What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-05 · 192 added, 310 removed, 456 unchanged (52% of the section changed)

2 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

(in millions, except per share amounts)

5 unchanged sentences

Total other operating costs and expenses 53 60

Equity in earnings (losses) of operating affiliate 2 ( 14 ) 8 ( 6 )

Equity in earnings of operating affiliate 11 3

Operating earnings 247 147

1 unchanged sentence

Interest income — ( 1 )

Other non-operating—net 1 ( 4 ) ( 2 ) ( 7 )

(Loss) earnings before income taxes ( 9 ) 133 346 665

Income tax (benefit) provision ( 13 ) 19 33 113

Loss on debt extinguishment 6 —

Earnings before income taxes 193 104

Income tax provision 18 13

Net earnings 175 91

Net earnings attributable to noncontrolling interest 24 23

Net (loss) earnings attributable to common stockholders $ ( 28 ) $ 65 $ 230 $ 438

Net (loss) earnings per share attributable to common stockholders:

Net earnings attributable to common stockholders $ 151 $ 68

Net earnings per share attributable to common stockholders:

Basic $ 0.70 $ 0.31

6 unchanged sentences

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

(in millions)

3 unchanged sentences

Defined benefit plans—net of taxes 1 9

38 ( 30 ) ( 22 ) ( 3 )

Comprehensive income 190 17

Comprehensive income attributable to noncontrolling interest 24 23

Comprehensive income attributable to common stockholders $ 10 $ 35 $ 208 $ 435

Comprehensive income (loss) attributable to common stockholders $ 166 $ ( 6 )

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30, 2020 December 31, 2019

2021 December 31,

(in millions, except share

19 unchanged sentences

Current operating lease liabilities 88 88

Current maturities of long-term debt — 249

Other current liabilities 6 15

Total current liabilities 891 906

Long-term debt 3,960 3,957

Long-term debt, net of current maturities 3,713 3,712

Deferred income taxes 1,175 1,184

24 unchanged sentences

(in millions, except per share amounts)

Balance as of June 30, 2020 $ 2 $ — $ 1,300 $ 1,997 $ ( 426 ) $ 2,873 $ 2,703 $ 5,576

Net (loss) earnings — — — ( 28 ) — ( 28 ) 32 4

Other comprehensive income — — — — 38 38 — 38

Acquisition of treasury stock under employee stock plans — ( 1 ) — — — ( 1 ) — ( 1 )

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

— — 1 — — 1 — 1

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

Cash dividends ($ 0.30 per share)

— — — ( 64 ) — ( 64 ) — ( 64 )

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

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

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

Net earnings — — — 151 — 151 24 175

Other comprehensive loss — — — — ( 22 ) ( 22 ) — ( 22 )

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

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

Other comprehensive income — — — — 15 15 — 15

Acquisition of treasury stock under employee stock plans — ( 10 ) — — — ( 10 ) — ( 10 )

4 unchanged sentences

— — — ( 65 ) — ( 65 ) — ( 65 )

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

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

CONSOLIDATED STATEMENTS OF EQUITY

(Continued) (Unaudited)

Common Stockholders

Stock Treasury

Stock Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Stockholders’ Equity Noncontrolling

Interest Total

(in millions, except per share amounts)

Balance as of June 30, 2019 $ 2 $ ( 2 ) $ 1,299 $ 2,111 $ ( 344 ) $ 3,066 $ 2,752 $ 5,818

Net earnings — — — 65 — 65 49 114

Other comprehensive loss — — — — ( 30 ) ( 30 ) — ( 30 )

Purchases of treasury stock — ( 72 ) — — — ( 72 ) — ( 72 )

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

— — 11 — — 11 — 11

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

Cash dividends ($ 0.30 per share)

— — — ( 67 ) — ( 67 ) — ( 67 )

Distribution declared to noncontrolling interest — — — — — — ( 64 ) ( 64 )

Balance as of September 30, 2019 $ 2 $ ( 74 ) $ 1,317 $ 2,109 $ ( 374 ) $ 2,980 $ 2,701 $ 5,681

Balance as of March 31, 2021 $ 2 $ ( 14 ) $ 1,333 $ 2,013 $ ( 305 ) $ 3,029 $ 2,641 $ 5,670

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

2 unchanged sentences

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

Retirement of treasury stock — 682 ( 90 ) ( 592 ) — — — —

Acquisition of treasury stock under employee stock plans — ( 8 ) — — — ( 8 ) — ( 8 )

4 unchanged sentences

— — — ( 65 ) — ( 65 ) — ( 65 )

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

Balance as of September 30, 2019 $ 2 $ ( 74 ) $ 1,317 $ 2,109 $ ( 374 ) $ 2,980 $ 2,701 $ 5,681

Distribution declared to noncontrolling interest — — — — — — ( 88 ) ( 88 )

Balance as of March 31, 2020 $ 2 $ ( 108 ) $ 1,313 $ 1,961 $ ( 440 ) $ 2,728 $ 2,675 $ 5,403

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

September 30,

Three months ended

(in millions)

5 unchanged sentences

Stock-based compensation expense 8 7

Unrealized net (gain) loss on natural gas derivatives ( 12 ) 3

Unrealized loss on embedded derivative 2 3

Loss (gain) on disposal of property, plant and equipment 14 ( 43 )

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

Loss on debt extinguishment 6 —

Unrealized net gain on natural gas derivatives ( 6 ) ( 12 )

Unrealized gain on embedded derivative — ( 1 )

Loss on disposal of property, plant and equipment 1 —

Undistributed earnings of affiliate—net of taxes ( 12 ) ( 4 )

Accounts receivable—net ( 7 ) ( 12 )

7 unchanged sentences

Additions to property, plant and equipment ( 71 ) ( 67 )

Proceeds from sale of property, plant and equipment 2 71

Distribution received from unconsolidated affiliate 1 —

Insurance proceeds for property, plant and equipment — 2

2 unchanged sentences

Proceeds from short-term borrowings — 500

Repayments of short-term borrowings ( 500 ) —

Payments of long-term borrowings ( 255 ) —

Dividends paid on common stock ( 65 ) ( 65 )

1 unchanged sentence

Purchases of treasury stock — ( 100 )

Issuances of common stock under employee stock plans 4 17

Shares withheld for taxes ( 10 ) ( 4 )

Net cash used in financing activities ( 473 ) ( 653 )

Proceeds from issuances of common stock under employee stock plans 7 3

Cash paid for shares withheld for taxes ( 10 ) ( 8 )

Net cash (used in) provided by financing activities ( 387 ) 242

Effect of exchange rate changes on cash and cash equivalents 1 ( 3 )

6 unchanged sentences

Background and Basis of Presentation

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

We operate 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 and sustainably grow our hydrogen and nitrogen platform to serve customers and create long-term shareholder value.

Our mission is to provide clean energy to feed and fuel the world sustainably.

With our employees focused on safe and reliable operations, environmental stewardship, and disciplined capital and corporate management, we are on a path to decarbonize our ammonia production network – the world’s largest – to enable green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities.

Our nine manufacturing complexes in the United States, Canada and the United Kingdom, an extensive storage, transportation and distribution network in North America, and logistics capabilities enabling a global reach underpin our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy.

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

Our principal nitrogen fertilizer products are anhydrous ammonia (ammonia), 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 granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

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

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

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

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

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CF INDUSTRIES HOLDINGS, INC.

New Accounting Standards

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.

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

2019-12—Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

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

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

Early adoption of this ASU is permitted.

We do not expect the adoption of this ASU will have a material effect on our consolidated financial statements.

Revenue Recognition

1 unchanged sentence

See Note 16—Segment Disclosures for our revenue by reportable segment, which are ammonia, granular urea, UAN, AN and Other.

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and nine months ended September 30, 2020 and 2019:

Ammonia Granular Urea UAN AN Other Total

(in millions)

Three months ended September 30, 2020

North America $ 116 $ 222 $ 221 $ 41 $ 56 $ 656

Europe and other 49 27 27 68 20 191

Total revenue $ 165 $ 249 $ 248 $ 109 $ 76 $ 847

Three months ended September 30, 2019

North America $ 152 $ 289 $ 278 $ 41 $ 63 $ 823

Europe and other 35 38 31 95 16 215

Total revenue $ 187 $ 327 $ 309 $ 136 $ 79 $ 1,038

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three months ended March 31, 2021 and 2020:

Ammonia Granular Urea UAN AN Other Total

(in millions)

Nine months ended September 30, 2020

Three months ended March 31, 2021

North America $ 168 $ 399 $ 222 $ 41 $ 77 $ 907

1 unchanged sentence

Total revenue $ 206 $ 399 $ 232 $ 105 $ 106 $ 1,048

Nine months ended September 30, 2019

Three months ended March 31, 2020

North America $ 154 $ 331 $ 230 $ 46 $ 59 $ 820

1 unchanged sentence

Total revenue $ 193 $ 337 $ 235 $ 116 $ 90 $ 971

As of September 30, 2020 and December 31, 2019, we had $ 143 million and $ 119 million, respectively, in customer advances on our consolidated balance sheets.

During the nine months ended September 30, 2020 and 2019, substantially all of the customer advances on our consolidated balance sheet at the beginning of each respective period were recognized as revenue.

CF INDUSTRIES HOLDINGS, INC.

As of March 31, 2021 and December 31, 2020, we had $ 341 million and $ 130 million, respectively, in customer advances on our consolidated balance sheets.

The revenue recognized during the three months ended March 31, 2021 and 2020 that was included in our customer advances at the beginning of each respective period amounted to approximately $ 85 million and $ 75 million, respectively.

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

The balances of customer incentives accrued at September 30, 2020 and December 31, 2019 were not material.

The balances of customer incentives accrued at March 31, 2021 and December 31, 2020 were not material.

From time to time, we will enter the marketplace to purchase product in order to satisfy obligations under contracts with our customers.

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

As discussed in Note 7—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.

During the three months ended March 31, 2021, in addition to products purchased from PLNL, we recognized $ 32 million of revenue from sales of granular urea, which we purchased in order to satisfy obligations under contracts with our customers due to lower production experienced as a result of Winter Storm Uri.

For the three months ended March 31, 2020, other than products purchased from PLNL, products purchased in the marketplace in order to satisfy obligations under contracts with our customers were not material.

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

As of September 30, 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 $ 892 million.

We expect to recognize approximately 13 % of these performance obligations as revenue in the remainder of 2020, approximately 49 % as revenue during 2021 and 2022, and approximately 38 % as revenue during 2023 and 2024.

Subject to the terms and conditions of the applicable contracts, if these customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under these contracts, in the aggregate, is approximately $ 225 million as of September 30, 2020.

As of March 31, 2021, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $ 805 million.

We expect to recognize approximately 25 % of these performance obligations as revenue in the remainder of 2021, approximately 47 % as revenue during 2022 and 2023, approximately 25 % as revenue during 2024 and 2025, and the remainder thereafter.

We monitor the ability of our customers to meet their purchase obligations, which could be impacted by the ongoing coronavirus disease 2019 (COVID-19) pandemic.

Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially filled at December 31, 2019 were satisfied in 2020.

Net (Loss) Earnings Per Share

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

Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially filled at December 31, 2020 will be satisfied in 2021.

CF INDUSTRIES HOLDINGS, INC.

Net Earnings Per Share

Net earnings per share were computed as follows:

Three months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

(in millions, except per share amounts)

Net (loss) earnings attributable to common stockholders $ ( 28 ) $ 65 $ 230 $ 438

Basic (loss) earnings per common share:

Net earnings attributable to common stockholders $ 151 $ 68

Basic earnings per common share:

Weighted-average common shares outstanding 214.9 216.0

Net (loss) earnings attributable to common stockholders $ ( 0.13 ) $ 0.29 $ 1.07 $ 1.98

Diluted (loss) earnings per common share:

Net earnings attributable to common stockholders $ 0.70 $ 0.31

Diluted earnings per common share:

Weighted-average common shares outstanding 214.9 216.0

1 unchanged sentence

Diluted weighted-average shares outstanding 216.0 216.6

Net (loss) earnings attributable to common stockholders $ ( 0.13 ) $ 0.29 $ 1.07 $ 1.97

Net earnings attributable to common stockholders $ 0.70 $ 0.31

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

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

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 3.1 million and 3.3 million in the three and nine months ended September 30, 2020, respectively, and 1.4 million and 1.5 million in the three and nine months ended September 30, 2019, respectively.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 1.2 million and 2.1 million in the three months ended March 31, 2021 and 2020, respectively.

Inventories consist of the following:

September 30, 2020 December 31, 2019

2021 December 31,

(in millions)

5 unchanged sentences

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

September 30, 2020 December 31, 2019

2021 December 31,

(in millions)

8 unchanged sentences

_______________________________________________________________________________

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

As of September 30, 2019 and December 31, 2018, we had property, plant and equipment that was accrued but unpaid of $ 61 million and $ 48 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 207 million and $ 650 million for the three and nine months ended September 30, 2020, respectively, and $ 218 million and $ 648 million for the three and nine months ended September 30, 2019, 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 nine months ended September 30, 2019.

(1) As of March 31, 2021 and December 31, 2020, we had property, plant and equipment that was accrued but unpaid of approximately $ 33 million and $ 43 million, respectively.

As of March 31, 2020 and December 31, 2019, we had property, plant and equipment that was accrued but unpaid of approximately $ 36 million and $ 42 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 200 million and $ 208 million for the three months ended March 31, 2021 and 2020, respectively.

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.

1 unchanged sentence

The following is a summary of capitalized plant turnaround costs:

Nine months ended

September 30,

Three months ended

(in millions)

10 unchanged sentences

Goodwill and Other Intangible Assets

The following table shows the carrying amount of goodwill by reportable segment as of September 30, 2020 and December 31, 2019:

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

Ammonia Granular Urea UAN AN Other Total

2 unchanged sentences

Effect of exchange rate changes 1 — — 2 — 3

Balance as of September 30, 2020 $ 586 $ 828 $ 576 $ 296 $ 71 $ 2,357

Balance as of March 31, 2021 $ 588 $ 828 $ 576 $ 312 $ 73 $ 2,377

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Amount Accumulated

7 unchanged sentences

Our intangible assets are being amortized over a weighted-average life of approximately 20 years.

Amortization expense of our identifiable intangible assets was $ 2 million and $ 6 million for the three and nine months ended September 30, 2020, respectively, and $ 2 million and $ 6 million for the three and nine months ended September 30, 2019, respectively.

Amortization expense of our identifiable intangible assets for each of the three-month periods ended March 31, 2021 and 2020 was $ 2 million.

The gross carrying amount and accumulated amortization of our intangible assets are also impacted by the effect of exchange rate changes.

2 unchanged sentences

Remainder of 2021 $ 6

CF INDUSTRIES HOLDINGS, INC.

Equity Method Investment

1 unchanged sentence

We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the ammonia segment.

As of September 30, 2020, the total carrying value of our equity method investment in PLNL was $ 86 million, $ 43 million more than our share of PLNL’s book value.

As of March 31, 2021, the total carrying value of our equity method investment in PLNL was $ 91 million, $ 41 million more than our share of PLNL’s book value.

The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment.

1 unchanged sentence

Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of this basis difference.

CF INDUSTRIES HOLDINGS, INC.

We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50 % of the ammonia produced by PLNL at current market prices.

Our ammonia purchases from PLNL totaled $ 14 million and $ 37 million for the three and nine months ended September 30, 2020, respectively, and $ 12 million and $ 46 million for the three and nine months ended September 30, 2019, respectively.

The Trinidadian tax authority (the Board of Inland Revenue) issued a proposed tax assessment against PLNL with respect to tax years 2011 and 2012 in the amount of approximately $ 12 million.

The proposed assessment asserted that PLNL should have withheld tax at a higher rate on dividends paid to its Trinidadian owners.

The Board of Inland Revenue also would have assessed statutory interest and penalties on the amount of tax owed when a final assessment was issued for the tax years 2011 and 2012.

As we own a 50 % interest in PLNL, our effective share of any assessment that is determined to be a liability of PLNL would be 50 %, which would be reflected as a reduction in our equity in earnings of PLNL.

During the third quarter of 2019, the Trinidadian government offered a tax amnesty period that provided taxpayers the opportunity to pay any prior year tax obligations and avoid accumulated interest or penalties.

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

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

Our 50 % share of PLNL’s tax charge is $ 16 million, which reduced our equity in earnings of operating affiliate for the three and nine months ended September 30, 2019.

Our ammonia purchases from PLNL totaled $ 26 million and $ 10 million for the three months ended March 31, 2021 and 2020, respectively.

Fair Value Measurements

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

September 30, 2020

March 31, 2021

Cost Basis Unrealized

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities included in our consolidated balance sheets as of September 30, 2020 and December 31, 2019 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

September 30, 2020

The following tables present assets and liabilities included in our consolidated balance sheets as of March 31, 2021 and December 31, 2020 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

March 31, 2021

Value Quoted Prices

12 unchanged sentences

Nonqualified employee benefit trusts 19 19 — —

Derivative assets 1 — 1 —

Derivative liabilities ( 7 ) — ( 7 ) —

1 unchanged sentence

Cash Equivalents

As of September 30, 2020 and December 31, 2019, our cash equivalents consisted primarily of U.S.

As of March 31, 2021 and December 31, 2020, our cash equivalents consisted primarily of U.S.

and Canadian government obligations and money market mutual funds that invest in U.S.

3 unchanged sentences

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

3 unchanged sentences

To determine the fair value of these instruments, we use quoted market prices from NYMEX and standard pricing models with inputs derived from or corroborated by observable market data such as forward curves supplied by an industry-recognized independent third party.

See Note 12—Derivative Financial Instruments for additional information.

CF INDUSTRIES HOLDINGS, INC.

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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 September 30, 2020 and December 31, 2019, the embedded derivative liability of $ 22 million and $ 20 million, respectively, is included in other current liabilities and other liabilities on our consolidated balance sheets.

Included in other operating—net in our consolidated statements of operations for the nine months ended September 30, 2020 and 2019 is a net loss of $ 2 million and $ 3 million, respectively.

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 both March 31, 2021 and December 31, 2020, the embedded derivative liability was $ 18 million.

Included in other operating—net in our consolidated statement of operations for the three months ended March 31, 2020 is a net gain of $ 1 million.

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

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Amount Fair Value Carrying

1 unchanged sentence

(in millions)

Long-term debt $ 3,960 $ 4,582 $ 3,957 $ 4,295

Long-term debt, including current maturities $ 3,713 $ 4,224 $ 3,961 $ 4,731

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

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CF INDUSTRIES HOLDINGS, INC.

For the three months ended September 30, 2020, we recorded an income tax benefit of $ 13 million on a pre-tax loss of $ 9 million, or an effective tax rate of 155.0 %, compared to an income tax provision of $ 19 million on pre-tax income of $ 133 million, or an effective tax rate of 14.6 %, for the three months ended September 30, 2019.

For the nine months ended September 30, 2020, we recorded an income tax provision of $ 33 million on pre-tax income of $ 346 million or an effective tax rate of 9.4 %, compared to an income tax provision of $ 113 million on pre-tax income of $ 665 million, or an effective tax rate of 17.1 %, for the nine months ended September 30, 2019.

For the nine months ended September 30, 2020, our income tax provision includes a $ 25 million benefit related to the settlement of certain U.S.

and foreign income tax audits, which primarily related to the settlement of the audit of the Terra amended tax returns, which is further described below.

For the nine months ended September 30, 2019, our income tax provision included an incentive tax credit from the State of Louisiana of $ 30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana complex.

For the three months ended March 31, 2021, we recorded an income tax provision of $ 18 million on pre-tax income of $ 193 million or an effective tax rate of 9.3 %, compared to an income tax provision of $ 13 million on pre-tax income of $ 104 million, or an effective tax rate of 12.3 %, for the three months ended March 31, 2020.

For the three months ended March 31, 2021, our income tax provision includes a $ 22 million benefit reflecting the impact of agreement on certain issues related to U.S.

federal income tax audits.

For the three months ended March 31, 2020, our income tax provision included a $ 6 million benefit related to the settlement of certain U.S.

and foreign income tax audits.

Our effective tax rate is also impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended September 30, 2020 of 155.0 %, which is based on a pre-tax loss of $ 9 million, including $ 32 million of earnings attributable to the noncontrolling interest, would be 121.6 percentage points lower if based on pre-tax loss exclusive of the $ 32 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended September 30, 2019 of 14.6 %, which is based on pre-tax income of $ 133 million, including $ 49 million attributable to the noncontrolling interest, would be 8.5 percentage points higher if based on pre-tax income exclusive of the $ 49 million attributable to the noncontrolling interest.

Our effective tax rate for the nine months ended September 30, 2020 of 9.4 %, which is based on pre-tax income of $ 346 million, including $ 83 million attributable to the noncontrolling interest, would be 3.0 percentage points higher if based on pre-tax income exclusive of the $ 83 million attributable to the noncontrolling interest.

Our effective tax rate for the nine months ended September 30, 2019 of 17.1 %, which is based on pre-tax income of $ 665 million, including $ 114 million attributable to the noncontrolling interest, would be 3.5 percentage points higher if based on pre-tax income exclusive of the $ 114 million attributable to the noncontrolling interest.

Our effective tax rate for the three months ended March 31, 2021 of 9.3 %, which is based on pre-tax income of $ 193 million, including $ 24 million attributable to the noncontrolling interest, would be 1.3 percentage points higher if based on pre-tax income exclusive of the $ 24 million attributable to the noncontrolling interest.

Our effective tax rate for the three months ended March 31, 2020 of 12.3 %, which is based on pre-tax income of $ 104 million, including $ 23 million attributable to the noncontrolling interest, would be 3.5 percentage points higher if based on pre-tax income exclusive of the $ 23 million attributable to the noncontrolling interest.

See Note 13—Noncontrolling Interest for additional information.

During the third quarter of 2020, as a result of an intercompany transaction with a foreign affiliate, we recognized a capital loss, which we will carry forward, and for which we recorded a deferred tax asset of approximately $ 90 million.

However, as the foreign affiliate has operations that do not normally generate capital gains and no practical plans to do so in the future, we established a full valuation allowance of approximately $ 90 million against the deferred tax asset.

As a result, there was no net impact on our income tax provision.

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

The CARES Act includes, among other things (i) 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;

(ii) 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 (iii) increased refundability of corporate alternative minimum tax (AMT) credits.

These provisions have limited applicability to the Company as (i) the Company does not expect to have a NOL in tax year 2020 and did not have a tax loss in 2018 or 2019 which would be eligible for carryback;

(ii) the Company was not limited by the interest deduction limitations for tax years 2019 and 2020 prior to changes made by the CARES Act;

and (iii) the Company utilized all of its AMT credits in 2019.

The Company continues to monitor and assess the impact of the CARES Act and other related governmental actions in response to the coronavirus impacts as more information becomes available.

Terra Amended Tax Returns

We completed the acquisition of Terra Industries Inc.

(Terra) in April 2010.

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

parent for U.S.

and foreign income tax purposes was not appropriate.

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

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

tax aspects of the Amended Tax Returns.

CF INDUSTRIES HOLDINGS, INC.

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

Congress (the Joint Committee).

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

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

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

Therefore, we expected to receive cash refunds in 2020.

In addition, as a result of this settlement and the finalization of carryover impacts of this audit settlement on other tax periods, we reduced our liability for unrecognized tax benefits by $ 19 million and recorded a corresponding deferred income tax liability in the first quarter of 2020.

In the second quarter of 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.

As a result of these events, in the second quarter of 2020, we recognized $ 16 million of interest income and $ 16 million of income tax benefit, which consisted of the following:

• additional interest income of $ 16 million ($ 13 million, net of tax) related to both the income tax matter and the withholding tax matter,

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

• an additional income tax benefit of $ 7 million related to the income tax matter.

We received income tax refunds, including interest, of $ 108 million relating to these matters in the second quarter of 2020, consisting of $ 68 million related to the income tax matter and $ 40 million related to the withholding tax matter.

In the third quarter of 2020, we received an additional $ 2 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.

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 $ 131 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 we have posted a CAD $ 98 million bond (or approximately $ 74 million) in lieu of paying the additional tax liability assessed.

In 2017, we made a request with United States Competent Authority (USCA) to include the Company’s dispute with CRA for consideration under the bilateral settlement provisions of the US-Canada Tax Treaty (the Treaty).

We also filed a companion request with Canadian Competent Authority (CASD) since this matter ultimately involves the allocation of profits and deductions between Canada and the United States.

In 2018, the matter was accepted for consideration under the bilateral settlement provisions of the Treaty by both countries.

Under the Treaty, USCA and CASD have two years from the commencement of discussions to reach a settlement or the matter can be referred to binding arbitration under the provisions of the Treaty.

This period has been extended to expire in December 2020, and it could be further extended if agreed upon by both parties.

The Company does not expect that resolution of this 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 this 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.

CF INDUSTRIES HOLDINGS, INC.

Interest Expense

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Three months ended

September 30, Nine months ended

September 30,

2020 2019 2020 2019

(in millions)

Interest on borrowings (1)

$ 46 $ 57 $ 139 $ 171

Fees on financing agreements (1)

Interest on tax liabilities (2)

Interest capitalized — ( 1 ) — ( 2 )

Total interest expense $ 48 $ 44

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(1) See Note 11—Financing Agreements for additional information.

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

(2) Interest on tax liabilities for the three months ended March 31, 2020 consists of a reduction in interest accrued on the reserve for unrecognized tax benefits.

CF INDUSTRIES HOLDINGS, INC.

Financing Agreements

Revolving Credit Agreement

On December 5, 2019, CF Holdings and CF Industries entered into a senior secured Fourth Amended and Restated Credit Agreement (the Revolving Credit Agreement), which amended and restated our Third Amended and Restated Revolving Credit Agreement, as previously amended (referred to herein, as in effect from time to time, as the Prior Credit Agreement), that was scheduled to mature September 18, 2020.

The Revolving Credit Agreement provides for a revolving credit facility of up to $ 750 million with a maturity of December 5, 2024.

We have a senior secured revolving credit agreement (the Revolving Credit Agreement), which provides for a revolving credit facility of up to $ 750 million with a maturity of December 5, 2024.

The Revolving Credit Agreement includes a letter of credit sub-limit of $ 125 million.

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

As of September 30, 2020, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of December 31, 2019.

In March 2020, we borrowed $ 500 million under the Revolving Credit Agreement to ensure we maintained ample financial flexibility in light of the uncertainty in the global markets caused by the COVID-19 pandemic, which we repaid in April 2020.

Maximum borrowings under the Revolving Credit Agreement during the nine months ended September 30, 2020 were $ 500 million.

The weighted-average annual interest rate of borrowings under the Revolving Credit Agreement during the nine months ended September 30, 2020 was 2.05 %.

There were no borrowings under the Prior Credit Agreement during the nine months ended September 30, 2019.

As of March 31, 2021, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of March 31, 2021 or December 31, 2020, or during the three months ended March 31, 2021.

Maximum borrowings under the Revolving Credit Agreement during the three months ended March 31, 2020 were $ 500 million.

The weighted-average annual interest rate of borrowings under the Revolving Credit Agreement during the three months ended March 31, 2020 was 2.05 %.

Borrowings under the Revolving Credit Agreement as of March 31, 2020 were repaid in full in April 2020.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants.

As of September 30, 2020, we were in compliance with all covenants under the Revolving Credit Agreement.

As of March 31, 2021, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letter of credit capacity under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement providing for up to $ 145 million of letters of credit.

As of September 30, 2020, approximately $ 126 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Long-term debt presented on our consolidated balance sheets as of September 30, 2020 and December 31, 2019 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate September 30, 2020 December 31, 2019

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $ 250 million of letters of credit.

As of March 31, 2021, approximately $ 220 million of letters of credit were outstanding under this agreement.

Long-term debt presented on our consolidated balance sheets as of March 31, 2021 and December 31, 2020 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate March 31, 2021 December 31, 2020

Principal Carrying Amount (1)

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Total long-term debt $ 3,750 $ 3,713 $ 4,000 $ 3,961

Current maturities of long-term debt — — 250 249

Long-term debt, net of current maturities $ 3,750 $ 3,713 $ 3,750 $ 3,712

_______________________________________________________________________________

(1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs.

Total unamortized debt discount was $ 9 million and $ 10 million as of September 30, 2020 and December 31, 2019, respectively, and total deferred debt issuance costs were $ 31 million and $ 33 million as of September 30, 2020 and December 31, 2019, respectively.

Total unamortized debt discount was $ 9 million as of both March 31, 2021 and December 31, 2020, and total deferred debt issuance costs were $ 28 million and $ 30 million as of March 31, 2021 and December 31, 2020, respectively.

CF INDUSTRIES HOLDINGS, INC.

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

Under the terms of the applicable indenture, the 3.400 % senior secured notes due December 2021 (the 2021 Notes) and the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above (together, the Senior Secured Notes) are guaranteed on a senior secured basis, jointly and severally, by CF Holdings and each current and future domestic subsidiary of CF Holdings (other than CF Industries) that from time to time is a borrower, or guarantees indebtedness, under the Revolving Credit Agreement.

The subsidiary guarantors of the Senior Secured Notes currently consist of CFE, CFS, CF USA and CFIDF.

On November 13, 2019, we redeemed in full all of the remaining $ 500 million outstanding principal amount of the 7.125 % senior notes due May 2020 (the 2020 Notes), in accordance with the optional redemption provisions in the indenture governing the 2020 Notes.

On December 13, 2019, we redeemed $ 250 million principal amount, representing 50 % of the $ 500 million principal amount outstanding immediately prior to such redemption, of the 2021 Notes in accordance with the optional redemption provisions in the indenture governing the 2021 Notes.

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

Under the terms of the indenture governing the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes are guaranteed on a senior secured basis, jointly and severally, by CF Holdings and each current and future domestic subsidiary of CF Holdings (other than CF Industries) that from time to time is a borrower, or guarantees indebtedness, under the Revolving Credit Agreement.

The subsidiary guarantors of the 2026 Notes currently consist of CFE, CFS, CF USA and CFIDF.

On March 20, 2021, we redeemed in full all of the remaining $ 250 million outstanding principal amount of the 3.400 % senior secured notes due December 2021 (the 2021 Notes), in accordance with the optional redemption provisions in the indenture governing the 2021 Notes.

The total aggregate redemption price paid on the 2021 Notes in connection with the redemption was $ 258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $ 6 million, primarily consisting of a premium paid on the early redemption of the notes.

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

Derivative Financial Instruments

We may use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future.

Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based products.

From time to time, we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates.

The derivatives that we may use to reduce our exposure to changes in prices for natural gas are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter markets.

These natural gas derivatives settle using primarily a NYMEX futures price index, which represents the basis for fair value at any given time.

We enter into natural gas derivative contracts with respect to natural gas to be consumed by us in the future, and settlements of those derivative contracts are scheduled to coincide with our anticipated purchases of natural gas used to manufacture nitrogen products during those future periods.

We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting.

As a result, changes in fair value of these contracts are recognized in earnings.

As of March 31, 2021, we had natural gas derivative contracts covering certain periods through March 2022.

As of March 31, 2021, our open natural gas derivative contracts consisted of natural gas basis swaps for 0.5 million MMBtus.

As of December 31, 2020, we had open natural gas derivative contracts consisting of natural gas fixed price swaps and basis swaps for 34.1 million MMBtus of natural gas.

For the three months ended March 31, 2021, we used derivatives to cover approximately 26 % of our natural gas consumption.

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

Gain (loss) recognized in income

Three months ended March 31,

Location 2021 2020

(in millions)

Unrealized net gains on natural gas derivatives Cost of sales $ 6 $ 12

Realized net losses on natural gas derivatives Cost of sales ( 3 ) ( 16 )

Gain on net settlement of natural gas derivatives due to Winter Storm Uri Cost of sales 112 —

Net derivative gains (losses) $ 115 $ ( 4 )

CF INDUSTRIES HOLDINGS, INC.

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

We also enter into supply agreements to facilitate the availability of natural gas to operate our plants.

When we purchase natural gas under these agreements, we intend to take physical delivery for use in our plants.

Certain of these supply agreements allow us to fix the price of the deliveries for the following month using an agreed upon first of month price.

We utilize the Normal Purchase Normal Sales (NPNS) derivative scope exception for these fixed price contracts and therefore, we do not account for them as derivatives.

In February 2021, the central portion of the United States experienced extreme and unprecedented cold weather due to the impact of Winter Storm Uri.

Certain natural gas suppliers and natural gas pipelines declared force majeure events due to natural gas well freeze-offs or frozen equipment.

This occurred at the same time as large increases in natural gas demand were occurring due to the extreme cold temperatures.

Due to these unprecedented factors, several states declared a state of emergency and natural gas was redirected for residential usage.

We net settled certain natural gas contracts with our suppliers and received prevailing market prices, which were in excess of our cost.

We no longer qualified for the NPNS derivative scope exception for the natural gas that was net settled with our suppliers due to the impact of Winter Storm Uri.

As a result, we recognized a gain of $ 112 million from the net settlement of the natural gas contracts, which is reflected in cost of sales in our consolidated statement of operations for the three months ended March 31, 2021.

The fair values of derivatives on our consolidated balance sheets are shown below.

As of March 31, 2021 and December 31, 2020, none of our derivative instruments were designated as hedging instruments.

See Note 8—Fair Value Measurements for additional information on derivative fair values.

Asset Derivatives Liability Derivatives

Balance Sheet Location March 31, 2021 December 31, 2020 Balance Sheet Location March 31, 2021 December 31, 2020

(in millions) (in millions)

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

Most of our International Swaps and Derivatives Association (ISDA) agreements contain credit-risk-related contingent features such as cross default provisions.

In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades or, under certain ISDA agreements, may require us to collateralize derivatives in a net liability position.

The Revolving Credit Agreement, at any time when it is secured, provides a cross collateral feature for those of our derivatives that are with counterparties that are party to, or affiliates of parties to, the Revolving Credit Agreement so that no separate collateral would be required for those counterparties in connection with such derivatives.

In the event the Revolving Credit Agreement becomes unsecured, separate collateral could be required in connection with such derivatives.

As of March 31, 2021 and December 31, 2020, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 6 million, respectively, which also approximates the fair value of the maximum amount of additional collateral that may need to be posted or assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

As of March 31, 2021 and December 31, 2020, we had no cash collateral on deposit with counterparties for derivative contracts.

The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event.

CF INDUSTRIES HOLDINGS, INC.

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

Amounts presented in consolidated

balance sheets (1)

Gross amounts not offset in consolidated balance sheets

instruments Cash collateral received (pledged) Net

(in millions)

December 31, 2020

Total derivative assets $ 1 $ — $ — $ 1

Total derivative liabilities ( 7 ) — — ( 7 )

Net derivative liabilities $ ( 6 ) $ — $ — $ ( 6 )

_______________________________________________________________________________

(1) We report the fair values of our derivative assets and liabilities on a gross basis on our consolidated balance sheets.

As a result, the gross amounts recognized and net amounts presented are the same.

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

Noncontrolling Interest

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Declaration of distributions payable ( 64 ) ( 88 )

Balance as of September 30 $ 2,649 $ 2,701

Balance as of March 31 $ 2,641 $ 2,675

Distributions payable to noncontrolling interest:

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Distributions to noncontrolling interest ( 64 ) ( 88 )

Balance as of September 30 $ — $ —

Balance as of March 31 $ — $ —

CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices.

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Treasury Stock

On August 1, 2018, our Board of Directors (the Board) authorized the repurchase of up to $ 500 million of CF Holdings common stock through June 30, 2020 (the 2018 Share Repurchase Program).

In 2018, we completed the 2018 Share Repurchase Program with the repurchase of 10.9 million shares for $ 500 million, of which $ 33 million was accrued and unpaid at December 31, 2018 and was paid in the first quarter of 2019.

In February 2019, we retired all 10.9 million shares that were repurchased under the 2018 Share Repurchase Program.

On February 13, 2019, the Board authorized the repurchase of up to $ 1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program).

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The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors.

In the nine months ended September 30, 2019, we repurchased approximately 5.7 million shares under the 2019 Share Repurchase Program for $ 250 million, of which $ 2 million was accrued and unpaid at September 30, 2019.

In the first quarter of 2020, we repurchased approximately 2.6 million shares of CF Holdings common stock under the 2019 Share Repurchase Program for $ 100 million, which we retired in the second quarter of 2020.

No shares were repurchased under the 2019 Share Repurchase Program in the second or third quarter of 2020.

At September 30, 2020, we held 27,392 shares of treasury stock.

The following table summarizes the share repurchases under the 2019 Share Repurchase Program.

Shares Amounts

(in millions)

Shares repurchased in 2019:

First quarter 1.5 $ 60

Second quarter 2.7 118

Third quarter 1.5 72

Fourth quarter 1.9 87

Total shares repurchased in 2019 7.6 337

Shares repurchased in 2020:

First quarter 2.6 100

Shares repurchased as of September 30, 2020

CF INDUSTRIES HOLDINGS, INC.

Accumulated Other Comprehensive Income (Loss)

Changes to accumulated other comprehensive income (loss) are as follows:

Since the 2019 Share Repurchase Program was announced in February 2019, we have repurchased approximately 10.2 million shares for $ 437 million, including 2.6 million shares repurchased during the first quarter of 2020 for $ 100 million.

No shares have been repurchased since the first quarter of 2020 under the 2019 Share Repurchase Program.

At March 31, 2021, we held 340,446 shares of treasury stock.

Accumulated Other Comprehensive Loss

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

Adjustment Unrealized

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Balance as of December 31, 2019 $ ( 188 ) $ 5 $ ( 183 ) $ ( 366 )

Gain arising during the period — — 5 5

Reclassification to earnings (1)

— — ( 1 ) ( 1 )

Effect of exchange rate changes and deferred taxes ( 83 ) — 8 ( 75 )

Balance as of September 30, 2019 $ ( 258 ) $ 5 $ ( 121 ) $ ( 374 )

Balance as of March 31, 2020 $ ( 271 ) $ 5 $ ( 174 ) $ ( 440 )

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

Gain arising during the period — — 1 1

Reclassification to earnings (1)

Effect of exchange rate changes and deferred taxes 14 — ( 1 ) 13

Balance as of September 30, 2020 $ ( 218 ) $ 5 $ ( 175 ) $ ( 388 )

Balance as of March 31, 2021 $ ( 130 ) $ 4 $ ( 179 ) $ ( 305 )

____________________________________________________________________________

(1) Reclassifications out of accumulated other comprehensive income (loss) to earnings during the three and nine months ended September 30, 2020 and 2019 were not material.

(1) Reclassifications out of accumulated other comprehensive loss to earnings during the three months ended March 31, 2021 and 2020 were not material.

Contingencies

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Although we do not own or operate the facility or directly sell our products to West Fertilizer Co., products that the CF Entities manufactured and sold to others were delivered to the facility and may have been stored at the West facility at the time of the incident.

CF INDUSTRIES HOLDINGS, INC.

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

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The remaining cases are in various stages of discovery and pre-trial proceedings.

The next group of cases is expected to be set for trial in 2021.

The next group of cases is expected to be set for trial after the Court resumes scheduling civil jury trials currently on hold because of the COVID-19 pandemic.

We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits.

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However, based upon currently available information, including available insurance coverage, we do not believe that this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

CF INDUSTRIES HOLDINGS, INC.

Other Litigation

2 unchanged sentences

Environmental

Florida Environmental Matter

On March 17, 2014, we completed the sale of our phosphate mining and manufacturing business, which was located in Florida, to The Mosaic Company (Mosaic).

Pursuant to the terms of the definitive agreement executed in October 2013, Mosaic assumed the following environmental matter and we agreed to indemnify Mosaic with respect to losses arising out of the matter below, subject to a maximum indemnification cap and the other terms of the definitive agreement.

Clean Air Act Notice of Violation

We received a Notice of Violation (NOV) from the EPA by letter dated June 16, 2010, alleging that we violated the Prevention of Significant Deterioration (PSD) Clean Air Act regulations relating to certain projects undertaken at the former Plant City, Florida facility’s sulfuric acid plants.

This NOV further alleges that the actions that are the basis for the alleged PSD violations also resulted in violations of Title V air operating permit regulations.

Finally, the NOV alleges that we failed to comply with certain compliance dates established by hazardous air pollutant regulations for phosphoric acid manufacturing plants and phosphate fertilizer production plants.

We had several meetings with the EPA with respect to this matter prior to our sale of the phosphate mining and manufacturing business in March 2014.

We and Mosaic have separately had continued discussions with the EPA subsequent to our sale of the phosphate mining and manufacturing business with respect to this matter.

We reached a settlement with the EPA and the United States Department of Justice to resolve the Plant City Clean Air Act matter, and executed a final stipulation of settlement that was approved by the United States District Court for the Middle District of Florida on August 5, 2020.

The settlement required us to pay a civil penalty of $ 550,000 to the United States, but did not include any required injunctive relief or other corrective actions.

Other Environmental Matters

From time to time, we receive notices from governmental agencies or third parties alleging that we are a potentially responsible party at certain cleanup sites under the Comprehensive Environmental Response, Compensation, and Liability Act or other environmental cleanup laws.

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Goodwill by segment is presented in Note 6—Goodwill and Other Intangible Assets.

Segment data for sales, cost of sales and gross margin for the three and nine months ended September 30, 2020 and 2019 are presented in the tables below.

Ammonia Granular Urea (1)

Segment data for sales, cost of sales and gross margin for the three months ended March 31, 2021 and 2020 are presented in the tables below.

Granular Urea (2)

(in millions)

Three months ended September 30, 2020

Three months ended March 31, 2021

Net sales $ 206 $ 399 $ 232 $ 105 $ 106 $ 1,048

4 unchanged sentences

Operating earnings $ 247

Three months ended September 30, 2019

Net sales $ 187 $ 327 $ 309 $ 136 $ 79 $ 1,038

Cost of sales 188 207 250 100 65 810

Gross margin $ ( 1 ) $ 120 $ 59 $ 36 $ 14 228

Total other operating costs and expenses 26

Equity in losses of operating affiliate ( 14 )

Operating earnings $ 188

Ammonia Granular Urea (1)

(in millions)

Nine months ended September 30, 2020

Three months ended March 31, 2020

Net sales $ 193 $ 337 $ 235 $ 116 $ 90 $ 971

4 unchanged sentences

Operating earnings $ 147

Nine months ended September 30, 2019

Net sales $ 847 $ 1,103 $ 934 $ 389 $ 268 $ 3,541

Cost of sales 654 686 722 308 224 2,594

Gross margin $ 193 $ 417 $ 212 $ 81 $ 44 947

Total other operating costs and expenses 113

Equity in losses of operating affiliate ( 6 )

Operating earnings $ 828

_______________________________________________________________________________

(1) Cost of sales and gross margin for the ammonia segment in the three months ended March 31, 2021, include the $ 112 million gain on the net settlement of certain natural gas contracts with our suppliers.

See Note 12—Derivative Financial Instruments for additional information.

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

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements