What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-09 · 285 added, 145 removed, 620 unchanged (41% of the section changed)

2 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

4 unchanged sentences

Selling, general and administrative expenses 52 49 167 154

Goodwill impairment 259 — 259 —

Long-lived and intangible asset impairment 236 — 236 —

Other operating—net 5 ( 4 ) 7 8

1 unchanged sentence

Equity in earnings of operating affiliate 15 2 37 8

Operating earnings 450 280 697 427

Operating (loss) earnings ( 97 ) 40 600 467

Interest expense 46 48 140 141

2 unchanged sentences

Other non-operating—net ( 19 ) 1 ( 17 ) ( 2 )

Earnings before income taxes 402 251 595 355

Income tax provision 85 33 103 46

Net earnings 317 218 492 309

(Loss) earnings before income taxes ( 137 ) ( 9 ) 458 346

Income tax (benefit) provision ( 46 ) ( 13 ) 57 33

Net (loss) earnings ( 91 ) 4 401 313

Net earnings attributable to noncontrolling interest 94 32 189 83

Net earnings attributable to common stockholders $ 246 $ 190 $ 397 $ 258

Net earnings per share attributable to common stockholders:

Net (loss) earnings attributable to common stockholders $ ( 185 ) $ ( 28 ) $ 212 $ 230

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

Basic $ ( 0.86 ) $ ( 0.13 ) $ 0.99 $ 1.07

6 unchanged sentences

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

(in millions)

Net earnings $ 317 $ 218 $ 492 $ 309

Other comprehensive income (loss):

Net (loss) earnings $ ( 91 ) $ 4 $ 401 $ 313

Other comprehensive (loss) income:

Foreign currency translation adjustment—net of taxes ( 26 ) 41 ( 2 ) ( 30 )

1 unchanged sentence

( 20 ) 38 4 ( 22 )

Comprehensive income 326 232 516 249

Comprehensive (loss) income ( 111 ) 42 405 291

Comprehensive income attributable to noncontrolling interest 94 32 189 83

Comprehensive income attributable to common stockholders $ 255 $ 204 $ 421 $ 198

Comprehensive (loss) income attributable to common stockholders $ ( 205 ) $ 10 $ 216 $ 208

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30,

2021 December 31,

17 unchanged sentences

Accounts payable and accrued expenses $ 537 $ 424

Income taxes payable 1 —

Customer advances 375 130

30 unchanged sentences

(in millions, except per share amounts)

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

Net earnings — — — 246 — 246 71 317

Other comprehensive income — — — — 9 9 — 9

Retirement of treasury stock — 13 ( 2 ) ( 11 ) — — — —

Balance as of June 30, 2021 $ 2 $ — $ 1,357 $ 2,183 $ ( 296 ) $ 3,246 $ 2,712 $ 5,958

Net (loss) earnings — — — ( 185 ) — ( 185 ) 94 ( 91 )

Other comprehensive loss — — — — ( 20 ) ( 20 ) — ( 20 )

Purchases of treasury stock — ( 50 ) — — — ( 50 ) — ( 50 )

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

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

3 unchanged sentences

— — — ( 65 ) — ( 65 ) — ( 65 )

Balance as of June 30, 2021 $ 2 $ — $ 1,357 $ 2,183 $ ( 296 ) $ 3,246 $ 2,712 $ 5,958

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

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

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

1 unchanged sentence

Other comprehensive income — — — — 4 4 — 4

Purchases of treasury stock — ( 50 ) — — — ( 50 ) — ( 50 )

Retirement of treasury stock — 13 ( 2 ) ( 11 ) — — — —

5 unchanged sentences

— — — ( 195 ) — ( 195 ) — ( 195 )

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

Balance as of June 30, 2021 $ 2 $ — $ 1,357 $ 2,183 $ ( 296 ) $ 3,246 $ 2,712 $ 5,958

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

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

CONSOLIDATED STATEMENTS OF EQUITY

9 unchanged sentences

(in millions, except per share amounts)

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

Net earnings — — — 190 — 190 28 218

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

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

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

4 unchanged sentences

— — — ( 64 ) — ( 64 ) — ( 64 )

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

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

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

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

9 unchanged sentences

— — — ( 193 ) — ( 193 ) — ( 193 )

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

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

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

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

September 30,

(in millions)

8 unchanged sentences

Unrealized loss on embedded derivative 2 2

Goodwill impairment 259 —

Long-lived and intangible asset impairment 236 —

Gain on sale of EU carbon credits ( 20 ) —

Loss on disposal of property, plant and equipment 3 14

9 unchanged sentences

Additions to property, plant and equipment ( 382 ) ( 206 )

Proceeds from sale of property, plant and equipment — 2

Distribution received from unconsolidated affiliate — 1

Insurance proceeds for property, plant and equipment — 2

1 unchanged sentence

Proceeds from sale of investments held in nonqualified employee benefit trust 13 —

Purchase of U.K.

emission credits ( 10 ) —

Proceeds from sale of EU emission credits 10 —

Other—net ( 1 ) —

38 unchanged sentences

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

Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of carbon credits required to meet environmental regulations, the cost of customer incentives, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax and valuation reserves, allowances for doubtful accounts receivable, the measurement of the fair values of investments for which markets are not active, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the assumptions used in 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 carbon credits required to meet environmental regulations, the cost of customer incentives, the cost to fulfill contractual commitments to our customers, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax and valuation reserves, allowances for doubtful accounts receivable, the measurement of the fair values of investments for which markets are not active, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the valuation of stock-based compensation awards granted to employees.

CF INDUSTRIES HOLDINGS, INC.

2 unchanged sentences

See Note 17—Segment Disclosures for our revenue by reportable segment, which are ammonia, granular urea, UAN, AN and Other.

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and six months ended June 30, 2021 and 2020:

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and nine months ended September 30, 2021 and 2020:

Ammonia Granular Urea UAN AN Other Total

(in millions)

Three months ended June 30, 2021

Three months ended September 30, 2021

North America $ 279 $ 386 $ 324 $ 48 $ 94 $ 1,131

1 unchanged sentence

Total revenue $ 344 $ 386 $ 390 $ 118 $ 124 $ 1,362

Three months ended June 30, 2020

Three months ended September 30, 2020

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

1 unchanged sentence

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

Ammonia Granular Urea UAN AN Other Total

(in millions)

Six months ended June 30, 2021

Nine months ended September 30, 2021

North America $ 878 $ 1,218 $ 949 $ 144 $ 263 $ 3,452

1 unchanged sentence

Total revenue $ 1,009 $ 1,218 $ 1,056 $ 359 $ 356 $ 3,998

Six months ended June 30, 2020

Nine months ended September 30, 2020

North America $ 614 $ 865 $ 739 $ 138 $ 171 $ 2,527

1 unchanged sentence

Total revenue $ 722 $ 915 $ 791 $ 343 $ 251 $ 3,022

As of June 30, 2021 and December 31, 2020, we had $ 9 million and $ 130 million, respectively, in customer advances on our consolidated balance sheets.

During the six months ended June 30, 2021 and 2020, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

As of September 30, 2021 and December 31, 2020, we had $ 375 million and $ 130 million, respectively, in customer advances on our consolidated balance sheets.

During the nine months ended September 30, 2021 and 2020, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

We offer cash incentives to certain customers generally based on the volume of their purchases over the fertilizer year ending June 30.

Our cash incentives do not provide an option to the customer for additional product.

As of June 30, 2021 and December 31, 2020, we had $ 42 million and $ 24 million, respectively, of customer incentives accrued on our consolidated balance sheet.

The balances of customer incentives accrued as of September 30, 2021 and December 31, 2020 were not material.

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

1 unchanged sentence

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

During the three and six months ended June 30, 2021, in addition to products purchased from PLNL, we recognized $ 36 million and $ 68 million, respectively, 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 six months ended June 30, 2020, other than products purchased from PLNL, products purchased in the marketplace in order to satisfy obligations under contracts with our customers were not material.

During the nine months ended September 30, 2021, in addition to products purchased from PLNL, we recognized $ 68 million of revenue from sales of granular urea, which we purchased in order to satisfy obligations under contracts with our customers due to lower production experienced as a result of Winter Storm Uri.

For the nine months ended September 30, 2020, other than products purchased from PLNL, products purchased in the marketplace in order to satisfy obligations under contracts with our customers were not material.

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

As of June 30, 2021, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $ 787 million.

We expect to recognize approximately 21 % of these

As of September 30, 2021, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $ 898 million.

We expect to recognize approximately 13 % of these performance obligations as revenue in the remainder of 2021, approximately 59 % as revenue during 2022 and 2023, approximately 24 % as revenue during 2024 and 2025, and the remainder thereafter.

Subject to the terms and conditions of the applicable contracts, if these customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under these contracts, in the aggregate, is approximately $ 181 million as of September 30, 2021.

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

CF INDUSTRIES HOLDINGS, INC.

performance obligations as revenue in the remainder of 2021, approximately 49 % as revenue during 2022 and 2023, approximately 26 % as revenue during 2024 and 2025, and the remainder thereafter.

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

Net Earnings Per Share

Net earnings per share were computed as follows:

United Kingdom Energy Crisis and Impairment Charges

During the third quarter of 2021, the United Kingdom experienced an energy crisis that included a substantial increase in the price of natural gas.

In the first half of 2021, natural gas prices had increased to levels that were considered high compared to historical prices, and prices then more than doubled within the third quarter of 2021.

On September 15, 2021, we announced the halt of operations at both our Ince and Billingham manufacturing facilities in the United Kingdom due to negative profitability driven by the high cost of natural gas.

The halt of operations at our U.K.

plants impacted the availability of certain products in the United Kingdom, including carbon dioxide, which is a byproduct of ammonia production.

Due to the critical nature of carbon dioxide to certain industries in the United Kingdom, on September 21, 2021, we entered into an interim agreement with the U.K.

Under the terms of the agreement, the U.K.

government agreed to cover the costs to restart the ammonia plant at Billingham and to offset losses incurred from production for a 21-day period.

As a result, we resumed production of ammonia at the Billingham facility in order to produce carbon dioxide for the United Kingdom.

While the interim agreement was in place, we entered into carbon dioxide pricing and offtake agreements with our customers, which have an initial term through January 31, 2022.

The amount of financial support that will be provided by the U.K.

government for the September 2021 period of the interim agreement is not expected to be material to our results of operations.

As of the filing of this report, production continues to be idled at our Ince facility.

Impairment Charges

energy crisis necessitated an evaluation of the goodwill and long-lived assets, including definite-lived intangible assets, of our U.K.

operations to determine if their fair value had declined to below their carrying value.

We performed the impairment evaluations on the U.K.

ammonia, U.K.

Other asset groups’ long-lived assets, including definite-lived intangible assets, and the U.K.

ammonia, U.K.

Other reporting units’ goodwill as of September 30, 2021.

Based on these analyses, we concluded that a decline in the fair value had occurred and we recognized impairment charges of $ 495 million in the third quarter of 2021, consisting of a goodwill impairment charge of $ 259 million and long-lived and intangible asset impairment charges of $ 236 million.

The valuation of our asset groups and reporting units requires significant judgment in evaluating recent indicators of market activity and estimating future cash flows, discount rates, and other factors.

Expected cash flows used in both the goodwill and long-lived asset impairment tests include assumptions about product selling prices and natural gas costs, as well as estimates of future production and sales volumes, operating rates, operating expenses, inflation, discount rates, tax rates and capital spending.

These assumptions include the time it could take for the U.K.

energy crisis to be resolved.

For purposes of our goodwill impairment analysis, we estimated the fair value of the reporting units using the income approach, which incorporated the estimated future cash flows and a terminal value discounted to their present value using an appropriate risk-adjusted discount rate from the perspective of a market participant.

The estimated future cash flows were based on our internal forecasts, updated for recent events.

These estimated future cash flows went beyond the specific operating plans, using a terminal value calculation, which incorporated historical and forecasted trends and an estimate of long-term future growth rates.

The future growth rates were based on our view of the long-term outlook for each reporting unit.

The discount rates utilized in the income approach, for our goodwill impairment test, and to discount the cash flows in calculating the long-lived asset impairment were derived using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing.

The discount rates are commensurate with the risks and uncertainties inherent in the business and in the United Kingdom and our cash flow forecasts, updated for recent events.

The discount rate utilized in the determination of fair value of our asset groups for the long-lived asset impairment test was 11.25 %.

The fair value of our property, plant and equipment utilized in the long-lived asset impairment analysis was estimated using the indirect method of the cost approach by determining the reproduction cost new of the assets and applying an appropriate inutility adjustment for certain assets in an idled state.

Additional assumptions utilized in the long-lived asset impairment analysis were royalty rates and attrition rates in estimating the fair value of our definite-lived intangible assets, consisting of trade names and customer relationships, for which we used the relief from royalty method of the income approach and the multi-period excess earnings method, respectively.

Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in our forecasts.

Of the factors discussed above, the assumptions for product selling prices and natural gas costs included in the expected cash flows utilized in both the long-lived asset and goodwill impairment tests, and the discount rates utilized in the income approach, for our goodwill impairment test, and to discount the cash flows in calculating the long-lived asset impairment, are more sensitive than others.

Assuming that all other assumptions utilized in our expected cash flows and the other inputs used in our long-lived asset and goodwill impairment tests remain unchanged, a change in each of these three inputs would have the following effect on the amount of long-lived asset and goodwill impairment recognized in the three months ended September 30, 2021:

CF INDUSTRIES HOLDINGS, INC.

Increase/(Decrease) in Increase/(Decrease) in

Long-lived Asset Impairment Goodwill Impairment

Assumption (in millions)

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

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

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

Natural Gas Cost per MMBtu (1)

$ 7 $ ( 33 ) $ 20 $ ( 53 )

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

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

_______________________________________________________________________________

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

As of September 30, 2021, after the recognition of the $ 495 million of impairment charges noted above, the goodwill related to our U.K.

operations was approximately $ 26 million, and the remaining long-lived assets related to our U.K.

operations were approximately $ 450 million, primarily consisting of property, plant and equipment.

For further information see Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets.

Net (Loss) Earnings Per Share

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

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

(in millions, except per share amounts)

Net earnings attributable to common stockholders $ 246 $ 190 $ 397 $ 258

Basic earnings per common share:

Net (loss) earnings attributable to common stockholders $ ( 185 ) $ ( 28 ) $ 212 $ 230

Basic (loss) earnings per common share:

Weighted-average common shares outstanding 214.9 213.9 215.3 215.0

Net earnings attributable to common stockholders $ 1.14 $ 0.89 $ 1.84 $ 1.20

Diluted earnings per common share:

Net (loss) earnings attributable to common stockholders $ ( 0.86 ) $ ( 0.13 ) $ 0.99 $ 1.07

Diluted (loss) earnings per common share:

Weighted-average common shares outstanding 214.9 213.9 215.3 215.0

1 unchanged sentence

Diluted weighted-average shares outstanding 214.9 213.9 216.4 215.3

Net earnings attributable to common stockholders $ 1.14 $ 0.89 $ 1.83 $ 1.20

Net (loss) earnings attributable to common stockholders $ ( 0.86 ) $ ( 0.13 ) $ 0.98 $ 1.07

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

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

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 1.2 million in both the three and six months ended June 30, 2021, and 4.7 million and 3.4 million in the three and six months ended June 30, 2020, respectively.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 3.5 million and 1.2 million in the three and nine months ended September 30, 2021, respectively, and 3.1 million and 3.3 million in the three and nine months ended September 30, 2020, respectively.

CF INDUSTRIES HOLDINGS, INC.

Inventories consist of the following:

September 30,

2021 December 31,

3 unchanged sentences

Total inventories $ 418 $ 287

CF INDUSTRIES HOLDINGS, INC.

Property, Plant and Equipment—Net

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

September 30,

2021 December 31,

2 unchanged sentences

Machinery and equipment (1)

12,696 12,539

Buildings and improvements (1)

5 unchanged sentences

_______________________________________________________________________________

(1) As of June 30, 2021 and December 31, 2020, we had property, plant and equipment that was accrued but unpaid of approximately $ 76 million and $ 43 million, respectively.

As of both June 30, 2020 and December 31, 2019, we had property, plant and equipment that was accrued but unpaid of approximately $ 42 million.

Depreciation and amortization related to property, plant and equipment was $ 239 million and $ 439 million for the three and six months ended June 30, 2021, respectively, and $ 235 million and $ 443 million for the three and six months ended June 30, 2020, respectively.

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

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

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

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

Asset impairment —During the third quarter of 2021, in light of the unprecedented increase in natural gas prices in the United Kingdom and its estimated impact on our U.K.

operations, we identified a triggering event indicating possible impairment of the long-lived assets related to our U.K.

manufacturing facilities within our ammonia, AN and Other segments, including property, plant, and equipment, and performed a recoverability test on the U.K.

ammonia, U.K.

Other asset groups’ long-lived assets as of September 30, 2021.

Our assets groups are the same as our reporting units.

The recoverability tests were based on forecasts of undiscounted cash flows within each of our U.K.

asset groups.

The results of the recoverability tests indicated that the long-lived assets within our U.K.

ammonia, U.K.

Other asset groups were not fully recoverable, and, as a result, long-lived asset impairment charges of $ 236 million were recorded, representing the excess of the carrying value of the asset groups over its fair value.

That impairment was allocated to each of the underlying assets reducing them to their fair value, of which $ 182 million was allocated to property, plant and equipment.

See Note 3—United Kingdom Energy Crisis and Impairment Charges and Note 7—Goodwill and Other Intangible Assets for additional information.

As a result of the long-lived asset impairment charges, long-lived assets on our consolidated balance sheet as of September 30, 2021 include $ 450 million related to the U.K.

asset groups, which primarily consists of approximately $ 390 million of property, plant and equipment.

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

The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred.

The following is a summary of capitalized plant turnaround costs:

Six months ended

The following is a summary of

CF INDUSTRIES HOLDINGS, INC.

capitalized plant turnaround costs:

Nine months ended

September 30,

(in millions)

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Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.

CF INDUSTRIES HOLDINGS, INC.

Goodwill and Other Intangible Assets

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

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

Ammonia Granular Urea UAN AN Other Total

1 unchanged sentence

Balance as of December 31, 2020 $ 587 $ 828 $ 576 $ 310 $ 73 $ 2,374

Impairment losses ( 4 ) — — ( 233 ) ( 22 ) ( 259 )

Effect of exchange rate changes — — — — 1 1

Balance as of June 30, 2021 $ 588 $ 828 $ 576 $ 312 $ 74 $ 2,378

Balance as of September 30, 2021 $ 583 $ 828 $ 576 $ 77 $ 52 $ 2,116

Goodwill is not amortized, but is reviewed for impairment annually in the fourth quarter and when circumstances or other events indicate that impairment may have occurred.

During the third quarter of 2021, in light of the unprecedented increase in natural gas prices in the United Kingdom and its estimated impact on our U.K.

operations, we identified a triggering event indicating possible impairment of goodwill within our U.K.

ammonia, U.K.

Other reporting units.

Due to the triggering event identified above, we performed an interim quantitative goodwill impairment analysis as of September 30, 2021 for our U.K.

ammonia, U.K.

Other reporting units.

We estimated the fair value of the reporting units using the income approach described in Note 3—United Kingdom Energy Crisis and Impairment Charges.

Based on the evaluation performed, we determined that the carrying value of all three reporting units exceeded their fair value, which resulted in a goodwill impairment charge totaling $ 259 million in the third quarter of 2021.

The goodwill impairment was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value.

As a result of the goodwill impairment charge, goodwill on our consolidated balance sheet as of September 30, 2021 includes $ 5 million related to the U.K.

ammonia reporting unit, $ 8 million related to the U.K.

AN reporting unit and $ 13 million related to the U.K.

Other reporting unit, which are included in the ammonia, AN and Other reportable segments, respectively.

As a result of the goodwill impairment, all three U.K.

reporting units were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the September 30, 2021 impairment test date.

CF INDUSTRIES HOLDINGS, INC.

Other Intangible Assets

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Amount Accumulated

5 unchanged sentences

Trade names 31 ( 10 ) 21 32 ( 9 ) 23

carbon credits 19 — 19 — — —

Total intangible assets $ 134 $ ( 68 ) $ 66 $ 165 $ ( 61 ) $ 104

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 $ 4 million for the three and six months ended June 30, 2021, respectively, and $ 2 million and $ 4 million for the three and six months ended June 30, 2020, respectively.

_______________________________________________________________________________

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

Our customer relationships and trade names are being amortized over a weighted-average life of approximately 20 years.

carbon credits are being amortized based on units of production.

Amortization expense of our identifiable intangible assets was $ 2 million and $ 6 million for the three and nine months ended September 30, 2021, respectively, and $ 2 million and $ 6 million for the three and nine months ended September 30, 2020, respectively.

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

2 unchanged sentences

Remainder of 2021 $ 1

As a result of the triggering event described above, we also performed a recoverability test on our long-lived assets within the U.K.

ammonia, U.K.

Other asset groups, including our definite-lived intangible assets, as of September 30, 2021.

The recoverability test was based on forecasts of undiscounted cash flows, as described in Note 3—United Kingdom Energy Crisis and Impairment Charges.

The results of the recoverability test indicated that the long-lived assets within our U.K.

ammonia, U.K.

Other asset groups were not fully recoverable, and, as a result, long-lived asset impairment charges, inclusive of the definite-lived intangible assets, of $ 236 million were recorded, representing the excess of the carrying value of the asset groups over its fair value.

That impairment was allocated to each of the underlying assets reducing them to their fair value, of which $ 50 million was allocated to definite-lived intangible assets.

See Note 3—United Kingdom Energy Crisis and Impairment Charges and Note 6—Property, Plant and Equipment—Net for additional information.

As a result of the long-lived asset impairment charges, long-lived assets on our consolidated balance sheet as of September 30, 2021 include $ 450 million related to the U.K.

asset groups, including approximately $ 30 million of customer relationships and trade names.

CF INDUSTRIES HOLDINGS, INC.

2 unchanged sentences

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 June 30, 2021, the total carrying value of our equity method investment in PLNL was $ 82 million, $ 40 million more than our share of PLNL’s book value.

As of September 30, 2021, the total carrying value of our equity method investment in PLNL was $ 92 million, $ 40 million more than our share of PLNL’s book value.

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

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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 $ 37 million and $ 63 million for the three and six months ended June 30, 2021, respectively, and $ 13 million and $ 23 million for the three and six months ended June 30, 2020, respectively.

Our ammonia purchases from PLNL totaled $ 30 million and $ 93 million for the three and nine months ended September 30, 2021, respectively, and $ 14 million and $ 37 million for the three and nine months ended September 30, 2020, respectively.

Fair Value Measurements

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

June 30, 2021

September 30, 2021

Cost Basis Unrealized

26 unchanged sentences

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

June 30, 2021

The following tables present assets and liabilities included in our consolidated balance sheets as of September 30, 2021 and December 31, 2020 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

September 30, 2021

Value Quoted Prices

18 unchanged sentences

Cash Equivalents

As of June 30, 2021 and December 31, 2020, our cash equivalents consisted primarily of U.S.

As of September 30, 2021 and December 31, 2020, our cash equivalents consisted primarily of U.S.

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

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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 June 30, 2021 and December 31, 2020, the embedded derivative liability was $ 20 million and $ 18 million, respectively.

Included in other operating—net in our consolidated statement of operations for the six months ended June 30, 2021 and 2020 is a net loss of $ 2 million and $ 1 million, respectively.

As of September 30, 2021 and December 31, 2020, the embedded derivative liability was $ 20 million and $ 18 million, respectively.

Included in other operating—net in our consolidated statement of operations for each of the nine-month periods ended September 30, 2021 and 2020 was a net loss of $ 2 million.

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

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Amount Fair Value Carrying

10 unchanged sentences

Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.

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

CF INDUSTRIES HOLDINGS, INC.

For the three months ended June 30, 2021, we recorded an income tax provision of $ 85 million on pre-tax income of $ 402 million, or an effective tax rate of 21.2 %, compared to an income tax provision of $ 33 million on pre-tax income of $ 251 million, or an effective tax rate of 13.4 %, for the three months ended June 30, 2020.

For the three months ended June 30, 2020, our income tax provision includes a $19 million benefit related to the settlement of the audit of the Terra amended tax returns, which is further described below.

For the six months ended June 30, 2021, we recorded an income tax provision of $ 103 million on pre-tax income of $ 595 million, or an effective tax rate of 17.4 %, compared to an income tax provision of $ 46 million on pre-tax income of $ 355 million, or an effective tax rate of 13.1 %, for the six months ended June 30, 2020.

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

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

For the three months ended September 30, 2021, we did not record an income tax benefit related to the goodwill impairment described in Note 3—United Kingdom Energy Crisis and Impairment Charges, above, as the impairment is non-deductible for income tax purposes.

In addition, as a result of the effective settlement of the U.S.

federal income tax audit for the 2012-2016 tax years, we reversed an accrual for unrecognized tax benefits and recognized a discrete income tax benefit of approximately $ 15 million.

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

For the nine months ended September 30, 2021, we did not record an income tax benefit related to the goodwill impairment described in Note 3—United Kingdom Energy Crisis and Impairment Charges, above, as the impairment is non-deductible for income tax purposes.

In addition, our income tax provision includes a $ 36 million benefit reflecting the impact of agreement on certain issues related to U.S.

federal income tax audits, including the reversal of an accrual for unrecognized tax benefits, as described above.

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

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

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

Our effective tax rate for the three months ended June 30, 2021 of 21.2 %, which is based on pre-tax income of $ 402 million, including $ 71 million attributable to the noncontrolling interest, would be 4.6 percentage points higher if based on pre-tax income exclusive of the $ 71 million attributable to the noncontrolling interest.

Our effective tax rate for the three months ended June 30, 2020 of 13.4 %, which is based on pre-tax income of $ 251 million, including $ 28 million attributable to the noncontrolling interest, would be 1.6 percentage points higher if based on pre-tax income exclusive of the $ 28 million attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2021 of 17.4 %, which is based on pre-tax income of $ 595 million, including $ 95 million attributable to the noncontrolling interest, would be 3.3 percentage points higher if based on pre-tax income exclusive of the $ 95 million attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2020 of 13.1 %, which is based on pre-tax income of $ 355 million, including $ 51 million attributable to the noncontrolling interest, would be 2.1 percentage points higher if based on pre-tax income exclusive of the $ 51 million attributable to the noncontrolling interest.

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

Our effective tax rate for the three months ended September 30, 2021 of 34.3 %, which is based on a pre-tax loss of $ 137 million, including $ 94 million of earnings attributable to the noncontrolling interest, would be 14.0 percentage points lower if based on pre-tax loss exclusive of the $ 94 million of earnings attributable to the noncontrolling interest.

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

Our effective tax rate for the nine months ended September 30, 2021 of 12.3 %, which is based on pre-tax income of $ 458 million, including $ 189 million attributable to the noncontrolling interest, would be 8.7 percentage points higher if based on pre-tax income exclusive of the $ 189 million of earnings attributable to the noncontrolling interest.

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

See Note 14—Noncontrolling Interest for additional information.

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

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

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

Terra Amended Tax Returns

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In July 2020, we received an additional $ 2 million, which finalized these matters with the IRS.

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

CF INDUSTRIES HOLDINGS, INC.

In 2017, we made a Voluntary Disclosures Program filing with the Canada Revenue Agency (CRA) with respect to the Canadian tax aspects of the amended returns and paid additional Canadian taxes due.

In late 2020, the CRA settled with us the voluntary disclosure matter, and, in the first quarter of 2021, we received approximately $ 20 million of withholding tax refunds, including interest, from the CRA.

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

CF INDUSTRIES HOLDINGS, INC.

Interest Expense

1 unchanged sentence

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

7 unchanged sentences

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

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

(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.

Financing Agreements

Revolving Credit Agreement

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.

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

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

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The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

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

As of June 30, 2021, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2021 or December 31, 2020, or during the six months ended June 30, 2021.

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

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

As of September 30, 2021, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of September 30, 2021 or December 31, 2020, or during the nine months ended September 30, 2021.

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

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

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

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

As of June 30, 2021, we were in compliance with all covenants under the Revolving Credit Agreement.

As of September 30, 2021, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

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

As of June 30, 2021, approximately $ 222 million of letters of credit were outstanding under this agreement.

As of September 30, 2021, approximately $ 229 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 June 30, 2021 and December 31, 2020 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate June 30, 2021 December 31, 2020

Long-term debt presented on our consolidated balance sheets as of September 30, 2021 and December 31, 2020 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate September 30, 2021 December 31, 2020

Principal Carrying Amount (1)

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

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

Total unamortized debt discount was $ 8 million and $ 9 million as of September 30, 2021 and December 31, 2020, respectively, and total deferred debt issuance costs were $ 27 million and $ 30 million as of September 30, 2021 and December 31, 2020, respectively.

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

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

Under the terms of the indenture governing the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes are guaranteed on a senior secured basis, 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.

Until August 23, 2021, the 2026 Notes were guaranteed by certain subsidiaries of CF Industries.

The requirement for subsidiary guarantees of the 2026 Notes was eliminated, and all subsidiary guarantees were automatically released, as a result of an investment grade rating event under the terms of the indenture governing the 2026 Notes on August 23, 2021.

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

1 unchanged sentence

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

On September 10, 2021, we redeemed $ 250 million principal amount, representing one-third of the $ 750 million principal amount outstanding prior to such redemption, of the 3.450 % senior notes due 2023 (2023 Notes), in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total aggregate redemption price paid on the 2023 Notes was approximately $ 265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $ 13 million, primarily consisting of a premium paid on the early redemption of the notes.

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

See Note 17—Subsequent Event for additional information regarding the 3.450% senior notes due June 2023.

CF INDUSTRIES HOLDINGS, INC.

8 unchanged sentences

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

As of June 30, 2021, we had natural gas derivative contracts covering certain periods through March 2022.

As of June 30, 2021, our open natural gas derivative contracts consisted of natural gas basis swaps for 6.8 million MMBtus.

As of September 30, 2021, we had natural gas derivative contracts covering certain periods through March 2022.

As of September 30, 2021, our open natural gas derivative contracts consisted of natural gas basis swaps and options for 20.7 million MMBtus.

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

For the six months ended June 30, 2021, we used derivatives to cover approximately 13 % of our natural gas consumption.

For the nine months ended September 30, 2021, we used derivatives to cover approximately 9 % of our natural gas consumption.

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

Gain (loss) recognized in income

Three months ended June 30, Six months ended June 30,

Three months ended

September 30, Nine months ended

September 30,

Location 2021 2020 2021 2020

15 unchanged sentences

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

As a result, we recognized a gain of $ 112 million from the net settlement of these natural gas contracts, which is reflected in cost of sales in our consolidated statement of operations for the six months ended June 30, 2021.

CF INDUSTRIES HOLDINGS, INC.

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

As of June 30, 2021 and December 31, 2020, none of our derivative instruments were designated as hedging instruments.

As of September 30, 2021 and December 31, 2020, none of our derivative instruments were designated as hedging instruments.

See Note 9—Fair Value Measurements for additional information on derivative fair values.

Asset Derivatives Liability Derivatives

Balance Sheet Location June 30, 2021 December 31, 2020 Balance Sheet Location June 30,

Balance Sheet Location September 30,

2021 December 31, 2020 Balance Sheet Location September 30,

2021 December 31, 2020

2 unchanged sentences

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 June 30, 2021 and December 31, 2020, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 6 million, respectively, which also approximates the fair value of the 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 June 30, 2021 and December 31, 2020, we had no cash collateral on deposit with counterparties for derivative contracts.

In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades.

As of September 30, 2021 and December 31, 2020, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 6 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

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

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

As of September 30, 2021 and December 31, 2020, we had no cash collateral on deposit with counterparties for derivative contracts.

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

Amounts presented in consolidated

3 unchanged sentences

(in millions)

June 30, 2021

September 30, 2021

Total derivative assets $ 15 $ — $ — $ 15

Total derivative liabilities ( 3 ) — — ( 3 )

Net derivative liabilities $ — $ — $ — $ —

Net derivative assets $ 12 $ — $ — $ 12

December 31, 2020

19 unchanged sentences

Declaration of distributions payable ( 194 ) ( 174 )

Balance as of June 30 $ 2,712 $ 2,703

Balance as of September 30 $ 2,676 $ 2,649

Distributions payable to noncontrolling interest:

2 unchanged sentences

Distributions to noncontrolling interest ( 194 ) ( 174 )

Balance as of June 30 $ — $ —

Balance as of September 30 $ — $ —

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

4 unchanged sentences

See Note 9—Fair Value Measurements for additional information.

On July 30, 2021, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2021 in accordance with CFN’s limited liability company agreement.

On July 30, 2021, CFN distributed $ 130 million to CHS for the distribution period ended June 30, 2021.

CF INDUSTRIES HOLDINGS, INC.

4 unchanged sentences

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.

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 June 30, 2021, we held 5,284 shares of treasury stock.

See Note 18—Subsequent Event for additional information.

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

• 1.1 million shares repurchased during the third quarter of 2021 for $ 50 million,

• 2.6 million shares repurchased during the first quarter of 2020 for $ 100 million, and

• 7.6 million shares repurchased during 2019 for $ 337 million.

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

Accumulated Other Comprehensive Loss

10 unchanged sentences

Effect of exchange rate changes and deferred taxes ( 30 ) — 2 ( 28 )

Balance as of June 30, 2020 $ ( 259 ) $ 5 $ ( 172 ) $ ( 426 )

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

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

2 unchanged sentences

Effect of exchange rate changes and deferred taxes ( 2 ) — 1 ( 1 )

Balance as of June 30, 2021 $ ( 120 ) $ 4 $ ( 180 ) $ ( 296 )

Balance as of September 30, 2021 $ ( 146 ) $ 4 $ ( 174 ) $ ( 316 )

____________________________________________________________________________

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

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

CF INDUSTRIES HOLDINGS, INC.

Contingencies

10 unchanged sentences

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.

31 unchanged sentences

Goodwill by segment is presented in Note 7—Goodwill and Other Intangible Assets.

Segment data for sales, cost of sales and gross margin for the three and six months ended June 30, 2021 and 2020 are presented in the tables below.

Ammonia Granular Urea (1)

Segment data for sales, cost of sales and gross margin for the three and nine months ended September 30, 2021 and 2020 are presented in the tables below.

Granular Urea (2)

(in millions)

Three months ended June 30, 2021

Three months ended September 30, 2021

Net sales $ 344 $ 386 $ 390 $ 118 $ 124 $ 1,362

3 unchanged sentences

Equity in earnings of operating affiliate 15

Operating earnings $ 450

Three months ended June 30, 2020

Operating loss $ ( 97 )

Three months ended September 30, 2020

Net sales $ 165 $ 249 $ 248 $ 109 $ 76 $ 847

4 unchanged sentences

Operating earnings $ 40

Granular Urea (1)

(in millions)

Six months ended June 30, 2021

Nine months ended September 30, 2021

Net sales $ 1,009 $ 1,218 $ 1,056 $ 359 $ 356 $ 3,998

4 unchanged sentences

Operating earnings $ 600

Six months ended June 30, 2020

Nine months ended September 30, 2020

Net sales $ 722 $ 915 $ 791 $ 343 $ 251 $ 3,022

5 unchanged sentences

_______________________________________________________________________________

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

(2) Cost of sales and gross margin for the ammonia segment in the six months ended June 30, 2021, include the $ 112 million gain on the net settlement of certain natural gas contracts with our suppliers.

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

See Note 13—Derivative Financial Instruments for additional information.

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

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

CF INDUSTRIES HOLDINGS, INC.

Subsequent Event

On August 9, 2021, we announced that CF Industries has elected to redeem on September 10, 2021, $ 250 million principal amount, representing one-third of the currently outstanding $ 750 million principal amount, of the 3.450 % senior notes due 2023 (2023 Notes), in accordance with the optional redemption provisions provided in the indenture governing the 2023 Notes.

We estimate, based on market interest rates on August 2, 2021, the total amount for the partial redemption of the 2023 Notes will be approximately $ 265 million, including accrued interest.

The partial redemption of the 2023 Notes will be funded with cash on hand.

See Note 11—Financing Agreements for additional information.

On November 3, 2021, the Board authorized the repurchase of up to $ 1.5 billion of CF Holdings common stock from January 1, 2022 through December 31, 2024 (the 2021 Share Repurchase Program).

Repurchases under the 2021 Share Repurchase Program may be made from time to time in the open market, through privately negotiated transactions, block transactions or otherwise.

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

See Note 15—Stockholders’ Equity for information related to the 2019 Share Repurchase Program, which expires on December 31, 2021.

CF INDUSTRIES HOLDINGS, INC.

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