10-K 1 cf-12312015x10k.htm 10-K 10-K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
 
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-32597
CF INDUSTRIES HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
 
20-2697511
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
4 Parkway North, Suite 400, Deerfield, Illinois
 
60015
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code (847) 405-2400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class 
 
Name of each exchange on which registered 
Common Stock, $0.01 par value per share

 
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
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 ý 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 ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý
The aggregate market value of the registrant's common stock held by non-affiliates was $14,966,659,383 based on the closing sale price of common stock on June 30, 2015.
233,082,556 shares of the registrant's common stock, $0.01 par value per share, were outstanding as of January 29, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its 2016 annual meeting of stockholders (Proxy Statement) are incorporated herein by reference into Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the 2015 fiscal year, or, if we do not file the proxy statement within such 120-day period, we will amend this Annual Report on Form 10-K to include the information required under Part III hereof not later than the end of such 120-day period.
 



CF INDUSTRIES HOLDINGS, INC.
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





CF INDUSTRIES HOLDINGS, INC.

PART I
ITEM 1.    BUSINESS.
Our Company
        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. Notes referenced throughout this document refer to consolidated financial statement footnote disclosures that are found in Item 8. Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements.
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 core market 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; Yazoo City, Mississippi; and Billingham, United Kingdom manufacturing facilities.
Prior to March 17, 2014, we also manufactured and distributed phosphate fertilizer products. Our principal phosphate products were diammonium phosphate (DAP) and monoammonium phosphate (MAP). On March 17, 2014, we completed the sale of our phosphate mining and manufacturing business, which was located in Florida, to The Mosaic Company (Mosaic) for approximately $1.4 billion in cash. See Note 4—Acquisitions and Divestitures for additional information.
Our principal assets include:
six North American nitrogen fertilizer manufacturing facilities located in: Donaldsonville, Louisiana (the largest nitrogen fertilizer complex in North America); Medicine Hat, Alberta (the largest nitrogen fertilizer complex in Canada); Port Neal, Iowa; Courtright, Ontario; Yazoo City, Mississippi; and Woodward, Oklahoma;

two United Kingdom nitrogen manufacturing complexes located in Ince and Billingham that produce AN, ammonia and NPKs;

a 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;

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.
In 2015, we entered into a number of strategic agreements and transactions as follows:
We acquired the remaining 50% equity interest in CF Fertilisers UK Group Limited (formerly known as GrowHow UK Group Limited) (CF Fertilisers UK) not previously owned by us on July 31, 2015 for total consideration of $570.4 million, and CF Fertilisers UK became wholly owned by us. This transaction added CF Fertilisers UK’s nitrogen manufacturing complexes in Ince, United Kingdom and Billingham, United Kingdom to our consolidated manufacturing capacity. 

We sold our interests in KEYTRADE AG (Keytrade), a global fertilizer trading company headquartered near Zurich, Switzerland, to the other key principals of Keytrade.

We sold our 50% ownership interest in an ammonia storage joint venture in Houston, Texas.


1


CF INDUSTRIES HOLDINGS, INC.

We entered into a definitive agreement (as amended, the Combination Agreement) under which we will combine with the European, North American and global distribution businesses (collectively, the ENA Business) of OCI N.V. (OCI). The combination transaction includes OCI’s nitrogen production facility in Geleen, Netherlands; its nitrogen production facility under construction in Wever, Iowa; its approximately 79.88% equity interest in an ammonia and methanol complex in Beaumont, Texas; and its global distribution business and the assumption of approximately $2 billion in net debt. Under the terms of the Combination Agreement, CF Holdings will become a subsidiary of a new holding company (New CF) domiciled in the Netherlands. This transaction is expected to close in mid-2016, subject to the approval of shareholders of both CF Holdings and OCI, the receipt of certain regulatory approvals, and other closing conditions. See Note 4—Acquisitions and Divestitures for additional information.

We entered into a strategic venture with CHS Inc. (CHS). The strategic venture commenced on February 1, 2016, at which time CHS purchased a minority equity interest in CF Industries Nitrogen, LLC (CFN), a subsidiary of CF Holdings, for $2.8 billion. CHS also began receiving deliveries from us pursuant to a supply agreement under which CHS has the right to purchase annually from us up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. CHS is entitled to semi-annual profit distributions from CFN as a result of its minority equity interest in CFN. See Note 27—Subsequent Event for additional information on this strategic venture.
We are currently constructing new ammonia and UAN plants at our Donaldsonville, Louisiana complex and new ammonia and urea plants at our Port Neal, Iowa complex. In November 2015, the new urea plant at the Donaldsonville, Louisiana complex came on line and was the first plant to be commissioned as part of our capacity expansion projects in North America. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)—Liquidity and Capital Resources—Capacity Expansion Projects and Restricted Cash for additional information related to our capacity expansion projects.
In the third quarter of 2015, we changed our reportable segment structure to separate AN from our Other segment as our AN products increased in significance as a result of the CF Fertilisers UK acquisition. Our reportable segment structure reflects how our chief operating decision maker (CODM), as defined under U.S. generally accepted accounting principles (GAAP), assesses the performance of our operating segments and makes decisions about resource allocation. Our reportable segments now consist of ammonia, granular urea, UAN, AN, Other, and phosphate. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Historical financial results have been restated to reflect the new reportable segment structure on a comparable basis. See Note 4—Acquisitions and Divestitures for additional information.
On May 15, 2015, we announced that our Board of Directors declared a five-for-one split of our common stock to be effected in the form of a stock dividend. On June 17, 2015, stockholders of record as of the close of business on June 1, 2015 (Record Date) received four additional shares of common stock for each share of common stock held on the Record Date. Shares reserved under the Company's equity and incentive plans were adjusted to reflect the stock split. All share and per share data has been retroactively restated to reflect the stock split, except for the number of authorized shares of common stock. Since the par value of the common stock remained at $0.01 per share, the recorded value for common stock has been retroactively restated to reflect the par value of total outstanding shares with a corresponding decrease to paid-in capital.
On March 17, 2014, we sold our phosphate mining and manufacturing business which was reported in our phosphate segment. The phosphate segment reflects the reported results of the phosphate business through March 17, 2014, plus the continuing sales of the phosphate inventory in the distribution network after March 17, 2014. The remaining phosphate inventory was sold in the second quarter of 2014; therefore, the phosphate segment does not have operating results subsequent to that quarter. However, the segment will continue to be included until the reporting of comparable period phosphate results ceases. See Note 4—Acquisitions and Divestitures for additional information.
The ammonia, granular urea, UAN, AN and Other segments are also referred to throughout this document as the “Nitrogen Product Segments." For the years ended December 31, 2015, 2014 and 2013, we sold 13.7 million, 13.3 million and 12.9 million product tons from the Nitrogen Product Segments generating net sales of $4.31 billion, $4.57 billion and $4.68 billion, respectively.
Our principal executive offices are located outside of Chicago, Illinois, at 4 Parkway North, Suite 400, Deerfield, Illinois 60015 and our telephone number is 847-405-2400. Our Internet website address is www.cfindustries.com. Information made available on our website does not constitute part of this Annual Report on Form 10-K.

2


CF INDUSTRIES HOLDINGS, INC.

We make available free of charge on or through our Internet website, www.cfindustries.com, all of our reports on Forms 10-K, 10-Q and 8-K and all amendments to those reports as soon as reasonably practicable after such material is filed electronically with, or furnished to, the Securities and Exchange Commission (SEC). Copies of our Corporate Governance Guidelines, Code of Corporate Conduct and charters for the Audit Committee, Compensation Committee, and Corporate Governance and Nominating Committee of our Board of Directors are also available on our Internet website. We will provide electronic or paper copies of these documents free of charge upon request. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Company History
We were founded in 1946 as a fertilizer brokerage operation by a group of regional agricultural cooperatives. During the 1960s, we expanded our distribution capabilities and diversified into fertilizer manufacturing through the acquisition of several existing plants and facilities. During the 1970s and again during the 1990s, we expanded our production and distribution capabilities significantly, spending approximately $1 billion in each of these decades.
We operated as a traditional manufacturing and supply cooperative until 2002, when we adopted a new business model that established financial performance as our principal objective, rather than assured supply to our owners. A critical aspect of the new business model was to establish a more economically driven approach to the marketplace.
In August 2005, we completed our initial public offering (IPO) of common stock, which is listed on the New York Stock Exchange. In connection with the IPO, we consummated a reorganization transaction whereby we ceased to be a cooperative and our pre-IPO owners' equity interests in CF Industries were canceled in exchange for all of the proceeds of the offering and shares of our common stock.
In April 2010, we acquired Terra Industries Inc. (Terra), a leading North American producer and marketer of nitrogen fertilizer products for a purchase price of $4.6 billion, which was paid in cash and shares of our common stock. As a result of the Terra acquisition, we acquired five nitrogen fertilizer manufacturing facilities, our 75.3% interest in TNCLP and certain joint venture interests.
In March 2014, we completed the sale of our phosphate mining and manufacturing business, which was located in Florida, to Mosaic for approximately $1.4 billion in cash.
In July 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK not previously owned by us for total consideration of $570.4 million, and CF Fertilisers UK became wholly owned by us.
Product Tons and Nutrient Tons
Unless otherwise stated, we measure our production and sales volume in this Annual Report on Form 10-K in product tons, which represents the weight of the product measured in short tons (one short ton is equal to 2,000 pounds). References to UAN product tons assume a 32% nitrogen content basis for production volume. 
We also provide certain supplementary volume information measured in nutrient tons. Nutrient tons represent the weight of the product’s nitrogen content, which varies by product. Ammonia represents 82% nitrogen content, granular urea represents 46% nitrogen content, UAN represents between 28% and 32% nitrogen content and AN represents between 29% and 35% nitrogen content. 
Reportable Segments
As discussed above, our reportable segments now consist of the following segments: ammonia, granular urea, UAN, AN, Other, and phosphate. These segments are differentiated by products. Historical financial results have been restated to reflect this new reportable segment structure on a comparable basis. See Note 21—Segment Disclosures for additional information.
We use 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.

3


CF INDUSTRIES HOLDINGS, INC.

Nitrogen Product Segments
We are the largest nitrogen fertilizer producer in North America. Our primary nitrogen fertilizer products are ammonia, granular urea, UAN and AN. Our historical sales of nitrogen fertilizer products from our Nitrogen Product Segments are shown in the following table. Net sales do not reflect amounts used internally, such as ammonia, in the manufacture of other products.
 
2015
 
2014
 
2013
 
Tons
 
Net Sales
 
Tons
 
Net Sales
 
Tons
 
Net Sales
 
(tons in thousands; dollars in millions)
Nitrogen Product Segments
 
 
 
 
 
 
 

 
 

 
 

Ammonia
2,995

 
$
1,523.1

 
2,969

 
$
1,576.3

 
2,427

 
$
1,437.9

Granular urea
2,460

 
788.0

 
2,459

 
914.5

 
2,506

 
924.6

UAN
5,865

 
1,479.7

 
6,092

 
1,669.8

 
6,383

 
1,935.1

AN
1,290

 
294.0

 
958

 
242.7

 
859

 
215.1

Other(1)
1,108

 
223.5

 
798

 
171.5

 
770

 
165.1

Total
13,718

 
$
4,308.3

 
13,276

 
$
4,574.8

 
12,945

 
$
4,677.8

_______________________________________________________________________________

(1) 
Other segment products include DEF, urea liquor, nitric acid, aqua ammonia and NPKs.
Gross margin for the Nitrogen Product Segments was $1.55 billion, $1.77 billion and $2.45 billion for the years ended December 31, 2015, 2014 and 2013, respectively.
We operate seven nitrogen fertilizer manufacturing facilities in North America. We own four nitrogen fertilizer manufacturing facilities in the United States, one in Medicine Hat, Alberta, Canada and one in Courtright, Ontario, Canada. We also have a 75.3% interest in TNCLP and its subsidiary, TNLP, which owns a nitrogen fertilizer manufacturing facility in Verdigris, Oklahoma. In 2015, the combined production capacity of these seven facilities represented approximately 37%, 34%, 45% and 21% of North American ammonia, granular urea, UAN and AN production capacity, respectively. Each of our nitrogen fertilizer manufacturing facilities in North America has on-site storage to provide flexibility to manage the flow of outbound shipments without impacting production.
We also operate two United Kingdom nitrogen manufacturing complexes located in Ince and Billingham that produce ammonia, AN and NPKs and serve primarily the British agricultural and industrial markets.
The following table shows the production capacities at each of our nitrogen manufacturing facilities:
 
Average Annual Capacity(1)
 
Gross
Ammonia(2)
 
Net
Ammonia(2)
 
UAN(3)
 
Urea(4)
 
AN(5)
 
NPKs
 
(tons in thousands)
Donaldsonville, Louisiana(6)(7)
3,070

 
1,130

 
2,415

 
1,680

 

 

Medicine Hat, Alberta
1,250

 
790

 

 
810

 

 

Port Neal, Iowa(8)
380

 
30

 
800

 
50

 

 

Verdigris, Oklahoma(9)(10)
1,180

 
390

 
1,975

 

 

 

Woodward, Oklahoma
480

 
140

 
820

 
25

 

 

Yazoo City, Mississippi(8)(10)(11)
560

 

 
160

 
40

 
1,075

 

Courtright, Ontario(8)(10)
500

 
265

 
345

 
160

 

 

Ince, U.K.(12)
380

 
20

 

 

 
575

 
385

Billingham, U.K.(10)
550

 
270

 

 

 
620

 

 
8,350

 
3,035

 
6,515

 
2,765

 
2,270

 
385

Unconsolidated Affiliate
 

 
 

 
 

 
 

 
 

 
 

Point Lisas, Trinidad(13)
360

 
360

 

 

 

 

Total
8,710

 
3,395

 
6,515

 
2,765

 
2,270

 
385

_______________________________________________________________________________

4


CF INDUSTRIES HOLDINGS, INC.


(1) 
Average annual capacity includes allowance for normal outages and planned maintenance shutdowns.
(2) 
Gross ammonia capacity includes ammonia used to produce upgraded products. Net ammonia capacity is gross ammonia capacity less ammonia used to produce upgraded products based on the product mix shown in the table.
(3) 
Measured in tons of UAN containing 32% nitrogen by weight.
(4) 
Urea is sold as granular urea from the Donaldsonville and Medicine Hat facilities, as urea liquor from the Port Neal, Woodward and Yazoo City facilities and as either granular urea or urea liquor from the Courtright facility. Urea liquor produced at the Yazoo City, Courtright, Woodward and Port Neal facilities can be sold as DEF.
(5) 
AN includes prilled products (Amtrate and IGAN) and AN solution produced for sale.
(6) 
The urea expansion capacity at Donaldsonville is online and available (Note: the urea expansion capacity of approximately 1.3 million tons has not been added to the capacity table above). If the full urea expansion capacity of approximately 1.3 million tons were produced, then the net ammonia balance would decrease by approximately 768,000 tons.
(7) 
The Donaldsonville facility's remaining production capacity depends on product mix. Including the urea expansion capacity, the facility is capable of producing approximately 3.0 million tons of granular urea with UAN running at capacity. Granular urea production can be increased to approximately 3.3 million tons if UAN production is reduced to approximately 1.6 million tons.
(8) 
Production of urea products at the Port Neal and Courtright facilities can be increased by reducing UAN production. Urea liquor production at the Yazoo City facility can be increased by obtaining additional ammonia to supplement the facility's ammonia production.
(9) 
Represents 100% of the capacity of this facility.
(10) 
Reduction of UAN or AN production at the Yazoo City, Courtright, Verdigris and Billingham facilities can allow more merchant nitric acid to be made available for sale.
(11) 
The Yazoo City facility's production capacity depends on product mix. With the facility maximizing the production of AN products, 160,000 tons of UAN can be produced. UAN production can be increased to 450,000 tons by reducing the production of AN to 945,000 tons.
(12) 
The Ince facility's production capacity depends on product mix. The facility can increase production of NPKs to 550,000 tons by reducing AN production to 485,000 tons.
(13) 
Represents our 50% interest in the capacity of PLNL.
The following table summarizes our nitrogen fertilizer production volume for the last three years.
 
December 31,
 
2015
 
2014
 
2013
 
(tons in thousands)
Ammonia(1)
7,673

 
7,011

 
7,105

Granular urea
2,520

 
2,347

 
2,474

UAN (32%)
5,888

 
5,939

 
6,332

AN
1,283

 
950

 
882

_______________________________________________________________________________

(1) 
Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN or AN.
Donaldsonville, Louisiana
The Donaldsonville nitrogen fertilizer complex is the largest nitrogen fertilizer production facility in North America. It has five ammonia plants, five urea plants, three nitric acid plants and two UAN plants. The complex, which is located on the Mississippi River, includes deep-water docking facilities, access to an ammonia pipeline, and truck and railroad loading capabilities. The complex has on-site storage for 160,000 tons of ammonia, 168,000 tons of UAN (measured on a 32% nitrogen content basis) and 163,000 tons of granular urea.
In the fourth quarter of 2012, we announced our expansion project plans for our Donaldsonville, Louisiana facility, which will increase our annual capacity of ammonia and granular urea by up to 1.3 million tons each and UAN by up to 1.8 million tons. The new Donaldsonville urea plant became operational during the fourth quarter of 2015. For additional details regarding this project, see Item 7. MD&A—Liquidity and Capital Resources—Capacity Expansion Projects and Restricted Cash.

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CF INDUSTRIES HOLDINGS, INC.

Medicine Hat, Alberta, Canada
Medicine Hat is the largest nitrogen fertilizer complex in Canada. It has two ammonia plants and one urea plant. The complex has on-site storage for 60,000 tons of ammonia and 60,000 tons of granular urea.
The complex is owned by Canadian Fertilizers Limited (CFL), which until April 30, 2013, was a variable interest entity which we consolidated in our financial statements. In April 2013, we purchased the remaining noncontrolling interest. CFL is now a wholly-owned subsidiary.
For further information about CFL, see Note 15—Noncontrolling Interest.
Port Neal, Iowa
The Port Neal facility is located approximately 12 miles south of Sioux City, Iowa on the Missouri River. The facility consists of an ammonia plant, two urea plants, two nitric acid plants and a UAN plant. The location has on-site storage for 30,000 tons of ammonia and 81,000 tons of 32% UAN.
In the fourth quarter of 2012, we also announced our expansion project plans for our Port Neal, Iowa facility, which will increase our annual capacity of ammonia by approximately 0.8 million tons and granular urea by approximately 1.3 million tons. For additional details regarding this project, see Item 7. MD&A—Liquidity and Capital Resources—Capacity Expansion Projects and Restricted Cash.
Verdigris, Oklahoma
The Verdigris facility is located northeast of Tulsa, Oklahoma, near the Verdigris River and is owned by TNLP. It is the second largest UAN production facility in North America. The facility comprises two ammonia plants, two nitric acid plants, two urea plants, two UAN plants and a port terminal. Through our 75.3% interest in TNCLP and its subsidiary, TNLP, we operate the plants and lease the port terminal from the Tulsa-Rogers County Port Authority. The complex has on-site storage for 60,000 tons of ammonia and 100,000 tons of 32% UAN.
Woodward, Oklahoma
The Woodward facility is located in rural northwest Oklahoma and consists of an ammonia plant, two nitric acid plants, two urea plants and two UAN plants. The facility has on-site storage for 36,000 tons of ammonia and 83,900 tons of 32% UAN.
Yazoo City, Mississippi
The Yazoo City facility is located in central Mississippi and includes one ammonia plant, four nitric acid plants, an AN plant, two urea plants, a UAN plant and a dinitrogen tetroxide production and storage facility. The site has on-site storage for 50,000 tons of ammonia, 48,000 tons of 32% UAN and 7,000 tons of AN and related products.
Courtright, Ontario, Canada
The Courtright facility is located south of Sarnia, Ontario near the St. Clair River. The facility consists of an ammonia plant, a UAN plant, a nitric acid plant and a urea plant. The location has on-site storage for 64,100 tons of ammonia, 10,400 tons of granular urea and 16,000 tons of 32% UAN.
Ince, United Kingdom
The Ince facility is located in northwestern England and consists of an ammonia plant, three nitric acid plants, an AN plant and three NPK plants. The location has on-site storage for 11,000 tons of ammonia, 110,000 tons of AN, and 50,000 tons of NPKs.
Billingham, United Kingdom
The Billingham facility, located in the Teesside chemical area in northeastern England, is geographically split among three primary locations: the main site, which contains an ammonia plant, three nitric acid plants and a carbon dioxide plant; the Portrack site, approximately two miles away, which contains an AN fertilizer plant; and the North Tees site, approximately seven miles away, which contains an ammonia storage area. These locations collectively have on-site storage for 40,000 tons of ammonia and 128,000 tons of AN.

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CF INDUSTRIES HOLDINGS, INC.

Point Lisas, Trinidad
The Point Lisas Nitrogen facility in the Republic of Trinidad and Tobago is owned jointly through a 50/50 venture with Koch Fertilizer LLC. This facility has the capacity to produce 720,000 tons of ammonia annually from natural gas supplied under a contract with The National Gas Company of Trinidad and Tobago.
Nitrogen Fertilizer Raw Materials
Natural gas is the principal raw material and primary fuel source used in the ammonia production process at our nitrogen fertilizer manufacturing facilities. In 2015, natural gas accounted for approximately 45% of our total production costs for nitrogen fertilizer products. Our nitrogen fertilizer manufacturing facilities have access to abundant, competitively-priced natural gas through a reliable network of pipelines that are connected to major natural gas trading hubs near the facilities. Our facilities utilize the following natural gas hubs: Henry Hub in Louisiana; ONEOK in Oklahoma; AECO in Alberta; Ventura in Iowa; Demarcation in Kansas; Dawn in Ontario; and the National Balancing Point in the United Kingdom.
Our nitrogen manufacturing facilities consume, in the aggregate, approximately 280 million MMBtus of natural gas annually. We employ a combination of spot and term purchases from a variety of quality suppliers to maintain a reliable, competitively-priced supply of natural gas. We also use certain financial instruments to hedge natural gas prices. For further information about our natural gas hedging activities, see Note 16—Derivative Financial Instruments.
Nitrogen Fertilizer Distribution
The safe, efficient and economical distribution of nitrogen fertilizer products is critical for successful operations. Our nitrogen fertilizer production facilities have access to multiple transportation modes by which we ship fertilizer products to terminals, warehouses and customers. Each of our production facilities has a unique distribution pattern based on its production capacity and location.
Our North American nitrogen production facilities can ship products via truck and rail to customers and our storage facilities in the U.S. and Canada, with access to our leased railcar fleet of approximately 5,600 tank and hopper cars, as well as railcars provided by rail carriers. Our United Kingdom nitrogen production facilities ship products via truck.
The North American waterway system is also used extensively to ship products from our Donaldsonville, Verdigris and Yazoo City facilities. We employ a fleet of twelve leased tow boats and 40 river barges to ship ammonia and UAN. We also utilize contract marine services to move urea fertilizer. We also export nitrogen fertilizer products via barge from our Billingham, United Kingdom manufacturing facility.
Three of our nitrogen production facilities also have access to pipelines for the transportation of ammonia. The Donaldsonville facility is connected to the 2,000-mile long Nustar pipeline through which we transport ammonia to more than 20 terminals and shipping points in the midwestern U.S. corn belt. Our Verdigris and Port Neal facilities are connected to the 1,100-mile long Magellan ammonia pipeline that also serves the U.S. Midwest.
Phosphate Segment
The phosphate segment reflects the reported results of the phosphate business through March 17, 2014, plus the continuing sales of the phosphate inventory in the distribution network after March 17, 2014. The remaining phosphate inventory was sold in the second quarter of 2014; therefore, the phosphate segment does not have operating results subsequent to that quarter although the segment will continue to be included until the reporting of comparable period phosphate results ceases.
Upon selling the phosphate business, we began to supply Mosaic with ammonia produced by our PLNL joint venture. The contract to supply ammonia to Mosaic from our PLNL joint venture represents the continuation of a supply practice that previously existed between our former phosphate mining and manufacturing business and other operations of the Company. Prior to March 17, 2014, PLNL sold ammonia to us for use in the phosphate business and the cost was included in our production costs in our phosphate segment. Subsequent to the sale of the phosphate business, we now sell the PLNL-sourced ammonia to Mosaic. The revenue from these sales to Mosaic and the costs to purchase the ammonia from PLNL are now included in our ammonia segment. Our 50% share of the operating results of our PLNL joint venture continues to be included in equity in earnings of operating affiliates in our consolidated statements of operations. Because of the significance of this continuing supply practice, in accordance with U.S. GAAP, the phosphate mining and manufacturing business is not reported as discontinued operations in our consolidated statements of operations. For additional information regarding this sale, see Note 4—Acquisitions and Divestitures.

7


CF INDUSTRIES HOLDINGS, INC.

Our historical sales of phosphate fertilizer products are shown in the table below.
 
2014
 
2013
 
Tons
 
Net Sales
 
Tons
 
Net Sales
 
(tons in thousands; dollars in millions)
Phosphate Fertilizer Products
 

 
 

 
 

 
 

DAP
372

 
$
127.6

 
1,408

 
$
600.6

MAP
115

 
40.8

 
449

 
196.3

Total
487

 
$
168.4

 
1,857

 
$
796.9

Gross margin for the phosphate segment was $10.1 million and $74.9 million for the years ended December 31, 2014 and 2013, respectively.
Storage Facilities and Other Properties
As of December 31, 2015, we owned or leased space at 88 in-market storage terminals and warehouses located in a 22-state region of the United States, Canada and the United Kingdom. Including storage at our production facilities, we have an aggregate storage capacity for approximately 3.3 million tons of fertilizer. Our storage capabilities are summarized in the following table.
 
Ammonia
 
Granular Urea
 
UAN(1)
 
AN
 
Number of
Facilities
 
Capacity
(000 Tons)
 
Number of
Facilities
 
Capacity
(000 Tons)
 
Number of
Facilities
 
Capacity
(000 Tons)
 
Number of
Facilities
 
Capacity
(000 Tons)
Plants
9

 
511

 
3

 
233

 
6

 
497

 
3

 
245

Terminal and Warehouse Locations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owned
22

 
815

 
1

 
40

 
8

 
219

 

 

Leased(2)
3

 
110

 
2

 
49

 
52

 
534

 

 

Total In-Market
25

 
925

 
3

 
89

 
60

 
753

 

 

Total Storage Capacity
 

 
1,436

 
 

 
322

 
 

 
1,250

 
 

 
245

_______________________________________________________________________________

(1) 
Capacity is expressed as the equivalent volume of UAN measured on a 32% nitrogen content basis.
(2) 
Our lease agreements are typically for periods of one to five years.
Customers
The principal customers for our nitrogen fertilizer and other nitrogen products are cooperatives, independent fertilizer distributors, farmers and industrial users. None of our customers in 2015 accounted for more than ten percent of our consolidated net sales. Sales are generated by our internal marketing and sales force.
Competition
Our markets are global and intensely competitive, based primarily on delivered price and, to a lesser extent, on customer service and product quality. During the peak demand periods, product availability and delivery time also play a role in the buying decisions of customers.
Our primary North American-based competitors include Agrium Inc., Koch Fertilizer LLC and Potash Corporation of Saskatchewan Inc. There is also significant competition from products sourced from other regions of the world, including some with lower natural gas or other feedstock costs. Because ammonia, urea and UAN are widely-traded fertilizer products and there are limited barriers to entry, we experience competition from foreign-sourced products continuously.
Our primary United Kingdom competition comes from imported products supplied by companies including Yara International, Origin Fertilisers, Bunn Fertiliser Limited (Koch), Ameropa, CHS and Helm. Urea and UAN are not produced in the United Kingdom, but along with AN, are widely-traded fertilizer products with limited barriers to entry.

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CF INDUSTRIES HOLDINGS, INC.

Seasonality
The fertilizer business is seasonal. The degree of seasonality of our business can change significantly from year to year due to conditions in the agricultural industry and other factors. The strongest demand for our products occurs during the spring planting season, with a second period of strong demand following the fall harvest. We and our customers generally build inventories during the low demand periods of the year in order to ensure timely product availability during the peak sales seasons. Seasonality is greatest for ammonia due to the short application season and the limited ability of our customers and their customers to store significant quantities of this product. The seasonality of fertilizer demand generally results in our sales volumes and net sales being the highest during the spring and our working capital requirements being the highest just prior to the start of the spring planting season. Our quarterly financial results can vary significantly from one year to the next due to weather-related shifts in planting schedules and purchasing patterns.
Financial Information About Foreign and Domestic Sales and Operations
The amount of net sales attributable to our sales to foreign and domestic markets over the last three fiscal years and the carrying value of our foreign and domestic long-lived assets are set forth in Note 21—Segment Disclosures.
Environmental, Health and Safety
We are subject to numerous environmental, health and safety laws and regulations in the United States, Canada, the United Kingdom and the Republic of Trinidad and Tobago, including laws and regulations relating to the generation and handling of hazardous substances and wastes; the cleanup of hazardous substance releases; the discharge of regulated substances to air or water; and the demolition of existing plant sites upon permanent closure. In the United States, these laws include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Toxic Substances Control Act (TSCA) and various other federal, state, provincial, local and international statutes. Violations of environmental, health and safety laws can result in substantial penalties, court orders to install pollution-control equipment, civil and criminal sanctions, permit revocations and facility shutdowns. In addition, environmental, health and safety laws and regulations may impose joint and several liability, without regard to fault, for cleanup costs on potentially responsible parties who have released or disposed of hazardous substances into the environment. We may be subject to more stringent enforcement of existing or new environmental, health and safety laws in the future.
Environmental, Health and Safety Expenditures
Our environmental, health and safety capital expenditures in 2015 totaled approximately $32.0 million. In 2016, we estimate that we will spend approximately $43.0 million for environmental, health and safety capital expenditures. Environmental, health and safety laws and regulations are complex, change frequently and have tended to become more stringent over time. We expect that continued government and public emphasis on environmental issues will result in increased future expenditures for environmental controls at our operations. Such expenditures could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, future environmental, health and safety laws and regulations or reinterpretation of current laws and regulations may require us to make substantial expenditures. Our costs to comply with, or any liabilities under, these laws and regulations could have a material adverse effect on our business, financial condition, results of operations and cash flows.
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. For additional information on the Section 185 fee, see Note 20—Contingencies.
Clean Air Act Information Request
On February 26, 2009, we received a letter from the Environmental Protection Agency (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. For additional information on the Clean Air Act Information Request, see Note 20—Contingencies.

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CF INDUSTRIES HOLDINGS, INC.

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 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. We and the current owner are currently conducting a remedial investigation/feasibility study of the site. In 2015, we and several other parties received a notice that the U.S. Department of 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. For additional information on the CERCLA/Remediation matters, see Note 20—Contingencies.
Regulation of Greenhouse Gases
We are subject to regulations in the United Kingdom, Canada and the United States concerning greenhouse gas (GHG) emissions.
The United Kingdom is a party to the Kyoto Protocol. As a result of agreements reached during a conference in Durban, South Africa in 2011, the Kyoto Protocol will continue in force for a second commitment period, which will expire by 2020. On December 12, 2015, 195 countries adopted by consensus a new international agreement known as the Paris Agreement. The Paris Agreement is intended to provide a framework pursuant to which the parties to the agreement will attempt to hold the increase in global average temperatures to below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. The Paris Agreement could result in more aggressive efforts to reduce GHG emissions in the jurisdictions in which we operate.
The United Kingdom has adopted GHG emissions regulations, including regulations to implement the European Union Greenhouse Gas Trading System. Our U.K. manufacturing plants are required to report GHG emissions annually to the United Kingdom Environment Agency pursuant to their site Environmental Permits and Climate Change Agreement, which specify energy efficiency targets. Failure to meet efficiency targets may require these plants to purchase CO2 emissions allowances. The steam boilers at each of our U.K. sites are also subject to the European Union Emissions Trading Scheme.
Canada withdrew from further participation in the Kyoto Protocol in December 2011, but is a signatory to the Paris Agreement. In Canada, we are required to conduct an annual review of our operations with respect to compliance with Environment Canada's National Pollutant Release Inventory and Ontario's Mandatory Monitoring and Reporting Regulation and the GHG Reporting Regulation. Ontario is party to the Western Climate Initiative (WCI), comprising California and several Canadian provinces. In April 2015, Ontario announced that it intended to implement its own GHG cap and trade program. On November 16, 2015, Ontario published a notice seeking comments on the design of its cap and trade system. The notice stated that Ontario was proposing to commence operation of the cap and trade program by January 1, 2017 and that this program would link with the cap and trade programs already in operation in California and Quebec. The design document further proposed that the initial cap be set at forecasted GHG emissions for 2017, with annual reductions in the cap designed to achieve the objective of reducing Ontario's GHG emissions to 15% below 1990 levels by 2020.
In Alberta, the Specified Gas Emitters Regulation (GHG Regulation) was implemented in 2007. This program requires facilities emitting more than 100,000 tons of GHGs per year to reduce emissions by 12% over such facilities' 2007 levels. To meet this requirement, companies can reduce emissions, purchase/use offset credits, or contribute to a technology fund at an annual rate of $15 per ton of CO2. Currently, our Medicine Hat facility’s method of compliance is to make contributions to the technology fund. Alberta has recently announced that it is replacing its current approach with respect to carbon by introducing a carbon tax that applies across all sectors. The carbon tax is set at $20 per ton (Canadian dollars) effective January 1, 2016 with an emissions reduction target of 15%, rise to $30 per ton (Canadian dollars) effective January 1, 2017 with an emissions reduction target of 20% and increase with the rate of inflation thereafter.
The United States is not a party to the Kyoto Protocol, but is a signatory to the Paris Agreement. In the United States, GHG regulation is evolving at state, regional and federal levels, although some of the more significant developments to date, including EPA's Clean Power Plan, do not directly impose obligations on our facilities. The EPA has issued a mandatory GHG reporting rule that required all of our U.S. manufacturing facilities to commence monitoring GHG emissions beginning on January 1, 2010 and begin reporting the previous year's emissions annually starting in 2011. In addition, if we seek to modify or expand any of our major facilities and as a result, are required to obtain a Prevention of Significant Deterioration (PSD) construction permit applicable to such facilities, we could be subject to pollution control requirements applicable to GHGs in addition to requirements applicable to conventional air pollutants. Such requirements may result in increased costs or delays in completing such projects. Other than the states' implementation of this permitting requirement, none of the states where our

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CF INDUSTRIES HOLDINGS, INC.

U.S. production facilities are located—Louisiana, Mississippi, Iowa and Oklahoma—has proposed control regulations limiting GHG emissions.
New Source Performance Standards for Nitric Acid Plants
We operate 13 nitric acid plants in the United States. On August 14, 2012, the EPA issued a final regulation revising air emission standards applicable to newly constructed, reconstructed or modified nitric acid plants. The regulations will apply to these plants if and when we undertake activities or operations that are considered modifications, including physical changes that would allow us to increase our production capacity at these plants. The regulations include certain provisions that could make it difficult for us to meet the limits on emissions of nitrogen oxides (NOx) notwithstanding pollution controls we may add to our plants, and accordingly, the regulations, could impact our ability to expand production at our existing plants. The EPA regulation did not include a limitation on emissions of nitrous oxide (a greenhouse gas).
Regulatory Permits and Approvals
We hold numerous environmental and other governmental permits and approvals authorizing operations at each of our facilities. A decision by a government agency to deny or delay issuing a new or renewed regulatory material permit or approval, or to revoke or substantially modify an existing material permit or approval, could have a material adverse effect on our ability to continue operations at the affected facility. Any future expansion of our existing operations is also predicated upon securing the necessary environmental or other permits or approvals. More stringent environmental standards may impact our ability to obtain such permits. The Baton Rouge area, where our Donaldsonville facility is located, currently is classified as marginal nonattainment for ozone with respect to the ozone standard issued in 2008. EPA has proposed reclassifying the Baton Rouge area as in attainment with the 2008 ozone standard based on 2012-2014 data. However, on October 26, 2015, EPA published a more stringent national ambient air quality standard for ozone that could cause Baton Rouge to again be classified as a nonattainment area. Such a classification (in the Baton Rouge area or in other areas where our manufacturing facilities are located) could result in more stringent air pollution emissions limits for our existing operations and would also subject our facilities to more stringent requirements to obtain approvals for plant expansions, or could make it difficult to obtain such approvals.
Employees
As of December 31, 2015, we employed approximately 2,800 full-time and 100 part-time employees.

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CF INDUSTRIES HOLDINGS, INC.

ITEM 1A.    RISK FACTORS.
        In addition to the other information contained in this Annual Report on Form 10-K, you should carefully consider the factors discussed below before deciding to invest in any of our securities. These risks and uncertainties could materially and adversely affect our business, financial condition, results of operations and cash flows.
Any changes to the tax laws or relevant facts may jeopardize or delay the proposed combination with the ENA Business of OCI.
Each of our and OCI’s respective obligations to consummate the transactions contemplated by the Combination Agreement is subject to a condition that there shall have been no (i) change in law, official interpretation thereof, or officially proposed action by the U.S. Internal Revenue Service (IRS) or the U.S. Department of the Treasury, other than those rules described in Notice 2015-79 issued by the Department of the Treasury and IRS on November 19, 2015, (whether or not yet approved or effective) with respect to subject matters covered by Code Section 7874 or (ii) passage of any bill that would implement a change in applicable laws by either the U.S. House of Representatives or the U.S. Senate with respect to subject matters covered by Code Section 7874, that, in either of case (i) or (ii), if finalized and made effective, in the opinion of our legal counsel or OCI’s legal counsel, (A) would reasonably be expected to cause New CF to be treated as a U.S. domestic corporation for U.S. federal tax purposes or (B) would cause New CF to fail to qualify for relevant benefits of the U.S.-Netherlands Tax Treaty. In addition, our obligation to consummate the combination is subject to a condition that we shall have received from our legal counsel (i) an opinion dated as of the closing date to the effect that Section 7874 of the Code (or any other U.S. tax laws), existing regulations promulgated thereunder, and official interpretation thereof as set forth in published guidance, should not apply in such a manner so as to cause New CF to be treated as a domestic corporation for U.S. federal income tax purposes from and after the closing date and (ii) an opinion dated as of the closing date to the effect that New CF should qualify for relevant benefits of the U.S.-Netherlands Tax Treaty. OCI’s obligations to consummate the combination are subject to a condition that OCI shall have received from OCI’s legal counsel an opinion dated as of the closing date to the effect that, for U.S. federal income tax purposes, the separation should be treated as a reorganization within the meaning of Section 368(a)(1)(D) and a distribution qualifying under Section 355 of the Code. In the event that one or more of the above conditions are not satisfied, the relevant party (or if applicable, each party) will determine, based on the facts and circumstances existing at the applicable time, whether to invoke the applicable condition and not consummate the combination or waive the condition and consummate the combination (assuming the other closing conditions are satisfied or waived). Accordingly, any changes in applicable tax laws, regulations or the underlying facts before the closing date could jeopardize or delay the combination and/or have a material adverse effect on New CF’s business, financial condition, results of operations, cash flows, and/or share price.
Governmental or regulatory actions could delay the transactions contemplated by the Combination Agreement or result in the imposition of conditions that reduce the anticipated benefits from the combination or cause the parties to abandon the combination.
Conditions to closing the proposed combination with the ENA Business of OCI include clearance by the Committee on Foreign Investment in the United States and that there is no judgment, temporary restraining order, preliminary or permanent injunction, ruling, determination, decision, opinion or comparable judicial or regulatory action of a governmental body in effect that prohibits the combination. At any time before or after the completion of the merger, and notwithstanding the termination of applicable waiting periods, the Antitrust Division and the FTC or any state Attorney General could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the parties. In addition, in some circumstances, a third party could initiate a private action under antitrust laws challenging or seeking to enjoin the combination, before or after it is completed. We and OCI may not prevail and may incur significant costs in defending or settling any action under the antitrust and competition laws. We have agreed to pay OCI $150 million if the Combination Agreement is terminated in certain circumstances if certain regulatory approvals are not obtained.
We are subject to business uncertainties and contractual restrictions while the proposed combination with the ENA Business of OCI is pending, which could adversely affect our business and operations.
In connection with the pending combination with the ENA Business of OCI, it is possible that some customers, suppliers and other persons with whom we have business relationships may delay or defer certain business decisions, or might decide to seek to terminate, change or renegotiate their relationship with us as a result of the combination, which could negatively affect our revenues and earnings, as well as the market price of our common stock, regardless of whether the combination is completed.

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CF INDUSTRIES HOLDINGS, INC.

Under the terms of the Combination Agreement, we are subject to certain restrictions on the conduct of our business prior to the closing, which may adversely affect our ability to execute certain of our business strategies. These restrictions, the waiver of which is subject to the consent of OCI (not to be unreasonably withheld), could prevent us from taking certain actions that may be beneficial to our business, such as making acquisitions, pursuing certain business opportunities or entering into certain financing instruments. Such limitations could negatively affect our operations and business prior to the closing.
Furthermore, the process of planning to integrate two businesses and organizations for the post-combination period can divert management attention and resources and could ultimately have an adverse effect on us.
The Combination Agreement contains provisions that limit our ability to pursue alternative transactions to the combination, could discourage potential alternative transactions and/or third parties from making alternative transaction proposals and could require, in certain circumstances, that we pay a termination fee of $150 million.
Pursuant to the terms of the Combination Agreement, we may be required to pay a termination fee of $150 million if the transactions contemplated by the Combination Agreement are not consummated because of the occurrence of certain events, including a change to the recommendation of our Board of Directors with respect to the proposals related to the combination that are to be voted on by our stockholders. Such a fee could be payable even if no other alternative transaction is consummated. In addition, if the Combination Agreement is terminated because we fail to obtain the required approval of our stockholders, we are obligated to reimburse OCI’s expenses up to a cap of $30 million.
We are generally prohibited from entering into an acquisition agreement with a third party, soliciting an alternative proposal from any third party involving 15% or more of our common stock, assets or earning power, and, subject to limited exceptions, participating in any discussions or negotiations regarding any proposal that is or could reasonably be expected to lead to an alternative acquisition proposal or furnishing any nonpublic information in connection therewith. In addition, under the terms of the Combination Agreement, we are not permitted to terminate the Combination Agreement if our Board of Directors withdraws its recommendation of the Combination Agreement or approves or recommends an alternative acquisition proposal and must continue in these circumstances to submit the Combination Agreement for consideration by our stockholders unless OCI terminates the Combination Agreement.
The presence of the above provisions and the termination fee could discourage third parties from making alternative acquisition proposals, even if such third party were prepared to pay consideration with a higher per share cash or market value than the proposed market value of the shares in the transactions contemplated by the Combination Agreement. As a result, third parties may make acquisition proposals, if at all, at a lower price than they would otherwise be willing to make in the absence of such restrictions on the ability of our Board of Directors to consider and/or negotiate with respect to such proposals. We may not be able to enter into an agreement with respect to a more favorable alternative transaction without incurring significant liability.
Failure to complete the proposed combination with the ENA Business of OCI, or significant delays in completing the combination, could negatively affect the trading price of our common stock and/or our future business and financial results.

The consummation of the proposed combination with the ENA Business of OCI is subject to numerous conditions, which may not be satisfied in a timely manner or at all. If the combination is not completed, or if there are significant delays in completing the combination, the trading price of our common stock and/or our future business and financial results could be negatively affected, and we will be subject to various risks, including the following:

we may be liable for damages to OCI under the terms and conditions of the Combination Agreement;
negative reactions from the financial markets, including declines in the price of our common stock due to the fact that current prices may reflect a market assumption that the combination will be completed;
having to pay certain significant costs relating to the combination;
lost opportunities resulting from restrictions on the conduct of our business during the pendency of the transaction; and
the attention of management will have been diverted to the combination rather than to current operations and pursuit of other opportunities that could have been beneficial to us.

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CF INDUSTRIES HOLDINGS, INC.

We may have difficulty attracting, motivating and retaining executives and other employees in light of the proposed combination with the ENA Business of OCI.

We could experience difficulty in attracting, motivating and retaining executives and other employees due to the uncertainty of the closing of the proposed combination with the ENA Business of OCI. In addition, certain key employees of the ENA Business may not wish to become employees of New CF. Until completion of the transactions contemplated by the Combination Agreement, employee retention could be a challenge for us as employees may have uncertainty about the combination and their future roles with New CF. If our employees or employees of the ENA Business depart prior to the closing of the combination due to uncertainty or the difficulty of integrating the two businesses, New CF's ability to realize the anticipated benefits of the transactions contemplated by the Combination Agreement could be reduced or delayed.
We are subject to risk associated with the CHS strategic venture.
We may not realize the full benefits from the CHS strategic venture that are expected. The realization of the expected benefits of the CHS strategic venture depends on our ability to successfully operate and manage the strategic venture, and on the market prices of the nitrogen fertilizer products that are the subject of our supply agreement with CHS over the life of the agreement, among other factors. Additionally, any challenges related to the CHS strategic venture could harm our relationships with our customers, employees or suppliers.
Our business is dependent on natural gas, the prices of which are subject to volatility.
Natural gas is the principal raw material used to produce nitrogen fertilizers. We use natural gas both as a chemical feedstock and as a fuel to produce ammonia, granular urea, UAN, AN and other nitrogen products.
Because most of our nitrogen fertilizer manufacturing facilities are located in the United States and Canada, North American natural gas comprises a significant portion of the total production cost of our products. The price of natural gas in North America has been volatile in recent years. During 2015, the daily closing price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, reached a low of $1.54 per MMBtu on four consecutive days in December 2015 and a high of $3.30 per MMBtu on January 16, 2015. During the three year period ended December 31, 2015, the daily closing price at the Henry Hub reached a low of $1.54 per MMBtu on four consecutive days in December 2015 and a high of $7.94 per MMBtu on March 5, 2014.
We also have manufacturing facilities located in the United Kingdom. These facilities are subject to fluctuations associated with the price of natural gas in Europe. The major natural gas trading point for the United Kingdom is the National Balancing Point (NBP). During 2015, the daily closing price at NBP reached a low of $4.60 per MMBtu on December 23, 2015 and December 24, 2015 and a high of $8.50 per MMBtu on February 12, 2015. During the three year period ended December 31, 2015, the daily closing price at NBP reached a low of $4.60 per MMBtu on December 23, 2015 and December 24, 2015 and a high of $16.00 per MMBtu on March 22, 2013.
Changes in the supply of and demand for natural gas can lead to periods of volatile natural gas prices. If high prices were to occur during a period of low fertilizer selling prices, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The price of natural gas in North America and worldwide has been volatile in recent years and has declined on average due in part to the development of significant natural gas reserves, including shale gas, and the rapid improvement in shale gas extraction techniques, such as hydraulic fracturing and horizontal drilling. Future production of natural gas from shale formations could be reduced by regulatory changes that restrict drilling or hydraulic fracturing or increase its cost or by reduction in oil exploration and development prompted by lower oil prices and resulting in production of less associated gas. Additionally, increased demand for natural gas, particularly in the Gulf Coast Region, due to increased industrial demand and increased natural gas exports could result in increased natural gas prices. If such reduced production or increased demand were to occur, or if other developments adversely impact the supply/demand balance for natural gas in the United States or elsewhere, natural gas prices could rise, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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CF INDUSTRIES HOLDINGS, INC.

Our business is cyclical, resulting in periods of industry oversupply during which our financial condition, results of operations and cash flows tend to be negatively affected.
Historically, selling prices for our products have fluctuated in response to periodic changes in supply and demand conditions. Demand is affected by planted acreage and application rates, driven by population growth, changes in dietary habits and non-food usage of crops, such as the production of ethanol and other biofuels, among other things. Supply is affected by available capacity and operating rates, raw material costs and availability, government policies and global trade. The construction of new nitrogen fertilizer manufacturing capacity in the industry, plus improvements to increase output from the existing production assets, increase nitrogen supply and affect the supply demand balance.
Periods of high demand, high capacity utilization and increasing operating margins tend to result in investment in production capacity, which may cause supply to exceed demand and selling prices and capacity utilization to decline. Future growth in demand for fertilizer may not be sufficient to absorb excess industry capacity.
During periods of industry oversupply, our financial condition, results of operations and cash flows tend to be affected negatively as the price at which we sell our products typically declines, resulting in possible reduced profit margins, write-downs in the value of our inventory and temporary or permanent curtailments of production.
Our products are global commodities, and we face intense global competition from other fertilizer producers.
We are subject to intense price competition from our competitors. Most fertilizers are global commodities, with little or no product differentiation, and customers make their purchasing decisions principally on the basis of delivered price and to a lesser extent on customer service and product quality. We compete with many producers, including state-owned and government-subsidized entities.
Consolidation in the industry has increased the resources of several of our competitors. Some of these competitors have greater total resources and are less dependent on earnings from fertilizer sales, which make them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities. Our competitive position could suffer to the extent we are not able to expand our own resources either through investments in new or existing operations or through acquisitions, joint ventures or partnerships.
China, the world's largest producer and consumer of nitrogen fertilizers, is expected to continue expanding its fertilizer production capacity in the medium term. If Chinese government policy, devaluation of the Chinese renminbi or decreases in Chinese producers' underlying costs such as the price of Chinese coal, encourage exports, this expected increase in capacity could adversely affect the balance between global supply and demand and may put downward pressure on global fertilizer prices, which could materially adversely affect our business, financial condition, results of operations and cash flows.
Our competitors in Russia and Ukraine have significant nitrogen fertilizer export capacity and continue to benefit from non-market pricing of natural gas, which allows them to increase exports at aggressive prices, depending on market conditions.  Most U.S. antidumping measures on solid urea and fertilizer grade ammonium nitrate from Russia and Ukraine will be under review by government agencies in the coming year and any revocation of such measures could lead to significant increases in imports from these countries.
We also face competition from other fertilizer producers in the Middle East, Europe and Latin America, who, depending on market conditions, fluctuating input prices, geographic location and freight economics, may take actions at times with respect to price or selling volumes that adversely affect our business, financial condition, results of operations and cash flows.
A decline in agricultural production or limitations on the use of our products for agricultural purposes could materially adversely affect the market for our products.
Conditions in the U.S. agricultural industry significantly impact our operating results. Our operating results are also affected by conditions in the European agricultural industry. The agricultural industries in the United States and Europe can be affected by a number of factors, including weather patterns and field conditions, current and projected grain inventories and prices, demand for agricultural products and governmental policies regarding trade in agricultural products. These factors are outside of our control.
Governmental policies, including farm and biofuel subsidies and commodity support programs, as well as the prices of fertilizer products, may also directly or indirectly influence the number of acres planted, the mix of crops planted and the use of fertilizers for particular agricultural applications. Ethanol production in the United States contributes significantly to corn demand, due in part to federal legislation mandating use of renewable fuels. An increase in ethanol production has led to an increase in the amount of corn grown in the United States and to increased fertilizer usage on both corn and other crops that

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CF INDUSTRIES HOLDINGS, INC.

have also benefited from improved farm economics. While the current Renewable Fuel Standard (RFS) encourages continued high levels of corn-based ethanol production, a continuing "food versus fuel" debate and other factors have resulted in calls to eliminate or reduce the renewable fuel mandate, or to eliminate or reduce corn-based ethanol as part of the renewable fuel mandate. This could have an adverse effect on corn-based ethanol production, planted corn acreage and fertilizer demand.
Developments in crop technology, such as nitrogen fixation, the conversion of atmospheric nitrogen into compounds that plants can assimilate, could also reduce the use of chemical fertilizers and adversely affect the demand for our products. In addition, from time to time various state legislatures have considered limitations on the use and application of chemical fertilizers due to concerns about the impact of these products on the environment. Any reduction in the demand for chemical fertilizer products, including any limitation on the use and application of chemical fertilizer, could affect the demand for our products, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations and those of our joint venture are dependent upon raw materials provided by third parties, and any delay or interruption in the delivery may adversely affect our business.
We and our joint venture use natural gas and other raw materials in the manufacture of fertilizers. We purchase the natural gas and other raw materials from third party suppliers. Our natural gas is transported by pipeline to our facilities and those of our joint venture by third party transportation providers or through the use of facilities owned by third parties. Delays or interruptions in the delivery of natural gas or other raw materials may be caused by, among other things, severe weather or natural disasters, unscheduled downtime, labor difficulties, insolvency of our suppliers or their inability to meet existing contractual arrangements, deliberate sabotage and terrorist incidents, or mechanical failures. In addition, the transport of natural gas by pipeline is subject to additional risks, including delays or interruptions caused by capacity constraints, leaks or ruptures. Any delay or interruption in the delivery of natural gas or other raw materials, even for a limited period, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our transportation and distribution activities rely on third party providers and are subject to environmental, safety and regulatory oversight. This exposes us to risks and uncertainties beyond our control that may adversely affect our operations and exposes us to additional liability.
We rely on railroad, truck, pipeline, river barge and ocean vessel companies to transport raw materials to our manufacturing facilities, to coordinate and deliver finished products to our distribution system and to ship finished products to our customers. We also lease rail cars in order to ship raw materials and finished products. These transportation operations, equipment and services are subject to various hazards, including adverse operating conditions on the inland waterway system, extreme weather conditions, system failures, work stoppages, delays, accidents such as spills and derailments and other accidents and operating hazards. Additionally, due to the aging infrastructure of certain bridges, roadways, rail lines, river locks, and equipment that our third party service providers utilize, we may experience delays in both the receipt of raw materials or the shipment of finished product while repairs, maintenance or replacement activities are conducted. Also, certain third party service providers, particularly railroads, have experienced periodic service slowdowns due to capacity constraints in their systems which impact the shipping times of our products.
These transportation operations, equipment and services are also subject to environmental, safety, and regulatory oversight. Due to concerns related to accidents, discharges or other releases of hazardous substances, terrorism or the potential use of fertilizers as explosives, governmental entities could implement new regulations affecting the transportation of raw materials or finished products.
If shipping of our products is delayed or we are unable to obtain raw materials as a result of these transportation companies' failure to operate properly, or if new and more stringent regulatory requirements are implemented affecting transportation operations or equipment, or if there are significant increases in the cost of these services or equipment, our revenues and cost of operations could be adversely affected. In addition, increases in our transportation costs, or changes in such costs relative to transportation costs incurred by our competitors, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In the United States and Canada, the railroad industry continues various efforts to limit the railroads' potential liability stemming from the transportation of Toxic Inhalation Hazard materials, such as the anhydrous ammonia we transport to and from our manufacturing and distribution facilities. For example, various railroads have implemented tariffs that include provisions that purport to shift liability to shippers to the extent that liabilities arise from third parties with insufficient resources. These initiatives could materially and adversely affect our operating expenses and potentially our ability to transport anhydrous ammonia and increase our liability for releases of our anhydrous ammonia while in the care, custody and control of the railroads, for which our insurance may be insufficient or unavailable. New regulations also could be implemented affecting the equipment used to ship our raw materials or finished products. Increases in transportation costs, or changes in such costs

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relative to transportation costs incurred by our competitors, and any railroad industry initiatives that may impact our ability to transport our products, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations and the production and handling of our products involve significant risks and hazards. We are not fully insured against all potential hazards and risks incident to our business. Therefore, our insurance coverage may not adequately cover our losses.
Our operations are subject to hazards inherent in the manufacture, transportation, storage and distribution of chemical products, including ammonia, which is highly toxic and corrosive. These hazards include: explosions; fires; severe weather and natural disasters; train derailments, collisions, vessel groundings and other transportation and maritime incidents; leaks and ruptures involving storage tanks, pipelines and rail cars; spills, discharges and releases of toxic or hazardous substances or gases; deliberate sabotage and terrorist incidents; mechanical failures; unscheduled plant downtime; labor difficulties and other risks. Some of these hazards can cause bodily injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties and liabilities.
We maintain property, business interruption, casualty and liability insurance policies, but we are not fully insured against all potential hazards and risks incident to our business. If we were to incur significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. We are subject to various self-retentions, deductibles and limits under these insurance policies. The policies also contain exclusions and conditions that could have a material adverse impact on our ability to receive indemnification thereunder. Our policies are generally renewed annually. As a result of market conditions, our premiums, self-retentions and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. In addition, significantly increased costs could lead us to decide to reduce, or possibly eliminate, coverage. There can be no assurance that we will be able to buy and maintain insurance with adequate limits and reasonable pricing terms and conditions.
In April 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. Thirty-four cases, including the three cases scheduled to begin trial on October 12, 2015 and some of the ten cases scheduled to begin trial on February 1, 2016, were resolved pursuant to confidential settlements fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. These cases will be set for trial in the upcoming months at the discretion of the Court. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits. The increased focus on the risks associated with fertilizers as a result of the incident could impact the regulatory environment and requirements applicable to fertilizer manufacturing and storage facilities.
Cyber security risks could result in disruptions in business operations and adverse operating results.
We rely on information technology and computer control systems in many aspects of our business, including internal and external communications, the management of our accounting, financial and supply chain functions and plant operations. Business and supply chain disruptions, plant and utility outages and information technology system and network disruptions due to cyber attacks could seriously harm our operations and materially adversely affect our operating results. Cyber security risks include attacks on information technology and infrastructure by hackers, damage or loss of information due to viruses, the unintended disclosure of confidential information, the misuse or loss of control over computer control systems, and breaches due to employee error. Our exposure to cyber security risks includes exposure through third parties on whose systems we place significant reliance for the conduct of our business. We have implemented security procedures and measures in order to protect our systems and information from being vulnerable to cyber attacks. We believe these measures and procedures are appropriate. However, we may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving

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types of cyber attacks. Compromises to our information and control systems could have severe financial and other business implications. 
Adverse weather conditions may decrease demand for our fertilizer products, increase the cost of natural gas or materially disrupt our operations.
Weather conditions that delay or disrupt field work during the planting and growing seasons may cause agricultural customers to use different forms of nitrogen fertilizer, which may adversely affect demand for the forms that we sell or may impede farmers from applying our fertilizers until the following growing season, resulting in lower demand for our products.
Adverse weather conditions following harvest may delay or eliminate opportunities to apply fertilizer in the fall. Weather can also have an adverse effect on crop yields, which could lower the income of growers and impair their ability to purchase fertilizer from our customers. Our quarterly financial results can vary significantly from one year to the next due to weather-related shifts in planting schedules and purchasing patterns.
Weather conditions or, in certain cases, weather forecasts, also can affect the price of natural gas, the principal raw material used to make our nitrogen fertilizer products. Colder than normal winters and warmer than normal summers increase the demand for natural gas for power generation and for residential and industrial use, which can increase the cost and/or decrease the availability of natural gas. In addition, adverse weather events such as very low temperatures leading to well freeze-offs or hurricanes affecting the Gulf of Mexico coastal states can impact the supply of natural gas and cause prices to rise.
We may not be able to complete our capacity expansion projects on schedule as planned, on budget or at all due to a number of factors, many of which are beyond our control.
We are constructing new ammonia and urea/UAN plants at our complex in Donaldsonville, Louisiana, and new ammonia and urea plants at our complex in Port Neal, Iowa. A portion of these multi-billion dollar projects was completed in late 2015 and the remaining projects are scheduled for completion at various times in 2016.
The design, development, construction and start-up of the new plants are subject to a number of risks, any of which could prevent us from completing the projects on schedule as planned and on budget or at all, including cost overruns, performance of third parties, the inability to obtain necessary permits or to obtain such permits without undue delay, inability to comply with permit terms and conditions, adverse weather, defects in materials and workmanship, labor and raw material shortages, transportation constraints, engineering and construction change orders, errors in the design, construction or start-up, and other unforeseen difficulties.
The Donaldsonville and Port Neal capacity expansion projects are dependent on the availability and performance of the engineering firms, construction firms, equipment suppliers, transportation providers and other vendors necessary to design and build the new units on a timely basis and on acceptable economic terms. If any of the third parties fails to perform as we expect, our ability to meet our expansion goals would be affected.
Our expansion plans may also result in other unanticipated adverse consequences, such as the diversion of management's attention from our existing plants and businesses and other opportunities.
We may not be successful in the expansion of our business.
We routinely consider possible expansions of our business, both within the United States and elsewhere. Major investments in our business, including as a result of acquisitions, partnerships, joint ventures, business combination transactions or other major investments require significant managerial resources, the diversion of which from our other activities may impair the operation of our business. We may be unable to identify or successfully compete for certain acquisition targets, which may hinder or prevent us from acquiring a target or completing other transactions. The risks of any expansion of our business through investments, acquisitions, partnerships, joint ventures or business combination transactions are increased due to the significant capital and other resources that we may have to commit to any such expansion, which may not be recoverable if the expansion initiative to which they were devoted is ultimately not implemented. As a result of these and other factors, including general economic risk, we may not be able to realize our projected returns from any future acquisitions, partnerships, joint ventures, business combination transactions or other major investments. Among the risks associated with the pursuit and consummation of acquisitions, partnerships, joint ventures or other major investments or business combination transactions are those involving:
difficulties in integrating the parties' operations, systems, technologies, products and personnel;
incurrence of significant transaction-related expenses;
potential integration or restructuring costs;

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potential impairment charges related to the goodwill, intangible assets or other assets to which any such transaction relates, in the event that the economic benefits of such transaction prove to be less than anticipated;
other unanticipated costs associated with such transactions;
our ability to achieve operating and financial efficiencies, synergies and cost savings;
our ability to obtain the desired financial or strategic benefits from any such transaction;
the parties’ ability to retain key business relationships, including relationships with employees, customers, partners and suppliers;
potential loss of key personnel;
entry into markets or involvement with products with which we have limited current or prior experience or in which competitors may have stronger positions;
assumption of contingent liabilities, including litigation;
exposure to unanticipated liabilities;
differences in the parties' internal control environments, which may require significant time and resources to resolve in conformity with applicable legal and accounting standards;
increased scope, geographic diversity and complexity of our operations;
the tax effects of any such transaction; and
the potential for costly and time-consuming litigation, including stockholder lawsuits.

International acquisitions, partnerships, joint ventures, business combination or investments and other international expansions of our business involve additional risks and uncertainties, including:

the impact of particular economic, tax, currency, political, legal and regulatory risks associated with specific countries;
challenges caused by distance and by language and cultural differences;
difficulties and costs of complying with a wide variety of complex laws, treaties and regulations;
unexpected changes in regulatory environments;
political and economic instability, including the possibility for civil unrest;
nationalization of properties by foreign governments;
tax rates that may exceed those in the United States, and earnings that may be subject to withholding requirements;
the imposition of tariffs, exchange controls or other restrictions; and
the impact of currency exchange rate fluctuations.

If we finance acquisitions, partnerships, joint ventures, business combination transactions or other major investments by issuing equity or convertible or other debt securities or loans, our existing stockholders may be diluted or we could face constraints under the terms of, and as a result of the repayment and debt-service obligations under, the additional indebtedness. A business combination transaction between us and another company could result in our stockholders receiving cash or shares of another entity on terms that such stockholders may not consider desirable. Moreover, the regulatory approvals associated with a business combination may result in divestitures or other changes to our business, the effects of which are difficult to predict.
We are subject to numerous environmental, health and safety laws, regulations and permitting requirements, as well as potential environmental liabilities, which may require us to make substantial expenditures.
We are subject to numerous environmental, health and safety laws and regulations in the United States, Canada, the United Kingdom and the Republic of Trinidad and Tobago, including laws and regulations relating to the generation and handling of hazardous substances and wastes; the cleanup of hazardous substance releases; the discharge of regulated substances to air or water; and the demolition of existing plant sites upon permanent closure. In the United States, these laws include the Clean Air Act, the Clean Water Act, the RCRA, the CERCLA, the TSCA and various other federal, state and local laws.
As a fertilizer company working with chemicals and other hazardous substances, our business is inherently subject to spills, discharges or other releases of hazardous substances into the environment. Certain environmental laws, including CERCLA, impose joint and several liability, without regard to fault, for cleanup costs on persons who have disposed of or released hazardous substances into the environment. Given the nature of our business, we have incurred, are incurring currently, and are likely to incur periodically in the future, liabilities under CERCLA and other environmental cleanup laws at our current facilities or facilities previously owned by us or other acquired businesses, adjacent or nearby third-party facilities or offsite disposal locations. The costs associated with future cleanup activities that we may be required to conduct or finance may be

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material. Additionally, we may become liable to third parties for damages, including personal injury and property damage, resulting from the disposal or release of hazardous substances into the environment.
Violations of environmental, health and safety laws can result in substantial penalties, court orders to install pollution-control equipment, civil and criminal sanctions, permit revocations and facility shutdowns. Environmental, health and safety laws change rapidly and have tended to become more stringent over time. As a result, we have not always been and may not always be in compliance with all environmental, health and safety laws and regulations. We may be subject to more stringent enforcement of existing or new environmental, health and safety laws in the future. Additionally, future environmental, health and safety laws and regulations or reinterpretation of current laws and regulations may require us to make substantial expenditures. We sell, among other products, DEF, which is subject to EPA emissions standards that may become more stringent in the future. Our costs to comply with, or any liabilities under, these laws and regulations could have a material adverse effect on our business, financial condition, results of operations and cash flows.
From time to time, our production of anhydrous ammonia has resulted in accidental releases that have temporarily disrupted our manufacturing operations and resulted in liability for administrative penalties and claims for personal injury. To date, our costs to resolve these liabilities have not been material. However, we could incur significant costs if our liability coverage is not sufficient to pay for all or a large part of any judgments against us, or if our insurance carrier refuses coverage for these losses.
We hold numerous environmental and other governmental permits and approvals authorizing operations at each of our facilities. Expansion or modification of our operations is predicated upon securing necessary environmental or other permits or approvals. A decision by a government agency to deny or delay issuing a new or renewed regulatory material permit or approval, or to revoke or substantially modify an existing permit or approval, or a determination that we have violated a law or permit as a result of a governmental inspection of our facilities could have a material adverse effect on our ability to continue operations at our facilities and on our business, financial condition, results of operations and cash flows. On October 1, 2015, the EPA released a final regulation lowering the national ambient air quality standard for ozone. This action is expected to result in additional areas of the country being classified as being in nonattainment with the ozone standard and subject to more stringent permitting requirements, which in turn could make it much more difficult and expensive to obtain permits to construct new facilities or expand our existing operations.
Future regulatory restrictions on greenhouse gas emissions in the jurisdictions in which we operate could materially adversely affect our business, financial condition, results of operations and cash flows.
We are subject to GHG regulations in the United Kingdom, Canada and the United States. In the United States, our existing facilities currently are only subject to GHG emissions reporting obligations, although our new and modified facilities are likely to be subject to GHG emissions standards included in their air permits. Our facilities in the United Kingdom are subject to regulatory emissions trading systems, which generally require us to hold or obtain emissions allowances to offset GHG emissions from those aspects of our operations that are subject to regulation under this program. Our facility in Alberta, Canada is subject to a provincial regulation requiring reductions in the facility's net emissions intensity, which can be met by facility improvements, the purchase of emissions offsets or performance credits, or contributions to a non-profit climate change fund established by Alberta. Alberta has recently announced that it is replacing its current approach with respect to carbon by introducing a carbon tax that applies across all sectors. The carbon tax will be set at $20 per ton (Canadian dollars) effective January 1, 2017, rise to $30 per ton (Canadian dollars) effective January 1, 2018 and increase with the rate of inflation thereafter. In April 2015, the province of Ontario, Canada, announced that it intends to implement a GHG cap and trade program. In November 2015, Ontario published a notice seeking comments on the design of its cap and trade system, which notice indicated that Ontario intended to commence operation of the cap and trade program effective January 1, 2017. There are substantial uncertainties as to the nature, stringency and timing of any future GHG regulations. More stringent GHG limitations, if they are enacted, are likely to have a significant impact on us, because our production facilities emit GHGs such as carbon dioxide and nitrous oxide and because natural gas, a fossil fuel, is a primary raw material used in our nitrogen production process. Regulation of GHGs may require us to make changes in our operating activities that would increase our operating costs, reduce our efficiency, limit our output, require us to make capital improvements to our facilities, increase our costs for or limit the availability of energy, raw materials or transportation, or otherwise materially adversely affect our business, financial condition, results of operations and cash flows. In addition, to the extent that GHG restrictions are not imposed in countries where our competitors operate or are less stringent than regulations that may be imposed in the United States, Canada or the United Kingdom, our competitors may have cost or other competitive advantages over us.

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Our operating results fluctuate due to seasonality. Our inability to predict future seasonal fertilizer demand accurately could result in our having excess inventory, potentially at costs in excess of market value, or product shortages.
The fertilizer business is seasonal. The degree of seasonality of our business can change significantly from year to year due to conditions in the agricultural industry and other factors. The strongest demand for our products occurs during the spring planting season, with a second period of strong demand following the fall harvest. We and our customers generally build inventories during the low demand periods of the year to ensure timely product availability during the peak sales seasons. Seasonality is greatest for ammonia due to the short application season and the limited ability of our customers and their customers to store significant quantities of this product. The seasonality of fertilizer demand results in our sales volumes and net sales being the highest during the spring and our working capital requirements being the highest just prior to the start of the spring planting season.
If seasonal demand is less than we expect, we may be left with excess inventory that will have to be stored (in which case our results of operations will be negatively affected by any related increased storage costs) or liquidated (in which case the selling price may be below our production, procurement and storage costs). The risks associated with excess inventory and product shortages are exacerbated by the volatility of natural gas and nitrogen fertilizer prices and the relatively brief periods during which farmers can apply nitrogen fertilizers. If prices for our products rapidly decrease, we may be subject to inventory write-downs, adversely affecting our operating results. If seasonal demand is greater than we expect, we may experience product shortages, and customers of ours may turn to our competitors for products that they would otherwise have purchased from us.
A change in the volume of products that our customers purchase on a forward basis, or the percentage of our sales volume that is sold to our customers on a forward basis, could increase our exposure to fluctuations in our profit margins and materially adversely affect our business, financial condition, results of operations and cash flows.
We offer our customers the opportunity to purchase products from us on a forward basis at prices and delivery dates we propose. Under our forward sales programs, customers generally make an initial cash down payment at the time of order and pay the remaining portion of the contract sales value in advance of the shipment date. Forward sales improve our liquidity due to the cash payments received from customers in advance of shipment of the product and allow us to improve our production scheduling and planning and the utilization of our manufacturing and distribution assets.
Any cash payments received in advance from customers in connection with forward sales are reflected on our consolidated balance sheets as a current liability until the related orders are shipped, which can take up to several months.
We believe the ability to purchase products on a forward basis is most appealing to our customers during periods of generally increasing prices for nitrogen fertilizers. Our customers may be less willing or even unwilling to purchase products on a forward basis during periods of generally decreasing or stable prices or during periods of relatively high fertilizer prices due to the expectation of lower prices in the future or limited capital resources. In periods of rising fertilizer prices, selling our nitrogen fertilizers on a forward basis may result in lower profit margins than if we had not sold fertilizer on a forward basis. Conversely, in periods of declining fertilizer prices, selling our nitrogen fertilizers on a forward basis may result in higher profit margins than if we had not sold fertilizer on a forward basis. In addition, fixing the selling prices of our products, often months in advance of their ultimate delivery to customers, typically causes our reported selling prices and margins to differ from spot market prices and margins available at the time of shipment.
Our business is subject to risks involving derivatives, including the risk that our hedging activities might not prevent losses.
We often utilize natural gas derivatives to hedge our financial exposure to the price volatility of natural gas, the principal raw material used in the production of nitrogen-based fertilizers. We have used fixed-price, physical purchase and sales contracts, futures, financial swaps and option contracts traded in the over-the-counter markets or on exchanges. In order to manage our exposure to changes in foreign currency exchange rates, from time to time, we may use foreign currency derivatives, primarily forward exchange contracts.
Our use of derivatives 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 that do not qualify for, or to which we do not apply, hedge accounting. To the extent that our derivative positions lose value, we may be required to post collateral with our counterparties, adversely affecting our liquidity.
Hedging arrangements are imperfect and unhedged risks will always exist. In addition, our hedging activities may themselves give rise to various risks that could adversely affect us. For example, we are exposed to counterparty credit risk when our derivatives are in a net asset position. The counterparties to our derivatives are multi-national commercial banks,

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major financial institutions or large energy companies. We monitor the derivative portfolio and credit quality of our counterparties and adjust the level of activity we conduct with individual counterparties as necessary. We also manage the credit risk through the use of multiple counterparties, credit limits, credit monitoring procedures, cash collateral requirements and master netting arrangements. However, our liquidity could be negatively impacted by a counterparty default on settlement of one or more of our derivative financial instruments.
We are reliant on a limited number of key facilities.
Our nitrogen fertilizer operations are concentrated in nine separate nitrogen complexes, the largest of which is the Donaldsonville complex, which currently represents approximately 35% of our ammonia production capacity and will represent approximately 40% of our ammonia production capacity after the Donaldsonville and Port Neal capacity expansion projects are fully operational. The suspension of operations at any of these complexes could adversely affect our ability to produce our products and fulfill our commitments, and could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, our Donaldsonville complex is located in an area of the United States that experiences a relatively high level of hurricane activity and our other complexes are located in areas that experience severe weather. Such storms, depending on their severity and location, have the potential not only to damage our facilities and disrupt our operations, but also to adversely affect the shipping and distribution of our products and the supply and price of natural gas in the respective regions. Moreover, our facilities may be subject to failure of equipment that may be difficult to replace and could result in operational disruptions.
We are exposed to risks associated with our joint venture.
As of December 31, 2015, our remaining joint venture is a 50% ownership interest in PLNL (which owns a facility in the Republic of Trinidad and Tobago). Our joint venture partner shares a measure of control over the operations of our PLNL joint venture. As a result, our investment in our PLNL joint venture involves risks that are different from the risks involved in owning facilities and operations independently. These risks include the possibility that our PLNL joint venture or our partner: have economic or business interests or goals that are or become inconsistent with our economic or business interests or goals; are in a position to take action contrary to (or have veto rights over) our instructions, requests, policies or objectives; subject our PLNL joint venture to liabilities exceeding those contemplated; take actions that reduce our return on investment; or take actions that harm our reputation or restrict our ability to run our business.
In addition, we may become involved in disputes with our PLNL joint venture partner, which could lead to impasses or situations that could harm the joint venture, which could reduce our revenues or increase our costs.
Our PLNL joint venture operates an ammonia plant that relies on natural gas supplied by The National Gas Company of Trinidad and Tobago Limited (NGC). The joint venture has experienced natural gas curtailments due to major maintenance activities being conducted at upstream natural gas facilities and decreased gas exploration and development activity in Trinidad. These curtailments have continued into 2015 and we are unable to predict when the curtailments will cease to occur. In the fourth quarter of 2015, we recorded a $61.9 million impairment of our equity method investment in PLNL as we determined the carrying value of our equity method investment in PLNL exceeded its fair value, primarily due to the ongoing natural gas curtailments and the expectation that these curtailments will continue into the future. In addition, failure to secure a long-term gas supply from NGC on a cost effective basis could adversely affect our ability to produce ammonia at the joint venture which could result in further impairment to the value of the joint venture, and could have a material adverse effect on our results of operations.
Acts of terrorism and regulations to combat terrorism could negatively affect our business.
Like other companies with major industrial facilities, we may be targets of terrorist activities. Many of our plants and facilities store significant quantities of ammonia and other materials that can be dangerous if mishandled. Any damage to infrastructure facilities, such as electric generation, transmission and distribution facilities, or injury to employees, who could be direct targets or indirect casualties of an act of terrorism, may affect our operations. Any disruption of our ability to produce or distribute our products could result in a significant decrease in revenues and significant additional costs to replace, repair or insure our assets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Due to concerns related to terrorism or the potential use of certain fertilizers as explosives, we are subject to various security laws and regulations. In the United States, these security laws include the Maritime Transportation Security Act of 2002 and the Chemical Facilities Anti-Terrorism Standards regulation. In addition, President Obama issued Executive Order 13650 Improving Chemical Facility Safety and Security to improve chemical facility safety in coordination with owners and operators. Governmental entities could implement new or impose more stringent regulations affecting the security of our plants, terminals and warehouses or the transportation and use of fertilizers. These regulations could result in higher operating costs or

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limitations on the sale of our products and could result in significant unanticipated costs, lower revenues and reduced profit margins. We manufacture and sell certain nitrogen fertilizers that can be used as explosives. It is possible that governmental entities in the United States or elsewhere could impose additional limitations on the use, sale or distribution of nitrogen fertilizers, thereby limiting our ability to manufacture or sell those products, or that illicit use of our products could result in liability for us.
We are subject to risks associated with international operations.
Our international business operations are subject to numerous risks and uncertainties, including difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations; unexpected changes in regulatory environments; currency fluctuations; tax rates that may exceed those in the United States; earnings that may be subject to withholding requirements; and the imposition of tariffs, exchange controls or other restrictions.
Our principal reporting currency is the U.S. dollar and our business operations and investments outside the United States increase our risk related to fluctuations in foreign currency exchange rates. The main currencies to which we are exposed, besides the U.S. dollar, are the Canadian dollar, British pound and the Euro. We may selectively reduce some foreign currency exchange rate risk by, among other things, requiring contracted purchases of our products to be settled in, or indexed to, the U.S. dollar or a currency freely convertible into U.S. dollars, or hedging through foreign currency derivatives. These efforts, however, may not be effective and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are subject to anti-corruption laws and regulations and economic sanctions programs in various jurisdictions, including the U.S. Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act of 2010, and economic sanctions programs administered by the United Nations, the European Union and the Office of Foreign Assets Control of the U.S. Department of the Treasury, and regulations set forth under the Comprehensive Iran Accountability Divestment Act. As a result of doing business internationally, we are exposed to a risk of violating anti-corruption laws and sanctions regulations applicable in those countries where we, our partners or agents operate. Violations of anti-corruption and sanctions laws and regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal fines and imprisonment. The violation of applicable laws by our employees, consultants, agents or partners could subject us to penalties and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are subject to antitrust and competition laws in various countries throughout the world. We cannot predict how these laws or their interpretation, administration and enforcement will change over time. Changes in antitrust laws globally, or in their interpretation, administration or enforcement, may limit our existing or future operations and growth.
Our investments in securities are subject to risks that may result in losses.
We generally invest cash and cash equivalents from our operations in what we believe to be relatively short-term, highly liquid and high credit quality instruments, including notes and bonds issued by governmental entities or corporations and money market funds. Securities issued by governmental entities include those issued directly by the United States government, those issued by state, local or other governmental entities, and those guaranteed by entities affiliated with governmental entities. Our investments are subject to fluctuations in both market value and yield based upon changes in market conditions, including interest rates, liquidity, general economic and credit market conditions and conditions specific to the issuers.
Due to the risks of investments, we may not achieve expected returns or may realize losses on our investments, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Deterioration of global market and economic conditions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
A slowdown of, or persistent weakness in, economic activity caused by a deterioration of global market and economic conditions could adversely affect our business in the following ways, among others: conditions in the credit markets could affect the ability of our customers and their customers to obtain sufficient credit to support their operations; the failure of our customers to fulfill their purchase obligations could result in increases in bad debts and impact our working capital; and the failure of certain key suppliers could increase our exposure to disruptions in supply or to financial losses. We also may experience declining demand and falling prices for some of our products due to our customers' reluctance to replenish inventories. The overall impact of a global economic downturn on us is difficult to predict, and our business could be materially adversely impacted.

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In addition, conditions in the international market for nitrogen fertilizers significantly influence our operating results. The international market for fertilizers is influenced by such factors as currency exchange rates, including the relative value of the U.S. dollar and its impact upon the cost of importing of nitrogen fertilizers into the United States, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets and the laws and policies of the markets in which we operate that affect foreign trade and investment.
We have a material amount of indebtedness, expect to have a substantial amount of indebtedness on a consolidated basis following consummation of the proposed combination with the ENA Business of OCI, and may need to incur additional indebtedness or need to refinance existing indebtedness, in the future, which may adversely affect our business.
As of December 31, 2015, we had approximately $5.6 billion of total funded indebtedness, consisting primarily of senior notes with varying maturity dates between 2018 and 2044. We had excess borrowing capacity under our existing revolving credit agreement of $1,995.1 million. In addition, upon the consummation of the proposed combination with the ENA Business of OCI, we expect to have a substantial amount of indebtedness on a consolidated basis. We expect that this indebtedness will include our existing indebtedness, approximately $1.2 billion of existing secured project finance indebtedness relating to the ENA Business, and indebtedness under any of the existing OCI convertible bonds assumed by us in connection with the combination. In addition, to fund the cash requirements in connection with the consummation of the combination, we expect that we or our subsidiaries will use either cash on hand or a combination of cash on hand and cash proceeds from external sources (whether using alternative financing arranged prior to the closing under the Combination Agreement or, if such financing is not arranged, a portion of the financing under our bridge credit agreement) of approximately $1.0 billion. In addition, upon the consummation of the combination, our bridge credit agreement provides for borrowings of up to $1.3 billion for general corporate purposes and our existing revolving credit agreement provides for up to $2.0 billion of borrowings for general corporate purposes.
Our substantial debt service obligations could have an adverse impact on our earnings and cash flows. Our substantial indebtedness could, as a result of our debt service obligation or through the operation of the financial and other restrictive covenants to which we are subject under the agreements and instruments governing that indebtedness and otherwise, have important consequences. For example, it could:
make it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions because any related decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled debt payments;
cause us to be less able to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;
cause us to use a portion of our cash flow from operations for debt service, reducing the availability of cash to fund working capital and capital expenditures, research and development and other business activities;
cause us to be more vulnerable to general adverse economic and industry conditions;
expose us to the risk of increased interest rates because certain of our borrowings, including borrowings under our credit agreements, could be at variable rates of interest;
make us more leveraged than some of our competitors, which could place us at a competitive disadvantage;
limit our ability to borrow additional monies in the future to fund working capital, capital expenditures and other general corporate purposes; and
result in a downgrade in the credit rating of our indebtedness which could increase the cost of further borrowings.
We expect to consider options to refinance our outstanding indebtedness from time to time. Our ability to obtain any financing, whether through the issuance of new debt securities or otherwise, and the terms of any such financing are dependent on, among other things, our financial condition, financial market conditions within our industry and generally, credit ratings and numerous other factors, including factors beyond our control. Consequently, in the event that we need to access the credit markets, including to refinance our debt, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable timeframe, if at all. An inability to obtain financing with acceptable terms when needed could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We expect that the terms of our indebtedness will allow us to incur significant additional debt in the future. If we incur additional indebtedness, the risks that we face as a result of our leverage could intensify. If our financial condition or operating results deteriorate, our relations with our creditors, including the holders of our outstanding debt securities, the lenders under our revolving credit agreement and our bridge credit agreement and our suppliers, may be materially and adversely affected.

24


CF INDUSTRIES HOLDINGS, INC.

FORWARD LOOKING STATEMENTS
From time to time, in this Annual Report on Form 10-K as well as in other written reports and verbal 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 future prospects, developments and business strategies. We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," 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" and elsewhere in this Form 10-K. Such factors include, among others:
the risk that changes to the tax laws or relevant facts may jeopardize or delay the combination or cause the parties to abandon the combination;
the risk that the governmental or regulatory actions could delay the combination or result in the imposition of conditions that could reduce the anticipated benefits from the combination or cause the parties to abandon the combination;
risks from the business uncertainties and contractual restrictions we are subject to while the combination is pending;
risks associated with the failure to complete the combination, or significant delays in completing the combination;
our ability to attract, motivate and retain executives and other employees in light of the combination;
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;
the volatility of natural gas prices in North America and Europe;
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;
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;
risks associated with cyber security;
weather conditions;
our ability to complete our production capacity expansion projects on schedule as planned, on budget or at all;

25


CF INDUSTRIES HOLDINGS, INC.

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 GHG 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 our PLNL joint venture;
acts of terrorism and regulations to combat terrorism;
risks associated with international operations;
losses on our investments in securities;
deterioration of global market and economic conditions; and
our ability to manage our indebtedness.

26


CF INDUSTRIES HOLDINGS, INC.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.    PROPERTIES.
Information regarding our facilities and properties is included in Part I, Item 1. Business—Reportable Segments and Part I, Item 1. Business—Storage Facilities and Other Properties.
ITEM 3.    LEGAL PROCEEDINGS.
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. Thirty-four cases, including the three cases scheduled to begin trial on October 12, 2015 and some of the ten cases scheduled to begin trial on February 1, 2016, were resolved pursuant to confidential settlements fully funded by insurance. The remaining cases are in various stages of discovery and pre-trial proceedings. These cases will be set for trial in the upcoming months at the discretion of the Court. We believe we have strong legal and factual defenses and intend to continue defending the CF Entities vigorously in the pending lawsuits.
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
Florida Environmental Matters
On March 17, 2014, we completed the sale of our phosphate mining and manufacturing business, which was located in Florida, to Mosaic. Pursuant to the terms of the definitive agreement executed in October 2013 among CF Industries Holdings, Inc., CF Industries, Inc. and Mosaic, Mosaic has assumed the following environmental matters and we have agreed to indemnify Mosaic with respect to losses arising out of the matters below, subject to a maximum indemnification cap and the other terms of the definitive agreement.
Clean Air Act Notice of Violation
We received a Notice of Violation (NOV) from the Environmental Protection Agency (EPA) by letter dated June 16, 2010, alleging that we violated the Prevention of Significant Deterioration (PSD) Clean Air Act regulations relating to certain projects undertaken at the former Plant City, Florida facility's sulfuric acid plants. This NOV further alleges that the actions that are the basis for the alleged PSD violations also resulted in violations of Title V air operating permit regulations. Finally, the NOV alleges that we failed to comply with certain compliance dates established by hazardous air pollutant regulations for phosphoric acid manufacturing plants and phosphate fertilizer production plants. We had several meetings with the EPA with

27


CF INDUSTRIES HOLDINGS, INC.

respect to this matter prior to our sale of the phosphate mining and manufacturing business in March 2014. We do not know at this time if this matter will be settled prior to initiation of formal legal action.
We cannot estimate the potential penalties, fines or other expenditures, if any, that may result from the Clean Air Act NOV and, therefore, we cannot determine if the ultimate outcome of this matter will have a material impact on our consolidated financial position, results of operations or cash flows.
EPCRA/CERCLA Notice of Violation
By letter dated July 6, 2010, the EPA issued a NOV to us alleging violations of Section 313 of the Emergency Planning and Community Right-to-Know Act (EPCRA) in connection with the former Plant City facility. EPCRA requires annual reports to be submitted with respect to the use of certain toxic chemicals. The NOV also included an allegation that we violated Section 304 of EPCRA and Section 103 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) by failing to file a timely notification relating to the release of hydrogen fluoride above applicable reportable quantities. We do not know at this time if this matter will be settled prior to initiation of formal legal action.
We do not expect that penalties or fines, if any, that may arise out of the EPCRA/CERCLA matter will have a material impact on our consolidated financial position, results of operations or cash flows.
Other
CERCLA/Remediation Matters
For information on pending proceedings relating to environmental remediation matters, see Item 1. Business—Environmental, Health and Safety and Note 20—Contingencies.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.



28


CF INDUSTRIES HOLDINGS, INC.

PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the New York Stock Exchange, Inc. (NYSE) under the symbol "CF". Quarterly high and low sales prices, as reported by the NYSE, are provided below:
 
Sales Prices
 
Dividends
per Share
2015
High
 
Low
 
First Quarter
$
62.89

 
$
54.60

 
$
0.30

Second Quarter
65.69

 
55.60

 
0.30

Third Quarter
70.32

 
43.88

 
0.30

Fourth Quarter
54.27

 
39.64

 
0.30


 
Sales Prices
 
Dividends
per Share
2014
High
 
Low
 
First Quarter
$
53.55

 
$
44.02

 
$
0.20

Second Quarter
53.39

 
46.48

 
0.20

Third Quarter
56.07

 
47.71

 
0.30

Fourth Quarter
58.06

 
47.89

 
0.30

The per share amounts above have been retroactively restated for all prior periods presented to reflect the five-for-one split of the Company’s common stock as discussed in Note 1—Background and Basis of Presentation in the notes to the consolidated financial statements included in Item 8 of this report.
As of February 18, 2016, there were 794 stockholders of record.
The following table sets forth stock repurchases for each of the three months of the quarter ended December 31, 2015.
 
Issuer Purchases of Equity Securities
Period
Total Number
of Shares
(or Units)
Purchased
 
Average
Price Paid
per Share
(or Unit)
 
Cumulative 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)
(1)
October 1, 2015 - October 31, 2015

 
$

  

 
$
100,000

November 1, 2015 - November 30, 2015

 

 

 
100,000

December 1, 2015 - December 31, 2015

 

 

 
100,000

Total

 

 
 

 
 

_______________________________________________________________________________

(1) 
Represents the authorized share repurchase program announced on August 6, 2014 that allows management to repurchase common stock for a total expenditure of up to $1.0 billion through December 31, 2016 (the 2014 Program). This program is discussed in Note 18—Stockholders' Equity, in the notes to the consolidated financial statements included in Item 8 of this report.




29


CF INDUSTRIES HOLDINGS, INC.

ITEM 6.    SELECTED FINANCIAL DATA.
The following selected historical financial data as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 have been derived from our audited consolidated financial statements and related notes included elsewhere in this document. The following selected historical financial data as of December 31, 2013, 2012 and 2011 and for the years ended December 31, 2012 and 2011 have been derived from our consolidated financial statements, which are not included in this document.
The selected historical financial data should be read in conjunction with the information contained in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.
 
Year ended December 31,
 
2015(1)
 
2014(2)
 
2013
 
2012
 
2011
 
(in millions, except per share amounts)
Statement of Operations Data:
 

 
 

 
 

 
 

 
 

Net sales
$
4,308.3

 
$
4,743.2

 
$
5,474.7

 
$
6,104.0

 
$
6,097.9

Cost of sales
2,761.2

 
2,964.7

 
2,954.5

 
2,990.7

 
3,202.3

Gross margin
1,547.1

 
1,778.5

 
2,520.2

 
3,113.3

 
2,895.6

Selling, general and administrative expenses
169.8

 
151.9

 
166.0

 
151.8

 
130.0

Transaction costs
56.9

 

 

 

 

Restructuring and integration costs

 

 

 

 
4.4

Other operating—net
92.3

 
53.3

 
(15.8
)
 
49.1

 
20.9

Total other operating costs and expenses
319.0

 
205.2

 
150.2

 
200.9

 
155.3

Gain on sale of phosphate business

 
750.1

 

 

 

Equity in earnings of operating affiliates
(35.0
)
 
43.1

 
41.7

 
47.0

 
50.2

Operating earnings
1,193.1

 
2,366.5

 
2,411.7

 
2,959.4

 
2,790.5

Interest expense (income)—net
131.6

 
177.3

 
147.5

 
131.0

 
145.5

Other non-operating—net
3.9

 
1.9

 
54.5

 
(1.1
)
 
(0.6
)
Earnings before income taxes and equity in earnings of non-operating affiliates
1,057.6

 
2,187.3

 
2,209.7

 
2,829.5

 
2,645.6

Income tax provision
395.8

 
773.0

 
686.5

 
964.2

 
926.5

Equity in earnings of non-operating affiliates—net of taxes
72.3

 
22.5

 
9.6

 
58.1

 
41.9

Net earnings
734.1

 
1,436.8

 
1,532.8

 
1,923.4

 
1,761.0

Less: Net earnings attributable to noncontrolling interest
34.2

 
46.5

 
68.2

 
74.7

 
221.8

Net earnings attributable to common stockholders
$
699.9

 
$
1,390.3

 
$
1,464.6

 
$
1,848.7

 
$
1,539.2

Cash dividends declared per common share(3)
$
1.20

 
$
1.00

 
$
0.44

 
$
0.32

 
$
0.20

Share and per share data:
 

 
 

 
 

 
 

 
 

Net earnings per share attributable to common stockholders(3):
 

 
 

 
 

 
 

 
 

Basic
$
2.97

 
$
5.43

 
$
4.97

 
$
5.79

 
$
4.44

Diluted
2.96

 
5.42

 
4.95

 
5.72

 
4.40

Weighted-average common shares outstanding(3):
 

 
 

 
 

 
 

 
 

Basic
235.3

 
255.9

 
294.4

 
319.3

 
347.0

Diluted
236.1

 
256.7

 
296.0

 
323.3

 
350.2

Other Financial Data:
 

 
 

 
 

 
 

 
 

Depreciation, depletion and amortization
$
479.6

 
$
392.5

 
$
410.6

 
$
419.8

 
$
416.2

Capital expenditures
2,469.3

 
1,808.5

 
823.8

 
523.5

 
247.2



30


CF INDUSTRIES HOLDINGS, INC.

 
 
December 31,
 
2015(1)
 
2014(2)
 
2013
 
2012
 
2011
 
(in millions)
Balance Sheet Data:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
286.0

 
$
1,996.6

 
$
1,710.8

 
$
2,274.9

 
$
1,207.0

Total assets(4)
12,738.9

 
11,254.2

 
10,618.1

 
10,157.4

 
8,974.5

Customer advances
161.5

 
325.4

 
120.6

 
380.7

 
257.2

Total debt
5,592.7

 
4,592.5

 
3,098.1

 
1,605.0

 
1,617.8

Total equity
4,387.2

 
4,572.5

 
5,438.4

 
6,282.2

 
4,932.9

_______________________________________________________________________________
(1) 
On July 31, 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK not previously owned by us. CF Fertilisers UK is now wholly owned by us. The financial results of CF Fertilisers UK have been consolidated within our financial results since July 31, 2015. Prior to July 31, 2015, our initial 50% equity interest in CF Fertilisers UK was accounted for as an equity method investment and the financial results of this investment were included in equity in earnings of non-operating affiliates—net of taxes. See Note 4—Acquisitions and Divestitures, to the Consolidated Financial Statements for additional information.
(2) 
On March 17, 2014, we completed the sale of our phosphate mining and manufacturing business. The selected historical financial data above includes the results of the phosphate business through March 17, 2014, plus the continuing sales of the phosphate inventory in the distribution network after March 17, 2014. The remaining phosphate inventory was sold in the second quarter of 2014. The results of the phosphate mining and manufacturing business are not reported as discontinued operations in our consolidated statements of operations, as further described in Note 4—Acquisitions and Divestitures, to the Consolidated Financial Statements.
(3) 
Share and per share amounts have been retroactively restated for all prior periods presented to reflect the five-for-one split of the Company’s common stock effected in the form of a stock dividend that was distributed on June 17, 2015.
(4) 
Deferred income taxes included in total assets have been retroactively restated for all prior periods presented to reflect our adoption during fiscal year 2015 of Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes (an update to Topic 740, Income Taxes), which requires the classification of all deferred tax assets and liabilities as noncurrent. See Note 3—New Accounting Standards and Note 10—Income Taxes, to the Consolidated Financial Statements for additional information.


31


CF INDUSTRIES HOLDINGS, INC.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
    You should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes included in Item 8. Financial Statements and Supplementary Data. 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 consolidated financial statements that are found in the following section: Item 8. Financial Statements and Supplementary Data, Notes to Consolidated 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
Strategic Initiatives
Financial Executive Summary
Key Industry Factors
Factors Affecting Our Results
Results of Consolidated Operations
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Operating Results by Business Segment
Liquidity and Capital Resources
Off-Balance Sheet Arrangements
Critical Accounting Policies and Estimates
Recent Accounting Pronouncements
Discussion of Seasonality Impacts on Operations
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 core market 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; Yazoo City, Mississippi; and Billingham, United Kingdom manufacturing facilities.
Prior to March 17, 2014, we also manufactured and distributed phosphate fertilizer products. Our principal phosphate products were diammonium phosphate (DAP) and monoammonium phosphate (MAP). On March 17, 2014, we completed the sale of our phosphate mining and manufacturing business, which was located in Florida, to The Mosaic Company (Mosaic) for approximately $1.4 billion in cash. See the section titled Items Affecting Comparability of Results for further information on this transaction and its impact.
Our principal assets include:
six North American nitrogen fertilizer manufacturing facilities located in: Donaldsonville, Louisiana (the largest nitrogen fertilizer complex in North America); Medicine Hat, Alberta (the largest nitrogen fertilizer complex in Canada); Port Neal, Iowa; Courtright, Ontario; Yazoo City, Mississippi; and Woodward, Oklahoma;
two United Kingdom nitrogen manufacturing complexes located in Ince and Billingham that produce AN, ammonia and NPKs;

32


CF INDUSTRIES HOLDINGS, INC.

a 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;
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.
In 2015, we entered into a number of strategic agreements and transactions as follows:
We acquired the remaining 50% equity interest in CF Fertilisers UK Group Limited (formerly known as GrowHow UK Group Limited) (CF Fertilisers UK) not previously owned by us on July 31, 2015 for total consideration of $570.4 million, and CF Fertilisers UK became wholly owned by us. This transaction added CF Fertilisers UK's nitrogen manufacturing complexes in Ince, United Kingdom and Billingham, United Kingdom to our consolidated manufacturing capacity. The impact of this acquisition is summarized below in the section titled Items Affecting Comparability of Results.
We sold our interests in KEYTRADE AG (Keytrade), a global fertilizer trading company headquartered near Zurich, Switzerland, to the other key principals of Keytrade.
We sold our 50% ownership interest in an ammonia storage joint venture in Houston, Texas.
We entered into a definitive agreement (as amended, the Combination Agreement) under which we will combine with the European, North American and global distribution businesses (collectively, the ENA Business) of OCI N.V. (OCI). The combination transaction includes OCI’s nitrogen production facility in Geleen, Netherlands; its nitrogen production facility under construction in Wever, Iowa; its approximately 79.88% equity interest in an ammonia and methanol complex in Beaumont, Texas; and its global distribution business and the assumption of approximately $2 billion in net debt. Under the terms of the Combination Agreement, CF Holdings will become a subsidiary of a new holding company (New CF) domiciled in the Netherlands. This transaction is expected to close in mid-2016, subject to the approval of shareholders of both CF Holdings and OCI, the receipt of certain regulatory approvals, and other closing conditions. See Strategic Initiatives—Agreement to Combine with Certain of OCI N.V.’s Businesses below, for further details on this transaction.
We entered into a strategic venture with CHS Inc. (CHS). The strategic venture commenced on February 1, 2016, at which time CHS purchased a minority equity interest in CF Industries Nitrogen, LLC (CFN), a subsidiary of CF Holdings, for $2.8 billion. CHS also began receiving deliveries from us pursuant to a supply agreement under which CHS has the right to purchase annually from us up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. CHS is entitled to semi-annual profit distributions from CFN as a result of its minority equity interest in CFN. See Strategic Initiatives—Strategic Venture with CHS below, for further details on this strategic venture.

33


CF INDUSTRIES HOLDINGS, INC.

Items Affecting Comparability of Results
CF Fertilisers UK Acquisition
On July 31, 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK not previously owned by us for total consideration of $570.4 million, and CF Fertilisers UK became a wholly-owned subsidiary. CF Fertilisers UK Limited (formerly known as GrowHow UK Limited), a wholly-owned subsidiary of CF Fertilisers UK, operates two nitrogen manufacturing complexes in the United Kingdom, in the cities of Ince and Billingham. We recorded a $94.4 million gain on the remeasurement to fair value of our initial 50% equity interest in CF Fertilisers UK that is included in equity in earnings of non-operating affiliates—net of taxes for the year ended December 31, 2015. This transaction increased our manufacturing capacity with the acquisition of CF Fertilisers UK nitrogen manufacturing complexes in Ince and Billingham, United Kingdom. The Ince complex is located in northwestern England and consists of an ammonia plant, three nitric acid plants, an AN plant and three NPK plants. The Billingham complex is located in the Teesside chemical area in northeastern England, and consists of an ammonia plant, three nitric acid plants, a carbon dioxide plant and an AN fertilizer plant. See Note 4—Acquisitions and Divestitures to our consolidated financial statements included in Item 8 of this report for additional information on the preliminary allocation of the total purchase price to the assets acquired and liabilities assumed in the CF Fertilisers UK acquisition on July 31, 2015.
The financial results of CF Fertilisers UK have been consolidated within our financial results since July 31, 2015. Prior to July 31, 2015, our initial 50% equity interest in CF Fertilisers UK was accounted for as an equity method investment, and the financial results of this investment were included in our consolidated statements of operations in equity in earnings of non-operating affiliates—net of taxes. The following table presents CF Fertilisers UK results since July 31, 2015, the date it became a consolidated subsidiary, which are included within our 2015 financial results.
 
CF Holdings Reportable Segments
 
 
CF Fertilisers UK
Ammonia
 
AN
 
Other
 
Consolidated
 
(in millions, except percentages)
Five months ended December 31, 2015
 

 
 
 
 

 
 

Net sales
$
38.4

 
$
117.0

 
$
53.0

 
$
208.4

Cost of sales
30.7

 
108.6

 
45.6

 
184.9

Gross margin
$
7.7

 
$
8.4

 
$
7.4

 
$
23.5

Gross margin percentage
20.1
%
 
7.2
%
 
14.0
%
 
11.3
%
New Segments
In the third quarter of 2015, we changed our reportable segment structure to separate AN from our Other segment as our AN products increased in significance as a result of the CF Fertilisers UK acquisition. Our new reportable segment structure reflects how our chief operating decision maker (CODM), as defined under U.S. generally accepted accounting principles (GAAP), assesses the performance of our reportable segments and makes decisions about resource allocation. Our reportable segments now consist of ammonia, granular urea, UAN, AN, Other, and phosphate. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Historical financial results have been restated to reflect the new reportable segment structure on a comparable basis.
A description of our reportable segments is included in the discussion of the operating results by business segment later in this discussion and analysis.
Five-for-One Common Stock Split
On May 15, 2015, we announced that our Board of Directors declared a five-for-one split of our common stock to be effected in the form of a stock dividend. On June 17, 2015, stockholders of record as of the close of business on June 1, 2015 (Record Date) received four additional shares of common stock for each share of common stock held on the Record Date. Shares reserved under the Company's equity and incentive plans were adjusted to reflect the stock split. All share and per share data has been retroactively restated to reflect the stock split, except for the number of authorized shares of common stock. Since the par value of the common stock remained at $0.01 per share, the recorded value for common stock has been retroactively restated to reflect the par value of total outstanding shares with a corresponding decrease to paid-in capital.

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CF INDUSTRIES HOLDINGS, INC.

Transaction Costs
As more fully described below in the section titled Strategic Initiatives, in 2015 we incurred $56.9 million of transaction costs attributable to various consulting and legal services associated primarily with executing the strategic agreements and preparing for the proposed combination with the ENA Business of OCI, our strategic venture with CHS and our acquisition of the remaining 50% equity interest in CF Fertilisers UK not previously owned by us.
Phosphate Business Disposition
On March 17, 2014, we sold our phosphate mining and manufacturing business and recognized pre-tax and after-tax gains on the sale of the phosphate business of $750.1 million and $462.8 million, respectively. Under the terms of the definitive transaction agreement, the accounts receivable and accounts payable pertaining to the phosphate mining and manufacturing business and certain phosphate inventory held in distribution facilities were not sold to Mosaic in the transaction and were settled in the ordinary course.
Upon selling the phosphate business, we began to supply Mosaic with ammonia produced by our PLNL joint venture. The contract to supply ammonia to Mosaic from our PLNL joint venture represents the continuation of a supply practice that previously existed between our former phosphate mining and manufacturing business and other operations of the Company. Prior to March 17, 2014, PLNL sold ammonia to us for use in the phosphate business and the cost was included in our production costs in our phosphate segment. Subsequent to the sale of the phosphate business, we now sell the PLNL-sourced ammonia to Mosaic. The revenue from these sales to Mosaic and the costs to purchase the ammonia from PLNL are now included in our ammonia segment. Our 50% share of the operating results of our PLNL joint venture continues to be included in our equity in earnings of operating affiliates in our consolidated statements of operations. Because of the significance of this continuing supply practice, in accordance with U.S. GAAP, the phosphate mining and manufacturing business is not reported as discontinued operations in our consolidated statements of operations.
The phosphate segment reflects the reported results of the phosphate business through March 17, 2014, plus the continuing sales of the phosphate inventory in the distribution network after March 17, 2014. The remaining phosphate inventory was sold in the second quarter of 2014; therefore, the phosphate segment does not have operating results subsequent to that quarter. However, the segment will continue to be included until the reporting of comparable period phosphate results ceases.
Impairment of our Investment in PLNL
In 2015, our equity in earnings of operating affiliates includes a $61.9 million impairment of our equity method investment in PLNL. In the fourth quarter of 2015, we determined the carrying value of our equity method investment in PLNL exceeded its fair value. This was primarily due to the ongoing natural gas curtailments impacting the results of operations of PLNL and the expectation that these curtailments will continue into the future. Our PLNL joint venture investment in the Republic of Trinidad and Tobago operates an ammonia plant that relies on natural gas supplied by The National Gas Company of Trinidad and Tobago Limited (NGC). The joint venture has experienced natural gas curtailments in 2015 and 2014 due to major maintenance activities being conducted at upstream natural gas facilities and decreased gas exploration and development activity in the Republic of Trinidad and Tobago. Commitments from NGC regarding the level of future availability and the related cost are not available. The future availability and cost of natural gas represents a significant assumption in the discounted cash flow models utilized for recoverability and impairment testing. No impairment was recognized in 2014 or 2013 related to this investment.
CFL Selling Price Modifications
Prior to April 30, 2013, CF Industries owned 49% of the voting common shares and 66% of the non-voting preferred shares of Canadian Fertilizers Limited (CFL), an Alberta, Canada based nitrogen fertilizer manufacturer and had the right to purchase 66% of the production of CFL. Also prior to April 30, 2013, Viterra, Inc. (Viterra) held 34% of the equity ownership of CFL and had the right to purchase up to the remaining 34% of CFL's production. Both CF Industries and Viterra were entitled to receive distributions of net earnings of CFL based upon their respective purchases from CFL. CFL was a variable interest entity that was consolidated in our financial statements. On April 30, 2013, CF Industries completed the acquisitions of all of the outstanding interests in CFL that it did not already own and CFL became our wholly-owned subsidiary. Once CFL became a wholly-owned subsidiary, CF Industries began purchasing all of the output of CFL for resale and reported those sales in its consolidated financial statements at market prices.
CF Industries' and Viterra's purchases of nitrogen fertilizer products from CFL were made under product purchase agreements, and the selling prices were determined under the provisions of these agreements. Until April 30, 2013, when CFL became a wholly-owned subsidiary in our consolidated financial statements, net sales and accounts receivable attributable to

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CF INDUSTRIES HOLDINGS, INC.

CFL were solely generated by transactions with Viterra, as all transactions with CF Industries were eliminated in consolidation in our financial statements.
The following summarizes the selling prices in the product purchase agreements that impacted the Company's results due to sales transactions to Viterra both before and after the effective date of the amendment.
Between the period of January 1, 2013 and April 30, 2013, CFL selling prices were based on production cost plus an agreed-upon margin.
Starting on April 30, 2013, CFL became a wholly-owned subsidiary of CF Industries. Once CFL became a wholly-owned subsidiary, CF industries began purchasing all of the output of CFL for resale and reported those sales in its consolidated financial statements at market prices.
As a result, the consolidated financial results for both 2015 and 2014 included a full year of market-based selling prices, while 2013 included four months of selling prices based on production cost plus an agreed-upon margin and eight months of market-based selling prices. These changes affect the year-over-year comparability of net sales, gross margin, operating earnings, earnings before income taxes and net earnings attributable to noncontrolling interest of 2013 as compared to 2014 and 2015, however, these changes do not impact the comparability of our net earnings attributable to common stockholders or net cash flows for the same period.
In order to provide comparable information for the periods presented, certain financial information is being provided for the 2013 comparable period adjusted as if twelve months of market-based selling prices had been used in the 2013 comparable period.
We report our consolidated financial results in accordance with U.S. GAAP. Management believes that the presentation in this report of non-GAAP financial measures of certain adjusted data and the period-to-period percentage changes in such measures, provides investors with additional meaningful information to assess period-to-period changes in our underlying operating performance. This information includes consolidated net sales, gross margin, net earnings attributable to noncontrolling interest, in addition to segment net sales, gross margin, gross margin as a percentage of net sales, and average selling prices per ton of ammonia and granular urea presented on an as adjusted basis as if all CFL sales to the noncontrolling interest had been priced based on market-based selling prices for the twelve months of 2013. These non-GAAP financial measures are provided only for the purpose of facilitating comparisons between the periods' operating performance, and do not purport to represent what our actual consolidated results of operations would have been, nor are they necessarily indicative of our future consolidated results of operations. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with U.S. GAAP.
Net Operating Loss (NOL) Settlement
At the time of our initial public offering (IPO) in 2005, we had accumulated a substantial amount of NOLs. Due to the uncertainty of realizing the tax benefit from the NOLs when we ceased to be a non-exempt cooperative for income tax purposes and became a public company, a full valuation allowance was recorded against the benefit of those NOLs. At that time, we entered into an agreement (NOL Agreement) with the pre-IPO owners under which they would benefit should any of the pre-IPO NOLs be realized in future years by using the NOLs to offset post-IPO taxable income. If this were to occur, we would pay the pre-IPO owners amounts equal to the resulting federal and state income taxes actually saved. As of December 31, 2012, the NOLs had a potential tax benefit of $94.3 million, which had been fully reserved by the valuation allowance.
In January 2013, we and the pre-IPO owners amended the NOL Agreement to provide, among other things, that we would be entitled to retain 26.9% of any settlement realized and 73.1% would be payable to them.
In March 2013, we entered into a closing agreement with the Internal Revenue Service (IRS) to resolve the tax treatment of the pre-IPO NOLs. Pursuant to the closing agreement, we agreed with the IRS that we will be entitled to a tax deduction equal to a portion of the NOLs over five years commencing with the 2012 tax year. The $20.6 million net benefit from this NOL settlement was recognized in the first quarter of 2013 as follows:
NOL tax benefits of $75.8 million were recognized, which reduced income tax expense.
A charge of $55.2 million was recognized for the 73.1% portion of the NOL benefit that will be paid to the pre-IPO owners as the tax benefits are realized. The $55.2 million charge was recognized in the consolidated statement of operations in other non-operating—net.

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CF INDUSTRIES HOLDINGS, INC.

Strategic Initiatives
Agreement to Combine with Certain of OCI N.V.’s Businesses
On August 6, 2015, we announced that we entered into a definitive agreement (as amended, the Combination Agreement), under which we will combine with the European, North American and global distribution businesses (collectively, the ENA Business) of OCI. OCI is a global producer and distributor of natural gas-based fertilizers and industrial chemicals based in the Netherlands. The combination transaction includes OCI’s nitrogen production facility in Geleen, Netherlands; its nitrogen production facility under construction in Wever, Iowa; its approximately 79.88% equity interest in an ammonia and methanol complex in Beaumont, Texas; and its global distribution business and the assumption of approximately $2 billion in net debt. The combination transaction also includes the purchase by CF Holdings or its designee of a 45% interest plus an option to acquire the remaining interest in OCI’s Natgasoline project in Texas, which upon completion in 2017 will be one of the world’s largest methanol facilities.
Under the terms of the Combination Agreement, CF Holdings will become a subsidiary of a new holding company (New CF) domiciled in the Netherlands. OCI will contribute the entities holding the ENA Business (other than the Natgasoline project) to New CF in exchange for ordinary shares of New CF (base share consideration), plus additional consideration of $700 million (subject to adjustment) to be paid in cash, ordinary shares of New CF or a mixture of cash and ordinary shares of New CF, as determined by CF Holdings in accordance with the terms of the Combination Agreement. The base share consideration will represent 25.6% of the ordinary shares of New CF that, upon consummation of the combination, subject to downward adjustment to account for the assumption by New CF, as contemplated by the Combination Agreement, of any of OCI’s 3.875% convertible bonds due 2018 that remain outstanding as of the closing date of the combination. The consideration for the 45% interest in Natgasoline is $517.5 million in cash. The actual ownership split of New CF upon completion of the combination as between former CF Holdings shareholders, on the one hand, and OCI and its shareholders, on the other hand, will be dependent on our share price at the time of closing, the amount of convertible bonds to be assumed by New CF at closing, the amount of adjustments to the amount of the additional consideration, and the mix of cash and New CF ordinary shares used to pay the additional consideration.
The transaction is expected to close in mid-2016, subject to the approval of shareholders of both CF Holdings and OCI, the receipt of certain regulatory approvals and other closing conditions. The consummation of the Natgasoline portion of the transaction is subject to conditions that are in addition to the conditions to which the consummation of the portion of the transaction involving the ENA Business other than the Natgasoline project is subject, and the consummation of the Natgasoline portion of the transaction is not a condition to consummation of the portion of the transaction involving the ENA Business other than the Natgasoline project. New CF will operate under a name to be determined by CF Holdings and be led by our existing management.
In conjunction with entering into the Combination Agreement, on August 6, 2015, CF Industries Holdings, Inc. obtained financing commitments from Morgan Stanley Senior Funding, Inc. and Goldman Sachs Bank USA to finance the transactions contemplated by the Combination Agreement and for general corporate purposes. The proceeds of such committed financing are available under a senior unsecured bridge term loan facility in an aggregate principal amount of up to $3.0 billion, subject to the terms and conditions set forth therein. See Note 12—Financing Agreements—Bridge Credit Agreement to our consolidated financial statements included in Item 8 of this report for additional information.
Strategic Venture with CHS
On August 12, 2015, we announced that we agreed to enter into a strategic venture with CHS. The strategic venture commenced on February 1, 2016, at which time CHS purchased a minority equity interest in CFN for $2.8 billion. CHS also began receiving deliveries from us pursuant to a supply agreement under which CHS has the right to purchase annually from us up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. CHS is entitled to semi-annual profit distributions from CFN as a result of its minority equity interest in CFN based generally on the volume of granular urea and UAN purchased by CHS pursuant to the supply agreement.
Capacity Expansion Projects
In 2012, we announced that we would construct new ammonia and urea/UAN plants at our Donaldsonville, Louisiana complex and new ammonia and urea plants at our Port Neal, Iowa complex. These new plants will increase our product mix flexibility at Donaldsonville, improve our ability to serve upper-Midwest urea customers from our Port Neal location, and allow us to benefit from the cost advantages of North American natural gas. In combination, these new facilities will be able to produce 2.1 million tons of gross ammonia per year, upgraded products ranging from 2.0 million to 2.7 million tons of granular urea per year and up to 1.8 million tons of UAN 32% solution per year, depending on our choice of product mix.

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CF INDUSTRIES HOLDINGS, INC.

In November 2015, the new urea plant at the Donaldsonville, Louisiana complex came on line and was the first plant to be commissioned as part of our capacity expansion projects. The new UAN plant at Donaldsonville is expected to be commissioned in the first quarter of 2016. The remaining plants are expected to be commissioned in mid-2016.
Financial Executive Summary
We reported net earnings attributable to common stockholders of $699.9 million in 2015, compared to net earnings of $1.39 billion in 2014, or a decline of $690.4 million or 50%. The 2014 reported results were significantly impacted by the sale of our phosphate business. In the first quarter of 2014, we sold the phosphate business and recognized a pre-tax gain of $750.1 million ($462.8 million after tax) on the sale of this business.
Diluted earnings per share attributable to common stockholders decreased 45% to $2.96 per share in 2015 from $5.42 per share in 2014. This decrease is due to lower net earnings partly offset by the lower diluted weighted-average shares outstanding in 2015 as compared to the prior year. During 2015, we repurchased 8.9 million shares of our common stock representing 4% of the prior year end outstanding shares, at a cost of $527.2 million.
In 2015, our total gross margin declined by $231.4 million, or 13%, to $1.55 billion in 2015 from $1.78 billion in 2014. The impact of the CF Fertilisers UK acquisition increased gross margin by $23.5 million. The remaining decline in our gross margin of $254.9 million, or 14%, was due to the $244.8 million decrease in gross margin in the Nitrogen Product Segments and the $10.1 million decline in gross margin in the phosphate segment as the phosphate business was sold in the first quarter of 2014. The remaining decrease in Nitrogen Product Segments gross margin, as more fully described below, was due primarily to lower average selling prices, lower sales volume, and the impact of mark-to-market losses on natural gas derivatives, partially offset by lower physical natural gas costs.
Average selling prices, primarily UAN and granular urea, decreased by 8%, which reduced gross margin by $348.8 million as international nitrogen fertilizer prices continued to decline due to excess global supply. The combination of falling global production costs, foreign currency devaluation and reduced ocean freight costs allowed many international producers to continue operations and the resulting supply weighed on global prices.
Sales volume, primarily ammonia, decreased by 3%, which decreased gross margin by $72.3 million due primarily to a poor fall application season and weaker demand as customers were unable to apply ammonia due to poor weather conditions and customers were hesitant to buy in a declining pricing environment.
Unrealized net mark-to-market losses on natural gas derivatives decreased gross margin by $96.8 million as 2015 included a $176.3 million loss compared to $79.5 million loss in 2014.
Lower physical natural gas costs in 2015, partially offset by the impact of natural gas derivatives that settled in the period, increased gross margin by $229.8 million compared to 2014. Lower gas costs were primarily driven by increased North American natural gas production, as increased well efficiencies increased supply. Warm weather conditions, especially in the fourth quarter, also contributed to high storage levels and the resulting decline in gas prices. 
Selling, general and administrative expenses increased $17.9 million to $169.8 million in 2015 from $151.9 million in 2014. The increase was due primarily to the impact of the CF Fertilisers UK acquisition, an increase in corporate project activities, and higher intangible amortization costs.
Transaction costs incurred in 2015 of $56.9 million are attributable to various consulting and legal services associated primarily with executing the strategic agreements and preparing for the proposed combination with the ENA Business of OCI, our strategic venture with CHS and our acquisition of the remaining 50% equity interest in CF Fertilisers UK not previously owned by us.
Other operating—net increased by $39.0 million from $53.3 million of expense in 2014 to expense of $92.3 million in 2015. The increased expense was due primarily to increased expansion project costs pertaining to our Donaldsonville, Louisiana and Port Neal, Iowa capacity expansion projects that did not qualify for capitalization compared to 2014.
Net interest expense decreased by $45.7 million to $131.6 million in 2015 from $177.3 million in 2014 due primarily to the higher amounts of capitalized interest related to our capacity expansion projects, partially offset by higher interest expense pertaining to the $1.0 billion and $1.5 billion of senior notes that were issued in September 2015 and

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CF INDUSTRIES HOLDINGS, INC.

in March 2014, respectively. We recorded capitalized interest of $154.5 million in 2015 primarily related to our capacity expansion projects compared to $74.2 million in 2014.
Net cash provided by operating activities in 2015 was $1.20 billion as compared to $1.41 billion in 2014, a decline of $204.9 million. This decline was primarily due to unfavorable working capital changes as customer advances were lower and inventory levels were higher in 2015 as compared to 2014 levels. Due to the declining pricing environment for nitrogen fertilizers in 2015, customers delayed making forward purchase commitments to purchase fertilizer in 2015, which reduced the amount of customer advances that were received, as compared to 2014 when fertilizer pricing was stronger. Inventory levels were also higher in 2015 due to a poor fall ammonia application season, as compared to 2014 when inventory levels declined.
Net cash used in investing activities was $2.98 billion in 2015 compared to $343.5 million in 2014 when we received proceeds of $1.37 billion from the sale of the phosphate business. During 2015, capital expenditures totaled $2.47 billion compared to $1.81 billion in 2014. The increase in capital expenditures is primarily related to the capacity expansion projects in Donaldsonville, Louisiana and Port Neal, Iowa. We also acquired the remaining 50% equity interest in CF Fertilisers UK not previously owned by us for a net cash payment of $551.6 million, which is net of cash acquired of $18.8 million.
Net cash provided by financing activities was $79.9 million in 2015 compared to net cash used in financing activities of $775.1 million in 2014. In September 2015, we issued senior notes and received proceeds of $1.0 billion. In March 2014, we issued senior notes and received proceeds of approximately $1.5 billion. In 2015, we repurchased shares of our common stock for $556.3 million in cash; in 2014, we repurchased shares of our common stock for $1.93 billion in cash. Dividends paid on common stock were $282.3 million and $255.7 million in 2015 and 2014, respectively.
The following is a summary of certain significant items that impacted the consolidated financial results in 2015, 2014 and 2013:
Net earnings attributable to common stockholders of $699.9 million for 2015 included a $94.4 million gain as a result of the remeasurement to fair value of our initial 50% equity interest in CF Fertilisers UK ($94.4 million after tax), a $61.9 million impairment of our equity method investment in PLNL ($61.9 million after tax), a $176.3 million unrealized net mark-to-market loss ($110.9 million after tax) on natural gas derivatives, $42.8 million of losses ($30.9 million after tax) as a result of the sale of equity method investments, $56.9 million of transaction costs ($56.9 million after tax), $51.3 million of expenses ($32.3 million after tax) related to our capacity expansion projects in Donaldsonville, Louisiana and Port Neal, Iowa that did not qualify for capitalization, and $21.6 million ($13.6 million after tax) of realized and unrealized net losses on foreign currency derivatives related to our capacity expansion projects. During 2015, we repurchased 8.9 million shares of our common stock at an average price of $59 per share representing 4% of the prior year end's outstanding shares at a cost of $527.2 million.
In 2014, we reported net earnings attributable to common stockholders of $1.39 billion. Our 2014 results included a $750.1 million gain ($462.8 million after tax) on the sale of the phosphate business, a $79.5 million unrealized net mark-to-market loss ($50.1 million after tax) on natural gas derivatives, $30.7 million of expenses ($19.4 million after tax) related to our capacity expansion projects that did not qualify for capitalization, $38.4 million ($24.2 million after tax) of realized and unrealized net losses on foreign currency derivatives and a $13.1 million ($8.2 million after tax) of retirement benefit settlement charges. During 2014, we repurchased 38.4 million shares of our common stock at an average price of $50 per share representing 14% of the prior year end's outstanding shares at a cost of $1.92 billion.
In 2013, we reported net earnings attributable to common stockholders of $1.46 billion. Our 2013 results included a $52.9 million unrealized net mark-to-market gain ($33.5 million after tax) on natural gas derivatives, $10.8 million of expenses ($6.8 million after tax) related to our capacity expansion projects that did not qualify for capitalization, $20.8 million ($13.2 million after tax) of realized and unrealized net gains on foreign currency derivatives and a net $20.6 million benefit from a settlement with the IRS concerning certain pre-IPO NOLs. During 2013, we repurchased 36.7 million shares of our common stock at an average price of $39 representing 12% of the prior year end's outstanding shares at a cost of $1.45 billion.

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CF INDUSTRIES HOLDINGS, INC.

Key Industry Factors
We operate in a highly competitive, global industry. Our products are globally-traded commodities and, as a result, we compete principally on the basis of delivered price and to a lesser extent on customer service and product quality. Moreover, our operating results are influenced by a broad range of factors, including those outlined below.
Global Supply & Demand
Historically, global fertilizer demand has been driven primarily by population growth, changes in dietary habits and planted acreage, and application rates, among other things. We expect these key variables to continue to have major impacts on long-term fertilizer demand for the foreseeable future. Short-term fertilizer demand depends on global economic conditions, weather patterns, the level of global grain stocks relative to consumption, governmental regulations, including requirements mandating increased use of bio-fuels and farm sector income. Other geopolitical factors like temporary disruptions in fertilizer trade related to government intervention or changes in the buying/selling patterns of key exporting/consuming countries such as China, India and Brazil, among others, often play a major role in shaping near-term market fundamentals. The economics of fertilizer manufacturing play a key role in decisions to increase or reduce production capacity. Supply of fertilizers is generally driven by available capacity and operating rates, raw material costs and availability, government policies and global trade. Raw materials are dependent on energy sources such as natural gas or coal; supply costs are affected by the supply availability and demand for these commodities.
Natural Gas Prices
Natural gas is the principal raw material used to produce nitrogen fertilizers. We use natural gas both as a chemical feedstock and as a fuel to produce ammonia, granular urea, UAN, AN and other nitrogen products. Because most of our nitrogen fertilizer manufacturing facilities are located in the United States and Canada, the price of natural gas in North America directly impacts a substantial portion of our operating expenses. Due to increases in natural gas production resulting from the rise in production from shale gas formations, natural gas prices in North America declined over the past several years, but are subject to volatility. During the three year period ended December 31, 2015, the daily closing price at the Henry Hub reached a low of $1.54 per MMBtu on four consecutive days in December 2015 and a high of $7.94 per MMBtu on March 5, 2014.
We also have manufacturing facilities located in the United Kingdom. These facilities are subject to fluctuations associated with the price of natural gas in Europe. The major natural gas trading point for the United Kingdom is the National Balancing Point (NBP). During 2015, the daily closing price at NBP reached a low of $4.60 per MMBtu on December 23, 2015 and December 24, 2015 and a high of $8.50 per MMBtu on February 12, 2015. During the three year period ended December 31, 2015, the daily closing price at NBP reached a low of $4.60 per MMBtu on both December 23, 2015 and December 24, 2015 and a high of $16.00 per MMBtu on March 22, 2013.
Natural gas costs, including the impact of realized natural gas derivatives, declined 28% in 2015 from 2014. Expenditures on natural gas represent a significant portion of our production costs. For example, natural gas costs, including realized gains and losses, comprised approximately 45% of our Nitrogen Product Segments total production costs in 2015.
Farmers' Economics
The demand for fertilizer is affected by the aggregate crop planting decisions and fertilizer application rate decisions of individual farmers. Individual farmers make planting decisions based largely on prospective profitability of a harvest, while the specific varieties and amounts of fertilizer they apply depend on factors like their current liquidity, soil conditions, weather patterns, crop prices and the types of crops planted.

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CF INDUSTRIES HOLDINGS, INC.

Global Trade in Fertilizer
In addition to the relationship between global supply and demand, profitability within a particular geographic region is determined by the supply/demand balance within that region. Regional supply and demand can be influenced significantly by factors affecting trade within regions. Some of these factors include the relative cost to produce and deliver product, relative currency values, the availability of credit and governmental trade policies. The development of additional natural gas reserves in North America over the last few years has decreased natural gas costs relative to the rest of the world, making North American nitrogen fertilizer producers more competitive. These lower natural gas costs contributed to announcements of several nitrogen fertilizer capacity expansion projects in North America, including our capacity expansion projects in Donaldsonville, Louisiana and Port Neal, Iowa. Changes in currency values may also alter our cost competitiveness relative to producers in other regions of the world.
Imports account for a significant portion of the nitrogen fertilizer consumed in North America. Producers of nitrogen-based fertilizers located in the Middle East, Ukraine, the Republic of Trinidad and Tobago, Venezuela, North Africa, Russia and China are major exporters to North America.
Government Policies
The policies of governments around the world can result in restrictions on imports and exports, the subsidization of natural gas prices, and subsidies or quotas applied to domestic producers, farmers, and imported or exported product. Due to the critical role that fertilizers play in food production, the construction and operation of fertilizer plants often are influenced by political and social objectives.
Ethanol Industry and the Renewable Fuel Standard
Corn used to produce ethanol accounts for approximately 38% of total U.S. corn demand. U.S. government policy, as expressed in the Renewable Fuel Standard (RFS), is a major determinant for the ethanol market. The RFS establishes minimum volumes of various types of renewable fuels, including ethanol, that must be included in the United States’ supply of fuel for transportation. In addition, Congress, at various times, has proposed legislation to either reduce or eliminate the RFS. While past legislation proposing changes to the RFS has not passed, there can be no assurance that future legislation will not be passed into law. Other factors that drive the ethanol market include the prices of ethanol, gasoline and corn. Lower gasoline prices may put pressure on ethanol prices that could result in reduced profitability and lower production for the ethanol industry.
Factors Affecting Our Results
Net Sales.    Our net sales are derived primarily from the sale of nitrogen fertilizers and are determined by the quantities of fertilizers we sell and the selling prices we realize. The volumes, mix and selling prices we realize are determined to a great extent by a combination of global and regional supply and demand factors. Net sales also include shipping and handling costs that are billed to our customers. Sales incentives are reported as a reduction in net sales.
Cost of Sales.    Our cost of sales includes manufacturing costs, purchased product costs, and distribution costs. Manufacturing costs, the most significant element of cost of sales, consist primarily of raw materials, realized and unrealized gains and losses on natural gas derivative instruments, maintenance, direct labor, depreciation and other plant overhead expenses. Purchased product costs primarily include the cost to purchase nitrogen fertilizers to augment or replace production at our facilities. Distribution costs include the cost of freight required to transport finished products from our plants to our distribution facilities and storage costs incurred prior to final shipment to customers.
We offer our customers the opportunity to purchase products from us on a forward basis at prices and on delivery dates we propose. As our customers enter into forward nitrogen fertilizer purchase contracts with us, we often use derivative instruments to reduce our exposure to changes in the cost of natural gas, the largest and most volatile component of our manufacturing costs for nitrogen-based fertilizer. We report our natural gas derivatives on the consolidated balance sheets at their fair value. Changes in the fair value of these derivatives are recorded in cost of sales as the changes occur. See "Forward Sales and Customer Advances" later in this discussion and analysis. As a result of fixing the selling prices of our products, often months in advance of their ultimate delivery to customers, our reported selling prices and margins may differ from market spot prices and margins available at the time of shipment. Volatility in quarterly reported earnings also may arise from the unrealized mark-to-market adjustments in the value of derivatives.
Selling, General and Administrative Expenses.    Our selling, general and administrative expenses consist primarily of corporate office expenses such as salaries and other payroll-related costs for our executive, administrative, legal, financial and marketing functions, as well as certain taxes and insurance and other professional service fees, including those for corporate initiatives.

41


CF INDUSTRIES HOLDINGS, INC.

Transaction Costs. Transaction costs consist of various consulting and legal services associated primarily with executing the strategic agreements and preparing for the proposed combination with the ENA Business of OCI, our strategic venture with CHS and our acquisition of the remaining 50% equity interest in CF Fertilisers UK not previously owned by us.
Other Operating—Net.    Other operating—net includes administrative costs associated with our capacity expansion projects and other costs that do not relate directly to our central operations. Costs included in "other costs" can include foreign exchange gains and losses, unrealized gains and losses on foreign currency derivatives, costs associated with our closed facilities, amounts recorded for environmental remediation for other areas of our business, litigation expenses and gains and losses on the disposal of fixed assets.
Equity in Earnings of Operating Affiliates.    Equity in earnings of operating affiliates consists of our 50% ownership interest in PLNL. We include our share of the net earnings from our investment in PLNL as an element of earnings from operations because this investment provides additional production and is integrated with our other supply chain and sales activities in the Nitrogen Product Segments. Our share of the net earnings includes the amortization of certain tangible and intangible assets identified as part of the application of purchase accounting at acquisition. In the fourth quarter of 2015, we recognized a $61.9 million impairment of our equity method investment in PLNL.
Interest Expense.    Our interest expense includes the interest on our long-term debt, amortization of the related fees required to execute financing agreements and annual fees pursuant to our revolving credit agreement. Capitalized interest relating to the construction of major capital projects reduces interest expense as the interest is capitalized and amortized over the estimated useful lives of the facility along with all other construction costs.
Interest Income.    Our interest income represents amounts earned on our cash, cash equivalents, investments and advances to unconsolidated affiliates.
Income Tax Provision.    Our income tax provision includes all currently payable and deferred United States and foreign income tax expense applicable to our ongoing operations.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are projected to be recovered or settled. Realization of deferred tax assets is dependent on our ability to generate sufficient taxable income, of an appropriate character, in future periods. A valuation allowance is established if it is determined to be more likely than not that a deferred tax asset will not be realized. Interest and penalties related to unrecognized tax benefits are reported as interest expense and income tax expense, respectively.
Equity in Earnings of Non-Operating Affiliates—Net of Taxes.    Equity in earnings of non-operating affiliates—net of taxes represents our share of the net earnings of the entities that we account for using the equity method and exclude from operating earnings. Income taxes related to these investments, if any, are reflected in this line. The amounts recorded as equity in earnings of non-operating affiliates—net of taxes relate to our investments in CF Fertilisers UK and Keytrade. During the second quarter of 2015, we sold our interests in Keytrade. On July 31, 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK not previously owned by us for total consideration of $570.4 million and recognized a $94.4 million gain on the remeasurement to fair value of our initial 50% equity interest in CF Fertilisers UK. CF Fertilisers UK became wholly owned by us and beginning July 31, 2015, the operating results of CF Fertilisers UK became part of our consolidated financial results.
Net Earnings Attributable to Noncontrolling Interest.    Net earnings attributable to noncontrolling interest include the net earnings attributable to the 24.7% interest of the publicly-held common units of TNCLP. Net earnings attributable to noncontrolling interest for the first four months of 2013 also included the interest of the 34% holder of CFL's equity ownership. On April 30, 2013, we purchased the noncontrolling interests of CFL.
We own an aggregate 75.3% of TNCLP and outside investors own the remaining 24.7%. The TNCLP Agreement of Limited Partnership allows the General Partner to receive Incentive Distribution Rights once a minimum distribution threshold has been met. Partnership interests in TNCLP are traded on the NYSE and TNCLP is separately registered with the SEC.

42


CF INDUSTRIES HOLDINGS, INC.

Results of Consolidated Operations
The following table presents our consolidated results of operations:
 
Twelve months ended December 31,
 
2015
 
2014
 
2013
 
2015 v. 2014
 
2014 v. 2013
 
(in millions, except as noted)
Net sales
$
4,308.3

 
$
4,743.2

 
$
5,474.7

 
$
(434.9
)
 
(9
)%
 
$
(731.5
)
 
(13
)%
Cost of sales
2,761.2

 
2,964.7

 
2,954.5

 
(203.5
)
 
(7
)%
 
10.2

 
 %
Gross margin
1,547.1

 
1,778.5

 
2,520.2

 
(231.4
)
 
(13
)%
 
(741.7
)
 
(29
)%
Gross margin percentage
35.9
%
 
37.5
%
 
46.0
%
 
(1.6
)%
 
 
 
(8.5
)%
 
 
Selling, general and administrative expenses
169.8

 
151.9

 
166.0

 
17.9

 
12
 %
 
(14.1
)
 
(8
)%
Transaction costs
56.9

 

 

 
56.9

 
N/M

 

 
N/M

Other operating—net
92.3

 
53.3

 
(15.8
)
 
39.0

 
73
 %
 
69.1

 
N/M

Total other operating costs and expenses
319.0

 
205.2

 
150.2

 
113.8

 
55
 %
 
55.0

 
37
 %
Gain on sale of phosphate business

 
750.1

 

 
(750.1
)
 
(100
)%
 
750.1

 
N/M

Equity in earnings of operating affiliates
(35.0
)
 
43.1

 
41.7

 
(78.1
)
 
(181
)%
 
1.4

 
3
 %
Operating earnings
1,193.1

 
2,366.5

 
2,411.7

 
(1,173.4
)
 
(50
)%
 
(45.2
)
 
(2
)%
Interest expense—net
131.6

 
177.3

 
147.5

 
(45.7
)
 
(26
)%
 
29.8

 
20
 %
Other non-operating—net
3.9

 
1.9

 
54.5

 
2.0

 
105
 %
 
(52.6
)
 
(97
)%
Earnings before income taxes and equity in earnings of non-operating affiliates
1,057.6

 
2,187.3

 
2,209.7

 
(1,129.7
)
 
(52
)%
 
(22.4
)
 
(1
)%
Income tax provision
395.8

 
773.0

 
686.5

 
(377.2
)
 
(49
)%
 
86.5

 
13
 %
Equity in earnings of non-operating affiliates—net of taxes
72.3

 
22.5

 
9.6

 
49.8

 
221
 %
 
12.9

 
134
 %
Net earnings
734.1

 
1,436.8

 
1,532.8

 
(702.7
)
 
(49
)%
 
(96.0
)
 
(6
)%
Less: Net earnings attributable to noncontrolling interest
34.2

 
46.5

 
68.2

 
(12.3
)
 
(26
)%
 
(21.7
)
 
(32
)%
Net earnings attributable to common stockholders
$
699.9

 
$
1,390.3

 
$
1,464.6

 
$
(690.4
)
 
(50
)%
 
$
(74.3
)
 
(5
)%
Diluted net earnings per share attributable to common stockholders(1)
$
2.96

 
$
5.42

 
$
4.95

 
$
(2.46
)
 
(45
)%
 
$
0.47

 
9
 %
Diluted weighted-average common shares outstanding(1)           
236.1

 
256.7

 
296.0

 
(20.6
)
 
(8
)%
 
(39.3
)
 
(13
)%
Dividends declared per common share(1)
$
1.20

 
$
1.00

 
$
0.44

 
$
0.20

 
 

 
$
0.56

 
 

Supplemental Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchased natural gas costs (per MMBtu)(2)
$
2.81

 
$
4.49

 
$
3.64

 
$
(1.68
)
 
 
 
$
0.85

 
 
Realized derivatives loss (gain) (per MMBtu)(3)
0.26

 
(0.24
)
 
0.02

 
0.50

 
 
 
(0.26
)
 
 
Cost of natural gas (per MMBtu)
$
3.07

 
$
4.25

 
$
3.66

 
$
(1.18
)
 
(28
)%
 
$
0.59

 
16
 %
Average daily market price of natural gas (per MMBtu) Henry Hub (Louisiana)
$
2.61

 
$
4.32

 
$
3.72

 
$
(1.71
)
 
(40
)%
 
$
0.60

 
16
 %
Average daily market price of natural gas (per MMBtu) National Balancing Point (UK)(4)
$
6.53

 

 

 
$
6.53

 
N/M

 

 
N/M

Capital expenditures
$
2,469.3

 
$
1,808.5

 
$
823.8

 
$
660.8

 
37
 %
 
$
984.7

 
120
 %
Production volume by product tons (000s):
 
 
 
 
 
 
 
 
 
 
 
 
 
      Ammonia(5)
7,673

 
7,011

 
7,105

 
662

 
9
 %
 
(94
)
 
(1
)%
      Granular urea
2,520

 
2,347

 
2,474

 
173

 
7
 %
 
(127
)
 
(5
)%
      UAN (32%)
5,888

 
5,939

 
6,332

 
(51
)
 
(1
)%
 
(393
)
 
(6
)%
AN
1,283

 
950

 
882

 
333

 
35
 %
 
68

 
8
 %
______________________________________________________________________________
N/M—Not Meaningful
(1) 
Share and per share amounts have been retroactively restated for all prior periods presented to reflect the five-for-one split of the Company’s common stock effected in the form of a stock dividend that was distributed on June 17, 2015.
(2) 
Includes the cost of natural gas purchased during the period for use in production.
(3) 
Includes the impact of gains and losses on natural gas derivatives that were settled and realized during the period. Excludes the unrealized mark-to-market gains and losses on natural gas derivatives.
(4) 
Amount represents average daily market price for the full year 2015.
(5) 
Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN.

43


CF INDUSTRIES HOLDINGS, INC.

Impact of CFL Selling Price Modifications
As discussed in the Items Affecting Comparability of Results section of this discussion and analysis, on April 30, 2013, CF Industries acquired the noncontrolling interests in CFL and CFL became a wholly-owned subsidiary of CF Industries. As a result, the consolidated financial results for 2015 and 2014 included twelve months of market-based selling prices, while 2013 included four months of selling prices based on production cost plus an agreed-upon margin and eight months of market-based selling prices. These changes affect the year-over-year comparability of net sales, gross margin, operating earnings, earnings before income taxes and net earnings attributable to noncontrolling interest, but do not impact the comparability of our net earnings attributable to common stockholders or net cash flows for the same period. 
The following table adjusts the results for 2013 to market-based selling prices for the full year to be on a comparable basis with 2015 and 2014.
 
Twelve months ended December 31,
 
2015
 
2014
 
2013
 
2015 v. 2014
 
2014 v. 2013
 
(in millions, except percentages)
Net sales
 

 
 

 
 

 
 

 
 

 
 

 
 

As reported
$
4,308.3

 
$
4,743.2

 
$
5,474.7

 
$
(434.9
)
 
(9
)%
 
$
(731.5
)
 
(13
)%
Impact of selling price adjustment

 

 
71.1

 

 
 

 
(71.1
)
 
 

As adjusted
$
4,308.3

 
$
4,743.2

 
$
5,545.8

 
$
(434.9
)
 
(9
)%
 
$
(802.6
)
 
(14
)%
Gross margin
 

 
 

 
 

 
 

 
 

 
 

 
 

As reported
$
1,547.1

 
$
1,778.5

 
$
2,520.2

 
$
(231.4
)
 
(13
)%
 
$
(741.7
)
 
(29
)%
Impact of selling price adjustment

 

 
71.1

 

 
 

 
(71.1
)
 
 

As adjusted
$
1,547.1

 
$
1,778.5

 
$
2,591.3

 
$
(231.4
)
 
(13
)%
 
$
(812.8
)
 
(31
)%
Net earnings attributable to noncontrolling interest
 

 
 

 
 

 
 

 
 

 
 

 
 

As reported
$
34.2

 
$
46.5

 
$
68.2

 
$
(12.3
)
 
(26
)%
 
$
(21.7
)
 
(32
)%
Impact of selling price adjustment

 

 
71.1

 

 
 

 
(71.1
)
 
 

As adjusted
$
34.2

 
$
46.5

 
$
139.3

 
$
(12.3
)
 
(26
)%
 
$
(92.8
)
 
(67
)%
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Consolidated Operating Results
Our reportable segments consist of ammonia, granular urea, UAN, AN, other, and phosphate and include the results of CF Fertilisers UK as a result of our acquisition that closed on July 31, 2015. The ammonia, granular urea, UAN, AN and Other segments are referred to in this discussion and analysis as the “Nitrogen Product Segments.&#