What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-05 · 339 added, 748 removed, 403 unchanged (73% of the section changed)

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All references to “CF Industries” refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc.

References to tons refer to short tons.

References to tons refer to short tons, and references to tonnes refer to metric tons.

Notes referenced in this discussion and analysis refer to the notes to our unaudited interim consolidated financial statements in Item 1.

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• Consolidated Results of Operations

◦ Third Quarter of 2021 Compared to Third Quarter of 2020

◦ Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

• Operating Results by Business Segment

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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 nine nitrogen 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.

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

Our principal assets as of September 30, 2021 include:

Our principal assets as of March 31, 2022 include:

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

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

CF INDUSTRIES HOLDINGS, INC.

• 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 (Trinidad) 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.

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 is focusing 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 announced an initial green ammonia project at our flagship Donaldsonville nitrogen complex to produce approximately 20,000 tons per year of green ammonia, which is further discussed below.

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

In April 2021, we signed an engineering and procurement contract with thyssenkrupp to supply a 20 MW alkaline water electrolysis plant to produce green hydrogen at our Donaldsonville nitrogen complex.

Construction and installation, which will be managed by us, is expected to begin in the fourth quarter of 2021 and to finish in 2023.

Our approach includes green ammonia production, which refers to ammonia produced through a carbon-free process, and blue ammonia production, 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.

In October 2020, we announced an initial green ammonia project at our Donaldsonville complex.

In April 2021, we signed an engineering and procurement contract with thyssenkrupp to supply a 20 MW alkaline water electrolysis plant to produce green hydrogen at our Donaldsonville complex.

Construction and installation, which is being managed by us, began in the fourth quarter of 2021 and is expected to finish in 2023, with an estimated total cost of approximately $100 million.

The cost of the project is expected to fit within our annual capital expenditure budgets.

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We believe that, when completed in 2023, the Donaldsonville green ammonia project will be the largest of its kind in North America.

In the third quarter of 2021, we signed a memorandum of understanding with Mitsui & Co., Inc.

that will guide us in a joint exploration of the development of blue ammonia projects in the United States.

We plan to conduct preliminary studies covering areas such as blue ammonia supply and supply chain infrastructure, CO 2 transportation and storage, expected environmental impacts, and blue ammonia economics and marketing opportunities in Japan and in other countries.

In the third quarter of 2021, we signed a memorandum of understanding with Mitsui & Co., Ltd.

(Mitsui) that is guiding us in a joint exploration of the development of blue ammonia projects in the United States.

On May 3, 2022, we and Mitsui announced our intention to jointly develop a greenfield ammonia production facility to produce blue ammonia in the United States.

We anticipate that a front-end engineering design (FEED) study will commence shortly with a final investment decision on constructing the blue ammonia production facility expected in 2023.

We have also announced steps to produce blue ammonia from our existing ammonia production network.

In the fourth quarter of 2021, our Board of Directors (the Board) authorized projects within our existing network that we believe will enable the permanent sequestration of up to 2.5 million tons of carbon emissions each year and the annual production of approximately 2 million tons of blue ammonia, which is equivalent to 1.25 million tons of net-zero carbon ammonia, starting in 2024.

The projects will involve constructing units at our Donaldsonville and Yazoo City complexes that dehydrate and compress CO 2 , a process essential for CO 2 transport via pipeline to sequestration sites.

Management expects that, once the units are in service and sequestration is initiated, we could sequester up to 2.5 million tons of CO 2 per year (2 million tons at Donaldsonville and 500,000 tons at Yazoo City).

Under current regulations, the projects would be expected to qualify for tax credits under Section 45Q of the Internal Revenue Code, which provides a credit per tonne of CO 2 sequestered.

Construction of the units at the Donaldsonville complex is expected to begin in 2022 and to be completed in 2024, with an estimated total cost of $200 million.

The Yazoo City project will be timed to coincide with CO 2 transport pipeline construction.

Once started, the Yazoo City project is expected to be completed in three years with an estimated total cost of $85 million.

In addition, we are currently in advanced discussions with several parties regarding transportation and sequestration of CO 2 from Donaldsonville.

Market Conditions and Current Developments

Selling Prices and Sales Volume

Our average selling price was higher in the third quarter of 2021 than in the third quarter of 2020, driven by the impact of a tighter global nitrogen supply and demand balance, as a result of strong global demand as well as decreased global supply availability as higher global energy costs continued to drive lower global operating rates.

In the third quarter of 2021, the average selling price for our products was $360 per ton, an increase of 101%, compared to $179 per ton in the third quarter of 2020, reflecting higher average selling prices across all our segments, which drove an increase in net sales of approximately $686 million.

In the nine months ended September 30, 2021, the average selling price for our products was $296 per ton, or 45% higher compared to $204 per ton for the nine months ended September 30, 2020.

This resulted in an increase in net sales of approximately $1.22 billion.

Our total sales volume was 20% lower in the third quarter of 2021 than in the third quarter of 2020 with lower sales reported in all segments.

We shipped 3.8 million tons of product in the third quarter of 2021 compared to 4.7 million tons in the third quarter of 2020 due primarily to lower supply from the impact of weather-related outages and the impact of both planned and unplanned maintenance activity.

During the third quarter of 2021, lower production was due primarily to a high level of plant turnaround and maintenance activity as well as downtime resulting from the impact of Hurricane Ida.

The lower sales volumes also reflect the idling of certain portions of our U.K.

operations in the second half of September due to the United Kingdom energy crisis, which is further discussed below.

Lower sales volume drove a decrease in net sales of approximately $171 million.

Geopolitical Environment

Russia’s invasion of Ukraine in February 2022, and the resulting war between Russia and Ukraine, has led to disruptions in the global markets for certain crop commodities, natural gas and nitrogen fertilizer.

In recent weeks, we have seen effects in particular from export reductions from the region;

energy, financial and transportation sanctions by U.S., Canadian, European and other governments;

and shipping and logistical complications.

As further described below, natural gas is the principal raw material used to produce our nitrogen products.

Natural gas is also a globally traded commodity that experiences price fluctuations based on supply demand balances and has been impacted by the recent geopolitical events.

As a result of Europe’s dependence on Russia for a portion of its natural gas supply, Russia’s invasion of Ukraine disrupted European energy markets and threatened security of natural gas supply.

This led to further increases in natural gas prices and natural gas price volatility, which in turn led to disruptions in manufacturing and distribution activities at other nitrogen manufacturers and suppliers in our industry and to reductions in global fertilizer supply.

CF INDUSTRIES HOLDINGS, INC.

We shipped 13.5 million tons of product in the first nine months of 2021 compared to 14.8 million tons in the first nine months of 2020, or a decline of 9%.

Lower sales volume drove a decrease in net sales of approximately $309 million.

The decrease in total sales volume was due primarily to the impact of decreased supply resulting from lower production in our ammonia, granular urea and AN segments in the first nine months of 2021 as a result of severe weather conditions in the first and third quarters of 2021, which disrupted natural gas and electricity supply, respectively.

Higher plant turnaround and maintenance activity also impacted the period.

Due to the lower production, we procured additional granular urea in the nine months ended September 30, 2021 in order to meet customer obligations and provide additional manufacturing flexibility once production resumed.

During the nine months ended September 30, 2021, to meet customer obligations, we purchased 201,000 tons of granular urea for $71 million, which we sold to customers for $68 million.

We currently expect sales volumes for our products in 2021 will be approximately 18 million product tons as a result of the increase in maintenance activity due to maintenance deferred from 2020, activity previously planned to occur in 2022 but accelerated into 2021, and the severe weather conditions in the first and third quarters of 2021.

These geopolitical developments have also led to supply chain disruptions for Russian producers of fertilizer.

Prior to the invasion, Russia had been the largest exporter of nitrogen fertilizer globally, and in recent years had been a significant supplier of nitrogen fertilizer to North America and Europe.

Russia and Ukraine are large exporters of commodity grains such as wheat, corn and soybeans.

The direct and indirect impacts of the war in Ukraine, and the related uncertainty, have resulted in an expectation that commodity grain supply from this region will be reduced, causing increased prices for grains globally.

The increase in commodity grain prices has in turn driven a greater demand for nitrogen fertilizer.

These events have further contributed to an already tight global supply demand balance for nitrogen fertilizers and even led to shortages of certain products in some international locations.

These factors are causing changes in global trade flows as both manufacturers and customers react to the changing market dynamics.

As a result, nitrogen fertilizer prices have significantly increased since the start of 2022.

We expect that the recent geopolitical events, including any further government-imposed sanctions, will have an impact on the future supply demand balance and future selling prices for our nitrogen fertilizer products, but the scope and duration of these impacts are unknown at the present time.

Nitrogen Selling Prices

Our nitrogen products are globally traded commodities with selling prices that fluctuate in response to global market conditions, changes in supply and demand, and other cost factors including domestic and local conditions.

Intense global competition—reflected in import volumes and prices—strongly influences delivered prices for nitrogen fertilizers around the world, including in the United States.

In general, the prevailing global prices for nitrogen products must be high enough in order for the marginal producers in the world with the highest input costs to at least break even over the long term, or else they would cease production and leave a portion of global demand unsatisfied.

In the first quarter of 2022, the average selling price for our products was $620 per ton, an increase of 170%, compared to $230 per ton in the first quarter of 2021, reflecting higher average selling prices across all our segments, which primarily drove the increase in net sales of approximately $1.82 billion, as sales volume in tons in the first quarter of 2022 was essentially unchanged compared to the first quarter of 2021.

The increase in our average selling price was caused by a tighter global nitrogen supply and demand balance resulting from strong global demand as well as a decrease in global supply availability as higher global energy costs continued to drive lower global operating rates, and exacerbated by the geopolitical environment described above.

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.

The following table presents the average daily market price of natural gas at the Henry Hub, the most heavily-traded natural gas pricing point in North America, and the National Balancing Point, the major trading point for natural gas in the United Kingdom:

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

2021 2020 2021 v.

Natural gas is both a chemical feedstock and a fuel used to produce nitrogen products.

Natural gas is a significant cost component of manufactured nitrogen products, representing approximately 50% of our production costs in the first quarter of 2022 and 40% of our production costs in 2021.

The following table presents the average daily market price of natural gas at the Henry Hub, the most heavily-traded natural gas pricing point in North America, and the National Balancing Point (NBP), the major trading point for natural gas in the United Kingdom:

Three Months Ended March 31,

2022 2021 2022 v.

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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 nine months of 2021 were higher than in the first nine months of 2020 due primarily to the impact of both extreme cold weather in the first quarter of 2021, including Winter Storm Uri in February 2021, and increased natural gas demand in the second and third quarters of 2021 due to the combination of the economy emerging from the COVID-19 pandemic and higher than normal temperatures.

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, 2021 was $4.27 per MMBtu compared to $1.95 per MMBtu for the three months ended September 30, 2020, an increase of 119%.

For the three months ended September 30, 2021, the daily closing price at the Henry Hub reached a low of $3.54 per MMBtu on July 9, 2021 and a high of $5.93 per MMBtu on September 29, 2021.

The average daily market price at the Henry Hub for the nine months ended September 30, 2021 was $3.52 per MMBtu compared to $1.82 per MMBtu for the nine months ended September 30, 2020, an increase of 93%.

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.

The average daily market price of natural gas at the Henry Hub for October 2021 was $5.49 per MMBtu.

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.

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

North American natural gas prices during the first three months of 2022 were higher on average than the first three months of 2021 due to tight supply and demand conditions within the market.

After a warm start to the winter season at the end of 2021, colder temperatures in the first quarter of 2022 drove higher heating demand.

North American supply failed to keep pace and did not sustain production levels achieved in late 2021, due to well freeze-offs and continued producer capital discipline hindering growth.

As a result, North American gas withdrawals from storage during the first quarter of 2022 were larger than normal, leading to end-of-quarter levels below both last year and the five-year average.

In addition, record high global gas prices and newly commissioned liquefaction facilities in North America led to record liquefied natural gas (LNG) exports from the United States throughout the first quarter of 2022.

CF INDUSTRIES HOLDINGS, INC.

The average daily market price at the Henry Hub for the three months ended March 31, 2022 was $4.60 per MMBtu compared to $3.38 per MMBtu for the three months ended March 31, 2021, an increase of 36%.

The average daily market price of natural gas at the Henry Hub for April 2022 was $6.48 per MMBtu.

In the first quarter of 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 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 use.

Due to these unprecedented factors, several states declared a state of emergency.

and natural gas was redirected for residential use.

At certain of our manufacturing locations, we reduced our natural gas consumption, and, as a consequence, our plants at these locations 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 nine months ended September 30, 2021.

CF INDUSTRIES HOLDINGS, INC.

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.

Our two nitrogen manufacturing facilities located in the United Kingdom are subject to fluctuations associated with the price of natural gas in Europe.

The price of natural gas in the United Kingdom increased throughout the first nine months of 2021 and reached unprecedented high levels in the third quarter of 2021, due primarily to a tighter supply and demand balance in the global liquefied natural gas market as a result of strong demand for natural gas in anticipation of winter weather and in response to low storage levels of natural gas in both Asia and Europe.

These factors have resulted in record high global prices for liquefied natural gas, raising European and U.K.

market prices to compete for limited supply.

Due to the high price levels for natural gas, we halted certain of our U.K.

manufacturing operations in September 2021.

See the discussion under “United Kingdom Energy Crisis,” below, for further information.

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

The average daily market price of natural gas at NBP for the three months ended September 30, 2021 was $15.98 per MMBtu compared to $2.69 per MMBtu for the three months ended September 30, 2020, an increase of nearly 500%.

For the three months ended September 30, 2021, the daily closing price at NBP reached a low of $11.14 per MMBtu on July 8, 2021 and a high of $25.41 per MMBtu on September 21, 2021.

The average daily market price of natural gas at NBP for the nine months ended September 30, 2021 was $10.63 per MMBtu compared to $2.49 per MMBtu for the nine months ended September 30, 2020, an increase of 327%.

The average daily market price of natural gas at NBP for October 2021 was $27.32 per MMBtu.

In the third quarter of 2021, the cost of natural gas used for production, which includes the impact of realized natural gas derivatives, increased 120% to $4.21 per MMBtu from $1.91 per MMBtu in the three months ended September 30, 2020.

This increase in natural gas costs resulted in a decrease in gross margin of approximately $153 million.

In the first nine months of 2021, 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 the net settlement of certain natural gas contracts with our suppliers, increased 66% to $3.51 per MMBtu from $2.11 per MMBtu in the nine months ended September 30, 2020.

The price of natural gas in the United Kingdom continued to reach record high prices during the first quarter of 2022.

Europe began the year with record low storage levels, but a large increase in LNG import vessels along with milder weather started to ease concerns.

However, Russia’s invasion of Ukraine on February 24, 2022 disrupted European energy markets and threatened security of supply, driving natural gas prices in Europe upward to unprecedented levels, further exacerbating an energy crisis that has been impacting our U.K.

operations, as further discussed below.

Prices subsequently declined in March as Russian supply of natural gas continued to flow, albeit with the possibility of total supply disruption still a concern.

The average daily market price of natural gas at the NBP for the three months ended March 31, 2022 was $30.20 per MMBtu compared to $6.90 per MMBtu for the three months ended March 31, 2021, an increase of 338%.

For the three months ended March 31, 2022, the daily closing price at NBP reached a low of $15.37 per MMBtu on January 3, 2022 and a high of $67.08 per MMBtu on March 8, 2022.

The average daily market price of natural gas at the NBP for April 2022 was $21.75 per MMBtu.

In the first quarter of 2022, the cost of natural gas used for production, which includes the impact of realized natural gas derivatives, increased 101% to $6.48 per MMBtu from $3.22 per MMBtu in the three months ended March 31, 2021.

This increase in natural gas costs resulted in a decrease in gross margin of approximately $271 million.

United Kingdom Energy Crisis

During the third quarter of 2021, the United Kingdom experienced an energy crisis that included a substantial increase in the price of natural gas.

During the third quarter of 2021, the United Kingdom began experiencing an energy crisis that included a substantial increase in the price of natural gas, which impacted our U.K.

In the first half of 2021, natural gas prices had increased to levels that were considered high compared to historical prices, and prices then more than doubled within the third quarter of 2021.

The average daily market price of natural gas at NBP was $3.20 per MMBtu for the full year ended December 31, 2020.

During the third quarter of 2021, the average daily market price of natural gas at NBP was $15.98 per MMBtu, with a high of $25.41 per MMBtu on September 21, 2021.

On September 15, 2021, we announced the halt of operations at both our Ince and Billingham manufacturing facilities in the United Kingdom due to negative profitability driven by the high cost of natural gas.

The halt of operations at our U.K.

plants impacted the availability of certain products in the United Kingdom, including carbon dioxide, which is a byproduct of ammonia production.

Due to the critical nature of carbon dioxide to certain industries in the United Kingdom, on September 21, 2021, we entered into an interim agreement with the U.K.

Under the terms of the agreement, the U.K.

government agreed to cover the costs to restart the ammonia plant at Billingham and to offset losses incurred from production for a 21-day period.

As a result, we resumed production of ammonia at the Billingham facility in order to produce carbon dioxide for the United Kingdom.

While the interim agreement was in place, we entered into carbon dioxide pricing and offtake agreements with our customers, which have an initial term through January 31, 2022.

The amount of financial support that will be provided by the U.K.

government for the September 2021 period of the interim agreement is not expected to be material to our results of operations.

As of the filing of this report, production continues to be idled at our Ince facility.

energy crisis necessitated an evaluation of the goodwill and long-lived assets, including definite-lived intangible assets, of our U.K.

operations to determine if their fair value had declined to below their carrying value.

We concluded that a decline in the fair value had occurred, and we recognized impairment charges of $495 million in the third quarter of 2021, consisting of a goodwill impairment charge of $259 million and long-lived and intangible asset impairment charges of $236 million.

See “Items Affecting Comparability of Results—U.K.

energy crisis impacts,” “Liquidity and Capital Resources—United Kingdom Energy Crisis,” below, Note 3—United Kingdom Energy Crisis and Impairment Charges, Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets for further information.

As of September 30, 2021, after the recognition of the $495 million of impairment charges noted above, the goodwill related to our U.K.

operations was approximately $26 million and the remaining long-lived assets related to our U.K.

operations was $450 million, primarily consisting of property, plant and equipment.

CF INDUSTRIES HOLDINGS, INC.

Shortly thereafter, our Billingham facility resumed operations.

As of the filing of this report, production continues at our Billingham facility and continues to be idled at our Ince facility.

During the first quarter of 2022, we concluded that the continued impacts of the U.K.

energy crisis, including higher natural gas prices due in part to the geopolitical environment described above, triggered an additional impairment test.

The results of our interim long-lived asset impairment test indicated that no long-lived asset impairment should be recorded as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U.K.

asset groups.

The results of our U.K.

operations are included in our Ammonia, AN and Other segments, and account for a small portion of our consolidated gross margin.

For the nine months ended September 30, 2021, our U.K.

For the three months ended March 31, 2022, gross margin generated by our U.K.

operations represented approximately 2% of our consolidated gross margin.

For the year ended December 31, 2021, our U.K.

operations generated negative gross margin representing approximately 1% of our consolidated gross margin.

For the year ended December 31, 2020, gross margin generated by our U.K.

operations accounted for 2% of our consolidated gross margin.

Manufacturing Costs and Granular Urea Purchases

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

In response to the lower production levels, in the first nine months of 2021, we procured granular urea in order to meet customer obligations and provide additional manufacturing flexibility.

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 in 2021, including activity that was deferred from 2020 as a result of the COVID-19 pandemic.

Because of these factors and the halt of operations in the United Kingdom, we incurred higher costs for manufacturing, maintenance and repair activity for both scheduled and unscheduled downtime in the first nine months of 2021.

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

In the nine months ended September 30, 2021, we purchased approximately $71 million of granular urea, which we sold to customers for $68 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.

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

We will continue to monitor safety guidelines related to COVID-19 as issued by governmental authorities and adjust our safety protocols, as needed.

CF INDUSTRIES HOLDINGS, INC.

Financial Executive Summary

We reported a net loss attributable to common stockholders of $185 million for the three months ended September 30, 2021 compared to a net loss attributable to common stockholders of $28 million for the three months ended September 30, 2020, a decrease in net earnings of $157 million.

Diluted net earnings per share attributable to common stockholders decreased $0.73 per share, to a loss of $0.86 per share in the third quarter of 2021 compared to a loss of $0.13 per share in the third quarter of 2020.

These decreases were due primarily to impairment charges related to our U.K.

operations, partially offset by higher operating results driven by an increase in gross margin.

Impact of impairment charges

The decrease in net earnings and diluted net earnings per share in the third quarter of 2021 was due primarily to impairment charges related to our U.K.

operations of $495 million, consisting of a goodwill impairment charge of $259 million and long-lived and intangible asset impairment charges of $236 million.

The after-tax impact of the impairment charges to the net loss per share attributable to common stockholders and diluted net loss per share attributable to common stockholders was $403 million and $1.88, respectively.

See “Market Conditions and Current Developments—United Kingdom Energy Crisis,” above, Note 3—United Kingdom Energy Crisis and Impairment Charges, Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets, for further information.

The following table includes gross margin, operating (loss) earnings, (loss) earnings before income taxes, net (loss) earnings attributable to common stockholders and diluted net (loss) earnings per share attributable to common stockholders for the third quarter of 2021, and shows the impact of the impairment charges on each of these measures by also including the corresponding “as adjusted” measure, which excludes the before- and after-tax impacts of the impairment charges.

Management utilizes these “as adjusted” measures, and believes they provide useful information to investors, for assessing period-to-period changes in our underlying operating performance, because these “as adjusted” measures exclude the non-cash impairment charges that resulted from the U.K.

energy crisis, as more fully described above.

Three months ended September 30, 2021

As reported Impact of impairment charges As adjusted (1)

(dollars in millions, except per share)

Gross margin $ 440 $ — $ 440

Operating (loss) earnings (97) 495 398

(Loss) earnings before income taxes (137) 495 358

Net (loss) earnings attributable to common stockholders (2)

(185) 403 218

Diluted net (loss) earnings per share attributable to common stockholders (2)

(0.86) 1.88 1.02

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(1) The “as adjusted” financial measures presented above are non-GAAP financial measures that should be viewed in addition to, and not as an alternative for, our reported results calculated and presented in accordance with U.S.

(2) The after-tax impact of impairment charges reflects the amount of income tax benefit recognized in the three months ended September 30, 2021 in accordance with guidance on accounting for income taxes in interim reporting periods.

Impact of higher gross margin

Gross margin increased by $357 million in the third quarter of 2021 to $440 million as compared to $83 million in the third 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:

Third Quarter of 2020 Higher Average Selling Prices Lower Volume Higher Natural Gas Costs (1)

Unrealized MTM on natural gas derivatives Higher Manufacturing, Maintenance, and Other Costs Third Quarter of 2021

(dollars in millions)

Net sales $ 847 $ 686 $ (171) $ — $ — $ — $ 1,362

Cost of sales 764 — (122) 153 (12) 139 922

Gross margin $ 83 $ 686 $ (49) $ (153) $ 12 $ (139) $ 440

Gross margin percentage 9.8 % 32.3 %

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(1) Higher natural gas costs include the impact, if any, of realized natural gas derivatives.

CF INDUSTRIES HOLDINGS, INC.

• Average selling prices increased 101% to $360 per ton in the third quarter of 2021 from $179 per ton in the third quarter of 2020, which increased gross margin by $686 million,

• Sales volume declined by 20% to 3.8 million tons in the third quarter of 2021 from 4.7 million tons in the third quarter of 2020, which reduced gross margin by $49 million,

• The cost of natural gas used for production increased 120% to $4.21 per MMBtu in the third quarter of 2021 from $1.91 per MMBtu in the third quarter of 2020, which reduced gross margin by $153 million, and

• We incurred higher manufacturing, maintenance and other costs, which reduced gross margin by $139 million, due primarily to higher plant turnaround and maintenance activity.

We reported net earnings attributable to common stockholders of $883 million for the three months ended March 31, 2022 compared to $151 million for the three months ended March 31, 2021, an increase in net earnings of 485%, or $732 million.

Diluted net earnings per share attributable to common stockholders increased $3.51 per share, to $4.21 per share, in the first quarter of 2022 compared to $0.70 per share in the first quarter of 2021.

These increases were due primarily to an increase in gross margin driven by higher average selling prices, partially offset by higher natural gas prices, and an increase in interest expense and income tax provision related to the Canada Revenue Agency Competent Authority Matter, discussed below under “Items Affecting Comparability of Results.”

Gross margin increased by $1.41 billion in the first quarter of 2022 to $1.70 billion as compared to $289 million in the first quarter of 2021.

Average selling prices increased 170% to $620 per ton in the first quarter of 2022 from $230 per ton in the first quarter of 2021, which increased gross margin by $1.83 billion.

The impact of higher average selling prices was partially offset by an increase in natural gas costs.

The cost of natural gas used for production increased 101% to $6.48 per MMBtu in the first quarter of 2022 from $3.22 per MMBtu in the first quarter of 2021, which reduced gross margin by $271 million.

In the first quarter of 2021, we recognized a gain of $112 million as a result of the net settlement of certain natural gas contracts with our suppliers as a result of Winter Storm Uri.

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, 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, 2021 and 2020, we reported a net loss attributable to common stockholders of $185 million and $28 million, respectively.

During the nine months ended September 30, 2021 and 2020, we reported net earnings attributable to common stockholders of $212 million and $230 million, respectively.

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

2021 2020 2021 2020

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

For the three months ended March 31, 2022 and 2021, we reported net earnings attributable to common stockholders of $883 million and $151 million, respectively.

In addition to the impact of market conditions discussed above, certain items impacted the comparability of our financial results for the three months ended March 31, 2022 and 2021.

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

Three Months Ended March 31,

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

(in millions)

1 unchanged sentence

$ (33) $ (25) $ (6) $ (5)

COVID impacts:

Special COVID-19 bonus for operational workforce (1)

— — 4 3 — — 19 15

Turnaround deferral (1)

— — 7 6 — — 7 6

Asset impairments (2)

495 403 — — 495 403 — —

Loss (gain) on foreign currency transactions, including intercompany loans (3)

2 1 (6) (5) 5 4 7 5

Engineering cost write-off (3)

— — 1 1 — — 9 7

Loss on sale of surplus land (3)

— — 2 1 — — 2 1

Insurance proceeds (3)

— — — — — — (10) (8)

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

Canada Revenue Agency Competent Authority Matter and Transfer pricing reserves:

Interest expense 198 196 — —

Interest income (36) (28)

Income tax provision (3)

Loss on debt extinguishment — — 6 5

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

______________________________________________________________________________

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

(2) The after-tax impact of asset impairment charges reflects the amount of income tax benefit recognized in the three and nine months ended September 30, 2021 in accordance with guidance on accounting for income taxes in interim reporting periods.

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

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

(3) The after-tax income tax provision amount of $72 million for the three months ended March 31, 2022 reflects an income tax provision of $78 million, consisting of the $76 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $2 million income tax provision referenced below under “Transfer pricing reserves,” net of $6 million of income tax provision that is reflected in the after-tax interest expense and interest income amounts shown in this table for the three months ended March 31, 2022.

Unrealized net mark-to-market gain on natural gas derivatives

4 unchanged sentences

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

In the three months ended September 30, 2021, we recognized an unrealized net mark-to-market gain of $12 million.

In the nine months ended September 30, 2021 and 2020, we recognized unrealized net mark-to-market gains of $18 million and $12 million, respectively.

In the three months ended March 31, 2022 and 2021, we recognized unrealized net mark-to-market gains of $33 million and $6 million, respectively.

CF INDUSTRIES HOLDINGS, INC.

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.

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.

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

In the nine months ended September 30, 2021 and 2020, we recognized losses of $5 million and $7 million, respectively, which consist 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.

Asset impairments

As a result of the U.K.

energy crisis and the events described under “Market Conditions and Current Developments—United Kingdom Energy Crisis,” above, we recognized impairment charges of $495 million in the third quarter of 2021, including a goodwill impairment charge of $259 million and long-lived and intangible asset impairment charges of $236 million.

See Note 3—United Kingdom Energy Crisis and Impairment Charges, Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets for further information.

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.

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, 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 foreign currency transactions, including intercompany loans

In the three months ended March 31, 2022, we recognized a loss of $6 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.

Canada Revenue Agency Competent Authority Matter

In 2016, the Canada Revenue Agency (CRA) and Alberta Tax and Revenue Administration (Alberta TRA) issued Notices of Reassessment for tax years 2006 through 2009 to one of our Canadian affiliates asserting a disallowance of certain patronage deductions.

We filed Notices of Objection with respect to the Notices of Reassessment with the CRA and Alberta TRA and posted letters of credit in lieu of paying the additional tax liability assessed.

The letters of credit serve as security until the matter is resolved.

In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between Canada and the United States, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011.

In the second quarter of 2021, the Company submitted the transfer pricing aspect of the matter into the arbitration process under the terms of the Treaty.

In February 2022, we were informed that a decision was reached by the arbitration panel for tax years 2006 through 2011.

In March 2022, we received further details of the results of the arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities, and we accepted the decision of the arbitration panel.

Under the terms of the arbitration decision, additional income for tax years 2006 through 2011 will be subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years of approximately $127 million, based on current estimates.

We expect this resulting Canadian tax liability, plus interest of approximately $98 million, will be assessed in the second quarter of 2022 and that payment of those amounts, aggregating to approximately $225 million, based on current estimates, will be due in the third quarter of 2022.

The letters of credit we had posted in lieu of paying the additional tax liability assessed by the Notices of Reassessment will be cancelled upon payment of the additional tax and interest to Canada.

Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, the Company will file amended tax returns in the United States to request a refund of tax overpaid.

In the three months ended March 31, 2022, as a result of the impact of these events on our Canadian and U.S.

federal and state income taxes, we recognized an income tax provision of $76 million, reflecting the net impact of $127 million of accrued income taxes payable to Canada for tax years 2006 to 2011, partially offset by net income tax receivables of approximately $51 million in the United States, and we accrued net interest of $99 million, primarily reflecting the impact of estimated interest payable to Canada.

Transfer pricing reserves

As a result of the outcome of the arbitration decision discussed above, we have also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after.

Based on this evaluation, for the three months ended March 31, 2022, we recorded the following:

• liabilities for unrecognized tax benefits of $319 million with a corresponding income tax provision, and accrued interest of $91 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of $329 million with a corresponding income tax benefit, and accrued interest income of $28 million related to the noncurrent income tax receivables.

In the three months ended March 31, 2022, the impact of this evaluation of transfer pricing positions on our consolidated statement of operations, including a $12 million deferred income tax provision for other transfer pricing tax effects, was a $2 million income tax provision and $63 million of net interest expense before tax ($69 million after tax).

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.

On September 10, 2021, we redeemed $250 million principal amount, representing one-third of the $750 million principal amount outstanding immediately prior to such redemption, of the 3.450% senior notes due 2023 (2023 Notes), in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total aggregate redemption price paid on the 2023 Notes was approximately $265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $13 million, primarily consisting of a premium paid on the early redemption of the notes.

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

tax aspects of the Amended Tax Returns.

CF INDUSTRIES HOLDINGS, INC.

In the second quarter of 2020, we received IRS notices indicating the amount of tax and interest to be refunded and received with respect to the income tax and withholding tax returns.

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

As a result, we recognized $16 million of interest income ($13 million, net of tax) and $19 million of additional income tax benefit.

In addition, in the second quarter of 2020, we received U.S.

Federal income tax refunds, including interest, of $108 million relating to these matters.

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

In 2017, we made a Voluntary Disclosures Program filing with the Canada Revenue Agency (CRA) with respect to the Canadian tax aspects of the amended returns and paid additional Canadian taxes due.

In late 2020, the CRA settled with us the voluntary disclosure matter, and, in the first quarter of 2021, we received approximately $20 million of withholding tax refunds, including interest, from the CRA.

These amounts were previously recorded in our consolidated balance sheet as of December 31, 2020.

On March 20, 2021, we redeemed in full all of the $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 in connection with the redemption of the 2021 Notes was $258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $6 million, consisting primarily of the premium paid on the redemption of the 2021 Notes prior to their scheduled maturity.

CF INDUSTRIES HOLDINGS, INC.

1 unchanged sentence

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

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

2021 2020 2021 v.

Three Months Ended March 31,

2022 2021 2022 v.

5 unchanged sentences

Selling, general and administrative expenses 64 55 9 16 %

Goodwill impairment 259 — 259 N/M 259 — 259 N/M

Long-lived and intangible asset impairment 236 — 236 N/M 236 — 236 N/M

Other operating—net 2 (2) 4 N/M

Total other operating costs and expenses 552 45 507 N/M 669 162 507 313 %

Equity in earnings of operating affiliate 15 2 13 N/M 37 8 29 363 %

Operating (loss) earnings (97) 40 (137) N/M 600 467 133 28 %

Total other operating costs and expenses 66 53 13 25 %

Equity in earnings of operating affiliate 26 11 15 136 %

Operating earnings 1,658 247 1,411 N/M

Interest expense—net 205 48 157 327 %

Loss on debt extinguishment 13 — 13 N/M 19 — 19 N/M

Other non-operating—net (19) 1 (20) N/M (17) (2) (15) N/M

(Loss) earnings before income taxes (137) (9) (128) N/M 458 346 112 32 %

Income tax (benefit) provision (46) (13) (33) (254) % 57 33 24 73 %

Net (loss) earnings (91) 4 (95) N/M 401 313 88 28 %

Net earnings attributable to noncontrolling interest 94 32 62 194 % 189 83 106 128 %

Net (loss) earnings attributable to common stockholders $ (185) $ (28) $ (157) N/M $ 212 $ 230 $ (18) (8) %

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

Loss on debt extinguishment — 6 (6) (100) %

Other non-operating—net 1 — 1 N/M

Earnings before income taxes 1,452 193 1,259 N/M

Income tax provision 401 18 383 N/M

Net earnings 1,051 175 876 N/M

Net earnings attributable to noncontrolling interest 168 24 144 N/M

Net earnings attributable to common stockholders $ 883 $ 151 $ 732 485 %

Diluted net earnings per share attributable to common stockholders

$ 4.21 $ 0.70 $ 3.51 N/M

7 unchanged sentences

Average daily market price of natural gas National Balancing Point (United Kingdom) $ 30.20 $ 6.90 $ 23.30 338 %

Unrealized net mark-to-market gain on natural gas derivatives $ (12) $ — $ (12) N/M $ (18) $ (12) $ (6) (50) %

Unrealized net mark-to-market gain on natural gas derivatives $ (33) $ (6) $ (27) (450) %

Depreciation and amortization $ 208 $ 204 $ 4 2 %

12 unchanged sentences

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

For the nine months ended September 30, 2021,

CF INDUSTRIES HOLDINGS, INC.

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

For the three months ended March 31, 2021, excludes the $112 million gain on net settlement of certain natural gas contracts with our suppliers due to Winter Storm Uri.

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

Third Quarter of 2021 Compared to Third Quarter of 2020

Our total net sales increased $515 million or 61%, to $1.36 billion in the third quarter of 2021 compared to $847 million in the third quarter of 2020 due to an increase in average selling prices, partially offset by a decrease in sales volume.

Our average selling price was $360 per ton in the third quarter of 2021, or 101% higher, compared to $179 per ton in the third quarter of 2020 due to higher average selling prices across all of our segments, primarily driven by the impact of a tighter global nitrogen supply and demand balance, as a result of strong global demand as well as decreased global supply availability as higher global energy costs continued to drive lower global operating rates.

Our total sales volume of 3.8 million product tons in the third quarter of 2021 was 20% lower compared to 4.7 million product tons in the third quarter of 2020 due to lower supply from the impact of weather-related production outages and the impact of both planned and unplanned maintenance activity.

During the third quarter of 2021, lower production was due primarily to a high level of plant turnaround and maintenance activity as well as downtime resulting from the impact of Hurricane Ida.

Cost of Sales

Our total cost of sales increased $158 million, or 21%, to $922 million in the third quarter of 2021 from $764 million in the third quarter of 2020.

The increase in our cost of sales was due primarily to higher costs for natural gas, which increased cost of sales by $153 million, and higher manufacturing, maintenance and other costs, which increased cost of sales by $139 million.

These increases were partially offset by a decline in cost of sales of $122 million due to a 20% decline in sales volume.

Cost of sales averaged $244 per ton in the third quarter of 2021, a 51% increase from $162 per ton in the third quarter of 2020.

The cost of natural gas used for production, including the impact of realized derivatives, increased 120% to $4.21 per MMBtu in the third quarter of 2021 from $1.91 per MMBtu in the third quarter of 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $3 million to $52 million in the third quarter of 2021 as compared to $49 million in the third quarter of 2020.

The increase was due primarily to higher incentive compensation, due to strong operating performance, and higher costs associated with certain corporate initiatives.

Goodwill Impairment and Long-lived and Intangible Asset Impairment

During the third quarter of 2021, the U.K.

energy crisis impacted our U.K.

operations, as described above under the heading “United Kingdom Energy Crisis” in the section titled “Market Conditions and Current Developments.” This necessitated an evaluation of the long-lived and intangible assets, including goodwill, of our U.K.

operations to determine if their fair value had declined to below their carrying value.

Management concluded that a decline in the fair value had occurred, and we recognized impairment charges of $495 million in the third quarter of 2021, consisting of a goodwill impairment charge of $259 million and long-lived and intangible asset impairment charges of $236 million.

See “Items Affecting Comparability of Results—U.K.

energy crisis impacts,” above;

“Liquidity and Capital Resources—United Kingdom Energy Crisis,” below;

Note 3—United Kingdom Energy Crisis and Impairment Charges;

Note 6—Property, Plant and Equipment—Net;

and Note 7—Goodwill and Other Intangible Assets for further information.

Other Operating—Net

Other operating—net was $5 million of expense in the third quarter of 2021 compared to $4 million of income in the third quarter of 2020.

The $5 million of expense in the third quarter of 2021 includes a loss on foreign currency transactions of $2 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.

The $4 million of income in the third quarter of 2020 was due primarily to a gain on foreign currency transactions of $6 million.

CF INDUSTRIES HOLDINGS, INC.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $15 million in the third quarter of 2021 compared to $2 million in the third quarter of 2020.

The increase in the third quarter of 2021 was due primarily to an increase in the operating results of PLNL as a result of higher ammonia selling prices partially offset by higher natural gas costs.

Interest Expense—Net

Net interest expense was $46 million in the third quarter of 2021 compared to $48 million in the third quarter of 2020.

The decrease was due primarily to our redemption of $250 million principal amount of the 2023 Notes, which is more fully described under “Liquidity and Capital Resources—Senior Notes,” below.

Loss on Debt Extinguishment

On September 10, 2021, we redeemed $250 million principal amount, representing one-third of the $750 million principal amount outstanding immediately prior to such redemption, of the 2023 Notes, in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total aggregate redemption price paid on the 2023 Notes was approximately $265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $13 million, primarily consisting of a premium paid on the early redemption of the notes.

Other Non-Operating—Net

Other non-operating—net was $19 million of income in the third quarter of 2021 compared to $1 million of expense in the third quarter of 2020.

The $19 million of income in the third quarter of 2021 was due primarily to a gain of $20 million on the sale of European Union (EU) carbon credits that, due to Brexit, could no longer be utilized by our U.K.

plants for carbon emission obligations in the United Kingdom.

For the three months ended September 30, 2021, we recorded an income tax benefit of $46 million on a pre-tax loss of $137 million, or an effective tax rate of 34.3%, compared to an income tax benefit of $13 million on a pre-tax loss of $9 million, or an effective tax rate of 155.0%, for the three months ended September 30, 2020.

For the three months ended September 30, 2021, we did not record an income tax benefit related to the goodwill impairment described in Note 3—United Kingdom Energy Crisis and Impairment Charges as the impairment is non-deductible for income tax purposes.

In addition, as a result of the effective settlement of the U.S.

federal income tax audit for the 2012-2016 tax years, we reversed an accrual for unrecognized tax benefits and recognized a discrete income tax benefit of approximately $15 million.

Our effective tax rate is also impacted by earnings attributable to the noncontrolling interest in CFN, as our consolidated income tax (benefit) 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, 2021 of 34.3%, which is based on a pre-tax loss of $137 million, including $94 million of earnings attributable to the noncontrolling interest, would be 14.0 percentage points lower, or 20.3%, if based on pre-tax loss exclusive of the $94 million of 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 a 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 a pre-tax loss exclusive of the $32 million of earnings attributable to the noncontrolling interest.

See Note 10—Income Taxes and Note 14—Noncontrolling Interest for additional information.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest increased $62 million to $94 million in the third quarter of 2021 as compared to $32 million in the third quarter of 2020 due to higher earnings of CFN driven by higher average selling prices due primarily to a tighter global nitrogen supply and demand balance, as a result of strong global demand as well as decreased global supply availability as higher global energy costs continued to drive lower global operating rates.

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

Net earnings per share attributable to common stockholders decreased $0.73 to a loss of $0.86 per diluted share in the third quarter of 2021 from a loss of $0.13 per diluted share in the third quarter of 2020.

This decrease was due primarily to impairment charges related to our U.K.

operations, partially offset by higher operating results driven by an increase in gross margin.

CF INDUSTRIES HOLDINGS, INC.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Our total net sales increased $976 million, or 32%, to $4.00 billion in the first nine months of 2021 as compared to $3.02 billion in the first nine months of 2020 due to a 45% increase in average selling prices, partially offset by a 9% decrease in sales volume.

Average selling prices were $296 per ton in the first nine months of 2021, or 45% higher compared to $204 per ton in the first nine months of 2020 due to higher average selling prices across all of our segments, primarily driven by the impact of a tighter global nitrogen supply and demand balance, as a result of strong global demand as well as decreased global supply availability as higher global energy costs continued to drive lower global operating rates.

Our total sales volume of 13.5 million product tons in the first nine months of 2021 was 9% lower compared to 14.8 million product tons in the first nine months of 2020 as a result of decreased supply due to lower production due primarily to a high level of plant turnaround and maintenance activity as well as downtime resulting from the impacts of Winter Storm Uri and Hurricane Ida.

First Quarter of 2022 Compared to First Quarter of 2021

Our total net sales increased $1.82 billion or 174%, to $2.87 billion in the first quarter of 2022 compared to $1.05 billion in the first quarter of 2021 due primarily to an increase in average selling prices.

Our average selling price was $620 per ton in the first quarter of 2022, or 170% higher, compared to $230 per ton in the first quarter of 2021 due to higher average selling prices across all of our segments, primarily driven by the impact of a tighter global nitrogen supply and demand balance, as a result of strong global demand as well as decreased global supply availability as higher global energy costs and geopolitical events drove lower global operating rates.

See “Market Conditions and Current Developments—Geopolitical Environment,” above, for further discussion.

Our total sales volume of 4.6 million product tons in the first quarter of 2022 was essentially unchanged compared to the first quarter of 2021, as higher sales volume in our UAN and Ammonia segments was offset by lower sales volume in our Granular Urea, Other and AN segments.

Cost of Sales

Our total cost of sales increased $365 million, or 15%, to $2.77 billion in the first nine months of 2021 as compared to $2.40 billion in the first nine months of 2020.

The increase in our cost of sales was due primarily to higher costs for natural gas, including the impact of realized derivatives, which increased cost of sales by $332 million, higher manufacturing, maintenance and other costs, which increased cost of sales by $307 million, and higher costs for purchased products as we purchased $71 million of granular urea during the first nine months of 2021 to meet customer obligations.

These increases were partially offset by the $112 million gain we recognized from the net settlement of certain natural gas contracts with our suppliers in February 2021 due to Winter Storm Uri as described above under the heading “Natural Gas” in the section titled “Market Conditions and Current Developments.” The $112 million gain on the net settlement of certain natural gas contracts in February 2021 is reflected in, and had the effect of reducing, our cost of sales in the first nine months of 2021.

In addition, there was a $220 million decline in cost of sales in the first nine months of 2021, as compared to the first nine months of 2020, due primarily to a 9% decline in sales volume.

Cost of sales averaged $205 per ton in the first nine months of 2021, a 27% increase from $162 per ton in the first nine months of 2020.

The cost of natural gas used for production, including the impact of realized derivatives, increased 66% to $3.51 per MMBtu in the first nine months of 2021 from $2.11 per MMBtu in the first nine months of 2020.

The cost of natural gas used for production of $3.51 per MMBtu in the first nine months of 2021 does not include the $112 million gain from the net settlement of certain natural gas contracts in February 2021.

Our total cost of sales increased $411 million, or 54%, to $1.17 billion in the first quarter of 2022 from $759 million in the first quarter of 2021.

The increase in our cost of sales was due primarily to higher costs for natural gas, which increased cost of sales by $271 million and higher costs for ammonia purchased from our joint venture in Trinidad.

In addition, in the first quarter of 2021, we recognized a gain of $112 million, which is included in cost of sales, as a result of the net settlement of certain natural gas contracts with our suppliers as a result of Winter Storm Uri.

Cost of sales also includes the impact of a $33 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2022 compared to a $6 million gain in the first quarter of 2021.

Cost of sales averaged $253 per ton in the first quarter of 2022, a 51% increase from $167 per ton in the first quarter of 2021.

The cost of natural gas used for production, including the impact of realized derivatives, increased 101% to $6.48 per MMBtu in the first quarter of 2022 from $3.22 per MMBtu in the first quarter of 2021.

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 discussed above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $13 million to $167 million in the first nine months of 2021 as compared to $154 million in the first nine months of 2020.

The increase was due primarily to higher incentive compensation, due to strong operating performance, and higher costs associated with certain corporate initiatives.

Goodwill Impairment and Long-lived and Intangible Asset Impairment

During the third quarter of 2021, the U.K.

energy crisis impacted our U.K.

operations, as described above under the heading “United Kingdom Energy Crisis” in the section titled “Market Conditions and Current Developments.” This crisis necessitated an evaluation of the long-lived and intangible assets, including goodwill, of our U.K.

operations to determine if their fair value had declined to below their carrying value.

See “Items Affecting Comparability of Results—U.K.

energy crisis impacts,” above;

“Liquidity and Capital Resources—United Kingdom Energy Crisis,” below;

Note 3—United Kingdom Energy Crisis and Impairment Charges;

Note 6—Property, Plant and Equipment—Net;

and Note 7—Goodwill and Other Intangible Assets for further information.

CF INDUSTRIES HOLDINGS, INC.

Other Operating—Net

Other operating—net was $7 million of expense in the first nine months of 2021 compared to $8 million of expense in the first nine months of 2020.

The expense in the first nine months of 2021 includes a loss on foreign currency transactions of $5 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.

The other operating—net expense in the first nine months of 2020 includes $9 million of expense related to the cancellation of a project, which is described in the section above titled “Items Affecting Comparability of Results—Engineering cost write-off,” and foreign currency transaction losses of $7 million.

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

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

Selling, general and administrative expenses increased $9 million to $64 million in the first quarter of 2022 as compared to $55 million in the first quarter of 2021.

The increase was due primarily to higher costs associated with corporate initiatives.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $37 million in the first nine months of 2021 compared to $8 million in the first nine months of 2020.

The increase was due primarily to an increase in the operating results of PLNL as a result of higher ammonia selling prices partially offset by higher natural gas costs.

Equity in earnings of operating affiliate was $26 million in the first quarter of 2022 compared to $11 million in the first quarter of 2021.

The increase in the first quarter of 2022 was due primarily to an increase in the operating results of PLNL as a result of higher ammonia selling prices partially offset by higher natural gas costs.

Interest Expense—Net

Net interest expense increased by $17 million to $140 million in the first nine months of 2021 compared to $123 million in the first nine months of 2020.

The increase is due primarily to $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.

Net interest expense was $205 million in the first quarter of 2022 compared to $48 million in the first quarter of 2021.

The increase of $157 million was due primarily to $162 million of net interest expense recorded in the first quarter of 2022 related to income tax matters, which are more fully described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing reserves,” above.

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.

On September 10, 2021, we redeemed $250 million principal amount, representing one-third of the $750 million principal amount outstanding immediately prior to such redemption, of the 2023 Notes, in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total aggregate redemption price paid on the 2023 Notes was approximately $265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $13 million, primarily consisting of a premium paid on the early redemption of the notes.

Other Non-Operating—Net

Other non-operating—net was $17 million of income in the first nine months of 2021 compared to $2 million of income in the first nine months of 2020.

The $17 million of income in the first nine months of 2021 was due primarily to a gain of $20 million on the sale of EU carbon credits that, due to Brexit, could no longer be utilized by our U.K.

plants for carbon emission obligations in the United Kingdom.

For the nine months ended September 30, 2021, we recorded an income tax provision of $57 million on pre-tax income of $458 million, or an effective tax rate of 12.3%, compared to an income tax provision of $33 million on pre-tax income of $346 million, or an effective tax rate of 9.4%, for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, we did not record an income tax benefit related to the goodwill impairment described in Note 3—United Kingdom Energy Crisis and Impairment Charges as the impairment is non-deductible for income tax purposes.

In addition, our income tax provision includes a $36 million benefit reflecting the impact of agreement on certain issues related to U.S.

federal income tax audits, including a discrete income tax benefit of approximately $15 million due to the reversal of an accrual for unrecognized tax benefits as a result of the effective settlement of the U.S.

federal income tax audit for the 2012-2016 tax years.

On March 20, 2021, we redeemed in full all of the $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 in connection with the redemption of the 2021 Notes was $258 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $6 million, consisting primarily of the premium paid on the redemption of the 2021 Notes prior to their scheduled maturity.

CF INDUSTRIES HOLDINGS, INC.

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 three months ended March 31, 2022, we recorded an income tax provision of $401 million on pre-tax income of $1.45 billion, or an effective tax rate of 27.6%, compared to an income tax provision of $18 million on pre-tax income of $193 million, or an effective tax rate of 9.3%, for the three months ended March 31, 2021.

For the three months ended March 31, 2022, our income tax provision includes $78 million of tax expense related to the Canada Revenue Agency Competent Authority Matter and certain transfer pricing reserves recorded in the period, which are further described above under “Items Affecting Comparability of Results.

” Additionally, for the three months ended March 31, 2022, we recognized a $20 million income tax benefit for the excess tax benefit related to certain share-based compensation activity.

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.

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, 2021 of 12.3%, which is based on pre-tax income of $458 million, including $189 million of earnings attributable to the noncontrolling interest, would be 8.7 percentage points higher, or 21.0%, if based on pre-tax income exclusive of the $189 million of 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 of earnings 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 of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended March 31, 2022 of 27.6%, which is based on pre-tax income of $1.45 billion, including $168 million of earnings attributable to the noncontrolling interest, would be 3.7 percentage points higher, or 31.3%, if based on pre-tax income exclusive of the $168 million of earnings 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.

See Note 10—Income Taxes and Note 14—Noncontrolling Interest for additional information.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest increased 128% to $189 million in the first nine months of 2021 from $83 million in the first nine months of 2020 due to higher earnings of CFN driven by higher average selling prices due primarily to a tighter global nitrogen supply and demand balance as higher global energy costs drove lower global operating rates.

Net earnings attributable to noncontrolling interest increased $144 million to $168 million in the first quarter of 2022 as compared to $24 million in the first quarter of 2021 due to higher earnings of CFN driven by higher average selling prices as described above under “Net Sales.”

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased 8% to $0.98 per diluted share in the first nine months of 2021 from $1.07 per diluted share in the first nine months of 2020.

This decrease is due primarily to impairment charges related to our U.K.

operations, partially offset by higher operating results driven by an increase in gross margin.

Net earnings per share attributable to common stockholders increased $3.51 to $4.21 per diluted share in the first quarter of 2022 from $0.70 per diluted share in the first quarter of 2021.

This increase was due primarily to an increase in gross margin, driven by higher average selling prices, partially offset by increases in natural gas costs.

The increase in gross margin was partially offset by increases in interest expense and income tax provision, which are described above, and an increase in net earnings attributable to noncontrolling interest.

Additionally, net earnings per diluted share increased due to a 3% reduction in the diluted weighted-average common shares outstanding, which declined from 216.0 million shares at March 31, 2021 to 209.9 million shares at March 31, 2022, due primarily to repurchases of common shares under our share repurchase programs.

CF INDUSTRIES HOLDINGS, INC.

3 unchanged sentences

Our management uses gross margin to evaluate segment performance and allocate resources.

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

The following tables present summary operating results by business segment and the major drivers of the variance in net sales, cost of sales and gross margin:

Variance due to the following items:

Third Quarter of 2020 Higher Average Selling Prices Volume Higher Natural Gas Costs (1)

Unrealized MTM on natural gas derivatives Higher Manufacturing, Maintenance and Other Costs Third Quarter of 2021

(dollars in millions)

Net sales $ 847 $ 686 $ (171) $ — $ — $ — $ 1,362

Cost of sales 764 — (122) 153 (12) 139 922

Gross margin $ 83 $ 686 $ (49) $ (153) $ 12 $ (139) $ 440

Gross margin percentage 9.8 % 32.3 %

Net sales $ 165 $ 197 $ (18) $ — $ — $ — $ 344

Cost of sales 174 — (14) 35 (4) 71 262

Gross margin $ (9) $ 197 $ (4) $ (35) $ 4 $ (71) $ 82

Gross margin percentage (5.5) % 23.8 %

Granular Urea

Net sales $ 249 $ 194 $ (57) $ — $ — $ — $ 386

Cost of sales 183 — (39) 38 (3) 21 200

Gross margin $ 66 $ 194 $ (18) $ (38) $ 3 $ (21) $ 186

Gross margin percentage 26.5 % 48.2 %

Net sales $ 248 $ 207 $ (65) $ — $ — $ — $ 390

Cost of sales 237 — (45) 35 (3) 9 233

Gross margin $ 11 $ 207 $ (20) $ (35) $ 3 $ (9) $ 157

Gross margin percentage 4.4 % 40.3 %

Net sales $ 109 $ 37 $ (28) $ — $ — $ — $ 118

Cost of sales 96 — (20) 28 (1) 19 122

Gross margin $ 13 $ 37 $ (8) $ (28) $ 1 $ (19) $ (4)

Gross margin percentage 11.9 % (3.4) %

Net sales $ 76 $ 51 $ (3) $ — $ — $ — $ 124

Cost of sales 74 — (4) 17 (1) 19 105

Gross margin $ 2 $ 51 $ 1 $ (17) $ 1 $ (19) $ 19

Gross margin percentage 2.6 % 15.3 %

CF INDUSTRIES HOLDINGS, INC.

Variance due to the following items:

Nine Months Ended September 30, 2020 Higher Average Selling Prices (2)

Higher Natural Gas Costs (1)

Unrealized MTM on natural gas derivatives (3)

Higher Manufacturing, Maintenance and Other Costs Increase in Purchased Urea (4)

Gain on Net Settlement of Natural Gas Contracts Nine Months Ended September 30, 2021

(dollars in millions)

Net sales $ 3,022 $ 1,224 $ (309) $ — $ — $ — $ 61 $ — $ 3,998

Cost of sales 2,401 — (220) 332 (6) 307 64 (112) 2,766

Gross margin $ 621 $ 1,224 $ (89) $ (332) $ 6 $ (307) $ (3) $ 112 $ 1,232

Gross margin percentage 20.5 % 30.8 %

Net sales $ 722 $ 348 $ (61) $ — $ — $ — $ — $ — $ 1,009

Cost of sales 609 — (40) 78 (2) 142 — (112) 675

Gross margin $ 113 $ 348 $ (21) $ (78) $ 2 $ (142) $ — $ 112 $ 334

Gross margin percentage 15.7 % 33.1 %

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

The following tables present summary operating results by business segment:

Granular Urea (2)

Net sales $ 915 $ 404 $ (162) $ — $ — $ — $ 61 $ — $ 1,218

Cost of sales 612 — (101) 81 (1) 50 64 — 705

Gross margin $ 303 $ 404 $ (61) $ (81) $ 1 $ (50) $ (3) $ — $ 513

Gross margin percentage 33.1 % 42.1 %

Net sales $ 791 $ 288 $ (23) $ — $ — $ — $ — $ — $ 1,056

Cost of sales 675 — (20) 85 (1) 20 — — 759

Gross margin $ 116 $ 288 $ (3) $ (85) $ 1 $ (20) $ — $ — $ 297

Gross margin percentage 14.7 % 28.1 %

(in millions)

Three months ended March 31, 2022

Net sales $ 640 $ 765 $ 1,015 $ 223 $ 225 $ 2,868

2 unchanged sentences

Gross margin percentage 56.3 % 64.7 % 66.0 % 23.3 % 53.8 % 59.2 %

Three months ended March 31, 2021

Net sales $ 206 $ 399 $ 232 $ 105 $ 106 $ 1,048

3 unchanged sentences

_______________________________________________________________________________

(1) Higher natural gas costs include the impact, if any, of realized natural gas derivatives.

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

(3) Represents the variance in the net unrealized mark-to-market gains and losses on natural gas derivatives compared to the prior year period.

(4) Represents the impact of the incremental tons compared to the prior year period.

(1) Cost of sales and gross margin for the ammonia segment in the three months ended March 31, 2021 include a $112 million gain on the net settlement of certain natural gas contracts with our suppliers.

See Note 13—Derivative Financial Instruments for additional information.

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

CF INDUSTRIES HOLDINGS, INC.

6 unchanged sentences

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

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

2021 2020 2021 v.

Three Months Ended March 31,

2022 2021 2022 v.

2 unchanged sentences

Cost of sales 280 80 200 250 %

Gross margin $ 82 $ (9) $ 91 N/M $ 334 $ 113 $ 221 196 %

Gross margin $ 360 $ 126 $ 234 186 %

Gross margin percentage 56.3 % 61.2 % (4.9) %

5 unchanged sentences

$ 1,074 $ 368 $ 706 192 %

Gross margin per product ton $ 119 $ (11) $ 130 N/M $ 139 $ 42 $ 97 231 %

Gross margin per product ton $ 495 $ 184 $ 311 169 %

Gross margin per nutrient ton (1)

$ 145 $ (14) $ 159 N/M $ 169 $ 52 $ 117 225 %

$ 604 $ 225 $ 379 168 %

Depreciation and amortization $ 34 $ 36 $ (2) (6) %

Unrealized net mark-to-market gain on natural gas derivatives $ (4) $ — $ (4) N/M $ (6) $ (4) $ (2) (50) %

Unrealized net mark-to-market gain on natural gas derivatives $ (8) $ (2) $ (6) (300) %

_______________________________________________________________________________

N/M—Not Meaningful

(1) Ammonia represents 82% nitrogen content.

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

Third Quarter of 2021 Compared to Third Quarter of 2020

Net sales in our ammonia segment increased by $179 million, or 108%, to $344 million in the third quarter of 2021 from $165 million in the third quarter of 2020 due primarily to a 140% increase in average selling prices, partially offset by a 13% decrease in sales volume.

Average selling prices increased to $499 per ton in the third quarter of 2021 compared to $208 per ton in the third 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, due to higher plant turnaround and maintenance activity in 2021 and weather-related outages, including the impact of Hurricane Ida.

First Quarter of 2022 Compared to First Quarter of 2021

Net sales in our Ammonia segment increased by $434 million, or 211%, to $640 million in the first quarter of 2022 from $206 million in the first quarter of 2021 due primarily to a 191% increase in average selling prices and a 6% increase in sales volume.

Average selling prices increased to $880 per ton in the first quarter of 2022 compared to $302 per ton in the first quarter of 2021 due primarily to the impact of a tighter global nitrogen supply and demand balance, in part due to the geopolitical factors as described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume was higher due primarily to higher supply availability due to increased production.

Cost of Sales.

Cost of sales in our ammonia segment averaged $380 per ton in the third quarter of 2021, a 74% increase from $219 per ton in the third quarter of 2020.

The increase is due primarily to higher realized natural gas costs, higher costs related to plant turnaround and maintenance activity, and a higher cost per ton for purchased ammonia from our joint venture in Trinidad.

Cost of sales in our Ammonia segment averaged $385 per ton in the first quarter of 2022, a 226% increase from $118 per ton in the first quarter of 2021.

The increase was due primarily to the impact of the $112 million gain on the net settlement of certain natural gas contracts in February 2021, which is more fully described under “Market Conditions and Current Developments” above, and higher realized natural gas costs and higher costs for ammonia purchased from our joint venture in Trinidad.

The $112 million gain on the net settlement of certain natural gas contracts reduced cost of sales in the first quarter of 2021 by $164 per ton, and represents 189 percentage points of the 226% increase in cost of sales per ton.

Gross Margin .

Gross margin in our ammonia segment increased by $91 million to $82 million in the third quarter of 2021 from a loss of $9 million in the third quarter of 2020, and our gross margin percentage was 23.8% in the third quarter of 2021 compared to (5.5)% in the third quarter of 2020 .

The increase in gross margin was due primarily to a 140% increase in average selling prices, which increased gross margin by $197 million.

The impact of higher average selling prices was partially offset by the impact of a $71 million net increase in manufacturing, maintenance and other costs , an increase in realized natural gas costs, which reduced gross margin by $35 million, and a 13% decrease in sales volume, which decreased gross margin by $4 million.

Gross margin also includes the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the third quarter of 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net sales in our ammonia segment increased by $287 million, or 40%, to $1,009 million in the nine months ended September 30, 2021 from $722 million in the nine months ended September 30, 2020 due primarily to a 55% increase in average selling prices, partially offset by a 10% decrease in sales volume.

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

Sales volume was lower due primarily to lower

Gross margin in our Ammonia segment increased by $234 million to $360 million in the first quarter of 2022 from $126 million in the first quarter of 2021, and our gross margin percentage was 56.3% in the first quarter of 2022 compared to 61.2% in the first quarter of 2021 .

The increase in gross margin was due primarily to a 191% increase in average selling prices, which increase d gross margin by $413 million, and a 6% increase in sales volume, which increase d gross margin by $17 million.

These factors were partially offset by an increase in realized natural gas costs, which reduced gross margin by $52 million, and a $38 million net increase in manufacturing, maintenance and other costs, driven by higher purchased product costs.

In addition, the first quarter of 2021 includes the impact of the $112 million gain on the net settlement of certain natural gas contracts.

Gross margin also includes the impact of an $8 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2022 compared to a $2 million gain in the first quarter of 2021.

CF INDUSTRIES HOLDINGS, INC.

supply availability resulting from reduced inventory and production due to plant turnaround and maintenance activity and weather-related outages, including the impact of Winter Storm Uri.

Cost of Sales.

Cost of sales in our ammonia segment averaged $280 per ton in the nine months ended September 30, 2021, a 23% increase from $228 per ton in the nine months ended September 30, 2020.

The increase is due primarily to higher realized natural gas costs, higher costs related to plant turnaround, maintenance and repair activity, and a higher cost per ton for purchased ammonia from our joint venture in Trinidad, partially offset by the impact of the $112 million gain on the net settlement of certain natural gas contracts in February 2021.

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

Gross Margin .

Gross margin in our ammonia segment increased by $221 million to $334 million in the nine months ended September 30, 2021 from $113 million in the nine months ended September 30, 2020, and our gross margin percentage was 33.1% in the nine months ended September 30, 2021 compared to 15.7% in the nine months ended September 30, 2020.

The increase in gross margin was due primarily to a 55% increase in average selling prices, which increased gross margin by $348 million and the $112 million gain on the net settlement of certain natural gas contracts in February 2021.

These factors were partially offset by a $142 million net increase in manufacturing, maintenance and other costs, an increase in realized natural gas costs, which decreased gross margin by $78 million, and a 10% decrease in sales volume, which decreased gross margin by $21 million.

Gross margin also includes the impact of a $6 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2021 compared to a $4 million gain in the nine months ended September 30, 2020.

Granular Urea Segment

5 unchanged sentences

The following table presents summary operating data for our Granular Urea segment:

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

2021 2020 2021 v.

Three Months Ended March 31,

2022 2021 2022 v.

14 unchanged sentences

Depreciation and amortization $ 64 $ 66 $ (2) (3) %

Unrealized net mark-to-market gain on natural gas derivatives $ (3) $ — $ (3) N/M $ (5) $ (4) $ (1) (25) %

Unrealized net mark-to-market gain on natural gas derivatives $ (7) $ (2) $ (5) (250) %

_______________________________________________________________________________

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 2021 Compared to Third Quarter of 2020

Net sales in our granular urea segment increased $137 million, or 55%, to $386 million in the third quarter of 2021 from $249 million in the third quarter of 2020 due primarily to a 100% increase in average selling prices, partially offset by a 22% decrease in sales volume.

Average selling prices increased to $449 per ton in the third quarter of 2021 compared to $225 per ton in the third 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 due to plant turnaround and maintenance activity and weather-related outages, including the impact of Hurricane Ida.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

Cost of sales in our granular urea segment averaged $233 per ton in the third quarter of 2021, a 41% increase from $165 per ton in the third quarter of 2020, due primarily to higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity.

Gross Margin .

Gross margin in our granular urea segment increased by $120 million to $186 million in the third quarter of 2021 from $66 million in the third quarter of 2020, and our gross margin percentage was 48.2% in the third quarter of 2021 compared to 26.5% in the third quarter of 2020.

The increase in gross margin was due primarily to a 100% increase in average selling prices, which increased gross margin by $194 million.

The impact of higher average selling prices was partially offset by an increase in realized natural gas costs, which decreased gross margin by $38 million, a $21 million net increase in other manufacturing, maintenance and other costs, and a 22% decrease in sales volume, which decreased gross margin by $18 million.

Gross margin also includes the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the third quarter of 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net sales in our granular urea segment increased $303 million, or 33%, to $1,218 million in the nine months ended September 30, 2021 from $915 million in the nine months ended September 30, 2020 due primarily to a 54% increase in average selling prices, partially offset by a 14% decrease in sales volume.

Average selling prices increased to $372 per ton in the nine months ended September 30, 2021 compared to $241 per ton in the nine months ended September 30, 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 due to plant turnaround, maintenance and repair activity and the impact of Winter Storm Uri.

Due to the reduced production, we purchased granular urea in the nine months ended September 30, 2021, which we sold for $68 million, to meet customer obligations.

First Quarter of 2022 Compared to First Quarter of 2021

Net sales in our Granular Urea segment increased $366 million, or 92%, to $765 million in the first quarter of 2022 from $399 million in the first quarter of 2021 due primarily to a 131% increase in average selling prices, partially offset by a 17% decrease in sales volume.

Average selling prices increased to $698 per ton in the first quarter of 2022 compared to $302 per ton in the first quarter of 2021 due primarily to the impact of a tighter global nitrogen supply and demand balance, in part due to the geopolitical factors as described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume was lower due primarily to lower supply availability resulting from lower production.

Cost of Sales.

Cost of sales in our granular urea segment averaged $215 per ton in the nine months ended September 30, 2021, a 34% increase from $161 per ton in the nine months ended September 30, 2020, due primarily to higher realized natural gas costs and higher costs related to plant turnaround, maintenance and repair activity due primarily to Winter Storm Uri.

In addition, we purchased $71 million of granular urea in the nine months ended September 30, 2021 to meet customer obligations.

Cost of sales in our Granular Urea segment averaged $246 per ton in the first quarter of 2022, a 23% increase from $200 per ton in the first quarter of 2021, due primarily to higher realized natural gas costs.

Gross Margin .

Gross margin in our granular urea segment increased by $210 million to $513 million in the nine months ended September 30, 2021 from $303 million in the nine months ended September 30, 2020, and our gross margin percentage was 42.1% in the nine months ended September 30, 2021 compared to 33.1% in the nine months ended September 30, 2020.

The increase in gross margin was due to a 54% increase in average selling prices, which increased gross margin by $404 million.

The impact of higher average selling prices was partially offset by higher realized natural gas costs, which decreased gross margin by $81 million, a 14% decrease in sales volume, which decreased gross margin by $61 million, and a $50 million net increase in manufacturing, maintenance and other costs.

In addition, we have experienced lower production throughout 2021.

As a result, in the nine months ended September 30, 2021, we purchased 201,000 tons of granular urea to meet customer obligations, which had the impact of reducing our gross margin percentage in our granular urea segment by 2.8 percentage points.

Gross margin also includes the impact of a $5 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2021 compared to a $4 million gain in the nine months ended September 30, 2020.

Gross margin in our Granular Urea segment increased by $360 million to $495 million in the first quarter of 2022 from $135 million in the first quarter of 2021, and our gross margin percentage was 64.7% in the first quarter of 2022 compared to 33.8% in the first quarter of 2021.

The increase in gross margin was due primarily to a 131% increase in average selling prices, which increased gross margin by $426 million, and a $3 million net decrease in manufacturing, maintenance and other costs.

These factors were partially offset by an increase in realized natural gas costs, which reduced gross margin by $48 million, and a 17% decrease in sales volume, which decreased gross margin by $26 million.

Gross margin also includes the impact of a $7 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2022 compared to a $2 million gain in the first quarter of 2021.

CF INDUSTRIES HOLDINGS, INC.

8 unchanged sentences

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

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

2021 2020 2021 v.

Three Months Ended March 31,

2022 2021 2022 v.

14 unchanged sentences

Depreciation and amortization $ 70 $ 56 $ 14 25 %

Unrealized net mark-to-market gain on natural gas derivatives $ (3) $ — $ (3) N/M $ (5) $ (4) $ (1) (25) %

Unrealized net mark-to-market gain on natural gas derivatives $ (8) $ (2) $ (6) (300) %

_______________________________________________________________________________

2 unchanged sentences

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

Third Quarter of 2021 Compared to Third Quarter of 2020

Net sales in our UAN segment increased $142 million, or 57%, to $390 million in the third quarter of 2021 from $248 million in the third quarter of 2020 due primarily to a 111% increase in average selling prices, partially offset by a 26% decrease in sales volume.

Average selling prices increased to $304 per ton in the third quarter of 2021 compared to $144 per ton in the third 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 from reduced production due to plant turnaround and maintenance activity and the impact of weather-related outages.

Cost of Sales.

Cost of sales in our UAN segment averaged $182 per ton in the third quarter of 2021, a 32% increase from $138 per ton in the third quarter of 2020, due primarily to the impact of higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity.

Gross Margin .

Gross margin in our UAN segment increased by $146 million to $157 million in the third quarter of 2021 from $11 million in the third quarter of 2020, and our gross margin percentage was 40.3% in the third quarter of 2021 compared to 4.4% in the third quarter of 2020.

The increase in gross margin was due to a 111% increase in average selling prices, which increased gross margin by $207 million.

The impact of higher average selling prices was partially offset by higher realized natural gas costs, which decreased gross margin by $35 million, a 26% decrease in sales volume, which decreased gross margin by $20 million, and a $9 million net increase in manufacturing, maintenance and other costs .

Gross margin includes the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the third quarter of 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net sales in our UAN segment increased $265 million, or 34%, to $1,056 million in the nine months ended September 30, 2021 from $791 million in the nine months ended September 30, 2020 due primarily to a 39% increase in average selling prices, partially offset by a 4% decrease in sales volume.

Average selling prices increased to $223 per ton in the nine months ended September 30, 2021 compared to $160 per ton in the nine months ended September 30, 2020, due primarily to the impact of a tighter global nitrogen supply and demand balance.

The decrease in sales volume was due to lower supply

CF INDUSTRIES HOLDINGS, INC.

availability from reduced production due to plant turnaround and maintenance activity and the impact of weather-related outages.

First Quarter of 2022 Compared to First Quarter of 2021

Net sales in our UAN segment increased $783 million, or 338%, to $1.02 billion in the first quarter of 2022 from $232 million in the first quarter of 2021 due to a 263% increase in average selling prices and a 21% increase in sales volume.

Average selling prices increased to $555 per ton in the first quarter of 2022 compared to $153 per ton in the first quarter of 2021 due primarily to the impact of a tighter global nitrogen supply and demand balance, in part due to the geopolitical factors as described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume was higher due primarily to higher supply availability resulting from an increase in production.

Cost of Sales.

Cost of sales in our UAN segment averaged $160 per ton in the nine months ended September 30, 2021, a 17% increase from $137 per ton in the nine months ended September 30, 2020.

The increase was due primarily to the impact of higher realized natural gas costs and higher costs related to plant turnaround, maintenance and repair activity.

Cost of sales in our UAN segment averaged $188 per ton in the first quarter of 2022, a 24% increase from $152 per ton in the first quarter of 2021, due primarily to the impact of higher realized natural gas costs and higher freight and distribution costs to ship UAN to meet demand on both the east and west coasts of the United States.

Gross Margin .

Gross margin in our UAN segment increased by $181 million to $297 million in the nine months ended September 30, 2021 from $116 million in the nine months ended September 30, 2020, and our gross margin percentage was 28.1% in the nine months ended September 30, 2021 compared to 14.7% in the nine months ended September 30, 2020.

The increase in gross margin was due to a 39% increase in average selling prices, which increased gross margin by $288 million.

The impact of higher average selling prices was partially offset by higher realized natural gas costs, which decreased gross margin by $85 million, a $20 million net increase in manufacturing, maintenance and other costs, and a 4% decrease in sales volume, which decreased gross margin by $3 million.

Gross margin in our UAN segment increased by $668 million to $670 million in the first quarter of 2022 from $2 million in the first quarter of 2021, and our gross margin percentage was 66.0% in the first quarter of 2022 compared to 0.9% in the first quarter of 2021.

The increase in gross margin was due primarily to a 263% increase in average selling prices, which increased gross margin by $736 million, and a 21% increase in sales volume, which increased gross margin by $12 million.

These factors were partially offset by an increase in realized natural gas costs, which reduced gross margin by $65 million, and a $21 million net increase in manufacturing, maintenance and other costs .

Antidumping and Countervailing Duty Investigations

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International Trade Commission (ITC) requesting the initiation of antidumping and countervailing duty investigations on imports of UAN from Russia and Trinidad.

We requested the investigations due to the harm we believe the domestic UAN industry has experienced from dumped and unfairly subsidized imports from these two countries.

The ITC instituted preliminary phase injury investigations on July 1, 2021, and Commerce announced the initiation of antidumping and countervailing duty investigations on July 21, 2021.

On August 13, the ITC announced its unanimous preliminary affirmative determination, finding that there is a reasonable indication that the U.S.

On August 13, 2021, the ITC made an affirmative preliminary determination that there is a reasonable indication that the U.S.

UAN industry is materially injured by reason of imports of UAN from Russia and Trinidad.

As a result, Commerce is proceeding with its investigations of whether and to what extent these imports are dumped and unfairly subsidized.

Commerce is due to announce the preliminary countervailing duty determinations on November 30.

Commerce’s preliminary antidumping determinations are currently due on December 8, but may be postponed.

We expect that Commerce will issue final determinations in 2022.

If any of Commerce’s final determinations are affirmative, the ITC would make a final determination as to whether the unfairly traded imports materially injure or threaten material injury to the U.S.

UAN industry.

If the ITC makes affirmative final determinations, then Commerce can impose duties equal to the level of dumping and unfair subsidies it finds.

At this time, we cannot predict the outcome of the proceedings, including whether antidumping or countervailing duties will be imposed on imports from either country, or the rate of any such duties.

CF INDUSTRIES HOLDINGS, INC.

On November 30, 2021, Commerce announced preliminary countervailing duty determinations finding that UAN imports from Russia are unfairly subsidized at rates ranging from 9.66% to 9.84% and UAN imports from Trinidad are unfairly subsidized at a rate of 1.83%, and imposed preliminary cash deposit requirements on those imports.

On January 27, 2022, Commerce announced preliminary antidumping duty determinations finding that Russian UAN imports are dumped (i.e.

sold at less than fair value) into the U.S.

market at rates ranging from 9.15% to 127.19%, and that Trinidadian UAN imports are dumped at a rate of 63.08%, and imposed preliminary cash deposit requirements on those imports.

Commerce issued a correction to its Trinidad finding on March 8, 2022, finding that Trinidadian UAN imports are dumped at a rate of 111.64% and modified the cash deposit requirements.

Commerce is scheduled to issue final antidumping and countervailing duty determinations later in 2022 and, if any of Commerce’s final determinations are affirmative, the ITC will make final determinations as to whether the unfairly traded imports materially injure or threaten material injury to the U.S.

UAN industry.

If the ITC makes affirmative final determinations, then Commerce will impose duties equal to the level of dumping and unfair subsidies it finds.

At this time, we cannot predict the outcome of the proceedings, including whether final antidumping or countervailing duties will be imposed on imports from either Russia or Trinidad, or the rate of any such duties.

Our AN segment produces ammonium nitrate (AN).

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

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

2021 2020 2021 v.

Three Months Ended March 31,

2022 2021 2022 v.

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Cost of sales 171 95 76 80 %

Gross margin $ (4) $ 13 $ (17) N/M $ 22 $ 53 $ (31) (58) %

Gross margin $ 52 $ 10 $ 42 420 %

Gross margin percentage 23.3 % 9.5 % 13.8 %

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$ 1,527 $ 714 $ 813 114 %

Gross margin per product ton $ (10) $ 24 $ (34) N/M $ 16 $ 32 $ (16) (50) %

Gross margin per product ton $ 121 $ 23 $ 98 426 %

Gross margin per nutrient ton (1)

$ (29) $ 70 $ (99) N/M $ 48 $ 94 $ (46) (49) %

$ 356 $ 68 $ 288 424 %

Depreciation and amortization $ 17 $ 19 $ (2) (11) %

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

Unrealized net mark-to-market gain on natural gas derivatives $ (6) $ — $ (6) N/M

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

Third Quarter of 2021 Compared to Third Quarter of 2020

First Quarter of 2022 Compared to First Quarter of 2021

Shortly thereafter, we restarted production at our Billingham facility;

however, production continues to be idled at our Ince facility.

See the discussion under “Market Conditions and Current Developments—United Kingdom Energy Crisis,” above, for further information.

Net sales in our AN segment increased $9 million, or 8%, to $118 million in the third quarter of 2021 from $109 million in the third quarter of 2020 due primarily to a 46% increase in average selling prices, partially offset by a 26% decrease in sales volume.

Average selling prices increased to $290 per ton in the third quarter of 2021 compared to $199 per ton in the third quarter of 2020 due primarily to the impact of a tighter global nitrogen supply and demand balance.

Sales volume declined due to lower supply availability resulting from reduced production due primarily to plant turnaround and maintenance activity.

Cost of Sales.

Cost of sales in our AN segment averaged $300 per ton in the third quarter of 2021, a 71% increase from $175 per ton in the third quarter of 2020.

The increase was due primarily to higher realized natural gas costs and higher costs related to plant turnaround activity.

Natural gas costs increased in both the United States and the United Kingdom in 2021.

For example, as measured by the average daily market price of natural gas at the NBP, the major natural gas trading point for the United Kingdom, natural gas prices increased to $15.98 per MMBtu in the third quarter of 2021 from $2.69 per MMBtu in the third quarter of 2020.

See the discussion under “Market Conditions and Current Developments—Natural Gas,” above, for further information.

Gross Margin .

Gross margin in our AN segment decreased $17 million to a loss of $4 million in the third quarter of 2021 from $13 million in the third quarter of 2020, and our gross margin percentage was (3.4)% in the third quarter of 2021 compared to 11.9% in the third quarter of 2020.

The decrease in gross margin was due to an increase in realized natural gas costs, which decreased gross margin by $28 million, a net increase of $19 million in manufacturing, maintenance and other costs, and a 26% decrease in sales volume, which decreased gross margin by $8 million.

These factors were partially offset by a 46% increase in average selling prices, which increased gross margin by $37 million.

Gross margin also includes the impact of a $1 million unrealized net mark-to-market gain on natural gas derivatives in the third quarter of 2021.

CF INDUSTRIES HOLDINGS, INC.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net sales in our AN segment increased $16 million, or 5%, to $359 million in the nine months ended September 30, 2021 from $343 million in the nine months ended September 30, 2020 due primarily to a 30% increase in average selling prices, partially offset by a 19% decrease in sales volume.

Average selling prices increased to $267 per ton in the nine months ended September 30, 2021 compared to $205 per ton in the nine months ended September 30, 2020 due primarily to the impact of a tighter global nitrogen supply and demand balance.

The decrease in sales volume was due primarily to lower supply availability as a result of reduced production due to plant turnaround and maintenance activity.

Net sales in our AN segment increased $118 million, or 112%, to $223 million in the first quarter of 2022 from $105 million in the first quarter of 2021 due to a 117% increase in average selling prices, partially offset by a 2% decrease in sales volume.

Average selling prices increased to $521 per ton in the first quarter of 2022 compared to $240 per ton in the first quarter of 2021 due primarily to the impact of a tighter global nitrogen supply and demand balance, in part due to the geopolitical factors as described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume declined due primarily to lower supply availability resulting from lower production.

Cost of Sales.

Cost of sales in our AN segment averaged $251 per ton in the nine months ended September 30, 2021, a 45% increase from $173 per ton in the nine months ended September 30, 2020.

The increase was due primarily to higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity.

Cost of sales in our AN segment averaged $400 per ton in the first quarter of 2022, an 84% increase from $217 per ton in the first quarter of 2021.

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

Natural gas costs increased in both the United States and the United Kingdom in the first quarter of 2022.

As measured by the average daily market price at the Henry Hub, natural gas prices in the United States increased to $4.60 per MMBtu in the first quarter of 2022 from $3.38 per MMBtu in the first quarter of 2021.

In the United Kingdom, the average daily market price of natural gas at the NBP increased to $30.20 per MMBtu in the first quarter of 2022 from $6.90 per MMBtu in the first quarter of 2021.

See the discussion under “Market Conditions and Current Developments—Natural Gas,” above, for further information.

Gross Margin .

Gross margin in our AN segment decreased by $31 million, or 58%, to $22 million in the nine months ended September 30, 2021 from $53 million in the nine months ended September 30, 2020, and our gross margin percentage was 6.1% in the nine months ended September 30, 2021 compared to 15.5% in the nine months ended September 30, 2020.

The decrease in gross margin was due to an increase in realized natural gas costs, which decreased gross margin by $55 million, a net increase of $44 million in manufacturing, maintenance and other costs, and a 19% decrease in sales volume, which decreased gross margin by $16 million.

These factors were partially offset by a 30% increase in average selling prices, which increased gross margin by $83 million.

Gross margin includes the impact of a $1 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2021.

Gross margin in our AN segment increased $42 million to $52 million in the first quarter of 2022 from $10 million in the first quarter of 2021, and our gross margin percentage was 23.3% in the first quarter of 2022 compared to 9.5% in the first quarter of 2021.

The increase in gross margin was due primarily to a 117% increase in average selling prices, which increased gross margin by $122 million, and an increase of $3 million due to product mix.

This increase was partially offset by an increase in realized natural gas costs, which reduced gross margin by $77 million, and a net increase of $12 million in manufacturing, maintenance and other costs.

Gross margin also includes the impact of a $6 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2022.

Other Segment

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

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

2021 2020 2021 v.

Three Months Ended March 31,

2022 2021 2022 v.

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Depreciation and amortization $ 19 $ 22 $ (3) (14) %

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

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

_______________________________________________________________________________

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CF INDUSTRIES HOLDINGS, INC.

Third Quarter of 2021 Compared to Third Quarter of 2020

Net sales in our Other segment increased by $48 million, or 63%, to $124 million in the third quarter of 2021 from $76 million in the third quarter of 2020 due primarily to a 70% increase in average selling prices, partially offset by a 4% decrease in sales volume.

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

The decrease in sales volume was due primarily to lower urea liquor and NPK sales, partially offset by higher DEF sales.

Cost of Sales.

Cost of sales in our Other segment averaged $193 per ton in the third quarter of 2021, a 48% increase from $130 per ton in the third quarter of 2020, due primarily to higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity.

Gross Margin .

Gross margin in our Other segment increased by $17 million to $19 million in the third quarter of 2021 from $2 million in the third quarter of 2020, and our gross margin percentage was 15.3% in the third quarter of 2021 compared to 2.6% in the third quarter of 2020.

The increase in gross margin was due to a 70% increase in average selling prices, which increased gross margin by $51 million and an increase of $1 million due to product mix.

These factors were partially offset by a $19 million net increase in manufacturing, maintenance and other costs and an increase in realized natural gas costs, which decreased gross margin by $17 million.

Gross margin also includes the impact of a $1 million unrealized net mark-to-market gain on natural gas derivatives in the third quarter of 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net sales in our Other segment increased by $105 million, or 42%, to $356 million in the nine months ended September 30, 2021 from $251 million in the nine months ended September 30, 2020 due primarily to a 40% increase in average selling prices and a 2% increase in sales volume.

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

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

First Quarter of 2022 Compared to First Quarter of 2021

Net sales in our Other segment increased by $119 million, or 112%, to $225 million in the first quarter of 2022 from $106 million in the first quarter of 2021 due to a 137% increase in average selling prices, partially offset by an 11% decrease in sales volume.

The increase in average selling prices was due primarily to the impact of a tighter global nitrogen supply and demand balance, in part due to the geopolitical factors as described above under “Market Conditions and Current Developments—Geopolitical Environment.” The decrease in sales volume was due primarily to lower NPK sales volumes in the first quarter of 2022, as our Ince manufacturing plant continues to be idled, and lower urea liquor sales volumes.

Cost of Sales.

Cost of sales in our Other segment averaged $166 per ton in the nine months ended September 30, 2021, a 33% increase from $125 per ton in the nine months ended September 30, 2020 due primarily to higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity.

Cost of sales in our Other segment averaged $191 per ton in the first quarter of 2022, a 29% increase from $148 per ton in the first quarter of 2021, due primarily to higher realized natural gas costs.

Gross Margin .

Gross margin in our Other segment increased by $30 million, or 83%, to $66 million in the nine months ended September 30, 2021 from $36 million in the nine months ended September 30, 2020, and our gross margin percentage was 18.5% in the nine months ended September 30, 2021 compared to 14.3% in the nine months ended September 30, 2020.

The increase in gross margin was due to a 40% increase in average selling prices, which increased gross margin by $101 million, and a 2% increase in sales volume, which increased gross margin by $12 million.

These factors were partially offset by a $51 million net increase in manufacturing, maintenance and other costs and an increase in realized natural gas costs, which decreased gross margin by $33 million.

Gross margin also includes the impact of a $1 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2021.

Gross margin in our Other segment increased by $105 million to $121 million in the first quarter of 2022 from $16 million in the first quarter of 2021, and our gross margin percentage was 53.8% in the first quarter of 2022 compared to 15.1% in the first quarter of 2021.

The increase in gross margin was due to a 137% increase in average selling prices, which increased gross margin by $132 million.

The increase in average selling prices was partially offset by an increase in realized natural gas costs, which reduced gross margin by $29 million, and an 11% decrease in sales volume, which decreased gross margin by $2 million.

Gross margin also includes the impact of a $4 million unrealized net mark-to-market gain on natural gas derivatives in the first quarter of 2022.

CF INDUSTRIES HOLDINGS, INC.

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Generally, our primary source of cash is cash from operations, which includes cash generated by customer advances.

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

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.

On September 10, 2021, we redeemed $250 million principal amount, representing one-third of the $750 million principal amount outstanding immediately prior to such redemption, of the 2023 Notes, in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

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

As of March 31, 2022, our cash and cash equivalents balance was $2.62 billion, an increase of $989 million from $1.63 billion at December 31, 2021.

At March 31, 2022, we were in compliance with all applicable covenant requirements under our revolving credit agreement and senior notes, and unused borrowing capacity under our revolving credit agreement was $750 million.

On March 21, 2022, we announced that our wholly owned subsidiary CF Industries, Inc.

elected to redeem in full the $500 million outstanding principal amount of its 3.450% senior notes due June 2023 (the 2023 Notes) on April 21, 2022, in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

See the discussion under “Debt,” below, for further information.

As of September 30, 2021, our cash and cash equivalents balance was $757 million, an increase of $74 million from $683 million at December 31, 2020.

At September 30, 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.

United Kingdom Energy Crisis

The halt of operations at our U.K.

plants impacted the availability of certain products in the United Kingdom, including carbon dioxide, which is a byproduct of ammonia production.

Due to the critical nature of carbon dioxide to certain industries in the United Kingdom, on September 21, 2021, we entered into an interim agreement with the U.K.

Under the terms of the agreement, the U.K.

government agreed to cover the costs to restart the ammonia plant at Billingham and to offset losses incurred from production for a 21-day period.

As a result, we resumed production of ammonia at the Billingham facility in order to produce carbon dioxide for the United Kingdom.

While the interim agreement was in place, we entered into carbon dioxide pricing and offtake agreements with our customers, which have an initial term through January 31, 2022.

The amount of financial support that will be provided by the U.K.

government for the September 2021 period of the interim agreement is not expected to be material to our results of operations.

As a result of the U.K.

energy crisis and the events described above, we recognized impairment charges of $495 million in the third quarter of 2021, consisting of a goodwill impairment charge of $259 million and long-lived and intangible asset impairment charges of $236 million.

See Note 3—United Kingdom Energy Crisis and Impairment Charges, Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets for additional information.

As of September 30, 2021, after the recognition of the $495 million of impairment charges, the goodwill related to our U.K.

operations was approximately $26 million and the remaining long-lived assets related to our U.K.

operations were approximately $450 million, primarily consisting of property, plant and equipment.

Management continues to assess the volatile market conditions in the United Kingdom that are impacting our U.K.

The factors that could lead to the resolution of the U.K.

energy crisis, and the timing of any such resolution, are unknown to us.

Production continues to be idled at our Ince facility, while the Billingham facility is currently operating due to the carbon dioxide agreements described above.

There remains significant uncertainty regarding future plans for these sites pending greater clarity as to the future cost of natural gas and electricity, selling prices for the products we produce in the United Kingdom and U.K.

government policy.

Persistence of the current levels of energy costs and product prices facing our U.K.

operations could lead to the continued idling or shutting down of our U.K.

This could result in, among other things, additional funding to support the cash needs of the U.K.

operations and recognition of further losses or further impairment charges related to our U.K.

Each of these actions could have a material adverse impact on our results of operations and cash flows.

CF INDUSTRIES HOLDINGS, INC.

On April 27, 2022, the Board declared a quarterly dividend of $0.40 per common share, representing an increase from the quarterly dividend of $0.30 per common share that was declared and paid in the first quarter of 2022.

The dividend will be paid on May 31, 2022 to stockholders of record as of May 16, 2022.

Cash Equivalents

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and those guaranteed by entities affiliated with governmental entities.

Share Repurchase Program

On November 3, 2021, the Board authorized the repurchase of up to $1.5 billion of CF Holdings common stock through December 31, 2024 (the 2021 Share Repurchase Program).

Repurchases under the 2021 Share Repurchase Program may be made from time to time in the open market, through privately negotiated transactions, through block transactions or otherwise.

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.

In the three months ended March 31, 2022, we repurchased approximately 1.3 million shares under the 2021 Share Repurchase Program for $100 million, of which $3 million was accrued and unpaid as of March 31, 2022.

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 $382 million in the first nine months of 2021 compared to $206 million in the first nine months of 2020.

We currently anticipate that capital expenditures for the full year of 2021 will be in the range of $500 million, which includes expenditures for our green ammonia project at our Donaldsonville manufacturing complex and reflects higher capital spending due to maintenance deferred from 2020 as well as activity that was previously planned to occur in 2022, but accelerated into 2021.

Capital expenditures totaled $63 million in the first three months of 2022 compared to $71 million in the first three months of 2021.

We currently anticipate that capital expenditures for the full year of 2022 will be in the range of $500 to $550 million, which includes capital expenditures at our Donaldsonville complex related to green and blue ammonia projects.

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.

CF INDUSTRIES HOLDINGS, INC.

Canada Revenue Agency Competent Authority Matter

In connection with the matter described above under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter,” we expect Canadian tax authorities will assess additional tax and interest for tax years 2006 to 2011 of approximately $225 million, based on current estimates, which we expect will be due in the third quarter of 2022, and the Company will file amended tax returns with U.S.

federal and state tax authorities for the relevant tax years, as a result of which we expect to receive net refunds of approximately $50 million, including tax and interest, in the next twelve months.

United Kingdom Energy Crisis

As discussed under “Market Conditions and Current Developments—United Kingdom Energy Crisis,” above, during the third quarter of 2021, the United Kingdom began experiencing an energy crisis that included a substantial increase in the price of natural gas, which impacted our U.K.

Management continues to assess these volatile market conditions in the United Kingdom.

The factors that could lead to the resolution of the U.K.

energy crisis, and the timing of any such resolution, are unknown to us.

Production continues to be idled at our Ince facility, while the Billingham facility is currently operating.

government policy, which could lead to the continued idling or shutting down of our U.K.

This could result in, among other things, additional funding to support the cash needs of our U.K.

operations and recognition of further losses or further asset impairment charges related to our U.K.

Each of these actions could have a material adverse impact on our results of operations and cash flows.

Revolving Credit Agreement

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

CF Industries is the lead borrower, and CF Holdings is the sole guarantor, under the Revolving Credit Agreement.

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

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

CF Industries is the lead borrower, and CF Holdings is the sole guarantor, under the Revolving Credit Agreement.

As of September 30, 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 September 30, 2021 or December 31, 2020, or during the nine months ended September 30, 2021.

In March 2020, we borrowed $500 million under the Revolving Credit Agreement to ensure we maintained ample financial flexibility in light of the uncertainty in the global markets, including the financial credit markets, caused by the COVID-19 pandemic.

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.

During the nine months ended September 30, 2020, maximum borrowings under the Revolving Credit Agreement were $500 million and the weighted-average annual interest rate of borrowings during the nine months ended September 30, 2020 was 2.05%.

As of March 31, 2022, 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, 2022 or December 31, 2021, or during the three months ended March 31, 2022.

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

As of September 30, 2021, we were in compliance with all covenants under the Revolving Credit Agreement.

As of March 31, 2022, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

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 September 30, 2021, approximately $229 million of letters of credit were outstanding under this agreement.

As of March 31, 2022, approximately $197 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 September 30, 2021 and December 31, 2020 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate September 30, 2021 December 31, 2020

Long-term debt presented on our consolidated balance sheets as of March 31, 2022 and December 31, 2021 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate March 31, 2022 December 31, 2021

Principal Carrying Amount (1)

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3.450% due June 2023 (2)

3.665% $ 500 $ 499 $ 500 $ 499

5.150% due March 2034 5.293% 750 741 750 741

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4.500% due December 2026 (3)

4.500% due December 2026 (2)

4.783% 750 741 750 742

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

Total unamortized debt discount was $8 million and $9 million as of September 30, 2021 and December 31, 2020, respectively, and total deferred debt issuance costs were $27 million and $30 million as of September 30, 2021 and December 31, 2020, respectively.

Total unamortized debt discount was $8 million as of both March 31, 2022 and December 31, 2021, and total deferred debt issuance costs were $30 million and $27 million as of March 31, 2022 and December 31, 2021, respectively.

(2) These notes were redeemed in full on April 21, 2022.

(3) Effective August 23, 2021, these notes are no longer secured, in accordance with the terms of the applicable indenture.

Public Senior 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.

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

On September 10, 2021, we redeemed $250 million principal amount, representing one-third of the $750 million principal amount outstanding immediately prior to such redemption, of the 2023 Notes, in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total amount paid for the redemption of the $250 million principal amount of the 2023 Notes, which was funded with cash on hand, was approximately $265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $13 million in the third quarter of 2021, primarily consisting of a premium paid on the early redemption of the notes.

On March 21, 2022, we announced that CF Industries elected to redeem in full all of the $500 million outstanding principal amount of the 2023 Notes on April 21, 2022, in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

On April 21, 2022, we redeemed in full all of the $500 million outstanding principal amount of the 2023 Notes in accordance with the optional redemption provisions in the indenture governing the 2023 Notes.

The total aggregate redemption price paid in connection with the redemption of the 2023 Notes was approximately $513 million, including accrued interest.

As a result, we will recognize a loss on debt extinguishment of approximately $8 million in the second quarter of 2022.

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

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

Senior Secured Notes

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 in the first quarter of 2021, 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 by CF Holdings.

Under the terms of the indenture governing the 4.500% senior secured notes due 2026 (the 2026 Notes), the 2026 Notes are guaranteed by CF Holdings.

Until August 23, 2021, the 2026 Notes were guaranteed by certain subsidiaries of CF Industries.

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Prior to the investment grade rating event, subject to certain exceptions, the obligations under the 2026 Notes and related guarantees were secured by a first priority security interest in collateral consisting of substantially all of the assets of CF Industries, CF Holdings and the subsidiary guarantors.

As a result of the investment grade rating event, the liens on the collateral securing the obligations under the 2026 Notes and related guarantees were

CF INDUSTRIES HOLDINGS, INC.

automatically released on August 23, 2021, and the indenture covenant that had limited dispositions of assets constituting collateral no longer applies.

As a result of the investment grade rating event, the liens on the collateral securing the obligations under the 2026 Notes and related guarantees were automatically released on August 23, 2021, and the indenture covenant that had limited dispositions of assets constituting collateral no longer applies.

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.

Share Repurchase Programs

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

Since the 2019 Share Repurchase Program was announced in February 2019, we have repurchased approximately 11.3 million shares for $487 million, consisting of:

• 1.1 million shares repurchased during the third quarter of 2021 for $50 million,

• 2.6 million shares repurchased during the first quarter of 2020 for $100 million, and

• 7.6 million shares repurchased during 2019 for $337 million.

On November 3, 2021, the Board authorized the repurchase of up to $1.5 billion of CF Holdings common stock from January 1, 2022 through December 31, 2024 (the 2021 Share Repurchase Program).

Repurchases under our share repurchase programs may be made from time to time in the open market, through privately negotiated transactions, block transactions or otherwise.

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.

CF INDUSTRIES HOLDINGS, INC.

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, 2021 and December 31, 2020, we had $375 million and $130 million, respectively, in customer advances on our consolidated balance sheets.

As of March 31, 2022 and December 31, 2021, we had $598 million and $700 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, our customers’ outlook of future market fundamentals and seasonality.

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

As of September 30, 2021, our open natural gas derivative contracts consisted of natural gas basis swaps and options for 20.7 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.

CF INDUSTRIES HOLDINGS, INC.

As of March 31, 2022, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 2.9 million MMBtus.

As of December 31, 2021, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 60.0 million MMBtus.

Defined Benefit Pension Plans

We contributed $33 million to our pension plans during the nine months ended September 30, 2021.

Over the remainder of 2021, we expect to contribute an additional $6 million to our pension plans, or a total of approximately $39 million for the full year 2021.

In addition, we currently expect our U.K.

subsidiary to contribute a total of approximately $91 million to our U.K.

plans in the four-year period ending in 2025, as agreed with the plans’ trustees.

We contributed $7 million to our pension plans in the three months ended March 31, 2022.

Over the remainder of 2022, we expect to contribute approximately $21 million to our pension plans, which would result in our making a total of approximately $28 million of contributions to our pension plans for the full year 2022.

In addition, we expect to contribute a total of approximately £50 million (or $66 million) to our U.K.

plans in the three-year period from 2023 to 2025, as agreed with the plans’ trustees.

Distribution to Noncontrolling Interest in CFN

On July 30, 2021, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2021 in accordance with CFN’s limited liability company agreement.

On July 30, 2021, CFN distributed $130 million to CHS for the distribution period ended June 30, 2021.

The estimate of the partnership distribution earned by CHS, but not yet declared, for the third quarter of 2021 is approximately $94 million.

Operating Activities

Net cash provided by operating activities during the first nine months of 2021 was $1,393 million, an increase of $452 million compared to $941 million in the first nine months of 2020.

The increase in cash flow from operations was due primarily to higher net earnings, partially offset by unfavorable changes in net working capital.

Net earnings for the first nine months of 2021 was $401 million as compared to $313 million for the first nine months of 2020.

Additionally, the first nine months of 2021 includes non-cash pre-tax impairment charges of $495 million that reduced net earnings, as described above under “United Kingdom Energy Crisis.” The increase in net earnings was due primarily to higher average selling prices and a $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.

During the first nine months of 2021, net changes in working capital reduced cash flow from operations by $53 million, while in the first nine months of 2020 net changes in working capital contributed $69 million to cash flow from operations.

The decreased cash flow from working capital changes was primarily driven by cash taxes paid, inventories and accounts receivable, partially offset by an increase in customer advances.

Investing Activities

Net cash used in investing activities was $383 million in the first nine months of 2021 as compared to $201 million in the first nine months of 2020.

During the first nine months of 2021, capital expenditures totaled $382 million compared to $206 million in the first nine months of 2020.

Financing Activities

Net cash used in financing activities was $936 million in the first nine months of 2021 compared to $473 million in the first nine months of 2020.

In the first nine months of 2021, we paid $518 million in connection with the redemption of the 2021 Notes and the partial redemption of the 2023 Notes.

In the first nine months of 2021, we spent $50 million to repurchase shares of common stock compared to $100 million in the first nine months of 2020.

Dividends paid on common stock was $195 million in the first nine months of 2021 compared to $193 million in the first nine months of 2020.

Distributions to noncontrolling interest totaled $194 million in the first nine months of 2021 as compared to $174 million in the first nine months of 2020.

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.

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

tax aspects of the Amended Tax Returns.

In the second quarter of 2020, we received IRS notices indicating the amount of tax and interest to be refunded and received with respect to the income tax and withholding tax returns.

As a result of these events, we recognized $16 million of interest income ($13 million, net of tax) and $19 million of additional income tax benefit.

In addition, in the second quarter of 2020, we received U.S.

Federal income tax refunds, including interest, of $108 million relating to these matters.

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

CF INDUSTRIES HOLDINGS, INC.

In 2017, we made a Voluntary Disclosures Program filing with the Canada Revenue Agency (CRA) with respect to the Canadian tax aspects of the amended returns and paid additional Canadian taxes due.

These amounts were previously recorded in our consolidated balance sheet as of December 31, 2020.

Canada Revenue Agency Notices of Reassessment

In 2016, the Canada Revenue Agency (CRA) issued Notices of Reassessment for tax years 2006 through 2009 to one of our Canadian affiliates asserting a disallowance of certain patronage allocations.

We filed notices of objection with respect to these reassessments with the CRA and posted letters of credit, which serve as security until the matter is resolved.

In 2018, the matter was accepted for consideration under the bilateral settlement provisions of the US-Canada Tax Treaty (the Treaty) by the United States and Canadian competent authorities.

In the second quarter of 2021, the Company entered the matter into a binding arbitration process under the terms of the Treaty.

The arbitration decision will be issued no later than the first quarter of 2022.

If we accept the arbitration decision, the associated letters of credit would be cancelled and we may owe additional tax and interest to one taxing jurisdiction, which would likely be due in the second quarter of 2022.

Simultaneously, pursuant to the arbitration determination, the Company would file amended tax returns for the relevant tax years with the second taxing jurisdiction to recover taxes overpaid and would receive interest on the overpayment.

The payment of tax and interest, and the subsequent receipt of tax and interest refunds, each of which could be material, will likely occur in different reporting periods.

Due to uncertainty about the ultimate outcome of this matter, we are not able to predict the amount of tax and interest that we may ultimately pay to, or subsequently receive from, the taxing authorities.

Regulation of Greenhouse Gases

manufacturing plants are subject to greenhouse gas (GHG) regulations in the United Kingdom.

After the United Kingdom’s exit from the European Union, the U.K.

government instituted new GHG regulations in 2021, including establishing the U.K.

Emission Trading Scheme (UK ETS).

The UK ETS replaces the European Union Emissions Trading System for U.K.

In conjunction with these changes, the U.K.

GHG regulations established a lower emission cap than applied to us under the European GHG regulations.

Under the new U.K.

requirements, we are required to obtain and surrender emission allowances equivalent to our annual greenhouse gas emissions, although we anticipate that we will be allocated a certain number of free allowances.

As a result of the new GHG regulations and the establishment of the UK ETS, our remaining European Union emissions credits are no longer applicable for us in the United Kingdom, and we will need separate U.K.

emissions credits to offset emissions that are in excess of the number of free allowances allocated to us.

Accordingly, in the third quarter of 2021, we sold our remaining EU emissions credits for approximately $20 million and recognized a corresponding gain, which is included in other non-operating—net in our consolidated statements of operations, as the credits were earned by us in prior years due to approved emission abatement actions that we had taken and, therefore, did not have a recognized cost associated with them.

We subsequently purchased approximately 321,000 of U.K.

carbon credits, which can be used to satisfy future carbon credit obligations in the United Kingdom, for approximately $19 million.

We may need to procure additional U.K.

carbon credits in the future.

emissions trading market is not a liquid market with numerous observable transactions.

Given the recent development of the market and the limited number of participants, changes in the price of credits could occur as the market is subject to change based on market participants and liquidity.

It is unclear if the UK ETS will be linked with other emission trading programs from other countries.

government can also change the emission cap or allowances of the GHG regulations, which could also impact the cost of compliance with this program.

On January 31, 2022, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended December 31, 2021 in accordance with CFN’s limited liability company agreement.

On January 31, 2022, CFN distributed $247 million to CHS for the distribution period ended December 31, 2021.

The estimate of the partnership distribution earned by CHS, but not yet declared, for the first quarter of 2022 is approximately $190 million.

CF INDUSTRIES HOLDINGS, INC.

Net cash provided by operating activities during the first three months of 2022 was $1.39 billion, an increase of $813 million compared to $578 million in the first three months of 2021.

The increase in cash flow from operations was due primarily to higher net earnings, partially offset by changes in net working capital.

Net earnings for the first three months of 2022 was $1.05 billion as compared to $175 million for the first three months of 2021.

The increase in net earnings was due primarily to an increase in gross margin, driven by higher average selling prices, partially offset by increases in natural gas costs.

The increase in gross margin was partially offset by an increase in interest expense and income tax provision, and an increase in net earnings attributable to noncontrolling interest.

During the first three months of 2022, net changes in working capital contributed $110 million to cash flow from operations, while in the first three months of 2021 net changes in working capital contributed $230 million to cash flow from operations.

The decreased cash flow from working capital changes was primarily attributable to customer advances and accounts receivable, partially offset by accrued and prepaid income taxes.

Net cash used in investing activities was $62 million in the first three months of 2022 as compared to $71 million in the first three months of 2021.

Capital expenditures totaled $63 million during the first three months of 2022 compared to $71 million in the first three months of 2021.

Net cash used in financing activities was $339 million in the first three months of 2022 compared to $387 million in the first three months of 2021.

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

In the first three months of 2022, we spent $98 million to repurchase shares of common stock, which included $1 million related to shares repurchased in late 2021 that were paid for in 2022.

In the first three months of 2022, we repurchased approximately 1.3 million shares for $100 million, of which $3 million was accrued and unpaid as of March 31, 2022.

Distributions to noncontrolling interest totaled $247 million in the first three months of 2022 as compared to $64 million in the first three months of 2021.

Proceeds from issuances of common stock under employee stock plans were $97 million in the first three months of 2022 compared to $7 million in the first three months of 2021.

Critical Accounting Estimates

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our consolidated financial statements, which have been prepared in accordance with U.S.

GAAP requires that we select policies and make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates.

We base our estimates on historical experience, technological assessment, opinions of appropriate outside experts, and the most recent information available to us.

Actual results may differ from these estimates.

Changes in estimates that may have a material impact on our results are discussed in the context of the underlying financial statements to which they relate.

The following discussion presents information about our critical accounting estimates related to the recoverability of long-lived assets and goodwill.

Recoverability of Long-Lived Assets and Goodwill

We review the carrying values of our property, plant and equipment and other long-lived assets, including our finite-lived intangible assets, and goodwill in accordance with U.S.

GAAP in order to assess recoverability.

Factors that we must estimate when performing impairment tests include production and sales volumes, selling prices, raw material costs, operating rates, operating expenses, inflation, discount rates, exchange rates, tax rates and capital spending.

Significant judgment is involved in estimating each of these factors, which include inherent uncertainties.

The factors we use are consistent with those used in our internal planning process.

The recoverability of the values associated with our goodwill and long-lived assets is dependent upon future operating performance of the specific businesses to which they are attributed.

Certain of the operating assumptions are particularly sensitive to the cyclical nature of the fertilizer business.

Adverse changes in demand for our products, increases in supply and the availability and costs of key raw materials could significantly affect the results of our review.

The recoverability and impairment tests of long-lived assets are required only when conditions exist that indicate the carrying value may not be recoverable.

For goodwill, impairment tests are required at least annually, or more frequently if events or circumstances indicate that it may be impaired.

During the third quarter of 2021, the U.K.

energy crisis necessitated an evaluation of the goodwill and long-lived assets, including definite-lived intangible assets, of our U.K.

operations to determine if their fair value had declined to below their carrying value.

We performed the impairment evaluations on the U.K.

ammonia, U.K.

Other asset groups’ long-lived assets, including definite-lived intangible assets, and the U.K.

ammonia, U.K.

Other reporting units’ goodwill as of September 30, 2021.

Based on these analyses, we concluded that a decline in the fair value had occurred and we recognized impairment charges of $ 495 million in the third quarter of 2021, consisting of a goodwill impairment charge of $ 259 million and long-lived and intangible asset impairment charges of $ 236 million.

See Note 3—United Kingdom Energy Crisis and Impairment Charges, Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets for additional information regarding the long-lived asset and goodwill impairment analyses, including the methodologies and assumptions used in estimating the fair values of our reporting units.

During the first three months of 2022, there were no material changes to our critical accounting estimates as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

CF INDUSTRIES HOLDINGS, INC.

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• the global commodity nature of our nitrogen products, the conditions in the international market for nitrogen products, and the intense global competition from other producers;

• conditions in the United States, Europe and other agricultural areas;

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

• weather conditions;

• conditions in the United States, Europe and other agricultural areas, including the influence of governmental policies and technological developments on the demand for agricultural products;

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

• weather conditions and the impact of severe adverse weather events;

• the seasonality of the fertilizer business;

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

• risks associated with cyber security;

• our reliance on a limited number of key facilities;

• risks associated with cyber security;

• acts of terrorism and regulations to combat terrorism;

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• 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;

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

• the 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 impact of the novel coronavirus disease 2019 (COVID-19) pandemic 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