Table of Contents
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to                              
Commission file number 001-32597
CF INDUSTRIES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 (State or other jurisdiction of
incorporation or organization)
 
20-2697511
 (I.R.S. Employer
Identification No.)
 
 
 
4 Parkway North, Suite 400
Deerfield, Illinois
 (Address of principal executive offices)
 
60015
 (Zip Code)
(847) 405-2400
 (Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
  (Do not check if a smaller reporting company)
 
Smaller reporting company o
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No x
233,247,225 shares of the registrant's common stock, $0.01 par value per share, were outstanding at July 28, 2017 .
 

Table of Contents

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

CF INDUSTRIES HOLDINGS, INC.
PART I—FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
 
(in millions, except per share amounts)
Net sales
$
1,124

 
$
1,134

 
$
2,161

 
$
2,138

Cost of sales
952

 
607

 
1,883

 
1,394

Gross margin
172

 
527

 
278

 
744

Selling, general and administrative expenses
49

 
52

 
95

 
97

Transaction costs
—

 
165

 
—

 
179

Other operating—net
10

 
63

 
16

 
124

Total other operating costs and expenses
59

 
280

 
111

 
400

Equity in losses of operating affiliates
(6
)
 
(9
)
 
(3
)
 
(9
)
Operating earnings
107

 
238

 
164

 
335

Interest expense
80

 
61

 
160

 
99

Interest income
(2
)
 
(1
)
 
(3
)
 
(2
)
Other non-operating—net
—

 
—

 
—

 
(2
)
Earnings before income taxes
29

 
178

 
7

 
240

Income tax provision (benefit)
5

 
95

 
(8
)
 
110

Net earnings
24

 
83

 
15

 
130

Less: Net earnings attributable to noncontrolling interests
21

 
36

 
35

 
57

Net earnings (loss) attributable to common stockholders
$
3

 
$
47

 
$
(20
)
 
$
73

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

 
 

 
 

 
 

Basic
$
0.01

 
$
0.20

 
$
(0.09
)
 
$
0.31

Diluted
$
0.01

 
$
0.20

 
$
(0.09
)
 
$
0.31

Weighted-average common shares outstanding:
 
 
 
 
 

 
 

Basic
233.5

 
233.3

 
233.2

 
233.2

Diluted
233.7

 
233.5

 
233.2

 
233.5

Dividends declared per common share
$
0.30

 
$
0.30

 
$
0.60

 
$
0.60

See accompanying Notes to Unaudited Consolidated Financial Statements.


1
Table of Contents

CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
 
(in millions)
Net earnings
$
24

 
$
83

 
$
15

 
$
130

Other comprehensive income (loss):
 

 
 

 
 

 
 

Foreign currency translation adjustment—net of taxes
52

 
(38
)
 
72

 
10

Defined benefit plans—net of taxes
1

 
(3
)
 
1

 
(3
)
 
53

 
(41
)
 
73

 
7

Comprehensive income
77

 
42

 
88

 
137

Less: Comprehensive income attributable to noncontrolling interests
21

 
36

 
35

 
57

Comprehensive income attributable to common stockholders
$
56

 
$
6

 
$
53

 
$
80

   
See accompanying Notes to Unaudited Consolidated Financial Statements.


2
Table of Contents

CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
 
 
June 30,
2017
 
December 31,
2016
 
(in millions, except share
and per share amounts)
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
2,001

 
$
1,164

Restricted cash
4

 
5

Accounts receivable—net
282

 
236

Inventories
325

 
339

Prepaid income taxes
34

 
841

Other current assets
29

 
70

Total current assets
2,675

 
2,655

Property, plant and equipment—net
9,441

 
9,652

Investments in affiliates
120

 
139

Goodwill
2,360

 
2,345

Other assets
340

 
340

Total assets
$
14,936

 
$
15,131

Liabilities and Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
616

 
$
638

Income taxes payable
—

 
1

Customer advances
5

 
42

Current portion of long-term debt
797

 
—

Other current liabilities
23

 
5

Total current liabilities
1,441

 
686

Long-term debt
4,986

 
5,778

Deferred income taxes
1,632

 
1,630

Other liabilities
487

 
545

Equity:
 

 
 

Stockholders' equity:
 

 
 

Preferred stock—$0.01 par value, 50,000,000 shares authorized
—

 
—

Common stock—$0.01 par value, 500,000,000 shares authorized, 2017—233,232,669 shares issued and 2016—233,141,771 shares issued
2

 
2

Paid-in capital
1,388

 
1,380

Retained earnings
2,205

 
2,365

Treasury stock—at cost, 2017—386 shares and 2016—27,602 shares
—

 
(1
)
Accumulated other comprehensive loss
(325
)
 
(398
)
Total stockholders' equity
3,270

 
3,348

Noncontrolling interests
3,120

 
3,144

Total equity
6,390

 
6,492

Total liabilities and equity
$
14,936

 
$
15,131

See accompanying Notes to Unaudited Consolidated Financial Statements.

3
Table of Contents

CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 
Common Stockholders
 
 
 
 
 
$0.01 Par
Value
Common
Stock
 
Treasury
Stock
 
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
 
Noncontrolling
Interests
 
Total
Equity
 
(in millions, except per share amounts)
Balance as of December 31, 2015
$
2

 
$
(153
)
 
$
1,378

 
$
3,058

 
$
(250
)
 
$
4,035

 
$
352

 
$
4,387

Net earnings
—

 
—

 
—

 
73

 
—

 
73

 
57

 
130

Other comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustment—net of taxes
—

 
—

 
—

 
—

 
10

 
10

 
—

 
10

Defined benefit plans—net of taxes
—

 
—

 
—

 
—

 
(3
)
 
(3
)
 
—

 
(3
)
Comprehensive income
 

 
 

 
 

 
 

 
 

 
80

 
57

 
137

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

 
3

 
(3
)
 
—

 
—

 
—

 
—

 
—

Stock-based compensation expense
—

 
—

 
9

 
—

 
—

 
9

 
—

 
9

Cash dividends ($0.60 per share)
—

 
—

 
—

 
(140
)
 
—

 
(140
)
 
—

 
(140
)
Issuance of noncontrolling interest in CF Industries Nitrogen, LLC (CFN)
—

 
—

 
—

 
—

 
—

 
—

 
2,792

 
2,792

Distributions declared to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
—

 
(20
)
 
(20
)
Balance as of June 30, 2016
$
2

 
$
(150
)
 
$
1,384

 
$
2,991

 
$
(243
)
 
$
3,984

 
$
3,181

 
$
7,165

Balance as of December 31, 2016
$
2

 
$
(1
)
 
$
1,380

 
$
2,365

 
$
(398
)
 
$
3,348

 
$
3,144

 
$
6,492

Net (loss) earnings
—

 
—

 
—

 
(20
)
 
—

 
(20
)
 
35

 
15

Other comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustment—net of taxes
—

 
—

 
—

 
—

 
72

 
72

 
—

 
72

Defined benefit plans—net of taxes
—

 
—

 
—

 
—

 
1

 
1

 
—

 
1

Comprehensive income
 

 
 

 
 

 
 

 
 

 
53

 
35

 
88

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

 
1

 
(1
)
 
—

 
—

 
—

 
—

 
—

Stock-based compensation expense
—

 
—

 
9

 
—

 
—

 
9

 
—

 
9

Cash dividends ($0.60 per share)
—

 
—

 
—

 
(140
)
 
—

 
(140
)
 
—

 
(140
)
Distributions declared to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(59
)
 
(59
)
Balance as of June 30, 2017
$
2

 
$
—

 
$
1,388

 
$
2,205

 
$
(325
)
 
$
3,270

 
$
3,120

 
$
6,390


See accompanying Notes to Unaudited Consolidated Financial Statements.

4
Table of Contents

CF INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six months ended 
 June 30,
 
2017
 
2016
 
(in millions)
Operating Activities:
 

 
 

Net earnings
$
15

 
$
130

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

 
 

Depreciation and amortization
422

 
327

Deferred income taxes
(8
)
 
875

Stock-based compensation expense
8

 
9

Unrealized net loss (gain) on natural gas and foreign currency derivatives
71

 
(189
)
Unrealized loss on embedded derivative
3

 
—

Loss on disposal of property, plant and equipment
1

 
4

Undistributed losses of affiliates—net of taxes
6

 
1

Changes in:
 

 
 

Accounts receivable—net
(35
)
 
24

Inventories
10

 
81

Accrued and prepaid income taxes
806

 
(673
)
Accounts payable and accrued expenses
(12
)
 
(67
)
Customer advances
(37
)
 
(149
)
Other—net
(63
)
 
73

Net cash provided by operating activities
1,187

 
446

Investing Activities:
 

 
 

Additions to property, plant and equipment
(185
)
 
(1,379
)
Proceeds from sale of property, plant and equipment
12

 
2

Distributions received from unconsolidated affiliates
6

 
—

Proceeds from sale of auction rate securities
9

 
—

Withdrawals from restricted cash funds
1

 
16

Other—net
—

 
3

Net cash used in investing activities
(157
)
 
(1,358
)
Financing Activities:
 

 
 

Proceeds from short-term borrowings
—

 
150

Payments of short-term borrowings
—

 
(150
)
Financing fees
—

 
(5
)
Dividends paid on common stock
(140
)
 
(140
)
Issuance of noncontrolling interest in CFN
—

 
2,800

Distributions to noncontrolling interests
(59
)
 
(20
)
Net cash (used in) provided by financing activities
(199
)
 
2,635

Effect of exchange rate changes on cash and cash equivalents
6

 
(1
)
Increase in cash and cash equivalents
837

 
1,722

Cash and cash equivalents at beginning of period
1,164

 
286

Cash and cash equivalents at end of period
$
2,001

 
$
2,008

See accompanying Notes to Unaudited Consolidated Financial Statements.

5
Table of Contents

CF INDUSTRIES HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1 .   Background and Basis of Presentation
We are one of the largest manufacturers and distributors of nitrogen fertilizer and other nitrogen products in the world. Our principal customers are cooperatives, independent fertilizer distributors, farmers and industrial users. Our principal nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. Our manufacturing and distribution facilities are concentrated in the midwestern United States and other major agricultural areas of the United States, Canada and the United Kingdom. We also export nitrogen fertilizer products from our Donaldsonville, Louisiana and Yazoo City, Mississippi manufacturing facilities, and our United Kingdom manufacturing facilities in Billingham and Ince.
All references to "CF Holdings," "the Company," "we," "us" and "our" refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to "CF Industries" refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc.
The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2016 , in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting. In the opinion of management, these statements reflect all adjustments, consisting only of normal and recurring adjustments, that are necessary for the fair representation of the information for the periods presented. The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Operating results for any period presented apply to that period only and are not necessarily indicative of results for any future period.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our 2016 Annual Report on Form 10-K filed with the SEC on February 23, 2017. 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 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.

6

2 .   New Accounting Standards
Recently Adopted Pronouncement
On January 1, 2017, we adopted Accounting Standards Update (ASU) No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU No. 2015-11 changes the inventory measurement principle for entities using the first-in, first out (FIFO) or average cost methods. For entities utilizing one of these methods, the inventory measurement principle changed from lower of cost or market to the lower of cost and net realizable value. We follow the FIFO or average cost methods and the adoption of this ASU did not have a material effect on our consolidated financial statements.
Recently Issued Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments. Additionally, the costs to obtain and fulfill a contract, including assets to be recognized, are to be capitalized and such capitalized costs should be disclosed. In 2016, the FASB issued additional ASUs that enhance the operability of the principal versus agent guidance in ASU No. 2014-09 by clarifying that an entity should consider the nature of each good or service promised to a customer at the individual good or service level, clarify that ASU No. 2014-09 should not be applied to immaterial performance obligations, and enhance the guidance around the treatment of shipping costs incurred to fulfill performance obligations. As modified by ASU No. 2015-14, Deferral of the Effective Date, the effective date of ASU No. 2014-09 is for interim and annual periods beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. We continue to analyze the impact of ASU No. 2014-09 on our revenue contracts by comparing the revenue recognition that would have occurred from applying this ASU to revenue contracts that existed in 2015, 2016 and 2017. Based on analysis to date, we believe the adoption of ASU No. 2014-09 will not have a material impact on the revenue reported in our consolidated financial statements. We are also reviewing our business processes, systems, and controls to determine what changes are needed to support adoption, including the additional disclosures required under ASU No. 2014-09. We intend to adopt ASU No. 2014-09 effective January 1, 2018 using the modified retrospective approach.
In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which will change the presentation of net benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net benefit cost will be presented separately outside of operating income. Additionally, only service costs may be capitalized on the balance sheet. This ASU is effective for annual and interim periods beginning after December 15, 2017. The guidance will be applied retrospectively for the income statement classification requirements and prospectively for the capitalization guidance. Early adoption is permitted. We do not expect the provisions of this ASU will have a material effect on our consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. We are currently evaluating the impact of this ASU on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements in ASC Topic 840, Leases. This ASU will require lessees to recognize the rights and obligations resulting from virtually all leases (other than leases that meet the definition of a short-term lease) on their balance sheets as right-of-use (ROU) assets with corresponding lease liabilities. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of income and expense recognized and expected to be recognized from existing contracts. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted, and requires the modified retrospective method of adoption. While we are continuing to evaluate the impact of the adoption of this ASU on our consolidated financial statements, we currently believe the most significant change relates to the recognition of new ROU assets and lease liabilities on our balance sheet for operating leases for certain property and equipment, including rail car leases and barge tow charters for the distribution of fertilizer.

7

3 .   Net Earnings Per Share
Net earnings per share were computed as follows:
 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
 
(in millions, except per share amounts)
Net earnings (loss) attributable to common stockholders
$
3

 
$
47

 
$
(20
)
 
$
73

Basic earnings per common share:
 

 
 

 
 

 
 

Weighted-average common shares outstanding
233.5

 
233.3

 
233.2

 
233.2

Net earnings (loss) attributable to common stockholders
$
0.01

 
$
0.20

 
$
(0.09
)
 
$
0.31

Diluted earnings per common share:
 

 
 

 
 

 
 

Weighted-average common shares outstanding
233.5

 
233.3

 
233.2

 
233.2

Dilutive common shares—stock options
0.2

 
0.2

 
—

 
0.3

Diluted weighted-average shares outstanding
233.7

 
233.5

 
233.2

 
233.5

Net earnings (loss) attributable to common stockholders
$
0.01

 
$
0.20

 
$
(0.09
)
 
$
0.31

In the computation of diluted earnings per common share, potentially dilutive stock options are excluded if the effect of their inclusion is anti-dilutive. Shares for anti-dilutive stock options not included in the computation of diluted earnings per common share were 6.0 million and 6.6 million for the three and six months ended June 30, 2017 , respectively, and 4.4 million and 4.3 million for the three and six months ended June 30, 2016 , respectively.
4 .   Inventories
Inventories consist of the following:
 
June 30,
2017
 
December 31,
2016
 
(in millions)
Finished goods
$
276

 
$
279

Raw materials, spare parts and supplies
49

 
60

Total inventories
$
325

 
$
339


8

5 .   Property, Plant and Equipment—Net
Property, plant and equipment—net consists of the following:
 
June 30,
2017
 
December 31,
2016
 
(in millions)
Land
$
70

 
$
69

Machinery and equipment
11,907

 
11,664

Buildings and improvements
879

 
878

Construction in progress
243

 
280

Property, plant and equipment (1)
13,099

 
12,891

Less: Accumulated depreciation and amortization
3,658

 
3,239

Property, plant and equipment—net
$
9,441

 
$
9,652

_______________________________________________________________________________

(1)  
As of June 30, 2017 and December 31, 2016 , we had property, plant and equipment that was accrued but unpaid of approximately $205 million and $225 million , respectively. These amounts included accruals related to our capacity expansion projects of $175 million and $185 million as of June 30, 2017 and December 31, 2016 , respectively. As of June 30, 2016 and December 31, 2015, we had property, plant and equipment that was accrued but unpaid of $383 million and $543 million, respectively.

Depreciation and amortization related to property, plant and equipment was $208 million and $405 million for the three and six months ended June 30, 2017 , respectively, and $146 million and $286 million for the three and six months ended June 30, 2016 , respectively.
Plant turnarounds —Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds. 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 
 June 30,
 
2017
 
2016
 
(in millions)
Net capitalized turnaround costs:
 

 
 

Beginning balance
$
206

 
$
220

Additions
73

 
14

Depreciation
(56
)
 
(42
)
Effect of exchange rate changes
3

 
3

Ending balance
$
226

 
$
195

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.

9

6 .  Goodwill and Other Intangible Assets
The following table shows the carrying amount of goodwill by reportable segment as of June 30, 2017 and December 31, 2016 :
 
Ammonia
 
Granular Urea
 
UAN
 
AN
 
Other
 
Total
 
(in millions)
Balance as of December 31, 2016
$
585

 
$
828

 
$
576

 
$
286

 
$
70

 
$
2,345

Effect of exchange rate changes
1

 
—

 
—

 
12

 
2

 
15

Balance as of June 30, 2017
$
586

 
$
828

 
$
576

 
$
298

 
$
72

 
$
2,360

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, 2017
 
December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
(in millions)
Intangible assets:
 

 
 

 
 

 
 

 
 

 
 

Customer relationships
$
129

 
$
(28
)
 
$
101

 
$
125

 
$
(24
)
 
$
101

TerraCair brand
10

 
(10
)
 
—

 
10

 
(10
)
 
—

Trade names
31

 
(3
)
 
28

 
29

 
(2
)
 
27

Total intangible assets
$
170

 
$
(41
)
 
$
129

 
$
164

 
$
(36
)
 
$
128

Amortization expense of our identifiable intangible assets was $3 million and $5 million for the three and six months ended June 30, 2017 , respectively, and $2 million and $4 million for the three and six months ended June 30, 2016 , respectively.
Total estimated amortization expense for the remainder of 2017 and each of the five succeeding fiscal years is as follows:
 
Estimated
Amortization
Expense
 
(in millions)
Remainder of 2017
$
4

2018
8

2019
8

2020
8

2021
8

2022
8


10

7 .  Equity Method Investments
We have a 50% ownership interest in Point Lisas Nitrogen Limited (PLNL), which operates an ammonia production facility in the Republic of Trinidad and Tobago. 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, 2017 , the total carrying value of our equity method investment in PLNL of approximately $120 million was $62 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 primarily reflects the revaluation of property, plant and equipment and the value of an exclusive natural gas contract. The increased basis for property, plant and equipment and the gas contract are being amortized over a remaining period of approximately 16 years and 1 year , respectively. Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of these basis differences. Our equity in losses of PLNL for both the three and six months ended June 30, 2016 of $9 million includes the impact of a planned maintenance activity in the second quarter of 2016 that resulted in the shutdown of the PLNL ammonia plant for approximately 45 days .
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 $24 million and $44 million for the three and six months ended June 30, 2017 , respectively, and $18 million and $34 million for the three and six months ended June 30, 2016 , respectively.
PLNL operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by The National Gas Company of Trinidad and Tobago Limited (NGC). PLNL has experienced curtailments in the supply of natural gas from NGC, which have reduced the ammonia production at PLNL. In 2016, NGC communicated to PLNL that it does not recognize PLNL's exercise of its option to renew the NGC Contract for an additional five-year term beyond its current termination date in September 2018, and that any NGC commitment to supply gas beyond 2018 will need to be based on new agreements regarding volume and price. PLNL has initiated arbitration proceedings against NGC and asserted claims in connection with NGC’s failure to supply the contracted quantities of natural gas, and its refusal to recognize PLNL’s exercise of its option to extend the NGC Contract. PLNL is seeking declaratory and injunctive relief, as well as damages for past and ongoing curtailments. Although PLNL believes its claims against NGC to be meritorious, it is not possible to predict the outcome of the arbitration. There are significant assumptions in the future operations of the joint venture that are uncertain at this time, including the quantities of gas NGC will make available, the cost of such gas, the estimates that are used to determine the useful lives of fixed assets and the assumptions in the discounted cash flow models utilized for recoverability and impairment testing. As part of our impairment assessment of our equity method investment in PLNL during the fourth quarter of 2016, we determined the carrying value exceeded the fair value and recognized a $134 million impairment charge in 2016. The carrying value of our equity method investment in PLNL at June 30, 2017 is approximately $120 million . If NGC does not make sufficient quantities of natural gas available to PLNL at prices that permit profitable operations, PLNL may cease operating its facility and we would write off the remaining investment in PLNL.
The Trinidad tax authority (the Board of Inland Revenue) has issued a tax assessment against PLNL related to a dispute over whether tax depreciation must be claimed during a tax holiday period that was granted to PLNL under the Trinidad Fiscal Incentives Act. The tax holiday was granted as an incentive to construct PLNL’s ammonia plant. PLNL is appealing the assessment. Based on the facts and circumstances of this matter, PLNL recorded an unrecognized tax benefit in the second quarter of 2017, which reduced our equity in earnings of PLNL for both the three and six months ended June 30, 2017 by approximately $7 million reflecting our 50% ownership interest.

11

8 .  Fair Value Measurements
Our cash and cash equivalents and other investments consist of the following:
 
June 30, 2017
 
Cost Basis
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
 
(in millions)
Cash
$
93

 
$
—

 
$
—

 
$
93

Cash equivalents:
 
 
 
 
 
 
 
U.S. and Canadian government obligations
1,893

 
—

 
—

 
1,893

Other debt securities
15

 
—

 
—

 
15

Total cash and cash equivalents
$
2,001

 
$
—

 
$
—

 
$
2,001

Restricted cash
4

 
—

 
—

 
4

Nonqualified employee benefit trusts
18

 
1

 
—

 
19

 
December 31, 2016
 
Cost Basis
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
 
(in millions)
Cash
$
89

 
$
—

 
$
—

 
$
89

Cash equivalents:
 
 
 
 
 
 
 
U.S. and Canadian government obligations
1,075

 
—

 
—

 
1,075

Total cash and cash equivalents
$
1,164

 
$
—

 
$
—

 
$
1,164

Restricted cash
5

 
—

 
—

 
5

Nonqualified employee benefit trusts
18

 
1

 
—

 
19

Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.
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, 2017 and December 31, 2016 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:
 
June 30, 2017
 
Total Fair
Value
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(in millions)
Cash equivalents
$
1,908

 
$
1,908

 
$
—

 
$
—

Restricted cash
4

 
4

 
—

 
—

Nonqualified employee benefit trusts
19

 
19

 
—

 
—

Derivative assets
2

 
—

 
2

 
—

Derivative liabilities
(23
)
 
—

 
(23
)
 
—

Embedded derivative liability
(29
)
 
—

 
(29
)
 
—


12

 
December 31, 2016
 
Total Fair
Value
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(in millions)
Cash equivalents
$
1,075

 
$
1,075

 
$
—

 
$
—

Restricted cash
5

 
5

 
—

 
—

Nonqualified employee benefit trusts
19

 
19

 
—

 
—

Derivative assets
56

 
—

 
56

 
—

Derivative liabilities
(6
)
 
—

 
(6
)
 
—

Embedded derivative liability
(26
)
 
—

 
(26
)
 
—

Cash Equivalents
As of June 30, 2017 and December 31, 2016 , our cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities.
Restricted Cash
We maintain a cash account for which the use of the funds is restricted. The restricted cash was put in place to satisfy certain requirements included in our engineering and procurement services contract for our capacity expansion projects. Under the terms of this contract, we were required to grant an affiliate of ThyssenKrupp Industrial Solutions a security interest in a restricted cash account and maintain a cash balance in that account equal to the cancellation fees for procurement services and equipment that would arise if we were to cancel the projects.
Nonqualified Employee Benefit Trusts
We maintain trusts associated with certain nonqualified supplemental pension plans. The investments are accounted for as available-for-sale securities. The fair values of the trust assets are based on daily quoted prices in an active market, which represents the net asset values of the shares held in the trusts. These trusts are included on our consolidated balance sheets in other assets.
Derivative Instruments
The derivative instruments that we use are primarily natural gas fixed price swaps and natural gas options traded in the over-the-counter (OTC) markets with multinational commercial banks, other major financial institutions or large energy companies. The natural gas derivative contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods. The natural gas derivative contracts settle using primarily NYMEX futures prices. To determine the fair value of these instruments, we use quoted market prices from NYMEX and standard pricing models with inputs derived from or corroborated by observable market data such as forward curves supplied by an industry-recognized independent third party. See Note  12—Derivative Financial Instruments for additional information.
Embedded Derivative Liability
Under the terms of our strategic venture with CHS Inc. (CHS), if our credit rating is reduced below certain levels by two of three specified credit rating agencies, we are required to make a non-refundable yearly payment of $5 million to CHS. In the fourth quarter of 2016, as a result of a reduction in our credit rating, we made a $5 million payment to CHS. The payment 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 term of the strategic venture is recognized on our consolidated balance sheet as an embedded derivative. See Note 13—Noncontrolling Interests for additional information regarding our strategic venture with CHS.
During the six months ended June 30, 2017 , we recorded adjustments to adjust the value of the embedded derivative liability by $3 million to $29 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. Based on these inputs, our fair value measurement is classified as Level 2. The charges to reflect the changes in fair value for the three and six months ended June 30, 2017 , of $2 million and $3 million , respectively, are included in other

13

operating—net in our consolidated statement of operations. As of June 30, 2017 and December 31, 2016, the embedded derivative liability of $29 million and $26 million , respectively, is included in other current liabilities and other liabilities on our consolidated balance sheets.
Financial Instruments
The carrying amount and estimated fair value of our financial instruments are as follows:
 
June 30, 2017
 
December 31, 2016
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
 
(in millions)
Long-term debt
$
5,783

 
$
5,742

 
$
5,778

 
$
5,506

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.
The carrying amounts of cash and cash equivalents, as well as instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries which may be written down to fair value as a result of impairment. 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.
Our equity method investment in the Republic of Trinidad and Tobago, PLNL, operates an ammonia plant that relies on natural gas supplied, under the NGC Contract, by NGC. As part of our impairment assessment of our equity method investment in PLNL during the fourth quarter of 2016, we determined the carrying value exceeded the fair value and recognized a $134 million impairment charge in 2016. See Note 7—Equity Method Investments for additional information.
9 .   Income Taxes
For the three months ended June 30, 2017 , we recorded an income tax provision of $5 million on pre-tax income of $29 million , or an effective tax rate of 17.7% , compared to an income tax provision of $95 million on pre-tax income of $178 million , or an effective tax rate of 53.2% , for the three months ended June 30, 2016 . Our effective tax rate excluding the earnings attributable to the noncontrolling interests for the three months ended June 30, 2017 is 63.3% as compared to an effective tax rate of 66.9% for the three months ended June 30, 2016 .
Our effective tax rate in both periods is impacted by earnings attributable to noncontrolling interests in CF Industries Nitrogen, LLC (CFN) and Terra Nitrogen Company L.P. (TNCLP), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interests. As a result, earnings attributable to the noncontrolling interests of $21 million in the second quarter of 2017 and $36 million in the second quarter of 2016, which are included in pre-tax income, have the effect of reducing the effective tax rate in both periods. See Note 13—Noncontrolling Interests for additional information.
The effective tax rate for the three months ended June 30, 2017 is also impacted by the unrecognized tax benefit recorded by PLNL, which reduces our earnings before income taxes by $7 million but does not change our income tax provision as the adjustment is not tax effected. See Note 7—Equity Method Investments for additional information.
The effective tax rate for the three months ended June 30, 2016 was also higher than expected as a result of the impact of the reversal of prior period tax benefits from U.S. manufacturing profits deductions and an increase in our valuation allowance related to the realizability of Canadian deferred taxes, partially offset by the impact of certain transaction costs capitalized in a prior tax year that became deductible as a result of the termination of our proposed combination transaction with OCI N.V.

14

During the third quarter of 2016, one of our Canadian subsidiaries received a Notice of Reassessment from the Canada Revenue Agency (CRA) for tax years 2006 through 2009 asserting a disallowance of certain patronage allocations. The tax assessment of CAD $174 million (or approximately $134 million ), including provincial taxes but excluding any interest or penalties, is the result of an audit that was initiated by the CRA in January 2010 and involves the sole issue of whether certain patronage allocations meet the requirements for deductibility under the Income Tax Act of Canada. The reassessment has been appealed and a letter of credit in the amount of CAD $87 million (or approximately $67 million ) has been posted. We believe that it is more likely than not that the patronage allocation deduction will ultimately be sustained. In the event that we do not prevail in the appeal, we should be entitled to a U.S. foreign tax credit against any incremental Canadian tax paid. The competent authorities of Canada and the United States have been notified of the potential need for competent authority assistance.
As of June 30, 2017 and December 31, 2016 , we had prepaid income taxes in the amount of $34 million and $841 million , respectively. In June 2017, we received a federal tax refund of approximately $815 million from the carryback of certain U.S. tax losses from 2016 to prior tax periods.
During the second quarter of 2017, the valuation allowance for the net operating losses of a subsidiary of the Company that were recorded in prior periods was reduced by $12 million as the result of a statutory income tax rate change.
On July 6, 2017, the State of Illinois enacted an income tax rate increase that will impact future tax assets and liabilities as recorded by the Company. The impact of this rate change is approximately $5 million and will be recorded in the period of enactment.
10 .   Interest Expense
Details of interest expense are as follows:
 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
 
(in millions)
Interest on borrowings (1)
$
76

 
$
75

 
$
152

 
$
151

Fees on financing agreements (1)(2)
4

 
32

 
8

 
36

Interest on tax liabilities
—

 
—

 
1

 
1

Interest capitalized (3)
—

 
(46
)
 
(1
)
 
(89
)
Total interest expense
$
80

 
$
61

 
$
160

 
$
99

_______________________________________________________________________________

(1)  
See Note 11—Financing Agreements for additional information.
(2)  
Fees on financing agreements for both the three and six months ended June 30, 2016 includes $28 million of fees related to the termination of the tranche B commitment under the bridge credit agreement as a result of the termination of an agreement to combine between CF Holdings and OCI N.V.
(3)  
For the three and six months ended June 30, 2016 , amounts include interest capitalized for our capacity expansion projects, which were completed as of December 31, 2016.

11 .  Financing Agreements
Revolving Credit Agreement
We have a senior secured revolving credit agreement (the Revolving Credit Agreement) providing for a revolving credit facility of up to $750 million with a maturity of September 18, 2020. The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million . Borrowings under the Revolving Credit Agreement may be used for working capital and general corporate purposes. CF Industries may designate as borrowers one or more wholly owned subsidiaries that are organized in the United States or any state thereof or the District of Columbia.
Borrowings under the Revolving Credit Agreement may be denominated in dollars, Canadian dollars, euro and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin, and the borrowers are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

15

As of June 30, 2017 , we had excess borrowing capacity under the Revolving Credit Agreement of $695 million (net of outstanding letters of credit of $55 million ). There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2017 or December 31, 2016 , or during the six months ended June 30, 2017 . Maximum borrowings outstanding under the Revolving Credit Agreement during the six months ended June 30, 2016 were $150 million with a weighted-average annual interest rate of 1.85% .
The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of June 30, 2017 , we were in compliance with all covenants under the Revolving Credit Agreement.
Letters of Credit
In addition to the letters of credit outstanding under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue letters of credit up to $75 million . As of June 30, 2017 , approximately $70 million of letters of credit were outstanding under this agreement.
Senior Notes
Long-term debt presented on our consolidated balance sheets as of June 30, 2017 and December 31, 2016 consisted of the following Public Senior Notes (unsecured) and Senior Secured Notes:
 
Effective Interest Rate
 
June 30,
2017
 
December 31,
2016
 
 
Principal
 
Carrying Amount (1)
 
Principal
 
Carrying Amount (1)
 
 
 
(in millions)
Public Senior Notes:
 
 
 
 
 
 
 
 
 
6.875% due May 2018
7.344%
 
$
800

 
$
797

 
$
800

 
$
795

7.125% due May 2020
7.529%
 
800

 
792

 
800

 
791

3.450% due June 2023
3.562%
 
750

 
746

 
750

 
745

5.150% due March 2034
5.279%
 
750

 
739

 
750

 
739

4.950% due June 2043
5.031%
 
750

 
741

 
750

 
741

5.375% due March 2044
5.465%
 
750

 
741

 
750

 
741

Senior Secured Notes:
 
 
 
 
 
 
 
 
 
3.400% due December 2021
3.782%
 
500

 
492

 
500

 
491

4.500% due December 2026
4.759%
 
750

 
735

 
750

 
735

Total long-term debt
 
 
$
5,850

 
$
5,783

 
$
5,850

 
$
5,778

Less: Current portion
 
 
800

 
797

 
—

 
—

Long-term debt
 
 
$
5,050

 
$
4,986

 
$
5,850

 
$
5,778

_______________________________________________________________________________
(1)  
Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $12 million as of both June 30, 2017 and December 31, 2016 , and total deferred debt issuance costs were $55 million and $60 million as of June 30, 2017 and December 31, 2016 , respectively. 
Public Senior Notes
Under the indentures (including the applicable supplemental indentures) governing the senior notes due 2018, 2020, 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, and, in connection with the effectiveness of the November 2016 amendment to our Revolving Credit Agreement, CF Holdings' wholly owned subsidiaries CF Industries Enterprises, Inc. (CFE) and CF Industries Sales, LLC (CFS) became subsidiary guarantors of the Public Senior Notes.
Interest on the Public Senior Notes is payable semiannually, and the Public Senior Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.

16

Senior Secured Notes
On November 21, 2016, CF Industries issued $500 million aggregate principal amount of 3.400% senior secured notes due 2021 (the 2021 Notes) and $750 million aggregate principal amount of 4.500% senior secured notes due 2026 (the 2026 Notes, and together with the 2021 Notes, the Senior Secured Notes). The net proceeds, after deducting discounts and offering expenses, from the issuance and sale of the Senior Secured Notes were approximately $1.23 billion . CF Industries used approximately $1.18 billion of the net proceeds for the prepayment (including payment of a make-whole amount of approximately $170 million and accrued interest) in full of the outstanding $1.0 billion aggregate principal amount of the senior notes due 2022, 2025 and 2027 (Private Senior Notes) issued by CF Industries on September 24, 2015.
Interest on the Senior Secured Notes is payable semiannually on December 1 and June 1 beginning on June 1, 2017, and the Senior Secured Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.
12 .   Derivative Financial Instruments
We use derivative financial instruments to reduce our exposure to changes in commodity prices and foreign currency exchange rates.
Commodity Price Risk Management
Natural gas is the largest and most volatile component of the manufacturing cost for nitrogen-based products. We manage the risk of changes in natural gas prices primarily through the use of derivative financial instruments. The derivatives that we use for this purpose are primarily natural gas fixed price swaps and natural gas options traded in the OTC markets. These natural gas derivatives settle using primarily a NYMEX futures price index, which represents the basis for fair value at any given time. We enter into natural gas derivative contracts with respect to natural gas to be consumed by us in the future, and settlements of those derivative contracts are scheduled to coincide with our anticipated purchases of natural gas used to manufacture nitrogen products during those future periods. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. As a result, changes in fair value of these contracts are recognized in earnings. As of June 30, 2017 , we have natural gas derivative contracts covering periods through December 2018.
As of June 30, 2017 and December 31, 2016 , we had open natural gas derivative contracts for 112.3 million MMBtus (millions of British thermal units) and 183.0 million MMBtus, respectively. For the six months ended June 30, 2017 , we used derivatives to cover approximately 42% of our natural gas consumption.
Foreign Currency Exchange Rates
A portion of the costs for our capacity expansion projects at our Donaldsonville, Louisiana complex and Port Neal, Iowa complex were euro-denominated. In order to manage our exposure to changes in the euro to U.S. dollar currency exchange rates, we hedged our projected euro-denominated payments through the end of 2016 using foreign currency forward contracts.
As of June 30, 2017 , accumulated other comprehensive loss (AOCL) includes $7 million of pre-tax gains related to foreign currency derivatives that were originally designated as cash flow hedges. The hedges were de-designated as of December 31, 2013. The remaining balance in AOCL is being reclassified into income over the depreciable lives of the property, plant and equipment associated with the capacity expansion projects.
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,
Location
 
2017
 
2016
 
2017
 
2016
 
 
 
(in millions)
Natural gas derivatives
Cost of sales
 
$
(18
)
 
$
211

 
$
(71
)
 
$
190

Foreign exchange contracts
Other operating—net
 
—

 
(4
)
 
—

 
(1
)
Unrealized net (losses) gains recognized in income
 
 
(18
)
 
207

 
(71
)
 
189

Realized net losses
 
 
(3
)
 
(59
)
 
(2
)
 
(115
)
Net derivative (losses) gains
 
 
$
(21
)
 
$
148

 
$
(73
)
 
$
74


17

The fair values of derivatives on our consolidated balance sheets are shown below. As of June 30, 2017 and December 31, 2016 , none of our derivative instruments were designated as hedging instruments. See Note  8—Fair Value Measurements for additional information on derivative fair values.
 
Asset Derivatives
 
Liability Derivatives
 
Balance Sheet
Location
 
June 30,
2017
 
December 31,
2016
 
Balance Sheet
Location
 
June 30,
2017
 
December 31,
2016
 
 
 
(in millions)
 
 
 
(in millions)
Natural gas derivatives
Other current assets
 
$
2

 
$
52

 
Other current liabilities
 
$
(18
)
 
$
—

Natural gas derivatives
Other assets
 
—

 
4

 
Other liabilities
 
(5
)
 
(6
)
Total derivatives
 
 
$
2

 
$
56

 
 
 
$
(23
)
 
$
(6
)
Most of our International Swaps and Derivatives Association (ISDA) agreements contain credit-risk-related contingent features such as cross default provisions and credit support thresholds. In the event of certain defaults or a credit ratings downgrade, our counterparty may request early termination and net settlement of certain derivative trades or 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, 2017 and December 31, 2016 , the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $23 million and zero , respectively, which also approximates the fair value of the maximum amount of additional collateral that would need to be posted or assets needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. At June 30, 2017 , we had $100 thousand of cash collateral on deposit with one of our counterparties for derivative contracts. At December 31, 2016 , we had no cash collateral on deposit with counterparties for derivative contracts. The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event.
The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of June 30, 2017 and December 31, 2016 :
 
Amounts
presented in
consolidated
balance
sheets (1)
 
Gross amounts not offset in consolidated balance sheets
 
 
 
 
Financial
instruments
 
Cash
collateral
received
(pledged)
 
Net
amount
 
(in millions)
June 30, 2017
 

 
 

 
 

 
 

Total derivative assets
$
2

 
$
2

 
$
—

 
$
—

Total derivative liabilities
(23
)
 
(2
)
 
—

 
(21
)
Net derivative liabilities
$
(21
)
 
$
—

 
$
—

 
$
(21
)
December 31, 2016
 

 
 

 
 

 
 

Total derivative assets
$
56

 
$
6

 
$
—

 
$
50

Total derivative liabilities
(6
)
 
(6
)
 
—

 
—

Net derivative assets
$
50

 
$
—

 
$
—

 
$
50

_______________________________________________________________________________

(1)  
We report the fair values of our derivative assets and liabilities on a gross basis on our consolidated balance sheets. As a result, the gross amounts recognized and net amounts presented are the same.
We do not believe the contractually allowed netting, close-out netting or setoff of amounts owed to, or due from, the counterparties to our ISDA agreements would have a material effect on our financial position.

18

13 .   Noncontrolling Interests
A reconciliation of the beginning and ending balances of noncontrolling interests and distributions payable to noncontrolling interests in our consolidated balance sheets is provided below.
 
Six months ended 
 June 30,
 
2017
 
2016
 
CFN
 
TNCLP
 
Total
 
CFN
 
TNCLP
 
Total
 
(in millions)
Noncontrolling interests:
 
 
 

 
 
 
 
 
 

 
 
Beginning balance
$
2,806

 
$
338

 
$
3,144

 
$
—

 
$
352

 
$
352

Issuance of noncontrolling interest in CFN
—

 
—

 
—

 
2,792

 
—

 
2,792

Earnings attributable to noncontrolling interests
23

 
12

 
35

 
40

 
17

 
57

Declaration of distributions payable
(48
)
 
(11
)
 
(59
)
 
—

 
(20
)
 
(20
)
Ending balance
$
2,781

 
$
339

 
$
3,120

 
$
2,832

 
$
349

 
$
3,181

Distributions payable to noncontrolling interests:
 
 
 

 
 
 
 
 
 

 
 
Beginning balance
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Declaration of distributions payable
48

 
11

 
59

 
—

 
20

 
20

Distributions to noncontrolling interests
(48
)
 
(11
)
 
(59
)
 
—

 
(20
)
 
(20
)
Ending balance
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

CF Industries Nitrogen, LLC (CFN)
We commenced a strategic venture with CHS on February 1, 2016, at which time CHS purchased a minority equity interest in CFN, a subsidiary of CF Holdings, for $2.8 billion , which represented approximately 11% of the membership interest of CFN. We own the remaining membership interest. Under the terms of CFN's limited liability company agreement, each member’s percentage membership interest will reflect, over time, the impact of the profitability of CFN and any member contributions made to, and distributions received from, CFN. For financial reporting purposes, the assets, liabilities and earnings of the strategic venture are consolidated into our financial statements. CHS' interest in the strategic venture is recorded in noncontrolling interests in our consolidated financial statements. On February 1, 2016, CHS also began receiving 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. As a result of its minority equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN. We are also entitled to semi-annual cash distributions from CFN. The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts.
In the third quarter of 2017, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2017 in accordance with the CFN limited liability company agreement. On July 31, 2017, CFN distributed $59 million to CHS for the distribution period ended June 30, 2017.
Additionally, under the terms of the strategic venture, if our credit rating is reduced below certain levels by two of three specified credit rating agencies, we are required to make a non-refundable yearly payment of $5 million to CHS. In the fourth quarter of 2016, as a result of a reduction in our credit rating, we made a $5 million payment to CHS. The payment 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. We recognized this term of the strategic venture as an embedded derivative. As of June 30, 2017 and December 31, 2016, the embedded derivative liability of $29 million and $26 million , respectively, is included in other current liabilities and other liabilities on our consolidated balance sheet. The $3 million charge to reflect the change in fair value for the six months ended June 30, 2017 is included in other operating—net in our consolidated statement of operations. See Note 8—Fair Value Measurements for additional information.


19

Terra Nitrogen Company, L.P. (TNCLP)
TNCLP is a master limited partnership (MLP) that owns a nitrogen fertilizer manufacturing facility in Verdigris, Oklahoma. We own approximately 75.3% of TNCLP through general and limited partnership interests. Outside investors own the remaining approximately 24.7% of the limited partnership. For financial reporting purposes, the assets, liabilities and earnings of the partnership are consolidated into our financial statements. The outside investors' limited partnership interests in the partnership are recorded in noncontrolling interests in our consolidated financial statements. The noncontrolling interest represents the noncontrolling unitholders' interest in the earnings and equity of TNCLP. Affiliates of CF Industries are required to purchase all of TNCLP's fertilizer products at market prices as defined in the Amendment to the General and Administrative Services and Product Offtake Agreement, dated September 28, 2010.
TNCLP makes cash distributions to the general and limited partners based on formulas defined within its First Amended and Restated Agreement of Limited Partnership (as amended, the TNCLP Agreement of Limited Partnership). Cash available for distribution (Available Cash) is defined in the TNCLP Agreement of Limited Partnership generally as all cash receipts less all cash disbursements, less certain reserves (including reserves for future operating and capital needs) established as the general partner determines in its reasonable discretion to be necessary or appropriate. Changes in working capital affect Available Cash, as increases in the amount of cash invested in working capital items (such as increases in receivables or inventory and decreases in accounts payable) reduce Available Cash, while declines in the amount of cash invested in working capital items increase Available Cash. Cash distributions to the limited partners and general partner vary depending on the extent to which the cumulative distributions exceed certain target threshold levels set forth in the TNCLP Agreement of Limited Partnership.
In each of the first and second quarters of 2017 and 2016 , the minimum quarterly distributions under the TNCLP Agreement of Limited Partnership were satisfied, which entitled Terra Nitrogen GP Inc. (TNGP), the general partner of TNCLP and an indirect wholly owned subsidiary of CF Holdings, to receive incentive distributions on its general partner interests (in addition to minimum quarterly distributions). TNGP has assigned its right to receive such incentive distributions to an affiliate of TNGP that is also an indirect wholly owned subsidiary of CF Holdings. The earnings attributed to our general partner interest in excess of the threshold levels for the six months ended June 30, 2017 and 2016 , were $14 million and $47 million , respectively.
As of June 30, 2017 , TNGP and its affiliates owned approximately 75.1% of TNCLP's outstanding common units. When not more than 25% of TNCLP's issued and outstanding common units are held by persons other than TNGP and its affiliates (collectively, non-affiliated persons), as was the case at June 30, 2017 , TNCLP, at TNGP's sole discretion, may call or assign to TNGP or its affiliates, TNCLP's right to acquire all, but not less than all, such outstanding common units held by non-affiliated persons. If TNGP elects to acquire all outstanding common units, TNCLP is required to give at least 30 but not more than 60  days' notice of TNCLP's decision to purchase the outstanding common units, and the purchase price per unit would be the greater of (1) the average of the previous 20 trading days' closing prices as of the date five days before the purchase is announced or (2) the highest price paid by TNGP or any of its affiliates for any unit within the 90  days preceding the date the purchase is announced.
Internal Revenue Service Regulation Impacting Master Limited Partnerships
Currently, no federal income taxes are paid by TNCLP due to its MLP status. Partnerships are generally not subject to federal income tax, although publicly traded partnerships (such as TNCLP) are treated as corporations for federal income tax purposes (and therefore are subject to federal income tax), unless at least 90% of the partnership's gross income is "qualifying income" as defined in Section 7704 of the Internal Revenue Code of 1986, as amended, and the partnership is not required to register as an investment company under the Investment Company Act of 1940. Any change in the tax treatment of income from fertilizer-related activities as qualifying income could cause TNCLP to be treated as a corporation for federal income tax purposes. If TNCLP were taxed as a corporation, under current law, due to its current ownership interest, CF Industries would qualify for a partial dividends received deduction on the dividends received from TNCLP. Therefore, we would not expect a change in the tax treatment of TNCLP to have a material impact on the consolidated financial condition or results of operations of CF Holdings.
On January 19, 2017, the Internal Revenue Service (IRS) issued final regulations on the types of income and activities that constitute or generate qualifying income of a MLP. For calendar year MLPs, the effective date of the regulations is January 1, 2018. The regulations have the effect of limiting the types of income and activities that qualify under the MLP rules, subject to certain transition provisions. The regulations define the activities that generate qualifying income from certain processing or refining and transportation activities with respect to any mineral or natural resource (including fertilizer) as activities that generate qualifying income, but the regulations reserve on specifics regarding fertilizer-related activities. We continue to monitor these IRS regulatory activities.

20

14 .   Defined Benefit Pension Plans
We contributed $69 million to our pension plans during the six months ended June 30, 2017, and expect to contribute an additional $12 million , or a total of approximately $81 million for the full year 2017. The contributions include a voluntary contribution of $59 million made to our U.S. pension plan in the second quarter.

15 .   Accumulated Other Comprehensive Income (Loss)
Changes to accumulated other comprehensive income (loss) are as follows:
 
Foreign
Currency
Translation
Adjustment
 
Unrealized
Gain (Loss)
on
Securities
 
Unrealized
Gain (Loss)
on
Derivatives
 
Defined
Benefit
Plans
 
Accumulated
Other
Comprehensive
Income (Loss)
 
(in millions)
Balance as of December 31, 2015
$
(198
)
 
$
1

 
$
5

 
$
(58
)
 
$
(250
)
Loss arising during the period
—

 
—

 
—

 
(3
)
 
(3
)
Effect of exchange rate changes and deferred taxes
10

 
—

 
—

 
—

 
10

Balance as of June 30, 2016
$
(188
)
 
$
1

 
$
5

 
$
(61
)
 
$
(243
)
Balance as of December 31, 2016
$
(272
)
 
$
1

 
$
5

 
$
(132
)
 
$
(398
)
Gain arising during the period
—

 
—

 
—

 
7

 
7

Effect of exchange rate changes and deferred taxes
72

 
—

 
—

 
(6
)
 
66

Balance as of June 30, 2017
$
(200
)
 
$
1

 
$
5

 
$
(131
)
 
$
(325
)
There were no amounts reclassified out of accumulated other comprehensive income (loss) to earnings during the six months ended June 30, 2017 and 2016 .
 


21

16 .  Contingencies
Litigation
West Fertilizer Co.
On April 17, 2013, there was a fire and explosion at the West Fertilizer Co. fertilizer storage and distribution facility in West, Texas. According to published reports, 15 people were killed and approximately 200 people were injured in the incident, and the fire and explosion damaged or destroyed a number of homes and buildings around the facility. Various subsidiaries of CF Industries Holdings, Inc. (the CF Entities) have been named as defendants along with other companies in lawsuits filed in 2013, 2014 and 2015 in the District Court of McLennan County, Texas by the City of West, individual residents of the County and other parties seeking recovery for damages allegedly sustained as a result of the explosion. The cases have been consolidated for discovery and pretrial proceedings in the District Court of McLennan County under the caption "In re: West Explosion Cases." The two-year statute of limitations expired on April 17, 2015. As of that date, over 400 plaintiffs had filed claims, including at least 9 entities, 325 individuals, and 80 insurance companies. Plaintiffs allege various theories of negligence, strict liability, and breach of warranty under Texas law. Although we do not own or operate the facility or directly sell our products to West Fertilizer Co., products that the CF Entities have manufactured and sold to others have been delivered to the facility and may have been stored at the West facility at the time of the incident.
The Court granted in part and denied in part the CF Entities' Motions for Summary Judgment in August 2015. Over one hundred forty cases have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. The next trial is scheduled to begin on January 16, 2018. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits. The Company cannot provide a range of reasonably possible loss due to the lack of damages discovery for many of the remaining claims and the uncertain nature of this litigation, including uncertainties around the potential allocation of responsibility by a jury to other defendants or responsible third parties. The recognition of a potential loss in the future in the West Fertilizer Co. litigation could negatively affect our results in the period of recognition. However, based upon currently available information, including available insurance coverage, we do not believe that this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Other Litigation
From time to time, we are subject to ordinary, routine legal proceedings related to the usual conduct of our business, including proceedings regarding public utility and transportation rates, environmental matters, taxes and permits relating to the operations of our various plants and facilities. Based on the information available as of the date of this filing, we believe that the ultimate outcome of these routine matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Environmental
Louisiana Environmental Matters
Clean Air Act—Section 185 Fee
Our Donaldsonville nitrogen complex is located in a five-parish region near Baton Rouge, Louisiana that, as of 2005, was designated as being in "severe" nonattainment with respect to the national ambient air quality standard (NAAQS) for ozone (the 1-hour ozone standard) pursuant to the Federal Clean Air Act (the Act). Section 185 of the Act requires states, in their state implementation plans, to levy a fee (Section 185 fee) on major stationary sources (such as the Donaldsonville complex) located in a severe nonattainment area that did not meet the 1-hour ozone standard by November 30, 2005. The fee was to be assessed for each calendar year (beginning in 2006) until the area achieved compliance with the ozone NAAQS.
Prior to the imposition of Section 185 fees, the Environmental Protection Agency (EPA) adopted a new ozone standard (the 8-hour ozone standard) and rescinded the 1-hour ozone standard. The Baton Rouge area was designated as a "moderate" nonattainment area with respect to the 8-hour ozone standard. However, because Section 185 fees had never been assessed prior to the rescission of the 1-hour ozone standard (rescinded prior to the November 30, 2005 ozone attainment deadline), the EPA concluded in a 2004 rulemaking implementing the 8-hour ozone standard that the Act did not require states to assess Section 185 fees. As a result, Section 185 fees were not assessed against us and other companies located in the Baton Rouge area.
In 2006, the federal D.C. Circuit Court of Appeals rejected the EPA's position and held that Section 185 fees were controls that must be maintained and fees should have been assessed under the Act. In January 2008, the U.S. Supreme Court declined to accept the case for review, making the appellate court's decision final.

22

In July 2011, the EPA approved a revision to Louisiana's air pollution program that eliminated the requirement for Baton Rouge area companies to pay Section 185 fees, based on Baton Rouge's ultimate attainment of the 1-hour standard through permanent and enforceable emissions reductions. The EPA's approval of the Louisiana air program revision became effective on August 8, 2011. However, a July 2011 decision by the federal D.C. Circuit Court of Appeals struck down a similar, but perhaps distinguishable, EPA guidance document regarding alternatives to Section 185 fees. At this time, the viability of EPA's approval of Louisiana's elimination of Section 185 fees is uncertain. Regardless of the approach ultimately adopted by the EPA, we expect that it is likely to be challenged by the environmental community, the states, and/or affected industries. Therefore, the costs associated with compliance with the Act cannot be determined at this time, and we cannot reasonably estimate the impact on our consolidated financial position, results of operations or cash flows.
Since 2011, the area has seen significant reductions in ozone levels, attributable to federal and state regulations and community involvement. On December 15, 2016, the EPA redesignated the Baton Rouge Nonattainment Area as "attainment" with the 2008 8-hour ozone standard. However, based on 2013-2015 air quality monitoring data, the State of Louisiana has recommended that the EPA designate the Baton Rouge area as "non-attainment" pursuant to the updated 2015 8-hour ozone standard. Although the EPA was supposed to designate areas under the 2015 standard by October 2017, the EPA announced in June 2017 that it was extending the deadline to establish designations under the 2015 ozone standard until October 2018.
Clean Air Act Information Request
On February 26, 2009, we received a letter from the EPA under Section 114 of the Act requesting information and copies of records relating to compliance with New Source Review and New Source Performance Standards at our Donaldsonville facility. We have completed the submittal of all requested information. There has been no further contact from the EPA regarding this matter.
Other
CERCLA/Remediation Matters
From time to time, we receive notices from governmental agencies or third parties alleging that we are a potentially responsible party at certain cleanup sites under CERCLA or other environmental cleanup laws. In 2011, we received a notice from the Idaho Department of Environmental Quality (IDEQ) that alleged that we were a potentially responsible party for the cleanup of a former phosphate mine site we owned in the late 1950s and early 1960s located in Georgetown Canyon, Idaho. The current owner of the property and a former mining contractor received similar notices for the site. In 2014, we and the current property owner entered into a Consent Order with IDEQ and the U.S. Forest Service to conduct a remedial investigation and feasibility study of the site. In 2015, we and several other parties received a notice that the U.S. Department of the Interior and other trustees intend to undertake a natural resource damage assessment for a group of former phosphate mines in southeast Idaho, including the former Georgetown Canyon mine. We are not able to estimate at this time our potential liability, if any, with respect to the cleanup of the site or a possible claim for natural resource damages. However, based on currently available information, we do not expect the remedial or financial obligations to which we may be subject involving this or other cleanup sites will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

23

17 .  Segment Disclosures
Our reportable segments consist of ammonia, granular urea, UAN, AN and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting of selling, general and administrative expenses and other operating—net) and non-operating expenses (interest and income taxes) are centrally managed and are not included in the measurement of segment profitability reviewed by management.
Our assets, with the exception of goodwill, are not monitored by or reported to our chief operating decision maker by segment; therefore, we do not present total assets by segment. Goodwill by segment is presented in Note  6—Goodwill and Other Intangible Assets .
Segment data for sales, cost of sales and gross margin for the three and six months ended June 30, 2017 and 2016 are presented in the tables below.
 
Ammonia
 
Granular
Urea (1)
 
UAN (1)
 
AN (1)
 
Other (1)
 
Consolidated
 
(in millions)
Three months ended June 30, 2017
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
389

 
$
259

 
$
286

 
$
112

 
$
78

 
$
1,124

Cost of sales
302

 
235

 
248

 
102

 
65

 
952

Gross margin
$
87

 
$
24

 
$
38

 
$
10

 
$
13

 
172

Total other operating costs and expenses
 

 
 

 
 

 
 
 
 

 
59

Equity in losses of operating affiliates
 

 
 

 
 

 
 
 
 

 
(6
)
Operating earnings
 

 
 

 
 

 
 
 
 

 
$
107

Three months ended June 30, 2016
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
358

 
$
240

 
$
370

 
$
90

 
$
76

 
$
1,134

Cost of sales
152

 
118

 
197

 
90

 
50

 
607

Gross margin
$
206

 
$
122

 
$
173

 
$
—

 
$
26

 
527

Total other operating costs and expenses
 

 
 

 
 

 
 
 
 

 
280

Equity in losses of operating affiliates
 

 
 

 
 

 
 
 
 

 
(9
)
Operating earnings
 

 
 

 
 

 
 
 
 

 
$
238

 
Ammonia
 
Granular
Urea (1)
 
UAN (1)
 
AN (1)
 
Other (1)
 
Consolidated
 
(in millions)
Six months ended June 30, 2017
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
671

 
$
497

 
$
603

 
$
237

 
$
153

 
$
2,161

Cost of sales
567

 
448

 
530

 
208

 
130

 
1,883

Gross margin
$
104

 
$
49

 
$
73

 
$
29

 
$
23

 
278

Total other operating costs and expenses
 

 
 

 
 

 
 
 
 

 
111

Equity in losses of operating affiliates
 

 
 

 
 

 
 
 
 

 
(3
)
Operating earnings
 

 
 

 
 

 
 
 
 

 
$
164

Six months ended June 30, 2016
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
625

 
$
475

 
$
679

 
$
215

 
$
144

 
$
2,138

Cost of sales
356

 
293

 
428

 
202

 
115

 
1,394

Gross margin
$
269

 
$
182

 
$
251

 
$
13

 
$
29

 
744

Total other operating costs and expenses
 

 
 

 
 

 
 
 
 

 
400

Equity in losses of operating affiliates
 

 
 

 
 

 
 
 
 

 
(9
)
Operating earnings
 

 
 

 
 

 
 
 
 

 
$
335

_______________________________________________________________________________

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


24

18 .   Condensed Consolidating Financial Statements
The following condensed consolidating financial information is presented in accordance with SEC Regulation S-X Rule 3-10, Financial statements of guarantors and issuers of guaranteed securities registered or being registered , and relates to (i) the senior notes due 2018, 2020, 2023, 2034, 2043 and 2044 (described in Note 11—Financing Agreements and referred to in this report as the Public Senior Notes) issued by CF Industries, Inc. (CF Industries), a 100% owned subsidiary of CF Industries Holdings, Inc. (Parent), and guarantees of the Public Senior Notes by Parent and by CFE and CFS (the Subsidiary Guarantors), which are 100% owned subsidiaries of Parent, and (ii) debt securities of CF Industries (Other Debt Securities), and guarantees thereof by Parent and the Subsidiary Guarantors, that may be offered and sold from time to time under registration statements that may be filed by Parent, CF Industries and the Subsidiary Guarantors with the SEC.
In the event that a subsidiary of Parent, other than CF Industries, becomes a borrower or a guarantor under the Revolving Credit Agreement (or any renewal, replacement or refinancing thereof), such subsidiary would be required to become a guarantor of the Public Senior Notes, provided that such requirement will no longer apply with respect to the Public Senior Notes due 2023, 2034, 2043 and 2044 following the repayment of the Public Senior Notes due 2018 and 2020 or the subsidiaries of Parent, other than CF Industries, otherwise becoming no longer subject to such a requirement to guarantee the Public Senior Notes due 2018 and 2020. CFE and CFS became guarantors of the Public Senior Notes as a result of this requirement on November 21, 2016.
All of the guarantees of the Public Senior Notes are, and we have assumed for purposes of this presentation of condensed consolidating financial information that the guarantees of any Other Debt Securities would be, full and unconditional (as such term is defined in SEC Regulation S-X Rule 3-10(h)) and joint and several. The guarantee of a Subsidiary Guarantor will be automatically released with respect to a series of the Public Senior Notes (1) upon the release, discharge or termination of such Subsidiary Guarantor’s guarantee of the Revolving Credit Agreement (or any renewal, replacement or refinancing thereof), (2) upon legal defeasance with respect to the Public Senior Notes of such series or satisfaction and discharge of the indenture with respect to such series of Public Senior Notes or (3) in the case of the Public Senior Notes due 2023, 2034, 2043 and 2044, upon the later to occur of (a) the discharge, termination or release of, or the release of such Subsidiary Guarantor from its obligations under, such Subsidiary Guarantor’s guarantee of the Public Senior Notes due 2018, including, without limitation, any such discharge, termination or release as a result of retirement, discharge or legal or covenant defeasance of, or satisfaction and discharge of the supplemental indenture governing, the Public Senior Notes due 2018, and (b) the discharge, termination or release of, or the release of such Subsidiary Guarantor from its obligations under, such Subsidiary Guarantor’s guarantee of the Public Senior Notes due 2020, including, without limitation, any such discharge, termination or release as a result of retirement, discharge or legal or covenant defeasance of, or satisfaction and discharge of the supplemental indenture governing, the Public Senior Notes due 2020.
For purposes of the presentation of condensed consolidating financial information, the subsidiaries of Parent other than CF Industries, CFE and CFS are referred to as the Non-Guarantors.
Presented below are condensed consolidating statements of operations for Parent, CF Industries, the Subsidiary Guarantors and the Non-Guarantors for the three and six months ended June 30, 2017 and 2016 , condensed consolidating statements of cash flows for Parent, CF Industries, the Subsidiary Guarantors and the Non-Guarantors for the six months ended June 30, 2017 and 2016 , and condensed consolidating balance sheets for Parent, CF Industries, the Subsidiary Guarantors and the Non-Guarantors as of June 30, 2017 and December 31, 2016 . To reflect the additional Subsidiary Guarantors that became effective on November 21, 2016, the condensed consolidating statement of operations for the three and six months ended June 30, 2016 and statement of cash flows for the six months ended June 30, 2016 have been restated to reflect the separate Subsidiary Guarantors. The condensed consolidating financial information presented below is not necessarily indicative of the financial position, results of operations, comprehensive income or cash flows of Parent, CF Industries, the Subsidiary Guarantors or the Non-Guarantors on a stand-alone basis.
In these condensed consolidating financial statements, investments in subsidiaries are presented under the equity method, in which our investments are recorded at cost and adjusted for our ownership share of a subsidiary's cumulative results of operations, distributions and other equity changes, and the eliminating entries reflect primarily intercompany transactions such as sales, accounts receivable and accounts payable and the elimination of equity investments and earnings of subsidiaries. Two of our consolidated entities have made elections to be taxed as partnerships for U.S. federal income tax purposes and are included in the non-guarantor column. Due to the partnership tax treatment, these subsidiaries do not record taxes on their financial statements. The tax provision pertaining to the income of these partnerships, plus applicable deferred tax balances are reflected on the financial statements of the parent company owner that is included in the subsidiary guarantors column in the following financial information. Liabilities related to benefit plan obligations are reflected on the legal entity that funds the obligation, while the benefit plan expense is included on the legal entity to which the employee provides services.

25

Condensed Consolidating Statement of Operations
 
Three months ended June 30, 2017
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net sales
$
—

 
$
111

 
$
903

 
$
833

 
$
(723
)
 
$
1,124

Cost of sales
—

 
71

 
870

 
734

 
(723
)
 
952

Gross margin
—

 
40

 
33

 
99

 
—

 
172

Selling, general and administrative expenses
2

 
3

 
27

 
17

 
—

 
49

Other operating—net
—

 
(1
)
 
1

 
10

 
—

 
10

Total other operating costs and expenses
2

 
2

 
28

 
27

 
—

 
59

Equity in losses of operating affiliates
—

 
—

 
—

 
(6
)
 
—

 
(6
)
Operating (loss) earnings
(2
)
 
38

 
5

 
66

 
—

 
107

Interest expense
—

 
80

 
9

 
2

 
(11
)
 
80

Interest income
—

 
(8
)
 
(1
)
 
(4
)
 
11

 
(2
)
Net earnings of wholly owned subsidiaries
(4
)
 
(27
)
 
(42
)
 
—

 
73

 
—

Earnings (loss) before income taxes
2

 
(7
)
 
39

 
68

 
(73
)
 
29

Income tax (benefit) provision
(1
)
 
(11
)
 
15

 
2

 
—

 
5

Net earnings
3

 
4

 
24

 
66

 
(73
)
 
24

Less: Net earnings attributable to noncontrolling interests
—

 
—

 
—

 
21

 
—

 
21

Net earnings attributable to common stockholders
$
3

 
$
4

 
$
24

 
$
45

 
$
(73
)
 
$
3


Condensed Consolidating Statement of Comprehensive Income
 
Three months ended June 30, 2017
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net earnings
$
3

 
$
4

 
$
24

 
$
66

 
$
(73
)
 
$
24

Other comprehensive income
53

 
53

 
37

 
50

 
(140
)
 
53

Comprehensive income
56

 
57

 
61

 
116

 
(213
)
 
77

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
21

 
—

 
21

Comprehensive income attributable to common stockholders
$
56

 
$
57

 
$
61

 
$
95

 
$
(213
)
 
$
56









26

Condensed Consolidating Statement of Operations
 
Six months ended June 30, 2017
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net sales
$
—

 
$
201

 
$
1,725

 
$
1,729

 
$
(1,494
)
 
$
2,161

Cost of sales
—

 
122

 
1,763

 
1,492

 
(1,494
)
 
1,883

Gross margin
—

 
79

 
(38
)
 
237

 
—

 
278

Selling, general and administrative expenses
2

 
5

 
55

 
33

 
—

 
95

Other operating—net
—

 
(2
)
 
2

 
16

 
—

 
16

Total other operating costs and expenses
2

 
3

 
57

 
49

 
—

 
111

Equity in losses of operating affiliates
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Operating (loss) earnings
(2
)
 
76

 
(95
)
 
185

 
—

 
164

Interest expense
—

 
161

 
20

 
3

 
(24
)
 
160

Interest income
—

 
(19
)
 
(2
)
 
(6
)
 
24

 
(3
)
Net loss (earnings) of wholly owned subsidiaries
19

 
(24
)
 
(140
)
 
—

 
145

 
—

(Loss) earnings before income taxes
(21
)
 
(42
)
 
27

 
188

 
(145
)
 
7

Income tax (benefit) provision
(1
)
 
(23
)
 
10

 
6

 
—

 
(8
)
Net (loss) earnings
(20
)
 
(19
)
 
17

 
182

 
(145
)
 
15

Less: Net earnings attributable to noncontrolling interests
—

 
—

 
—

 
35

 
—

 
35

Net (loss) earnings attributable to common stockholders
$
(20
)
 
$
(19
)
 
$
17

 
$
147

 
$
(145
)
 
$
(20
)

Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2017
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net (loss) earnings
$
(20
)
 
$
(19
)
 
$
17

 
$
182

 
$
(145
)
 
$
15

Other comprehensive income
73

 
73

 
49

 
68

 
(190
)
 
73

Comprehensive income
53

 
54

 
66

 
250

 
(335
)
 
88

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
35

 
—

 
35

Comprehensive income attributable to common stockholders
$
53

 
$
54

 
$
66

 
$
215

 
$
(335
)
 
$
53


27

Condensed Consolidating Statement of Operations
 
Three months ended June 30, 2016
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net sales
$
—

 
$
57

 
$
940

 
$
767

 
$
(630
)
 
$
1,134

Cost of sales
—

 
78

 
646

 
513

 
(630
)
 
607

Gross margin
—

 
(21
)
 
294

 
254

 
—

 
527

Selling, general and administrative expenses
1

 
3

 
33

 
15

 
—

 
52

Transaction costs
(56
)
 
—

 
221

 
—

 
—

 
165

Other operating—net
1

 
(1
)
 
4

 
59

 
—

 
63

Total other operating costs and expenses
(54
)
 
2

 
258

 
74

 
—

 
280

Equity in losses of operating affiliates
—

 
—

 
—

 
(9
)
 
—

 
(9
)
Operating earnings (loss)
54

 
(23
)
 
36

 
171

 
—

 
238

Interest expense
—

 
76

 
49

 
(44
)
 
(20
)
 
61

Interest income
—

 
(15
)
 
(1
)
 
(5
)
 
20

 
(1
)
Net earnings of wholly owned subsidiaries
(23
)
 
(61
)
 
(178
)
 
—

 
262

 
—

Earnings (loss) before income taxes
77

 
(23
)
 
166

 
220

 
(262
)
 
178

Income tax provision (benefit)
30

 
(46
)
 
86

 
25

 
—

 
95

Net earnings
47

 
23

 
80

 
195

 
(262
)
 
83

Less: Net earnings attributable to noncontrolling interest
—

 
—

 
—

 
36

 
—

 
36

Net earnings attributable to common stockholders
$
47

 
$
23

 
$
80

 
$
159

 
$
(262
)
 
$
47


Condensed Consolidating Statement of Comprehensive Income (Loss)
 
Three months ended June 30, 2016
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net earnings
$
47

 
$
23

 
$
80

 
$
195

 
$
(262
)
 
$
83

Other comprehensive loss
(41
)
 
(41
)
 
(40
)
 
—

 
81

 
(41
)
Comprehensive income (loss)
6

 
(18
)
 
40

 
195

 
(181
)
 
42

Less: Comprehensive income attributable to noncontrolling interest
—

 
—

 
—

 
36

 
—

 
36

Comprehensive income (loss) attributable to common stockholders
$
6

 
$
(18
)
 
$
40

 
$
159

 
$
(181
)
 
$
6



28

Condensed Consolidating Statement of Operations
 
Six months ended June 30, 2016
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net sales
$
—

 
$
202

 
$
1,743

 
$
1,509

 
$
(1,316
)
 
$
2,138

Cost of sales
—

 
126

 
1,481

 
1,103

 
(1,316
)
 
1,394

Gross margin
—

 
76

 
262

 
406

 
—

 
744

Selling, general and administrative expenses
2

 
4

 
62

 
29

 
—

 
97

Transaction costs
(46
)
 
—

 
224

 
1

 
—

 
179

Other operating—net
—

 
—

 
8

 
116

 
—

 
124

Total other operating costs and expenses
(44
)
 
4

 
294

 
146

 
—

 
400

Equity in losses of operating affiliates
—

 
—

 
—

 
(9
)
 
—

 
(9
)
Operating earnings (loss)
44

 
72

 
(32
)
 
251

 
—

 
335

Interest expense
—

 
162

 
61

 
(76
)
 
(48
)
 
99

Interest income
—

 
(32
)
 
(6
)
 
(12
)
 
48

 
(2
)
Net earnings of wholly owned subsidiaries
(55
)
 
(76
)
 
(291
)
 
—

 
422

 
—

Other non-operating—net
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Earnings before income taxes
99

 
18

 
204

 
341

 
(422
)
 
240

Income tax provision (benefit)
26

 
(37
)
 
103

 
18

 
—

 
110

Net earnings
73

 
55

 
101

 
323

 
(422
)
 
130

Less: Net earnings attributable to noncontrolling interest
—

 
—

 
—

 
57

 
—

 
57

Net earnings attributable to common stockholders
$
73

 
$
55

 
$
101

 
$
266

 
$
(422
)
 
$
73


Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2016
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Net earnings
$
73

 
$
55

 
$
101

 
$
323

 
$
(422
)
 
$
130

Other comprehensive income
7

 
7

 
7

 
—

 
(14
)
 
7

Comprehensive income
80

 
62

 
108

 
323

 
(436
)
 
137

Less: Comprehensive income attributable to noncontrolling interest
—

 
—

 
—

 
57

 
—

 
57

Comprehensive income attributable to common stockholders
$
80

 
$
62

 
$
108

 
$
266

 
$
(436
)
 
$
80



29

Condensed Consolidating Balance Sheet
 
June 30, 2017
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non- Guarantors
 
Eliminations
and
Reclassifications
 
Consolidated
 
(in millions)
Assets
 

 
 

 
 
 
 

 
 

 
 

Current assets:
 

 
 

 
 
 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
31

 
$
1,406

 
$
564

 
$
—

 
$
2,001

Restricted cash
—

 
—

 
—

 
4

 
—

 
4

Accounts and notes receivable—net
12

 
902

 
1,589

 
311

 
(2,532
)
 
282

Inventories
—

 
—

 
143

 
182

 
—

 
325

Prepaid income taxes
—

 
—

 
21

 
13

 
—

 
34

Other current assets
—

 
—

 
19

 
10

 
—

 
29

Total current assets
12

 
933

 
3,178

 
1,084

 
(2,532
)
 
2,675

Property, plant and equipment—net
—

 
—

 
125

 
9,316

 
—

 
9,441

Deferred income taxes
—

 
22

 
—

 
—

 
(22
)
 
—

Investments in affiliates
3,765

 
9,464

 
6,629

 
120

 
(19,858
)
 
120

Due from affiliates
571

 
—

 
—

 
—

 
(571
)
 
—

Goodwill
—

 
—

 
2,063

 
297

 
—

 
2,360

Other assets
—

 
82

 
96

 
404

 
(242
)
 
340

Total assets
$
4,348

 
$
10,501

 
$
12,091

 
$
11,221

 
$
(23,225
)
 
$
14,936

Liabilities and Equity
 

 
 

 
 
 
 

 
 

 
 

Current liabilities:
 

 
 

 
 
 
 

 
 

 
 

Accounts and notes payable and accrued expenses
$
1,078

 
$
369

 
$
1,197

 
$
504

 
$
(2,532
)
 
$
616

Customer advances
—

 
—

 
5

 
—

 
—

 
5

Current portion of long-term debt
—

 
797

 
—

 
—

 
—

 
797

Other current liabilities
—

 
—

 
20

 
3

 
—

 
23

Total current liabilities
1,078

 
1,166

 
1,222

 
507

 
(2,532
)
 
1,441

Long-term debt
—

 
4,986

 
169

 
73

 
(242
)
 
4,986

Deferred income taxes
—

 
—

 
1,479

 
175

 
(22
)
 
1,632

Due to affiliates
—

 
571

 
—

 
—

 
(571
)
 
—

Other liabilities
—

 
15

 
256

 
216

 
—

 
487

Equity:
 

 
 

 
 
 
 

 
 

 
 

Stockholders' equity:
 

 
 

 
 
 
 

 
 

 
 

Preferred stock
—

 
—

 
—

 
—

 
—

 
—

Common stock
2

 
—

 
—

 
4,921

 
(4,921
)
 
2

Paid-in capital
1,388

 
(13
)
 
9,505

 
1,783

 
(11,275
)
 
1,388

Retained earnings
2,205

 
4,101

 
(310
)
 
701

 
(4,492
)
 
2,205

Treasury stock
—

 
—

 
—

 
—

 
—

 
—

Accumulated other comprehensive loss
(325
)
 
(325
)
 
(222
)
 
(283
)
 
830

 
(325
)
Total stockholders' equity
3,270

 
3,763

 
8,973

 
7,122

 
(19,858
)
 
3,270

Noncontrolling interests
—

 
—

 
(8
)
 
3,128

 
—

 
3,120

Total equity
3,270

 
3,763

 
8,965

 
10,250

 
(19,858
)
 
6,390

Total liabilities and equity
$
4,348

 
$
10,501

 
$
12,091

 
$
11,221

 
$
(23,225
)
 
$
14,936


30

Condensed Consolidating Balance Sheet
 
December 31, 2016
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non- Guarantors
 
Eliminations
and
Reclassifications
 
Consolidated
 
(in millions)
Assets
 

 
 

 
 
 
 

 
 

 
 

Current assets:
 

 
 

 
 
 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
36

 
$
878

 
$
250

 
$
—

 
$
1,164

Restricted cash
—

 
—

 
—

 
5

 
—

 
5

Accounts and notes receivable—net
20

 
1,259

 
1,418

 
495

 
(2,956
)
 
236

Inventories
—

 
—

 
164

 
175

 
—

 
339

Prepaid income taxes
—

 
—

 
839

 
2

 
—

 
841

Other current assets
—

 
—

 
59

 
11

 
—

 
70

Total current assets
20

 
1,295

 
3,358

 
938

 
(2,956
)
 
2,655

Property, plant and equipment—net
—

 
—

 
131

 
9,521

 
—

 
9,652

Investments in affiliates
3,711

 
9,370

 
6,019

 
139

 
(19,100
)
 
139

Due from affiliates
571

 
—

 
—

 
—

 
(571
)
 
—

Goodwill
—

 
—

 
2,064

 
281

 
—

 
2,345

Other assets
—

 
85

 
101

 
385

 
(231
)
 
340

Total assets
$
4,302

 
$
10,750

 
$
11,673

 
$
11,264

 
$
(22,858
)
 
$
15,131

Liabilities and Equity
 

 
 

 
 
 
 

 
 

 
 

Current liabilities:
 

 
 

 
 
 
 

 
 

 
 

Accounts and notes payable and accrued expenses
$
954

 
$
418

 
$
1,505

 
$
717

 
$
(2,956
)
 
$
638

Income taxes payable
—

 
—

 
—

 
1

 
—

 
1

Customer advances
—

 
—

 
42

 
—

 
—

 
42

Other current liabilities
—

 
—

 
5

 
—

 
—

 
5

Total current liabilities
954

 
418

 
1,552

 
718

 
(2,956
)
 
686

Long-term debt
—

 
5,903

 
39

 
67

 
(231
)
 
5,778

Deferred income taxes
—

 
90

 
1,374

 
166

 
—

 
1,630

Due to affiliates
—

 
571

 
—

 
—

 
(571
)
 
—

Other liabilities
—

 
59

 
270

 
216

 
—

 
545

Equity:
 

 
 

 
 
 
 

 
 

 
 

Stockholders' equity:
 

 
 

 
 
 
 

 
 

 
 

Preferred stock
—

 
—

 
—

 
—

 
—

 
—

Common stock
2

 
—

 
—

 
4,383

 
(4,383
)
 
2

Paid-in capital
1,380

 
(13
)
 
9,045

 
2,246

 
(11,278
)
 
1,380

Retained earnings
2,365

 
4,120

 
(329
)
 
668

 
(4,459
)
 
2,365

Treasury stock
(1
)
 
—

 
—

 
—

 
—

 
(1
)
Accumulated other comprehensive loss
(398
)
 
(398
)
 
(271
)
 
(351
)
 
1,020

 
(398
)
Total stockholders' equity
3,348

 
3,709

 
8,445

 
6,946

 
(19,100
)
 
3,348

Noncontrolling interests
—

 
—

 
(7
)
 
3,151

 
—

 
3,144

Total equity
3,348

 
3,709

 
8,438

 
10,097

 
(19,100
)
 
6,492

Total liabilities and equity
$
4,302

 
$
10,750

 
$
11,673

 
$
11,264

 
$
(22,858
)
 
$
15,131



31

Condensed Consolidating Statement of Cash Flows
 
Six months ended June 30, 2017
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non- Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Operating Activities:
 

 
 

 
 
 
 

 
 

 
 

Net (loss) earnings
$
(20
)
 
$
(19
)
 
$
17

 
$
182

 
$
(145
)
 
$
15

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
 

 
 

 
 

 
 

 
 

 
 

Depreciation and amortization
—

 
6

 
11

 
405

 
—

 
422

Deferred income taxes
—

 
—

 
(9
)
 
1

 
—

 
(8
)
Stock-based compensation expense
8

 
—

 
—

 
—

 
—

 
8

Unrealized net loss on natural gas and foreign currency derivatives
—

 
—

 
60

 
11

 
—

 
71

Unrealized loss on embedded derivative
—

 
—

 
3

 
—

 
—

 
3

Loss on disposal of property, plant and equipment
—

 
—

 
—

 
1

 
—

 
1

Undistributed (earnings) loss of affiliates—net
19

 
(23
)
 
(141
)
 
6

 
145

 
6

Changes in:
 

 
 

 
 
 
 

 
 

 
 

Intercompany accounts receivable/accounts payable—net
(7
)
 
(56
)
 
119

 
(56
)
 
—

 
—

Accounts receivable—net
—

 
(9
)
 
(19
)
 
(7
)
 
—

 
(35
)
Inventories
—

 
—

 
15

 
(5
)
 
—

 
10

Accrued and prepaid income taxes
—

 
(23
)
 
840

 
(11
)
 
—

 
806

Accounts and notes payable and accrued expenses
—

 
12

 
2

 
(26
)
 
—

 
(12
)
Customer advances
—

 
—

 
(37
)
 
—

 
—

 
(37
)
Other—net
—

 
(3
)
 
(46
)
 
(14
)
 
—

 
(63
)
Net cash (used in) provided by operating activities
—

 
(115
)
 
815

 
487

 
—

 
1,187

Investing Activities:
 

 
 

 
 
 
 

 
 

 
 

Additions to property, plant and equipment
—

 
—

 
(5
)
 
(180
)
 
—

 
(185
)
Proceeds from sale of property, plant and equipment
—

 
—

 
—

 
12

 
—

 
12

Distributions received from unconsolidated affiliates
—

 
—

 
—

 
6

 
—

 
6

Proceeds from sale of auction rate securities
—

 
9

 
—

 
—

 
—

 
9

Withdrawals from restricted cash funds
—

 
—

 
—

 
1

 
—

 
1

Net cash used in investing activities
—

 
9

 
(5
)
 
(161
)
 
—

 
(157
)
Financing Activities:
 

 
 

 
 
 
 

 
 

 
 

Long-term debt—net
—

 
(126
)
 
129

 
(3
)
 
—

 
—

Short-term debt—net
140

 
227

 
(449
)
 
82

 
—

 
—

Dividends paid on common stock
(140
)
 
—

 
—

 
(38
)
 
38

 
(140
)
Dividends to/from affiliates
—

 
—

 
38

 
—

 
(38
)
 
—

Distributions to noncontrolling interests
—

 
—

 
—

 
(59
)
 
—

 
(59
)
Net cash provided by (used in) financing activities
—

 
101

 
(282
)
 
(18
)
 
—

 
(199
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
6

 
—

 
6

(Decrease) increase in cash and cash equivalents
—

 
(5
)
 
528

 
314

 
—

 
837

Cash and cash equivalents at beginning of period
—

 
36

 
878

 
250

 
—

 
1,164

Cash and cash equivalents at end of period
$
—

 
$
31

 
$
1,406

 
$
564

 
$
—

 
$
2,001



32

Condensed Consolidating Statement of Cash Flows
 
Six months ended June 30, 2016
 
Parent
 
CF Industries
 
Subsidiary Guarantors
 
Non- Guarantors
 
Eliminations
 
Consolidated
 
(in millions)
Operating Activities:
 

 
 

 
 
 
 

 
 

 
 

Net earnings
$
73

 
$
55

 
$
101

 
$
323

 
$
(422
)
 
$
130

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
 

 
 

 
 

 
 

 
 

 
 

Depreciation and amortization
—

 
(1
)
 
44

 
284

 
—

 
327

Deferred income taxes
—

 
19

 
852

 
4

 
—

 
875

Stock-based compensation expense
9

 
—

 
—

 
—

 
—

 
9

Unrealized net gain on natural gas and foreign currency derivatives
—

 
—

 
(165
)
 
(24
)
 
—

 
(189
)
Loss on disposal of property, plant and equipment
—

 
—

 
—

 
4

 
—

 
4

Undistributed (earnings) losses of affiliates—net
(55
)
 
(77
)
 
(292
)
 
3

 
422

 
1

Changes in:
 

 
 

 
 
 
 

 
 

 
 

Intercompany accounts receivable/accounts payable—net
1

 
92

 
204

 
(297
)
 
—

 
—

Accounts receivable—net
—

 
39

 
(20
)
 
5

 
—

 
24

Inventories
—

 
—

 
47

 
34

 
—

 
81

Accrued and prepaid income taxes
—

 
—

 
(674
)
 
1

 
—

 
(673
)
Accounts and notes payable and accrued expenses
(9
)
 
(58
)
 
(2
)
 
2

 
—

 
(67
)
Customer advances
—

 
—

 
(149
)
 
—

 
—

 
(149
)
Other—net
—

 
—

 
4

 
69

 
—

 
73

Net cash provided by (used in) operating activities
19

 
69

 
(50
)
 
408

 
—

 
446

Investing Activities:
 

 
 

 
 
 
 

 
 

 
 

Additions to property, plant and equipment
—

 
—

 
(11
)
 
(1,368
)
 
—

 
(1,379
)
Proceeds from sale of property, plant and equipment
—

 
—

 
—

 
2

 
—

 
2

Withdrawals from restricted cash funds
—

 
—

 
—

 
16

 
—

 
16

Other—net
—

 
—

 
(400
)
 
3

 
400

 
3

Net cash used in investing activities
—

 
—

 
(411
)
 
(1,347
)
 
400

 
(1,358
)
Financing Activities:
 

 
 

 
 
 
 

 
 

 
 

Short-term debt—net
(17
)
 
(61
)
 
(172
)
 
250

 
—

 
—

Proceeds from short-term debt
—

 
150

 
—

 
—

 
—

 
150

Payments on short-term debt
—

 
(150
)
 
—

 
—

 
—

 
(150
)
Financing fees
—

 
(5
)
 
—

 
—

 
—

 
(5
)
Dividends paid on common stock
(140
)
 
(140
)
 
(140
)
 
(109
)
 
389

 
(140
)
Dividends to/from affiliates
140

 
140

 
109

 
—

 
(389
)
 
—

Issuance of noncontrolling interest in CFN
—

 
—

 
—

 
2,800

 
—

 
2,800

Distributions to noncontrolling interest
—

 
—

 
—

 
(20
)
 
—

 
(20
)
Distribution received for CHS strategic venture
—

 
—

 
2,000

 
(2,000
)
 
—

 
—

Other—net
—

 
—

 
—

 
400

 
(400
)
 
—

Net cash (used in) provided by financing activities
(17
)
 
(66
)
 
1,797

 
1,321

 
(400
)
 
2,635

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Increase in cash and cash equivalents
2

 
3

 
1,336

 
381

 
—

 
1,722

Cash and cash equivalents at beginning of period
1

 
—

 
121

 
164

 
—

 
286

Cash and cash equivalents at end of period
$
3

 
$
3

 
$
1,457

 
$
545

 
$
—

 
$
2,008


33

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
         You should read the following discussion and analysis in conjunction with our annual consolidated financial statements and related notes, which were included in our 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2017 , as well as Item 1. Financial Statements, in this Form 10-Q. All references to "CF Holdings," "we," "us," "our" and "the Company" refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to "CF Industries" refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc. References to tons refer to short-tons. Notes referenced in this discussion and analysis refer to the notes to our unaudited interim consolidated financial statements that are found in the preceding section: Item 1. Financial Statements. The following is an outline of the discussion and analysis included herein:
•
Overview of CF Holdings
•
Our Company
•
Items Affecting Comparability of Results
•
Financial Executive Summary
•
Results of Consolidated Operations
•
Second Quarter of 2017 Compared to Second Quarter of 2016
•
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
•
Operating Results by Business Segment
•
Liquidity and Capital Resources
•
Off-Balance Sheet Arrangements
•
Critical Accounting Policies and Estimates
•
Recent Accounting Pronouncements
•
Forward-Looking Statements
Overview of CF Holdings
Our Company
We are one of the largest manufacturers and distributors of nitrogen fertilizer and other nitrogen products in the world. Our principal customers are cooperatives, independent fertilizer distributors, farmers and industrial users. Our principal nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. Our manufacturing and distribution facilities are concentrated in the midwestern United States and other major agricultural areas of the United States, Canada and the United Kingdom. We also export nitrogen fertilizer products from our Donaldsonville, Louisiana and Yazoo City, Mississippi manufacturing facilities, and our United Kingdom manufacturing facilities in Billingham and Ince.
Our principal assets include:
•
four U.S. nitrogen fertilizer manufacturing facilities located in Donaldsonville, Louisiana (the largest nitrogen fertilizer complex in the world); Port Neal, Iowa; Yazoo City, Mississippi; and Woodward, Oklahoma. These facilities are owned by CF Industries Nitrogen, LLC (CFN), in which we own approximately 89% and CHS Inc. (CHS), owns the remainder. See Note 13—Noncontrolling Interests to our unaudited interim consolidated financial statements for additional information on our strategic venture with CHS.
•
an approximately 75.3% interest in Terra Nitrogen Company, L.P. (TNCLP), a publicly traded limited partnership of which we are the sole general partner and the majority limited partner and which, through its subsidiary Terra Nitrogen, Limited Partnership (TNLP), operates a nitrogen fertilizer manufacturing facility in Verdigris, Oklahoma;
•
two Canadian nitrogen fertilizer manufacturing facilities located in Medicine Hat, Alberta (the largest nitrogen fertilizer complex in Canada) and Courtright, Ontario;
•
two United Kingdom nitrogen manufacturing complexes located in Billingham and Ince;

34
Table of Contents

•
an extensive system of terminals and associated transportation equipment located primarily in the midwestern United States; and
•
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.
Items Affecting Comparability of Results
Nitrogen Fertilizer Selling Prices
Over the last decade, strong demand, high capacity utilization and increasing operating margins as a result of higher global nitrogen fertilizer prices stimulated global investment in nitrogen production facilities, which resulted in an increase in global nitrogen fertilizer production capacity. As a result, global nitrogen fertilizer supply increased more quickly than global nitrogen fertilizer demand, creating the current global oversupply in the market, and leading to lower nitrogen fertilizer selling prices.
A significant amount of new nitrogen production capacity came on line in 2016 and the first half of 2017, and additional production capacity is expected to come on line in the second half of 2017, including a significant increase in production capacity located in North America. The new capacity will further increase supply. We expect the lower priced environment to continue until global supply and demand become more balanced through a combination of continued demand growth and supply reductions as producers respond to lower realized margins by taking higher cost production facilities off line.
The U.S. Gulf is a major global fertilizer pricing point due to the volume of nitrogen fertilizer that trades there. Through most of 2016, nitrogen pricing at the U.S. Gulf declined, often trading below parity with other international pricing points due to continued imports from various exporting regions and decreased North American buyer interest as a result of greater global nitrogen supply availability. Seasonal decreases in agricultural demand combined with delayed customer purchasing activity resulted in multi-year lows in nitrogen fertilizer selling prices in the second half of 2016. During the first quarter of 2017, prices began to increase as the supply and demand balance tightened in anticipation of spring fertilizer demand for the planting and growing season. However, as the first quarter progressed, increased imports into the North American market increased fertilizer supply, which pressured selling prices downward as the quarter ended. During the second quarter of 2017, anticipated demand failed to materialize and the increased imports into the United States that occurred in the first quarter of 2017 continued in the second quarter, negatively impacting selling prices.
The greater global nitrogen supply availability and resulting low nitrogen fertilizer selling prices significantly impacted our results for the three and six months ended June 30, 2017 . The average selling price for our products for the three months ended June 30, 2017 was $223 per ton compared to $249 per ton for the three months ended June 30, 2016 , a decrease of 10% resulting in a decrease in both net sales and gross margin by approximately $149 million between the periods. The average selling prices for our products in the six months ended June 30, 2017 was $221 per ton compared to $248 per ton for the six months ended June 30, 2016 , a decrease of 11% , resulting in a decrease in both net sales and gross margin of approximately $264 million between the periods. In addition to the direct impact of lower selling prices, during periods of declining prices, customers tend to delay purchasing fertilizer in anticipation of prices in the future being lower than current prices.
In addition to the impact of market conditions on nitrogen fertilizer selling prices, certain significant items impacted our financial results during the three and six months ended June 30, 2017 and 2016 . The following table and related discussion outline these significant items and how they impacted the comparability of our financial results during these periods. During the three months ended June 30, 2017 and 2016 , we reported net earnings attributable to common stockholders of $3 million and $47 million , respectively. During the six months ended June 30, 2017 and 2016 , we reported net (loss) earnings attributable to common stockholders of $(20) million and $73 million , respectively.

35
Table of Contents

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
Pre-Tax
After-Tax
 
Pre-Tax
After-Tax
 
Pre-Tax
After-Tax
 
Pre-Tax
After-Tax
 
(in millions)
 
(in millions)
Depreciation and amortization (1)
$
217

$
137

 
$
181

$
114

 
$
422

$
265

 
$
327

$
205

Unrealized net mark-to-market loss (gain) on natural gas derivatives (2)
18

11

 
(211
)
(132
)
 
71

44

 
(190
)
(119
)
Transaction costs
—

—

 
165

84

 
—

—

 
179

96

Loss on foreign currency transactions including intercompany loans (3)
1

1

 
38

37

 
1

1

 
83

81

Capacity expansion project expenses (3)
—

—

 
19

12

 
—

—

 
35

22

Equity method investment tax contingency accrual (4)
7

7

 
—

—

 
7

7

 
—

—

Financing costs related to bridge loan commitment fee (5)
—

—

 
28

18

 
—

—

 
28

18

Strategic Venture with CHS:
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest (6)
15

15

 
23

23

 
23

23

 
40

40

Loss on embedded derivative (3)
2

1

 
—

—

 
3

2

 
—

—

Total Impact of Significant Items
$
260

$
172

 
$
243

$
156

 
$
527

$
342

 
$
502

$
343

______________________________________________________________________________
(1)     Included primarily in cost of sales and selling, general and administrative expenses in our consolidated statements of operations.
(2)     Included in cost of sales in our consolidated statements of operations.
(3)     Included in other operating—net in our consolidated statements of operations.
(4)     Included in equity in losses of operating affiliates in our consolidated statements of operations.
(5)     Included in interest expense in our consolidated statements of operations.
(6)     Included in net earnings attributable to noncontrolling interests in our consolidated statements of operations.
 
 
 
 
 
 
 
The following describes the significant items that impacted the comparability of our financial results for the three and six months ended June 30, 2017 and 2016 . Descriptions of items below that refer to amounts in the table above, refer to the pre-tax amounts.
Depreciation and amortization
Total depreciation and amortization expense recognized in the three and six months ended June 30, 2017 was $217 million and $422 million , respectively, and for the three and six months ended June 30, 2016 was $181 million and $327 million , respectively. This increase in depreciation expense reflects the completion of our capacity expansion projects and placing in service all five of the new plants prior to the end of 2016. The capacity expansion projects were originally announced in 2012 and included the construction of new ammonia, urea, and UAN plants at our Donaldsonville, Louisiana complex and new ammonia and urea plants at our Port Neal, Iowa complex. These plants increased our overall production capacity by approximately 25%, improved our product mix flexibility at Donaldsonville, and improved our ability to serve upper-Midwest urea customers from our Port Neal location. The following table indicates the quarter in which each of the five expansion plants were placed in service.
Quarter placed in service
 
Expansion plant location
Q4 2015
 
Donaldsonville Urea
Q1 2016
 
Donaldsonville UAN
Q4 2016
 
Donaldsonville Ammonia
Q4 2016
 
Port Neal Ammonia and Urea
Depreciation expense pertaining to each of our capacity expansion plants commenced once the applicable plant was placed in service.

36
Table of Contents

Unrealized net mark-to-market loss (gain) on natural gas derivatives
Natural gas is typically the largest and most volatile single component of the manufacturing cost for nitrogen-based products. We manage the risk of changes in natural gas prices through the use of derivative financial instruments. The derivatives that we use for this purpose are primarily natural gas fixed price swaps and natural gas options. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. This can result in volatility in reported earnings due to the unrealized mark-to-market adjustments that occur from changes in the value of the derivatives, which is reflected in cost of sales in our consolidated statements of operations. In the three months ended June 30, 2017 and 2016 , we recognized unrealized net mark-to-market losses (gains) on natural gas derivatives of $18 million and $(211) million , respectively. In the six months ended June 30, 2017 and 2016 , we recognized unrealized net mark-to-market losses (gains) of $71 million and $(190) million , respectively.
Transaction costs
On August 6, 2015, we entered into a definitive agreement (as amended, the Combination Agreement) to combine with the European, North American and global distribution businesses of OCI N.V. (OCI). On May 22, 2016, CF Holdings, OCI and the other parties to the Combination Agreement entered into a termination agreement under which the parties agreed to terminate the Combination Agreement by mutual written consent. In the three and six months ended June 30, 2016 , we incurred $165 million and $179 million , respectively, of transaction costs associated with the proposed combination with certain businesses of OCI and our strategic venture with CHS, including a $150 million termination fee paid to OCI in the second quarter of 2016 and costs for various consulting and legal services.
Loss on foreign currency transactions including intercompany loans
In the three and six months ended June 30, 2016 , we recognized losses of $38 million and $83 million , respectively, from the impact of changes in foreign currency exchange rates on primarily British pound and Canadian dollar denominated intercompany loans that were not permanently invested. Due to a restructuring of certain intercompany loans, we did not incur the same level of foreign exchange rate impacts in the three and six months ended June 30, 2017 .
Capacity expansion project expenses
Our capacity expansion projects were completed as of December 31, 2016. Capacity expansion project expenses in the three and six months ended June 30, 2016 were $19 million and $35 million , respectively, generally consisting of administrative costs and other project costs that did not qualify for capitalization.
Equity method investment tax contingency accrual
The Trinidad tax authority (the Board of Inland Revenue) has issued a tax assessment against our equity method investment in the Republic of Trinidad and Tobago, PLNL, related to a dispute over whether tax depreciation must be claimed during a tax holiday period that was granted to PLNL under the Trinidad Fiscal Incentives Act. The tax holiday was granted as an incentive to construct PLNL’s ammonia plant. PLNL is appealing the assessment. Based on the facts and circumstances of this matter, PLNL recorded an unrecognized tax benefit in the second quarter of 2017, which reduced our equity in earnings of PLNL for both the three and six months ended June 30, 2017 by approximately $7 million reflecting our 50% ownership interest.
Strategic Venture with CHS
We commenced a strategic venture with CHS on February 1, 2016, at which time CHS purchased a minority equity interest in CFN for $2.8 billion, which represented approximately 11% of the membership interest of CFN. We own the remaining membership interest. Under the terms of CFN's limited liability company agreement, each member’s percentage membership interest will reflect, over time, the impact of the profitability of CFN and any member contributions made to, and distributions received from, CFN. CHS also began receiving 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. As a result of its minority equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN. We are also entitled to semi-annual cash distributions from CFN. The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts. We began recognizing the noncontrolling interest pertaining to CHS’ ownership interest in CFN on February 1, 2016. We recognized earnings attributable to the noncontrolling interest in CFN of $15 million and $23 million for the three and six months ended June 30, 2017 , respectively, and $23 million and $40 million for the three and six months ended June 30, 2016, respectively. See Note 13—Noncontrolling Interests for additional information on our strategic venture with CHS.

37
Table of Contents

Under the terms of our strategic venture with CHS, if our credit rating is reduced below certain levels by two of three specified credit rating agencies, we are required to make a non-refundable yearly payment of $5 million to CHS. The payment would 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 three specified credit rating agencies or February 1, 2026. In the fourth quarter of 2016, as a result of a reduction in our credit rating, we made a $5 million payment to CHS. This term of the strategic venture is recognized on our consolidated balance sheet as an embedded derivative liability. Included in other operating-net in our consolidated statement of operations for the three and six months ended June 30, 2017 are unrealized losses of $2 million and $3 million , respectively, to adjust the liability to fair value.
Financial Executive Summary
We reported net earnings attributable to common stockholders of $3 million for the three months ended June 30, 2017 compared to $47 million for the three months ended June 30, 2016 , a decrease of $44 million . Diluted net earnings per share attributable to common stockholders was $0.01 in the second quarter of 2017 compared to $0.20 in the second quarter of 2016 . 
During the second quarter of 2017 , we experienced lower net earnings attributable to common stockholders compared to the second quarter of 2016 due primarily to lower gross margin as a result of higher unrealized net mark-to-market losses on natural gas derivatives, lower average selling prices resulting from the excess global supply of nitrogen fertilizer, higher natural gas costs, and higher depreciation as a result of the completion of our capacity expansion projects. These items were partially offset by an increase in sales volume as a result of increased production from the completion of our capacity expansion projects.
Net interest expense increased to $78 million in the three months ended June 30, 2017 from $60 million in the three months ended June 30, 2016 , due primarily to higher amounts of capitalized interest in 2016 related to our capacity expansion projects that reduced interest expense in 2016. The completion of our capacity expansion projects reduced the amount of capitalized interest in 2017. No capitalized interest was recorded for the three months ended June 30, 2017 compared to $46 million for the three months ended June 30, 2016 .
Our total gross margin declined by $355 million , or 67% , to $172 million in the second quarter of 2017 from $527 million in the second quarter of 2016 . The change in gross margin was due primarily to:
• a higher unrealized net mark-to-market loss on natural gas derivatives, which decreased gross margin by $229 million as the second quarter of 2017 included an $18 million loss and the second quarter of 2016 included a $211 million gain ,
• a decrease in average selling prices of 10% , which reduced gross margin by $149 million , which impacted all of our nitrogen products. The average selling prices for ammonia, granular urea and UAN declined by 18% , 14% and 13% in the second quarter, respectively,
• an increase in physical natural gas costs in the second quarter of 2017 , partially offset by the impact of natural gas derivatives that settled in the period, which decreased gross margin by $57 million as compared to the second quarter of 2016 ,
• an increase in depreciation and amortization due to the completion of our capacity expansion projects,
• partially offset by an increase in sales volume of 11% , which increased gross margin by $82 million, primarily driven by an increase in sales volume for ammonia and granular urea of 32% and 26% , respectively, as well as targeted cost reduction initiatives and production efficiencies due to increased volume.

38
Table of Contents

Results of Consolidated Operations
The following table presents our consolidated results of operations and supplemental data:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017 v. 2016
 
2017
 
2016
 
2017 v. 2016
 
(in millions, except as noted)
Net sales
$
1,124

 
$
1,134

 
$
(10
)
 
(1
)%
 
$
2,161

 
$
2,138

 
$
23

 
1
 %
Cost of sales
952

 
607

 
345

 
57
 %
 
1,883

 
1,394

 
489

 
35
 %
Gross margin
172

 
527

 
(355
)
 
(67
)%
 
278

 
744

 
(466
)
 
(63
)%
Gross margin percentage
15.3
%
 
46.5
%
 
(31.2
)%
 
 
 
12.9
%
 
34.8
%
 
(21.9
)%
 
 
Selling, general and administrative expenses
49

 
52

 
(3
)
 
(6
)%
 
95

 
97

 
(2
)
 
(2
)%
Transaction costs
—

 
165

 
(165
)
 
(100
)%
 
—

 
179

 
(179
)
 
(100
)%
Other operating—net
10

 
63

 
(53
)
 
(84
)%
 
16

 
124

 
(108
)
 
(87
)%
Total other operating costs and expenses
59

 
280

 
(221
)
 
(79
)%
 
111

 
400

 
(289
)
 
(72
)%
Equity in losses of operating affiliates
(6
)
 
(9
)
 
3

 
33
 %
 
(3
)
 
(9
)
 
6

 
67
 %
Operating earnings
107

 
238

 
(131
)
 
(55
)%
 
164

 
335

 
(171
)
 
(51
)%
Interest expense—net
78

 
60

 
18

 
30
 %
 
157

 
97

 
60

 
62
 %
Other non-operating—net
—

 
—

 
—

 
—
 %
 
—

 
(2
)
 
2

 
100
 %
Earnings before income taxes
29

 
178

 
(149
)
 
(84
)%
 
7

 
240

 
(233
)
 
(97
)%
Income tax provision (benefit)
5

 
95

 
(90
)
 
(95
)%
 
(8
)
 
110

 
(118
)
 
N/M

Net earnings
24

 
83

 
(59
)
 
(71
)%
 
15

 
130

 
(115
)
 
(88
)%
Less: Net earnings attributable to noncontrolling interests
21

 
36

 
(15
)
 
(42
)%
 
35

 
57

 
(22
)
 
(39
)%
Net earnings (loss) attributable to common stockholders
$
3

 
$
47

 
$
(44
)
 
(94
)%
 
$
(20
)
 
$
73

 
$
(93
)
 
N/M

Diluted net earnings (loss) per share attributable to common stockholders
$
0.01

 
$
0.20

 
$
(0.19
)
 
(95
)%
 
$
(0.09
)
 
$
0.31

 
$
(0.40
)
 
N/M

Diluted weighted-average common shares outstanding          
233.7

 
233.5

 
0.2

 
—
 %
 
233.2

 
233.5

 
(0.3
)
 
—
 %
Dividends declared per common share
$
0.30

 
$
0.30

 
$
—

 
—
 %
 
$
0.60

 
$
0.60

 
$
—

 
—
 %
Natural Gas Supplemental Data (per MMBtu)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Natural gas costs in cost of sales (1)
$
3.35

 
$
2.10

 
$
1.25

 
60
 %
 
$
3.50

 
$
2.29

 
$
1.21

 
53
 %
Realized derivatives loss in cost of sales (2)
0.04

 
0.75

 
(0.71
)
 
(95
)%
 
0.01

 
0.77

 
(0.76
)
 
(99
)%
Cost of natural gas in cost of sales
$
3.39

 
$
2.85

 
$
0.54

 
19
 %
 
$
3.51

 
$
3.06

 
$
0.45

 
15
 %
Average daily market price of natural gas Henry Hub (Louisiana)
$
3.05

 
$
2.10

 
$
0.95

 
45
 %
 
$
3.02

 
$
2.04

 
$
0.98

 
48
 %
Average daily market price of natural gas National Balancing Point (UK)
$
4.85

 
$
4.50

 
$
0.35

 
8
 %
 
$
5.43

 
$
4.43

 
$
1.00

 
23
 %
Unrealized net mark-to-market loss (gain) on natural gas derivatives
$
18

 
$
(211
)
 
$
229

 
N/M

 
$
71

 
$
(190
)
 
$
261

 
N/M

Capital expenditures
$
91

 
$
703

 
$
(612
)
 
(87
)%
 
$
185

 
$
1,379

 
$
(1,194
)
 
(87
)%
Sales volume by product tons (000s)
5,046

 
4,557

 
489

 
11
 %
 
9,791

 
8,608

 
1,183

 
14
 %
Production volume by product tons (000s):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ammonia (3)
2,656

 
1,991

 
665

 
33
 %
 
5,164

 
3,994

 
1,170

 
29
 %
Granular urea
1,236

 
808

 
428

 
53
 %
 
2,238

 
1,627

 
611

 
38
 %
UAN (32%)
1,722

 
1,771

 
(49
)
 
(3
)%
 
3,539

 
3,289

 
250

 
8
 %
AN
459

 
386

 
73

 
19
 %
 
1,001

 
817

 
184

 
23
 %
___________________________________________________________________________
N/M—Not Meaningful
(1)  
Includes the cost of natural gas that is included in cost of sales during the period under the first-in, first-out (FIFO) inventory cost method.
(2)  
Includes realized gains and losses on natural gas derivatives settled during the period. Excludes unrealized mark-to-market gains and losses on natural gas derivatives.
(3)  
Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN.

39
Table of Contents

Second Quarter of 2017 Compared to Second Quarter of 2016
Net Sales
Our total net sales decreased $10 million , or 1% , to $1,124 million in the second quarter of 2017 compared to $1,134 million in the second quarter of 2016 due primarily to a 10% decrease in average selling prices partially offset by an 11% increase in sales volume.
Average selling prices were $223 per ton in the second quarter of 2017 compared to $249 per ton in the second quarter of 2016 due primarily to lower ammonia, granular urea and UAN selling prices in 2017 . Selling prices were negatively impacted by greater global nitrogen supply availability. During the second quarter of 2017, anticipated demand failed to materialize and the increased imports into the United States that occurred in the first quarter of 2017 continued in the second quarter, negatively impacting selling prices.
The increase in total sales volume of 11% was due primarily to increased production from the completion of our capacity expansion projects and higher export sales due to the increased imports into the United States.
Cost of Sales
Our total cost of sales increased $345 million , or 57% , from the second quarter of 2016 to the second quarter of 2017 . The increase in cost of sales was due primarily to higher unrealized net mark-to-market loss es on natural gas derivatives, higher sales volume, higher realized natural gas costs, and higher depreciation expense related to the completion of our capacity expansion projects and placing those assets into service, partially offset by targeted cost reduction initiatives and production efficiencies due to increased volume. The cost of sales per ton averaged $189 in the second quarter of 2017 , a 42% increase from the $133 per ton in the same quarter of 2016 . The second quarter of 2017 included an unrealized net mark-to-market loss of $18 million compared to an unrealized net mark-to-market gain of $211 million in the second quarter of 2016 . Additionally, realized natural gas costs, including the impact of realized derivatives, increased 19% from $2.85 per MMBtu in 2016 to $3.39 in 2017 .
Selling, General and Administrative Expenses
Selling, general and administrative expenses decrease d $3 million to $49 million in the second quarter of 2017 from $52 million in the same quarter of 2016 , due primarily to lower professional service fees for certain corporate office initiatives.
Transaction Costs
In the second quarter of 2016 , we incurred $165 million of transaction costs associated primarily with the agreements pertaining to the proposed combination with certain businesses of OCI that was terminated on May 22, 2016 and our strategic venture with CHS. Transaction costs include the $150 million termination fee paid to OCI in the second quarter of 2016 as a result of the termination of the combination agreement and costs for various consulting and legal services.
Other Operating—Net
Other operating—net was $10 million of expense in the second quarter of 2017 compared to $63 million of expense in the same quarter of 2016 . The decreased expense was due primarily to the $38 million loss in the second quarter of 2016 from the impact of changes in foreign currency exchange rates on primarily British pound and Canadian dollar denominated intercompany loans that were not permanently invested. Due to a restructuring of certain intercompany loans, we did not incur the same level of foreign exchange rate impacts in the three months ended June 30, 2017 . The decreased expense is also due to expansion project expenses in the three months ended June 30, 2016 of $19 million , generally consisting of administrative and other project costs that did not qualify for capitalization.
Equity in Losses of Operating Affiliates
Equity in losses of operating affiliates, consisting of our 50% share of the operating results of PLNL, was $6 million in the second quarter of 2017 compared to $9 million in the second quarter of 2016 . During the second quarter of 2017, PLNL recorded an unrecognized tax benefit related to a tax assessment against PLNL, which reduced our equity in earnings of PLNL for the three months ended June 30, 2017 by approximately $7 million reflecting our 50% ownership interest. The tax assessment related to a dispute over whether tax depreciation must be claimed during a tax holiday period that was granted to PLNL under the Trinidad Fiscal Incentives Act. The tax holiday was granted as an incentive to construct PLNL's ammonia plant. PLNL is appealing the assessment. The loss in 2016 was due primarily to costs of $24 million that were incurred by PLNL during the second quarter of 2016 related to a planned maintenance activity at the PLNL ammonia plant that resulted in the shutdown of the plant for approximately 45 days.

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Interest Expense—Net
Net interest expense was $78 million in the second quarter of 2017 compared to $60 million in the second quarter of 2016 , an increase of $18 million . The increased interest expense is primarily due to a decrease in the amount of interest capitalized due to the completion of the capacity expansion projects. In the second quarter of 2016 , capitalized interest was $46 million compared to zero in the second quarter of 2017. Net interest expense in the second quarter of 2016 also includes the amortization of capitalized bridge credit agreement fees of $28 million pertaining to the bridge loan for our proposed combination with certain businesses of OCI. Upon the termination of the proposed combination with OCI, the unamortized portion of these fees was expensed.
Income Taxes
For the three months ended June 30, 2017 , we recorded an income tax provision of $5 million on pre-tax income of $29 million , or an effective tax rate of 17.7% , compared to an income tax provision of $95 million on pre-tax income of $178 million , or an effective tax rate of 53.2% , for the three months ended June 30, 2016 . Our effective tax rate excluding the earnings attributable to the noncontrolling interests for the three months ended June 30, 2017 is 63.3% as compared to an effective tax rate of 66.9% for the three months ended June 30, 2016 .
Our effective tax rate in both periods is impacted by earnings attributable to noncontrolling interests in CFN and TNCLP, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interests. As a result, in the second quarter of 2017, earnings attributable to the noncontrolling interests of $21 million and, in the second quarter of 2016, earnings attributable to the noncontrolling interests of $36 million , which is included in pre-tax income, have the effect of reducing the effective tax rate in both periods.
The effective tax rate for the three months ended June 30, 2017 is also impacted by the unrecognized tax benefit recorded by PLNL, which reduces our earnings before income taxes but does not change our income tax provision as the adjustment is not tax effected.
The effective tax rate for the three months ended June 30, 2016 was also higher than expected as a result of the impact of the reversal of prior period tax benefits from U.S. manufacturing profits deductions and an increase in our valuation allowance related to the realizability of Canadian deferred taxes, partially offset by the impact of certain transaction costs capitalized in a prior tax year that became deductible as a result of the termination of our proposed combination transaction with OCI.
See Note 13—Noncontrolling Interests , Note 9—Income Taxes and Note 7—Equity Method Investments for additional information.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests decreased $15 million in the second quarter of 2017 compared to the second quarter of 2016 due primarily to lower net earnings attributable to the noncontrolling interest in CFN due to lower average selling prices for UAN and granular urea, higher natural gas costs and higher depreciation as a result of the completion of our capacity expansion projects. This decrease is also due to lower net earnings attributable to the 24.7% publicly held limited partner interests in TNCLP due to higher unrealized net mark-to-market losses on natural gas derivatives and lower average selling prices for ammonia and UAN.
Diluted Net (Loss) Earnings Per Share Attributable to Common Stockholders
Diluted net earnings per share attributable to common stockholders decrease d $0.19 to $0.01 in the second quarter of 2017 from $0.20 in the second quarter of 2016 . This decrease is due primarily to lower gross margin driven by the impact of lower selling prices due to the nitrogen oversupply.

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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Net Sales
Our total net sales increased $23 million , or 1% , to $2,161 million in the first six months of 2017 compared to $2,138 million in the first six months of 2016 due primarily to a 14% increase in sales volume partially offset by an 11% decrease in average selling prices.
Average selling prices were $221 per ton in the first six months of 2017 compared to $248 per ton in the first six months of 2016 due primarily to lower ammonia, UAN, and granular urea selling prices in 2017 . Selling prices were negatively impacted by greater global nitrogen supply availability. During the first quarter of 2017, prices began to increase as the supply and demand balance tightened in anticipation of spring fertilizer demand for the planting and growing season. However, as the first quarter progressed, increased imports into North America increased fertilizer supply, which pressured selling prices downward as the quarter ended. During the second quarter of 2017, anticipated demand failed to materialize and the increased imports that occurred in the first quarter of 2017 continued in the second quarter impacting selling prices.
Our total sales volume increase d by 14% from the first six months of 2016 to the first six months of 2017 due primarily to the increased production from the completion of our capacity expansion projects.
Cost of Sales
Our total cost of sales increased $489 million , or 35% , from the first six months of 2016 to the first six months of 2017 . The increase in our cost of sales was due primarily to the impact of higher unrealized net mark-to-market loss es on natural gas derivatives, higher sales volume and higher realized natural gas costs, in addition to higher depreciation expense related to the completion of our capacity expansion projects and placing those assets into service, partially offset by targeted cost reduction initiatives and production efficiencies due to increased volume. The cost of sales per ton averaged $192 in the first six months of 2017 , a 19% increase from $162 per ton in the same period of 2016 . The first six months of 2017 included a $71 million unrealized net mark-to-market loss compared to a $190 million unrealized net mark-to-market gain in the first six months of 2016 . Additionally, realized natural gas costs, including the impact of realized derivatives, increased 15% from $3.06 per MMBtu in 2016 to $3.51 in 2017.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decrease d $2 million to $95 million in the first six months of 2017 from $97 million in the comparable period of 2016 . The decrease was due primarily to lower professional service fees for certain corporate office initiatives.
Transaction Costs
In the first six months of 2016 , we incurred $179 million of transaction costs associated with the agreements pertaining to the proposed combination with certain businesses of OCI and our strategic venture with CHS. Transaction costs include the $150 million termination fee paid to OCI in the second quarter of 2016 as a result of the termination of the combination agreement and costs for various consulting and legal services.
Other Operating—Net
Other operating—net was $16 million of expense in the first six months of 2017 compared to $124 million of expense in the comparable period of 2016 . The decreased expense was due primarily to the $83 million loss in the first six months of 2016 from the impact of changes in foreign currency exchange rates on primarily British pound and Canadian dollar denominated intercompany loans that were not permanently invested. Due to a restructuring of certain intercompany loans, we did not incur the same level of foreign exchange rate impacts in the first six months of 2017 . The decreased expense is also due to expansion project expenses in the first six months of 2016 of $35 million , generally consisting of administrative and other project costs that did not qualify for capitalization.
Equity in Losses of Operating Affiliates
Equity in losses of operating affiliates consists primarily of our 50% share of the operating results of PLNL. Equity in losses of operating affiliates was $3 million in the first six months of 2017 compared to $9 million in the first six months of 2016 . During the second quarter of 2017, PLNL recorded an unrecognized tax benefit related to a tax assessment against PLNL, which reduced our equity in earnings of PLNL for the six months ended June 30, 2017 by approximately $7 million reflecting our 50% ownership interest. This was partially offset by a $4 million increase in equity of earnings due primarily to improved operating results from PLNL as a result of increased sales volume. The loss in 2016 at PLNL was due primarily to costs of

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$24 million that were incurred during the second quarter of 2016 related to a planned maintenance activity at the PLNL ammonia plant that resulted in the shutdown of the plant for approximately 45 days.
Interest Expense—Net
Net interest expense was $157 million in the first six months of 2017 compared to $97 million in the first six months of 2016 . The $60 million increase is primarily due to a decrease in the amount of interest capitalized due to the completion of the capacity expansion projects. In the first six months of 2016 , capitalized interest was $89 million compared to $1 million in the first six months of 2017 . Net interest expense in the first six months of 2016 also includes the amortization of capitalized bridge credit agreement fees of $28 million pertaining to the bridge loan for our proposed combination with certain businesses of OCI. Upon the termination of the proposed combination with OCI, the unamortized portion of these fees was expensed.
Income Taxes
For the six months ended June 30, 2017 , we recorded an income tax benefit of $8 million on pre-tax income of $7 million , or an effective tax rate of (119.1%), compared to an income tax provision of $110 million on pre-tax income of $240 million , or an effective tax rate of 45.9%, for the six months ended June 30, 2016 . Our effective tax rate excluding the earnings attributable to the noncontrolling interests for the six months ended June 30, 2017 is 28.1% as compared to an effective tax rate of 60.3% for the six months ended June 30, 2016 .
Our effective tax rate in both periods is impacted by earnings attributable to the noncontrolling interests in CFN and TNCLP, as our consolidated income tax (benefit) provision does not include a tax provision on the earnings attributable to the noncontrolling interests. As a result, in the first six months of 2017, earnings attributable to the noncontrolling interests of $35 million and, in the first six months of 2016, of $57 million , which are included in pre-tax income, have the effect of reducing the effective tax rate.
The effective tax rate for the six months ended June 30, 2017 is also impacted by the unrecognized tax benefit recorded by PLNL, which reduces our earnings before income taxes but does not change our income tax provision as the adjustment is not tax effected.
The effective tax rate for the six months ended June 30, 2016 was also higher than expected as a result of the impact of the reversal of prior period tax benefits from U.S. manufacturing profits deductions and an increase in our valuation allowance related to the realizability of Canadian deferred taxes, partially offset by the impact of certain transaction costs capitalized in a prior tax year that became deductible as a result of the termination of our proposed combination transaction with OCI.
See Note 13—Noncontrolling Interests , Note 9—Income Taxes and 7—Equity Method Investments for additional information.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests decreased $22 million in the first six months of 2017 compared to the comparable period in 2016 due primarily to lower net earnings attributable to the noncontrolling interest in CFN due to lower average selling prices for UAN and granular urea, higher natural gas costs and higher depreciation as a result of the completion of our capacity expansion projects. This decrease is also due to lower net earnings attributable to the 24.7% publicly held limited partner interests in TNCLP due to lower average selling prices for ammonia and UAN and higher unrealized net mark-to-market losses on natural gas derivatives.
Diluted Net Earnings (Loss) Per Share Attributable to Common Stockholders
Diluted net earnings (loss) per share attributable to common stockholders decrease d $0.40 to $(0.09) per share in the first six months of 2017 from $0.31 per share in the first six months of 2016 . This decrease is due to lower gross margin primarily driven by the impact of lower selling prices due to greater global nitrogen supply availability.

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Operating Results by Business Segment
Our reportable segments consist of ammonia, granular urea, UAN, AN and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting of selling, general and administrative expenses and other operating—net) and non-operating expenses (interest and income taxes), are centrally managed and are not included in the measurement of segment profitability reviewed by management. The following table presents summary operating results by business segment:
 
Ammonia
 
Granular
Urea (1)
 
UAN (1)
 
AN (1)
 
Other (1)
 
Consolidated
 
(in millions, except percentages)
Three months ended June 30, 2017
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
389

 
$
259

 
$
286

 
$
112

 
$
78

 
$
1,124

Cost of sales
302

 
235

 
248

 
102

 
65

 
952

Gross margin
$
87

 
$
24

 
$
38

 
$
10

 
$
13

 
$
172

Gross margin percentage
22.4
%
 
9.3
%
 
13.3
%
 
8.9
%
 
16.7
%
 
15.3
%
Three months ended June 30, 2016
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
358

 
$
240

 
$
370

 
$
90

 
$
76

 
$
1,134

Cost of sales
152

 
118

 
197

 
90

 
50

 
607

Gross margin
$
206

 
$
122

 
$
173

 
$
—

 
$
26

 
$
527

Gross margin percentage
57.5
%
 
50.8
%
 
46.8
%
 
—
%
 
34.2
%
 
46.5
%
Six months ended June 30, 2017
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
671

 
$
497

 
$
603

 
$
237

 
$
153

 
$
2,161

Cost of sales
567

 
448

 
530

 
208

 
130

 
1,883

Gross margin
$
104

 
$
49

 
$
73

 
$
29

 
$
23

 
$
278

Gross margin percentage
15.5
%
 
9.9
%
 
12.1
%
 
12.2
%
 
15.0
%
 
12.9
%
Six months ended June 30, 2016
 

 
 

 
 

 
 
 
 

 
 

Net sales
$
625

 
$
475

 
$
679

 
$
215

 
$
144

 
$
2,138

Cost of sales
356

 
293

 
428

 
202

 
115

 
1,394

Gross margin
$
269

 
$
182

 
$
251

 
$
13

 
$
29

 
$
744

Gross margin percentage
43.0
%
 
38.3
%
 
37.0
%
 
6.0
%
 
20.1
%
 
34.8
%
_______________________________________________________________________________
(1)  
The cost of products that are upgraded into other products is transferred at cost into the upgraded product results.

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Ammonia Segment
Our ammonia segment produces anhydrous ammonia (ammonia), which is our most concentrated nitrogen fertilizer as it contains 82% nitrogen. The results of our ammonia segment consist of sales of ammonia to external customers. In addition, ammonia is the "basic" nitrogen product that we upgrade into other nitrogen products such as granular urea, UAN and AN. We produce ammonia at all of our nitrogen manufacturing complexes.
The following table presents summary operating data for our ammonia segment:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017 v. 2016
 
2017
 
2016
 
2017 v. 2016
 
(in millions, except as noted)
 
(in millions, except as noted)
Net sales
$
389

 
$
358

 
$
31

 
9
 %
 
$
671

 
$
625

 
$
46

 
7
 %
Cost of sales
302

 
152

 
150

 
99
 %
 
567

 
356

 
211

 
59
 %
Gross margin
$
87

 
$
206

 
$
(119
)
 
(58
)%
 
$
104

 
$
269

 
$
(165
)
 
(61
)%
Gross margin percentage
22.4
%
 
57.5
%
 
(35.1
)%
 
 
 
15.5
%
 
43.0
%
 
(27.5
)%
 
 
Sales volume by product tons (000s)
1,152

 
870

 
282

 
32
 %
 
2,072

 
1,607

 
465

 
29
 %
Sales volume by nutrient tons (000s) (1)
945

 
713

 
232

 
33
 %
 
1,699

 
1,318

 
381

 
29
 %
Average selling price per product ton
$
338

 
$
411

 
$
(73
)
 
(18
)%
 
$
324

 
$
389

 
$
(65
)
 
(17
)%
Average selling price per nutrient ton (1)
$
412

 
$
502

 
$
(90
)
 
(18
)%
 
$
395

 
$
474

 
$
(79
)
 
(17
)%
Gross margin per product ton
$
76

 
$
237

 
$
(161
)
 
(68
)%
 
$
50

 
$
167

 
$
(117
)
 
(70
)%
Gross margin per nutrient ton (1)
$
92

 
$
289

 
$
(197
)
 
(68
)%
 
$
61

 
$
204

 
$
(143
)
 
(70
)%
Depreciation and amortization
$
49

 
$
19

 
$
30

 
158
 %
 
$
93

 
$
40

 
$
53

 
133
 %
Unrealized net mark-to-market loss (gain) on natural gas derivatives
$
6

 
$
(69
)
 
$
75

 
N/M

 
$
23

 
$
(62
)
 
$
85

 
N/M

_______________________________________________________________________________
N/M—Not Meaningful
(1)  
Ammonia represents 82% nitrogen content. Nutrient tons represent the equivalent tons of nitrogen within the product tons.
Second Quarter of 2017 Compared to Second Quarter of 2016
Net Sales.     Total net sales in the ammonia segment increase d by $31 million , or 9% , in the second quarter of 2017 from the second quarter of 2016 due primarily to a 32% increase in sales volume partially offset by an 18% decrease in average selling prices. Higher production from the completion of our capacity expansion projects led to an increase in the amount of ammonia available for sale. Selling prices declined due to greater global nitrogen supply availability and the impact of an increased proportion of export sales that on average are lower-priced than sales to customers in North America.
Cost of Sales.     Cost of sales in our ammonia segment averaged $262 per ton in the second quarter of 2017 , a 51% increase from $174 per ton in the same quarter of 2016 . The increase was due primarily to an unrealized net mark-to-market loss on natural gas derivatives in the second quarter of 2017 compared to a gain in the same quarter of 2016, higher realized natural gas costs, and higher depreciation as a result of the new ammonia plants at our Donaldsonville and Port Neal facilities, partially offset by the impact of production efficiencies due to increased volume. Depreciation and amortization in our ammonia segment in the second quarter of 2017 was $43 per ton compared to $22 per ton in the second quarter of 2016 .
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Net Sales.     Total net sales in the ammonia segment increase d by $46 million , or 7% , in the six months ended June 30, 2017 from the six months ended June 30, 2016 due primarily to a 29% increase in sales volume partially offset by 17% decrease in average selling prices. The increase in sales volume was due to higher production from the completion of our capacity expansion projects, higher demand from an early start to the 2017 spring application season due to favorable soil and weather conditions in the Southern Plains and Midwest regions of the United States and an increase in exports. Selling prices declined due to greater global nitrogen supply availability and the impact of an increased proportion of export sales that on average are lower-priced than sales to customers in North America.
Cost of Sales.     Cost of sales in our ammonia segment averaged $274 per ton in the six months ended June 30, 2017 , a 23% increase from $222 per ton in the six months ended June 30, 2016 . The increase was due primarily to an unrealized net mark-to-market loss on natural gas derivatives in the six months ended June 30, 2017 compared to a gain in the comparable period of 2016, higher realized natural gas costs, and higher depreciation as a result of the new ammonia plants at our

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Donaldsonville and Port Neal facilities, partially offset by the impact of production efficiencies due to increased volume. Depreciation and amortization in our ammonia segment in the six months ended June 30, 2017 was $45 per ton compared to $25 per ton in the six months ended June 30, 2016 .
Granular Urea Segment
Our granular urea segment produces granular urea, which contains 46% nitrogen. Produced from ammonia and carbon dioxide, it has the highest nitrogen content of any of our solid nitrogen fertilizers. Granular urea is produced at our Courtright, Ontario; Donaldsonville, Louisiana; Medicine Hat, Alberta; and Port Neal, Iowa nitrogen complexes.
The following table presents summary operating data for our granular urea segment:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017 v. 2016
 
2017
 
2016
 
2017 v. 2016
 
(in millions, except as noted)
 
(in millions, except as noted)
Net sales
$
259

 
$
240

 
$
19

 
8
 %
 
$
497

 
$
475

 
$
22

 
5
 %
Cost of sales
235

 
118

 
117

 
99
 %
 
448

 
293

 
155

 
53
 %
Gross margin
$
24

 
$
122

 
$
(98
)
 
(80
)%
 
$
49

 
$
182

 
$
(133
)
 
(73
)%
Gross margin percentage
9.3
%
 
50.8
%
 
(41.5
)%
 
 
 
9.9
%
 
38.3
%
 
(28.4
)%
 
 
Sales volume by product tons (000s)
1,221

 
972

 
249

 
26
 %
 
2,179

 
1,891

 
288

 
15
 %
Sales volume by nutrient tons (000s) (1)
561

 
447

 
114

 
26
 %
 
1,002

 
870

 
132

 
15
 %
Average selling price per product ton
$
212

 
$
247

 
$
(35
)
 
(14
)%
 
$
228

 
$
251

 
$
(23
)
 
(9
)%
Average selling price per nutrient ton (1)
$
462

 
$
537

 
$
(75
)
 
(14
)%
 
$
496

 
$
546

 
$
(50
)
 
(9
)%
Gross margin per product ton
$
20

 
$
126

 
$
(106
)
 
(84
)%
 
$
22

 
$
96

 
$
(74
)
 
(77
)%
Gross margin per nutrient ton (1)
$
43

 
$
273

 
$
(230
)
 
(84
)%
 
$
49

 
$
209

 
$
(160
)
 
(77
)%
Depreciation and amortization
$
67

 
$
25

 
$
42

 
168
 %
 
$
120

 
$
50

 
$
70

 
140
 %
Unrealized net mark-to-market loss (gain) on natural gas derivatives
$
5

 
$
(55
)
 
$
60

 
N/M

 
$
19

 
$
(49
)
 
$
68

 
N/M

_______________________________________________________________________________
N/M—Not Meaningful
(1) Granular urea represents 46% nitrogen content. Nutrient tons represent the tons of nitrogen within the product tons.

Second Quarter of 2017 Compared to Second Quarter of 2016
Net Sales.     Net sales in the granular urea segment increase d $19 million , or 8% , in the second quarter of 2017 from the second quarter of 2016 due primarily to a 26% increase in sales volume partially offset by a 14% decrease in average selling prices. Sales volume was higher due primarily to increased production as a result of our expanded urea capacity at our Port Neal facility that came on line in the fourth quarter of 2016. Average selling prices decrease d to $212 per ton in the second quarter of 2017 compared to $247 per ton in the second quarter of 2016 due primarily to greater global nitrogen supply availability.
Cost of Sales.     Cost of sales in our granular urea segment averaged $192 per ton in the second quarter of 2017 , a 59% increase from $121 per ton in the same quarter of 2016 . The increase was due primarily to an unrealized net mark-to-market loss on natural gas derivatives in the second quarter of 2017 compared to a gain in the same quarter of 2016, higher depreciation as a result of the new granular urea plant at our Port Neal facility, and higher realized natural gas costs, partially offset by the impact of production efficiencies due to increased volume. Depreciation and amortization in our granular urea segment in the second quarter of 2017 was $55 per ton compared to $26 per ton in the second quarter of 2016 .
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Net Sales.     Net sales in the granular urea segment increase d $22 million , or 5% , in the six months ended June 30, 2017 from the six months ended June 30, 2016 due primarily to a 15% increase in sales volume partially offset by a 9% decrease in average selling prices. Sales volume was higher due to increased production as a result of our expanded urea capacity at our Port Neal facility that came on line in the fourth quarter of 2016. Average selling prices decrease d to $228 per ton in the first six months of 2017 compared to $251 per ton in the comparable period of 2016 due primarily to greater global nitrogen supply availability, including a higher level of imports, which pressured selling prices.
Cost of Sales.     Cost of sales in our granular urea segment averaged $206 per ton in the first six months of 2017 , a 33% increase from $155 per ton in the comparable period of 2016 . The increase was due primarily to an unrealized net mark-to-

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market loss on natural gas derivatives in the six months ended June 30, 2017 compared to a gain in the comparable period of 2016, higher depreciation as a result of the new granular urea plant at our Port Neal facility, and higher realized natural gas costs, partially offset by the impact of production efficiencies due to increased volume. Depreciation and amortization in our granular urea segment in the six months ended June 30, 2017 was $55 per ton compared to $26 per ton in the six months ended June 30, 2016 .
UAN Segment
Our UAN segment produces urea ammonium nitrate solution (UAN). UAN, a liquid fertilizer product with a nitrogen content that typically ranges from 28% to 32%, is produced by combining urea and ammonium nitrate. UAN is produced at our nitrogen complexes in Courtright, Ontario; Donaldsonville, Louisiana; Port Neal, Iowa; Verdigris, Oklahoma; Woodward, Oklahoma; and Yazoo City, Mississippi.
The following table presents summary operating data for our UAN segment:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017 v. 2016
 
2017
 
2016
 
2017 v. 2016
 
(in millions, except as noted)
 
(in millions, except as noted)
Net sales
$
286

 
$
370

 
$
(84
)
 
(23
)%
 
$
603

 
$
679

 
$
(76
)
 
(11
)%
Cost of sales
248

 
197

 
51

 
26
 %
 
530

 
428

 
102

 
24
 %
Gross margin
$
38

 
$
173

 
$
(135
)
 
(78
)%
 
$
73

 
$
251

 
$
(178
)
 
(71
)%
Gross margin percentage
13.3
%
 
46.8
%
 
(33.5
)%
 
 
 
12.1
%
 
37.0
%
 
(24.9
)%
 
 
Sales volume by product tons (000s)
1,631

 
1,832

 
(201
)
 
(11
)%
 
3,480

 
3,284

 
196

 
6
 %
Sales volume by nutrient tons (000s) (1)
516

 
577

 
(61
)
 
(11
)%
 
1,100

 
1,034

 
66

 
6
 %
Average selling price per product ton
$
175

 
$
202

 
$
(27
)
 
(13
)%
 
$
173

 
$
207

 
$
(34
)
 
(16
)%
Average selling price per nutrient ton (1)
$
554

 
$
641

 
$
(87
)
 
(14
)%
 
$
548

 
$
657

 
$
(109
)
 
(17
)%
Gross margin per product ton
$
23

 
$
94

 
$
(71
)
 
(76
)%
 
$
21

 
$
76

 
$
(55
)
 
(72
)%
Gross margin per nutrient ton (1)
$
74

 
$
300

 
$
(226
)
 
(75
)%
 
$
66

 
$
243

 
$
(177
)
 
(73
)%
Depreciation and amortization
$
56

 
$
59

 
$
(3
)
 
(5
)%
 
$
121

 
$
117

 
$
4

 
3
 %
Unrealized net mark-to-market loss (gain) on natural gas derivatives
$
5

 
$
(65
)
 
$
70

 
N/M

 
$
21

 
$
(59
)
 
$
80

 
N/M

_______________________________________________________________________________
N/M—Not Meaningful
(1)  
UAN represents between 28% and 32% of nitrogen content, depending on the concentration specified by the customer. Nutrient tons represent the tons of nitrogen within the product tons.
Second Quarter of 2017 Compared to Second Quarter of 2016
Net Sales.     Net sales in the UAN segment decrease d $84 million , or 23% , in the second quarter of 2017 from the second quarter of 2016 due primarily to a 11% decrease in sales volume and a 13% decrease in average selling prices. Sales volume was lower due to unfavorable weather in North America, which resulted in late planting and delayed UAN purchases and applications, as well as customer reluctance to carry inventory. Average selling prices decrease d to $175 per ton in the second quarter of 2017 compared to $202 per ton in the second quarter of 2016 . UAN selling prices were lower due to greater global nitrogen supply availability.
Cost of Sales.     Cost of sales in our UAN segment averaged $152 per ton in the second quarter of 2017 , a 41% increase from $108 per ton in the second quarter of 2016 . The increase was due primarily to an unrealized net mark-to-market loss on natural gas derivatives in the second quarter of 2017 compared to a gain in the same quarter of 2016 and higher realized natural gas costs, partially offset by targeted cost reduction initiatives.
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Net Sales.     Net sales in the UAN segment decrease d $76 million , or 11% , in the six months ended June 30, 2017 from the six months ended June 30, 2016 due primarily to a 16% decrease in average selling prices, partially offset by a 6% increase in sales volume. Average selling prices decrease d to $173 per ton in the first six months of 2017 compared to $207 per ton in the comparable period of 2016 . UAN selling prices were lower due to greater global nitrogen supply availability. Increases in UAN exports at lower selling prices also impacted our average selling prices. Our sales volume was higher due primarily to increased exports.
Cost of Sales.     Cost of sales in our UAN segment averaged $152 per ton in the first six months of 2017 , a 16% increase from $131 per ton in the comparable period of 2016 . The increase was due primarily to the impact of unrealized net mark-to-

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market loss on natural gas derivatives in the first six months of 2017 compared to gains in the comparable period of 2016 and the impact of higher realized natural gas costs in the first six months of 2017 , partially offset by targeted cost reduction initiatives and production efficiencies due to increased volume.
AN Segment
Our AN segment produces ammonium nitrate (AN). AN is a nitrogen-based product with a nitrogen content between 29% and 35%. AN is used as nitrogen fertilizer and is also used by industrial customers for commercial explosives and blasting systems. AN is produced at our nitrogen complexes in Yazoo City, Mississippi and Ince and Billingham, United Kingdom.
The following table presents summary operating data for our AN segment:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017 v. 2016
 
2017
 
2016
 
2017 v. 2016
 
(in millions, except as noted)
 
(in millions, except as noted)
Net sales
$
112

 
$
90

 
$
22

 
24
 %
 
$
237

 
$
215

 
$
22

 
10
 %
Cost of sales
102

 
90

 
12

 
13
 %
 
208

 
202

 
6

 
3
 %
Gross margin
$
10

 
$
—

 
$
10

 
N/M

 
$
29

 
$
13

 
$
16

 
123
 %
Gross margin percentage
8.9
%
 
—
%
 
8.9
%
 
 
 
12.2
%
 
6.0
%
 
6.2
%
 
 
Sales volume by product tons (000s)
539

 
453

 
86

 
19
 %
 
1,107

 
1,011

 
96

 
9
 %
Sales volume by nutrient tons (000s) (1)
183

 
154

 
29

 
19
 %
 
374

 
342

 
32

 
9
 %
Average selling price per product ton
$
208

 
$
199

 
$
9

 
5
 %
 
$
214

 
$
213

 
$
1

 
—
 %
Average selling price per nutrient ton (1)
$
612

 
$
584

 
$
28

 
5
 %
 
$
634

 
$
629

 
$
5

 
1
 %
Gross margin per product ton
$
19

 
$
—

 
$
19

 
N/M

 
$
26

 
$
13

 
$
13

 
100
 %
Gross margin per nutrient ton (1)
$
55

 
$
—

 
$
55

 
N/M

 
$
78

 
$
38

 
$
40

 
105
 %
Depreciation and amortization
$
21

 
$
28

 
$
(7
)
 
(25
)%
 
$
40

 
$
50

 
$
(10
)
 
(20
)%
Unrealized net mark-to-market loss (gain) on natural gas derivatives
$
1

 
$
(9
)
 
$
10

 
N/M

 
$
3

 
$
(8
)
 
$
11

 
N/M

_______________________________________________________________________________
N/M—Not Meaningful
(1)  
Nutrient tons represent the tons of nitrogen within the product tons.
Second Quarter of 2017 Compared to Second Quarter of 2016
Net Sales.     Total net sales in our AN segment increase d $22 million , or 24% , in the second quarter of 2017 from the second quarter of 2016 due primarily to a 5% increase in average selling prices and a 19% increase in sales volume partially offset by the impact of foreign exchange rate changes between the U.S. dollar and the British pound. Average selling prices were higher due to the commencement of a new long-term supply agreement. The increase in sales volume was driven by strong shipment in the United Kingdom in the second quarter of 2017.
Cost of Sales.     Total cost of sales in our AN segment averaged $189 per ton in the second quarter of 2017 , a 5% decrease from $199 per ton in the second quarter of 2016 , due primarily to costs in the second quarter of 2016 related to the completion of the reconfiguration at our Yazoo City complex and the impact of foreign exchange rate changes between the U.S. dollar and the British pound, partially offset by an unrealized net mark-to-market loss on natural gas derivatives in the second quarter of 2017 compared to a gain in the same quarter of 2016 and higher realized natural gas costs.
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Net Sales.     Total net sales in our AN segment increase d $22 million , or 10% , in the six months ended June 30, 2017 from the six months ended June 30, 2016 as a 9% increase in sales volume, due to the commencement of a new long-term supply agreement, was partially offset by the impact of foreign exchange rate changes between the U.S. dollar and the British pound.
Cost of Sales.      Total cost of sales in our AN segment averaged $188 per ton in the first six months of 2017 , a 6% decrease from $200 per ton in the comparable period of 2016 . The decrease was due primarily to the impact of foreign exchange rate changes between the U.S. dollar and the British pound and costs in the second quarter of 2016 related to the completion of the reconfiguration at our Yazoo City complex, partially offset by higher realized natural gas costs and the impact of an unrealized net mark-to-market loss on natural gas derivatives in the first six months of 2017 compared to a gain in the comparable period of 2016 .

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Other Segment
Our Other segment primarily includes the following products:
•
Diesel exhaust fluid (DEF) is an aqueous urea solution typically made with 32.5% high-purity urea and 67.5% deionized water.
•
Urea liquor is a liquid product that we sell in concentrations of 40%, 50% and 70% urea as a chemical intermediate.
•
Nitric acid is a nitrogen-based product with a nitrogen content of 22.2%.
•
Compound fertilizer products (NPKs) are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.
The following table presents summary operating data for our Other segment:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017 v. 2016
 
2017
 
2016
 
2017 v. 2016
 
(in millions, except as noted)
 
(in millions, except as noted)
Net sales
$
78

 
$
76

 
$
2

 
3
 %
 
$
153

 
$
144

 
$
9

 
6
 %
Cost of sales
65

 
50

 
15

 
30
 %
 
130

 
115

 
15

 
13
 %
Gross margin
$
13

 
$
26

 
$
(13
)
 
(50
)%
 
$
23

 
$
29

 
$
(6
)
 
(21
)%
Gross margin percentage
16.7
%
 
34.2
%
 
(17.5
)%
 
 
 
15.0
%
 
20.1
%
 
(5.1
)%
 
 
Sales volume by product tons (000s)
503

 
430

 
73

 
17
 %
 
953

 
815

 
138

 
17
 %
Sales volume by nutrient tons (000s) (1)
100

 
84

 
16

 
19
 %
 
188

 
157

 
31

 
20
 %
Average selling price per product ton
$
155

 
$
177

 
$
(22
)
 
(12
)%
 
$
161

 
$
177

 
$
(16
)
 
(9
)%
Average selling price per nutrient ton (1)
$
780

 
$
905

 
$
(125
)
 
(14
)%
 
$
814

 
$
917

 
$
(103
)
 
(11
)%
Gross margin per product ton
$
26

 
$
60

 
$
(34
)
 
(57
)%
 
$
24

 
$
36

 
$
(12
)
 
(33
)%
Gross margin per nutrient ton (1)
$
130

 
$
310

 
$
(180
)
 
(58
)%
 
$
122

 
$
185

 
$
(63
)
 
(34
)%
Depreciation and amortization
$
13

 
$
12

 
$
1

 
8
 %
 
$
25

 
$
22

 
$
3

 
14
 %
Unrealized net mark-to-market loss (gain) on natural gas derivatives
$
1

 
$
(13
)
 
$
14

 
N/M

 
$
5

 
$
(12
)
 
$
17

 
N/M

_______________________________________________________________________________
N/M—Not Meaningful
(1)  
Nutrient tons represent the tons of nitrogen within the product tons.
Second Quarter of 2017 Compared to Second Quarter of 2016
Net Sales.     Total net sales in our Other segment increase d by $2 million , or 3% , in the second quarter of 2017 from the second quarter of 2016 due primarily to a 17% increase in sales volume partially offset by a 12% decrease in average selling prices. The increase in our Other segment sales volume was due primarily to an increase in DEF sales volume as the demand in the North American DEF market continued to grow. In June 2017, we also completed the addition of new DEF capacity at our Donaldsonville facility. The decline in average selling prices is due primarily to greater global nitrogen supply availability weighing on global nitrogen fertilizer selling prices.
Cost of Sales.     Cost of sales in our Other segment averaged $129 per ton in the second quarter of 2017 , a 10% increase from $117 per ton in the second quarter of 2016 due primarily to an unrealized net mark-to-market loss on natural gas derivatives in the second quarter of 2017 compared to a gain in the same quarter of 2016.
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
Net Sales.     Total net sales in our Other segment increase d by $9 million , or 6% , in the six months ended June 30, 2017 from the six months ended June 30, 2016 due to a 17% increase in sales volume partially offset by a 9% decrease in average selling prices and the impact of foreign exchange rate changes between the U.S. dollar and the British pound. The increase in our Other segment sales volume was due to an increase in DEF sales volume as the demand in the North American DEF market continued to grow. The decline in average selling prices is due to greater global nitrogen supply availability weighing on global nitrogen fertilizer selling prices.
Cost of Sales.     Cost of sales in our Other segment averaged $137 per ton in the six months ended June 30, 2017 , a 3% decrease from $141 per ton in the six months ended June 30, 2016 due primarily to the impact of foreign exchange rate changes between the U.S. dollar and the British pound, and the impact of production efficiencies, partially offset by the impact of an unrealized net mark-to-market loss on natural gas derivatives in the first six months of 2017 compared to a gain in the comparable period of 2016 .

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Liquidity and Capital Resources
Our primary uses of cash are generally for operating costs, working capital, capital expenditures, debt service, investments, taxes, share repurchases and dividends. Our working capital requirements are affected by several factors, including demand for our products, selling prices, raw material costs, freight costs and seasonal factors inherent in the business. Generally, our primary source of cash is cash from operations, which includes cash generated by customer advances. We may also from time to time access the capital markets or engage in borrowings under our credit agreements.
In 2016, we completed our capacity expansion projects at Donaldsonville, Louisiana and Port Neal, Iowa that were originally announced in 2012. These projects provided us with an increase of approximately 25% in production capacity and had a total capital cost of $5.2 billion. The completion of our capacity expansion projects will reduce what had been a substantial use of liquidity in recent years. See discussion under "Overview of CF Holdings—Items Affecting Comparability of Results—Depreciation and Amortization," above, and "—Capital Spending," below, for further information on these projects.
A significant portion of the capital assets that were constructed as part of the capacity expansion projects qualifies for bonus depreciation under the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). Under the provisions of the PATH Act, eligible capital additions are subject to 50% bonus depreciation. In the second quarter of 2017, we filed a claim to carry back the 2016 federal tax loss to prior periods and received a refund of approximately $815 million of federal taxes paid in those prior periods. See "—Realization of 2016 Tax Assets Resulting From Bonus Depreciation," below.
At June 30, 2017 , our balance of cash and cash equivalents was $2.00 billion and we were in compliance with all applicable covenant requirements under our Revolving Credit Agreement, Public Senior Notes and Senior Secured Notes.
Cash and Cash Equivalents
We had cash and cash equivalents of $2.00 billion and $1.16 billion as of June 30, 2017 and December 31, 2016 , respectively. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less. Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.
Capital Spending
We make capital expenditures to sustain our asset base, increase our capacity, improve plant efficiency and comply with various environmental, health and safety requirements. Capital expenditures totaled $185 million in the first six months of 2017 compared to $1,379 million in the first six months of 2016 , with the decrease primarily due to the completion in 2016 of our capacity expansion projects at Donaldsonville, Louisiana and Port Neal, Iowa.
The total cost of the capacity expansion projects includes approximately $175 million of costs for work performed in 2016, which were accrued but unpaid as of June 30, 2017 . See discussion under "—Projected Capital Spending," below, for further information.
Projected Capital Spending
New capital expenditures for 2017 are estimated to be approximately $400 million. Additionally, as of June 30, 2017 and December 31, 2016, we had approximately $175 million and $185 million , respectively, of costs accrued for work completed in 2016 related to the capacity expansion projects. Most of these unpaid amounts are the subject of disputes with certain contractors and vendors. Actual cash expenditures in 2017 will also reflect any payments for these capacity expansion project amounts when they occur.
Planned capital expenditures are subject to change due to delays in regulatory approvals or permitting, unanticipated increases in cost, changes in scope and completion time, performance of third parties, adverse weather, defects in materials and workmanship, labor or material shortages, transportation constraints, acceleration or delays in the timing of the work and other unforeseen difficulties.

50
Table of Contents

Realization of 2016 Tax Assets Resulting From Bonus Depreciation
The PATH Act permits bonus depreciation on certain eligible capital additions in the year the assets are placed in service. Under the provisions of the PATH Act, eligible capital additions are subject to 50% bonus depreciation in the year the asset is placed in service. A significant portion of the capital assets constructed as part of the Donaldsonville, Louisiana and Port Neal, Iowa capacity expansion projects qualifies for 50% bonus depreciation. We generated a substantial federal tax loss in 2016, primarily as a result of the bonus depreciation deductions. In the second quarter of 2017, we received a federal tax refund of approximately $815 million as a result of the claim to carry back the 2016 federal tax loss to prior income tax years.
Debt
Revolving Credit Agreement
We have a senior secured revolving credit agreement (the Revolving Credit Agreement) providing for a revolving credit facility of up to $750 million with a maturity of September 18, 2020. The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million . Borrowings under the Revolving Credit Agreement may be used for working capital and general corporate purposes. CF Industries may designate as borrowers one or more wholly owned subsidiaries that are organized in the United States or any state thereof, or the District of Columbia.
Borrowings under the Revolving Credit Agreement may be denominated in dollars, Canadian dollars, euro and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin, and the borrowers are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.
As of June 30, 2017 , we had excess borrowing capacity under the Revolving Credit Agreement of $695 million (net of outstanding letters of credit of $55 million ). There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2017 or December 31, 2016 , or during the six months ended June 30, 2017 . Maximum borrowings outstanding under the Revolving Credit Agreement during the six months ended June 30, 2016 were $150 million , with a weighted-average annual interest rate of 1.85% .
The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of June 30, 2017 , we were in compliance with all covenants under the Revolving Credit Agreement.
Letters of Credit
In addition to the letters of credit outstanding under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue letters of credit up to $75 million . As of June 30, 2017 , approximately $70 million of letters of credit were outstanding under this agreement.

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Senior Notes
Long-term debt presented on our consolidated balance sheets as of June 30, 2017 and December 31, 2016 consisted of the following Public Senior Notes (unsecured) and Senior Secured Notes:
 
Effective Interest Rate
 
June 30,
2017
 
December 31,
2016
 
 
Principal
 
Carrying Amount (1)
 
Principal
 
Carrying Amount (1)
 
 
 
(in millions)
Public Senior Notes:
 
 
 
 
 
 
 
 
 
6.875% due May 2018
7.344%
 
$
800

 
$
797

 
$
800

 
$
795

7.125% due May 2020
7.529%
 
800

 
792

 
800

 
791

3.450% due June 2023
3.562%
 
750

 
746

 
750

 
745

5.150% due March 2034
5.279%
 
750

 
739

 
750

 
739

4.950% due June 2043
5.031%
 
750

 
741

 
750

 
741

5.375% due March 2044
5.465%
 
750

 
741

 
750

 
741

Senior Secured Notes:
 
 
 
 
 
 
 
 
 
3.400% due December 2021
3.782%
 
500

 
492

 
500

 
491

4.500% due December 2026
4.759%
 
750

 
735

 
750

 
735

Total long-term debt
 
 
$
5,850

 
$
5,783

 
$
5,850

 
$
5,778

Less: Current portion
 
 
800

 
797

 
—

 
—

Long-term debt
 
 
$
5,050

 
$
4,986

 
$
5,850

 
$
5,778

_______________________________________________________________________________
(1)  
Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $12 million as of both June 30, 2017 and December 31, 2016 , and total deferred debt issuance costs were $55 million and $60 million as of June 30, 2017 and December 31, 2016 , respectively. 
Public Senior Notes
Under the indentures (including the applicable supplemental indentures) governing our senior notes due 2018, 2020, 2023, 2034, 2043 and 2044 (the Public Senior Notes), each series of Public Senior Notes is guaranteed by CF Holdings, and, in connection with the effectiveness of the November 2016 amendment to our Revolving Credit Agreement, CF Holdings' wholly owned subsidiaries CF Industries Enterprises, Inc. (CFE) and CF Industries Sales, LLC (CFS) became subsidiary guarantors of the Public Senior Notes.
Interest on the Public Senior Notes is payable semiannually, and the Public Senior Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.
Senior Secured Notes
On November 21, 2016, CF Industries issued $500 million aggregate principal amount of 3.400% senior secured notes due 2021 (the 2021 Notes) and $750 million aggregate principal amount of 4.500% senior secured notes due 2026 (the 2026 Notes, and together with the 2021 Notes, the Senior Secured Notes). The net proceeds, after deducting discounts and offering expenses, from the issuance and sale of the Senior Secured Notes were approximately $1.23 billion . CF Industries used approximately $1.18 billion of the net proceeds for the prepayment (including payment of a make-whole amount of approximately $170 million and accrued interest) in full of the outstanding $1.0 billion aggregate principal amount of the senior notes 2022, 2025 and 2027 (Private Senior Notes) issued by CF Industries on September 24, 2015.
Interest on the Senior Secured Notes is payable semiannually on December 1 and June 1 beginning on June 1, 2017, and the Senior Secured Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.


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Table of Contents

Forward Sales and Customer Advances
We offer our customers the opportunity to purchase products from us on a forward basis at prices and on delivery dates we propose. Therefore, our reported fertilizer selling prices and margins may differ from market spot prices and margins available at the time of shipment.
Customer advances, which typically represent a portion of the contract's sales value, are received shortly after the contract is executed, with any remaining unpaid amount generally being collected by the time the product is shipped, thereby reducing or eliminating the accounts receivable related to such sales. Any cash payments received in advance from customers in connection with forward sales contracts are reflected on our consolidated balance sheets as a current liability until related orders are shipped and revenue is recognized. As of June 30, 2017 and December 31, 2016 , we had $5 million and $42 million , respectively, in customer advances on our consolidated balance sheets.
While customer advances are generally a significant source of liquidity, the level of forward sales contracts is affected by many factors including current market conditions and our customers' outlook of future market fundamentals. During periods of declining prices, such as the current environment, customers tend to delay purchasing fertilizer in anticipation that prices in the future will be lower than the current prices. If the level of sales under our forward sales programs were to decrease in the future, our cash received from customer advances would likely decrease and our accounts receivable balances would likely increase. Additionally, borrowing under the Revolving Credit Agreement could become necessary. Due to the volatility inherent in our business and changing customer expectations, we cannot estimate the amount of future forward sales activity.
Under our forward sales programs, a customer may delay delivery of an order due to weather conditions or other factors. These delays generally subject the customer to potential charges for storage or may be grounds for termination of the contract by us. Such a delay in scheduled shipment or termination of a forward sales contract due to a customer's inability or unwillingness to perform may negatively impact our reported sales.
Derivative Financial Instruments
We use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future. Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based fertilizers. From time to time, we also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates. Because we use derivative instruments, volatility in reported quarterly earnings can result from the unrealized mark-to-market adjustments in the value of the derivatives. In the three and six months ended June 30, 2017 , we recognized unrealized net mark-to-market losses on natural gas derivatives of $18 million and $71 million , respectively. In the three and six months ended June 30, 2016 , we recognized unrealized net mark-to-market gains on natural gas derivatives of $211 million and $190 million , respectively. These amounts are reflected in cost of sales in our consolidated statements of operations.
Derivatives expose us to counterparties and the risks associated with their ability to meet the terms of the contracts. For derivatives that are in net asset positions, we are exposed to credit loss from nonperformance by the counterparties. We control our credit risk through the use of multiple counterparties that are multinational commercial banks, other major financial institutions or large energy companies, and, in most cases, the use of International Swaps Derivative Association (ISDA) agreements. The ISDA agreements are master netting arrangements commonly used for over-the-counter derivatives that mitigate exposure to counterparty credit risk, in part, by creating contractual rights of netting and setoff, the specifics of which vary from agreement to agreement.
The ISDA agreements to most of our derivative instruments contain credit-risk-related contingent features, such as cross default provisions and credit support thresholds. In the event of certain defaults or a credit ratings downgrade, our counterparty may request early termination and net settlement of certain derivative trades or 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, 2017 and December 31, 2016 , the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $23 million and zero , respectively, which also approximates the fair value of the maximum amount of additional collateral that would need to be posted or assets needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. As of June 30, 2017 and December 31, 2016 , we had open natural gas derivative contracts for 112.3 million MMBtus and 183.0 million MMBtus, respectively. At June 30, 2017 , we had $100 thousand cash collateral on deposit with counterparties for derivative contracts. At December 31, 2016 , we had no cash collateral on deposit with counterparties for derivative contracts. The credit support documents executed in connection

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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.
Embedded Derivative Liability
Under the terms of our strategic venture with CHS, if our credit rating is reduced below certain levels by two of three specified credit rating agencies, we are required to make a non-refundable yearly payment of $5 million to CHS. The payment would 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 three specified credit rating agencies or February 1, 2026. In the fourth quarter of 2016, as a result of a reduction in our credit rating, we made a $5 million payment to CHS.
This term of the strategic venture is recognized on our consolidated balance sheet as an embedded derivative and its value is included in other liabilities. See Note 13—Noncontrolling Interests for additional information.
The fair value of the embedded derivative liability as of June 30, 2017 , is $29 million , which is included in other liabilities and other current liabilities on our consolidated balance sheet. Included in other operating—net in our consolidated statement of operations for the three and six months ended June 30, 2017 are losses of $2 million and $3 million , respectively, to adjust the liability to fair value.
Defined Benefit Pension Plans
We contributed $69 million to our pension plans during the six months ended June 30, 2017 . Over the remainder of 2017, we expect to contribute an additional $12 million to our pension plans, or a total of approximately $81 million for the full year 2017. The contributions in 2017 include a voluntary contribution of $59 million made in the second quarter.
Distribution on Noncontrolling Interest in CFN
In the third quarter of 2017, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2017 in accordance with the CFN limited liability company agreement. On July 31, 2017, CFN distributed $59 million to CHS for the distribution period ended June 30, 2017.
Cash Flows
Operating Activities
Net cash provided by operating activities during the first six months of 2017 was $1,187 million as compared to $446 million in the first six months of 2016 . The $741 million increase was primarily due to working capital changes including the receipt of our $815 million income tax refund as a result of the claim to carry back the 2016 federal tax loss to prior income tax years. The increase in net cash provided by operating activities was also a result of entering 2017 with a lower level of customer advances than 2016 due to customer reluctance to enter into prepaid contracts in a declining fertilizer price environment. These increases were partially offset by higher contributions to our pension plans. In the first six months of 2017 , we contributed $69 million to our pension plans compared to $12 million in the first six months of 2016 .
Investing Activities
Net cash used in investing activities was $157 million in the first six months of 2017 as compared to $1,358 million in the first six months of 2016 . The $1,201 million decrease is due primarily to lower capital expenditures as a result of the completion of our capacity expansion projects in Donaldsonville, Louisiana and Port Neal, Iowa at the end of 2016. During the first six months of 2017 , capital expenditures totaled $185 million compared to $1,379 million in the first six months of 2016 .
Financing Activities
Net cash used in financing activities was $199 million in the first six months of 2017 compared to net cash provided by financing activities of $2,635 million in the same period of 2016 . In the first six months of 2016 , CHS purchased a minority equity interest in CFN for $2.8 billion . Dividends paid on common stock in each of the six months ended June 30, 2017 and 2016 were $140 million .
Contractual Obligations
There have been no material changes outside the ordinary course of business to our contractual obligations as described in our 2016 Annual Report on Form 10-K filed with the SEC on February 23, 2017 .

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Off-Balance Sheet Arrangements
We have operating leases for certain property and equipment under various noncancelable agreements, including rail car leases and barge tow charters for the distribution of fertilizer. The rail car leases currently have minimum terms ranging from one to eleven years and the barge charter commitments currently have terms ranging from one to seven years. We also have terminal and warehouse storage agreements for our distribution system, some of which contain minimum throughput requirements. The storage agreements contain minimum terms ranging from one to five years and commonly contain automatic annual renewal provisions thereafter unless canceled by either party. See Note  24—Leases in the notes to our consolidated financial statements included in our 2016 Annual Report on Form 10-K filed with the SEC on February 23, 2017 for additional information concerning leases.
We do not have any other off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
There were no changes to our significant accounting policies or estimates during the first six months of 2017.
Recent Accounting Pronouncements
See Note  2—New Accounting Standards for a discussion of recent accounting pronouncements.

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FORWARD-LOOKING STATEMENTS
From time to time, in this Quarterly Report on Form 10-Q as well as in other written reports and oral statements, we make forward-looking statements that are not statements of historical fact and may involve a number of risks and uncertainties. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our prospects, future developments and business strategies. We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," or "would" and similar terms and phrases, including references to assumptions, to identify forward-looking statements in this document. These forward-looking statements are made based on currently available competitive, financial and economic data, our current expectations, estimates, forecasts and projections about the industries and markets in which we operate and management's beliefs and assumptions concerning future events affecting us. These statements are not guarantees of future performance and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, our actual results may differ materially from what is expressed in or implied by any forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this document. Additionally, we do not undertake any responsibility to provide updates regarding the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this document.
Important factors that could cause actual results to differ materially from our expectations are disclosed under "Risk Factors" in Item 1A in our 2016 Annual Report on Form 10-K filed with the SEC on February 23, 2017 . Such factors include, among others:
•
the cyclical nature of our business and the agricultural sector;
•
the global commodity nature of our fertilizer products, the impact of global supply and demand on our selling prices, and the intense global competition from other fertilizer producers;
•
conditions in the U.S. and European agricultural industry;
•
the volatility of natural gas prices in North America and Europe;
•
difficulties in securing the supply and delivery of raw materials, increases in their costs or delays or interruptions in their delivery;
•
reliance on third party providers of transportation services and equipment;
•
the significant risks and hazards involved in producing and handling our products against which we may not be fully insured;
•
our ability to manage our indebtedness;
•
operating and financial restrictions imposed on us by the agreements governing our senior secured indebtedness;
•
risks associated with our incurrence of additional indebtedness;
•
our ability to maintain compliance with covenants under the agreements governing our indebtedness;
•
downgrades of our credit ratings;
•
risks associated with cyber security;
•
weather conditions;
•
risks associated with our ability to utilize our tax net operating losses and other tax assets, including the risk that the use of such tax benefits is limited by an "ownership change;"
•
risks associated with changes in tax laws and disagreements with taxing authorities;
•
risks associated with expansions of our business, including unanticipated adverse consequences and the significant resources that could be required;
•
potential liabilities and expenditures related to environmental, health and safety laws and regulations and permitting requirements;
•
future regulatory restrictions and requirements related to greenhouse gas emissions;
•
the seasonality of the fertilizer business;
•
the impact of changing market conditions on our forward sales programs;
•
risks involving derivatives and the effectiveness of our risk measurement and hedging activities;
•
our reliance on a limited number of key facilities;
•
risks associated with the operation or management of the CHS strategic venture, risks and uncertainties relating to the market prices of the fertilizer products that are the subject of our supply agreement with CHS over the life of the supply agreement, and the risk that any challenges related to the CHS strategic venture will harm our other business relationships;
•
risks associated with our PLNL joint venture;
•
acts of terrorism and regulations to combat terrorism;
•
risks associated with international operations; and
•
deterioration of global market and economic conditions.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to the impact of changes in commodity prices, interest rates and foreign currency exchange rates.
Commodity Prices
Our net sales, cash flows and estimates of future cash flows related to nitrogen-based fertilizers are sensitive to changes in fertilizer prices as well as changes in the prices of natural gas and other raw materials unless these costs have been fixed or hedged. A $1.00 per MMBtu change in the price of natural gas would change the cost to produce a ton of ammonia, granular urea, UAN (32%), and AN by approximately $32, $22, $14 and $15, respectively.
Natural gas is the largest and most volatile component of the manufacturing cost for nitrogen-based fertilizers. We manage the risk of changes in natural gas prices primarily with the use of derivative financial instruments covering periods through December 2018. The derivative instruments that we use are primarily natural gas fixed price swaps and natural gas options. These derivatives settle using primarily NYMEX futures price indexes, which represent the basis for fair value at any given time. The contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods.
As of June 30, 2017 and December 31, 2016 , we had open natural gas derivative contracts for 112.3 million MMBtus and 183.0 million MMBtus, respectively. A $1.00 per MMBtu increase in the forward curve prices of natural gas at June 30, 2017 would result in a favorable change in the fair value of these derivative positions of $99 million , and a $1.00 per MMBtu decrease in the forward curve prices of natural gas would change their fair value unfavorably by $99 million .
From time to time we may purchase nitrogen products on the open market to augment or replace production at our facilities.
Interest Rate Fluctuations
As of June 30, 2017 , we had eight series of senior notes totaling $5.85 billion of principal outstanding with maturity dates of May 1, 2018, May 1, 2020, December 1, 2021, June 1, 2023, December 1, 2026, March 15, 2034, June 1, 2043 and March 15, 2044. The senior notes have fixed interest rates. As of June 30, 2017 , the carrying value and fair value of our senior notes was approximately $5.78 billion and $5.74 billion , respectively.
Borrowings under the Revolving Credit Agreement bear current market rates of interest and we are subject to interest rate risk on such borrowings. There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2017 or December 31, 2016 , or during the six months ended June 30, 2017 . Maximum borrowings outstanding under the Revolving Credit Agreement during the six months ended June 30, 2016 were $150 million with a weighted-average annual interest rate of 1.85% .
Foreign Currency Exchange Rates
From the fourth quarter of 2012 through 2016, we had entered into euro/U.S. dollar derivative hedging transactions related to the euro-denominated construction costs associated with our capacity expansion projects at our Donaldsonville, Louisiana and Port Neal, Iowa facilities. All of these foreign currency derivatives settled prior to December 31, 2016.
We are directly exposed to changes in the value of the Canadian dollar, the British pound and the euro. Outside of the transactions described above, we generally do not maintain any exchange rate derivatives or hedges related to these currencies.



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ITEM 4.    CONTROLS AND PROCEDURES.
         (a)    Disclosure Controls and Procedures.   The Company's management, with the participation of the Company's principal executive officer and principal financial officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the Company's principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in (i) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
         (b)    Changes in Internal Control Over Financial Reporting.   There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS.
West Fertilizer Co.
On April 17, 2013, there was a fire and explosion at the West Fertilizer Co. fertilizer storage and distribution facility in West, Texas. According to published reports, 15 people were killed and approximately 200 people were injured in the incident, and the fire and explosion damaged or destroyed a number of homes and buildings around the facility. Various subsidiaries of CF Industries Holdings, Inc. (the CF Entities) have been named as defendants along with other companies in lawsuits filed in 2013, 2014 and 2015 in the District Court of McLennan County, Texas by the City of West, individual residents of the County and other parties seeking recovery for damages allegedly sustained as a result of the explosion. The cases have been consolidated for discovery and pretrial proceedings in the District Court of McLennan County under the caption "In re: West Explosion Cases." The two-year statute of limitations expired on April 17, 2015. As of that date, over 400 plaintiffs had filed claims, including at least 9 entities, 325 individuals, and 80 insurance companies. Plaintiffs allege various theories of negligence, strict liability, and breach of warranty under Texas law. Although we do not own or operate the facility or directly sell our products to West Fertilizer Co., products that the CF Entities have manufactured and sold to others have been delivered to the facility and may have been stored at the West facility at the time of the incident.
The Court granted in part and denied in part the CF Entities' Motions for Summary Judgment in August 2015. Over one hundred forty cases have been resolved pursuant to confidential settlements that have been or we expect will be fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. The next trial is scheduled to begin on January 16, 2018. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits. The Company cannot provide a range of reasonably possible loss due to the lack of damages discovery for many of the remaining claims and the uncertain nature of this litigation, including uncertainties around the potential allocation of responsibility by a jury to other defendants or responsible third parties. The recognition of a potential loss in the future in the West Fertilizer Co. litigation could negatively affect our results in the period of recognition. However, based upon currently available information, including available insurance coverage, we do not believe that this litigation will have a material adverse effect on our consolidated financial position, results of operations or cash flows.


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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following table sets forth stock repurchases for each of the three months of the quarter ended June 30, 2017 .
 
Issuer Purchases of Equity Securities
Period
Total
Number
of Shares
(or Units)
Purchased (1)
 
Average
Price Paid
per Share
(or Unit)
 
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
 
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
(in thousands)
April 1, 2017 - April 30, 2017
1,002

 
$
26.74

 
—

 
$
—

May 1, 2017 - May 31, 2017
386

 
27.20

 
—

 
—

June 1, 2017 - June 30, 2017
—

 
—

 
—

 
—

Total
1,388

 
$
26.87

 
—

 
 

_______________________________________________________________________________
(1)  
Represents shares withheld to pay for employee tax obligations upon the vesting of restricted stock units.

ITEM 6.    EXHIBITS.
A list of exhibits filed with this Report on Form 10-Q (or incorporated by reference to exhibits previously filed or furnished) is provided in the Exhibit Index on page 61  of this report.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
CF INDUSTRIES HOLDINGS, INC.
 
Date: August 3, 2017
By:
/s/ W. ANTHONY WILL
 
 
 
W. Anthony Will
  President and Chief Executive Officer
(Principal Executive Officer)
 
Date: August 3, 2017
By:
/s/ DENNIS P. KELLEHER
 
 
 
Dennis P. Kelleher
  Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX
Exhibit No.
Description
10.1

Change in Control Severance Agreement, effective as of July 25, 2013, by and between CF Industries Holdings, Inc. and Adam L. Hall
31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101

The following financial information from CF Industries Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (1) Consolidated Statements of Operations, (2) Consolidated Statements of Comprehensive Income, (3) Consolidated Balance Sheets, (4) Consolidated Statements of Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to Unaudited Consolidated Financial Statements


    

61

CF INDUSTRIES HOLDINGS, INC.
Exhibit 10.1
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT, effective as of July 25, 2013, is made by and between CF Industries Holdings, Inc., a Delaware corporation (the “Company”), and Adam L. Hall (the “Executive”).
WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and
WHEREAS, the Board recognizes that the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:
1. Defined Terms . The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.
2. Term of Agreement .  This Agreement shall become effective upon execution, and the Term shall continue in effect through December 31, 2014; provided , however , that commencing on January 1, 2014 and each January 1 thereafter, the Term shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend the Term; and further   provided , however , that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the month in which such Change in Control occurred.
3. Company’s Covenants Summarized .  In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive’s covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other payments and benefits described herein.  No Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive’s employment with the Company following a Change in Control and during the Term.  This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.
4. The Executive’s Covenants .  The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term,

1

the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change in Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive’s employment for Good Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Company of the Executive’s employment for any reason.
5.      Compensation Other Than Severance Payments .
5.1      Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive’s employment is terminated by the Company for Disability.
5.2      If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive’s full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company’s compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.
5.3      If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive’s normal post-termination compensation and benefits as such payments become due.  Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company’s retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason.
6.      Severance Payments .
6.1      If the Executive’s employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall, subject to Section 6.2, pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 (“Severance Payments”), in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof.  For purposes of this Agreement, the Executive’s employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) the Executive’s employment is terminated by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with

2

the Company the consummation of which would constitute a Change in Control, (ii) the Executive terminates his employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person, or (iii) the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs).
(A)      In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive’s base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (ii) the Executive’s target annual bonus pursuant to any annual bonus or incentive plan maintained by the Company in respect of the fiscal year in which the Date of Termination occurs or, if higher, the fiscal year in which the first event or circumstance constituting Good Reason occurs.
(B)      For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability, accident and health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason; provided, however, that, unless the Executive consents to a different method, such health insurance benefits shall be provided through a third-party insurer. The value of such benefits shall be taxable to the Executive to the extent necessary to avoid the imposition of excise taxes or other penalties on the Company pursuant to the operation of Section 10101(d) of The Patient Protection and Affordable Care Act of 2010 (amending Section 2716 of the Public Health Service Act) or a successor or similar law.
(C)      In addition to the benefits to which the Executive is entitled under each Pension Plan, the Company shall pay the Executive a lump sum amount, in cash, equal to the sum of (1) the amount that would have been contributed or allocated to each Pension Plan by the Company on the Executive’s behalf (without regard to whether such amount would be vested) during the two years immediately following the Date of Termination, determined (x) as if the Executive made the maximum permissible contributions thereto (if contributions are permitted under such Pension Plan) during such period, (y) as if the Executive earned compensation during such period at a rate equal to the Executive’s compensation (as defined in the applicable Pension Plan) during the twelve (12) months immediately preceding the Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (z) without regard to any amendment to the applicable Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of benefits thereunder and

3

(2) all other amounts credited to the Executive’s account under each Pension Plan to the extent such amounts were unvested on the Date of Termination.
(D)      The Company shall provide the Executive with outplacement services suitable to the Executive’s position for a period of two years or, if earlier, until the first acceptance by the Executive of an offer of employment.
(E)      Notwithstanding any provision of any annual or long-term incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation which has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the Date of Termination under any such plan and which, as of the Date of Termination, is contingent only upon the continued employment of the Executive to a subsequent date, and (ii) a pro rata portion to the Date of Termination of the aggregate value of all contingent incentive compensation awards to the Executive for all then uncompleted periods under any such plan, calculated as to each such award by multiplying the award that the Executive would have earned on the last day of the performance award period, assuming the achievement, at the target level (or, if greater, based on actual results to Date of Termination), of the individual and corporate performance goals established with respect to such award, by the fraction obtained by dividing the number of full months and any fractional portion of a month during such performance award period through the Date of Termination by the total number of months contained in such performance award period.
6.2      As described more fully on Exhibit B hereto (which Exhibit shall govern the implementation of this Section 6.2), in the event that the payments and benefits to be received by the Executive in connection with a Change in Control or a termination of the Executive’s employment would be subject to the Excise Tax, such payments and benefits shall be reduced to the greatest amount that the Executive may receive without becoming subject to the Excise Tax, unless the Executive would be better off on an after-tax basis (including following application of the Excise Tax) receiving the full amount of such payments and benefits, in which case no such reduction shall be applied.
6.3      The payments provided in subsections (A),(C) and (E) of Section 6.1 hereof shall be made not later than the fifth day following the date upon which the revocation period for the release described in Section 6.6 expires; provided , however , that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Executive or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination.  In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code). 

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Notwithstanding the foregoing, the payments and benefits described in this Agreement shall be subject to the provisions of Section 14.3.
6.4      The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder.  Such payments shall be made within five (5) business days after delivery of the Executive’s written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.  The Executive’s reimbursement rights described in this Section 6.4 shall remain in effect for the Executive’s lifetime, provided, that, in order for the Executive to be entitled to reimbursement hereunder, the Executive must submit the written reimbursement request described above within 180 days following the date upon which the applicable expense is incurred.
6.5      The Executive agrees that prior to and following the Date of Termination, he shall retain in confidence any confidential information known to him concerning the Company and its Affiliates and their respective businesses for as long as such information is not publicly disclosed.
6.6      Notwithstanding anything to the contrary, all compensation and benefits payable to Executive pursuant to this Section 6 (other than as described in Section 6.4) are conditioned on receipt by the Company of an executed release of claims by Executive in the form attached hereto as Exhibit A and the expiration of any revocation period in such release.  In order to be entitled to such compensation and benefits, the Executive must execute such release of claims within the consideration period described in paragraph (d) in the form of release attached hereto as Exhibit A and must not revoke such release.
7.      Termination Procedures and Compensation During Dispute .
7.1      Notice of Termination .  After a Change in Control and during the Term, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.  Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.
7.2      Date of Termination .  “Date of Termination,” with respect to any purported termination of the Executive’s employment after a Change in Control and during the Term, shall

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mean (i) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive’s duties during such thirty (30) day period), and (ii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).
7.3      Dispute Concerning Termination .  If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided , however , that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence. 
7.4      Compensation During Dispute .  If a purported termination occurs following a Change in Control and during the Term and the Date of Termination is extended in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof.  Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement.
8.      No Mitigation .  The Company agrees that, if the Executive’s employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.  Further, no payment or benefit provided for in this Agreement shall be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.
9.      Successors; Binding Agreement .
9.1      In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

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9.2      This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.
10.      Notices .  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the address inserted below the Executive’s signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:
To the Company:
 
CF Industries Holdings, Inc.
4 Parkway North, Suite 400
Deerfield, Illinois 60015-2590
 
Attention: Senior Vice President, Human Resources
 
11.      Miscellaneous .  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board.  No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided , however , that this Agreement shall supersede any agreement setting forth the terms and conditions of the Executive’s employment with the Company only in the event that the Executive’s employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois.  All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections.  Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed.  The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration.

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12.      Validity .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
13.      Counterparts .  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
14.      Settlement of Disputes; Arbitration .  (A) All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing.  Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.  Notwithstanding the above,  in the event of any dispute, any decision by the Board hereunder shall be subject to a de novo review by the arbitrator.
14.1      Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect; provided , however , that the evidentiary standards set forth in this Agreement shall apply.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.  Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the Executive’s right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.
14.2      It is the intention of the Company and the Executive that this Agreement not result in taxation of the Executive under Section 409A of the Code and the regulations and guidance promulgated thereunder and that the Agreement shall be construed in accordance with such intention. Without limiting the generality of the foregoing, the Company and the Executive agree as follows:
(A)      Notwithstanding anything to the contrary herein, if the Executive is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code) with respect to the Company, any amounts (or benefits) otherwise payable to or in respect of him under this Agreement pursuant to the Executive's termination of employment with the Company shall be delayed, to the extent required so that taxes are not imposed on the Executive pursuant to Section 409A of the Code, and shall be paid upon the earliest date permitted by Section 409A(a)(2) of the Code;
(B)      Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separately identified payment for purposes of Section 409A of the Code, and any payments that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise.

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(C)      For purposes of this Agreement, the Executive's employment with the Company will not be treated as terminated unless and until such termination of employment constitutes a “separation from service” for purposes of Section 409A of the Code;
(D)      To the extent necessary to comply with the provisions of Section 409A of the Code and the guidance issued thereunder (1) reimbursements to the Executive as a result of the operation of Section 6.1(B), or Section 6.4 hereof shall be made not later than the end of the calendar year following the year in which the reimbursable expense is incurred and shall otherwise be made in a manner that complies with the requirements of Treasury Regulation Section 1.409A-3(i)(l)(iv), (2) if Executive is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Code), any reimbursements to the Executive as a result of the operation of such sections with respect to a reimbursable event within the first six months following the Date of Termination which are required to be delayed pursuant to Section 14.3(A) shall be made as soon as practicable following the date which is six months and one day following the Date of Termination (subject to clause (1) of this sentence); and
(E)      If required in order to comply with the requirements of Section 409A of the Code, the payment required under clause (2) of Section 6.1(C) shall, notwithstanding the other timing provisions set forth herein, be paid to the Executive on the dates upon which the forfeited Pension Plan amounts to which such payments relate would have been paid, had such amounts been vested upon the Date of Termination.
(F)      To the extent the date upon which the Executive executes the release described in Section 6.6 could, based upon when the Executive executes such release, result in the payment of an amount hereunder (or the commencement of payments hereunder) either in the year in which the Date of Termination occurs or in the subsequent calendar year, any such amount shall be paid (or commence to be paid) in the subsequent calendar year.
15.      Definitions .  For purposes of this Agreement, the following terms shall have the meanings indicated below:
(A)      “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
(B)      “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.
(C)      “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act. 
(D)      “Board” shall mean the Board of Directors of the Company.
(E)      “Cause” for termination by the Company of the Executive’s employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s

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incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) that has not been cured within 30 days after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise.  For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in or not opposed to the best interest of the Company and (y) in the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board by clear and convincing evidence that Cause exists.
(F)      “Change in Control” shall mean the first to occur of:
(I)      any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of CF Industries Holdings, Inc. (not including in the securities beneficially owned by such Person any securities acquired directly from CF Industries Holdings, Inc. or any of its subsidiaries) representing 25% or more of the combined voting power of CF Industries Holdings, Inc.’s then outstanding securities; or
(II)      the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, as of the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of CF Industries Holdings, Inc.) whose appointment or election by the Board or nomination for election by CF Industries Holdings, Inc.’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or
(III)      there is consummated a merger or consolidation of CF Industries Holdings, Inc. or any direct or indirect subsidiary of CF Industries Holdings, Inc. with any other corporation, other than a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the Board of the entity surviving such merger or consolidation or, if CF Industries Holdings, Inc. or the entity surviving such merger is then a subsidiary, the ultimate parent thereof; or
(IV)      the stockholders of CF Industries Holdings, Inc. approve a plan of complete liquidation or dissolution of CF Industries Holdings, Inc. or there is consummated an agreement for the sale or disposition by CF Industries Holdings, Inc. of all or substantially all of CF Industries Holdings, Inc.’s assets, other than (a) a sale or disposition by CF Industries Holdings, Inc. of all or substantially

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all of CF Industries Holdings, Inc.’s assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by stockholders of CF Industries Holdings, Inc. following the completion of such transaction in substantially the same proportions as their ownership of CF Industries Holdings, Inc. immediately prior to such sale or (b) other than a sale or disposition by CF Industries Holdings, Inc. of all or substantially all of CF Industries Holdings, Inc.’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent thereof.
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of CF Industries Holdings, Inc. immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of CF Industries Holdings, Inc. immediately following such transaction or series of transactions.
(G)      “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(H)      “Company” shall mean CF Industries Holdings, Inc., as applicable, and except in determining under Section 15(F) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(I)      “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.
(J)      “Disability”  shall be deemed the reason for the termination by the Company of the Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive’s duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.
(K)      “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
(L)      “Excise Tax” shall mean any excise tax imposed under section 4999 of the Code.
(M)      “Executive” shall mean the individual named in the first paragraph of this Agreement.
(N)      “Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent which specifically references this Agreement) after any Change in Control, or prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the second sentence of Section 6.1

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hereof (treating all references in paragraphs (I) through (VII) below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V), (VI), (VII) or (VIII) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:
(I)      the assignment to the Executive of any duties inconsistent with the Executive’s status as an executive officer of the Company or a substantial adverse alteration in the nature or status of the Executive’s responsibilities from those in effect immediately prior to the Change in Control including, without limitation, if the Executive was, immediately prior to the Change in Control, an executive officer of a public company, the Executive ceasing to be an executive officer of a public company;
(II)       a reduction by the Company in the Executive’s annual base salary as in effect on the date hereof or as the same may be  increased from time to time except for across-the-board salary reductions similarly affecting all executives of the Company and all executives of any Person in control of the Company;
(III)      the relocation of the Executive’s principal place of employment to a location more than 35 miles from the Executive’s principal place of employment immediately prior to the Change in Control or the Company’s requiring the Executive to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with the Executive’s present business travel obligations;
(IV)      the failure by the Company to pay to the Executive any portion of the Executive’s current compensation or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days after the date demand for payment is made provided such compensation is due;
(V)      the failure by the Company to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control which is material to the Executive’s total compensation unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control;
(VI)       the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all

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executives of the Company and all executives of any Person in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled with the Company in accordance with the vacation policy applicable to the Executive in effect at the time of the Change in Control;
(VII)      the failure of the Company to obtain the assumption and agreement of a successor required under Section 9.1 hereof; or
(VIII)       any purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes of this Agreement, no such purported termination shall be effective.  The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness.
The Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.  In order for Good Reason to exist hereunder, the Executive must provide notice to the Company of the existence of the condition described in clauses (I) through (VIII) above within 90 days of the initial existence of the condition (or, if later, within 90 days of the Executive’s becoming aware of such condition), and the Company must have failed to cure such condition within 30 days of the receipt of such notice.
(O)      “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.
(P)      “Pension Plan” shall mean any tax-qualified, supplemental or excess retirement plan (including defined benefit and defined contribution retirement plans) maintained by the Company (including, without limitation, the CF Industries Holdings, Inc. Pension Plan) and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits and any successor to any such plan.
(Q)      “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) CF Industries Holdings, Inc. or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of CF Industries, Inc. or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(R)      “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
(I)      the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

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(II)      the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;
(III)       any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or
(IV)      the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.
(S)      “Retirement” shall be deemed the reason for the termination by the Executive of the Executive’s employment if such employment is terminated in accordance with the Company’s retirement policy, including early retirement, generally applicable to its salaried employees.
(T)      “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.
(U)      “Term” shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein).

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
 
 
 
CF INDUSTRIES HOLDINGS, INC.
 
 
 
 
 
 
 
 
By:
/s/ Stephen R. Wilson
 
 
 
Name: Stephen R. Wilson
 
 
 
Title: Chairman and CEO
 
 
 
 
 
 
 
 
 
 
 
/s/ Adam L. Hall
 
 
 
Adam L. Hall
 


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EXHIBIT A
 
RELEASE
 
(a) Adam L. Hall (“ Executive ”), for and in consideration of benefits provided pursuant to the Change in Control Severance Agreement with CF Industries Holdings, Inc. (collectively, referred to herein as the “ Company ”) entered into effective as of July 25, 2013 and as amended thereafter (the “ Severance Agreement ”), on behalf of Executive and Executive’s heirs, executors, administrators, successors and assigns, voluntarily, knowingly and willingly releases and discharges the Company and its parents, subsidiaries and affiliates (collectively, the “ Company Group ”), together with their respective present and former partners, officers, directors, employees and agents, and each of their predecessors, heirs, executors, administrators, successors and assigns, and any and all employee pension or welfare benefit plans of the Company, including current and former trustees and administrators of these plans (collectively, the “ Company Releasees ”) from any and all charges, complaints, claims, promises, agreements, controversies, causes of action, demands, damages and liabilities (“ Claims ”) of any nature whatsoever, known or unknown, suspected or unsuspected, which against the Company Releasees, jointly or severally, Executive or Executive’s heirs, executors, administrators, successors or assigns ever had or now have by reason of any matter, cause or thing whatsoever arising from the beginning of time to the time Executive executes this release (the “ Release ”).  This Release includes, without limitation, any Claims arising out of or relating in any way to Executive’s employment or director relationship with the Company, or the termination thereof, any Claims arising under any statute or regulation, including but not limited to the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, or the Employee Retirement Income Security Act of 1974, each as amended, or any other federal, state or local law, regulation, ordinance or common law, or under any policy, agreement, understanding or promise, written or oral, formal or informal, between any Company Releasee and Executive.  Executive shall not be entitled to any recovery, in any action or proceeding that may be commenced on Executive’s behalf in any way arising out of or relating to the matters released under this Release.  Notwithstanding the foregoing, nothing herein shall release any Company Releasee from any Claim based on (i) Executive’s rights under the Severance Agreement or any other agreement with the Company (including, but not limited to, any stock option agreements), (ii) any right or claim that arises after the date Executive executes this Release, (iii) Executive’s eligibility for indemnification in accordance with applicable laws or the certificate of incorporation or by-laws of the Company (or any affiliate or subsidiary) or any applicable insurance policy, with respect to any liability Executive incurs or incurred as a director, officer or employee of the Company or any affiliate or subsidiary (including as a trustee, director or officer of any employee benefit plan) or (iv) any rights Executive may have to vested benefits under any employee benefit plan or program.
(b) Executive has been advised to consult with an attorney of Executive’s choice prior to signing this Release, has done so and enters into this Release freely and voluntarily.

A-1

[ (c) Executive acknowledges that the Company has enclosed with this Release information concerning (i) the ages and job titles of all employees who are eligible to receive severance pay and (ii) the ages of all employees in the same job classification or organizational unit who are not eligible to receive severance pay. ] (1)
(d) Executive has had at least [ twenty-one (21) ] [ forty-five (45) ] (2) calendar days to consider the terms of this Release.  Once Executive has signed this Release, Executive has seven (7) additional days to revoke Executive’s consent and may do so by writing to the Company as provided in Section 10 of the Severance Agreement.  Executive’s Release shall not be effective, and no payments or benefits shall be due under Section 6 of the Severance Agreement, until the eighth day after Executive has executed this Release and returned it to the Company, assuming that Executive has not revoked Executive’s consent to this Release during such time (the “Revocation Date”).
(e) In the event that any one or more of the provisions of this Release shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder thereof shall not in any way be affected or impaired thereby.
(f) This Release shall be governed by the law of the State of Illinois without reference to its choice of law rules.
 
 
CF INDUSTRIES HOLDINGS, INC.
 
 
 
 
 
By:
 
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
Signed as of this     day of                   .
 
 
 
 
 
 
 
 
Adam L. Hall
 
 
 
 
 
Signed as of this     day of                   .
 
 
 

(1)                                  Note :  this paragraph is to be included only for applicable group terminations or exit incentive programs.
 
(2)                                   Note :  use longer period for applicable group terminations or exit incentive programs.



A-2

EXHIBIT B

The provisions of Section 6.2 shall be effected as set forth in this Exhibit B.

(A)     Notwithstanding any other provisions of the Agreement, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a Change in Control or the termination of the Executive's employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the Severance Payments, being hereinafter referred to as the “Total Payments”) would be subject (in whole or part), to the Excise Tax, then the Total Payments shall be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). If a reduction in the Total Payments is required under this paragraph (A) of Exhibit B, the Total Payments shall be reduced by the Company in its reasonable discretion in the following order: (A) reduction of any cash payment (excluding any cash payment with respect to the acceleration of equity awards), that is otherwise payable to the Executive that is exempt from Section 409A of the Code; (B) reduction of any other payments or benefits otherwise payable to the Executive (other than those described in clause (C) below) on a pro-rata basis or such other manner that complies with Section 409A of the Code; and (C) reduction of any payment or benefit with respect to the acceleration of equity awards that is otherwise payable to the Executive (on a pro-rata basis as between equity awards that are covered by Section 409A of the Code and those that are not (or such other manner that complies with Section 409A of the Code)).

(B)    For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm (the “Auditor”) which was, immediately prior to the Change in Control, the Company's independent auditor, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

B-1

(C)    At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). If the Executive objects to the Company's calculations, the Company shall pay to the Executive such portion of the Severance Payments (up to 100% thereof) as the Executive determines is necessary to result in the proper application of paragraph (A) of this Exhibit B.

Example

The following is an example of the application of the provisions of Section 6.2 and Exhibit B hereof:

Explanation of Tax Provisions . Section 4999 of the Internal Revenue Code imposes an excise tax on the recipient of any "excess parachute payment" equal to 20% of such amount. A "parachute payment" is any payment that is contingent on a change in control of a corporation and includes, for example, severance benefits, additional retirement benefits and non-cash compensation such as the continuation of health insurance and the accelerated vesting of stock option and other equity-based awards. "Excess parachute payments" consist of the excess of parachute payments over an executive's "base amount," i.e., the average taxable compensation received by him or her from the company during the five taxable years (or his or her entire period of employment, if employed by the company for less than five years) preceding the year in which the change in control occurs.
        
The Safe Harbor . The Code provides a "safe harbor" of 300% of the executive's base amount (i.e., the excess parachute payment rules do not apply if the aggregate amount of parachute payments is less than three times the executive's base amount). If, however, the parachute payments equal or exceed the safe harbor amount, the entire excess over the base amount will be subject to the excise tax and disallowance of deduction. For example, if an executive has a base amount of $100,000, parachute payments of up to $299,999 will not be subject to the excise tax or the disallowance of deduction, but a parachute payment of $300,000 (only $1 more) will be subject to those rules to the extent of $200,000 (the excess of the parachute payments over the executive's safe harbor). Note that because of this treatment, an individual entitled to parachute payments only slightly in excess of his or her safe harbor amount may be in a better after-tax position if his or her payments are automatically reduced (or "capped") to the safe harbor amount. Such an individual is said to be in the "valley." In the above example, the individual avoids an excise tax of $40,000 (20% of the $200,000 excess parachute payment) merely by having his or her payments reduced by $1.

Application of Section 6.2 . In light of the fact that the receipt of certain amounts of parachute payments could put the recipient in a worse after-tax economic position, Section 6.2 provides that the amount of parachute payments an executive will receive will be "capped" or limited to the amount of the executive's safe harbor. In the example above, Section 6.2 would provide that the executive is not entitled to the additional payment of $1, which payment would otherwise result in an additional $40,000 in excise taxes.


B-2

This "cap" will not apply, however, if the executive is better off on an after-tax economic basis receiving the full amount of parachute payments otherwise provided for in the Agreement and taking into account the imposition of the excise tax. Using the example above, if the executive with the $299,999 safe harbor was otherwise entitled under the Agreement to parachute payments of $400,000 (rather than $300,000 as in the prior example), under the Agreement the payments would not be capped.

In such a circumstance, the payments would exceed the executive's base amount by $300,000, resulting in an excise tax of $60,000 and aggregate income tax of $140,000 (assuming a 35% federal income tax rate and disregarding state taxes). In such a case, the executive's after tax benefit of $200,000 would exceed the after-tax benefit he would have received if his payment were reduced to the safe harbor amount ($299,999 x 65% = $195,000), meaning that he would be better off on an after tax basis receiving all of his parachute payments, even after the imposition of the excise tax.




B-3



CF INDUSTRIES HOLDINGS, INC.
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, W. Anthony Will, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of CF Industries Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:
August 3, 2017
 
/s/ W. ANTHONY WILL  
 
 
 
W. Anthony Will
  President and Chief Executive Officer
(Principal Executive Officer)








CF INDUSTRIES HOLDINGS, INC.
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis P. Kelleher, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of CF Industries Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date:
August 3, 2017
 
/s/ DENNIS P. KELLEHER
 
 
 
Dennis P. Kelleher
  Senior Vice President and Chief Financial Officer
(Principal Financial Officer)






CF INDUSTRIES HOLDINGS, INC.
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of CF Industries Holdings, Inc. (the Company) for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, W. Anthony Will, as President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ W. ANTHONY WILL
 
W. Anthony Will
  President and Chief Executive Officer
(Principal Executive Officer)
 
Date:
August 3, 2017
 








CF INDUSTRIES HOLDINGS, INC.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CF Industries Holdings, Inc. (the Company) for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Dennis P. Kelleher, as Senior Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ DENNIS P. KELLEHER
 
Dennis P. Kelleher
  Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
 
Date:
August 3, 2017