What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 463 added, 412 removed, 1407 unchanged (38% of the section changed)

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CF INDUSTRIES HOLDINGS, INC.

Evaluation of the measurement of projected benefit obligations

As discussed in Note 12 to the consolidated financial statements, the Company’s projected benefit obligation (PBO) associated with its defined benefit pension plans established in North America and the United Kingdom were $841 million and $590 million as of December 31, 2021, respectively.

Measurements of projected benefit obligations

As discussed in Note 11 to the consolidated financial statements, the Company’s projected benefit obligation (PBO) associated with its defined benefit pension plans established in North America and the United Kingdom was $274 million and $347 million, respectively, as of December 31, 2022.

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

In addition to measuring the PBO as of December 31, 2022, a remeasurement of the PBO was done in July 2022 when the Company entered into an agreement with an insurance company to purchase a non-participating group annuity contract and transferred approximately $375 million of its primary U.S.

defined benefit pension plan’s PBO to the insurance company.

Determining the PBO requires the Company to make assumptions, including the selection of a discount rate for each of the North American and United Kingdom plans and assumptions relating to inflationary increases, including but not limited to an adjusted retail price index (RPI) for the United Kingdom plans.

The selected discount rate and estimated inflationary increases are then applied to these future benefit payments in determining the present value of those obligations as of December 31, 2021.

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

The selected discount rates and adjusted RPI are then applied to these future benefit payments in determining the present value of those obligations.

We identified the evaluation of the Company’s PBO measurements in July 2022 and as of December 31, 2022 to be a critical audit matter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Impairment of U.K.

goodwill and long-lived assets

As discussed in Note 6 to the consolidated financial statements, the Company recognized long-lived assets and goodwill impairment charges of $236 million and $285 million, respectively, in the year ended December 31, 2021.

Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate the asset group’s carrying amount may not be recoverable.

An entity may first assess qualitative factors to determine whether it is necessary perform a quantitative goodwill impairment test.

If a quantitative test for goodwill impairment is necessary, the Company must estimate the fair value of the reporting units to which goodwill is assigned.

Management concluded the United Kingdom (U.K.) energy crisis necessitated a quantitative impairment evaluation of long-lived assets and goodwill of the Company’s U.K.

Ammonia, U.K.

Other asset groups and reporting units to determine if their fair value had declined below their carrying value.

Fair values of the asset groups and reporting units were estimated using the income approach.

Management’s estimated future cash flows for the U.K.

asset groups and U.K.

reporting units involved the use of significant judgments and assumptions with respect to forecasted product selling prices and projected natural gas costs, among other factors.

We involved actuarial professionals with specialized skills and knowledge, who assisted in:

• developing an understanding and assessing the methods used by the Company’s actuaries to develop the discount rates and adjusted RPI

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

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

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

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

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

Salvage values of property, plant, and equipment at the Ince facility

As discussed in Notes 2, 5, and 6 to the consolidated financial statements, the Company recognized long-lived asset impairment charges of $152 million in the year ended December 31, 2022, including $135 million of property, plant, and equipment impairment related to the restructuring of its operations within the United Kingdom.

The United Kingdom restructuring plan included a planned permanent closure of the Company’s Ince facility, which was akin to a decision to dispose of a long-lived asset (group) before the initially intended date and therefore it was determined to be an indicator of impairment.

In response to this impairment indicator, the Company compared the undiscounted cash flows expected to result from the use and eventual disposition of the Ince asset group to its carrying amount and concluded the carrying amount was not recoverable and should be adjusted to its fair value.

The Company estimated fair value based on the salvage value of its Ince asset group by determining the replacement cost of the underlying assets and then adjusting each of the asset categories to an estimated salvage value.

CF INDUSTRIES HOLDINGS, INC.

We identified the evaluation of the long-lived assets and goodwill impairment analyses for the U.K.

Ammonia, U.K.

Other asset groups and reporting units as a critical audit matter.

Subjective auditor judgment was required to evaluate the forecasted product selling prices and projected natural gas costs.

Changes to these assumptions could have had a substantial impact on the fair value of each asset group or reporting unit and, as a result, on the amount of the impairment charges recognized.

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

• evaluated the design and tested the operating effectiveness of internal controls related to the valuation of long-lived assets and goodwill, including controls related to the assumptions about forecasted product selling prices and projected natural gas costs

• evaluated the forecasted product selling prices by comparing them to the Company’s historical selling prices and external market data

• evaluated the projected natural gas costs by comparing them to external market and industry data

• performed sensitivity analyses over forecasted product selling prices and projected natural gas costs to evaluate management’s selected assumptions relative to a range of reasonable outcomes.

Company considered, but did not rely upon, a market or income based fair value approach as there was not an active secondary market for the Ince assets nor was the property generating future cash flows from operations.

Salvage values were estimated using industry recognized price publications.

We identified the evaluation of the estimated salvage value of the Ince asset group as a critical audit matter.

Subjective auditor judgment was required to evaluate the selection of the valuation approach and assumptions used by the Company to estimate the fair value of these long-lived assets.

Key assumptions made by the Company include inflationary adjustments to original asset costs to arrive at replacement costs and salvage value adjustment factors applied to asset replacement costs.

Changes to these assumptions could have had a significant impact on the fair value of the Ince asset group and, as a result, on the amount of the impairment charges recognized.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s long-lived assets impairment process, including controls related to the selection of the valuation approach and assumptions used to estimate salvage values as noted above.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s assertion that the cost approach represented the highest and best use of the Ince asset group, by considering whether an active secondary market existed for the Ince assets and whether sufficient income was attributable to the property on an in-use basis

• evaluating inflationary adjustments to original asset costs used in the replacement cost estimates by comparing them to publicly available inflationary indices

• evaluating the estimated salvage value adjustment factors by comparing them to industry recognized price publications.

(signed) KPMG LLP

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long-lived and intangible asset impairment 239 236 —

operations restructuring 19 — —

Other operating—net 10 ( 39 ) ( 17 )

Total other operating costs and expenses 558 705 189

Equity in earnings (loss) of operating affiliate 47 11 ( 5 )

Equity in earnings of operating affiliate 94 47 11

Operating earnings 5,397 1,729 623

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Current operating lease liabilities 93 89

Current maturities of long-term debt — 249

Other current liabilities 95 54

Total current liabilities 995 1,432

Long-term debt, net of current maturities 3,465 3,712

Long-term debt 2,965 3,465

Deferred income taxes 958 1,029

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— — — ( 260 ) — ( 260 ) — ( 260 )

Deferred tax related to noncontrolling interest — — 21 — — 21 — 21

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

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— — — ( 306 ) — ( 306 ) — ( 306 )

Deferred tax related to noncontrolling interest — — 21 — — 21 — 21

Distributions declared to noncontrolling interest — — — — — — ( 619 ) ( 619 )

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Stock-based compensation expense 41 30 25

Unrealized net loss (gain) on natural gas derivatives 25 ( 6 ) 14

Loss on embedded derivative 1 3 4

Loss on debt extinguishment 8 19 —

Unrealized net loss (gain) on natural gas derivatives 41 25 ( 6 )

(Gain) loss on embedded derivative ( 14 ) 1 3

goodwill impairment — 285 —

long-lived and intangible asset impairment 239 236 —

Pension settlement loss and curtailment gains 17 — —

Gain on sale of emission credits ( 6 ) ( 49 ) —

Loss (gain) on disposal of property, plant and equipment 3 15 ( 40 )

Undistributed (earnings) losses of affiliate—net of taxes ( 6 ) ( 1 ) 2

Loss on disposal of property, plant and equipment 2 3 15

Undistributed earnings of affiliate—net of taxes ( 1 ) ( 6 ) ( 1 )

Accounts receivable—net ( 110 ) ( 235 ) ( 19 )

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Proceeds from sale of investments held in nonqualified employee benefit trust 1 12 —

Purchase of U.K.

emission credits ( 10 ) — —

Purchase of emission credits ( 9 ) ( 10 ) —

Proceeds from sale of emission credits 15 58 —

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Financing fees ( 4 ) — —

Purchases of treasury stock ( 539 ) ( 100 ) ( 370 )

Dividends paid on common stock ( 306 ) ( 260 ) ( 258 )

Distributions to noncontrolling interest ( 619 ) ( 194 ) ( 174 )

Purchases of treasury stock ( 1,347 ) ( 539 ) ( 100 )

Proceeds from issuances of common stock under employee stock plans 106 64 5

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Effect of exchange rate changes on cash and cash equivalents ( 20 ) 1 6

Increase (decrease) in cash and cash equivalents 945 396 ( 395 )

Increase in cash and cash equivalents 695 945 396

Cash and cash equivalents at beginning of period 1,628 683 287

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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 nitrogen 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 nitrogen 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.

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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.

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers.

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

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nitrogen manufacturing facilities, located in Donaldsonville, Louisiana;

Port Neal, Iowa;

Sergeant Bluff, Iowa (our Port Neal complex);

Yazoo City, Mississippi;

Verdigris, Oklahoma;

Claremore, Oklahoma (our Verdigris complex);

and Woodward, Oklahoma.

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• two Canadian nitrogen manufacturing facilities, located in Medicine Hat, Alberta and Courtright, Ontario;

• two United Kingdom nitrogen manufacturing facilities, located in Billingham and Ince;

• a United Kingdom nitrogen manufacturing facility, located in Billingham;

• an extensive system of terminals and associated transportation equipment located primarily in the Midwestern United States;

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

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

Summary of Significant Accounting Policies

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

Significant estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of emission 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 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, the determination of the benefit obligation and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

Such estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, plant closure and asset retirement obligations, the cost of emission credits required to meet environmental regulations, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax reserves and the assessment of the realizability of deferred tax assets, measurement of the fair values of investments for which markets are not active, the determination of the funded status and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

Revenue Recognition

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

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

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

Inventories are reported at the lower of cost and net realizable value with cost determined on a first-in, first-out and average cost basis.

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

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

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

See Note 9—Equity Method Investment for additional information.

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

Our share of the net earnings from this investment is reported as an element of earnings from operations because PLNL’s operations

CF INDUSTRIES HOLDINGS, INC.

provide additional production and are integrated with our supply chain and sales activities in the Ammonia segment.

See Note 8—Equity Method Investment for additional information.

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

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

Turnaround costs are classified as investing activities in our consolidated statements of cash flows.

Turnaround costs are classified as investing activities and included in capital expenditures in our consolidated statements of cash flows.

See Note 6—Property, Plant and Equipment—Net for additional information.

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

See Note 6—United Kingdom Energy Crisis and Impairment Charges and Note 7—Property, Plant and Equipment—Net for additional information.

For property, plant and equipment that is planned for abandonment, we first consider a market or income-based valuation method.

In situations where a secondary market does not exist and the assets have been idled and planned for abandonment and therefore will not generate future cash flows from operations, we estimate a salvage value for those assets.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges and Note 6—Property, Plant and Equipment—Net for additional information.

Goodwill and Other Intangible Assets

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We perform our annual goodwill impairment review in the fourth quarter of each year at the reporting unit level.

Our evaluation can begin with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value.

Our evaluation generally begins with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value.

If after performing the qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, then no further analysis is necessary.

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If the fair value of the reporting unit is less than its carrying amount, goodwill impairment would be recognized equal to the amount of the carrying value in excess of the reporting unit’s fair value, limited to the total amount of goodwill allocated to the reporting unit.

Our intangible assets are presented in other assets on our consolidated balance sheets.

See Note 6—United Kingdom Energy Crisis and Impairment Charges and Note 8—Goodwill and Other Intangible Assets for additional information regarding our goodwill and other intangible assets.

CF INDUSTRIES HOLDINGS, INC.

Our intangible assets are presented in other assets on our consolidated balance sheets.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges and Note 7—Goodwill and Other Intangible Assets for additional information regarding our goodwill and other intangible assets.

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

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Cash flows related to natural gas derivatives are reported as operating activities.

See Note 16—Derivative Financial Instruments for additional information.

CF INDUSTRIES HOLDINGS, INC.

See Note 15—Derivative Financial Instruments for additional information.

Debt Issuance Costs

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Emission Credits

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

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

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

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Gains and losses resulting from intercompany foreign currency transactions that are of a long-term investment nature, if any, are reported in other comprehensive income.

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 arrangement 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.

Revenue Recognition

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Depending on the terms of the contract, either we or the customer arranges delivery of the product to the customer’s intended destination.

When we arrange delivery of the product and control of the product transfers upon loading, we recognize freight revenue, which was not material for 2021, 2020 or 2019.

When we arrange delivery of the product and control of the product transfers upon loading, we recognize freight revenue, which was $ 91 million for 2022, and not material for 2021 and 2020.

Certain of our contracts require us to supply products on a continuous basis to the customer.

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

During the year ended December 31, 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 primarily to the impact of Winter Storm Uri.

Other than products purchased from PLNL and granular urea purchased as a result of Winter Storm Uri, products purchased in the marketplace in order to satisfy the obligations of our customers were not material during 2021, 2020 or 2019.

Other than products purchased from PLNL, products purchased in the marketplace in order to satisfy the obligations of our customers were not material during 2022, $ 68 million for 2021 and not material for 2020.

Transaction Price

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

Accrual of these incentives involves the use of estimates, including how much product the customer will purchase and whether the customer will achieve a

CF INDUSTRIES HOLDINGS, INC.

certain level of purchases within the incentive period.

Accrual of these incentives involves the use of estimates, including how much product the customer will purchase and whether the customer will achieve a certain level of purchases within the incentive period.

The balances of customer incentives accrued at December 31, 2022 and 2021 were not material.

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The following table summarizes our revenue by product and by geography (based on destination of our shipment) for 2022, 2021 and 2020:

CF INDUSTRIES HOLDINGS, INC.

Ammonia Granular

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As of December 31, 2022 and 2021, we had $ 229 million and $ 700 million, respectively, in customer advances on our consolidated balance sheets.

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

The decrease in the balance of customer advances was due primarily to our customers delaying fertilizer transactions at the end of 2022 in anticipation that prices in the future would be lower than the current prices.

During 2022, all of our customer advances that were recorded as of December 31, 2021 were recognized as revenue.

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

As of December 31, 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 $ 809 million.

We expect to recognize approximately 44 % of these performance obligations as revenue in 2022, approximately 50 % as revenue during 2023 and 2024, approximately 4 % as revenue during 2025 and 2026, and the remainder thereafter.

If these customers do not fulfill their contractual obligations under such contracts, the legally enforceable minimum amount that they would pay to us under these contracts is approximately $ 162 million as of December 31, 2021.

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, the amount of which payment may vary based upon the terms and conditions of the applicable contract.

As of December 31, 2022, 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 were approximately $ 1.2 billion.

We expect to recognize approximately 45 % of these performance obligations as revenue in 2023, approximately 28 % as revenue during 2024-2026, approximately 12 % as revenue during 2027-2029, 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 such contracts, in the aggregate, was approximately $ 335 million as of December 31, 2022.

Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially filled at December 31, 2022 will be satisfied in 2023.

All of our contracts require that the period between the payment for goods and the transfer of those goods to the customer occur within normal contractual terms that do not exceed one year;

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

We have also expensed any incremental costs associated with obtaining a contract that has a duration of less than one year, and there were no costs capitalized during 2021, 2020 or 2019.

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

We have also elected the practical expedient to not capitalize any incremental costs associated with obtaining a contract that has a duration of less than one year, and there were no costs capitalized during 2022, 2021 or 2020.

CF INDUSTRIES HOLDINGS, INC.

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Dilutive common shares—stock-based awards 0.9 1.2 0.3

Diluted weighted-average shares outstanding 216.2 215.2 221.6

Diluted weighted-average common shares outstanding 204.2 216.2 215.2

Net earnings attributable to common stockholders $ 16.38 $ 4.24 $ 1.47

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

Diluted earnings per common 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 0.9 million, 3.3 million and 1.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

United Kingdom Energy Crisis and Impairment Charges

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero , 0.9 million and 3.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

United Kingdom Operations Restructuring and Impairment Charges

2021 Impairment

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

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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 new carbon dioxide pricing and offtake agreements with our customers, which had an initial term through January 31, 2022.

The amount of financial support provided by the U.K.

government under the terms of the interim agreement was not material.

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

Impairment Charges

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

government and resumed production of ammonia at the Billingham facility in order to produce carbon dioxide.

During the interim period, we entered into new carbon dioxide pricing and offtake agreements with our customers, which had an initial term through January 31, 2022.

The amount received under the terms of the interim agreement with the U.K.

government was not material.

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

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Our assets groups are the same as our reporting units.

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

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

In the fourth quarter of 2021, natural gas prices in the United Kingdom continued to rise, which triggered an additional impairment test of long-lived assets and goodwill and resulted in an additional goodwill impairment charge of $ 26 million.

The results of our long-lived asset impairment test indicated that no additional long-lived asset impairment should be recorded as the undiscounted cash flows were in excess of the carrying values for each of the U.K.

The results of our long-lived asset impairment test indicated that no additional long-lived asset impairment existed, as the undiscounted cash flows were in excess of the carrying values for each of the U.K.

asset groups.

In total, we recognized

For the full year ended December 31, 2021, these evaluations resulted in total impairment charges of $ 521 million, consisting of goodwill impairment of $ 285 million and long-lived and intangible asset impairment of $ 236 million.

As of December 31, 2021, no goodwill related to our U.K.

reporting units remained.

CF INDUSTRIES HOLDINGS, INC.

impairment charges of $ 521 million in 2021, consisting of long-lived and intangible asset impairment charges of $ 236 million and goodwill impairment charges of $ 285 million.

2022 Impairment and Restructuring

During the first quarter of 2022, we concluded that the continued impacts of the U.K.

energy crisis, including further increases and volatility in natural gas prices due in part to geopolitical events as a result of Russia’s invasion of Ukraine in February 2022, triggered an additional long-lived asset impairment test.

The results of this test indicated that no additional long-lived asset impairment existed, as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U.K.

asset groups.

In the second quarter of 2022, we approved and announced our proposed plan to restructure our U.K.

operations, including the planned permanent closure of the Ince facility, which had been idled since September 2021, and optimization of the remaining manufacturing operations at our Billingham facility.

Pursuant to our proposed plan to restructure our U.K.

operations and dispose of the Ince facility assets before we originally intended, we concluded that an evaluation of our long-lived assets and an additional impairment test was required.

Our assessment then identified the U.K.

asset groups as U.K.

Ammonia, U.K.

Other, comprising our ongoing U.K.

operations, and Ince, U.K.

In response to this impairment indicator, we compared the undiscounted cash flows expected to result from the use and eventual disposition of the Ince, U.K.

asset group to its carrying amount and concluded the carrying amount was not recoverable and should be adjusted to its fair value.

As a result, in the second quarter of 2022, we recorded total charges of $ 162 million related to the Ince facility as follows:

• asset impairment charges of $ 152 million consisting of the following:

◦ an impairment charge of $ 135 million related to property, plant and equipment that is planned for abandonment at the Ince facility, including a liability of approximately $ 9 million for the costs of certain asset retirement activities related to the Ince site;

◦ an intangible asset impairment charge of $ 8 million related to trade names;

◦ an impairment charge of $ 9 million related to the write-down of spare parts and certain raw materials at the Ince facility;

• a charge for post-employment benefits totaling $ 10 million, which is included in the U.K.

operations restructuring line item in our consolidated statements of operations, related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

There was no additional asset impairment indicated for the three asset groups that comprise the continuing U.K.

operations as the undiscounted estimated future cash flows were in excess of the carrying values for each of these asset groups.

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

Russian natural gas flows to Europe via the Nord Stream 1 pipeline ceased, causing the United Kingdom to experience unprecedented natural gas prices.

In addition, the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries, further contributing to the uncertainty in European energy markets.

Given these factors and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we temporarily idled ammonia production at our Billingham complex.

As a result, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K.

The results of our impairment test indicated that the carrying values for our U.K.

Ammonia and U.K.

AN asset groups exceeded the undiscounted estimated future cash flows.

As a result, we recognized asset impairment charges of $ 87 million, primarily related to property, plant and equipment and definite-lived intangible assets.

In August 2022, the final restructuring plan for our U.K.

operations was approved, and decommissioning activities were initiated.

As a result, in the third quarter of 2022, we incurred additional charges related to our U.K.

restructuring of $ 8 million, primarily related to one-time termination benefits.

In the fourth quarter of 2022, we incurred additional charges related to our U.K.

restructuring of $ 1 million, primarily related to one-time termination benefits.

For the full year ended December 31, 2022, as a result of the above, we recognized total impairment and restructuring charges of $ 258 million, consisting of long-lived and intangible asset impairment charges of $ 239 million and restructuring charges of $ 19 million.

As of December 31, 2022, amounts accrued related to the final restructuring plan for our U.K.

operations consisted of $ 2 million for employee contractual and one-time termination benefits and $ 6 million for asset retirement obligations, and we

CF INDUSTRIES HOLDINGS, INC.

expect substantially all of these restructuring activities will be completed in 2023.

We are working with customers, vendors, regulators and others to finalize closure plans for our Ince facility.

See Note 6—Property, Plant and Equipment—Net, Note 7—Goodwill and Other Intangible Assets and Note 23—Asset Retirement Obligations for additional information.

Assumptions in the impairment evaluations

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 the long-lived asset and goodwill impairment tests reflect 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.

The valuation also incorporated assumptions regarding the time it could take for the U.K.

The expected cash flows used in the long-lived asset and goodwill impairment tests reflected 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.

The valuations also incorporate assumptions regarding the time it could take for the U.K.

energy crisis to be resolved.

For purposes of our goodwill impairment analyses, 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.

In addition, assumptions were used to estimate the fair value of the long-lived assets in our asset groups, which included replacement cost and, for the Ince, U.K.

asset group that is planned for abandonment, salvage value.

For purposes of our goodwill impairment analyses in 2021, 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 at that time.

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 tests, 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 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.

The discount rates utilized in the income approach, for our goodwill impairment tests, and to discount the cash flows in calculating 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 were commensurate with the risks and uncertainties inherent in the business and in the United Kingdom and our cash flow forecasts, updated for recent events at that time.

Additional assumptions utilized in the long-lived asset impairment analyses 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.

For the asset groups that comprise the continuing U.K.

operations, the fair value of our property, plant and equipment utilized in the long-lived asset impairment analyses was estimated using the indirect method of the cost approach by determining the reproduction cost new, or replacement cost, of the assets and applying appropriate adjustments for depreciation including an inutility adjustment based on the cash flows expected to be generated by those asset groups.

For property, plant and equipment within the Ince, U.K.

asset group, an asset group planned for abandonment, we first considered use of a market or income-based valuation method.

However, given that a secondary market did not exist and the assets had been idled with a planned abandonment and therefore would not generate future cash flows from operations, we estimated the fair value of the asset group by determining the replacement cost of the underlying assets and then adjusting each of the asset categories to an estimated salvage value utilizing industry recognized price publications.

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

As of December 31, 2021, after the recognition of the $ 26 million goodwill impairment charge in the fourth quarter of 2021, we have no remaining goodwill related to our U.K.

operations, and the remaining long-lived assets related to our U.K.

operations were approximately $ 425 million, primarily consisting of property, plant and equipment.

For further information see Note 7—Property, Plant and Equipment—Net and Note 8—Goodwill and Other Intangible Assets.

As discussed above, the results of our fourth quarter long-lived asset impairment test indicated that no additional long-lived asset impairment should be recorded as the undiscounted cash flows were in excess of the carrying values for each of the U.K.

asset groups.

Of the factors discussed above, the assumptions regarding product selling prices and natural gas costs included in the expected cash flows utilized in the long-lived asset impairment test were 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 test remained unchanged, a decrease of $5.00 per product ton in the average selling price or an increase of $0.50 per MMBtu in the cost of natural gas would have resulted in long-lived asset impairment for certain of the U.K.

asset groups as the undiscounted cash flows would have been lower than their carrying values, and the resulting long-lived asset impairment charges for the fourth quarter of 2021 would have been as follows:

Long-lived Asset Impairment

Assumption (in millions)

+$5.00 -$5.00

Average Selling Price per Product Ton $ — $ 10

+$0.50 -$0.50

Natural Gas Cost per MMBtu (1)

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(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.

CF INDUSTRIES HOLDINGS, INC.

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_______________________________________________________________________________

(1) As of December 31, 2021, machinery and equipment, buildings and improvements, and construction in progress include impairment charges in 2021 of $ 169 million, $ 5 million and $ 8 million, respectively.

(1) As of December 31, 2022, machinery and equipment, buildings and improvements, and construction in progress include impairment charges in 2022 of $ 354 million, $ 7 million and $ 25 million, respectively, which include impairment charges related to our U.K.

operations of $204 million in 2022, and $ 182 million in 2021.

As of December 31, 2021, machinery and equipment, buildings and improvements, and construction in progress include cumulative impairment charges related to our U.K.

operations of $ 169 million, $ 5 million and $ 8 million, respectively, which were recorded in 2021.

(2) As of December 31, 2022 and 2021, we had property, plant and equipment that was accrued but unpaid of approximately $ 53 million and $ 35 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 838 million, $ 871 million and $ 876 million in 2022, 2021 and 2020, respectively.

Asset impairment —During the third quarter of 2021, in light of the substantial 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.

Accordingly, we 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.

As a result, long-lived asset impairment charges of $ 236 million were recorded.

The amount of the impairment that was allocated to property, plant and equipment was $ 182 million.

In the fourth quarter of 2021, natural gas prices in the United Kingdom continued to rise, which triggered an additional impairment test of the long-lived assets in our U.K.

asset groups.

This test indicated that no additional long-lived asset impairment should be recorded as the undiscounted cash flows were in excess of the carrying values for each of the U.K.

asset groups.

Long-lived assets on our consolidated balance sheet as of December 31, 2021 include approximately $ 425 million related to the U.K.

asset groups, which primarily consists of approximately $ 385 million of property, plant and equipment.

See Note 6—United Kingdom Energy Crisis and Impairment Charges and Note 8—Goodwill and Other Intangible Assets for additional information.

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

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

In June 2022, we approved and announced our proposed plan to restructure our U.K.

operations, including the planned permanent closure of our Ince facility and optimization of the remaining manufacturing operations at our Billingham facility.

As a result, in the second quarter of 2022, we recorded an asset impairment charge of $ 135 million to write down the property, plant and equipment at the Ince facility to its estimated salvage value.

The asset impairment consisted of $ 128 million related to machinery and equipment, $ 2 million relating to buildings and improvements, and $ 5 million related to construction in progress.

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

Given the increase in the price of natural gas in the United Kingdom and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we temporarily idled ammonia production at our Billingham complex.

As a result, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K.

The results of our impairment test indicated that the carrying values for our U.K.

Ammonia and U.K.

AN asset groups exceeded the undiscounted estimated future cash flows.

As a result, we recognized asset impairment charges of $ 87 million, of which $ 69 million related to property, plant and equipment, consisting of $ 57 million related to machinery and equipment and $ 12 million related to construction in progress.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges for additional information.

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.

Scheduled replacements and overhauls of plant machinery and equipment include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors, heat exchangers and the replacement of catalysts when a full plant shutdown occurs.

Scheduled inspections are also conducted during full plant shutdowns, including required safety inspections which entail the disassembly of various components such as steam boilers, pressure vessels and other equipment requiring safety certifications.

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

CF INDUSTRIES HOLDINGS, INC.

The following is a summary of capitalized plant turnaround costs:

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(in millions)

Net capitalized turnaround costs at beginning of the year $ 226 $ 246 $ 252

Net capitalized turnaround costs as of January 1 $ 355 $ 226 $ 246

Additions 118 250 84

Depreciation ( 134 ) ( 121 ) ( 104 )

Impairment related to U.K.

operations ( 21 ) — —

Effect of exchange rate changes ( 6 ) — —

Net capitalized turnaround costs at end of the year $ 355 $ 226 $ 246

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

Net capitalized turnaround costs as of December 31 $ 312 $ 355 $ 226

Goodwill and Other Intangible Assets

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Balance as of December 31, 2021 $ 579 $ 828 $ 576 $ 69 $ 39 $ 2,091

Impairment losses ( 9 ) — — ( 241 ) ( 35 ) ( 285 )

Effect of exchange rate changes ( 2 ) — — — — ( 2 )

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Other reporting units.

We estimated the fair value of the reporting units using the income approach described in Note 6—United Kingdom Energy Crisis and Impairment Charges.

We estimated the fair value of the reporting units using the income approach described in Note 5—United Kingdom Operations Restructuring 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.

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operations on our consolidated balance sheet as of December 31, 2021.

See Note 6—United Kingdom Energy Crisis and Impairment Charges for additional information.

For the year ended December 31, 2021, goodwill impairment totaled $285 million, of which $ 9 million related to our Ammonia segment, $ 241 million related to our AN segment and $ 35 million related to our Other segment.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges for additional information.

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:

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 impairment, and net of accumulated amortization, as follows:

December 31, 2022 December 31, 2021

Amount Accumulated

Amortization Net Gross

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Customer relationships (1)

$ 50 $ ( 35 ) $ 15 $ 84 $ ( 60 ) $ 24

Trade names (2)

— — — 31 ( 10 ) 21

Total intangible assets $ 50 $ ( 35 ) $ 15 $ 115 $ ( 70 ) $ 45

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(1) As of December 31, 2021, the gross carrying amount for customer relationships and trade names include impairment charges in 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.

(1) As of December 31, 2022, the gross carrying amount for customer relationships is net of impairment charges related to our U.K.

operations of $ 55 million, of which $ 6 million was recorded in 2022 and $ 49 million was recorded in 2021.

As of December 31, 2021, the gross carrying amount for customer relationships is net of impairment charges of $ 49 million, which were recorded in 2021.

(2) As of December 31, 2022, trade names, which are related to our U.K.

operations, had been written down to zero as a result of impairment charges of $ 18 million, including $ 17 million recorded in 2022, and $ 1 million recorded in 2021.

At December 31, 2021, the gross carrying amount for trade names is net of impairment charges of $ 1 million, which were recorded in 2021.

Our customer relationships are being amortized over a weighted-average life of approximately 18 years.

For the years ended December 31, 2022, 2021 and 2020, amortization expense of our identifiable intangible assets was $ 3 million, $8 million and $8 million, respectively.

The gross carrying amount and accumulated amortization of our intangible assets reflected in the table above were also impacted by the effect of exchange rates.

Total estimated amortization expense for each of the fiscal years from 2023 to 2027 is approximately $ 3 million.

In June 2022, we approved and announced our proposed plan to restructure our U.K.

operations, including the planned permanent closure of our Ince facility and optimization of the remaining manufacturing operations at our Billingham facility.

As a result, in the second quarter of 2022, we recorded an intangible asset impairment charge of $ 8 million related to trade names.

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

As a result, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K.

operations, which resulted in asset impairment charges of $ 87 million in our U.K.

Ammonia and U.K.

AN asset groups, of which $ 15 million related to intangible assets, consisting of $ 6 million related to customer relationships and $ 9 million related to trade names.

As a result of these impairment charges, intangible assets related to our U.K.

operations were fully written off.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges for additional information.

During the fourth quarter of 2021, as we had estimated that we had sufficient emission credits for our 2021 obligations, we sold excess U.K.

emission credits, including those purchased in the third quarter of 2021, for approximately $ 46 million and recognized a corresponding gain of $ 27 million, which is included in other operating—net in our consolidated statement of operations.

Amortization expense of our identifiable intangible assets for each of the years ended December 31, 2021, 2020 and 2019 was $ 8 million.

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

Total estimated amortization expense for each of the fiscal years 2022-2026 is $ 4 million.

In the third quarter of 2021, 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 6—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.

As a result, long-lived asset impairment charges, inclusive of the definite-lived intangible assets, of $ 236 million were recorded.

The amount of the impairment that was allocated to definite-lived intangible assets was $ 50 million.

In the fourth quarter of 2021, natural gas prices in the United Kingdom continued to rise, which triggered an additional impairment test of the long-lived assets in our U.K.

asset groups.

This test indicated that no additional long-lived asset impairment should be recorded as the undiscounted cash flows were in excess of the carrying values for each of the U.K.

asset groups.

See Note 6—United Kingdom Energy Crisis and Impairment Charges and Note 7—Property, Plant and Equipment—Net for additional information.

Long-lived assets on our consolidated balance sheet as of December 31, 2021 include approximately $ 425 million related to the U.K.

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

CF INDUSTRIES HOLDINGS, INC.

Equity Method Investment

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

We have a 50 % ownership interest in PLNL, which operates an ammonia production facility in Trinidad.

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.

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Our ammonia purchases from PLNL totaled $ 259 million, $ 150 million and $ 57 million in 2022, 2021 and 2020, respectively.

CF INDUSTRIES HOLDINGS, INC.

The Trinidadian tax authority (the Board of Inland Revenue) issued a proposed tax assessment against PLNL with respect to tax years 2011 and 2012 asserting 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.

As we own a 50 % interest in PLNL, our effective share of any assessment that was 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 in the third quarter of 2019.

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

Fair Value Measurements

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Embedded Derivative Liability

Since 2016, our credit ratings have been below certain levels and, as a result, we made an annual payment of $ 5 million to CHS in the fourth quarter of each year.

These payments will continue on a yearly basis until the earlier of the date that our credit rating is upgraded to or above certain levels by two of the three specified credit rating agencies or February 1, 2026.

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

As of December 31, 2021 and 2020, the embedded derivative liability was $ 15 million and $ 18 million,

Under the terms of our strategic venture with CHS, if our credit rating as determined by two of three specified credit rating agencies is below certain levels, we are required to make a non-refundable yearly payment of $ 5 million to CHS until the earlier of the date that our credit rating is upgraded to above such levels by two of the three specified credit rating agencies or February 1, 2026.

Beginning in 2016, our credit ratings were below such levels and, as a result, we made an annual payment of $ 5 million to CHS in the fourth quarter of each year from 2016 through 2021.

Our credit rating was upgraded above certain levels in July 2022 by one of the specified credit rating agencies and in October 2022 by another one of the specified credit rating agencies.

As a result of these upgrades, we were not required to make a $ 5 million annual payment to CHS in the fourth quarter of 2022.

CF INDUSTRIES HOLDINGS, INC.

respectively.

Included in other operating—net in our consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019 is a net loss of $ 1 million, $ 3 million and $ 4 million, respectively.

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.

This obligation has been recognized on our consolidated balance sheets as an embedded derivative at fair value and has been included within other current liabilities and other liabilities.

As of December 31, 2022 and 2021, the embedded derivative liability was $ 1 million and $ 15 million, respectively.

Included in other operating—net in our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020 is a net (gain) loss of $( 14 ) million, $ 1 million and $ 3 million, respectively.

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

Based on these inputs, our fair value measurement is classified as Level 2.

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(in millions)

Long-term debt, including current maturities $ 3,465 $ 4,113 $ 3,961 $ 4,731

Long-term debt $ 2,965 $ 2,764 $ 3,465 $ 4,113

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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These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment.

In the case of property, plant and equipment planned for abandonment, as described in Note 5—United Kingdom Operations Restructuring and Impairment Charges, fair value was measured as the estimated salvage value of such assets, which was immaterial.

The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets.

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

See Note 6—United Kingdom Energy Crisis and Impairment Charges for additional information on the fair values and unobservable inputs utilized in the impairment evaluations performed in 2021 for the long-lived assets, including definite-lived intangible assets, and goodwill related to our U.K.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges for additional information on the fair values and unobservable inputs utilized in the impairment evaluations performed for the long-lived assets, including definite-lived intangible assets, and goodwill related to our U.K.

CF INDUSTRIES HOLDINGS, INC.

Income Tax Provision

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

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Income tax provision $ 1,158 $ 283 $ 31

Terra Amended Tax Returns

We completed the acquisition of Terra Industries Inc.

(Terra) in April 2010.

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

parent for U.S.

and foreign income tax purposes was not appropriate.

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

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

tax aspects of the Amended Tax Returns.

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

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

Congress (the Joint Committee).

For purposes of its review, the 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.

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

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

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

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

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

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

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

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

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

Federal withholding tax matter, and

CF INDUSTRIES HOLDINGS, INC.

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

Federal income tax matter and related state amended returns.

In 2020, we received U.S.

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

As a result, all U.S.

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

In addition, 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.

Canada Revenue Agency Competent Authority Matter

In 2016, the CRA and Alberta Tax and Revenue Administration (TRA) 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 $ 138 million), including provincial taxes but excluding any interest or penalties.

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

The letters of credit serve as security until the matter is resolved.

In 2018, the matter, including the related transfer pricing topic, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011.

In the second quarter of 2021, the Company entered the matter into the arbitration process under the terms of the Treaty.

In February 2022, we were informed that a decision was reached by the arbitration board regarding the matter.

See Note 26—Subsequent Event for further information.

Effective Tax Rate

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

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Non-deductible goodwill impairment — 60 —

Transfer pricing arbitration 69 — —

Federal income tax return audits — ( 38 ) —

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

Non-deductible goodwill impairment in the table above relates to the goodwill impairment described in Note 6—United Kingdom Energy Crisis and Impairment Charges, above.

Non-deductible goodwill impairment in the table above relates to the goodwill impairment recognized in 2021 as described in Note 5—United Kingdom Operations Restructuring and Impairment Charges.

We did not record an income tax benefit for the goodwill impairment as it is nondeductible for income tax purposes.

We reached agreement on certain issues related to U.S.

federal income tax audits for the 2012-2016 tax years and reversed accruals for unrecognized tax benefits of $ 13 million related to those tax years.

In 2021, we reached agreement on certain issues related to U.S.

federal income tax audits for the tax years 2012 through 2016 and reversed accruals for unrecognized tax benefits of $ 13 million related to those tax years.

This resulted in a $ 38 million federal income tax benefit, which included the reduction in our unrecognized tax benefits.

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federal taxable income, which is included in the line “State income tax, net of federal” in the table above.

Canada Revenue Agency Competent Authority Matter

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

We filed Notices of Objection with respect to the Notices of Reassessment with the CRA and Alberta TRA and posted letters of credit in lieu of paying the additional tax liability assessed.

The letters of credit served as security until the matter was resolved, as discussed below.

In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between Canada and the United States, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011.

In the second quarter of 2021, the Company submitted the transfer pricing aspect of the matter into the arbitration process under the terms of the Treaty.

In February 2022, we were informed that a decision was reached by the arbitration panel for tax years 2006 through 2011.

In March 2022, we received further details of the results of the arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities, and we accepted the decision of the arbitration panel.

Under the terms of the arbitration decision, additional income for tax years 2006 through 2011 was subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years of approximately $ 129 million.

As a result of the impact of these events on our Canadian and U.S.

federal and state income taxes, we recognized an income tax provision of $ 78 million, reflecting the net impact of $ 129 million of accrued income taxes payable to Canada for tax years 2006 to 2011, partially offset by net income tax receivables of approximately $ 51 million in the United States, and we accrued net interest of $ 102 million, primarily reflecting the estimated interest payable to Canada.

The $ 69 million in the effective tax rate table above excludes the state income tax liability of $ 9 million, which is included in the line “State income tax, net of federal.”

In the second half of 2022, this tax liability and the related interest was assessed and paid, resulting in total payments of $ 224 million, which also reflect the impact of changes in foreign currency exchange rates.

As a result, the letters of credit we had posted in lieu of paying the additional tax liability assessed by the Notices of Reassessment were cancelled.

Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, the Company will file amended tax returns in the United States to request a refund of taxes paid.

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.

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

tax aspects of the Amended Tax Returns.

In 2017, we also made a Voluntary Disclosures Program filing with the CRA with respect to the Canadian tax aspects of the Amended Tax Returns and paid additional Canadian taxes due.

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

Congress (the Joint Committee).

For purposes of its review, the

CF INDUSTRIES HOLDINGS, INC.

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