What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-08-06 · 300 added, 299 removed, 575 unchanged (51% of the section changed)

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◦ Market Conditions and Current Developments

◦ Items Affecting Comparability of Results

◦ Financial Executive Summary

◦ Items Affecting Comparability of Results

• Consolidated Results of Operations

◦ Second Quarter of 2020 Compared to Second Quarter of 2019

◦ Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

◦ Third Quarter of 2020 Compared to Third Quarter of 2019

◦ Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

• Operating Results by Business Segment

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Overview of CF Holdings

We are a leading global manufacturer and distributor of nitrogen products for fertilizer, emissions abatement and other industrial applications.

We are a leading global manufacturer of hydrogen and nitrogen products for clean energy, emissions abatement, fertilizer, and other industrial applications.

We operate manufacturing complexes in the United States, Canada and the United Kingdom, which are among the most cost-advantaged, efficient and flexible in the world, and an extensive storage, transportation and distribution network in North America.

Our 3,000 employees focus on safe and reliable operations, environmental stewardship and disciplined capital and corporate management, driving our strategy to leverage and sustainably grow our nitrogen and chemicals platform to serve customers and create long-term shareholder value.

Our 3,000 employees focus on safe and reliable operations, environmental stewardship and disciplined capital and corporate management, driving our strategy to leverage and sustainably grow our hydrogen and nitrogen platform to serve customers and create long-term shareholder value.

Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users.

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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 granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

Our principal assets as of June 30, 2020 include:

Our principal assets as of September 30, 2020 include:

nitrogen manufacturing facilities located in Donaldsonville, Louisiana (the largest nitrogen complex in the world);

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Since that time, efforts to slow the spread of COVID-19 have intensified.

A number of countries, as well as certain states and cities within the United States, have enacted temporary closures of businesses, issued shelter in place or quarantine orders, and taken other restrictive measures in response to the pandemic.

A number of countries, as well as certain states and cities within the United States, have continued to enact temporary closures of businesses, to issue shelter in place or quarantine orders, and to take other restrictive measures in response to the pandemic.

Due to the use of fertilizer products in crop production, our business operations have been designated as part of the critical infrastructure by the United States and as essential businesses in the United Kingdom and Canada, with corresponding designations for those states and provinces in which we operate that have issued restrictive orders.

As a result, our manufacturing complexes continued to operate during the first half of 2020 and have continued to operate through the date of this report.

Our production of ammonia, the basic building block for our products, was 5.2 million tons in both the first six months of 2020 and the first six months of 2019.

As a result, our manufacturing complexes continued to operate during the first nine months of 2020 and have continued to operate through the date of this report.

Our production of ammonia, the basic building block for our products, was 7.6 million tons in both the first nine months of 2020 and the first nine months of 2019.

Through the date of this filing, we have continued to ship products by all modes of transportation to our customers, and we have not experienced any significant delays in marine, rail or truck transportation services due to the pandemic.

In the first half of 2020, we did not experience a meaningful impact in customer demand as a result of the COVID-19 pandemic.

Our total volume of products shipped in the first six months of 2020 of 10.1 million tons was 3% higher compared to 9.8 million tons in the first six months of 2019.

In response to the pandemic, we instituted safety precautions to protect the health and well-being of all of our employees, including the manufacturing workforce who operate our nitrogen complexes and distribution facilities.

These safety measures included installing thermal temperature checks at each of our sites for all personnel who arrive at our sites, adjusting schedules to support social distancing, including changes to loading and shipping procedures, maintaining a close contact log for employees, self-quarantine logs, requiring face coverings on site, restricting visitor access, and implementing enhanced cleaning protocols and travel restrictions for employees.

In the first nine months of 2020, we did not experience a meaningful impact in customer demand as a result of the COVID-19 pandemic.

Our total volume of products shipped in the first nine months of 2020 of 14.8 million tons was 2% higher compared to 14.6 million tons in the first nine months of 2019.

In response to the pandemic, we instituted safety precautions early in the year to protect the health and well-being of all of our employees, including the manufacturing workforce who operate our nitrogen complexes and distribution facilities.

These safety measures included installing thermal temperature checks at each of our sites for all personnel, including contractors, who arrive at our sites, adjusting schedules to support social distancing, including changes to loading and shipping procedures, maintaining a close contact log for employees, self-quarantine logs, requiring face coverings on site, restricting visitor access, and implementing enhanced cleaning protocols and travel restrictions for employees.

We also paid approximately $19 million of bonuses to our operational workforce under a special COVID-19 bonus program, which concluded in June.

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We have operated our business in a remote working environment and could continue to do so for an extended duration, if necessary.

However, if the pandemic were to impact a large portion of our workforce in any one location, we might need to temporarily idle that facility, which could have an impact on our business operations, profitability and cash flow.

However, if the pandemic were to impact a large portion of our workforce in any one location, we might need to idle that facility temporarily, which could have an impact on our business operations, profitability and cash flow.

The impact of the COVID-19 pandemic is fluid and continues to evolve.

As a result, we cannot predict the extent to which our business, results of operations, financial condition or liquidity will be impacted by the pandemic in the future.

There was strong demand for fertilizer in the first six months of 2020 as we shipped 10.1 million tons of product compared to 9.8 million tons in the first six months of 2019, a 3% increase.

There was strong demand for fertilizer in the first nine months of 2020 as we shipped 14.8 million tons of product compared to 14.6 million tons in the first nine months of 2019.

Our shipments can shift between quarters due primarily to shifts in weather patterns that impact fertilizer applications.

In the second quarter of 2020, our sales volumes were lower across most of our major products compared to the second quarter of 2019 as a result of higher sales volumes in the second quarter of 2019 due to the delayed spring application season as a result of persistent cold and wet weather last year.

Additionally, certain shipments of granular urea occurred earlier, in the first quarter of 2020, due to favorable weather conditions.

In the third quarter of 2020, our sales volumes were lower across most of our major products compared to the third quarter of 2019.

In 2019, weather-related delays in the fertilizer application season resulted in delayed shipments from the second quarter into the third quarter of 2019.

Additionally, we experienced lower supply availability of granular urea and AN in the third quarter of 2020 due to plant turnaround and maintenance activity.

However, we experienced greater supply availability of ammonia, and, as a result, we shipped higher sales volumes of ammonia in the third quarter of 2020 compared to the third quarter of 2019 despite this seasonally slow time of year.

CF INDUSTRIES HOLDINGS, INC.

In the three months ended June 30, 2020, sales volume was 5.4 million product tons, a decrease of 6%, compared to sales volume of 5.7 million product tons for three months ended June 30, 2019.

In the three months ended September 30, 2020, sales volume was 4.7 million product tons compared to sales volume of 4.8 million product tons for three months ended September 30, 2019.

This decrease in sales volume resulted in a decrease in net sales of approximately $6 million.

Sales volumes in our granular urea, ammonia, Other and UAN segments decreased in the second quarter of 2020 compared to the second quarter of 2019, partially offset by an increase in our AN segmen t sales volumes.

In the six months ended June 30, 2020, sales volume was 10.1 million product tons, an increase of 3%, compared to sales volume of 9.8 million product tons for the six months ended June 30, 2019.

Sales volumes in our granular urea, UAN and AN segments decreased in the third quarter of 2020 compared to the third quarter of 2019, partially offset by an increase in sales volumes in our ammonia and Other segmen ts.

In the nine months ended September 30, 2020, sales volume was 14.8 million product tons, an increase of 2%, compared to sales volume of 14.6 million product tons for the nine months ended September 30, 2019.

This increase in sales volume resulted in an increase in net sales of approximately $67 million.

Sales volumes across all products increased in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Sales volumes in our ammonia, AN, UAN and Other segments increased in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, partially offset by a decrease in sales volume in our granular urea segment.

Selling Prices

The selling prices for all products were lower in the second quarter of 2020 than the second quarter of 2019 as global energy prices remained low, driving higher global nitrogen operating rates and the resulting additional global supply availability.

In the second quarter of 2020, the average selling price for our products was $224 per ton, a decrease of 15% compared to $263 per ton in the second quarter of 2019.

The third quarter is typically the slowest quarter for our business due to the seasonal nature of fertilizer applications in the Northern Hemisphere, which can also impact selling prices as seasonality impacts the supply and demand balance for our products.

The selling prices for all products were lower in the third quarter of 2020 than the third quarter of 2019 as global energy prices remained low, driving higher global nitrogen operating rates and the resulting additional global supply availability.

In the third quarter of 2020, the average selling price for our products was $179 per ton, a decrease of 18% compared to $218 per ton in the third quarter of 2019.

This resulted in a decrease in net sales of approximately $185 million.

In the six months ended June 30, 2020, the average selling price for our products was $216 per ton, or 15% lower compared to $255 per ton for the six months ended June 30, 2019.

In the nine months ended September 30, 2020, the average selling price for our products was $204 per ton, or 16% lower compared to $243 per ton for the nine months ended September 30, 2019.

This resulted in a decrease in net sales of approximately $586 million.

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Due to increases in natural gas production resulting from the rise in production from shale gas formations, natural gas prices in North America have declined over the last decade, but are subject to volatility.

Natural gas prices during the first half of 2020 were lower on average than in the first half of 2019, due in part to reduced demand related to measures designed to curb the spread of COVID-19, partially offset by reductions in supply.

The average daily market price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, for the three months ended June 30, 2020 was $1.65 per MMBtu compared to $2.51 per MMBtu for the three months ended June 30, 2019, a decrease of 34%.

The average daily market price at the Henry Hub for the six months ended June 30, 2020 was $1.76 per MMBtu compared to $2.70 per MMBtu for the six months ended June 30, 2019, a decrease of 35%.

Natural gas prices during the first nine months of 2020 were lower on average than in the first nine months of 2019, due in part to reduced energy demand as a result of the COVID-19 pandemic, partially offset by reductions in supply.

The average daily market price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, for the three months ended September 30, 2020 was $1.95 per MMBtu compared to $2.33 per MMBtu for the three months ended September 30, 2019, a decrease of 16%.

The average daily market price at the Henry Hub for the nine months ended September 30, 2020 was $1.82 per MMBtu compared to $2.57 per MMBtu for the nine months ended September 30, 2019, a decrease of 29%.

We also have manufacturing facilities located in the United Kingdom.

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The major natural gas trading point for the United Kingdom is the National Balancing Point (NBP).

The price of natural gas in the United Kingdom declined throughout the first half of 2020 as a result of increased availability of liquefied natural gas in the global market as well as the global economic downturn related to the COVID-19 pandemic.

The average daily market price of natural gas at NBP for the three months ended June 30, 2020 was $1.60 per MMBtu compared to $4.07 per MMBtu for the three months ended June 30, 2019, a decrease of 61%.

The average daily market price at NBP for the six months ended June 30, 2020 was $2.40 per MMBtu compared to $5.15 per MMBtu for the six months ended June 30, 2019, a decrease of 53%.

Natural gas costs in cost of sales, including the impact of realized natural gas derivatives, decreased 34% to $1.86 per MMBtu in the three months ended June 30, 2020 from $2.81 per MMBtu in the three months ended June 30, 2019, which resulted in an increase in gross margin of approximately $96 million.

Natural gas costs in cost of sales, including the impact of realized natural gas derivatives, decreased 30% to $2.20 per MMBtu in the six months ended June 30, 2020 from $3.15 per MMBtu in the six months ended June 30, 2019, which resulted in an increase in gross margin of approximately $183 million.

The price of natural gas in the United Kingdom declined throughout the first nine months of 2020 as a result of increased availability of liquefied natural gas in the global market as well as the global economic downturn related to the COVID-19 pandemic.

The average daily market price of natural gas at NBP for the three months ended September 30, 2020 was $2.69 per MMBtu compared to $3.42 per MMBtu for the three months ended September 30, 2019, a decrease of 21%.

The average daily market price at NBP for the nine months ended September 30, 2020 was $2.49 per MMBtu compared to $4.56 per MMBtu for the nine months ended September 30, 2019, a decrease of 45%.

Natural gas costs in cost of sales, including the impact of realized natural gas derivatives, decreased 15% to $1.91 per MMBtu in the three months ended September 30, 2020 from $2.24 per MMBtu in the three months ended September 30, 2019, which resulted in an increase in gross margin of approximately $30 million.

Natural gas costs in cost of sales, including the impact of realized natural gas derivatives, decreased 26% to $2.11 per MMBtu in the nine months ended September 30, 2020 from $2.86 per MMBtu in the nine months ended September 30, 2019, which resulted in an increase in gross margin of approximately $213 million.

CF INDUSTRIES HOLDINGS, INC.

Financial Executive Summary

We reported a net loss attributable to common stockholders of $28 million for the three months ended September 30, 2020 compared to net earnings attributable to common stockholders of $65 million for the three months ended September 30, 2019, a decrease in net earnings of $93 million.

The decrease in net earnings was due primarily to lower selling prices, which reduced gross margin, partially offset by a lower income tax provision.

Gross margin decreased by $145 million in the third quarter of 2020 to $83 million as compared to $228 million in the third quarter of 2019.

The decrease in gross margin was primarily driven by an 18% decrease in average selling prices, which reduced gross margin by $185 million, partially offset by a 15% decrease in natural gas costs, which increased gross margin by $30 million.

Due to lower earnings before income taxes, our income tax provision decreased by $32 million to income tax benefit of $13 million in the third quarter of 2020 as compared to income tax provision of $19 million in the third quarter of 2019.

Diluted net (loss) earnings per share attributable to common stockholders decreased $0.42 per share, to $(0.13) per share in the third quarter of 2020 compared to $0.29 per share in the third quarter of 2019.

This decrease is due primarily to lower net earnings, partially offset by a 3% reduction in diluted weighted-average common shares outstanding due to repurchases made under our share repurchase program.

On February 13, 2019, our Board of Directors (the Board) authorized the repurchase of up to $1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program).

In 2019, we repurchased approximately 7.6 million shares of CF Holdings common stock for $337 million, of which approximately 5.7 million shares were repurchased in the first nine months of 2019 for $250 million.

In the first quarter of 2020, we repurchased approximately 2.6 million shares for $100 million.

No shares were repurchased under the 2019 Share Repurchase Program in the second or third quarter of 2020.

See discussion under “Liquidity and Capital Resources—Share Repurchase Program,” below.

Items Affecting Comparability of Results

In addition to the impact of market conditions discussed above, certain items impacted the comparability of our financial results during the three and six months ended June 30, 2020 and 2019.

In addition to the impact of market conditions discussed above, certain items impacted the comparability of our financial results during the three and nine months ended September 30, 2020 and 2019.

The following table and related discussion outline these items and how they impacted the comparability of our financial results during these periods.

During the three months ended June 30, 2020 and 2019, we reported net earnings attributable to common stockholders of $190 million and $283 million, respectively.

During the six months ended June 30, 2020 and 2019, we reported net earnings attributable to common stockholders of $258 million and $373 million, respectively.

Three Months Ended June 30, Six Months Ended June 30,

During the three months ended September 30, 2020 and 2019, we reported net (loss) earnings attributable to common stockholders of $(28) million and $65 million, respectively.

During the nine months ended September 30, 2020 and 2019, we reported net earnings attributable to common stockholders of $230 million and $438 million, respectively.

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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(in millions)

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

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

$ — $ — $ 2 $ 2 $ (12) $ (9) $ 3 $ 3

COVID impacts:

Special COVID-19 bonus for operational workforce (1)

4 3 — — 19 15 — —

Turnaround deferral (1)

7 6 — — 7 6 — —

(Gain) loss on foreign currency transactions, including intercompany loans (2)

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1 1 — — 9 7 — —

Loss on sale of surplus land (2)

2 1 — — 2 1 — —

Insurance proceeds (2)

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— — — — (16) (32) — —

PLNL withholding tax charge (5)

— — 16 16 — — 16 16

______________________________________________________________________________

(1) Included in cost of sales in our consolidated statements of operations.

CF INDUSTRIES HOLDINGS, INC.

(2) Included in other operating—net in our consolidated statements of operations.

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(4) Included in interest income and income tax provision in our consolidated statements of operations.

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

(5) Included in equity in earnings (losses) of operating affiliate in our consolidated statements of operations.

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

Natural gas is the largest and most volatile single component of the manufacturing cost for nitrogen-based products.

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This can result in volatility in reported earnings due to the unrealized mark-to-market adjustments that occur from changes in the value of the derivatives, which are reflected in cost of sales in our consolidated statements of operations.

In the three months ended June 30, 2019, we recognized an unrealized net mark-to-market gain of $1 million.

In the six months ended June 30, 2020 and 2019, we recognized an unrealized net mark-to-market (gain) loss of $(12) million and $1 million, respectively.

Special COVID-19 bonus for operational workforce

In the nine months ended September 30, 2020 and 2019, we recognized an unrealized net mark-to-market (gain) loss of $(12) million and $3 million, respectively.

COVID impacts

In March 2020, a short-term bonus program was initiated to compensate operational employees for continuing their critical tasks during the COVID-19 pandemic.

The bonus program concluded in June 2020.

Approximately $19 million was paid as part of the program, of which approximately $15 million was recognized in cost of sales in our consolidated statement of operations for the three months ended June 30, 2020, with the remaining $4 million to be recognized in the third quarter of 2020.

Approximately $19 million was paid as part of the program and was recognized in cost of sales in our consolidated statements of operations for the nine months ended September 30, 2020, of which approximately $4 million was recognized in the third quarter of 2020 as the related inventory was sold.

In the three and nine months ended September 30, 2020, certain plant turnaround activities were deferred because of the COVID-19 pandemic.

As a result, we incurred $7 million of expense, which is recognized in cost of sales in our consolidated statements of operations.

(Gain) loss on foreign currency transactions, including intercompany loans

In the three and six months ended June 30, 2020, we recognized a (gain) loss of $(5) million and $13 million, respectively, primarily consisting of the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

CF INDUSTRIES HOLDINGS, INC.

In the nine months ended September 30, 2020 and 2019, we recognized a loss of $7 million and $12 million, respectively, primarily consisting of the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

Engineering cost write-off

In June 2020, a project at one of our nitrogen complexes was cancelled and $8 million of previously capitalized engineering costs were expensed in the three months ended June 30, 2020.

The expense is recognized in the line titled other operating—net in our consolidated statements of operations.

In June 2020, a project at one of our nitrogen complexes was cancelled and, as a result, $9 million of previously capitalized engineering costs were expensed in the nine months ended September 30, 2020.

The expense is reflected in other operating—net in our consolidated statements of operations.

Loss on sale of surplus land

In the three and nine months ended September 30, 2020, we recognized a loss of $2 million on the sale of surplus land, which is reflected in other operating—net in our consolidated statements of operations.

Insurance proceeds

In the six months ended June 30, 2020, we recognized income of $10 million related to insurance claims at one of our nitrogen complexes.

In the nine months ended September 30, 2020, we recognized income of $10 million related to insurance claims at one of our nitrogen complexes.

The $10 million of income consists of $8 million related to business interruption insurance proceeds and $2 million related to property insurance proceeds.

In the three and nine months ended September 30, 2019, we recognized income of $37 million related to insurance claims at one of our nitrogen complexes.

The $37 million of income consisted of $22 million related to business interruption proceeds and $15 million related to property insurance proceeds.

These proceeds are reflected in other operating—net in our consolidated statements of operations.

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In April 2019, we completed the sale, received proceeds of $55 million and recognized a pre-tax gain of $45 million.

The gain is reflected in other operating—net in our consolidated statement of operations for the three and six months ended June 30, 2019.

The gain is reflected in other operating—net in our consolidated statement of operations for the nine months ended September 30, 2019.

CF INDUSTRIES HOLDINGS, INC.

Louisiana incentive tax credit

For the six months ended June 30, 2019, our income tax provision included an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana nitrogen complex.

For the nine months ended September 30, 2019, our income tax provision included an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana nitrogen complex.

Terra amended tax returns

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(i) an income tax related matter and (ii) a withholding tax matter.

In December 2019, we received notification that the Joint Committee had approved the IRS audit reports and related income tax refunds relating to the income tax related matter, and in the second quarter of 2020, we received notification that the Joint Committee approved the IRS audit report and related withholding tax refunds relating to the withholding tax matter.

In late 2019, we received notification that the Joint Committee had approved the IRS audit reports and related income tax refunds relating to the income tax related matter, and in the second quarter of 2020, we received notification that the Joint Committee approved the IRS audit report and related withholding tax refunds relating to the withholding tax matter.

See “Liquidity and Capital Resources—Terra Amended Tax Returns,” below, for additional information.

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We received income tax refunds, including interest, of $108 million relating to these matters in the second quarter of 2020.

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

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

As a result of the finalization of these tax matters, all U.S.

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

CF INDUSTRIES HOLDINGS, INC.

Financial Executive Summary

We reported net earnings attributable to common stockholders of $190 million for the three months ended June 30, 2020 compared to $283 million for the three months ended June 30, 2019, a decrease in net earnings of $93 million, or 33%.

The decrease in net earnings was due primarily to the following:

• Gross margin decreased by $165 million in the second quarter of 2020 to $334 million as compared to $499 million in the second quarter of 2019.

The decrease in gross margin was primarily driven by a 15% decrease in average selling prices, which reduced gross margin by $198 million, and a 6% decrease in sales volume, which decreased gross margin by $56 million, partially offset by a 34% decrease in natural gas costs, which increased gross margin by $96 million.

• Other operating—net decreased by $43 million in the second quarter of 2020 to $6 million of expense as compared to $37 million of income in the second quarter of 2019.

The second quarter of 2019 included a gain on the sale of the Pine Bend facility of $45 million.

The second quarter of 2020 includes $8 million of expense related to the cancellation of a project.

Both of these items are more fully described above under “Items Affecting Comparability of Results.”

• Net interest expense decreased by $23 million in the second quarter of 2020 to $32 million as compared to $55 million in the second quarter of 2019.

The decrease was due primarily to $16 million of interest income related to the finalization of the Terra amended tax returns, which is more fully described under “Liquidity and Capital Resources—Terra Amended Tax Returns,” below.

In addition, the decrease reflects our redemption of $750 million of aggregate principal amount of long-term debt in the fourth quarter of 2019, which is more fully described under “Liquidity and Capital Resources—Senior Notes,” below.

• Our income tax provision decreased by $69 million in the second quarter of 2020 to $33 million as compared to $102 million in the second quarter of 2019 due to lower earnings before income taxes as well as t he impact of the finalization of the T erra amended tax returns, which is more fully described under “ Liquidity and Capital Resources —Terra Amended Tax Returns,” below.

Diluted net earnings per share attributable to common stockholders decreased 30%, or $0.39 per share, to $0.89 in the second quarter of 2020 compared to $1.28 in the second quarter of 2019.

On February 13, 2019, our Board of Directors (the Board) authorized the repurchase of up to $1 billion of CF Holdings common stock through December 31, 2021 (the 2019 Share Repurchase Program).

In 2019, we repurchased approximately 7.6 million shares of CF Holdings common stock for $337 million, of which approximately 4.2 million shares were repurchased in the first half of 2019 for $178 million.

No shares were repurchased in the three months ended June 30, 2020, and for the six months ended June 30, 2020, we repurchased approximately 2.6 million shares for $100 million.

See discussion under “Liquidity and Capital Resources—Share Repurchase Program,” below, for further information.

PLNL withholding tax charge

The Trinidadian tax authority (the Board of Inland Revenue) issued a proposed tax assessment against PLNL with respect to tax years 2011 and 2012 in the amount of approximately $12 million.

The proposed assessment asserted that PLNL should have withheld tax at a higher rate on dividends paid to its Trinidadian owners.

The Board of Inland Revenue also would have assessed statutory interest and penalties on the amount of tax owed when a final assessment was issued for the tax years 2011 and 2012.

During the third quarter of 2019, the Trinidadian government offered a tax amnesty period that provided taxpayers the opportunity to pay any prior year tax obligations and avoid accumulated interest or penalties.

During the tax amnesty period, PLNL evaluated the proposed assessment, including considering the outcome of certain recent legal cases involving other taxpayers.

As a result of this evaluation, in the third quarter of 2019, PLNL paid withholding tax to the Board of Inland Revenue under the amnesty program for tax years back to 2011, and recognized a charge for $32 million.

Our 50% share of PLNL’s tax charge is $16 million, which reduced our equity in earnings of operating affiliate for the three and nine months ended September 30, 2019.

CF INDUSTRIES HOLDINGS, INC.

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The following table presents our consolidated results of operations and supplemental data:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 v.

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Selling, general and administrative expenses 49 56 (7) (13) % 154 176 (22) (13) %

Other operating—net 6 (37) 43 N/M 12 (33) 45 N/M

Other operating—net (4) (30) 26 87 % 8 (63) 71 N/M

Total other operating costs and expenses 45 26 19 73 % 162 113 49 43 %

Equity in earnings of operating affiliate 3 1 2 200 % 6 8 (2) (25) %

Equity in earnings (losses) of operating affiliate 2 (14) 16 N/M 8 (6) 14 N/M

Operating earnings 40 188 (148) (79) % 467 828 (361) (44) %

Interest expense—net 48 59 (11) (19) % 123 170 (47) (28) %

Other non-operating—net (3) (2) (1) (50) % (3) (3) — — %

Earnings before income taxes 251 422 (171) (41) % 355 532 (177) (33) %

Income tax provision 33 102 (69) (68) % 46 94 (48) (51) %

Other non-operating—net 1 (4) 5 N/M (2) (7) 5 71 %

(Loss) earnings before income taxes (9) 133 (142) N/M 346 665 (319) (48) %

Income tax (benefit) provision (13) 19 (32) N/M 33 113 (80) (71) %

Net earnings 4 114 (110) (96) % 313 552 (239) (43) %

Net earnings attributable to noncontrolling interest 32 49 (17) (35) % 83 114 (31) (27) %

Net earnings attributable to common stockholders $ 190 $ 283 $ (93) (33) % $ 258 $ 373 $ (115) (31) %

Diluted net earnings per share attributable to common stockholders

$ 0.89 $ 1.28 $ (0.39) (30) % $ 1.20 $ 1.67 $ (0.47) (28) %

Net (loss) earnings attributable to common stockholders $ (28) $ 65 $ (93) N/M $ 230 $ 438 $ (208) (47) %

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

$ (0.13) $ 0.29 $ (0.42) N/M $ 1.07 $ 1.97 $ (0.90) (46) %

Diluted weighted-average common shares outstanding

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$ 1.92 $ 2.24 $ (0.32) (14) % $ 2.05 $ 2.87 $ (0.82) (29) %

Realized derivatives loss (gain) in cost of sales (2)

Realized derivatives (gain) loss in cost of sales (2)

(0.01) — (0.01) — % 0.06 (0.01) 0.07 N/M

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Average daily market price of natural gas National Balancing Point (UK) $ 2.69 $ 3.42 $ (0.73) (21) % $ 2.49 $ 4.56 $ (2.07) (45) %

Unrealized net mark-to-market (gain) loss on natural gas derivatives $ — $ (1) $ 1 100 % $ (12) $ 1 $ (13) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ — $ 2 $ (2) (100) % $ (12) $ 3 $ (15) N/M

Depreciation and amortization $ 212 $ 223 $ (11) (5) % $ 662 $ 663 $ (1) — %

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CF INDUSTRIES HOLDINGS, INC.

Second Quarter of 2020 Compared to Second Quarter of 2019

Our total net sales decreased $298 million, or 20%, to $1.20 billion in the second quarter of 2020 compared to $1.50 billion in the second quarter of 2019 due to a 15% decrease in average selling prices, which reduced net sales by $198 million, and a 6% decrease in sales volume, which decreased net sales by $100 million.

Average selling prices were $224 per ton in the second quarter of 2020, or 15% lower, compared to $263 per ton in the second quarter of 2019 due to lower average selling prices across all products, primarily driven by increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Additionally, in the second quarter of 2019, high water levels and flooding impacted shipping and logistics on inland rivers and reduced access to imports, which reduced supply availability and contributed to higher average selling prices in the second quarter of 2019.

Our total sales volume was 5.4 million product tons in the second quarter of 2020, or 6% lower, as compared to 5.7 million product tons in the second quarter of 2019 due primarily to lower sales volumes in our granular urea, ammonia, Other and UAN segments, partially offset by higher AN sales volumes.

The decrease was due primarily to the delayed spring application season in 2019 as a result of persistent cold and wet weather.

Additionally, certain shipments of granular urea occurred earlier, in the first quarter of 2020, due to favorable weather conditions.

The decrease in sales volumes in the second quarter of 2020 was also impacted by lower ammonia supply availability as a result of lower production.

Third Quarter of 2020 Compared to Third Quarter of 2019

Our total net sales decreased $191 million, or 18%, to $847 million in the third quarter of 2020 compared to $1.04 billion in the third quarter of 2019 due primarily to an 18% decrease in average selling prices, which reduced net sales by $185 million.

Our average selling price was $179 per ton in the third quarter of 2020, or 18% lower, compared to $218 per ton in the third quarter of 2019 due to lower average selling prices across all products, primarily driven by increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Our total sales volume of 4.7 million product tons in the third quarter of 2020 was essentially flat compared to the third quarter of 2019 as lower sales volume in our granular urea, UAN and AN segments was offset by higher sales volume in our ammonia and Other segments.

Cost of Sales

Our total cost of sales decreased $133 million, or 13%, to $870 million in the second quarter of 2020 from $1.00 billion in the second quarter of 2019.

The decrease in our cost of sales was due primarily to lower realized natural gas costs, including the impact of realized derivatives, and the impact of lower volumes, partially offset by higher costs related to plant turnaround and maintenance activity and the impact of the special COVID-19 bonus, which is more fully described in the section above titled “Items Affecting Comparability of Results—Special COVID-19 bonus for operational workforce.” Cost of sales averaged $162 per ton in the second quarter of 2020, a 7% decrease from $175 per ton in the second quarter of 2019.

Natural gas costs, including the impact of realized derivatives, decreased 34% to $1.86 per MMBtu in the second quarter of 2020 from $2.81 per MMBtu in the second quarter of 2019.

Our total cost of sales decreased $46 million, or 6%, to $764 million in the third quarter of 2020 from $810 million in the third quarter of 2019.

The decrease in our cost of sales was due primarily to lower realized natural gas costs, including the impact of realized derivatives, and lower distribution costs, partially offset by higher costs related to plant turnaround and maintenance activity.

Cost of sales averaged $162 per ton in the third quarter of 2020, a 5% decrease from $170 per ton in the third quarter of 2019.

Natural gas costs, including the impact of realized derivatives, decreased 15% to $1.91 per MMBtu in the third quarter of 2020 from $2.24 per MMBtu in the third quarter of 2019.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $11 million to $51 million in the second quarter of 2020 as compared to $62 million in the second quarter of 2019.

The decrease was due primarily to lower incentive compensation and lower corporate project activity as a result of the COVID-19 pandemic.

Selling, general and administrative expenses decreased $7 million to $49 million in the third quarter of 2020 as compared to $56 million in the third quarter of 2019.

The decrease was due primarily to lower incentive compensation as a result of lower operating results and lower corporate project activity as a result of the COVID-19 pandemic.

Other Operating—Net

Other operating—net was $6 million of expense in the second quarter of 2020 compared to $37 million of income in the second quarter of 2019.

The $6 million of expense in the second quarter of 2020 was due primarily to $8 million of expense related to the cancellation of a project, which is more fully described in the section above titled “Items Affecting Comparability of Results—Engineering cost write-off,” partially offset by a gain on foreign currency transactions of $5 million.

The gain on foreign currency transactions was due to the impact of changes in foreign currency exchange rates in the second quarter of 2020 on intercompany loans that were not permanently invested.

The $37 million of income in the second quarter of 2019 was primarily due to a gain recognized on the sale of the Pine Bend facility of $45 million, partially offset by foreign currency transaction losses.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $3 million in the second quarter of 2020 compared to $1 million in the second quarter of 2019.

The increase was due primarily to an increase in the operating results of PLNL.

Other operating—net was $4 million of income in the third quarter of 2020 compared to $30 million of income in the third quarter of 2019.

The $4 million of income in the third quarter of 2020 was due primarily to a gain on foreign currency transactions of $6 million, reflecting the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

The $30 million of income in the third quarter of 2019 was due primarily to insurance proceeds of $37 million.

See “Items Affecting Comparability of Results—Insurance proceeds,” above, for additional information.

Equity in Earnings (Losses) of Operating Affiliate

Equity in earnings of operating affiliate was $2 million in the third quarter of 2020 compared to losses of $14 million in the third quarter of 2019.

The loss in the third quarter of 2019 included approximately $16 million related to a withholding tax charge recognized by PLNL regarding a multi-year tax dispute.

See “Items Affecting Comparability of Results—PLNL withholding tax charge,” above, for additional information.

Interest Expense—Net

Net interest expense was $32 million in the second quarter of 2020 compared to $55 million in the second quarter of 2019.

In addition, the decrease reflects our redemption of $750 million aggregate principal amount of long-term debt in the fourth quarter of 2019, which is more fully described under “Liquidity and Capital Resources—Senior Notes,” below.

CF INDUSTRIES HOLDINGS, INC.

For the three months ended June 30, 2020, we recorded an income tax provision of $33 million on pre-tax income of $251 million, or an effective tax rate of 13.4%, compared to an income tax provision of $102 million on pre-tax income of $422 million, or an effective tax rate of 24.2%, for the three months ended June 30, 2019.

For the three months ended June 30, 2020, our income tax provision includes a $19 million benefit related to the settlement of the audit of the Terra amended tax returns, which is more fully described under “Liquidity and Capital Resources—Terra Amended Tax Returns,” below.

Net interest expense was $48 million in the third quarter of 2020 compared to $59 million in the third quarter of 2019.

The decrease was due primarily to our redemption of $750 million aggregate principal amount of long-term debt in the fourth quarter of 2019, which is more fully described under “Liquidity and Capital Resources—Senior Notes,” below.

For the three months ended September 30, 2020, we recorded an income tax benefit of $13 million on a pre-tax loss of $9 million, or an effective tax rate of 155.0%, compared to an income tax provision of $19 million on pre-tax income of $133 million, or an effective tax rate of 14.6%, for the three months ended September 30, 2019.

Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CFN, as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest.

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

Our effective tax rate for the three months ended June 30, 2019 of 24.2%, which is based on pre-tax income of $422 million, including $37 million attributable to the noncontrolling interest, would be 2.3 percentage points higher if based on pre-tax income exclusive of the $37 million attributable to the noncontrolling interest.

Our effective tax rate for the three months ended September 30, 2020 of 155.0%, which is based on pre-tax loss of $9 million, including $32 million of earnings attributable to the noncontrolling interest, would be 121.6 percentage points lower, or 33.4%, if based on pre-tax loss exclusive of the $32 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended September 30, 2019 of 14.6%, which is based on pre-tax income of $133 million, including $49 million

CF INDUSTRIES HOLDINGS, INC.

attributable to the noncontrolling interest, would be 8.5 percentage points higher, or 23.1%, if based on pre-tax income exclusive of the $49 million attributable to the noncontrolling interest.

See Note 10—Income Taxes and Note 13—Noncontrolling Interest for additional information.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest decreased $9 million to $28 million in the second quarter of 2020 from $37 million in the second quarter of 2019 due to lower earnings from CFN driven by lower average selling prices due primarily to increased global nitrogen supply availability.

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased $0.39 to $0.89 per diluted share in the second quarter of 2020 from $1.28 per diluted share in the second quarter of 2019.

Net earnings attributable to noncontrolling interest decreased $17 million to $32 million in the third quarter of 2020 from $49 million in the third quarter of 2019 due to lower earnings from CFN driven by lower average selling prices due primarily to increased global nitrogen supply availability.

Diluted Net (Loss) Earnings Per Share Attributable to Common Stockholders

Net (loss) earnings per share attributable to common stockholders decreased $0.42 to $(0.13) per diluted share in the third quarter of 2020 from $0.29 per diluted share in the third quarter of 2019.

This decrease reflects lower net earnings, partially offset by the impact of a 3% reduction in diluted weighted-average common shares outstanding due to repurchases made under our share repurchase program.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Our total net sales decreased $328 million, or 13%, to $2.18 billion in the first six months of 2020 as compared to $2.50 billion in the first six months of 2019 due to a 15% decrease in average selling prices, which reduced net sales by $401 million, partially offset by a 3% increase in sales volume, which increased net sales by $73 million.

Average selling prices were $216 per ton in the first six months of 2020, or 15% lower, as compared to $255 per ton in the first six months of 2019 due to lower average selling prices across all products, primarily driven by increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Additionally, in the first half of 2019, high water levels and flooding impacted shipping and logistics on inland rivers and reduced access to imports, which reduced supply availability and contributed to higher average selling prices in the first half of 2019.

Our total sales volume was 10.1 million product tons in the first six months of 2020, or 3% higher, as compared to 9.8 million product tons in the first six months of 2019 due to higher sales volume across all products, primarily driven by higher AN and UAN sales volumes.

Higher sales volume reflects the impact of more favorable weather that allowed greater fertilizer application during the spring of 2020 compared to 2019 and an increase in planted corn acres in the United States.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Our total net sales decreased $519 million, or 15%, to $3.02 billion in the first nine months of 2020 as compared to $3.54 billion in the first nine months of 2019 due to a 16% decrease in average selling prices, which reduced net sales by $586 million, partially offset by a 2% increase in sales volume, which increased net sales by $67 million.

Average selling prices were $204 per ton in the first nine months of 2020, or 16% lower, as compared to $243 per ton in the first nine months of 2019 due to lower average selling prices across all products, primarily driven by increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Our total sales volume was 14.8 million product tons in the first nine months of 2020, or 2% higher, as compared to 14.6 million product tons in the first nine months of 2019, due to greater supply availability.

Higher sales volume in our ammonia, AN, UAN and Other segments was partially offset by lower sales volumes in our granular urea segment.

Cost of Sales

Our total cost of sales decreased $147 million, or 8%, to $1.64 billion in the first six months of 2020 as compared to $1.78 billion in the first six months of 2019.

Our total cost of sales decreased $193 million, or 7%, to $2.40 billion in the first nine months of 2020 as compared to $2.59 billion in the first nine months of 2019.

The decrease in our cost of sales was due primarily to lower realized natural gas costs, including the impact of realized derivatives.

We recognized an unrealized net mark-to-market gain on natural gas derivatives of $12 million in the first six months of 2020 compared to an unrealized net mark-to-market loss of $1 million in the first six months of 2019.

These factors were partially offset by an increase in cost of sales due to higher sales volumes, higher distribution costs and costs related to the special COVID-19 bonus.

The special COVID-19 bonus is more fully described in the section above titled “Items Affecting Comparability of Results—Special COVID-19 bonus for operational workforce.” Cost of sales averaged $161 per ton in the first six months of 2020, a 12% decrease from $182 per ton in the first six months of 2019 due primarily to the impact of lower realized natural gas costs.

Natural gas costs, including the impact of realized derivatives,

CF INDUSTRIES HOLDINGS, INC.

decreased 30% to $2.20 per MMBtu in the first six months of 2020 from $3.15 per MMBtu in the first six months of 2019.

We recognized an unrealized net mark-to-market gain on natural gas derivatives of $12 million in the first nine months of 2020 compared to an unrealized net mark-to-market loss of $3 million in the first nine months of 2019.

These factors were partially offset by an increase in cost of sales due to higher sales volumes, higher costs related to plant turnaround and maintenance activity, and costs related to the special COVID-19 bonus.

The special COVID-19 bonus is more fully described in the section above titled “Items Affecting Comparability of Results—Special COVID-19 bonus for operational workforce.” Cost of sales averaged $162 per ton in the first nine months of 2020, a 9% decrease from $178 per ton in the first nine months of 2019 due primarily to the impact of lower realized natural gas costs.

Natural gas costs, including the impact of realized derivatives, decreased 26% to $2.11 per MMBtu in the first nine months of 2020 from $2.86 per MMBtu in the first nine months of 2019.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $15 million to $105 million in the first six months of 2020 as compared to $120 million in the first six months of 2019.

Selling, general and administrative expenses decreased $22 million to $154 million in the first nine months of 2020 as compared to $176 million in the first nine months of 2019.

The decrease was due primarily to lower corporate project activity as a result of the COVID-19 pandemic and lower incentive compensation.

CF INDUSTRIES HOLDINGS, INC.

Other Operating—Net

Other operating—net was $12 million of expense in the first six months of 2020 compared to $33 million of income in the first six months of 2019.

The expense in the first six months of 2020 includes foreign currency transaction losses of $13 million and $8 million of expense related to the cancellation of a project, which is more fully described in the section above titled “Items Affecting Comparability of Results—Engineering cost write-off.” These factors were partially offset by insurance proceeds of $10 million.

Other operating—net was $8 million of expense in the first nine months of 2020 compared to $63 million of income in the first nine months of 2019.

The expense in the first nine months of 2020 includes $9 million of expense related to the cancellation of a project, which is more fully described in the section above titled “Items Affecting Comparability of Results—Engineering cost write-off,” and foreign currency transaction losses of $7 million, due to the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

These factors were partially offset by insurance proceeds of $10 million.

See “Items Affecting Comparability of Results—Insurance proceeds,” above, for additional information.

The loss on foreign currency transactions was due to the impact of changes in foreign currency exchange rates in the first six months of 2020 on intercompany loans that were not permanently invested.

The $33 million of income in the first six months of 2019 was due primarily to the gain recognized on the sale of the Pine Bend facility of $45 million, partially offset by foreign currency transaction losses.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $6 million in the first six months of 2020 compared to $8 million in the first six months of 2019.

The decrease was due primarily to lower operating results of PLNL as a result of lower average selling prices.

The $63 million of income in the first nine months of 2019 was due primarily to the gain recognized on the sale of the Pine Bend facility of $45 million and insurance proceeds of $37 million, partially offset by foreign currency transaction losses.

Equity in Earnings (Losses) of Operating Affiliate

Equity in earnings of operating affiliate was $8 million in the first nine months of 2020 compared to losses of $6 million in the first nine months of 2019.

The loss in the first nine months of 2019 included approximately $16 million related to a withholding tax charge recognized by PLNL regarding a multi-year tax dispute.

See “Items Affecting Comparability of Results—PLNL withholding tax charge,” above, for additional information.

Interest Expense—Net

Net interest expense decreased by $36 million to $75 million in the first six months of 2020 compared to $111 million in the first six months of 2019.

Net interest expense decreased by $47 million to $123 million in the first nine months of 2020 compared to $170 million in the first nine months of 2019.

In addition, the decrease reflects $16 million of interest income in 2020 related to the finalization of the Terra amended tax returns, which is more fully described under “Liquidity and Capital Resources—Terra Amended Tax Returns,” below.

For the six months ended June 30, 2020, we recorded an income tax provision of $46 million on pre-tax income of $355 million, or an effective tax rate of 13.1%, compared to an income tax provision of $94 million on pre-tax income of $532 million, or an effective tax rate of 17.7%, for the six months ended June 30, 2019.

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

For the nine months ended September 30, 2020, we recorded an income tax provision of $33 million on pre-tax income of $346 million, or an effective tax rate of 9.4%, compared to an income tax provision of $113 million on pre-tax income of $665 million, or an effective tax rate of 17.1%, for the nine months ended September 30, 2019.

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

and foreign income tax audits, which primarily related to the settlement of the audit of the Terra amended tax returns, which is more fully described under “Liquidity and Capital Resources—Terra Amended Tax Returns,” below.

For the six months ended June 30, 2019, our income tax benefit included an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana nitrogen complex.

For the nine months ended September 30, 2019, our income tax benefit included an incentive tax credit from the State of Louisiana of $30 million, net of federal income tax, related to certain capital projects at our Donaldsonville, Louisiana nitrogen complex.

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

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

Our effective tax rate for the six months ended June 30, 2019 of 17.7%, which is based on pre-tax income of $532 million, including $65 million attributable to the noncontrolling interest, would be 2.4 percentage points higher if based on pre-tax income exclusive of the $65 million attributable to the noncontrolling interest.

Our effective tax rate for the nine months ended September 30, 2020 of 9.4%, which is based on pre-tax income of $346 million, including $83 million attributable to the noncontrolling interest, would be 3.0 percentage points higher, or 12.4%, if based on pre-tax income exclusive of the $83 million attributable to the noncontrolling interest.

Our effective tax rate for the nine months ended September 30, 2019 of 17.1%, which is based on pre-tax income of $665 million, including $114 million attributable to the noncontrolling interest, would be 3.5 percentage points higher, or 20.6%, if based on pre-tax income exclusive of the $114 million attributable to the noncontrolling interest.

See Note 10—Income Taxes and Note 13—Noncontrolling Interest for additional information.

CF INDUSTRIES HOLDINGS, INC.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest decreased $14 million to $51 million in the first six months of 2020 from $65 million in the first six months of 2019 due to lower earnings of CFN driven by lower average selling prices due primarily to increased global nitrogen supply availability.

Net earnings attributable to noncontrolling interest decreased $31 million to $83 million in the first nine months of 2020 from $114 million in the first nine months of 2019 due to lower earnings of CFN driven by lower average selling prices due primarily to increased global nitrogen supply availability.

CF INDUSTRIES HOLDINGS, INC.

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased $0.47 to $1.20 per diluted share in the first six months of 2020 from $1.67 per diluted share in the first six months of 2019.

Net earnings per share attributable to common stockholders decreased $0.90 to $1.07 per diluted share in the first nine months of 2020 from $1.97 per diluted share in the first nine months of 2019.

This decrease is due primarily to lower net earnings, partially offset by the impact of a 3% reduction in diluted weighted-average common shares outstanding due to repurchases made under our share repurchase program.

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The following table presents summary operating results by business segment:

Ammonia Granular

Ammonia Granular Urea (1)

(dollars in millions)

Three months ended June 30, 2020

Three months ended September 30, 2020

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

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Gross margin percentage (5.5) % 26.5 % 4.4 % 11.9 % 2.6 % 9.8 %

Three months ended June 30, 2019

Three months ended September 30, 2019

Net sales $ 187 $ 327 $ 309 $ 136 $ 79 $ 1,038

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Gross margin percentage (0.5) % 36.7 % 19.1 % 26.5 % 17.7 % 22.0 %

Six months ended June 30, 2020

Nine months ended September 30, 2020

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

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Gross margin percentage 15.7 % 33.1 % 14.7 % 15.5 % 14.3 % 20.5 %

Six months ended June 30, 2019

Nine months ended September 30, 2019

Net sales $ 847 $ 1,103 $ 934 $ 389 $ 268 $ 3,541

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The following table presents summary operating data for our ammonia segment:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 v.

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Cost of sales 174 188 (14) (7) % 609 654 (45) (7) %

Gross margin $102 $173 $(71) (41) % $122 $194 $(72) (37) %

Gross margin $ (9) $ (1) $ (8) N/M $ 113 $ 193 $ (80) (41) %

Gross margin percentage (5.5) % (0.5) % (5.0) % 15.7 % 22.8 % (7.1) %

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$ 253 $ 317 $ (64) (20) % $ 329 $ 405 $ (76) (19) %

Gross margin per product ton $91 $142 $(51) (36) % $65 $106 $(41) (39) %

Gross margin per product ton $ (11) $ (1) $ (10) N/M $ 42 $ 76 $ (34) (45) %

Gross margin per nutrient ton (1)

$111 $173 $(62) (36) % $79 $129 $(50) (39) %

$ (14) $ (2) $ (12) N/M $ 52 $ 92 $ (40) (43) %

Depreciation and amortization $ 34 $ 41 $ (7) (17) % $ 133 $ 123 $ 10 8 %

Unrealized net mark-to-market gain on natural gas derivatives $— $— $— — % $(4) $— $(4) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ — $ 1 $ (1) (100) % $ (4) $ 1 $ (5) N/M

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Nutrient tons represent the tons of nitrogen within the product tons.

Second Quarter of 2020 Compared to Second Quarter of 2019

Net sales in our ammonia segment decreased by $109 million, or 23%, to $364 million in the second quarter of 2020 from $473 million in the second quarter of 2019 due primarily to a 16% decrease in average selling prices and a 9% decrease in sales volume.

Average selling prices decreased to $326 per ton in the second quarter of 2020 compared to $387 per ton in the second quarter of 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Sales volume was lower due to supply availability resulting from plant turnaround and maintenance activity.

Third Quarter of 2020 Compared to Third Quarter of 2019

Net sales in our ammonia segment decreased by $22 million, or 12%, to $165 million in the third quarter of 2020 from $187 million in the third quarter of 2019 due primarily to a 20% decrease in average selling prices, partially offset by a 10% increase in sales volume.

Average selling prices decreased to $208 per ton in the third quarter of 2020 compared to $260 per ton in the third quarter of 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Higher sales volume was due to greater supply availability as a result of increased production.

Cost of Sales.

Cost of sales in our ammonia segment averaged $235 per ton in the second quarter of 2020, a 4% decrease from $245 per ton in the second quarter of 2019.

The decrease is due primarily to lower realized natural gas costs, partially offset by higher costs related to plant turnaround and maintenance activity and the impact of higher distribution costs.

Cost of sales in our ammonia segment averaged $219 per ton in the third quarter of 2020, a 16% decrease from $261 per ton in the third quarter of 2019.

The decrease is due primarily to the impact of lower realized natural gas costs, lower distribution costs and lower costs related to plant turnaround and maintenance activity.

Gross Margin .

Gross margin in our ammonia segment decreased by $71 million to $102 million in the second quarter of 2020 from $173 million in the second quarter of 2019, and our gross margin percentage was 28.0% in the second quarter of 2020 compared to 36.6% in the second quarter of 2019 .

The decrease in gross margin was due to a 16% decrease in average selling prices, which reduced gross margin by $67 million, a 9% decrease in sales volume, which decreased gross margin by $27 million, and an $18 million net increase in other manufacturing and distribution costs.

These factors were partially offset by a decrease in realized natural gas costs, which increased gross margin by $41 million.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net sales in our ammonia segment decreased by $103 million, or 16%, to $557 million in the six months ended June 30, 2020 from $660 million in the six months ended June 30, 2019 due primarily to an 18% decrease in average selling prices, partially offset by a 3% increase in sales volume.

Gross margin in our ammonia segment decreased by $8 million to $(9) million in the third quarter of 2020 from $(1) million in the third quarter of 2019, and our gross margin percentage was (5.5)% in the third quarter of 2020 compared to (0.5)% in the third quarter of 2019 .

The decrease in gross margin was due to a 20% decrease in average selling prices, which reduced gross margin by $40 million.

Lower average selling prices were partially offset by a $16 million net decrease in other manufacturing and distribution costs, a decrease in realized natural gas costs, which increased gross margin by $11 million, a 10% increase in sales volume, which increased gross margin by $4 million, and the impact of a $1 million unrealized net mark-to-market loss on natural gas derivatives in the third quarter of 2019 .

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Net sales in our ammonia segment decreased by $125 million, or 15%, to $722 million in the nine months ended September 30, 2020 from $847 million in the nine months ended September 30, 2019 due primarily to a 19% decrease in average selling prices, partially offset by a 5% increase in sales volume.

The decrease in average selling prices was due to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Sales volume was higher due to increased fertilizer applications from favorable weather conditions and higher planted corn acres in the United States in the six months ended June 30, 2020, which resulted in higher shipments.

Sales volume was higher due to greater supply availability.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

Cost of sales in our ammonia segment averaged $231 per ton in the six months ended June 30, 2020, a 9% decrease from $255 per ton in the six months ended June 30, 2019 due primarily to the impact of lower realized natural gas costs, partially offset by higher costs related to plant turnaround and maintenance activity and the impact of higher distribution costs.

Cost of sales in our ammonia segment averaged $228 per ton in the nine months ended September 30, 2020, an 11% decrease from $256 per ton in the nine months ended September 30, 2019 due primarily to the impact of lower realized natural gas costs.

Gross Margin .

Gross margin in our ammonia segment decreased by $72 million to $122 million in the six months ended June 30, 2020 from $194 million in the six months ended June 30, 2019, and our gross margin percentage was 21.9% in the six months ended June 30, 2020 compared to 29.4% in the six months ended June 30, 2019.

The decrease in gross margin was due to an 18% decrease in average selling prices, which reduced gross margin by $125 million and a $9 million net increase in other manufacturing and distribution costs.

These factors were partially offset by a decrease in realized natural gas costs, which increased gross margin by $51 million, a 3% increase in sales volume, which increased gross margin by $7 million, and a $4 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2020.

Gross margin in our ammonia segment decreased by $80 million to $113 million in the nine months ended September 30, 2020 from $193 million in the nine months ended September 30, 2019, and our gross margin percentage was 15.7% in the nine months ended September 30, 2020 compared to 22.8% in the nine months ended September 30, 2019.

The decrease in gross margin was due to a 19% decrease in average selling prices, which reduced gross margin by $165 million.

Lower average selling prices were partially offset by a decrease in realized natural gas costs, which increased gross margin by $62 million, a 5% increase in sales volume, which increased gross margin by $11 million, a $7 million net decrease in other manufacturing and distribution costs, and the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2020 compared to a $1 million unrealized net mark-to-market loss on natural gas derivatives in the nine months ended September 30, 2019.

Granular Urea Segment

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The following table presents summary operating data for our granular urea segment:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 v.

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Nutrient tons represent the tons of nitrogen within the product tons.

Second Quarter of 2020 Compared to Second Quarter of 2019

Net sales in our granular urea segment decreased $104 million, or 24%, to $329 million in the second quarter of 2020 from $433 million in the second quarter of 2019 due primarily to a 13% decrease in average selling prices and a 12% decrease in sales volume.

Average selling prices decreased to $250 per ton in the second quarter of 2020 compared to $289 per ton in the second quarter of 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Additionally, high water levels and flooding in the second quarter of 2019 impacted shipping and logistics on inland rivers and reduced access to imports, which contributed to higher average selling prices in the second quarter of 2019.

Sales volume was lower due primarily to more favorable weather conditions in the first quarter of 2020, which accelerated requests for early deliveries.

In addition, the delayed spring application season in the first quarter of 2019 shifted demand into the second quarter of 2019, which contributed to higher sales volumes in the second quarter of 2019.

Third Quarter of 2020 Compared to Third Quarter of 2019

Net sales in our granular urea segment decreased $78 million, or 24%, to $249 million in the third quarter of 2020 from $327 million in the third quarter of 2019 due primarily to an 18% decrease in average selling prices and an 8% decrease in sales volume.

Average selling prices decreased to $225 per ton in the third quarter of 2020 compared to $273 per ton in the third quarter of 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Sales volume was lower due primarily to lower supply availability due to plant turnaround and maintenance activity and lower inventory levels entering the third quarter of 2020 due to robust product shipments earlier in the year.

Cost of Sales.

Cost of sales in our granular urea segment averaged $156 per ton in the second quarter of 2020, a 7% decrease from $167 per ton in the second quarter of 2019, primarily driven by lower realized natural gas costs.

Cost of sales in our granular urea segment averaged $165 per ton in the third quarter of 2020, a 5% decrease from $173 per ton in the third quarter of 2019, primarily driven by lower production costs, including lower realized natural gas costs, and lower distribution costs.

CF INDUSTRIES HOLDINGS, INC.

Gross Margin .

Gross margin in our granular urea segment decreased by $58 million to $124 million in the second quarter of 2020 from $182 million in the second quarter of 2019, and our gross margin percentage was 37.7% in the second quarter of 2020 compared to 42.0% in the second quarter of 2019.

The decrease in gross margin was due to a 13% decrease in average selling prices, which decreased gross margin by $50 million, and a 12% decrease in sales volume, which decreased gross margin by $25 million.

These factors were partially offset by lower realized natural gas costs, which increased gross margin by $15 million and a $2 million net decrease in other manufacturing and distribution costs.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net sales in our granular urea segment decreased $110 million, or 14%, to $666 million in the six months ended June 30, 2020 from $776 million in the six months ended June 30, 2019 due primarily to a 15% decrease in average selling prices.

Average selling prices decreased to $247 per ton in the six months ended June 30, 2020 compared to $290 per ton in the six months ended June 30, 2019.

Gross margin in our granular urea segment decreased by $54 million to $66 million in the third quarter of 2020 from $120 million in the third quarter of 2019, and our gross margin percentage was 26.5% in the third quarter of 2020 compared to 36.7% in the third quarter of 2019.

The decrease in gross margin was due to an 18% decrease in average selling prices, which decreased gross margin by $52 million, and an 8% decrease in sales volume, which decreased gross margin by $12 million.

These factors were partially offset by a $7 million net decrease in other manufacturing and distribution costs and lower realized natural gas costs, which increased gross margin by $3 million.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Net sales in our granular urea segment decreased $188 million, or 17%, to $915 million in the nine months ended September 30, 2020 from $1.10 billion in the nine months ended September 30, 2019 due primarily to a 15% decrease in average selling prices and a 2% decrease in sales volume.

Average selling prices decreased to $241 per ton in the nine months ended September 30, 2020 compared to $284 per ton in the nine months ended September 30, 2019.

The decrease was due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Additionally, high water levels and flooding in the first half of 2019 impacted shipping and logistics on inland rivers and reduced access to imports, which contributed to higher average selling prices in the first half of 2019.

Sales volume in our granular urea segment was 2.7 million tons in the first six months of each of 2020 and 2019.

Sales volume was lower due primarily to lower supply availability as a result of plant turnaround and maintenance activity.

Cost of Sales.

Cost of sales in our granular urea segment averaged $159 per ton in the six months ended June 30, 2020, an 11% decrease from $179 per ton in the six months ended June 30, 2019.

Cost of sales in our granular urea segment averaged $161 per ton in the nine months ended September 30, 2020, a 9% decrease from $177 per ton in the nine months ended September 30, 2019.

The decrease was due primarily to lower realized natural gas costs.

Gross Margin .

Gross margin in our granular urea segment decreased by $60 million to $237 million in the six months ended June 30, 2020 from $297 million in the six months ended June 30, 2019, and our gross margin percentage was 35.6% in the six months ended June 30, 2020 compared to 38.3% in the six months ended June 30, 2019.

The decrease in gross margin was due to a 15% decrease in average selling prices, which decreased gross margin by $114 million.

This factor was partially offset by lower realized natural gas costs, which increased gross margin by $41 million, an $8 million net decrease in other manufacturing and distribution costs and the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2020 compared to a $1 million loss in the six months ended June 30, 2019.

Gross margin in our granular urea segment decreased by $114 million to $303 million in the nine months ended September 30, 2020 from $417 million in the nine months ended September 30, 2019, and our gross margin percentage was 33.1% in the nine months ended September 30, 2020 compared to 37.8% in the nine months ended September 30, 2019.

The decrease in gross margin was due to a 15% decrease in average selling prices, which decreased gross margin by $166 million, and a 2% decrease in sales volume, which decreased gross margin by $15 million.

These factors were partially offset by lower realized natural gas costs, which increased gross margin by $44 million, an $18 million net decrease in other manufacturing and distribution costs, and the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2020 compared to a $1 million loss in the nine months ended September 30, 2019.

Our UAN segment produces urea ammonium nitrate solution (UAN).

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The following table presents summary operating data for our UAN segment:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 v.

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Depreciation and amortization $ 69 $ 66 $ 3 5 % $ 186 $ 183 $ 3 2 %

Unrealized net mark-to-market gain on natural gas derivatives $ (1) $ (1) $ — — % $ (4) $ — $ (4) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ — $ 1 $ (1) (100) % $ (4) $ 1 $ (5) N/M

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Nutrient tons represent the tons of nitrogen within the product tons.

Second Quarter of 2020 Compared to Second Quarter of 2019

Net sales in our UAN segment decreased $61 million, or 17%, to $308 million in the second quarter of 2020 from $369 million in the second quarter of 2019 due primarily to a 15% decrease in average selling prices and a 2% decrease in sales volume.

Average selling prices decreased to $167 per ton in the second quarter of 2020 compared to $197 per ton in the second quarter of 2019 due primarily to increased imports into the United States as trade flows adjust in response to the European Union anti-dumping duties.

Additionally, high water levels and flooding in the second quarter of 2019 impacted shipping and logistics on inland rivers, which contributed to higher average selling prices in the second quarter of 2019.

The decrease in sales volume was due primarily to more favorable weather conditions in the first quarter of 2020, which accelerated requests for early deliveries.

Third Quarter of 2020 Compared to Third Quarter of 2019

Net sales in our UAN segment decreased $61 million, or 20%, to $248 million in the third quarter of 2020 from $309 million in the third quarter of 2019 due primarily to a 19% decrease in average selling prices and a 1% decrease in sales volume.

Average selling prices decreased to $144 per ton in the third quarter of 2020 compared to $177 per ton in the third quarter of 2019 due primarily to increased imports into the United States as trade flows continue to adjust in response to the European Union anti-dumping duties.

Cost of Sales.

Cost of sales in our UAN segment averaged $133 per ton in the second quarter of 2020, a 10% decrease from $148 per ton in the second quarter of 2019, primarily driven by lower realized natural gas costs.

Cost of sales in our UAN segment averaged $138 per ton in the third quarter of 2020, a 3% decrease from $143 per ton in the third quarter of 2019, primarily driven by lower realized natural gas costs and the impact of lower distribution costs.

Gross Margin .

Gross margin in our UAN segment decreased by $29 million to $63 million in the second quarter of 2020 from $92 million in the second quarter of 2019, and our gross margin percentage was 20.5% in the second quarter of 2020 compared to 24.9% in the second quarter of 2019.

The decrease in gross margin was due to a 15% decrease in average selling prices, which decreased gross margin by $53 million, and a 2% decrease in sales volume, which decreased gross margin by $3 million.

These factors were partially offset by lower realized natural gas costs, which increased gross margin by $24 million, and a $3 million net decrease in other manufacturing and distribution costs.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net sales in our UAN segment decreased $82 million, or 13%, to $543 million in the six months ended June 30, 2020 from $625 million in the six months ended June 30, 2019 due to a 16% decrease in average selling prices, partially offset by a 3% increase in sales volume.

Average selling prices decreased to $168 per ton in the six months ended June 30, 2020 compared to $199 per ton in the six months ended June 30, 2019, due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates and increased imports into the United States as trade flows adjust in response to the European Union anti-dumping duties.

The increase in sales volume was due primarily to favorable weather that allowed greater fertilizer application during the spring of 2020 compared to 2019 and an increase in planted corn acres in the United States.

Gross margin in our UAN segment decreased by $48 million to $11 million in the third quarter of 2020 from $59 million in the third quarter of 2019, and our gross margin percentage was 4.4% in the third quarter of 2020 compared to 19.1% in the third quarter of 2019.

The decrease in gross margin was due to a 19% decrease in average selling prices, which decreased gross margin by $62 million.

Lower average selling prices were partially offset by lower realized natural gas costs, which increased gross margin by $8 million, a $5 million net decrease in other manufacturing and distribution costs, and the impact of a $1 million unrealized net mark-to-market loss on natural gas derivatives in the third quarter of 2019 .

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Net sales in our UAN segment decreased $143 million, or 15%, to $791 million in the nine months ended September 30, 2020 from $934 million in the nine months ended September 30, 2019 due primarily to a 16% decrease in average selling prices, partially offset by a 2% increase in sales volume.

Average selling prices decreased to $160 per ton in the nine months ended September 30, 2020 compared to $191 per ton in the nine months ended September 30, 2019, due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates and increased imports into the United States as trade flows adjust in response to the European Union anti-dumping duties.

The increase in sales volume was due to greater supply availability.

Cost of Sales.

Cost of sales in our UAN segment averaged $135 per ton in the six months ended June 30, 2020, a 10% decrease from $150 per ton in the six months ended June 30, 2019.

Cost of sales in our UAN segment averaged $137 per ton in the nine months ended September 30, 2020, a 7% decrease from $148 per ton in the nine months ended September 30, 2019.

The decrease was due primarily to lower realized natural gas costs.

Gross Margin .

Gross margin in our UAN segment decreased by $48 million to $105 million in the six months ended June 30, 2020 from $153 million in the six months ended June 30, 2019, and our gross margin percentage was 19.3% in the six months ended June 30, 2020 compared to 24.5% in the six months ended June 30, 2019.

Gross margin in our UAN segment decreased by $96 million to $116 million in the nine months ended September 30, 2020 from $212 million in the nine months ended September 30, 2019, and our gross margin percentage was 14.7% in the nine months ended September 30, 2020 compared to 22.7% in the nine months ended September 30, 2019.

The decrease in gross margin was due to a 16% decrease in average selling prices, which decreased gross margin by $162 million, and a $14 million net increase in other manufacturing and distribution costs.

These factors were partially offset by lower realized natural gas costs, which increased gross margin by $56 million, a 3% increase in sales volume, which increased gross margin by $8 million, and the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2020.

These factors were partially offset by lower realized natural gas costs, which increased gross margin by $64 million, a 2% increase in sales volume, which increased gross margin by $11 million, and the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2020 compared to a $1 million loss in the nine months ended September 30, 2019.

CF INDUSTRIES HOLDINGS, INC.

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The following table presents summary operating data for our AN segment:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 v.

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Depreciation and amortization $ 25 $ 24 $ 1 4 % $ 76 $ 67 $ 9 13 %

Unrealized net mark-to-market loss on natural gas derivatives $ 1 $ — $ 1 N/M $ — $ — $ — — %

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

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N/M—Not Meaningful

(1) AN represents between 29% and 35% of nitrogen content.

Nutrient tons represent the tons of nitrogen within the product tons.

Second Quarter of 2020 Compared to Second Quarter of 2019

Net sales in our AN segment decreased $8 million, or 6%, to $118 million in the second quarter of 2020 from $126 million in the second quarter of 2019 due to a 14% decrease in average selling prices, partially offset by a 9% increase in sales volume.

Average selling prices decreased to $205 per ton in the second quarter of 2020 compared to $239 per ton in the second quarter of 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Sales volume increased due primarily to higher demand in Europe for agricultural applications and greater supply availability as a result of higher inventory levels entering the second quarter of 2020.

Third Quarter of 2020 Compared to Third Quarter of 2019

Net sales in our AN segment decreased $27 million, or 20%, to $109 million in the third quarter of 2020 from $136 million in the third quarter of 2019 due primarily to an 18% decrease in average selling prices and a 2% decrease in sales volume.

Average selling prices decreased to $199 per ton in the third quarter of 2020 compared to $242 per ton in the third quarter of 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

Sales volume declined due primarily to lower supply availability as a result of plant maintenance activity.

Cost of Sales.

Cost of sales in our AN segment averaged $158 per ton in the second quarter of 2020, an 11% decrease from $178 per ton in the second quarter of 2019.

Cost of sales in our AN segment averaged $175 per ton in the third quarter of 2020, a 2% decrease from $178 per ton in the third quarter of 2019.

The decrease was due primarily to lower realized natural gas costs.

Gross Margin .

Gross margin in our AN segment decreased $5 million, or 16%, to $27 million in the second quarter of 2020 from $32 million in the second quarter of 2019, and our gross margin percentage was 22.9% in the second quarter of 2020 compared to 25.4% in the second quarter of 2019.

The decrease in gross margin was due to a 14% decrease in average selling prices, which decreased gross margin by $22 million and the impact of a $1 million unrealized net mark-to-market loss on natural gas derivatives in the second quarter of 2020.

These factors were partially offset by a decrease in realized natural gas costs, which increased gross margin by $11 million, a net decrease of $4 million in other manufacturing and distribution costs, and a 9% increase in sales volume, which increased gross margin by $3 million.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net sales in our AN segment decreased $19 million, or 8%, to $234 million in the six months ended June 30, 2020 from $253 million in the six months ended June 30, 2019 due primarily to a 15% decrease in average selling prices, partially offset by a 9% increase in sales volume.

Average selling prices decreased to $208 per ton in the six months ended June 30, 2020 compared to $246 per ton in the six months ended June 30, 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due primarily to higher demand in Europe for agricultural applications and greater supply availability as a result of higher inventory levels entering the first quarter of 2020.

Gross margin in our AN segment decreased $23 million, or 64%, to $13 million in the third quarter of 2020 from $36 million in the third quarter of 2019, and our gross margin percentage was 11.9% in the third quarter of 2020 compared to 26.5% in the third quarter of 2019.

The decrease in gross margin was due to an 18% decrease in average selling prices, which decreased gross margin by $24 million, a 2% decrease in sales volume, which decreased gross margin by $3 million, and a net increase of $2 million in other manufacturing and distribution costs.

These factors were partially offset by a decrease in realized natural gas costs, which increased gross margin by $6 million.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Net sales in our AN segment decreased $46 million, or 12%, to $343 million in the nine months ended September 30, 2020 from $389 million in the nine months ended September 30, 2019 due primarily to a 16% decrease in average selling prices, partially offset by a 5% increase in sales volume.

Average selling prices decreased to $205 per ton in the nine months ended September 30, 2020 compared to $245 per ton in the nine months ended September 30, 2019 due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due to greater supply availability as a result of higher inventory levels entering 2020.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

Cost of sales in our AN segment averaged $172 per ton in the six months ended June 30, 2020, a 15% decrease from $202 per ton in the six months ended June 30, 2019.

Cost of sales in our AN segment averaged $173 per ton in the nine months ended September 30, 2020, an 11% decrease from $194 per ton in the nine months ended September 30, 2019.

The decrease was due primarily to lower realized natural gas costs and lower costs related to plant maintenance activity.

Gross Margin .

Gross margin in our AN segment decreased by $5 million, or 11%, to $40 million in the six months ended June 30, 2020 from $45 million in the six months ended June 30, 2019, and our gross margin percentage was 17.1% in the six months ended June 30, 2020 compared to 17.8% in the six months ended June 30, 2019.

Gross margin in our AN segment decreased by $28 million, or 35%, to $53 million in the nine months ended September 30, 2020 from $81 million in the nine months ended September 30, 2019, and our gross margin percentage was 15.5% in the nine months ended September 30, 2020 compared to 20.8% in the nine months ended September 30, 2019.

The decrease in gross margin was due to a 16% decrease in average selling prices, which decreased gross margin by $69 million.

This factor was partially offset by a decrease in realized natural gas costs, which increased gross margin by $23 million, a net decrease of $11 million in other manufacturing and distribution costs, and a 9% increase in sales volume, which increased gross margin by $6 million.

Lower average selling prices were partially offset by a decrease in realized natural gas costs, which increased gross margin by $29 million, a net decrease of $9 million in other manufacturing and distribution costs, and a 5% increase in sales volume, which increased gross margin by $3 million.

Other Segment

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The following table presents summary operating data for our Other segment:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 v.

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Depreciation and amortization $ 18 $ 18 $ — — % $ 52 $ 54 $ (2) (4) %

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

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

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(1) Nutrient tons represent the tons of nitrogen within the product tons.

Second Quarter of 2020 Compared to Second Quarter of 2019

Net sales in our Other segment decreased by $16 million, or 16%, to $85 million in the second quarter of 2020 from $101 million in the second quarter of 2019 due to a 7% decrease in average selling prices and a 10% decrease in sales volume.

The decrease in average selling prices is due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

The decrease in sales volume is due primarily to a decrease in demand for urea liquor, DEF and nitric acid as a result of the COVID-19 pandemic.

Third Quarter of 2020 Compared to Third Quarter of 2019

Net sales in our Other segment decreased by $3 million, or 4%, to $76 million in the third quarter of 2020 from $79 million in the third quarter of 2019 due primarily to a 10% decrease in average selling prices, partially offset by a 7% increase in sales volume.

The decrease in average selling prices was due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due primarily to an increase in DEF, NPK and nitric acid sales volumes.

Cost of Sales.

Cost of sales in our Other segment averaged $125 per ton in the second quarter of 2020, an 8% decrease from $136 per ton in the second quarter of 2019, due primarily to lower realized natural gas costs.

Cost of sales in our Other segment averaged $130 per ton in the third quarter of 2020, a 6% increase from $123 per ton in the third quarter of 2019, due primarily to higher costs related to plant maintenance activity and higher distribution costs.

Gross Margin .

Gross margin in our Other segment decreased by $2 million, or 10%, to $18 million in the second quarter of 2020 from $20 million in the second quarter of 2019, and our gross margin percentage was 21.2% in the second quarter of 2020 compared to 19.8% in the second quarter of 2019.

The decrease in gross margin was due to a 7% decrease in average selling prices, which reduced gross margin by $6 million, and a 10% decrease in sales volume, which decreased gross

Gross margin in our Other segment decreased by $12 million, or 86%, to $2 million in the third quarter of 2020 from $14 million in the third quarter of 2019, and our gross margin percentage was 2.6% in the third quarter of 2020 compared to 17.7% in the third quarter of 2019.

The decrease in gross margin was due to an $8 million net increase in other

CF INDUSTRIES HOLDINGS, INC.

margin by $4 million.

These factors were partially offset by a decrease in realized natural gas costs, which increased gross margin by $5 million, and a $3 million net decrease in other manufacturing and distribution costs.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net sales in our Other segment decreased by $14 million, or 7%, to $175 million in the six months ended June 30, 2020 from $189 million in the six months ended June 30, 2019 due to a 9% decrease in average selling prices, partially offset by a 2% increase in sales volume.

The decrease in average selling prices is due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

manufacturing and distribution costs and a 10% decrease in average selling prices, which reduced gross margin by $7 million.

These factors were partially offset by a decrease in realized natural gas costs, which increased gross margin by $2 million, and a 7% increase in sales volume, which increased gross margin by $1 million.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Net sales in our Other segment decreased by $17 million, or 6%, to $251 million in the nine months ended September 30, 2020 from $268 million in the nine months ended September 30, 2019 due primarily to a 10% decrease in average selling prices, partially offset by a 3% increase in sales volume.

The decrease in average selling prices was due primarily to increased global nitrogen supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due primarily to higher NPK and DEF sales volumes, partially offset by lower nitric acid sales volume.

Cost of Sales.

Cost of sales in our Other segment averaged $123 per ton in the six months ended June 30, 2020, a 13% decrease from $141 per ton in the six months ended June 30, 2019 due primarily to lower realized natural gas costs.

Cost of sales in our Other segment averaged $125 per ton in the nine months ended September 30, 2020, a 7% decrease from $135 per ton in the nine months ended September 30, 2019 due primarily to lower realized natural gas costs.

Gross Margin .

Gross margin in our Other segment increased by $4 million, or 13%, to $34 million in the six months ended June 30, 2020 from $30 million in the six months ended June 30, 2019, and our gross margin percentage was 19.4% in the six months ended June 30, 2020 compared to 15.9% in the six months ended June 30, 2019.

The increase in gross margin was due to a decrease in realized natural gas costs, which increased gross margin by $12 million, and a $9 million net decrease in other manufacturing and distribution costs.

These factors were partially offset by a 9% decrease in average selling prices, which reduced gross margin by $17 million.

CF INDUSTRIES HOLDINGS, INC.

Gross margin in our Other segment decreased by $8 million, or 18%, to $36 million in the nine months ended September 30, 2020 from $44 million in the nine months ended September 30, 2019, and our gross margin percentage was 14.3% in the nine months ended September 30, 2020 compared to 16.4% in the nine months ended September 30, 2019.

The decrease in gross margin was due to a 10% decrease in average selling prices, which reduced gross margin by $24 million.

Lower average selling prices were partially offset by a decrease in realized natural gas costs, which increased gross margin by $14 million, a 3% increase in sales volume, which increased gross margin by $1 million, and a $1 million net decrease in other manufacturing and distribution costs.

Liquidity and Capital Resources

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In March 2020, as the impact of the COVID-19 pandemic unfolded in many locations around the world, credit markets began to function less efficiently, causing concern about liquidity in credit markets generally.

In response to this and out of an abundance of caution, we borrowed $500 million under our $750 million revolving credit agreement to ensure we maintained ample financial flexibility in light of the uncertainty in the global markets, including the financial credit markets, caused by the pandemic.

In response to these market factors, the U.S.

Federal Reserve took steps to ensure ample liquidity in the market.

These actions by the Federal Reserve, together with other measures taken by the U.S.

government, including enactment of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), helped the financial markets return to more normal activity.

In April 2020, due to confidence in the functioning of the credit markets and strong nitrogen fertilizer business conditions, we repaid the $500 million of borrowings that were outstanding under our revolving credit agreement as of March 31, 2020.

As of June 30, 2020, our cash and cash equivalents balance was $563 million, an increase of $276 million from $287 million at December 31, 2019.

At June 30, 2020, we were in compliance with all applicable covenant requirements under our revolving credit agreement, senior notes and senior secured notes, and unused borrowing capacity under our revolving credit agreement was $750 million.

As of September 30, 2020, our cash and cash equivalents balance was $553 million, an increase of $266 million from $287 million at December 31, 2019.

At September 30, 2020, we were in compliance with all applicable covenant requirements under our revolving credit agreement, senior notes and senior secured notes, and unused borrowing capacity under our revolving credit agreement was $750 million.

Cash Equivalents

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and those guaranteed by entities affiliated with governmental entities.

CF INDUSTRIES HOLDINGS, INC.

Share Repurchase Program

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

During the first quarter of 2020, we repurchased approximately 2.6 million shares of CF Holdings common stock for $100 million.

No shares were repurchased in the three months ended June 30, 2020.

During the first quarter of 2020, we repurchased approximately 2.6 million shares of CF Holdings common stock under the the 2019 Share Repurchase Program for $100 million.

In the second quarter of 2020, we retired the approximately 2.6 million shares that were repurchased during the first quarter of 2020 under the 2019 Share Repurchase Program.

CF INDUSTRIES HOLDINGS, INC.

No shares were repurchased in the second or third quarter of 2020 under the 2019 Share Repurchase Program.

At September 30, 2020, we held 27,392 shares of treasury stock.

The following table summarizes the share repurchases under the 2019 Share Repurchase Program.

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First quarter 2.6 100

Second quarter — —

Total shares repurchased in 2020 2.6 100

Shares repurchased as of June 30, 2020 10.2 $ 437

Shares repurchased as of September 30, 2020

Capital Spending

We make capital expenditures to sustain our asset base, increase our capacity, improve plant efficiency and comply with various environmental, health and safety requirements.

Capital expenditures totaled $119 million in the first six months of 2020 compared to $154 million in the first six months of 2019.

In light of the uncertainty caused by the COVID-19 pandemic, including uncertainty regarding the duration of government actions implemented to slow the spread of the virus and the safety precautions we have implemented to protect the health and well-being of all our employees, we continue to plan for a range of scenarios and have taken actions to defer certain non-essential capital activity.

As a result, we currently anticipate that capital expenditures for the full year of 2020 will be approximately $350 million.

Capital expenditures totaled $206 million in the first nine months of 2020 compared to $297 million in the first nine months of 2019.

We currently anticipate that capital expenditures for the full year of 2020 will be approximately $350 million, after taking into account actions we have taken to defer certain non-essential capital activity as a result of uncertainty caused by the COVID-19 pandemic, including uncertainty regarding the duration of government actions implemented to slow the spread of the virus and the safety precautions we have implemented to protect the health and well-being of all our employees.

Planned capital expenditures are generally subject to change due to delays in regulatory approvals or permitting, unanticipated increases in cost, changes in scope and completion time, performance of third parties, delays in the receipt of equipment, adverse weather, defects in materials and workmanship, labor or material shortages, transportation constraints, acceleration or delays in the timing of the work and other unforeseen difficulties.

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(i) an income tax related matter and (ii) a withholding tax matter.

In December 2019, we received notification that the Joint Committee had approved the IRS audit reports and related income tax refunds relating to the income tax related matter.

CF INDUSTRIES HOLDINGS, INC.

In late 2019, we received notification that the Joint Committee had approved the IRS audit reports and related income tax refunds relating to the income tax related matter.

Therefore, we expected to receive cash refunds in 2020.

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• additional interest income of $16 million ($13 million, net of tax) related to both the income tax matter and the withholding tax matter,

CF INDUSTRIES HOLDINGS, INC.

• a reduction in our liabilities for unrecognized tax benefits of $12 million with a corresponding reduction in income tax expense related to the withholding tax matter, and

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We received income tax refunds, including interest, of $108 million relating to these matters in the second quarter of 2020, consisting of $68 million related to the income tax matter and $40 million related to the withholding tax matter.

In July 2020, we received an additional $2 million related to the withholding tax matter, which finalizes these matters with the IRS.

In the third quarter of 2020, we received an additional $2 million related to the withholding tax matter, which finalized these matters with the IRS.

As a result of the finalization of the income tax matter and the withholding tax matter, all U.S.

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Borrowings under the Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions, share repurchases and other general corporate purposes.

CF Industries, the lead borrower under the Revolving Credit Agreement, may designate as additional borrowers one or more of its wholly owned subsidiaries that are organized in the United States or any state thereof, or the District of Columbia, England and Wales or any other jurisdiction as mutually agreed to by all of the lenders party to the Revolving Credit Agreement, the administrative agent under the Revolving Credit Agreement and CF Industries.

Borrowings under the Revolving Credit Agreement may be denominated in U.S.

dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin, and the borrowers are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees.

dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to an applicable eurocurrency rate or base rate plus, in either case, a specified margin.

We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees.

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

CF Industries is the lead borrower under the Revolving Credit Agreement.

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

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In April 2020, due to confidence in the functioning of the credit markets and strong nitrogen fertilizer business conditions, we repaid the $500 million of borrowings that were outstanding under the Revolving Credit Agreement as of March 31, 2020, which returned our unused borrowing capacity under the Revolving Credit Agreement to $750 million.

As of June 30, 2020, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2020 or December 31, 2019.

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

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

There were no borrowings under the Prior Credit Agreement during the six months ended June 30, 2019.

As of September 30, 2020, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of September 30, 2020 or December 31, 2019.

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

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

There were no borrowings under the Prior Credit Agreement during the nine months ended September 30, 2019.

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

As of June 30, 2020, we were in compliance with all covenants under the Revolving Credit Agreement.

As of September 30, 2020, we were in compliance with all covenants under the Revolving Credit Agreement.

CF INDUSTRIES HOLDINGS, INC.

Letters of Credit

In addition to the letter of credit capacity under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement providing for up to $145 million of letters of credit.

As of June 30, 2020, approximately $126 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Long-term debt presented on our consolidated balance sheets as of June 30, 2020 and December 31, 2019 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate June 30, 2020 December 31, 2019

As of September 30, 2020, approximately $126 million of letters of credit were outstanding under this agreement.

Long-term debt presented on our consolidated balance sheets as of September 30, 2020 and December 31, 2019 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate September 30, 2020 December 31, 2019

Principal Carrying Amount (1)

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

Total unamortized debt discount was $9 million and $10 million as of June 30, 2020 and December 31, 2019, respectively, and total deferred debt issuance costs were $32 million and $33 million as of June 30, 2020 and December 31, 2019, respectively.

Total unamortized debt discount was $9 million and $10 million as of September 30, 2020 and December 31, 2019, respectively, and total deferred debt issuance costs were $31 million and $33 million as of September 30, 2020 and December 31, 2019, respectively.

Public Senior Notes

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The subsidiary guarantors of the Senior Secured Notes currently consist of CFE, CFS, CF USA and CFIDF.

CF INDUSTRIES HOLDINGS, INC.

Subject to certain exceptions, the obligations under the Senior Secured Notes and each guarantor’s related guarantee are secured by a first priority security interest in substantially all of the assets of CF Industries, CF Holdings and the subsidiary guarantors, including a pledge by CF USA of its equity interests in CFN and mortgages over certain material fee-owned domestic real properties (the Collateral).

The obligations under the Revolving Credit Agreement, together with certain letter of credit, cash management, hedging and similar obligations and future pari passu secured indebtedness, are secured by the Collateral on a pari passu basis with the Senior Secured Notes.

The liens on the Collateral securing the obligations under the

CF INDUSTRIES HOLDINGS, INC.

Senior Secured Notes of a series and the related guarantees will be automatically released and the covenant under the applicable indenture limiting dispositions of Collateral will no longer apply if CF Holdings has an investment grade corporate rating, with a stable or better outlook, from two of three selected ratings agencies and there is no default or event of default under the applicable indenture.

The liens on the Collateral securing the obligations under the Senior Secured Notes of a series and the related guarantees will be automatically released and the covenant under the applicable indenture limiting dispositions of Collateral will no longer apply if CF Holdings has an investment grade corporate rating, with a stable or better outlook, from two of three selected ratings agencies and there is no default or event of default under the applicable indenture.

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

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Any cash payments received in advance from customers in connection with forward sales contracts are reflected on our consolidated balance sheets as a current liability until control transfers and revenue is recognized.

As of June 30, 2020 and December 31, 2019, we had $8 million and $119 million, respectively, in customer advances on our consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, we had $143 million and $119 million, respectively, in customer advances on our consolidated balance sheets.

While customer advances are generally a significant source of liquidity, the level of forward sales contracts is affected by many factors including current market conditions and our customers’ outlook of future market fundamentals.

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Volatility in reported quarterly earnings can result from the unrealized mark-to-market adjustments in the value of the derivatives.

As of June 30, 2020, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 8.9 million MMBtus.

As of September 30, 2020, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 20.5 million MMBtus.

As of December 31, 2019, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 41.1 million MMBtus.

Defined Benefit Pension Plans

We contributed $13 million to our pension plans during the six months ended June 30, 2020.

We contributed $38 million to our pension plans during the nine months ended September 30, 2020.

Over the remainder of 2020, we expect to contribute an additional $7 million to our pension plans, or a total of approximately $45 million for the full year 2020.

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On July 31, 2020, CFN distributed $86 million to CHS for the distribution period ended June 30, 2020.

Operating Activities

Net cash provided by operating activities during the first six months of 2020 was $718 million, an increase of $25 million compared to $693 million in the first six months of 2019.

The increase in cash flow from operations was impacted by favorable changes in net working capital, with increases across all major categories of working capital, partially offset by lower net

The estimate of the partnership distribution earned by CHS, but not yet declared, for the third quarter of 2020 is approximately $32 million.

CF INDUSTRIES HOLDINGS, INC.

During the first six months of 2020, net changes in working capital contributed $77 million to cash flow from operations, while in the first six months of 2019 net changes in working capital reduced net cash flow from operations by $244 million.

As further described under Terra Amended Tax Returns above, we received income tax refunds, including interest, of $108 million in the first six months of 2020 related to the finalization of the amended U.S.

Operating Activities

Net cash provided by operating activities during the first nine months of 2020 was $941 million, a decrease of $262 million compared to $1.20 billion in the first nine months of 2019.

The decrease in cash flow from operations was impacted by lower net earnings, partially offset by favorable changes in net working capital.

During the first nine months of 2020, net changes in working capital contributed $69 million to cash flow from operations, while in the first nine months of 2019 net changes in working capital reduced cash flow from operations by $81 million.

As further described under Terra Amended Tax Returns above, we received income tax refunds, including interest, of $108 million in the first nine months of 2020 related to the finalization of the amended U.S.

tax returns related to Terra.

These refunds offset cash tax payments and contributed to the net increase in working capital in the first six months of 2020.

These refunds offset cash tax payments and contributed to the net increase in working capital in the first nine months of 2020.

We expect to be a domestic net cash tax payer going forward.

Investing Activities

Net cash used in investing activities was $117 million in the first six months of 2020 as compared to $91 million in the first six months of 2019.

Net cash used in investing activities in the first six months of 2019 included proceeds of $55 million related to the sale of our Pine Bend facility.

During the first six months of 2020, capital expenditures totaled $119 million compared to $154 million in the first six months of 2019.

Net cash used in investing activities was $201 million in the first nine months of 2020 as compared to $211 million in the first nine months of 2019.

Net cash used in investing activities in the first nine months of 2019 included proceeds of $55 million related to the sale of our Pine Bend facility.

During the first nine months of 2020, capital expenditures totaled $206 million compared to $297 million in the first nine months of 2019.

The decrease in capital expenditures in 2020 was due primarily to actions taken to defer certain non-essential capital project activity as a result of the COVID-19 pandemic and an increase in maintenance activity.

Financing Activities

Net cash used in financing activities was $323 million in the first six months of 2020 compared to net cash used in financing activities of $426 million in the same period of 2019.

Dividends paid on common stock during the six months ended June 30, 2020 and 2019 were $129 million and $133 million, respectively.

In the first six months of 2020, we spent $100 million to repurchase shares of common stock compared to $209 million in the first six months of 2019, which included approximately $33 million related to shares repurchased in late 2018 that were paid for in 2019.

Distributions to noncontrolling interest totaled $88 million in the first six months of 2020 as compared to $86 million in the first six months of 2019.

Net cash used in financing activities was $473 million in the first nine months of 2020 compared to $653 million in the first nine months of 2019.

The decrease was due primarily to lower share repurchases.

In the first nine months of 2020, we spent $100 million to repurchase shares of common stock compared to $280 million in the first nine months of 2019, which included approximately $33 million related to shares repurchased in late 2018 that were paid for in 2019.

Dividends paid on common stock during the nine months ended September 30, 2020 and 2019 were $193 million and $200 million, respectively.

Distributions to noncontrolling interest totaled $174 million in the first nine months of 2020 as compared to $186 million in the first nine months of 2019.

Contractual Obligations

During the six months ended June 30, 2020, except for the borrowing and repayment of $500 million under the Revolving Credit Agreement, there were no material changes outside the ordinary course of business to our contractual obligations described under the heading “Contractual Obligations” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 24, 2020.

During the nine months ended September 30, 2020, except for the borrowing and repayment of $500 million under the Revolving Credit Agreement, there were no material changes outside the ordinary course of business to our contractual obligations described under the heading “Contractual Obligations” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 24, 2020.

Off-Balance Sheet Arrangements

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Critical Accounting Policies and Estimates

There were no changes to our significant accounting policies or estimates during the first six months of 2020.

There were no changes to our significant accounting policies or estimates during the first nine months of 2020.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis