Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

2022 Equity and Incentive Plan

In May 2022, our shareholders approved the CF Industries Holdings, Inc. 2022 Equity and Incentive Plan (the 2022 Equity and Incentive Plan), including 2.5 million new shares of the Company’s common stock available for grant thereunder as part of our pay-for-performance compensation program, which we use to provide incentives that are aligned with the interests of our shareholders. The 2022 Equity and Incentive Plan replaced the CF Industries Holdings, Inc. 2014 Equity and Incentive Plan (the 2014 Equity and Incentive Plan) and permits grants of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, which in each case may be conditioned on performance criteria, to employees and certain consultants of the Company and its subsidiaries and non-employee directors of the Company.

Share Reserve and Individual Award Limits

The maximum number of shares reserved for the grant of awards under the 2022 Equity and Incentive Plan is the sum of (i) 2.5 million shares, plus (ii) the number of shares that remain available for new grants under the 2014 Equity and Incentive Plan when the 2022 Equity and Incentive Plan was approved by shareholders, plus (iii) the number of shares subject to stock options granted under the 2014 Equity and Incentive Plan or the CF Industries Holdings, Inc. 2009 Equity and Incentive Plan that were outstanding when the 2022 Equity and Incentive Plan was approved by shareholders, but only to the extent such awards terminate or expire without the delivery of shares, plus (iv) 1.61 times the number of shares subject to restricted stock or restricted stock unit awards (including performance restricted stock unit awards) granted under the 2014 Equity and Incentive Plan that were outstanding when the 2022 Equity and Incentive Plan was approved by shareholders, but only to the extent such awards terminate or expire without the delivery of shares. In no event will the number of shares available for issuance under the 2022 Equity and Incentive Plan exceed 10,615,515 shares. Shares issued with respect to all awards granted under the 2022 Equity and Incentive Plan are counted against the share reserve on a one-for-one basis. The shares subject to any outstanding award under the 2022 Equity and Incentive Plan will be available for subsequent award and issuance under the 2022 Equity and Incentive Plan to the extent those awards subsequently expire, are forfeited or cancelled, or terminate for any reason prior to issuance of the shares subject to those awards. In addition, shares tendered or withheld in payment of the exercise price of an

award and shares withheld by the Company to satisfy tax withholding obligations related to an award will be available for subsequent award under the 2022 Equity and Incentive Plan. As of December 31, 2022, we had approximately 6.8 million shares available for future awards under the 2022 Equity and Incentive Plan. The 2022 Equity and Incentive Plan provides that no more than 5.0 million shares may be issued pursuant to the exercise of incentive stock options, subject to adjustment upon certain capitalization events.

Restricted Stock Awards, Restricted Stock Units and Performance Restricted Stock Units

The fair value of a restricted stock award (RSA) or a restricted stock unit (RSU) is equal to the number of shares subject to the award multiplied by the closing market price of our common stock on the date of grant. We estimated the fair value of each performance restricted stock unit (PSU) on the date of grant using a Monte Carlo simulation. Generally, RSUs vest in three equal annual installments following the date of grant. PSUs are granted to key employees and generally vest three years from the date of grant subject to the attainment of applicable performance goals during the performance period. The RSAs awarded to non-management members of the Board vest the earlier of one year from the date of the grant or the date of the next annual stockholder meeting. During the vesting period, the holders of the RSAs are entitled to dividends and voting rights. During the vesting period, the holders of the RSUs are paid dividend equivalents in cash to the extent we pay cash dividends. PSUs accrue dividend equivalents to the extent we pay cash dividends on our common stock during the performance and vesting periods. Upon vesting of the PSUs, holders are paid the cash equivalent of the dividends paid during the performance and vesting periods based on the shares of common stock, if any, delivered in settlement of PSUs. Holders of RSUs and PSUs are not entitled to voting rights unless and until the awards have vested.

A summary of restricted stock activity during the year ended December 31, 2022 is presented below.


	Restricted Stock Awards			Restricted Stock Units			Performance Restricted Stock Units
	Shares	Weighted- Average Grant-Date Fair Value		Shares	Weighted- Average Grant-Date Fair Value		Shares	Weighted- Average Grant-Date Fair Value
Outstanding as of December 31, 2021	35,508	$	49.28	660,849	$	40.98	425,268	$	46.83
Granted	16,736	95.59		231,506	71.68		203,821	81.38
Restrictions lapsed (vested)(1)	(35,508)	49.28		(323,106)	41.61		(214,203)	46.57
Forfeited	—	—		(22,569)	50.82		(3,201)	63.06
Outstanding as of December 31, 2022	16,736	95.59		546,680	53.21		411,685	63.95

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(1)For performance restricted stock units, the shares represent the performance restricted stock units granted in 2019, for which the three-year performance period ended December 31, 2021.

The 2022, 2021 and 2020 weighted-average grant-date fair value for RSAs was $95.59, $49.28 and $27.51, for RSUs was $71.68, $38.69 and $45.23, and for PSUs was $81.38, $48.25 and $47.93, respectively.

The actual tax benefit realized from restricted stock vested in each of the years ended December 31, 2022, 2021 and 2020 was $14 million, $7 million and $5 million, respectively. The fair value of restricted stock vested was $60 million, $29 million and $22 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Stock Options

Under the 2014 Equity and Incentive Plan and our other predecessor plans, we granted to plan participants nonqualified stock options to purchase shares of our common stock. The exercise price of these options was equal to the market price of our common stock on the date of grant. The contractual life of each option was ten years and generally one-third of the options vested on each of the first three anniversaries of the date of grant. No stock option awards were granted under the 2014 Equity and Incentive Plan or our other predecessor plans after 2017, and no stock option awards have been granted under the 2022 Equity and Incentive Plan.

A summary of stock option activity during the year ended December 31, 2022 is presented below:


	Shares	Weighted- Average Exercise Price
Outstanding as of December 31, 2021	2,637,586	$	42.48

Exercised	(2,475,550)	42.79


Outstanding as of December 31, 2022	162,036	37.72
Exercisable as of December 31, 2022	162,036	37.72


	Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value(1) (in millions)
Outstanding as of December 31, 2022	2.9	$	8
Exercisable as of December 31, 2022	2.9	$	8

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(1)The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our closing stock price of $85.20 as of December 31, 2022, which would have been received by the option holders had all option holders exercised their options as of that date.

Selected amounts pertaining to stock option exercises are as follows:


	Year ended December 31,
	2022		2021		2020
	(in millions)
Cash received from stock option exercises	$	106	$	64	$	8
Actual tax benefit realized from stock option exercises	$	23	$	9	$	1
Pre-tax intrinsic value of stock options exercised	$	100	$	39	$	4

Compensation Cost

Compensation cost is recorded primarily in selling, general and administrative expenses. The following table summarizes stock-based compensation costs and related income tax benefits:


	Year ended December 31,
	2022		2021		2020
	(in millions)
Stock-based compensation expense	$	41	$	30	$	26
Income tax benefit	(9)		(7)		(6)
Stock-based compensation expense, net of income taxes	$	32	$	23	$	20

As of December 31, 2022, pre-tax unrecognized compensation cost was $16 million for RSAs and RSUs, which will be recognized over a weighted-average period of 1.6 years, and $20 million for PSUs, which will be recognized over a weighted-average period of 1.3 years.

Excess tax benefits realized from the vesting of restricted stock or stock option exercises are recognized as an income tax benefit in our consolidated statements of operations and are required to be reported as an operating cash inflow rather than a reduction of taxes paid. The excess tax benefits realized in 2022, 2021 and 2020 were $96 million, $22 million and $3 million, respectively.