What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-05 · 311 added, 502 removed, 373 unchanged (69% of the section changed)

12 unchanged sentences

◦ Our Company

◦ Our Commitment to a Clean Energy Economy

◦ Market Conditions and Current Developments

2 unchanged sentences

• Consolidated Results of Operations

◦ 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

• Liquidity and Capital Resources

• Off-Balance Sheet Arrangements

• Critical Accounting Policies and Estimates

• Recent Accounting Pronouncements

• Critical Accounting Estimates

• Forward-Looking Statements

Overview of CF Holdings

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 hydrogen and nitrogen platform to serve customers and create long-term shareholder value.

Our mission is to provide clean energy to feed and fuel the world sustainably.

With our employees focused on safe and reliable operations, environmental stewardship, and disciplined capital and corporate management, we are on a path to decarbonize our ammonia production network – the world’s largest – to enable green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities.

Our nine manufacturing complexes in the United States, Canada and the United Kingdom, an extensive storage, transportation and distribution network in North America, and logistics capabilities enabling a global reach underpin our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy.

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

Our principal nitrogen fertilizer products are anhydrous ammonia (ammonia), granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

Our principal assets as of September 30, 2020 include:

Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen.

Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

Our principal assets as of March 31, 2021 include:

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

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• two Canadian nitrogen manufacturing facilities located in Medicine Hat, Alberta (the largest nitrogen complex in Canada) and Courtright, Ontario;

CF INDUSTRIES HOLDINGS, INC.

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

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

CF INDUSTRIES HOLDINGS, INC.

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

Our Commitment to a Clean Energy Economy

In October 2020, we announced that we are taking significant steps to support a global hydrogen and clean fuel economy, through the production of green and blue ammonia.

Since ammonia is one of the most efficient ways to transport and store hydrogen and is also a fuel in its own right, we believe that the Company, as the world’s largest producer of ammonia with an unparalleled manufacturing and distribution network and deep technical expertise, is uniquely positioned to fulfill anticipated demand for hydrogen and ammonia from green and blue sources.

Our approach will focus on green ammonia production, which refers to ammonia produced through a carbon-free process, and blue ammonia, which relates to ammonia produced by conventional processes but with CO 2 removed through carbon capture and sequestration (CCS) and other certified carbon abatement projects.

We have announced an initial green ammonia project at our flagship Donaldsonville nitrogen complex to produce approximately 20,000 tons per year of green ammonia.

Additionally, we are developing CCS and other carbon abatement projects across our production facilities that will enable us to produce blue ammonia.

Market Conditions and Current Developments

COVID-19 Pandemic

In March 2020, the World Health Organization characterized the outbreak of coronavirus disease 2019 (COVID-19) as a pandemic.

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 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 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 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.

In addition, since mid-March 2020, the majority of our non-operational personnel at our sites who work in administrative and operational support functions have worked remotely in order to maintain social distancing following governmental guidelines.

These administrative and operational support functions have operated effectively during this period, meeting our commitments to our customers and continuing to manage our business without interruption.

We have not furloughed any employees or instituted any reductions in pay or benefits or other significant cost containment measures due to the pandemic.

We participate in a global market, which includes a global supply chain and customer base.

The long-term effects of the COVID-19 pandemic are unclear and could adversely affect our business in the future.

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 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 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 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 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, 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 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 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 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.

Natural Gas Prices

Natural gas is the principal raw material used to produce nitrogen fertilizers.

Selling Prices and Sales Volume

Our average selling price was higher in the first quarter of 2021 than in the first quarter of 2020, driven by the impact of a tighter global nitrogen supply and demand balance as higher global energy costs drove lower global operating rates.

In the first quarter of 2021, the average selling price for our products was $230 per ton, an increase of 11%, compared to $207 per ton in the first quarter of 2020.

Higher average selling prices drove an increase in net sales of approximately $101 million.

We reported higher average selling prices in the first quarter of 2021 as compared to the first quarter of 2020 across most of our segments.

Our total sales volume was 3% lower in the first three months of 2021 compared to the first three months of 2020.

We shipped 4.6 million tons of product compared to 4.7 million tons in the first three months of 2020.

Lower sales volume drove a decrease in net sales of approximately $56 million.

The decrease in total sales volume was due primarily to the impact of decreased supply resulting from lower production in the first three months of 2021 in our ammonia, granular urea and AN segments as a result of severe weather conditions, which disrupted natural gas supply at certain of our facilities primarily as a result of Winter Storm Uri, and higher maintenance activity.

Lower sales volumes in our AN, ammonia and granular urea segments were partially offset by higher sales volumes in our UAN and Other segments.

Due to the lower production, we procured additional granular urea in order to meet obligations to customers and provide additional manufacturing flexibility once production resumed.

We purchased 97 thousand tons of granular urea for $33 million to meet customer obligations, which we sold to customers and recognized revenue of $32 million.

Natural gas is the principal raw material used to produce our nitrogen products.

We use natural gas both as a chemical feedstock and as a fuel to produce nitrogen products.

Natural gas is a significant cost component of manufactured nitrogen products, representing approximately one-third of our production costs.

Most of our nitrogen fertilizer manufacturing facilities are located in the United States and Canada.

As a result, the price of natural gas in North America directly impacts a substantial portion of our operating expenses.

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

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%.

In February 2021, the central portion of the United States experienced extreme and unprecedented cold weather due to the impact of Winter Storm Uri.

Certain natural gas suppliers and natural gas pipelines declared force majeure events due to natural gas well freeze-offs or frozen equipment.

This occurred at the same time as large increases in natural gas demand were occurring due to the cold temperatures.

Due to these unprecedented factors, several states declared a state of emergency and natural gas was redirected for residential usage.

At certain of our manufacturing locations, we reduced our natural gas consumption and therefore these plants either operated at reduced rates or temporarily suspended operations.

We net settled certain natural gas contracts with our suppliers and received prevailing market prices, which were in excess of our cost.

As a result, we recognized a gain of $112 million, which is reflected in cost of sales in our consolidated statement of operations for the three months ended March 31, 2021.

Most of our nitrogen manufacturing facilities are located in the United States and Canada.

As a result, the price of natural gas in North America, which is subject to volatility, directly impacts a substantial portion of our operating expenses.

Natural gas prices during the first three months of 2021 were higher than in the first three months of 2020, due primarily to the impact of extreme cold weather in the first quarter of 2021, including Winter Storm Uri in February 2021.

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 March 31, 2021 was $3.38 per MMBtu compared to $1.88 per MMBtu for the three months ended March 31, 2020, an increase of

CF INDUSTRIES HOLDINGS, INC.

As a result of Winter Storm Uri, the daily closing price at the Henry Hub reached a high of $23.61 per MMBtu on February 18, 2021.

We also have manufacturing facilities located in the United Kingdom.

Production costs for these facilities are subject to fluctuations associated with the price of natural gas in Europe.

These facilities are subject to fluctuations associated with the price of natural gas in Europe.

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

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.

The average daily market price of natural gas at NBP for the three months ended March 31, 2021 was $6.90 per MMBtu compared to $3.20 per MMBtu for the three months ended March 31, 2020, an increase of 116%.

The price of natural gas in the United Kingdom increased in the first three months of 2021 due primarily to a tighter supply and demand balance in the global liquefied natural gas market as a result of severe cold temperatures in Asia that increased global liquefied natural gas demand and resulted in record Asian prices for liquefied natural gas.

The cost of natural gas used for production, which includes the impact of realized natural gas derivatives and excludes the $112 million gain that resulted from returning/selling gas to our suppliers, increased 23% to $3.22 per MMBtu in the three months ended March 31, 2021 from $2.61 per MMBtu in the three months ended March 31, 2020.

This increase in natural gas costs resulted in a decrease in gross margin of approximately $48 million.

Manufacturing Costs and Granular Urea Purchases

In the first quarter of 2021, we experienced lower production levels and higher manufacturing and maintenance costs.

In response to these factors, we procured granular urea in order to meet obligations to customers and provide additional manufacturing flexibility once production resumed.

The following summarizes the impact from these activities:

• Certain of our plants operated at lower operating rates or temporarily suspended operations due to the lack of natural gas due to Winter Storm Uri or due to maintenance activity.

As a result, in the first quarter of 2021, we incurred higher costs for manufacturing, maintenance and repair activity for both scheduled and unscheduled downtime.

• Due to the lower production, we procured additional granular urea in order to meet obligations to customers.

We purchased approximately $33 million of granular urea to meet customer obligations, which we sold to customers and recognized revenue of $32 million.

COVID-19 Pandemic

In March 2020, the World Health Organization characterized the outbreak of coronavirus disease 2019 (COVID-19) as a pandemic.

Due to the use of fertilizer products in crop production to support the global food supply chain, our business operations were designated as part of the critical infrastructure by the United States and as essential businesses in the United Kingdom and Canada, with corresponding designations by those states and provinces in which we operate.

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

In addition, 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 response to the pandemic, we instituted and have continued to enforce 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.

Through the date of this report, we have not experienced any meaningful impact in customer demand as a result of the pandemic.

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.

We reported net earnings attributable to common stockholders of $151 million for the three months ended March 31, 2021 compared to $68 million for the three months ended March 31, 2020, an increase in net earnings of $83 million, or 122%.

The increase in net earnings was due primarily to higher average selling prices and the $112 million gain on the net settlement of certain natural gas contracts with our suppliers in February 2021, partially offset by higher natural gas costs and higher costs related to manufacturing, maintenance and repair activity due primarily to Winter Storm Uri.

Gross margin increased by $85 million in the first quarter of 2021 to $289 million as compared to $204 million in the first quarter of 2020.

The following table and related discussion describe the significant factors that drove the increase in gross margin.

Variance due to the following items:

First Quarter of 2020 Higher Average Selling Prices (1)

Higher Natural Gas Costs (2)

Unrealized MTM on natural gas derivatives Higher Manufacturing, Maintenance, and Other Costs Purchased Urea (1)

Gain on Net Settlement of Natural Gas Contracts First Quarter of 2021

(dollars in millions)

Net sales $ 971 $ 101 $ (56) $ — $ — $ — $ 32 $ — $ 1,048

Cost of sales 767 — (46) 48 6 63 33 (112) 759

Gross margin $ 204 $ 101 $ (10) $ (48) $ (6) $ (63) $ (1) $ 112 $ 289

Gross margin percentage 21.0 % 27.6 %

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(1) Selling price and volume impact of granular urea purchased to satisfy customer commitments is reflected in Purchased Urea column.

(2) Higher natural gas costs include the impact of realized natural gas derivatives.

• Average selling prices increased 11% to $230 per ton in the first quarter of 2021 from $207 per ton in the first quarter of 2020, which increased gross margin by $101 million,

• Sales volume declined by 3% to 4.6 million tons in the first quarter of 2021 from 4.7 million tons in the first quarter of 2020, which reduced gross margin by $10 million,

• The cost of natural gas used for production increased 23% to $3.22 per MMBtu in the first quarter of 2021 from $2.61 per MMBtu in the first quarter of 2020, which reduced gross margin by $48 million,

• We recognized a net unfavorable unrealized mark-to-market impact of $6 million as the first quarter of 2020 included an unrealized net mark-to-market gain of $12 million and the first quarter of 2021 included an unrealized net mark-to-market gain of $6 million,

• We incurred higher manufacturing, maintenance and other costs, which reduced gross margin by $63 million, due primarily to higher maintenance and repair activities, including the impact of winter storms,

• We purchased 97 thousand tons of granular urea for $33 million to meet obligations to customers, which we sold to customers and recognized revenue of $32 million, and

• The gain on the net settlement of certain natural gas contracts with our suppliers as a result of Winter Storm Uri was $112 million.

Diluted net earnings per share attributable to common stockholders increased $0.39 per share, to $0.70 per share in the first quarter of 2021 compared to $0.31 per share in the first quarter of 2020.

This increase is due primarily to higher net earnings driven by the increase in gross margin, as described above.

During the first quarter of 2021, we redeemed in full all of the remaining $250 million outstanding principal amount of the 3.400% senior secured notes due December 2021 and recognized a loss on debt extinguishment of $6 million.

CF INDUSTRIES HOLDINGS, INC.

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 nine months ended September 30, 2020 and 2019.

In addition to the impact of market conditions, winter storms and manufacturing and maintenance activity discussed above, certain items impacted the comparability of our financial results during the three months ended March 31, 2021 and 2020.

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 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

Pre-Tax After-Tax Pre-Tax After-Tax Pre-Tax After-Tax Pre-Tax After-Tax

During the three months ended March 31, 2021 and 2020, we reported net earnings attributable to common stockholders of $151 million and $68 million, respectively.

Three Months Ended March 31,

Pre-Tax After-Tax Pre-Tax After-Tax

(in millions)

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)

(6) (5) 5 4 7 5 12 9

Engineering cost write-off (2)

1 1 — — 9 7 — —

Loss on sale of surplus land (2)

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

$ (6) $ (5) $ (12) $ (9)

Loss on foreign currency transactions, including intercompany loans (2)

Insurance proceeds (2)

— — (37) (29) (10) (8) (37) (29)

Gain on sale of Pine Bend facility (2)

— — — — — — (45) (35)

Louisiana incentive tax credit (3)

— — — — — — — (30)

Terra amended tax returns—interest income and income tax benefit (4)

— — — — (16) (32) — —

PLNL withholding tax charge (5)

— — 16 16 — — 16 16

Loss on debt extinguishment 6 5 — —

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(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.

(3) Included in income tax provision in our consolidated statements of operations.

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

(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

Unrealized net mark-to-market 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 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 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 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, 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.

In the three months ended March 31, 2021 and 2020, we recognized unrealized net mark-to-market gains of $6 million and $12 million, respectively.

Loss on foreign currency transactions, including intercompany loans

In the three months ended March 31, 2020, we recognized a loss of $18 million, which consists of foreign currency exchange rate impacts on foreign currency denominated transactions, including the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

Insurance proceeds

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.

Gain on sale of Pine Bend facility

During the first quarter of 2019, we entered into an agreement to sell our Pine Bend dry bulk storage and logistics facility in Minnesota.

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 nine months ended September 30, 2019.

CF INDUSTRIES HOLDINGS, INC.

Louisiana incentive tax credit

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

We completed the acquisition of Terra Industries Inc.

(Terra) in April 2010.

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

parent for U.S.

and foreign income tax purposes was not appropriate.

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

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

tax aspects of the Amended Tax Returns.

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

Congress (the Joint Committee).

For purposes of its review, the Joint Committee separated the IRS audit reports into two separate matters:

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

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

As a result of these events, in the second quarter of 2020, we recognized $16 million of interest income and $16 million of income tax benefit, which consisted of the following:

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

• 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

• an additional income tax benefit of $7 million related to the income tax matter.

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

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.

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.

In the three months ended March 31, 2020, we recognized income of $10 million related to insurance claims at one of our nitrogen complexes, which consisted of $8 million related to business interruption proceeds and $2 million related to property insurance proceeds.

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

Loss on debt extinguishment

On March 20, 2021, we redeemed in full all of the remaining $250 million outstanding principal amount of the 3.400% senior secured notes due December 2021 (the 2021 Notes) in accordance with the optional redemption provisions in the indenture governing the 2021 Notes.

The total aggregate redemption price paid on the 2021 Notes in connection with the redemption was $258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $6 million, primarily consisting of a premium paid on the early redemption of the notes.

CF INDUSTRIES HOLDINGS, INC.

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

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

2020 2019 2020 v.

Three Months Ended March 31,

2021 2020 2021 v.

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Total other operating costs and expenses 53 60 (7) (12) %

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

Equity in earnings of operating affiliate 11 3 8 N/M

Operating earnings 247 147 100 68 %

Interest expense—net 48 43 5 12 %

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) %

Loss on debt extinguishment 6 — 6 N/M

Earnings before income taxes 193 104 89 86 %

Income tax provision 18 13 5 38 %

Net earnings 175 91 84 92 %

Net earnings attributable to noncontrolling interest 24 23 1 4 %

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) %

Net earnings attributable to common stockholders $ 151 $ 68 $ 83 122 %

Diluted net earnings per share attributable to common stockholders

$ 0.70 $ 0.31 $ 0.39 126 %

Diluted weighted-average common shares outstanding

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Natural gas supplemental data (per MMBtu)

Natural gas costs in cost of sales (1)

Cost of natural gas used for production in cost of sales (1)

$ 3.22 $ 2.61 $ 0.61 23 %

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

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

Cost of natural gas in cost of sales $ 1.91 $ 2.24 $ (0.33) (15) % $ 2.11 $ 2.86 $ (0.75) (26) %

Average daily market price of natural gas Henry Hub (Louisiana) $ 3.38 $ 1.88 $ 1.50 80 %

Average daily market price of natural gas National Balancing Point (UK) $ 6.90 $ 3.20 $ 3.70 116 %

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

Unrealized net mark-to-market gain on natural gas derivatives $ (6) $ (12) $ 6 50 %

Depreciation and amortization $ 204 $ 211 $ (7) (3) %

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N/M—Not Meaningful

(1) Includes the cost of natural gas and related transportation that is included in cost of sales during the period under the first-in, first-out inventory cost method.

(1) Includes the cost of natural gas used for production and related transportation that is included in cost of sales during the period under the first-in, first-out inventory cost method.

Includes realized gains and losses on natural gas derivatives settled during the period.

Excludes unrealized mark-to-market gains and losses on natural gas derivatives.

Excludes the $112 million gain on net settlement of certain natural gas contracts with our suppliers due to Winter Storm Uri in February 2021.

(2) Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN.

CF INDUSTRIES HOLDINGS, INC.

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.

First Quarter of 2021 Compared to First Quarter of 2020

Our total net sales increased $77 million, or 8%, to $1,048 million in the first quarter of 2021 compared to $971 million in the first quarter of 2020 due to an increase in average selling prices, partially offset by a decrease in sales volume.

Average selling prices increased by 11% due to strong market conditions, which was partially offset by a 3% decline in sales volume.

The increase in net sales also reflects the sale of 97 thousand tons of granular urea that we purchased during the first quarter of 2021 to meet obligations to customers.

Our average selling price was $230 per ton in the first quarter of 2021, or 11% higher, compared to $207 per ton in the first quarter of 2020 due to higher average selling prices across most of our segments, primarily driven by the impact of a tighter global nitrogen supply and demand balance, partially offset by a lower average selling price for our UAN segment as orders that were fulfilled in the first quarter of 2021 were taken and priced in the later portion of 2020 when selling prices were lower.

Our total sales volume of 4.6 million product tons in the first quarter of 2021 was 3% lower compared to 4.7 million tons in the first quarter of 2020 as lower sales volume in our AN, ammonia and granular urea segments was offset by higher sales volume in our UAN and Other segments.

Sales volume was lower due to the impact of lower production due to reduced plant operating rates or the temporary idling of certain plants due to Winter Storm Uri and maintenance and repair activity.

Cost of Sales

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.

Our total cost of sales decreased $8 million, or 1%, to $759 million in the first quarter of 2021 from $767 million in the first quarter of 2020.

The decrease in our cost of sales was due primarily to the gain we recognized from the net settlement of certain natural gas contracts with our suppliers due to Winter Storm Uri that reduced cost of sales, which is more fully described above in the section titled “Market Conditions and Current Developments.” This gain was partially offset by higher costs for natural gas, higher costs for purchased products, and higher manufacturing, maintenance and other costs due primarily to higher maintenance and repair activities, including the impact of winter storms.

We recognized a $112 million gain on the net settlement of certain natural gas contracts with our suppliers in February 2021 due to Winter Storm Uri, which is included in cost of sales.

Additionally, cost of sales declined by $46 million due primarily to a 3% decline in sales volume.

These reductions in cost of sales were partially offset by higher realized natural gas costs, including the impact of realized derivatives, which increased cost of sales by $48 million, and higher manufacturing, maintenance and other costs, which increased cost of sales by $63 million.

In addition, we purchased $33 million of granular urea during the first quarter of 2021 to meet obligations to customers.

Cost of sales averaged $167 per ton in the first quarter of 2021, a 2% increase from $163 per ton in the first quarter of 2020, reflecting the net impact of higher natural gas costs, the impact of higher quantities of purchased products, and higher manufacturing, maintenance and repair costs, partially offset by the $112 million gain on the net settlement of certain natural gas contracts in February 2021.

The cost of natural gas used for production, including the impact of realized derivatives, increased 23% to $3.22 per MMBtu in the first quarter of 2021 from $2.61 per MMBtu in the first quarter of 2020.

The cost of natural gas used for production of $3.22 per MMBtu in the first quarter of 2021 does not include the $112 million gain from the net settlement of certain natural gas contracts in February 2021.

Selling, General and Administrative Expenses

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.

Selling, general and administrative expenses were essentially unchanged at $55 million in the first quarter of 2021 as compared to $54 million in the first quarter of 2020.

Other Operating—Net

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.

Other operating—net was $2 million of income in the first quarter of 2021 compared to $6 million of expense in the first quarter of 2020.

The $2 million of income in the first quarter of 2021 was due primarily to the gain recognized on the recovery of certain precious metals from our manufacturing operations.

The $6 million of expense in the first quarter of 2020 was due primarily to foreign currency transaction losses of $18 million, which consists of foreign currency exchange rate impacts on foreign currency denominated transactions, including the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

These losses were partially offset by insurance proceeds of $10 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 $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 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 $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.

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 $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 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 $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 $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 $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.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $11 million in the first quarter of 2021 compared to $3 million in the first quarter of 2020.

The increase in the first quarter of 2021 was due primarily to an increase in the operating results of PLNL as a result of higher ammonia average selling prices.

Interest Expense—Net

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 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 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.

Net interest expense was $48 million in the first quarter of 2021 compared to $43 million in the first quarter of 2020.

The first quarter of 2020 included a $4 million reduction in interest accrued on the reserve for unrecognized tax benefits.

Loss on Debt Extinguishment

On March 20, 2021, we redeemed in full all of the remaining $250 million outstanding principal amount of the 2021 Notes in accordance with the optional redemption provisions in the indenture governing the 2021 Notes.

The total aggregate redemption price paid on the 2021 Notes in connection with the redemption was $258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $6 million, primarily consisting of a premium paid on the early redemption of the notes.

For the three months ended March 31, 2021, we recorded an income tax provision of $18 million on pre-tax income of $193 million, or an effective tax rate of 9.3%, compared to an income tax provision of $13 million on pre-tax income of $104 million, or an effective tax rate of 12.3%, for the three months ended March 31, 2020.

For the three months ended March 31, 2021, our income tax provision includes a $22 million benefit reflecting the impact of agreement on certain issues related to U.S.

federal income tax audits.

For the three months ended March 31, 2020, our income tax provision included a $6 million benefit related to the settlement of certain U.S.

and foreign income tax audits.

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 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.

Our effective tax rate for the three months ended March 31, 2021 of 9.3%, which is based on pre-tax income of $193 million, including $24 million of earnings attributable to the noncontrolling interest, would be 1.3 percentage points higher, or 10.6%, if based on pre-tax income exclusive of the $24 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended March 31, 2020 of 12.3%, which is based on pre-tax income of $104 million, including $23 million attributable to the noncontrolling interest, would be 3.5 percentage points higher, or 15.8%, if based on pre-tax income exclusive of the $23 million attributable to the noncontrolling interest.

See Note 9—Income Taxes and Note 13—Noncontrolling Interest for additional information.

Net Earnings Attributable to Noncontrolling Interest

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.

Net earnings attributable to noncontrolling interest were essentially unchanged at $24 million in the first quarter of 2021 as compared to $23 million in the first quarter of 2020.

Diluted Net Earnings Per Share Attributable to Common Stockholders

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.

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

Net earnings per share attributable to common stockholders increased $0.39 to $0.70 per diluted share in the first quarter of 2021 from $0.31 per diluted share in the first quarter of 2020.

This increase was due primarily to the increase in net earnings, driven by higher gross margin, as described above.

CF INDUSTRIES HOLDINGS, INC.

Operating Results by Business Segment

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Total other operating costs and expenses (consisting of selling, general and administrative expenses and other operating—net) and non-operating expenses (interest and income taxes), are centrally managed and are not included in the measurement of segment profitability reviewed by management.

The following table presents summary operating results by business segment:

Ammonia Granular Urea (1)

The following table presents summary operating results by business segment for the first quarter of 2021 and the major drivers of the variance in net sales, cost of sales and gross margin compared to the first quarter of 2020:

Variance due to the following items:

First Quarter of 2020 Higher (Lower) Average Selling Prices (1)

Higher Natural Gas Costs (2)

Unrealized MTM on natural gas derivatives Higher Manufacturing, Maintenance and Other Costs Purchased Urea (1)

Gain on Net Settlement of Natural Gas Contracts First Quarter of 2021

(dollars in millions)

Three months ended September 30, 2020

Net sales $ 971 $ 101 $ (56) $ — $ — $ — $ 32 $ — $ 1,048

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Gross margin percentage 21.0 % 27.6 %

Three months ended September 30, 2019

Net sales $ 193 $ 30 $ (17) $ — $ — $ — $ — $ — $ 206

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Gross margin percentage 10.4 % 61.2 %

Nine months ended September 30, 2020

Granular Urea

Net sales $ 337 $ 66 $ (36) $ — $ — $ — $ 32 $ — $ 399

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Gross margin percentage 33.5 % 33.8 %

Nine months ended September 30, 2019

Net sales $ 235 $ (23) $ 20 $ — $ — $ — $ — $ — $ 232

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Gross margin percentage 17.9 % 0.9 %

Net sales $ 116 $ 12 $ (23) $ — $ — $ — $ — $ — $ 105

Cost of sales 103 — (20) 8 1 3 — — 95

Gross margin $ 13 $ 12 $ (3) $ (8) $ (1) $ (3) $ — $ — $ 10

Gross margin percentage 11.2 % 9.5 %

Net sales $ 90 $ 16 $ — $ — $ — $ — $ — $ — $ 106

Cost of sales 74 — (3) 5 — 14 — — 90

Gross margin $ 16 $ 16 $ 3 $ (5) $ — $ (14) $ — $ — $ 16

Gross margin percentage 17.8 % 15.1 %

_______________________________________________________________________________

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

(1) Selling price and volume impact of granular urea purchased to satisfy customer commitments is reflected in Purchased Urea column.

(2) Higher natural gas costs include the impact of realized natural gas derivatives.

CF INDUSTRIES HOLDINGS, INC.

Ammonia Segment

Our ammonia segment produces anhydrous ammonia (ammonia), which is our most concentrated nitrogen fertilizer as it contains 82% nitrogen.

Our ammonia segment produces anhydrous ammonia (ammonia), which is our most concentrated nitrogen product.

Ammonia contains 82% nitrogen and 18% hydrogen.

The results of our ammonia segment consist of sales of ammonia to external customers.

In addition, ammonia is the “basic” nitrogen product that we upgrade into other nitrogen products such as granular urea, UAN and AN.

In addition, ammonia is the base nitrogen product that we upgrade into other nitrogen products such as granular urea, UAN and AN.

We produce ammonia at all of our nitrogen manufacturing complexes.

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

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

2020 2019 2020 v.

Three Months Ended March 31,

2021 2020 2021 v.

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Depreciation and amortization $ 36 $ 39 $ (3) (8) %

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

Unrealized net mark-to-market gain on natural gas derivatives $ (2) $ (4) $ 2 50 %

_______________________________________________________________________________

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

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.

First Quarter of 2021 Compared to First Quarter of 2020

Net sales in our ammonia segment increased by $13 million, or 7%, to $206 million in the first quarter of 2021 from $193 million in the first quarter of 2020 due primarily to a 19% increase in average selling prices, partially offset by a 10% decrease in sales volume.

Average selling prices increased to $302 per ton in the first quarter of 2021 compared to $253 per ton in the first quarter of 2020 due primarily to the impact of a tighter global nitrogen supply and demand balance.

Sales volume was lower due primarily to lower supply availability resulting from reduced production.

Cost of Sales.

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.

Cost of sales in our ammonia segment averaged $118 per ton in the first quarter of 2021, a 48% decrease from $227 per ton in the first quarter of 2020.

The decrease is due primarily to the impact of the $112 million gain on the net settlement of certain natural gas contracts with our suppliers in February 2021.

See “Market Conditions and Current Developments” above, for additional information on the operational impacts of Winter Storm Uri.

The $112 million gain on the net settlement of certain natural gas contracts reduced cost of sales by $164 per ton.

Cost of sales per ton, exclusive of the gain, is $282 per ton, a 24% increase compared to the first quarter of 2020.

The increase reflects higher maintenance and repair activity due primarily to Winter Storm Uri and higher realized natural gas costs.

Gross Margin .

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 greater supply availability.

Gross margin in our ammonia segment increased by $106 million to $126 million in the first quarter of 2021 from $20 million in the first quarter of 2020, and our gross margin percentage was 61.2% in the first quarter of 2021 compared to 10.4% in the first quarter of 2020 .

The increase in gross margin was due primarily to the $112 million gain on the net settlement of certain natural gas contracts in February 2021 and a 19% increase in average selling prices, which increased gross margin by $30 million.

These factors were partially offset by the impact of a $25 million net increase in manufacturing, maintenance and other costs, including the impact of Winter Storm Uri, an increase in realized natural gas costs, which reduced gross margin by $5 million, a 10% decrease in sales volume, which decreased gross margin by $4 million, and the impact of a $2 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2021 compared to a $4 million gain in the first quarter of 2020 .

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

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 $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 September 30, Nine Months Ended September 30,

2020 2019 2020 v.

Three Months Ended March 31,

2021 2020 2021 v.

14 unchanged sentences

Depreciation and amortization $ 66 $ 72 $ (6) (8) %

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

Unrealized net mark-to-market gain on natural gas derivatives $ (2) $ (4) $ 2 50 %

_______________________________________________________________________________

N/M—Not Meaningful

(1) Granular urea represents 46% nitrogen content.

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

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 $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 $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.

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

First Quarter of 2021 Compared to First Quarter of 2020

Net sales in our granular urea segment increased $62 million, or 18%, to $399 million in the first quarter of 2021 from $337 million in the first quarter of 2020 due primarily to a 24% increase in average selling prices, partially offset by a 4% decrease in sales volume.

Average selling prices increased to $302 per ton in the first quarter of 2021 compared to $244 per ton in the first quarter of 2020 due primarily to a tighter global nitrogen supply and demand balance.

Sales volume was lower due primarily to lower supply availability resulting from reduced production due to the impact of Winter Storm Uri and maintenance and repair activity.

See “Market Conditions and Current Developments” above for further information on the operational impacts of Winter Storm Uri.

Due to the reduced production, we purchased additional granular urea to meet obligations to customers, which we sold for $32 million.

Cost of Sales.

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.

Cost of sales in our granular urea segment averaged $200 per ton in the first quarter of 2021, a 23% increase from $162 per ton in the first quarter of 2020, due primarily to the impact of purchasing $33 million of granular urea to meet obligations to customers.

In addition, the increase in cost of sales per ton resulted from higher realized natural gas costs and higher costs related to maintenance and repair activity due primarily to Winter Storm Uri.

Gross Margin .

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.

Gross margin in our granular urea segment increased by $22 million to $135 million in the first quarter of 2021 from $113 million in the first quarter of 2020, and our gross margin percentage was 33.8% in the first quarter of 2021 compared to 33.5% in the first quarter of 2020.

The increase in gross margin was due to higher average selling prices, which increased gross margin by $66 million.

Partially offsetting the increase in average selling prices was the impact of an increase in realized natural gas costs, which decreased gross margin by $16 million, higher manufacturing, maintenance and other costs, including the impact of Winter Storm Uri, reduced gross margin by $11 million, a decrease in sales volume, which decreased gross margin by $14 million, the impact of a $2 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2021 compared to a $4 million gain in the first quarter of 2020, and a $1 million loss on the sale of purchased urea.

In addition, due to the impact of Winter Storm Uri, we experienced lower production during the first quarter of 2021 and purchased 97 thousand tons of granular urea for $33 million to meet obligations to customers, which was sold for $32 million, which had the impact of reducing our gross margin percentage in our granular urea segment by 3.3 percentage points.

CF INDUSTRIES HOLDINGS, INC.

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 September 30, Nine Months Ended September 30,

2020 2019 2020 v.

Three Months Ended March 31,

2021 2020 2021 v.

14 unchanged sentences

Depreciation and amortization $ 56 $ 52 $ 4 8 %

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

Unrealized net mark-to-market gain on natural gas derivatives $ (2) $ (3) $ 1 33 %

_______________________________________________________________________________

N/M—Not Meaningful

CF INDUSTRIES HOLDINGS, INC.

(1) UAN represents between 28% and 32% of nitrogen content.

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

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 $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 $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.

First Quarter of 2021 Compared to First Quarter of 2020

Net sales in our UAN segment decreased $3 million, or 1%, to $232 million in the first quarter of 2021 from $235 million in the first quarter of 2020 due primarily to a 9% decrease in average selling prices, partially offset by a 9% increase in sales volume.

Average selling prices decreased to $153 per ton in the first quarter of 2021 compared to $169 per ton in the first quarter of 2020 as orders that were fulfilled in the first quarter of 2021 were taken and priced in the later portion of 2020 when selling prices were lower.

Sales volume was higher due primarily to increased production and higher demand from fall 2020 forward commitments.

Cost of Sales.

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.

Cost of sales in our UAN segment averaged $152 per ton in the first quarter of 2021, a 9% increase from $139 per ton in the first quarter of 2020, due primarily to the impact of higher realized natural gas costs.

Gross Margin .

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 $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.

Gross margin in our UAN segment decreased by $40 million to $2 million in the first quarter of 2021 from $42 million in the first quarter of 2020, and our gross margin percentage was 0.9% in the first quarter of 2021 compared to 17.9% in the first quarter of 2020.

The decrease in gross margin was due to a 9% decrease in average selling prices, which decreased gross margin by $23 million, higher realized natural gas costs, which decreased gross margin by $14 million, a $10 million net increase in manufacturing, maintenance and other costs, and the impact of a $2 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2021 compared to a $3 million gain in the first quarter of 2020 .

These factors were partially offset by a 9% increase in sales volume, which increased gross margin by $8 million.

CF INDUSTRIES HOLDINGS, INC.

4 unchanged sentences

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

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

2020 2019 2020 v.

Three Months Ended March 31,

2021 2020 2021 v.

14 unchanged sentences

Depreciation and amortization $ 19 $ 26 $ (7) (27) %

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

Unrealized net mark-to-market gain on natural gas derivatives $ — $ (1) $ 1 100 %

_______________________________________________________________________________

1 unchanged sentence

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

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.

First Quarter of 2021 Compared to First Quarter of 2020

Net sales in our AN segment decreased $11 million, or 9%, to $105 million in the first quarter of 2021 from $116 million in the first quarter of 2020 due primarily to a 20% decrease in sales volume, partially offset by a 13% increase in average selling prices.

Sales volume declined due primarily to lower supply availability resulting from lower inventory levels entering 2021 and reduced production.

Average selling prices increased to $240 per ton in the first quarter of 2021 compared to $212 per ton in the first quarter of 2020 due primarily to a tighter global nitrogen supply and demand balance.

Cost of Sales.

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.

Cost of sales in our AN segment averaged $217 per ton in the first quarter of 2021, a 15% increase from $188 per ton in the first quarter of 2020.

The increase was due primarily to higher realized natural gas costs.

Gross Margin .

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.

Gross margin in our AN segment decreased $3 million, or 23%, to $10 million in the first quarter of 2021 from $13 million in the first quarter of 2020, and our gross margin percentage was 9.5% in the first quarter of 2021 compared to 11.2% in the first quarter of 2020.

The decrease in gross margin was due to an increase in realized natural gas costs, which decreased gross margin by $8 million, a 20% decrease in sales volume, which decreased gross margin by $3 million, a net increase of $3 million in manufacturing, maintenance and other costs, and the impact of a $1 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2020.

These factors were partially offset by a 13% increase in average selling prices, which increased gross margin by $12 million.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

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 $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.

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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• Urea liquor is a liquid product that we sell in concentrations of 40%, 50% and 70% urea as a chemical intermediate.

• Nitric acid is a nitrogen-based industrial product.

• Nitric acid is a nitrogen-based mineral acid that is used in the production of nitrate-based fertilizers, nylon precursors and other specialty chemicals.

• Compound fertilizer products (NPKs) are granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

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

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

2020 2019 2020 v.

Three Months Ended March 31,

2021 2020 2021 v.

14 unchanged sentences

Depreciation and amortization $ 22 $ 17 $ 5 29 %

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

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

_______________________________________________________________________________

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

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.

First Quarter of 2021 Compared to First Quarter of 2020

Net sales in our Other segment increased by $16 million, or 18%, to $106 million in the first quarter of 2021 from $90 million in the first quarter of 2020 due primarily to an 18% increase in average selling prices.

The increase in average selling prices was due primarily to a tighter global nitrogen supply and demand balance.

Cost of Sales.

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.

Cost of sales in our Other segment averaged $148 per ton in the first quarter of 2021, a 21% increase from $122 per ton in the first quarter of 2020, due primarily to higher costs related to manufacturing and maintenance activity and higher realized natural gas costs.

Gross Margin .

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

Gross margin in our Other segment was $16 million in both the first quarter of 2021 and the first quarter of 2020, and our gross margin percentage was 15.1% in the first quarter of 2021 compared to 17.8% in the first quarter of 2020.

Gross margin was impacted by an 18% increase in average selling prices, which increased gross margin by $16 million and an increase of $3 million due to product mix.

Offsetting these factors was a $14 million net increase in manufacturing, maintenance and other costs and an increase in realized natural gas costs, which decreased gross margin by $5 million.

CF INDUSTRIES HOLDINGS, INC.

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 $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 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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We may also from time to time access the capital markets or engage in borrowings under our credit agreement.

Our cash from operations could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic.

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.

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 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.

On March 20, 2021, we redeemed in full all of the remaining $250 million outstanding principal amount of the 2021 Notes, in accordance with the optional redemption provisions in the indenture governing the 2021 Notes.

The total aggregate redemption price paid on the 2021 Notes in connection with the redemption was $258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $6 million, primarily consisting of a premium paid on the early redemption of the notes.

As of March 31, 2021, our cash and cash equivalents balance was $804 million, an increase of $121 million from $683 million at December 31, 2020.

At March 31, 2021, 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

5 unchanged sentences

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 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.

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.

Shares Amounts

(in millions)

Shares repurchased in 2019:

First quarter 1.5 $ 60

Second quarter 2.7 118

Third quarter 1.5 72

Fourth quarter 1.9 87

Shares repurchased in 2019 7.6 337

Shares repurchased in 2020:

First quarter 2.6 100

Shares repurchased as of September 30, 2020

Since the 2019 Share Repurchase Program was announced in February 2019, we have repurchased approximately 10.2 million shares for $437 million, including 2.6 million shares repurchased during the first quarter of 2020 for $100 million.

No shares have been repurchased since the first quarter of 2020 under the 2019 Share Repurchase Program.

At March 31, 2021, we held 340,446 shares of treasury stock.

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 $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.

Capital expenditures totaled $71 million in the first three months of 2021 compared to $67 million in the first three months of 2020.

We currently anticipate that capital expenditures for the full year of 2021 will be in the range of $450 million, which reflects a return to a normal spending level and includes expenditures for the green ammonia project at our Donaldsonville manufacturing complex.

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.

All of these factors may also be influenced or exacerbated by the direct or indirect impacts of the COVID-19 pandemic.

Terra Amended Tax Returns

The Company completed the acquisition of Terra Industries Inc.

(Terra) in April 2010.

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

parent for U.S.

and foreign income tax purposes was not appropriate.

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

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

tax aspects of the Amended Tax Returns.

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

Congress (the Joint Committee).

For purposes of its review, the Joint Committee separated the IRS audit reports into two separate matters:

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

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.

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 and we received IRS Notices indicating the amount of tax and interest to be refunded and received with respect to the withholding tax matter and the income tax matter.

As a result of these events, in the second quarter of 2020, we recognized $16 million of interest income and $16 million of income tax benefit, which consisted of the following:

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

• 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

• an additional income tax benefit of $7 million related to the income tax matter.

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 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.

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

Revolving Credit Agreement

On December 5, 2019, CF Holdings and CF Industries entered into a senior secured Fourth Amended and Restated Credit Agreement (the Revolving Credit Agreement), which amended and restated our Third Amended and Restated Revolving Credit Agreement, as previously amended (referred to herein, as in effect from time to time, as the Prior Credit Agreement), that was scheduled to mature September 18, 2020.

The Revolving Credit Agreement provides for a revolving credit facility of up to $750 million with a maturity of December 5, 2024.

We have a senior secured revolving credit agreement (the Revolving Credit Agreement), which provides for a revolving credit facility of up to $750 million with a maturity of December 5, 2024.

The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million.

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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 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.

As of March 31, 2021, 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 March 31, 2021 or December 31, 2020, or during the three months ended March 31, 2021.

Maximum borrowings under the Revolving Credit Agreement during the three months ended March 31, 2020 were $500 million.

The weighted-average annual interest rate of borrowings under the Revolving Credit Agreement during the three months ended March 31, 2020 was 2.05%.

Borrowings under the Revolving Credit Agreement as of March 31, 2020 were repaid in full in April 2020.

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

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

CF INDUSTRIES HOLDINGS, INC.

As of March 31, 2021, we were in compliance with all covenants under the Revolving Credit Agreement.

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 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

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $250 million of letters of credit.

As of March 31, 2021, approximately $220 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 March 31, 2021 and December 31, 2020 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate March 31, 2021 December 31, 2020

Principal Carrying Amount (1)

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Total long-term debt $ 3,750 $ 3,713 $ 4,000 $ 3,961

Current maturities of long-term debt — — 250 249

Long-term debt, net of current maturities $ 3,750 $ 3,713 $ 3,750 $ 3,712

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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 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.

Total unamortized debt discount was $9 million as of both March 31, 2021 and December 31, 2020, and total deferred debt issuance costs were $28 million and $30 million as of March 31, 2021 and December 31, 2020, respectively.

Public Senior Notes

On November 13, 2019, we redeemed in full all of the remaining $500 million outstanding principal amount of the 7.125% senior notes due May 2020 (the 2020 Notes), in accordance with the optional redemption provisions in the indenture governing the 2020 Notes.

The total aggregate redemption price, excluding accrued interest paid on the 2020 Notes in connection with the redemption, was approximately $512 million.

As a result, we recognized a loss on debt extinguishment of $12 million, primarily consisting of premiums paid for the early retirement of debt for the 2020 Notes.

Under the indentures (including the applicable supplemental indentures) governing our senior notes due 2023, 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes is guaranteed by CF Holdings.

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Senior Secured Notes

On December 13, 2019, we redeemed $250 million principal amount, representing 50% of the $500 million principal amount outstanding immediately prior to such redemption, of the 3.400% senior secured notes due December 2021 (the 2021 Notes) in accordance with the optional redemption provisions in the indenture governing the 2021 Notes.

The total aggregate redemption price, excluding accrued interest paid on the 2021 Notes redeemed in connection with the redemption, was approximately $257 million.

As a result, we recognized a loss on debt extinguishment of $9 million, primarily consisting of premiums paid for the early retirement of debt for the 2021 Notes.

Under the terms of the applicable indenture, the 2021 Notes and the 4.500% senior secured notes due 2026 (the 2026 Notes, and together with the 2021 Notes, the Senior Secured Notes) are guaranteed on a senior secured basis, jointly and severally, by CF Holdings and each current and future domestic subsidiary of CF Holdings (other than CF Industries) that from time to time is a borrower, or guarantees indebtedness, under the Revolving Credit Agreement.

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

The total aggregate redemption price paid on the 2021 Notes in connection with the redemption was $258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $6 million, primarily consisting of a premium paid on the early redemption of the notes.

Under the terms of the indenture governing the 4.500% senior secured notes due 2026 (the 2026 Notes), the 2026 Notes are guaranteed on a senior secured basis, jointly and severally, by CF Holdings and each current and future domestic subsidiary of CF Holdings (other than CF Industries) that from time to time is a borrower, or guarantees indebtedness, under the Revolving Credit Agreement.

The subsidiary guarantors of the 2026 Notes currently consist of CFE, CFS, CF USA and CFIDF.

Subject to certain exceptions, the obligations under the 2026 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 2026 Notes.

The liens on the Collateral securing the obligations under the 2026 Notes and the related guarantees will be automatically released and the covenant under the 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 indenture.

Interest on the 2026 Notes is payable semiannually, and the 2026 Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.

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 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.

Forward Sales and Customer Advances

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

As of March 31, 2021 and December 31, 2020, we had $341 million and $130 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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We may use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future.

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

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

From time to time, we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates.

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

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.

As of March 31, 2021, our open natural gas derivative contracts consisted of natural gas basis swaps for 0.5 million MMBtus.

As of December 31, 2020, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 34.1 million MMBtus.

Defined Benefit Pension Plans

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

We contributed $7 million to our pension plans during the three months ended March 31, 2021.

Over the remainder of 2021, we expect to contribute an additional $25 million to our pension plans, or a total of approximately $32 million for the full year 2021.

Distribution to Noncontrolling Interest in CFN

On July 31, 2020, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2020 in accordance with CFN’s limited liability company agreement.

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

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.

On January 31, 2021, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended December 31, 2020 in accordance with CFN’s limited liability company agreement.

On February 1, 2021, CFN distributed $64 million to CHS for the distribution period ended December 31, 2020.

The estimate of the partnership distribution earned by CHS, but not yet declared, for the first quarter of 2021 is approximately $50 million.

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 nine months of 2020.

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

Net cash provided by operating activities during the first three months of 2021 was $578 million, an increase of $286 million compared to $292 million in the first three months of 2020.

The increase in cash flow from operations was due primarily to favorable changes in net working capital and higher net earnings.

During the first three months of 2021, net changes in working capital contributed $230 million to cash flow from operations, while in the first three months of 2020 net changes in working capital contributed $42 million to cash flow from operations.

The increased cash flow from working capital changes was primarily driven by customer advances and accounts payable and accrued expenses.

The increase in net earnings was due primarily to higher average selling prices and the $112 million gain on the net settlement of certain natural gas contracts with our suppliers in February 2021, partially offset by higher costs related to manufacturing, maintenance and repair activity due primarily to Winter Storm Uri.

CF INDUSTRIES HOLDINGS, INC.

Investing Activities

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.

Net cash used in investing activities was $71 million in the first three months of 2021 as compared to $65 million in the first three months of 2020.

During the first three months of 2021, capital expenditures totaled $71 million compared to $67 million in the first three months of 2020.

Financing Activities

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 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

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

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

Recent Accounting Pronouncements

See Note 2—New Accounting Standards for a discussion of recent accounting pronouncements.

Net cash used in financing activities was $387 million in the first three months of 2021 compared to $242 million in the first three months of 2020.

In the first three months of 2021, we paid $255 million in connection with the redemption of the 2021 Notes.

The first three months of 2020 included $500 million of borrowings under the Revolving Credit Agreement.

In the first three months of 2021, no shares of common stock were repurchased compared to $100 million in the first three months of 2020.

Dividends paid on common stock for each of the three-month periods ended March 31, 2021 and 2020 was $65 million.

Distributions to noncontrolling interest totaled $64 million in the first three months of 2021 as compared to $88 million in the first three months of 2020.

Critical Accounting Estimates

There were no changes to our significant accounting estimates during the first three months of 2021.

CF INDUSTRIES HOLDINGS, INC.

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Additionally, we do not undertake any responsibility to provide updates regarding the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this document.

Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” in Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 24, 2020, and Part II, Item 1A of this Quarterly Report on Form 10-Q.

Such factors include, among others:

• the impact of the novel coronavirus disease 2019 (COVID-19) pandemic, including measures taken by governmental authorities to slow the spread of the virus, on our business and operations;

• the cyclical nature of our business and the impact of global supply and demand on our selling prices;

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• the volatility of natural gas prices in North America and Europe;

• weather conditions;

• the seasonality of the fertilizer business;

• the impact of changing market conditions on our forward sales programs;

• difficulties in securing the supply and delivery of raw materials, increases in their costs or delays or interruptions in their delivery;

• reliance on third party providers of transportation services and equipment;

• risks associated with cyber security;

• our reliance on a limited number of key facilities;

• acts of terrorism and regulations to combat terrorism;

• risks associated with international operations;

• the significant risks and hazards involved in producing and handling our products against which we may not be fully insured;

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• downgrades of our credit ratings;

• risks associated with cyber security;

• weather conditions;

• risks associated with changes in tax laws and disagreements with taxing authorities;

• our reliance on a limited number of key facilities;

• risks involving derivatives and the effectiveness of our risk measurement and hedging activities;

• potential liabilities and expenditures related to environmental, health and safety laws and regulations and permitting requirements;

• future regulatory restrictions and requirements related to greenhouse gas emissions;

• regulatory restrictions and requirements related to greenhouse gas emissions;

• the development and growth of the market for green and blue (low-carbon) ammonia and the risks and uncertainties relating to the development and implementation of our green and blue (low-carbon) ammonia projects;

• risks associated with expansions of our business, including unanticipated adverse consequences and the significant resources that could be required;

• the seasonality of the fertilizer business;

• the impact of changing market conditions on our forward sales programs;

• risks involving derivatives and the effectiveness of our risk measurement and hedging activities;

• risks associated with the operation or management of the CHS strategic venture, risks and uncertainties relating to the market prices of the fertilizer products that are the subject of our supply agreement with CHS over the life of the supply agreement, and the risk that any challenges related to the CHS strategic venture will harm our other business relationships;

• risks associated with our PLNL joint venture;

• acts of terrorism and regulations to combat terrorism;

• risks associated with international operations;

• deterioration of global market and economic conditions.

• the impact of the novel coronavirus disease 2019 (COVID-19) pandemic, including measures taken by governmental authorities to slow the spread of the virus, on our business and operations.

CF INDUSTRIES HOLDINGS, INC.

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