What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-05 · 247 added, 143 removed, 581 unchanged (40% of the section changed)

2 unchanged sentences

Three months ended

June 30, Six months ended

2022 2021 2022 2021

(in millions, except per share amounts)

3 unchanged sentences

Selling, general and administrative expenses 73 60 137 115

operations restructuring 162 — 162 —

Other operating—net 6 4 8 2

22 unchanged sentences

Three months ended

June 30, Six months ended

2022 2021 2022 2021

(in millions)

3 unchanged sentences

Defined benefit plans—net of taxes 8 ( 1 ) 12 —

( 19 ) 9 ( 28 ) 24

Comprehensive income 1,320 326 2,362 516

26 unchanged sentences

Current operating lease liabilities 87 89

Current maturities of long-term debt 499 —

Other current liabilities 29 54

Total current liabilities 1,097 1,432

Long-term debt, net of current maturities 2,963 3,465

Long-term debt 2,964 3,465

Deferred income taxes 1,025 1,029

25 unchanged sentences

(in millions, except per share amounts)

Balance as of March 31, 2022 $ 2 $ ( 123 ) $ 1,482 $ 2,907 $ ( 266 ) $ 4,002 $ 2,751 $ 6,753

Net earnings — — — 1,165 — 1,165 174 1,339

Other comprehensive loss — — — — ( 19 ) ( 19 ) — ( 19 )

Purchases of treasury stock — ( 490 ) — — — ( 490 ) — ( 490 )

Retirement of treasury stock — 281 ( 23 ) ( 260 ) — ( 2 ) — ( 2 )

Issuance of $ 0.01 par value common stock under employee stock plans

— 1 3 — — 4 — 4

Stock-based compensation expense — — 12 — — 12 — 12

Cash dividends ($ 0.40 per share)

— — — ( 83 ) — ( 83 ) — ( 83 )

Balance as of June 30, 2022 $ 2 $ ( 331 ) $ 1,474 $ 3,729 $ ( 285 ) $ 4,589 $ 2,925 $ 7,514

Balance as of December 31, 2021 $ 2 $ ( 2 ) $ 1,375 $ 2,088 $ ( 257 ) $ 3,206 $ 2,830 $ 6,036

10 unchanged sentences

Distribution declared to noncontrolling interest — — — — — — ( 247 ) ( 247 )

Balance as of June 30, 2022 $ 2 $ ( 331 ) $ 1,474 $ 3,729 $ ( 285 ) $ 4,589 $ 2,925 $ 7,514

CONSOLIDATED STATEMENTS OF EQUITY

(Continued) (Unaudited)

Common Stockholders

Stock Treasury

Stock Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Stockholders’ Equity Noncontrolling

Interest Total

(in millions, except per share amounts)

Balance as of March 31, 2021 $ 2 $ ( 14 ) $ 1,333 $ 2,013 $ ( 305 ) $ 3,029 $ 2,641 $ 5,670

Net earnings — — — 246 — 246 71 317

Other comprehensive income — — — — 9 9 — 9

Retirement of treasury stock — 13 ( 2 ) ( 11 ) — — — —

Issuance of $ 0.01 par value common stock under employee stock plans

— 1 18 — — 19 — 19

Stock-based compensation expense — — 8 — — 8 — 8

Cash dividends ($ 0.30 per share)

— — — ( 65 ) — ( 65 ) — ( 65 )

Balance as of June 30, 2021 $ 2 $ — $ 1,357 $ 2,183 $ ( 296 ) $ 3,246 $ 2,712 $ 5,958

Balance as of December 31, 2020 $ 2 $ ( 4 ) $ 1,317 $ 1,927 $ ( 320 ) $ 2,922 $ 2,681 $ 5,603

1 unchanged sentence

Other comprehensive income — — — — 24 24 — 24

Retirement of treasury stock — 13 ( 2 ) ( 11 ) — — — —

Acquisition of treasury stock under employee stock plans — ( 10 ) — — — ( 10 ) — ( 10 )

5 unchanged sentences

Distribution declared to noncontrolling interest — — — — — — ( 64 ) ( 64 )

Balance as of March 31, 2021 $ 2 $ ( 14 ) $ 1,333 $ 2,013 $ ( 305 ) $ 3,029 $ 2,641 $ 5,670

Balance as of June 30, 2021 $ 2 $ — $ 1,357 $ 2,183 $ ( 296 ) $ 3,246 $ 2,712 $ 5,958

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Six months ended

(in millions)

7 unchanged sentences

Unrealized net gain on natural gas derivatives ( 50 ) ( 6 )

Unrealized loss on embedded derivative — 2

operations restructuring asset impairment 152 —

Gain on sale of emission credits ( 3 ) —

Loss on disposal of property, plant and equipment — 2

10 unchanged sentences

Proceeds from sale of property, plant and equipment 1 —

Purchase of U.K.

emission credits ( 9 ) —

Proceeds from sale of EU emission credits 9 —

Distributions received from unconsolidated affiliate 4 —

Purchase of investments held in nonqualified employee benefit trust ( 1 ) ( 12 )

Proceeds from sale of investments held in nonqualified employee benefit trust 1 12

Purchase of emission credits ( 9 ) —

Proceeds from sale of emission credits 12 —

Other—net — ( 1 )

Net cash used in investing activities ( 121 ) ( 182 )

36 unchanged sentences

The preparation of the unaudited interim consolidated financial statements requires us to make use of estimates and assumptions that may significantly affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited consolidated financial statements and the reported revenues and expenses for the periods presented.

Such estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, the cost of carbon credits required to meet environmental regulations, the cost of customer incentives, the cost to fulfill contractual commitments to our customers, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax and valuation reserves, allowances for doubtful accounts receivable, the measurement of the fair values of investments for which markets are not active, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the valuation of stock-based compensation awards granted to employees.

Such estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, plant closure and asset retirement obligations, the cost of carbon credits required to meet environmental regulations, the cost of customer incentives, the cost to fulfill contractual commitments to our customers, useful lives of property and identifiable intangible assets, the assumptions used in the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax reserves and the assessment of the realizability of deferred tax assets, assumptions used in the determination of the funded status and annual expense of defined benefit pension and other postretirement benefit plans and the valuation of stock-based compensation awards granted to employees.

CF INDUSTRIES HOLDINGS, INC.

2 unchanged sentences

See Note 17—Segment Disclosures for our revenue by reportable segment, which are Ammonia, Granular Urea, UAN, AN and Other.

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three months ended March 31, 2022 and 2021:

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and six months ended June 30, 2022 and 2021:

Ammonia Granular Urea UAN AN Other Total

(in millions)

Three months ended March 31, 2022

Three months ended June 30, 2022

North America $ 987 $ 816 $ 877 $ 76 $ 180 $ 2,936

1 unchanged sentence

Total revenue $ 1,115 $ 833 $ 976 $ 253 $ 212 $ 3,389

Three months ended March 31, 2021

Three months ended June 30, 2021

North America $ 431 $ 433 $ 403 $ 55 $ 92 $ 1,414

1 unchanged sentence

Total revenue $ 459 $ 433 $ 434 $ 136 $ 126 $ 1,588

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.

The revenue recognized during the three months ended March 31, 2022 and 2021 that was included in our customer advances at the beginning of each respective period amounted to approximately $ 560 million and $ 85 million, respectively.

Six months ended June 30, 2022

North America $ 1,570 $ 1,552 $ 1,890 $ 159 $ 333 $ 5,504

Europe and other 185 46 101 317 104 753

Total revenue $ 1,755 $ 1,598 $ 1,991 $ 476 $ 437 $ 6,257

Six months ended June 30, 2021

North America $ 599 $ 832 $ 625 $ 96 $ 169 $ 2,321

Europe and other 66 — 41 145 63 315

Total revenue $ 665 $ 832 $ 666 $ 241 $ 232 $ 2,636

As of June 30, 2022 and December 31, 2021, we had $ 72 million and $ 700 million, respectively, in customer advances on our consolidated balance sheets.

During the six months ended June 30, 2022 and 2021, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

We offer cash incentives to certain customers generally based on the volume of their purchases over the fertilizer year ending June 30.

Our cash incentives do not provide an option to the customer for additional product.

The balances of customer incentives accrued as of March 31, 2022 and December 31, 2021 were not material.

The balances of customer incentives accrued as of June 30, 2022 and December 31, 2021 were not material.

We have certain customer contracts with performance obligations under which, if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, the amount of which payment may vary based upon the terms and conditions of the applicable contract.

As of March 31, 2022, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts are approximately $ 750 million.

As of June 30, 2022, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 790 million.

We expect to recognize approximately 28 % of these performance obligations as revenue in the remainder of 2022, approximately 65 % as revenue during 2023-2024, approximately 5 % as revenue during 2025-2026, and the remainder thereafter.

Subject to the terms and conditions of the applicable contracts, if the customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under such contracts, in the aggregate, is approximately $ 140 million as of March 31, 2022.

Subject to the terms and conditions of the applicable contracts, if the customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under such contracts, in the aggregate, was approximately $ 120 million as of June 30, 2022.

Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially fulfilled at December 31, 2021 will be satisfied in 2022.

3 unchanged sentences

Three months ended

June 30, Six months ended

2022 2021 2022 2021

(in millions, except per share amounts)

10 unchanged sentences

In the computation of diluted earnings per common share, potentially dilutive stock-based awards are excluded if the effect of their inclusion is anti-dilutive.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were 1.2 million in the three months ended March 31, 2021.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero for the three and six months ended June 30, 2022, and 1.2 million in both the three and six months ended June 30, 2021.

Inventories consist of the following:

4 unchanged sentences

Total inventories $ 497 $ 408

United Kingdom Energy Crisis and Impairment Charges

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.

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.

After certain agreements were finalized, 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.

In the second half of 2021, the U.K.

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

United Kingdom Operations, Proposed Restructuring and Impairment Charges

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.

energy crisis necessitated evaluations in the third and fourth quarters of 2021, of the long-lived assets, including definite-lived intangible assets, and goodwill of our U.K.

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

Based on these analyses, we concluded that declines in fair value had occurred, and we recognized impairment charges of $ 521 million in 2021, consisting of long-lived and intangible asset impairment charges of $ 236 million and goodwill impairment charges of $ 285 million.

As a result, we had no remaining goodwill related to our U.K.

operations on our consolidated balance sheet as of December 31, 2021.

CF INDUSTRIES HOLDINGS, INC.

The evaluations resulted in total goodwill impairment charges of $ 285 million, and total long-lived and intangible asset impairment charges of $ 236 million, in 2021.

As of December 31, 2021, after the recognition of the goodwill impairment charges, no goodwill related to our U.K.

operations remained.

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

energy crisis, including further increases and volatility in natural gas prices due in part to recent geopolitical events as a result of Russia’s invasion of Ukraine in February 2022, triggered an additional long-lived asset impairment test.

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

asset groups, consisting of U.K.

energy crisis, including further increases and volatility in natural gas prices due in part to geopolitical events as a result of Russia’s invasion of Ukraine in February 2022, triggered an additional long-lived asset impairment test.

The results of this test indicated that no additional long-lived asset impairment existed as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U.K.

asset groups.

asset groups consist of U.K.

Ammonia, U.K.

In June 2022, we approved and announced our proposed plan to restructure our U.K.

operations, which includes our manufacturing complexes in Ince and Billingham.

This plan includes permanently closing the Ince facility and optimizing the remaining manufacturing operations at the Billingham facility.

The Ince facility has been idled since September 15, 2021.

As a result, in the three months ended June 30, 2022, we recorded total charges of $ 162 million, as follows:

CF INDUSTRIES HOLDINGS, INC.

• asset impairment charges totaling $ 152 million consisting of the following:

◦ an impairment charge of $ 135 million related to property, plant and equipment that has been classified as held for abandonment at the Ince facility, including a liability of approximately $ 9 million for the costs of certain asset retirement activities related to the Ince site;

◦ an intangible asset impairment charge of $ 8 million related to trade names;

◦ an impairment charge of $ 9 million related to the write-down of spare parts and certain raw materials at the Ince facility;

• a charge for post-employment benefits totaling $ 10 million related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

These amounts are included in the U.K.

operations restructuring line item in our consolidated statements of operations for the three and six months ended June 30, 2022.

We are working with customers, vendors, regulators and others to finalize closure plans, and we expect substantially all of the restructuring activities will be completed within the next twelve months.

As a result of the proposed restructuring of our U.K.

operations, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K.

operations, consisting of U.K.

Ammonia, U.K.

The results of this long-lived asset impairment test indicated that no additional asset impairment should be recorded as the undiscounted estimated future cash flows for the continuing U.K.

operations were in excess of the carrying values for each of the U.K.

asset groups.

Property, Plant and Equipment—Net

12 unchanged sentences

_______________________________________________________________________________

(1) At both March 31, 2022 and December 31, 2021, machinery and equipment, buildings and improvements, and construction in progress include cumulative impairment charges of $ 169 million, $ 5 million and $ 8 million, respectively, which were recorded in 2021.

(2) As of March 31, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $ 22 million and $ 35 million, respectively.

As of March 31, 2021 and December 31, 2020, we had property, plant and equipment that was accrued but unpaid of approximately $ 33 million and $ 43 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 205 million and $ 200 million for the three months ended March 31, 2022 and 2021, respectively.

In 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 recent geopolitical events, triggered an impairment test of the long-lived assets in our U.K.

asset groups.

This test indicated that no long-lived asset impairment existed as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U.K.

asset groups.

Long-lived assets on our consolidated balance sheet as of March 31, 2022 include approximately $ 400 million, approximately $ 360 million of which consists of property, plant and equipment, related to the U.K.

asset groups.

See Note 5—United Kingdom Energy Crisis and Impairment Charges for additional information.

(1) As of June 30, 2022, machinery and equipment, buildings and improvements, and construction in progress include cumulative impairment charges of $ 297 million, $ 7 million and $ 13 million, respectively, which include impairment charges related to our U.K.

operations of $ 135 million recorded in the second quarter of 2022 and $ 182 million recorded in 2021.

As of December 31, 2021, machinery and equipment, buildings and improvements, and construction in progress include cumulative impairment charges of $ 169 million, $ 5 million and $ 8 million, respectively, which were recorded in 2021.

(2) As of June 30, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $ 51 million and $ 35 million, respectively.

As of June 30, 2021 and December 31, 2020, we had property, plant and equipment that was accrued but unpaid of approximately $ 76 million and $ 43 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 219 million and $ 424 million for the three and six months ended June 30, 2022, respectively, and $ 239 million and $ 439 million for the three and six months ended June 30, 2021, respectively.

In June 2022, we approved and announced our proposed plan to restructure our U.K.

This plan includes permanently closing the Ince facility and optimizing the remaining manufacturing operations at the Billingham facility.

As a result, we recorded total charges of $ 162 million, including an asset impairment charge of $ 135 million to write down the property, plant and equipment at the Ince facility to its estimated salvage value, which are reflected in the line “U.K.

operations restructuring” in our consolidated statements of operations for the three and six months ended June 30, 2022.

The asset impairment consisted of $ 128 million related to machinery and equipment, $ 2 million relating to buildings and improvements,

CF INDUSTRIES HOLDINGS, INC.

and $ 5 million related to construction in progress.

See Note 5—United Kingdom Operations, Proposed Restructuring and Impairment Charges for additional information.

Plant turnarounds —Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds.

The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred.

Scheduled replacements and overhauls of plant machinery and equipment during a plant turnaround include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors and heat exchangers and the replacement of catalysts when a full plant shutdown occurs.

Scheduled inspections, including required safety inspections which entail the disassembly of various components such as steam boilers, pressure vessels and other equipment requiring safety certifications, are also conducted during full plant shutdowns.

Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.

The following is a summary of capitalized plant turnaround costs:

Three months ended

Six months ended

(in millions)

3 unchanged sentences

Depreciation ( 70 ) ( 51 )

Impairment ( 7 ) —

Effect of exchange rate changes ( 4 ) 1

Ending balance $ 300 $ 265

CF INDUSTRIES HOLDINGS, INC.

Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.

Goodwill and Other Intangible Assets

The following table shows the carrying amount of goodwill by reportable segment as of March 31, 2022 and December 31, 2021:

The following table shows the carrying amount of goodwill by reportable segment as of June 30, 2022 and December 31, 2021:

Granular Urea UAN AN (1)

2 unchanged sentences

Effect of exchange rate changes ( 1 ) — — — — ( 1 )

Balance as of March 31, 2022 $ 579 $ 828 $ 576 $ 69 $ 39 $ 2,091

Balance as of June 30, 2022 $ 578 $ 828 $ 576 $ 69 $ 39 $ 2,090

_______________________________________________________________________________

(1) At both March 31, 2022 and December 31, 2021, the carrying amount of goodwill includes accumulated impairment losses in our Ammonia, AN and Other segments of $ 9 million, $ 241 million and $ 35 million, respectively.

(1) At both June 30, 2022 and December 31, 2021, the carrying amount of goodwill includes accumulated impairment losses in our Ammonia, AN and Other segments of $ 9 million, $ 241 million and $ 35 million, respectively.

All of our identifiable intangible assets have definite lives and are presented in other assets on our consolidated balance sheets at gross carrying amount, net of accumulated amortization, as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Amount Accumulated

9 unchanged sentences

_______________________________________________________________________________

(1) At both March 31, 2022 and December 31, 2021, the gross carrying amount for customer relationships and trade names includes cumulative impairment charges of $ 49 million and $ 1 million, respectively, which were recorded in 2021.

(1) At both June 30, 2022 and December 31, 2021, the gross carrying amount for customer relationships includes cumulative impairment charges of $ 49 million, which were recorded in 2021.

CF INDUSTRIES HOLDINGS, INC.

(2) At June 30, 2022, the gross carrying amount for trade names includes cumulative impairment charges of $ 9 million, including $ 8 million recorded in the second quarter of 2022, and $ 1 million recorded in 2021.

At December 31, 2021, the gross carrying amount for trade names includes cumulative impairment charges of $ 1 million, which were recorded in 2021.

Our customer relationships and trade names are being amortized over a weighted-average life of approximately 20 years.

Amortization expense of our identifiable intangible assets was $ 1 million and $ 2 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense of our identifiable intangible assets was $ 1 million and $ 2 million for the three and six months ended June 30, 2022, respectively, and $ 2 million and $ 4 million for the three and six months ended June 30, 2021, respectively.

The gross carrying amount and accumulated amortization of our intangible assets are also impacted by the effect of exchange rate changes.

Total estimated amortization expense for the remainder of 2022 is $ 2 million and for each of the fiscal years 2023-2027 is $ 4 million.

In 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 recent geopolitical events, triggered an impairment test of the long-lived assets in our U.K.

asset groups.

This test indicated that no long-lived asset impairment existed as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U.K.

asset groups.

See Note 5—United Kingdom Energy Crisis and Impairment Charges for additional information.

Long-lived assets on our consolidated balance sheet as of March 31, 2022 include approximately $ 400 million, $ 25 million of which consists of customer relationships and trade names, related to the U.K.

asset groups.

CF INDUSTRIES HOLDINGS, INC.

In June 2022, we approved and announced our proposed plan to restructure our U.K.

This plan includes permanently closing the Ince facility and optimizing the remaining manufacturing operations at the Billingham facility.

As a result, in the three months ended June 30, 2022, we recorded an intangible asset impairment charge of $ 8 million related to trade names.

See Note 5—United Kingdom Operations, Proposed Restructuring and Impairment Charges for additional information.

Equity Method Investment

1 unchanged sentence

We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the Ammonia segment.

As of March 31, 2022, the total carrying value of our equity method investment in PLNL was $ 84 million, $ 38 million more than our share of PLNL’s book value.

As of June 30, 2022, the total carrying value of our equity method investment in PLNL was $ 79 million, $ 37 million more than our share of PLNL’s book value.

The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment.

2 unchanged sentences

We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50 % of the ammonia produced by PLNL at current market prices.

Our ammonia purchases from PLNL totaled $ 74 million and $ 26 million for the three months ended March 31, 2022 and 2021, respectively.

Our ammonia purchases from PLNL totaled $ 77 million and $ 151 million for the three and six months ended June 30, 2022, respectively, and $ 37 million and $ 63 million for the three and six months ended June 30, 2021, respectively.

Fair Value Measurements

Our cash and cash equivalents and other investments consist of the following:

March 31, 2022

June 30, 2022

Cost Basis Unrealized

8 unchanged sentences

Nonqualified employee benefit trusts 16 1 — 17

CF INDUSTRIES HOLDINGS, INC.

December 31, 2021

14 unchanged sentences

and those guaranteed by entities affiliated with governmental entities.

CF INDUSTRIES HOLDINGS, INC.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities included in our consolidated balance sheets as of March 31, 2022 and December 31, 2021 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

March 31, 2022

The following tables present assets and liabilities included in our consolidated balance sheets as of June 30, 2022 and December 31, 2021 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

June 30, 2022

Value Quoted Prices

5 unchanged sentences

Derivative assets 22 — 22 —

Derivative liabilities ( 3 ) — ( 3 ) —

Embedded derivative liability ( 15 ) — ( 15 ) —

10 unchanged sentences

Cash Equivalents

As of March 31, 2022 and December 31, 2021, our cash equivalents consisted primarily of U.S.

As of June 30, 2022 and December 31, 2021, our cash equivalents consisted primarily of U.S.

and Canadian government obligations and money market mutual funds that invest in U.S.

government obligations and other investment-grade securities.

CF INDUSTRIES HOLDINGS, INC.

Nonqualified Employee Benefit Trusts

9 unchanged sentences

See Note 13—Derivative Financial Instruments for additional information.

CF INDUSTRIES HOLDINGS, INC.

Embedded Derivative Liability

4 unchanged sentences

This obligation is recognized on our consolidated balance sheets as an embedded derivative and is included within other current liabilities and other liabilities.

As of both March 31, 2022 and December 31, 2021, the embedded derivative liability was $ 15 million.

As of both June 30, 2022 and December 31, 2021, the embedded derivative liability was $ 15 million.

The inputs into the fair value measurement include the probability of future upgrades and downgrades of our credit rating based on historical credit rating movements of other public companies and the discount rates to be applied to potential annual payments based on applicable credit spreads of other public companies at different credit rating levels.

3 unchanged sentences

The carrying amount and estimated fair value of our financial instruments are as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Amount Fair Value Carrying

1 unchanged sentence

(in millions)

Long-term debt, including current maturities $ 3,462 $ 3,781 $ 3,465 $ 4,113

Long-term debt $ 2,964 $ 2,881 $ 3,465 $ 4,113

The fair value of our long-term debt was based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs and value drivers are observable and, as a result, they are classified as Level 2 inputs.

The carrying amounts of cash and cash equivalents, as well as instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities.

CF INDUSTRIES HOLDINGS, INC.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

2 unchanged sentences

These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment.

In the case of property, plant and equipment held for abandonment, as described in Note 5—United Kingdom Operations, Proposed Restructuring and Impairment Charges, fair value was measured as the estimated salvage value of such assets, which was immaterial.

The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets.

Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.

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 $ 20 million of income tax benefit due to share-based compensation activity and $ 78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter and certain transfer pricing reserves recorded in the period, as discussed below.

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.

For the three months ended June 30, 2022, we recorded an income tax provision of $ 357 million on pre-tax income of $ 1.70 billion, or an effective tax rate of 21.1 %, compared to an income tax provision of $ 85 million on pre-tax income of $ 402 million, or an effective tax rate of 21.2 %, for the three months ended June 30, 2021.

For the six months ended June 30, 2022, we recorded an income tax provision of $ 758 million on pre-tax income of $ 3.15 billion, or an effective tax rate of 24.1 %, compared to an income tax provision of $ 103 million on pre-tax income of $ 595 million, or an effective tax rate of 17.4 %, for the six months ended June 30, 2021.

For the six months ended June 30, 2022, our income tax provision includes $ 22 million of income tax benefit due to share-based compensation activity and $ 78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, as discussed below.

For the six months ended June 30, 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 CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the

CF INDUSTRIES HOLDINGS, INC.

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 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 if based on pre-tax income exclusive of the $ 24 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended June 30, 2022 of 21.1 %, which is based on pre-tax income of $ 1.70 billion, including $ 174 million of earnings attributable to the noncontrolling interest, would be 2.4 percentage points higher if based on pre-tax income exclusive of the $ 174 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended June 30, 2021 of 21.2 %, which is based on pre-tax income of $ 402 million, including $ 71 million of earnings attributable to the noncontrolling interest, would be 4.6 percentage points higher if based on pre-tax income exclusive of the $ 71 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2022 of 24.1 %, which is based on pre-tax income of $ 3.15 billion, including $ 342 million of earnings attributable to the noncontrolling interest, would be 2.9 percentage points higher if based on pre-tax income exclusive of the $ 342 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2021 of 17.4 %, which is based on pre-tax income of $ 595 million, including $ 95 million of earnings attributable to the noncontrolling interest, would be 3.3 percentage points higher if based on pre-tax income exclusive of the $ 95 million of earnings attributable to the noncontrolling interest.

Canada Revenue Agency Competent Authority Matter

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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.

CF INDUSTRIES HOLDINGS, INC.

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

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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 $ 129 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.

We expect this resulting Canadian tax liability, plus interest of approximately $ 103 million, will be assessed in the second half of 2022 and that payment of those amounts, aggregating to approximately $ 232 million, based on current estimates, will be due in the second half 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.

In the six months ended June 30, 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 $ 78 million, reflecting the net impact of $ 129 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 $ 104 million, primarily reflecting the impact of estimated interest payable to Canada.

Of the $ 78 million of income tax provision and $ 104 million of net interest expense recognized in the six months ended June 30, 2022, $ 2 million of income tax provision and $ 5 million of net interest expense was recognized in the three months ended June 30, 2022.

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).

As of March 31, 2022, as a result of recording these transfer pricing reserves, the total amount of our unrecognized tax benefits was $ 349 million, and the total amounts accrued for interest and penalties related to income taxes included in other liabilities was $ 96 million.

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

Based on this evaluation and our evaluation during the three months ended June 30, 2022, we recorded the following in the six months ended June 30, 2022:

• liabilities for unrecognized tax benefits of approximately $ 314 million with a corresponding income tax provision, and accrued interest of approximately $ 116 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of approximately $ 359 million with a corresponding income tax benefit, and accrued interest income of approximately $ 30 million related to the noncurrent income tax receivables.

In the six months ended June 30, 2022, the impact of these evaluations of transfer pricing positions on our consolidated statement of operations, including $ 26 million of net deferred income tax provision for other transfer pricing tax effects, was $ 19 million of income tax benefit and $ 86 million of net interest expense before tax ($ 93 million after tax).

Of the $ 19 million of income tax benefit and $ 86 million of net interest expense recognized in the six months ended June 30, 2022, $ 21 million of income tax benefit and $ 23 million of net interest expense ($ 24 million after tax) was recognized in the three months ended June 30, 2022.

Unrecognized tax benefits

As of June 30, 2022, the total amount of our unrecognized tax benefits was $ 351 million, and the total amounts accrued for interest and penalties related to income taxes included in other liabilities was $ 125 million, which primarily reflects the impacts of the evaluation of our transfer pricing positions.

As of December 31, 2021, the total amount of our unrecognized tax benefits was $ 27 million and the total amounts accrued for interest and penalties related to income taxes was $ 4 million.

We expect that the ultimate outcome of the transfer pricing reserves will not have a material net impact on our results of operations, financial condition or cash flows.

We expect that the ultimate outcome of these transfer pricing reserves will not have a material net impact on our results of operations, financial condition or cash flows.

However, we can provide no assurance as to the ultimate outcome.

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

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.

As of June 30, 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 June 30, 2022 or December 31, 2021, or during the six months ended June 30, 2022.

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

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

As of June 30, 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 March 31, 2022, approximately $ 197 million of letters of credit were outstanding under this agreement.

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

As of June 30, 2022, approximately $ 275 million of letters of credit were outstanding under this agreement.

Long-term debt presented on our consolidated balance sheets as of June 30, 2022 and December 31, 2021 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate June 30, 2022 December 31, 2021

Principal Carrying Amount (1)

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Total long-term debt $ 3,000 $ 2,964 $ 3,500 $ 3,465

Current maturities of long-term debt 500 499 — —

Long-term debt, net of current maturities $ 3,000 $ 2,963 $ 3,500 $ 3,465

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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 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.

Total unamortized debt discount was $ 8 million as of both June 30, 2022 and December 31, 2021, and total deferred debt issuance costs were $ 28 million and $ 27 million as of June 30, 2022 and December 31, 2021, respectively.

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

As of June 30, 2022, under the indentures (including the applicable supplemental indentures) governing the senior notes due 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes was guaranteed by CF Holdings.

CF INDUSTRIES HOLDINGS, INC.

As of March 31, 2022 , u nder the indentures (including the applicable supplemental indentures) governing the senior notes due 2023, 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes was guaranteed by CF Holdings.

As of March 31, 2022 , u nder the terms of the indenture governing the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes were guaranteed by CF Holdings.

As of June 30, 2022, under the terms of the indenture governing the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes were guaranteed by CF Holdings.

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

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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.

On March 21, 2022, we announced that CF Industries elected to redeem in full all of the $ 500 million outstanding principal amount of the 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 Note 18—Subsequent Events for additional information.

Interest on the outstanding Public Senior Notes and the 2026 Notes is payable semiannually, and the outstanding Public Senior Notes 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.

On April 21, 2022, we redeemed in full all of the $ 500 million outstanding principal amount of the 3.450 % senior notes due June 2023 (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 $ 513 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $ 8 million, consisting primarily of the premium paid on the redemption of the 2023 Notes prior to their scheduled maturity.

Interest on the Public Senior Notes and the 2026 Notes is payable semiannually, and the Public Senior Notes 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.

Interest Expense

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Three months ended

June 30, Six months ended

2022 2021 2022 2021

(in millions)

Interest on borrowings (1)

$ 38 $ 44 $ 80 $ 90

Fees on financing agreements (1)

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As a result, changes in fair value of these contracts are recognized in earnings.

As of March 31, 2022, we had natural gas derivative contracts covering certain periods through March 2023.

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, we had open natural gas derivative contracts consisting of natural

As of June 30, 2022, we had natural gas derivative contracts covering certain periods through March 2023.

As of June 30, 2022, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 11.2 million MMBtus.

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

For the six months ended June 30, 2022, we used derivatives to cover approximately 24 % of our natural gas consumption.

CF INDUSTRIES HOLDINGS, INC.

gas fixed price swaps, basis swaps and options for 60.0 million MMBtus of natural gas.

For the three months ended March 31, 2022, we used derivatives to cover approximately 45 % of our natural gas consumption.

The effect of derivatives in our consolidated statements of operations is shown in the table below.

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Three months ended

June 30, Six months ended

Location 2022 2021 2022 2021

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Unrealized net gains on natural gas derivatives Cost of sales $ 17 $ — $ 50 $ 6

Realized net gains (losses) on natural gas derivatives Cost of sales 17 ( 3 )

Realized net (losses) gains on natural gas derivatives Cost of sales ( 9 ) — 8 ( 3 )

Gain on net settlement of natural gas derivatives due to Winter Storm Uri Cost of sales — — — 112

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We no longer qualified for the NPNS derivative scope exception for the natural gas that was net settled with our suppliers due to the impact of Winter Storm Uri.

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

The fair values of derivatives on our consolidated balance sheets are shown below.

As of March 31, 2022 and December 31, 2021, none of our derivative instruments were designated as hedging instruments.

As of June 30, 2022 and December 31, 2021, none of our derivative instruments were designated as hedging instruments.

See Note 9—Fair Value Measurements for additional information on derivative fair values.

Asset Derivatives Liability Derivatives

Balance Sheet Location March 31,

Balance Sheet Location June 30,

2022 December 31, 2021 Balance Sheet

Location March 31,

Location June 30,

2022 December 31, 2021

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In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades, or under certain ISDA agreements, may require us to collateralize derivatives in a net liability position.

As of March 31, 2022 and December 31, 2021, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 31 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

As of June 30, 2022 and December 31, 2021, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 31 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event.

As of March 31, 2022 and December 31, 2021, we had no cash collateral on deposit with counterparties for derivative contracts.

As of June 30, 2022 and December 31, 2021, we had no cash collateral on deposit with counterparties for derivative contracts.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of June 30, 2022 and December 31, 2021:

CF INDUSTRIES HOLDINGS, INC.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of March 31, 2022 and December 31, 2021:

Amounts presented in consolidated

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(in millions)

March 31, 2022

June 30, 2022

Total derivative assets $ 22 $ — $ — $ 22

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Declaration of distributions payable ( 247 ) ( 64 )

Balance as of March 31 $ 2,751 $ 2,641

Balance as of June 30 $ 2,925 $ 2,712

Distributions payable to noncontrolling interest:

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Distributions to noncontrolling interest ( 247 ) ( 64 )

Balance as of March 31 $ — $ —

CF INDUSTRIES HOLDINGS, INC.

Balance as of June 30 $ — $ —

CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices.

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The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts.

Additionally, under the terms of the strategic venture, we recognized an embedded derivative related to our credit rating.

Additionally, under the terms of the strategic

CF INDUSTRIES HOLDINGS, INC.

venture, we recognized an embedded derivative related to our credit rating.

See Note 9—Fair Value Measurements for additional information.

On July 31, 2022, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2022 in accordance with CFN’s limited liability company agreement.

On August 1, 2022, CFN distributed $ 371 million to CHS for the distribution period ended June 30, 2022.

Stockholders’ Equity

2022 Equity and Incentive Plan

In May 2022, our shareholders approved the CF Industries Holdings, Inc.

2022 Equity and Incentive Plan (the Plan), including 2.5 million new shares of the Company’s common stock available for grant thereunder as part of our pay-for-performance compensation program, which we use to provide incentives that are aligned with the interests of our shareholders.

The Plan replaced the CF Industries Holdings, Inc.

2014 Equity and Incentive Plan and permits grants of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, which in each case may be conditioned on performance criteria, to employees and certain consultants of the Company and its subsidiaries and non-employee directors of the Company.

Treasury Stock

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

In the three months ended March 31, 2022, we repurchased approximately 1.3 million shares under the 2021 Share Repurchase Program for $ 100 million.

In the three months ended March 31, 2022, we retired 27,962 shares of repurchased stock, including shares repurchased under the share repurchase program that expired on December 31, 2021.

At March 31, 2022, we held 1,563,679 shares of treasury stock.

In the six months ended June 30, 2022, we repurchased approximately 6.6 million shares under the 2021 Share Repurchase Program for $ 590 million, of which $ 14 million was accrued and unpaid as of June 30, 2022.

In the six months ended June 30, 2022, we retired approximately 3.2 million shares of repurchased stock, and we held approximately 3.8 million shares of treasury stock as of June 30, 2022.

Accumulated Other Comprehensive Loss

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Balance as of December 31, 2020 $ ( 144 ) $ 4 $ ( 180 ) $ ( 320 )

Loss arising during the period — — ( 3 ) ( 3 )

Reclassification to earnings (1)

Effect of exchange rate changes and deferred taxes 24 — ( 2 ) 22

Balance as of March 31, 2021 $ ( 130 ) $ 4 $ ( 179 ) $ ( 305 )

Balance as of June 30, 2021 $ ( 120 ) $ 4 $ ( 180 ) $ ( 296 )

Balance as of December 31, 2021 $ ( 141 ) $ 4 $ ( 120 ) $ ( 257 )

Gain arising during the period — — 3 3

Reclassification to earnings (1)

Effect of exchange rate changes and deferred taxes ( 40 ) — 7 ( 33 )

Balance as of March 31, 2022 $ ( 154 ) $ 4 $ ( 116 ) $ ( 266 )

Balance as of June 30, 2022 $ ( 181 ) $ 4 $ ( 108 ) $ ( 285 )

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(1) Reclassifications out of accumulated other comprehensive loss to the consolidated statements of operations during the three months ended March 31, 2022 and 2021 were not material.

(1) Reclassifications out of accumulated other comprehensive loss to the consolidated statements of operations during the three and six months ended June 30, 2022 and 2021 were not material.

CF INDUSTRIES HOLDINGS, INC.

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Goodwill by segment is presented in Note 7—Goodwill and Other Intangible Assets.

Segment data for sales, cost of sales and gross margin for the three months ended March 31, 2022 and 2021 are presented in the table below.

Segment data for sales, cost of sales and gross margin for the three and six months ended June 30, 2022 and 2021 are presented in the table below.

Granular Urea (2)

(in millions)

Three months ended March 31, 2022

Three months ended June 30, 2022

Net sales $ 1,115 $ 833 $ 976 $ 253 $ 212 $ 3,389

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Operating earnings $ 1,778

Three months ended March 31, 2021

Three months ended June 30, 2021

Net sales $ 459 $ 433 $ 434 $ 136 $ 126 $ 1,588

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Operating earnings $ 450

Six months ended June 30, 2022

Net sales $ 1,755 $ 1,598 $ 1,991 $ 476 $ 437 $ 6,257

Cost of sales 722 630 688 322 206 2,568

Gross margin $ 1,033 $ 968 $ 1,303 $ 154 $ 231 3,689

Total other operating costs and expenses (3)

Equity in earnings of operating affiliate 54

Operating earnings $ 3,436

Six months ended June 30, 2021

Net sales $ 665 $ 832 $ 666 $ 241 $ 232 $ 2,636

Cost of sales 413 505 526 215 185 1,844

Gross margin $ 252 $ 327 $ 140 $ 26 $ 47 792

Total other operating costs and expenses 117

Equity in earnings of operating affiliate 22

Operating earnings $ 697

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

(1) Cost of sales and gross margin for the Ammonia segment for the six months ended June 30, 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.

Subsequent Events

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.

See Note 11—Financing Agreements for additional information.

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.

(3) Total other operating costs and expenses for the three and six months ended June 30, 2022 include $ 162 million of restructuring charges related to our U.K.

See Note 5—United Kingdom Operations, Proposed Restructuring and Impairment Charges for additional information.

CF INDUSTRIES HOLDINGS, INC.

Subsequent Event

On July 15, 2022, we entered into an agreement with an insurance company to purchase a non-participating group annuity contract and transfer approximately $ 375 million of our primary U.S.

defined benefit pension plan’s projected benefit obligation, subject to customary closing conditions.

The transaction closed on July 22, 2022 and was funded with plan assets.

Under the transaction, the insurance company will assume responsibility for pension benefits and annuity administration for approximately 4,000 retirees or their beneficiaries.

As a result of this transaction, in the third quarter of 2022, we will remeasure the plan's projected benefit obligation and plan assets and we expect to recognize a non-cash pre-tax pension settlement loss of approximately $ 25 million, based on current interest rates, reflecting the unamortized net unrecognized postretirement benefit costs related to the settled obligations, with a corresponding offset to accumulated other comprehensive loss.

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 1. Financial Statements