

As part of the assessment process when performing impairment tests, we estimate many factors including future production and sales volumes, selling prices, raw materials costs, operating rates, operating expenses, inflation, discount rates, exchange rates, tax rates and capital spending.

The assumptions we make are material estimates that are used in the impairment testing.

CF INDUSTRIES HOLDINGS, INC.

Income Tax Provision (Benefit)

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

Income Tax Provision

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

Year ended December 31,

2020 2019 2018

(in millions)

Earnings (loss) before income taxes

Income tax provision (benefit) before Tax Reform

Domestic $ 421 $ 679 $ 516

Earnings before income taxes $ 463 $ 772 $ 547

Federal $ 106 $ 4 $ 5

Foreign 6 21 14

State ( 7 ) ( 48 ) 6

105 ( 23 ) 25

Federal ( 76 ) 112 85

Foreign 4 — ( 10 )

State ( 2 ) 37 3

( 74 ) 149 78

Income tax provision before Tax Reform 31 126 103

Tax Reform - Current

Tax Reform - Deferred

Income tax provision (benefit) - Tax Reform

Income tax provision (benefit)

Settlement of Terra Amended Tax Returns

The Company completed the acquisition of Terra Industries Inc.

Federal — — 19

Foreign — — —

State — — ( 3 )

Income tax provision - Tax Reform — — 16

Income tax provision $ 31 $ 126 $ 119

Terra Amended Tax Returns

We completed the acquisition of Terra Industries Inc.

(Terra) in April 2010.

After the acquisition, the Company determined that the manner in which Terra reported the repatriation of cash from foreign affiliates to its U.S.

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 the Company amended certain tax returns, including Terra’s income and withholding tax returns, back to 1999 (the Amended Tax Returns) to correct these tax returns and paid additional income and withholding taxes, and related interest and penalties.

As a result, in 2012 we amended certain tax returns, including Terra’s income and withholding tax returns, back to 1999 (the Amended Tax Returns) and paid additional income and withholding taxes, and related interest and penalties.

In early 2013, the Internal Revenue Service (IRS) commenced an examination of the U.S.

tax aspects of the Amended Tax Returns.

In 2017, the Company also made a Voluntary Disclosure Filing with the Canadian Revenue Agency (CRA) with respect to the Canadian tax aspects of this matter and paid additional Canadian taxes due.

In 2017, we also made a Voluntary Disclosure Filing with the Canadian Revenue Agency (CRA) with respect to the Canadian tax aspects of this matter and paid additional Canadian taxes due.

In early 2019, the IRS completed its examination of the Amended Tax Returns and submitted its audit reports and related refund claims to the Joint Committee on Taxation of the U.S.

Congress (the Joint Committee).

For purposes of its review, the

CF INDUSTRIES HOLDINGS, INC.

Joint Committee separated the IRS audit reports into two separate matters:

For purposes of its review, the Joint Committee separated the IRS audit reports into two separate matters:

(i) an income tax related matter and (ii) a withholding tax matter.

In December 2019, we received notification that the Joint Committee had approved the IRS audit reports relating to the income tax related matter.

As a result, we expect to receive a cash refund in the first half of 2020 of approximately $ 57 million , including interest.

As a result of the approval by the Joint Committee, the Company recognized in the fourth quarter of 2019 the following amounts in its consolidated statement of operations;

In late 2019, we received notification that the Joint Committee had approved the IRS audit reports and related income tax refunds relating to the income tax related matter.

As a result of the approval by the Joint Committee, we recognized in the fourth quarter of 2019 the following amounts in our consolidated statement of operations;

(i) $ 5 million of interest income ($ 4 million, net of tax);

and (ii) a reduction in income tax expense of $ 10 million as a result of the favorable settlement of certain uncertain tax positions.

The Joint Committee has not yet approved the IRS audit report relating to the withholding tax matter.

If this approval is received, we expect to receive an additional tax refund of approximately $ 29 million , excluding related interest, and record a reduction in income tax expense of approximately $ 12 million .

The Company previously recorded a tax receivable of CAD $ 27 million (or $ 21 million ) related to the Canadian tax aspects of this matter, which continues to be under review by the CRA.

During the fourth quarter of 2017, we recorded an income tax benefit of $ 491 million reflecting the impact of the Tax Cuts and Jobs Act (the “Tax Act” or “Tax Reform”) that was enacted on December 22, 2017, including a provisional amount of $ 57 million for the transition tax liability based on amounts reasonably estimable.

In 2018, a $ 16 million increase to the provisional amount of the transition tax liability was recorded.

No income tax refunds were received in 2019 related to the Amended Tax Returns.

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

In addition, the CRA settled with us the Voluntary Disclosure matter.

CF INDUSTRIES HOLDINGS, INC.

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

• additional income of $ 26 million ($ 23 million, net of tax) representing $16 million of interest income related to the U.S.

Federal income tax matter and withholding tax matter and a $10 million reversal of previously accrued interest related to the Canadian tax aspects of this matter,

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

Federal withholding tax matter, and

• an additional income tax benefit of $ 9 million related to the U.S.

Federal income tax matter and related state amended returns.

In 2020, we received U.S.

Federal income tax refunds, including interest, of $ 110 million relating to the Amended Tax Returns, consisting of $ 68 million related to the income tax matter and $ 42 million related to the withholding tax matter, which finalized these matters with the IRS.

As a result of the finalization of the income tax matter and the withholding tax matter, all U.S.

federal tax years commencing before January 1, 2012 are now closed.

In the first quarter of 2021, we received approximately $ 20 million of withholding tax refunds, including interest, from the CRA, related to the Voluntary Disclosure Filing.

These amounts were previously recorded in our consolidated balance sheet as of December 31, 2020.

Canada Revenue Agency Notices of Reassessment

In 2016, the Canada Revenue Agency (CRA) issued Notices of Reassessment for tax years 2006 through 2009 to one of our Canadian affiliates asserting a disallowance of certain patronage allocations.

The tax assessments totaled CAD $ 174 million (or approximately $ 137 million), including provincial taxes but excluding any interest or penalties.

We filed a Notice of Objection with respect to the Notices of Reassessment with the CRA and Alberta Tax and Revenue Administration and we posted letters of credit in lieu of paying the additional tax liability assessed.

In 2018, the matter was accepted for consideration under the bilateral settlement provisions of the US-Canada Tax Treaty (the Treaty) by the United States and Canadian competent authorities and was subject to a two-year period to reach a settlement.

The period was subsequently extended, but it expired in February 2021 and the matter is being referred to binding arbitration under the provisions of the Treaty.

While there is uncertainty about the ultimate timing and outcome of this matter, which may be resolved in binding arbitration, we do not expect that resolution of the matter will result in a material net tax liability, because the Company would be entitled to an offsetting U.S.

foreign tax credit for any incremental Canadian tax paid.

Upon resolution of the matter, interest would be assessed based upon the amount of tax due.

Similarly, the Company would be entitled to receive interest on the offsetting reduction in tax due to the foreign tax credit.

Due to uncertainty in how each taxing authority would apply their interest calculation rules, we are not able to predict the net amount of interest that we would pay to or receive from the taxing authorities.

The Tax Cuts and Jobs Act (the “Tax Act” or “Tax Reform”) was enacted on December 22, 2017.

Among other provisions, the Tax Act imposed a transition tax liability on taxpayers with undistributed foreign entity earnings.

In 2018, we recorded a $ 16 million increase to the provisional amount of the transition tax liability.

The adjustment to the provisional amount was required to properly reflect the inclusion of amounts subject to the transition tax in tax returns where the amounts were to be reported.

The adjustments related to changes in (i) the amount of includible income subject to the transition tax;

The adjustment related to changes in (i) the amount of includible income subject to the transition tax;

(ii) the computation of the allowable foreign tax credits against the transition tax liability and (iii) the allocation of certain gains and losses to various foreign tax credit baskets.

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The Tax Act also provided a new category of income from foreign operations, Global Intangible Low-Taxed Income (GILTI), that was subject to federal income tax beginning in the year ended December 31, 2018.

tax on foreign earnings in the effective tax rate table below includes our tax on GILTI in 2019 and 2018, which is primarily related to Canadian earnings.

The Tax Act also adopted new rules imposing a limitation of the ability of corporations to deduct net business interest expense.

For tax years through 2021, this provision limits the deduction of net business interest expense to thirty percent of Adjusted Taxable Income (ATI).

Under this provision and proposed regulations issued thereunder, ATI is similar to earnings before interest, income taxes, depreciation and amortization (EBITDA), but (i) substitutes taxable income for net income and (ii) treats depreciation expense capitalized to inventory as not qualifying as depreciation expense for purposes of determining ATI.

For calendar year 2019, we do not expect to have any of our net business interest expense disallowed under this provision.

For calendar year 2018, we did not have any of our net business interest expense disallowed under this provision.

During 2018 and 2019, the IRS issued proposed regulations clarifying and implementing a number of provisions contained within the Tax Act (the Proposed Regulations).

While the majority of the Proposed Regulations are not final and there is no assurance that when finally enacted, the enacted regulations will be the same as the Proposed Regulations, we have computed our 2019 and 2018 income tax provision and related balance sheet accounts reflecting the provisions of the Proposed Regulations.

tax on foreign earnings in the effective tax rate table below includes our tax on GILTI, which is primarily related to Canadian earnings.

CF INDUSTRIES HOLDINGS, INC.

COVID-19 Tax Legislation

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law.

The CARES Act includes, among other things, a five-year net operating loss (NOL) carryback (including a related technical correction to the 2017 Tax Cuts and Jobs Act) for tax losses incurred in tax years 2018 through 2020, a change in interest deduction limitations for tax years 2019 and 2020, increasing the annual interest limitation from 30% to 50% of adjusted taxable income and increased refundability of corporate alternative minimum tax (AMT) credits.

These provisions have limited applicability to the Company.

On December 27, 2020, the Consolidated Appropriations Act, 2021 (the CAA) was signed into law.

The CAA extends certain provisions of the CARES Act, provides additional funding for others and contains new relief provisions.

The tax provisions within this legislation will not have a significant effect on the Company.

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

Effective Tax Rate

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

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

Year ended December 31,

2020 2019 2018

(in millions, except percentages)

Earnings (loss) before income taxes

Expected tax provision (benefit) at U.S.

statutory rate (21% in 2019 and 2018, 35% in 2017)

Earnings before income taxes $ 463 $ 772 $ 547

Expected tax provision at U.S.

statutory rate of 21% $ 97 $ 162 $ 115

State income taxes, net of federal ( 1 ) 2 3

Net earnings attributable to noncontrolling interests ( 24 ) ( 32 ) ( 29 )

manufacturing profits deduction

Foreign tax rate differential 1 2 —

tax on foreign earnings (including GILTI in 2019 and 2018)

tax on foreign earnings ( 6 ) 3 12

Foreign partnership basis difference ( 7 ) — —

Valuation allowance — — 4

Tax rate change — — ( 2 )

Settlement of Terra amended returns

enacted tax rate change (Tax Reform)

Transition tax liability and other (Tax Reform)

Income tax provision (benefit)

Terra amended tax returns ( 24 ) ( 10 ) —

Other ( 5 ) ( 1 ) —

Transition tax liability (Tax Reform) — — 16

Income tax provision $ 31 $ 126 $ 119

Effective tax rate 6.7 % 16.3 % 21.7 %

Income tax provision (benefit) before Tax Reform (1)

Income tax provision before Tax Reform (1)

$ 31 $ 126 $ 103

Effective tax rate before Tax Reform 6.7 % 16.3 % 18.7 %

_______________________________________________________________________________

Income tax provision (benefit) before Tax Reform reflects the income tax provision (benefit) less the Tax Reform impacts included in the table above consisting of U.S.

enacted tax rate change (Tax Reform) and transition tax liability and other.

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

On April 2, 2018, we acquired the TNCLP Public Units.

Our effective tax rate in 2018 was impacted by a $ 16 million reduction to our deferred tax liability as a result of the change in our effective state income tax rate as a result of the implementation of legal entity structure changes related to the acquisition.

See Note 17—Noncontrolling Interests for additional information.

State income taxes for the years ended December 31, 2019 , 2018 and 2017 includes income tax expense (benefit) of $ 7 million , $( 3 ) million and $( 30 ) million , respectively, net of federal tax effect, for state net operating loss carryforwards.

State income taxes for the years ended December 31, 2019 , 2018 and 2017 , were also impacted by state tax credits of $ 25 million , $ 18 million and $ 1 million , respectively, net of federal tax effect, principally related to the generation of new jobs at our capital expansion project in Iowa as well as capital assets placed in service at our production facilities in Oklahoma.

Most of these credits have been recorded as deferred tax assets and will be available to offset state income tax liabilities in future tax years.

Due to limitations on the availability of some of these credits in future tax years, a valuation allowance has been recorded.

For the year ended December 31, 2018, we recorded a net increase to the valuation allowance of $ 11 million .

The foreign tax rate differential is impacted by the inclusion of equity earnings from our equity method investment in PLNL, a foreign operating affiliate, which are included in pre-tax earnings on an after-tax basis, and includes a $ 4 million deferred tax benefit in 2019 for an enacted tax rate change.

Our effective tax rate is impacted by earnings attributable to noncontrolling interests in CFN and, prior to April 2, 2018, TNCLP, as our consolidated income tax provision (benefit) does not include a tax provision on the earnings attributable to the noncontrolling interests.

As a result, earnings attributable to the noncontrolling interests of $ 153 million , $ 138 million and $ 92 million in 2019 , 2018 and 2017 , respectively, which are included in earnings (loss) before income taxes, impacted the effective tax rate in all three years.

Our effective tax rate in 2018 was impacted by a $ 16 million reduction to our deferred tax liability as a result of the change in our effective state income tax rate due to the implementation of legal entity structure changes related to the acquisition.

See Note 17—Noncontrolling Interests for additional information.

In 2020, the foreign tax rate differential includes $ 6 million tax expense for the revaluing of deferred taxes due to an enacted rate change in the jurisdiction of a foreign affiliate.

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

federal return in the fourth quarter of 2020.

CF INDUSTRIES HOLDINGS, INC.

We recorded an income tax receivable of approximately $ 22 million as a result of the carryback of the tax net operating loss for the year ended December 31, 2017 to prior tax years.

The tax receivable from the net operating loss carryback was reduced by an alternative minimum tax of $ 36 million in the carryback periods.

The alternative minimum tax incurred as a result of the carryback of the net operating loss became a refundable tax credit as a result of the impact of the Tax Act.

These refundable tax credits were available for tax years subsequent to the tax year ended December 31, 2018 and were recorded in our noncurrent income tax receivable on our consolidated balance sheet as of December 31, 2018.

The $ 22 million income tax receivable for the net operating loss carryback was included in prepaid income taxes on our consolidated balance sheet as of December 31, 2018, and the refund was received in 2019.

We utilized the majority of the $ 36 million refundable tax credit to reduce our income taxes payable for 2019.

In addition, we utilized the remaining U.S.

federal net operating loss carryforward in 2019.

As a result, there are no remaining U.S.

federal net operating loss carryforwards at December 31, 2019.

The income tax benefit for the year ended December 31, 2017 includes the tax impact of the U.S.

manufacturing profits deductions claimed in prior years that will not be deductible as a result of the carryback of the tax net operating losses to these prior tax years.

Our effective tax rate is impacted by earnings attributable to noncontrolling interests in CFN and, prior to April 2, 2018, TNCLP, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interests.

As a result, earnings attributable to the noncontrolling interests of $ 115 million, $ 153 million and $ 138 million in 2020, 2019 and 2018, respectively, which are included in earnings before income taxes, impacted the effective tax rate in all three years.

See Note 17—Noncontrolling Interests for additional information.

Deferred Taxes

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Operating lease right-of-use assets ( 60 ) ( 65 )

Foreign earnings

Other ( 6 ) ( 6 )

( 1,443 ) ( 1,564 )

Net deferred tax liability $ ( 1,184 ) $ ( 1,246 )

As of December 31, 2018 and 2017, a foreign subsidiary of the Company had net operating loss carryforwards of $ 379 million and $ 383 million , respectively, with corresponding deferred tax assets of $ 99 million and $ 100 million , respectively.

The majority of these carryforwards were indefinitely available in the foreign jurisdiction.

As the future realization of these carryforwards was not anticipated, a full valuation allowance was recorded as of December 31, 2018 and 2017.

The change in the valuation allowance related to these net operating loss carryforwards was a net decrease of $ 1 million and $ 11 million in 2018 and 2017, respectively.

During 2019, as a result of group legal entity reorganizations, the foreign net operating loss carryforwards were eliminated, which resulted in a net decrease of $ 99 million in the net operating loss carryforwards deferred tax asset, with a corresponding reduction in the related valuation allowance.

We consider the earnings of our United Kingdom subsidiaries to be permanently reinvested.

As of December 31, 2020, we would not expect any additional U.S.

and foreign income tax that would be due upon repatriation of these accumulated earnings, other than foreign withholding tax, which we have not accrued.

During 2019, as a result of group legal entity reorganizations, foreign net operating loss carryforwards were eliminated, which resulted in a net decrease of $ 99 million in the net operating loss carryforwards deferred tax asset.

We recorded a corresponding reduction in the related valuation allowance of $ 99 million as these losses were not anticipated to be realized.

The valuation allowance activity in the current year is primarily attributable to a capital loss.

As a result of an intercompany transaction with a foreign affiliate, we recognized a capital loss which will be carried forward and for which we recorded a deferred tax asset of approximately $ 90 million.

The foreign affiliate operations do not normally generate capital gains and there is no practical plan to do so in the future, therefore, we established a full valuation allowance of approximately $ 90 million against the deferred tax asset.

As of December 31, 2020, our net operating loss and capital loss carryforwards are comprised of state net operating loss carryforwards with expiration dates generally ranging from 2027 to 2037 and foreign capital loss carryforwards, which can be carried forward indefinitely.

Due to the difficulty in realizing capital loss carryforwards, we have recorded a full valuation allowance against the foreign capital loss carryforwards.

Our foreign affiliates, including the foreign affiliate described above, have operations that do not normally generate capital gains and have no practical plans to do so in the future.

As a result, we have recorded a full valuation allowance against all foreign capital loss carryforwards.

As of December 31, 2020, we have state tax credit carryforwards resulting in a deferred tax asset of $ 69 million.

The state tax credits have expiration dates generally ranging from 2033 to 2040.

We have recorded a $ 27 million valuation allowance on the portion of the state tax credits that are not expected to be realized before they expire based on taxable income projections.

CF INDUSTRIES HOLDINGS, INC.

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Unrecognized tax benefits:

Beginning balance

Balance as of January 1 $ 104 $ 126

Additions for tax positions taken during the current year — —

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Reductions related to settlements with tax jurisdictions ( 23 ) ( 44 )

Ending balance

Balance as of December 31 $ 81 $ 104

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

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

In addition, we reduced our liabilities for unrecognized tax benefits by $ 4 million with a corresponding reduction in income tax provision.

In 2019, we increased the amount of our unrecognized tax benefits by $ 22 million.

The increase primarily relates to an addition for state investment tax credits.

The increase primarily related to an addition for state investment tax credits.

In addition, we reduced the amount of our unrecognized tax benefits in 2019 by $ 44 million.

This reduction primarily relates to the approval by the Joint Committee of the IRS audit report related to the Amended Tax Returns described above.

This reduction primarily related to the approval by the Joint Committee of the IRS audit report related to the Terra Amended Tax Returns described above.

We file federal, provincial, state and local income tax returns principally in the United States, Canada and the United Kingdom, as well as in certain other foreign jurisdictions.

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

Pension Plans

Retiree Medical Plans

North America

United Kingdom

North America

Pension Plans Retiree Medical Plans

North America United Kingdom North America

December 31, December 31, December 31,

2020 2019 2020 2019 2020 2019

(in millions)

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Benefit obligation as of January 1 ( 839 ) ( 742 ) ( 597 ) ( 524 ) ( 37 ) ( 43 )

Service cost ( 17 ) ( 14 ) — — — —

Interest cost ( 25 ) ( 30 ) ( 11 ) ( 15 ) ( 1 ) ( 1 )

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Funded status as of December 31 $ ( 38 ) $ ( 49 ) $ ( 152 ) $ ( 179 ) $ ( 35 ) $ ( 37 )

In the table above, the line titled “Plan amendments” in 2019 relates to updates to certain mortality tables for the U.S.

In the table above, the line titled “Plan amendments” for 2019 relates to the impact of updates to certain mortality tables for the U.S.

plan and a conversion option for pensions in payment for the U.K.

and for 2018, the impact of the guaranteed minimum pension equalization due to a U.K.

High Court ruling that occurred in 2018.

The line titled “Change in assumptions and other” for our North America pension plans primarily reflects the impact of losses due to the decrease in discount rates for 2019 , and for 2018 , the impact of gains due to the increase in discount rates.

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

The line titled “Change in assumptions and other” for our U.K.

pension plans primarily reflects losses due to the decrease in discount rates partially offset by gains due to the decrease in inflation rate assumptions for 2019 , and for 2018 , gains due to the increase in discount rates offset partially by losses due to the increase in inflation rate assumptions.

The line titled “Change in assumptions and other” for our retiree medical plans in 2019 primarily reflects gains due to demographic claims and experience and a change in legislation, offset by losses due to a decrease in the discount rates;

and for 2018 , gains due to the increase in discount rates.

pension plans primarily reflects losses due to the decrease in discount rates for 2020 and 2019.

For 2019, the losses from the decrease in discount rates was partially offset by gains due to the decrease in inflation rate assumptions.

The line titled “Benefit payments” includes $ 22 million of lump sum payments for our U.S.

pension plan in December 2020.

CF INDUSTRIES HOLDINGS, INC.

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

Pension Plans

Retiree Medical Plans

North America

United Kingdom

North America

Pension Plans Retiree Medical Plans

North America United Kingdom North America

December 31, December 31, December 31,

2020 2019 2020 2019 2020 2019

(in millions)

Other assets $ 10 $ 10 $ — $ — $ — $ —

Accrued expenses — — — — ( 3 ) ( 3 )

Other liabilities ( 48 ) ( 59 ) ( 152 ) ( 179 ) ( 32 ) ( 34 )

$ ( 38 ) $ ( 49 ) $ ( 152 ) $ ( 179 ) $ ( 35 ) $ ( 37 )

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

Pension Plans

Retiree Medical Plans

North America

United Kingdom

North America

Pension Plans Retiree Medical Plans

North America United Kingdom North America

December 31, December 31, December 31,

2020 2019 2020 2019 2020 2019

(in millions)

Prior service cost (benefit)

Prior service cost $ 4 $ 5 $ 1 $ 1 $ — $ —

Net actuarial loss 79 82 129 132 4 2

$ 83 $ 87 $ 130 $ 133 $ 4 $ 2

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

Pension Plans

Retiree Medical Plans

North America

United Kingdom

North America

Pension Plans Retiree Medical Plans

North America United Kingdom North America

2020 2019 2018 2020 2019 2018 2020 2019 2018

(in millions)

Service cost $ 17 $ 14 $ 15 $ — $ — $ — $ — $ — $ —

Interest cost 25 30 28 11 15 14 1 1 2

Expected return on plan assets ( 30 ) ( 32 ) ( 31 ) ( 14 ) ( 18 ) ( 17 ) — — —

Amortization of prior service (benefit) cost

Amortization of prior service cost (benefit) 1 — — — — — — ( 1 ) ( 1 )

Amortization of actuarial loss (gain) 3 — 3 3 — — ( 1 ) ( 1 ) ( 1 )

Net periodic benefit cost (income) 16 12 15 — ( 3 ) ( 3 ) — ( 1 ) —

Net actuarial loss (gain)

Net actuarial (gain) loss ( 1 ) 3 3 ( 4 ) 60 ( 3 ) 1 ( 4 ) ( 8 )

Prior service cost (credit) — 4 — — ( 3 ) 5 — — —

Amortization of prior service benefit

Amortization of prior service (cost) benefit ( 1 ) — — — — — — 1 1

Amortization of actuarial (loss) gain ( 3 ) — ( 3 ) ( 3 ) — — 1 1 1

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plan and a conversion option for pensions in payment for the U.K.

and for 2018, a U.K.

plan amendment due to the guaranteed minimum pension equalization.

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

CF INDUSTRIES HOLDINGS, INC.

The accumulated benefit obligation (ABO) in aggregate for the defined benefit pension plans in North America was approximately $ 793 million and $ 703 million as of December 31, 2019 and December 31, 2018 , respectively.

The ABO in aggregate for the defined benefit pension plans in the United Kingdom was approximately $ 597 million and $ 524 million as of December 31, 2019 and December 31, 2018 , respectively.

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

The ABO in aggregate for the defined benefit pension plans in the United Kingdom was approximately $ 643 million and $ 597 million as of December 31, 2020 and 2019, respectively.

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

North America

United Kingdom

North America United Kingdom

2020 2019 2020 2019

(in millions)

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Fair value of plan assets 667 630 491 418

The following table presents aggregated information for those individual defined benefit pension plans that have a projected benefit obligation (PBO) in excess of plan assets as of December 31, which excludes two North American defined benefit pension plans that have plan assets in excess of its PBO for 2019 and one North American defined benefit pension plan that has plan assets in excess of its PBO for 2018:

North America

United Kingdom

North America United Kingdom

2020 2019 2020 2019

(in millions)

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

Pension Plans

Retiree Medical Plans

North America

United Kingdom

North America

Pension Plans Retiree Medical Plans

North America United Kingdom North America

(in millions)

2021 $ 47 $ 27 $ 3

2026-2030 251 163 9

CF INDUSTRIES HOLDINGS, INC.

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

Pension Plans

Retiree Medical Plans

North America

United Kingdom

North America

Pension Plans Retiree Medical Plans

North America United Kingdom North America

2020 2019 2018 2020 2019 2018 2020 2019 2018

Weighted-average discount rate—obligation 2.4 % 3.1 % 4.1 % 1.5 % 2.0 % 2.9 % 2.2 % 3.0 % 4.1 %

Weighted-average discount rate—expense 3.1 % 4.1 % 3.6 % 2.0 % 2.9 % 2.5 % 3.0 % 4.1 % 3.4 %

Weighted-average cash balance interest crediting rate—obligation

Weighted-average cash balance interest crediting rate—expense

Weighted-average rate of increase in future compensation

Weighted-average expected long-term rate of return on assets—expense

Weighted-average retail price index—obligation

Weighted-average retail price index—expense

Weighted-average cash balance interest crediting rate—obligation 3.0 % 3.0 % 3.0 % n/a n/a n/a n/a n/a n/a

Weighted-average cash balance interest crediting rate—expense 3.0 % 3.0 % 3.0 % n/a n/a n/a n/a n/a n/a

Weighted-average rate of increase in future compensation 4.2 % 4.2 % 4.3 % n/a n/a n/a n/a n/a n/a

Weighted-average expected long-term rate of return on assets—expense 4.1 % 4.6 % 4.5 % 3.4 % 4.4 % 4.2 % n/a n/a n/a

Weighted-average retail price index—obligation n/a n/a n/a 3.0 % 3.0 % 3.3 % n/a n/a n/a

Weighted-average retail price index—expense n/a n/a n/a 3.0 % 3.3 % 3.2 % n/a n/a n/a

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As of January 1, 2021, our weighted-average expected long-term rate of return on assets is 3.2 %, which will be used in determining expense for 2021.

For our United Kingdom plans, the expected long-term rate of return on assets is based on the expected long-term performance of the underlying investments, adjusted for investment managers’ fees.

For our United Kingdom plans, the expected long-term rate of return on assets is based on the expected long-term performance of the underlying investments, adjusted for investment managers’ fees and estimated plan expenses.

As of January 1, 2021, our weighted-average expected long-term rate of return on assets is 3.3 %, which will be used in determining expense for 2021.

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

For post-65 retirees, the assumed health care cost trend rates start with an 8.3 % increase in 2020 , followed by a gradual decline in increases to 4.5 % for 2026 and thereafter.

For post-65 retirees, the assumed health care cost trend rates start with a 7.0 % increase in 2021, followed by a gradual decline in increases to 4.5 % for 2030 and thereafter.

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

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The investment strategies for the plans, including target asset allocations and investment vehicles, are subject to change within the guidelines of the policies.

CF INDUSTRIES HOLDINGS, INC.

The target asset allocation for our U.S.

pension plan is 80 % non-equity and 20 % equity, which has been determined based on analysis of actual historical rates of return and plan needs and circumstances.

The equity investments are tailored to exceed

CF INDUSTRIES HOLDINGS, INC.

the growth of the benefit obligation and are a combination of U.S.

The equity investments are tailored to exceed the growth of the benefit obligation and are a combination of U.S.

total stock market index mutual funds.

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The non-equity investments have a duration profile that is similar to the benefit obligation in order to mitigate the impact of interest rate changes on the funded status.

The pension assets in the United Kingdom plans are each administered by a Board of Trustees consisting of employer nominated trustees, member nominated trustees and an independent trustee.

Trustees may be appointed or removed by CF Fertilisers UK Group Limited (formerly known as GrowHow UK Group Limited) (CF Fertilisers UK), provided CF Fertilisers UK fulfills its obligation to have at least one third of the Board of Trustees as member nominated.

The pension assets in the United Kingdom plans are each administered by a Board of Trustees consisting of employer nominated trustees, member nominated trustees and an independent trustee, with a requirement that member nominated trustees represent at least one-third of each Board of Trustees.

It is the responsibility of the trustees to ensure prudent management and investment of the assets in the plans.

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Assets of the United Kingdom plans are invested in externally managed pooled funds.

The target asset allocation for one of the United Kingdom plans is 55 % actively managed target return funds, 10 % actively and passively managed bond and gilt funds, 20% liability-driven investment funds, and 15 % actively managed property funds.

The target asset allocation for the other United Kingdom plan is 50 % actively managed target return funds, 20 % actively and passively managed bond and gilt funds, 25% liability-driven investment funds, and 5 % in an actively managed property fund.

The target return funds diversify assets across multiple asset classes (which may include, among others, traditional equities and bonds) and may use derivatives.

The bond and gilt funds generally invest in fixed income debt securities including government bonds, gilts, high yield and emerging market bonds, and investment grade corporate bonds and may use derivatives.

The liability-driven investment funds generally invest in government gilts, gilt repurchase agreements, and derivatives.

The property funds are invested predominately in freehold and leasehold property.

The assets are allocated between a growth portfolio and a matching portfolio.

The growth portfolio seeks a return premium on investments across multiple asset classes.

Growth portfolio funds may include, among others, traditional equities and bonds, growth fixed income, hedged funds, and may use derivatives.

The matching portfolio seeks to align asset changes with changes in liability due to interest and discount rate.

Matching portfolio funds are composed of corporate bonds, U.K.

gilts and liability-driven investment funds and generally invest in fixed income debt securities including government bonds, gilts, gilt repurchase agreements, swaps and investment grade corporate bonds and may use derivatives.

The target asset allocation for one of the United Kingdom plans is 55 % in the growth portfolio and 45 % in the matching portfolio and the other United Kingdom plan is 60 % in the growth portfolio (including a legacy holding in an actively managed property fund) and 40 % in the matching portfolio.

CF INDUSTRIES HOLDINGS, INC.

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December 31, 2020

(Level 1) Significant

(Level 2) Significant

(in millions)

Cash and cash equivalents (1)

$ 30 $ 7 $ 23 $ —

Equity mutual funds

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Accruals and payables—net ( 1 )

Total assets $ 846

United Kingdom

December 31, 2020

(Level 1) Significant

(Level 2) Significant

(in millions)

Pooled target return funds (8)

Pooled UK government index-linked securities (9)

Pooled global fixed income funds (10)

Liability-driven investment funds (11)

Cash and cash funds (8)

$ 22 $ 5 $ 17 $ —

Pooled equity funds (9)

Pooled diversified funds (10)

government fixed and index-linked securities funds (11)

Pooled global debt funds (12)

Pooled liability-driven investment funds (13)

Total assets at fair value by fair value levels $ 439 $ 5 $ 434 $ —

Pooled property funds measured at NAV as a practical expedient (12)

Funds measured at NAV as a practical expedient (14)

Total assets $ 491

CF INDUSTRIES HOLDINGS, INC.

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December 31, 2019

(Level 1) Significant

(Level 2) Significant

(in millions)

Cash and cash equivalents (1)

$ 21 $ 1 $ 20 $ —

Equity mutual funds

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Treasury bonds and notes (4)

Pooled mutual funds (13)

Corporate bonds and notes (5)

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Total assets at fair value by fair value levels $ 791 $ 163 $ 628 $ —

Receivables—net

Accruals and payables—net ( 1 )

Total assets $ 790

United Kingdom

December 31, 2019

(Level 1) Significant

(Level 2) Significant

(in millions)

Cash $ 4 $ 4 $ — $ —

Pooled target return funds (15)

Pooled UK government index-linked securities (9)

government index-linked securities funds (16)

Pooled global fixed income funds (17)

Pooled liability-driven investment funds (13)

Total assets at fair value by fair value levels $ 373 $ 4 $ 369 $ —

Pooled property funds measured at NAV as a practical expedient (14)

Total assets $ 418

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

Pooled target return funds invest in a broad array of asset classes and a range of diversifiers including the use of derivatives.

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

(9) Pooled equity funds invest in a broad array of global equity, equity-related securities, a range of diversifiers and may use derivatives for efficient portfolio management.

The funds are valued at net asset value (NAV) as determined by the fund managers based on the value of the underlying net assets of the fund.

Pooled United Kingdom government index-linked funds invest primarily in United Kingdom government index-linked gilt securities.

(10) Pooled diversified funds invest in broad array of asset classes and a range of diversifiers including the use of derivatives.