What changed in this filing

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Item 7. Management’s Discussion and Analysis

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• Overview of CF Holdings

• Our Company

• Our Commitment to a Clean Energy Economy

• Industry Factors

• Market Conditions and Current Developments

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• Critical Accounting Estimates

• Recent Accounting Pronouncements

Overview of CF Holdings

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

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

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers.

Our principal assets as of December 31, 2022 include:

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

Port Neal, Iowa;

Sergeant Bluff, Iowa (our Port Neal complex);

Yazoo City, Mississippi;

Verdigris, Oklahoma;

Claremore, Oklahoma (our Verdigris complex);

and Woodward, Oklahoma.

These facilities are wholly owned directly or indirectly by CF Industries Nitrogen, LLC (CFN), of which we own approximately 89% and CHS Inc.

(CHS) owns the remainder.

See Note 18—Noncontrolling Interest for additional information on our strategic venture with CHS;

(CHS) owns the remainder (see Note 17—Noncontrolling Interest for additional information on our strategic venture with CHS);

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

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

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• a United Kingdom nitrogen manufacturing facility located in Billingham;

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

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

• 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.

CF INDUSTRIES HOLDINGS, INC.

We previously operated a United Kingdom nitrogen manufacturing facility located in Ince.

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

operations, including the planned permanent closure of our Ince facility.

In August 2022, the final restructuring plan was approved, and decommissioning activities were initiated.

See “Market Conditions and Current Developments—United Kingdom Operations,” below, for more information.

Our Commitment to a Clean Energy Economy

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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 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.

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 byproduct removed through carbon capture and sequestration (CCS).

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.

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

We will integrate the green hydrogen generated by the electrolysis plant into existing ammonia synthesis loops to enable the production of approximately 20,000 tons per year of green ammonia.

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.

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

The preliminary studies we are conducting with Mitsui cover 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.

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

In the fourth quarter of 2021, our Board of Directors authorized projects that we believe will enable the annual production of up to 1.25 million tons of blue ammonia from our existing network 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 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.

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

In July 2022, we and Mitsui & Co., Ltd.

(Mitsui) signed a joint development agreement for the companies’ proposed plans to construct an export-oriented blue ammonia facility.

We and Mitsui continue to progress a front-end engineering and design (FEED) study for the project, and expect to make a final investment decision on the proposed facility in the second half of 2023.

Should the companies agree to move forward, the ammonia facility would be constructed at our new Blue Point complex.

We acquired the land on the west bank of the Mississippi river in Ascension Parish, Louisiana, for the complex during the third quarter of 2022.

Construction and commissioning of a new world-scale ammonia plant typically takes approximately four years from the time construction begins.

We are also exploring opportunities to produce blue ammonia from our existing ammonia production network.

We have announced a project with an estimated cost of $200 million to construct a CO 2 dehydration and compression facility at our Donaldsonville complex to enable the transport and permanent sequestration of the ammonia process CO 2 byproduct.

Engineering activities and procurement of major equipment for the facility are in progress, and modification of the site’s existing equipment to allow integration with existing operations has begun.

Once the dehydration and compression unit is in service and sequestration is initiated, we expect that the Donaldsonville complex will have the capacity to dehydrate and compress up to 2 million tons per year of CO 2 , enabling the production of blue ammonia.

In October 2022, we announced that we had entered into a definitive CO 2 offtake agreement with ExxonMobil to transport and permanently sequester the CO 2 from Donaldsonville.

Start-up for the project is scheduled for early 2025.

Under current regulations, the project 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.

Industry Factors

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We expect these key variables to continue to have major impacts on long-term fertilizer demand for the foreseeable future.

Short-term fertilizer demand growth may depend on global economic conditions, farm sector income, weather patterns, the level of global grain stocks relative to

Short-term fertilizer demand growth may depend on global economic conditions, farm sector income, weather patterns, the level of global grain stocks relative to consumption, fertilizer application rates, and governmental regulations, including fertilizer subsidies or requirements mandating increased use of bio-fuels or industrial nitrogen products, such as DEF.

Geopolitical factors such as temporary disruptions in fertilizer trade related to government intervention or changes in the buying/selling patterns of key exporting/consuming countries, including China, India, Russia and Brazil, among others, often play a major role in shaping near-term market

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consumption, fertilizer application rates, and governmental regulations, including fertilizer subsidies or requirements mandating increased use of bio-fuels or industrial nitrogen products.

Other geopolitical factors like temporary disruptions in fertilizer trade related to government intervention or changes in the buying/selling patterns of key exporting/consuming countries such as China, India, Russia and Brazil, among others, often play a major role in shaping near-term market fundamentals.

fundamentals.

The economics of nitrogen-based fertilizer manufacturing play a key role in decisions to increase or reduce production capacity.

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Raw materials are dependent on energy sources such as natural gas or coal;

therefore, supply costs are affected by the supply of and demand for these commodities.

therefore, supply costs are affected by the supply of and demand for those commodities.

Global Trade in Fertilizer

In addition to the relationship between global supply and demand, profitability within a particular geographic region is determined by the supply/demand balance within that region.

Profitability of our products within a particular geographic region is determined not only by the relationship between global supply and demand, but also by the supply/demand balance within that region.

Regional supply and demand can be influenced significantly by factors affecting trade within regions.

Some of these factors include the relative cost to produce and deliver product, relative currency values, the availability of credit, agricultural supply and demand, industrial product demand and policies such as emissions abatement and governmental nitrogen product trade policies, including the imposition of duties, tariffs or quotas, that affect foreign trade or investment.

The development of additional natural gas reserves in North America over the last decade has decreased natural gas costs relative to the rest of the world, making North American nitrogen fertilizer producers more competitive.

Some of these factors include the relative cost to produce and deliver product, relative currency values, the availability of credit, agricultural supply and demand, industrial product demand and policies such as emissions abatement, government support for manufacturers or purchasers and governmental nitrogen product trade policies, including the imposition of duties, tariffs or quotas, that affect foreign trade or investment.

The development of additional natural gas reserves in North America over the last decade has decreased natural gas costs in North America relative to the rest of the world, making North American nitrogen fertilizer producers more competitive.

Changes in currency values may also alter our cost competitiveness relative to producers in other regions of the world.

Imports account for a significant portion of the nitrogen fertilizer consumed in North America.

Producers of nitrogen-based fertilizers located in the Middle East, the Republic of Trinidad and Tobago, North Africa and Russia have been major exporters to North America in recent years.

As a result, the North American nitrogen fertilizer market for certain nitrogen products is dependent on imports to balance supply and demand.

The North American nitrogen fertilizer market for certain nitrogen products is dependent on imports to balance supply and demand, and imports traditionally account for a significant portion of nitrogen fertilizer products consumed in North America.

Producers of nitrogen-based fertilizers located in the Middle East, Trinidad, North Africa and Russia have been major exporters to North America in recent years.

Farmers’ Economics

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Market Conditions and Current Developments

Selling Prices and Sales Volume

The selling prices for all of our major products were higher in 2021 than 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 drove lower global operating rates.

Geopolitical Environment

Russia’s invasion of Ukraine in February 2022, and the resulting war between Russia and Ukraine, have disrupted global markets for certain commodities, including natural gas, nitrogen fertilizers and certain commodity grains, leading to production curtailments, export reductions and logistical complications involving these commodities.

Additionally, energy, financial and transportation sanctions have been announced by U.S., Canadian, European and other governments against Russia in response to the war.

Market participants have been adjusting trade flows and manufacturers have been adjusting production levels in response to these factors.

Continued market disruption is expected given the uncertainty of the situation.

As of the date of filing of this report, nitrogen fertilizers have largely been explicitly exempted from these Russian sanctions by the United States and certain other governments.

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

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

European energy markets, which have historically sourced a substantial portion of their natural gas from Russia, have been disrupted by Russia’s invasion of Ukraine and the subsequent reduction of Russian natural gas supply to Europe.

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

In addition, as discussed under “Market Conditions and Current Developments—United Kingdom Operations,” below, in September 2022, we temporarily idled ammonia production at our Billingham complex due to the high price of natural gas.

Several European governments, including the United Kingdom, and the European Union (EU) are seeking to address energy market supply and volatility with a variety of government programs and policy changes.

These programs, some of which are evolving and may change over time, may reduce the costs of natural gas in the United Kingdom and, to some extent, the EU but the full impact of these programs remains to be seen.

The geopolitical developments relating to the war in Ukraine have also led to some supply chain disruptions for Russian producers of fertilizer, contributing to reduced global nitrogen fertilizer supply.

Prior to its February 2022 invasion of Ukraine, Russia in recent years had been a significant supplier of nitrogen fertilizer products to North America and Europe and a leading exporter of nitrogen fertilizer products globally.

Since that invasion, the closure of a pipeline historically transporting ammonia

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from Russia through Ukraine for export has been a large contributor to reduced global exportable ammonia supply.

In addition, Russia and Ukraine have been 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 reduced commodity grain supply from Russia and Ukraine, causing increased prices for grains globally.

The increase in commodity grain prices in turn supported strong demand for nitrogen fertilizer in 2022.

These events have further contributed to an already tight global supply and demand balance for nitrogen fertilizers.

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

As a result, global nitrogen fertilizer prices remained high and also experienced significant volatility in 2022.

We expect that the recent geopolitical events, and any further government-imposed sanctions or other government actions affecting food or energy security, will continue to have an impact on the supply and demand balance of nitrogen fertilizer products globally and selling prices for our nitrogen fertilizer products, but the ultimate scope and duration of these impacts remain to be seen.

Nitrogen Selling Prices and Sales Volume

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.

In general, the prevailing global prices for nitrogen products must be at a level to incent the high cost marginal producer to produce product at a breakeven or above price, or else they would cease production and leave a portion of global demand unsatisfied.

The selling prices for all of our major products were higher in 2022 than in 2021, driven by the impact of a tighter global nitrogen supply and demand balance, as a result of strong global demand and 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.

The average selling price for our products for 2022 and 2021 was $610 per ton and $353 per ton, respectively.

The increase in average selling prices of 73% in 2022 from 2021 resulted in an increase in net sales of approximately $4.80 billion.

Our total sales volume was 9% lower in 2021 than in 2020 with lower sales volume reported in all segments.

We shipped 18.5 million tons of product in 2021 compared to 20.3 million tons in 2020 due primarily to lower supply from the impact of both planned and unplanned maintenance activity and the impact of weather-related outages.

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

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

Lower sales volume resulted in a decrease in net sales of approximately $404 million.

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Our total sales volume was 1% lower in 2022 than in 2021 as lower sales volume in our Ammonia, Other and AN segments was mostly offset by higher sales volume in our Granular Urea and UAN segments.

We shipped 18.3 million tons of product in 2022 compared to 18.5 million tons in 2021.

The lower sales volume reflects the impact of our Ince facility closure, which is further discussed below.

Sales volume for our products in 2022, 2021 and 2020 is shown in the table below.

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Total 18,331 $ 11,186 18,501 $ 6,538 20,296 $ 4,124

Natural Gas Prices

CF INDUSTRIES HOLDINGS, INC.

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 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, the major trading point for natural gas in the United Kingdom:

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

Natural gas is a significant cost component of our manufactured nitrogen products, representing approximately 50% of our production costs in 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:

Year ended December 31,

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Average daily market price of natural gas National Balancing Point (United Kingdom) $ 24.56 $ 15.50 $ 3.20 $ 9.06 58 % $ 12.30 384 %

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

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 directly impacts a substantial portion of our operating expenses.

North American natural gas prices during 2021 were higher on average than during 2020 due to tight supply and demand conditions within the market.

Demand for natural gas was strong throughout 2021 as cold weather early in the year, including the impact of Winter Storm Uri in February, contributed to strength in demand.

Warmer weather in the summer of 2021 contributed to higher natural gas usage for electrical generation, and the economy emerging from COVID-19 pandemic conditions added to the strong summer demand.

The supply response from natural gas producers during 2021 was insufficient to offset these demand factors, leading to higher prices throughout the year.

In addition, liquefied natural gas (LNG) exports increased significantly in 2021 compared to 2020 as favorable pricing differentials between North America and global natural gas prices led LNG facilities in the United States to run at near maximum levels.

The average daily market price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, was $3.82 per MMBtu for 2021 compared to $1.99 per MMBtu for 2020, an increase of 92%.

During 2021, the daily closing price at the Henry Hub reached a low of $2.36 per MMBtu on April 7, 2021 and a high of $23.61 per MMBtu on February 18, 2021 as a result of Winter Storm Uri.

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.

North American natural gas prices during 2022 were higher on average than during 2021 due to tighter supply and demand conditions within the market.

Natural gas prices increased steadily through the first half of 2022 as the increase in demand for natural gas for power generation and liquefied natural gas (LNG) exports exceeded production increases.

Late in the second quarter of 2022, prices declined as the Freeport LNG facility outage reduced demand for natural gas for LNG exports and allowed natural gas injections to refill storage at an accelerated pace.

Record high temperatures in the United States in the summer of 2022 and the limited substitution to coal generation due to high coal prices and available coal supply increased demand for natural gas in the electricity sector, raising natural gas prices to over $9.00 per MMBtu.

Natural gas prices decreased late in the third quarter of 2022 due to increasing production, cooler temperatures and above average storage injections.

Prices continued to decline during the fourth quarter of 2022 until late December when extreme cold weather covered much of the United States, increasing demand for natural gas for use in residential and commercial heating.

The average daily market price at the Henry Hub was $6.38 per MMBtu for 2022 compared to $3.82 per MMBtu for 2021, an increase of 67%.

During 2022, the daily closing price at the Henry Hub reached a low of $3.45 per MMBtu on November 10, 2022 and a high of $9.85 per MMBtu on August 23, 2022.

During the three-year period ended December 31, 2022, the daily closing price at the Henry Hub reached a low of $1.34 per MMBtu on September 22, 2020 and three consecutive days in October 2020 and a high of $23.61 per MMBtu on February 18, 2021.

The average daily market price of natural gas at the Henry Hub for January 2023 was $3.29 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.

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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 year ended December 31, 2021.

Our Billingham U.K.

nitrogen manufacturing facility is subject to fluctuations associated with the price of natural gas in Europe.

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.

During the second quarter of 2022, the price of natural gas in the United Kingdom declined as Russian natural gas flows via pipeline to Europe generally remained steady despite the ongoing war in Ukraine.

European natural gas prices began to increase late in the second quarter of 2022 after the unplanned outage of the Freeport LNG liquefaction terminal in the United States impacted global LNG supply.

In the third quarter of 2022, prices continued to increase when Russian natural gas flows to Europe via the Nord Stream 1 pipeline ceased.

Natural gas prices began to decrease late in the third quarter of 2022 as natural gas storage levels in continental Europe reached robust levels, although prices remained elevated compared to historical price levels.

This trend continued in the fourth quarter of 2022 as Europe experienced a mild start to winter and LNG deliveries to the continent remained elevated, decreasing the risk of natural gas shortages.

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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 2021 and reached unprecedented high levels in the third quarter, and even higher levels in the fourth quarter.

The increase in natural gas prices was due to the combination of low storage levels in Europe, reduced supply from Russia, and a tight global supply and demand balance in the LNG market as a result of strong demand in both Europe and Asia to fill storage locations in anticipation of winter.

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 at NBP was $15.50 per MMBtu for 2021 compared to $3.20 per MMBtu for 2020, an increase of 384%.

During 2021, the daily closing price at NBP reached a low of $5.58 per MMBtu on February 23, 2021 and a high of $60.10 per MMBtu on December 22, 2021.

The average daily market price of natural gas at NBP for January 2022 was $25.91 per MMBtu.

In 2021, the total cost of natural gas used for production at all of our locations, 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 88% to $4.21 from $2.24 per MMBtu in 2020.

This increase in natural gas costs resulted in a decrease in gross margin of $663 million.

United Kingdom Energy Crisis

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.

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 in the third quarter of 2021.

The major natural gas trading point for the United Kingdom is the NBP.

The average daily market price at the NBP was $24.56 per MMBtu for 2022 compared to $15.50 per MMBtu for 2021, an increase of 58%.

During 2022, the daily closing price at the NBP reached a low of $1.23 per MMBtu on June 10, 2022 and a high of $67.08 per MMBtu on March 8, 2022.

During the three-year period ended December 31, 2022, the daily closing price at the NBP reached a low of $1.04 per MMBtu on May 22, 2020, and a high of $67.08 per MMBtu on March 8, 2022.

The average daily market price of natural gas at the NBP for January 2023 was $18.93 per MMBtu.

In 2022, the total cost of natural gas used for production at all of our locations, which includes the impact of realized natural gas derivatives, increased 71% to $7.18 from $4.21 per MMBtu in 2021.

The cost of natural gas used for production of $4.21 per MMBtu in 2021 does not include the $112 million gain from the net settlement of certain natural gas contracts in February 2021.

The increase in natural gas costs in 2022 as compared to 2021 resulted in a decrease in gross margin of approximately $1.05 billion.

United Kingdom Operations

Starting in 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.

The energy crisis and the geopolitical environment, as discussed above, have continued to evolve since the third quarter of 2021.

As a result of these factors, management has taken certain actions relating to our U.K.

The following table summarizes the total impact of these factors for the years ended December 31, 2022 and 2021.

For the year ended December 31, 2020, no impairment or restructuring charges were recognized.

Year ended December 31,

2022 2021 2022 v.

(in millions)

goodwill impairment $ — $ 285 $ (285) (100) %

long-lived and intangible asset impairment 239 236 3 1 %

operations restructuring 19 — 19 N/M

Total $ 258 $ 521 $ (263) (50) %

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N/M—Not Meaningful

2021 Impairment

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

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 new carbon dioxide pricing and offtake agreements with our customers, which had an initial term through January 31, 2022.

The amount of financial support provided by the U.K.

government under the terms of the interim agreement was not material.

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

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

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

Shortly thereafter, our Billingham facility resumed operations.

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

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

We concluded that a decline in fair value had occurred, and we recorded long-lived asset and goodwill impairment charges of $495 million.

The continued impacts of the U.K.

energy crisis in the fourth quarter of 2021 triggered an additional impairment test, and we recognized an additional goodwill impairment charge of $ 26 million.

We recognized total 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.

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

energy crisis impacts,” and “Liquidity and Capital Resources—United Kingdom Energy Crisis,” below, Note 6—United Kingdom Energy Crisis and Impairment Charges, Note 7—Property, Plant and Equipment—Net and Note 8—Goodwill and Other Intangible Assets for further information.

As of December 31, 2021, after the recognition of the $ 521 million of impairment charges noted above, we have no remaining goodwill related to our U.K.

operations, and the remaining long-lived assets related to our U.K.

operations were approximately $ 425 million, consisting primarily of property, plant and equipment.

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

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

operations remained.

2022 Impairment and Restructuring

In 2022, we recognized total impairment charges of $239 million and restructuring charges of $19 million, as described below.

In the second quarter of 2022, the long-term outlook deteriorated for nitrogen producers in regions that rely on LNG imports to satisfy natural gas demand.

As further described above, natural gas represents a substantial portion of the cost to produce nitrogen products.

Natural gas forward prices suggested that nitrogen facilities in the United Kingdom and mainland Europe would be the world’s high-cost marginal producers for the foreseeable future, presenting a challenge to the sustainability of our U.K.

In June 2022, due in large part to the nitrogen industry conditions described above, we approved and announced our proposed plan to restructure our U.K.

operations, including the planned permanent closure of our

CF INDUSTRIES HOLDINGS, INC.

Ince facility and optimization of the remaining manufacturing operations at our Billingham facility.

As a result, in the second quarter of 2022, we recorded total charges of $162 million as follows:

• asset impairment charges of $152 million, primarily consisting of impairment of property, plant and equipment at the Ince facility that is planned for abandonment, and impairment of certain trade name intangible assets;

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

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

Russian natural gas flows to Europe via the Nord Stream 1 pipeline ceased, causing the United Kingdom to experience unprecedented natural gas prices.

In addition, the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries, further contributing to the uncertainty in European energy markets.

Given these factors and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we temporarily idled ammonia production at our Billingham complex.

As a result, we concluded that an additional impairment test was triggered for the asset groups that comprise our continuing U.K.

As a result, in the third quarter of 2022, we recorded total charges of $95 million as follows:

• asset impairment charges of $87 million related to property, plant and equipment and definite-lived intangible assets at our Billingham complex;

• a charge for post-employment benefits of $8 million for additional charges primarily related to one-time termination benefits.

In the fourth quarter of 2022, we incurred additional charges related to our U.K.

restructuring of $1 million, primarily related to one-time termination benefits.

We continue to work with customers, vendors, regulators and others to finalize closure plans of our Ince complex.

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 year ended December 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.

CF INDUSTRIES HOLDINGS, INC.

Manufacturing Costs and Granular Urea Purchases

In 2021, we experienced lower production levels and higher manufacturing and maintenance costs than in 2020.

Certain of our plants operated at lower operating rates or temporarily suspended operations during 2021 due to the lack of natural gas due to Winter Storm Uri or the impact of Hurricane Ida, or due to maintenance activity, including activity that was deferred from 2020 as a result of the COVID-19 pandemic.

In 2021, we had the highest level of maintenance activity in our history, including turnarounds at seven of our 17 ammonia plants.

Because of these factors, including 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 2021.

In response to the lower production in 2021 as a result of weather conditions and maintenance activity, we procured additional granular urea in order to meet customer obligations and provide additional manufacturing flexibility.

In the year ended December 31, 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 were permitted to continue to operate and, through the date of this report, we have not suspended or shutdown operations as a result of the pandemic.

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 along with the rise of new variants of COVID-19, we instituted and have continued to enforce safety precautions and encourage safe behavior in order to protect the health and well-being of all of our employees.

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.

See Note 5—United Kingdom Operations Restructuring and Impairment Charges for further information.

Financial Executive Summary

We reported net earnings attributable to common stockholders of $917 million in 2021 compared to $317 million in 2020, an increase in net earnings of 189%, or $600 million.

We reported net earnings attributable to common stockholders of $3.35 billion in 2022 compared to $917 million in 2021, an increase in net earnings of 265%, or $2.43 billion.

The increase in net earnings reflects an increase of $3.47 billion in gross margin to $5.86 billion for the year ended December 31, 2022, due primarily to higher average selling prices partially offset by higher natural gas costs.

Average selling prices increased 73% to $610 per ton in 2022 from $353 per ton in 2021, which increased gross margin by $4.80 billion.

The cost of natural gas used for production increased 71% to $7.18 per MMBtu from $4.21 per MMBtu in 2021, which reduced gross margin by approximately $1.05 billion.

The increase in average selling prices and higher natural gas costs are more fully described above under “Market Conditions and Current Developments.”

Partially offsetting the increase in gross margin was an increase in the income tax provision of $875 million for the year ended December 31, 2022, to $1.16 billion, due primarily to higher taxable income due to improved profitability.

The year ended December 31, 2022 also includes pre-tax impairment and restructuring charges related to our U.K.

operations of $258 million compared to $521 million in the year ended December 31, 2021, which are more fully described under “Market Conditions and Current Developments—United Kingdom Operations,” above.

Diluted net earnings per share attributable to common stockholders increased $12.14 per share, to $16.38 per share in 2022 compared to $4.24 per share in 2021.

These increases were due primarily to higher operating results driven by an increase in gross margin, partially offset by impairment charges related to our U.K.

Impact of higher gross margin

Gross margin increased by $1.59 billion in 2021 to $2.39 billion as compared to $801 million in 2020.

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

Variance due to the following items:

Year Ended December 31, 2020 Higher Average Selling Prices (1)

Higher Natural Gas Costs (2)

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 Year Ended December 31, 2021

(dollars in millions)

Net sales $ 4,124 $ 2,757 $ (404) $ — $ — $ — $ 61 $ — $ 6,538

Cost of sales 3,323 — (312) 663 31 494 64 (112) 4,151

Gross margin $ 801 $ 2,757 $ (92) $ (663) $ (31) $ (494) $ (3) $ 112 $ 2,387

Gross margin % 19.4 % 36.5 %

_______________________________________________________________________________

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

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

(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.

• Average selling prices increased 74% in 2021 to $353 per ton from $203 per ton in 2020, which increased gross margin by approximately $2.76 billion,

• Sales volume decreased 9% to 18.5 million product tons in 2021 from 20.3 million product tons in 2020, which reduced gross margin by approximately $92 million,

• The cost of natural gas used for production increased 88% to $4.21 per MMBtu in 2021 from $2.24 per MMBtu in 2020, which reduced gross margin by $663 million,

• We incurred higher manufacturing, maintenance and other costs, which reduced gross margin by $494 million, due primarily to higher plant turnaround and maintenance activity,

• We purchased 201,000 tons of granular urea for $71 million to meet customer obligations, which we sold to customers for $68 million, and

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

Impact of impairment charges

Net earnings and diluted net earnings per share in 2021 were impacted by impairment charges related to our U.K.

operations of $521 million, consisting of long-lived and intangible asset impairment charges of $236 million and goodwill impairment charges of $285 million.

The after-tax impact of the impairment charges to net earnings attributable to common stockholders and diluted net earnings per share attributable to common stockholders was $463 million and $2.14, respectively.

See “Market Conditions and Current Developments—United Kingdom Energy Crisis,” above, Note 6—United Kingdom Energy Crisis and Impairment Charges, Note 7—Property, Plant and Equipment—Net and Note 8—Goodwill and Other Intangible Assets, for further information.

CF INDUSTRIES HOLDINGS, INC.

The following table includes gross margin, operating earnings, earnings before income taxes, net earnings attributable to common stockholders and diluted net earnings per share attributable to common stockholders for 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.

Year ended December 31, 2021

As reported Impact of impairment charges As adjusted (1)

(dollars in millions, except per share)

Gross margin $ 2,387 $ — $ 2,387

Operating earnings 1,729 521 2,250

Earnings before income taxes 1,543 521 2,064

Net earnings attributable to common stockholders 917 463 1,380

Diluted net earnings per share attributable to common stockholders 4.24 2.14 6.38

_______________________________________________________________________________

(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 accounting principles generally accepted in the United States (U.S.

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 years ended December 31, 2021 and 2020.

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

During the years ended December 31, 2021 and 2020, we reported net earnings attributable to common stockholders of $917 million and $317 million, respectively.

During the years ended December 31, 2022 and 2021, we reported net earnings attributable to common stockholders of $3.35 billion and $917 million, respectively.

In addition to the impact of market conditions discussed above, certain items affected the comparability of our financial results during the years ended December 31, 2022 and 2021.

The following table and related discussion outline these items.

The descriptions of items below that refer to amounts in the table refer to the pre-tax amounts unless otherwise noted.

Pre-Tax After-Tax (1)

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(in millions)

Unrealized net mark-to-market loss (gain) on natural gas derivatives (2)

Unrealized net mark-to-market loss on natural gas derivatives (2)

$ 41 $ 31 $ 25 $ 19

COVID impacts:

Special COVID-19 bonus for operational workforce (2)

Turnaround deferral (2)

Asset impairments 521 463 — —

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

Engineering cost write-off (3)

Loss on sale of surplus land (3)

Insurance proceeds (3)

goodwill impairment — — 285 285

long-lived and intangible asset impairment 239 180 236 178

operations restructuring 19 14 — —

Unrealized gain on embedded derivative liability (3)

(14) (11) — —

Pension settlement loss and curtailment gains — net (4)

Canada Revenue Agency Competent Authority Matter and Transfer pricing positions:

Interest expense 170 168 — —

Interest income (29) (22) — —

Income tax provision (5)

Loss on debt extinguishment 8 6 19 15

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

______________________________________________________________________________

(1) The tax impact is calculated utilizing a marginal effective rate of 23.6% and 23.2% in 2021 and 2020, respectively, except for asset impairments, which reflects the amount of income tax benefit recognized on the long-lived and intangible asset impairment charges.

(1) The tax impact is calculated utilizing a marginal effective rate of 23.5% and 23.6% in 2022 and 2021, respectively, except for U.K.

long-lived and intangible asset impairments, which reflects the amount of income tax benefit recognized.

An income tax benefit for the U.K.

goodwill impairment was not recorded as it is nondeductible for income tax purposes.

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

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

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

CF INDUSTRIES HOLDINGS, INC.

The following describes the significant items that impacted the comparability of our financial results in 2021 and 2020.

Descriptions of items below that refer to amounts in the table above, refer to the pre-tax amounts, except for the discussion under Terra amended tax returns .

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

(4) Included in other non-operating—net in our consolidated statement of operations.

(5) For the year ended December 31, 2022, the after-tax income tax provision amount of $65 million reflects an income tax provision of $70 million, consisting of the $78 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $8 million of income tax benefit referenced below under “Transfer pricing positions,” net of $5 million of income tax provision that is reflected in the after-tax interest expense and interest income amounts shown in this table.

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

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

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

In 2021 and 2020, we recognized an unrealized net mark-to-market loss (gain) on natural gas derivatives of $25 million and $(6) million, respectively.

COVID impacts

In March 2020, a short-term bonus program was initiated to compensate operational employees for continuing their critical tasks at the beginning of 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 statement of operations for the year ended December 31, 2020.

In addition, certain plant turnaround activities were deferred because of the COVID-19 pandemic.

As a result, we incurred $7 million of expense for the year ended December 31, 2020, which was recognized in cost of sales in our consolidated statement of operations.

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 $521 million in 2021, including long-lived and intangible asset impairment charges of $236 million and goodwill impairment charges of $285 million.

See Note 6—United Kingdom Energy Crisis and Impairment Charges, Note 7—Property, Plant and Equipment—Net and Note 8—Goodwill and Other Intangible Assets, for further information.

In 2022 and 2021, we recognized an unrealized net mark-to-market loss on natural gas derivatives of $41 million and $25 million, respectively.

Loss on foreign currency transactions, including intercompany loans

In 2021 and 2020, we recognized losses of $6 million and $5 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.

Engineering cost write-off

In 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 year ended December 31, 2020.

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

Loss on sale of surplus land

In 2020, we recognized a loss of $2 million on the sale of surplus land, which is reflected in other operating—net in our consolidated statement of operations.

Insurance proceeds

We recognized income of $37 million in 2020 related to insurance claims at one of our nitrogen complexes, which consisted of $35 million related to business interruption insurance proceeds and $2 million related to property insurance proceeds.

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

Loss on debt extinguishment

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

The total aggregate redemption price paid 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.

In 2022 and 2021, we recognized losses on foreign currency transactions of $28 million and $6 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.

CF INDUSTRIES HOLDINGS, INC.

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 (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 $265 million, including accrued interest.

In 2022, we recognized total charges related to our U.K.

operations of $258 million, consisting primarily of asset impairment charges related to property, plant and equipment at our Billingham and Ince facilities and definite-lived intangible assets.

In 2021, we recognized impairment charges of $521 million, including a goodwill impairment charge of $285 million and long-lived and intangible asset impairment charges of $236 million.

See “Market Conditions and Current Developments—United Kingdom Operations,” above;

Note 5—United Kingdom Operations Restructuring and Impairment Charges;

Note 6—Property, Plant and Equipment—Net;

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

Unrealized gain on embedded derivative liability

Under the terms of our strategic venture with CHS, if our credit rating as determined by two of three specified credit rating agencies is below certain levels, we are required to make a non-refundable yearly payment of $5 million to CHS until the earlier of the date that our credit rating is upgraded to above such levels by two of the three specified credit rating agencies or February 1, 2026.

This obligation is recorded at fair value and has been recognized on our consolidated balance sheets as an embedded derivative.

Beginning in 2016, our credit ratings were below such levels and, as a result, under the terms of the strategic venture, we made an annual payment of $5 million to CHS in the fourth quarter of each year from 2016 through 2021.

Our credit rating was upgraded above certain levels in July 2022 by one of the specified credit rating agencies and in October 2022 by another one of the specified credit rating agencies.

As a result of these upgrades, in the fourth quarter of 2022, there was a reduction in the fair value of the embedded derivative liability, and we recognized an unrealized gain of $14 million.

Pension settlement loss and curtailment gains—net

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.

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

Under the transaction, the insurance company assumed 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 remeasured the plan's projected benefit obligation and plan assets, and we recognized a non-cash pre-tax pension settlement loss of $24 million, reflecting the unamortized net unrecognized postretirement benefit costs related to the settled obligations, with a corresponding offset to accumulated other comprehensive loss.

In the fourth quarter of 2022, the final settlement of the non-participating group annuity contract resulted in a refund of $4 million to us, which decreased the non-cash pre-tax pension settlement loss recognized by $3 million to $21 million.

The settlement loss is reflected in other non-operating—net in our consolidated statement of operations for the year ended December 31, 2022.

In October 2022, we remeasured certain of our U.S.

and Canadian defined benefit pension plans due to plan amendments resulting from a revision to our North American retirement plan strategy.

As a result of these plan amendments, we recognized $4 million of curtailment gains, which are reflected in other non-operating—net in our consolidated statement of operations.

See Note 11—Pension and Other Postretirement Benefits for further information for the year ended December 31, 2022.

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 served as security until the matter was resolved, as discussed below.

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 was subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years of approximately $129 million.

CF INDUSTRIES HOLDINGS, INC.

In 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 through 2011, partially offset by net income tax receivables of approximately $51 million in the United States, and we accrued net interest of $102 million, primarily reflecting the interest paid to Canada.

See “Liquidity and Capital Resources—Canada Revenue Agency Competent Authority Matter and Transfer Pricing,” below, for additional information.

Transfer pricing positions

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, we recorded the following in 2022:

• liabilities for unrecognized tax benefits of $159 million, with a corresponding income tax provision, and accrued interest of $59 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of $188 million, with a corresponding income tax benefit, and accrued interest income of $20 million related to the noncurrent income tax receivables.

In 2022, the impact of these evaluations of transfer pricing positions on our consolidated statement of operations, including $21 million of net deferred income tax provision for other transfer pricing tax effects, was $8 million of income tax benefit and $39 million of net interest expense before tax ($44 million after tax).

See “Liquidity and Capital Resources—Canada Revenue Agency Competent Authority Matter and Transfer Pricing,” below, for additional information.

Loss on debt extinguishment

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 April 2022 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 $500 million principal amount of the 2023 Notes prior to their scheduled maturity.

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.

I n 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, we recognized $26 million ($23 million, net of tax) of interest-related income and $18 million of additional income tax benefit.

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

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 for the 2023 Notes redeemed in September 2021 was approximately $265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $13 million, consisting primarily of a premium paid on the redemption of the $250 million principal amount of the 2023 Notes prior to their scheduled maturity.

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 March 2021 redemption of 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 $250 million principal amount of the 2021 Notes prior to their scheduled maturity.

CF INDUSTRIES HOLDINGS, INC.

11 unchanged sentences

long-lived and intangible asset impairment 239 236 — 3 1 % 236 N/M

Other operating—net (39) (17) (73) (22) (129) % 56 77 %

operations restructuring 19 — — 19 N/M — — %

Other operating—net 10 (39) (17) 49 N/M (22) (129) %

Total other operating costs and expenses 558 705 189 (147) (21) % 516 273 %

Equity in earnings (loss) of operating affiliate 47 11 (5) 36 327 % 16 N/M

Equity in earnings of operating affiliate 94 47 11 47 100 % 36 327 %

Operating earnings 5,397 1,729 623 3,668 212 % 1,106 178 %

1 unchanged sentence

Loss on debt extinguishment 8 19 — (11) (58) % 19 N/M

Other non-operating—net (16) (1) (7) (15) N/M 6 86 %

Other non-operating—net 15 (16) (1) 31 N/M (15) N/M

Earnings before income taxes 5,095 1,543 463 3,552 230 % 1,080 233 %

11 unchanged sentences

Average daily market price of natural gas National Balancing Point (United Kingdom) $ 24.56 $ 15.50 $ 3.20 $ 9.06 58 % $ 12.30 384 %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 25 $ (6) $ 14 $ 31 N/M $ (20) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 41 $ 25 $ (6) $ 16 64 % $ 31 N/M

Depreciation and amortization $ 850 $ 888 $ 892 $ (38) (4) % $ (4) — %

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Sales incentives are reported as a reduction in net sales.

Our total net sales increased $2.41 billion, or 59%, to $6.54 billion in 2021 compared to $4.12 billion in 2020 due to a 74% increase in average selling prices, partially offset by a 9% decrease in sales volume.

Average selling prices were $353 per ton in 2021 compared to $203 per ton in 2020, an increase of 74%, 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 and decreased global supply availability as higher global energy costs drove lower global operating rates.

Our total sales volume of 18.5 million product tons in 2021 was 9% lower compared to 20.3 million product tons in 2020 as a result of decreased supply due to lower production due primarily to a high level of plant turnaround and maintenance activity and downtime resulting from the impacts of Winter Storm Uri and Hurricane Ida.

Gross ammonia production for 2021 was approximately 9.3 million tons compared to 10.4 million tons in 2020.

Management expects gross ammonia production for 2022 will return to historical levels (9.5 to 10.0 million tons) based on normal operating conditions and a return to a typical level of planned maintenance activities.

Our net sales increased $4.65 billion, or 71%, to $11.19 billion in 2022 compared to $6.54 billion in 2021 due to a 73% increase in average selling prices, partially offset by a 1% decrease in sales volume.

Average selling prices were $610 per ton in 2022 compared to $353 per ton in 2021, an increase of 73%, 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 and 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 sales volume of 18.3 million product tons in 2022 was 1% lower compared to 18.5 million product tons in 2021, as lower sales volume in our Ammonia, Other and AN segments was mostly offset by higher sales volume in our Granular Urea and UAN segments.

Gross ammonia production for 2022 was approximately 9.8 million tons compared to 9.3 million tons in 2021, reflecting a return to a typical level of planned maintenance activities compared to 2021.

We expect gross ammonia production for 2023 will be approximately 9.5 million tons, which could be higher or lower depending on operating rates at our Billingham complex.

Cost of Sales

Our cost of sales includes manufacturing costs, purchased product costs, and distribution costs.

Our cost of sales includes manufacturing costs, purchased product costs, distribution costs and storage costs.

Manufacturing costs, the most significant element of cost of sales, consist primarily of raw materials, realized and unrealized gains and losses on natural gas derivatives, maintenance, direct labor, depreciation and other plant overhead expenses.

Purchased product costs primarily include the cost to purchase nitrogen fertilizers to augment or replace production at our facilities.

Distribution costs consist of the cost of freight required to transport finished products from our plants to our distribution facilities, which are recognized in cost of sales when the product is sold to our customers, and storage costs incurred prior to final shipment to customers.

Our cost of sales increased $828 million, or 25%, to $4.15 billion in 2021 as compared to $3.32 billion in 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 $663 million;

higher manufacturing, maintenance and other costs, which increased cost of sales by $494 million;

and higher costs for purchased products as we purchased $71 million of granular urea in 2021 to meet customer obligations.

Cost of sales also includes the impact of a $25 million unrealized net mark-to-market loss on natural gas derivatives in 2021 compared to a $6 million gain in 2020.

These items increasing our cost of sales 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 Prices” 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 2021.

In addition, there was a $312 million decline in cost of sales in 2021, as compared to 2020, due primarily to a 9% decline in sales volume.

Storage costs consist of costs incurred prior to final shipment to customers.

Our cost of sales increased $1.17 billion, or 28%, to $5.33 billion in 2022 as compared to $4.15 billion in 2021.

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 $1.05 billion, and higher costs for ammonia purchased from PLNL, our joint venture in Trinidad.

In addition, cost of sales in 2021 includes a gain of $112 million on the net settlement of certain natural gas contracts with our suppliers as a result of Winter Storm Uri.

Cost of sales averaged $290 per ton in 2022, a 29% increase from $224 per ton in 2021.

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Our selling, general and administrative expenses consist primarily of corporate office expenses such as salaries and other payroll-related costs for our executive, administrative, legal, financial, IT, and sales functions, as well as certain taxes and insurance and other professional service fees, including those for corporate initiatives.

CF INDUSTRIES HOLDINGS, INC.

Selling, general and administrative expenses increased $67 million, or 30%, to $290 million in 2022 from $223 million in 2021.

The increase was due primarily to higher incentive compensation, due to strong operating performance.

Long-lived and Intangible Asset Impairment and Goodwill Impairment

In 2021, we recognized total impairment charges of $521 million, consisting of long-lived and intangible asset impairment charges of $236 million and goodwill impairment charges of $285 million.

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

The increase was due primarily to higher costs associated with certain corporate initiatives, including costs related to the development of a new enterprise resource planning system (ERP) for our North American operations as well as costs related to our clean energy strategy.

In addition, the increase in selling, general and administrative expenses includes an increase in

CF INDUSTRIES HOLDINGS, INC.

charitable contributions for the initial funding of the CF Industries Foundation and higher stock-based compensation.

The CF Industries Foundation is a not-for-profit corporation that we formed in December 2022 to advance our philanthropic goals and develop programs that further our charitable objectives.

In 2022, we recognized total charges related to our U.K.

operations of $258 million, consisting of $239 million of asset impairment charges primarily related to property, plant and equipment at our Billingham and Ince facilities and definite-lived intangible assets and $19 million of restructuring charges primarily related to post-employment benefits related to contractual and statutory obligations and one-time termination benefits.

In 2021, we recognized total charges related to our U.K.

operations of $521 million, consisting of goodwill impairment of $285 million and long-lived and intangible asset impairment charges of $236 million.

See “Market Conditions and Current Developments—United Kingdom Operations,” above;

Note 5—United Kingdom Operations Restructuring 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 includes administrative costs that do not relate directly to our central operations.

Costs included in “other operating costs” can include foreign currency transaction gains and losses, unrealized gains and losses on foreign currency derivatives, litigation expenses and gains and losses on the disposal of fixed assets.

Other operating—net was $39 million of income in 2021 compared to $17 million of income in 2020.

The income in 2021 primarily includes a gain of $29 million on sales of carbon credits.

In addition, other operating—net includes the amount received under the terms of the agreement with the U.K.

government associated with the restart of our Billingham facility, partially offset by a loss on foreign currency transactions of $6 million, which includes the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested.

The income in 2020 primarily includes insurance proceeds of $37 million, partially offset by $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 a loss on foreign currency transactions of $5 million.

Costs included in “other operating costs” can include foreign currency transaction gains and losses, unrealized gains and losses on foreign currency derivatives, litigation expenses, gains and losses on the disposal of fixed assets and FEED study costs related to a greenfield ammonia production facility.

Other operating—net was $10 million of expense in 2022 compared to $39 million of income in 2021.

The expense in 2022 primarily includes a loss on foreign currency transactions of $28 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 loss on foreign currency transactions in 2022 was partially offset by an unrealized gain of $14 million related to an embedded derivative liability.

See “Items Affecting Comparability of Results—Unrealized gain on embedded derivative liability,” above, for further information.

The income in 2021 includes a gain of $29 million on sales of emission credits.

In addition, other operating—net in 2021 includes the amount received under the terms of an agreement with the U.K.

government associated with the restart of our Billingham facility, partially offset by a loss on foreign currency transactions of $6 million.

Equity in Earnings of Operating Affiliate

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

Our share of the net earnings includes the amortization of certain tangible assets identified as part of the application of purchase accounting at acquisition.

Our share of the net earnings includes the amortization of the increased basis of property, plant and equipment revalued as part of the application of purchase accounting at acquisition.

Equity in earnings of operating affiliate was $94 million in 2022 compared to $47 million in 2021.

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Interest Expense—Net

Our interest expense—net includes the interest expense on our long-term debt, amortization of the related fees required to execute financing agreements, annual fees pursuant to our revolving credit agreement and interest on tax liabilities.

Our interest expense—net represents the net of our interest expense and interest income.

Interest expense includes interest on our long-term debt, amortization of the related fees required to execute financing agreements, annual fees pursuant to our revolving credit agreement and interest on tax liabilities.

Capitalized interest relating to the construction of major capital projects reduces interest expense as the interest is capitalized and amortized over the estimated useful lives of the related assets.

Interest expense—net also includes interest income, which includes amounts earned on our cash, cash equivalents, and investments and any interest earned related to income tax refunds.

Interest income includes amounts earned on our cash, cash equivalents, and investments and any interest earned related to income tax refunds.

Net interest expense increased by $96 million to $279 million in 2022 from $183 million in 2021.

The increase was due primarily to $26 million of interest income in 2020 related to the finalization of the Terra amended tax returns, which is more fully described under “Items Affecting Comparability of Results—Terra Amended Tax Returns,” 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 in connection with the redemption on 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.

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 in connection with the redemption of the 2023 Notes was approximately $265 million, including accrued interest.

As a result, we recognized a loss on debt extinguishment of $13 million, consisting primarily of the premium paid on the redemption of the $250 million principal amount of the 2023 Notes prior to their scheduled maturity.

The increase was due primarily to $141 million of net interest expense recorded in 2022 related to income tax matters, which are described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

This increase was partially offset by $33 million of higher interest income on investments and a $20 million decrease in interest on borrowings due to the redemption of senior notes described under “Liquidity and Capital Resources,” below.

CF INDUSTRIES HOLDINGS, INC.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million and $19 million in 2022 and in 2021, respectively, is described under “Items Affecting Comparability of Results—Loss on Debt Extinguishment,” above.

Other Non-Operating—Net

Other non-operating—net was $16 million of income in 2021 compared to $1 million of income in 2020.

The $16 million of income in 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.

Other non-operating—net was $15 million of expense in 2022 compared to $16 million of income in 2021.

The $15 million of expense in 2022 was due primarily to a pension settlement loss of $21 million related to the purchase of a non-participating group annuity contract to settle retiree obligations under our primary U.S.

defined benefit pension plan and curtailment gains of $4 million related to the remeasurement of certain of our North American defined benefit pension plans due to plan amendments.

The pension settlement loss and curtailment gains are described under “Items Affecting Comparability of Results—Pension settlement loss and curtailment gains—net,” above.

The $16 million of income in 2021 was due primarily to a gain of $20 million on the sale of EU emission credits that, due to Brexit, could no longer be utilized by our U.K.

operations for carbon emission obligations in the United Kingdom.

Income Tax Provision

Our income tax provision for 2021 was $283 million on pre-tax income of $1,543 million, or an effective tax rate of 18.3%, compared to an income tax provision of $31 million on pre-tax income of $463 million, or an effective tax rate of 6.7%, in 2020.

For 2021, we did not record an income tax benefit related to the goodwill impairment charges described in Note 6—United Kingdom Energy Crisis and Impairment Charges as the goodwill impairment charges are non-deductible for income tax purposes.

Our income tax provision for 2022 was $1.16 billion on pre-tax income of $5.10 billion, or an effective tax rate of 22.7%, compared to an income tax provision of $283 million on pre-tax income of $1.54 billion, or an effective tax rate of 18.3%, in 2021.

For 2022, our income tax provision includes $22 million of income tax expense to record a valuation allowance in the United Kingdom, $23 million of income tax benefit for the excess tax benefit related to certain share-based compensation activity and $78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, which is described above under “Items Affecting Comparability of Results.”

For 2021, we did not record an income tax benefit related to the goodwill impairment charges described in Note 5—United Kingdom Operations Restructuring and Impairment Charges, as the goodwill impairment charges are non-deductible for income tax purposes.

Our income tax provision for 2021 includes a $26 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.

For 2020, our income tax provision includes a $27 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 “Items Affecting Comparability of Results—Terra Amended Tax Returns,” above.

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

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

Our effective tax rate for 2021 of 18.3%, which is based on pre-tax income of $1,543 million, would be 5.3 percentage points higher, or 23.6%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $343 million.

Our effective tax rate for 2020 of 6.7%, which is based on pre-tax income of $463 million, would be 2.2 percentage points higher, or 8.9%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $115 million.

Our effective tax rate for 2022 of 22.7%, which is based on pre-tax income of $5.10 billion, would be 3.0 percentage points higher, or 25.7%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $591 million.

Our effective tax rate for 2021 of 18.3%, which is based on pre-tax income of $1.54 billion, would be 5.3 percentage points higher, or 23.6%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $343 million.

Both 2022 and 2021 were impacted by additional discrete tax items.

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Net earnings per share attributable to common stockholders increased 286% to $16.38 per diluted share in 2022 from $4.24 per diluted share in 2021.

This increase is due primarily to higher operating results driven by an increase in gross margin, partially offset by impairment charges related to our U.K.

This increase is due primarily to higher average selling prices, partially offset by higher natural gas costs, and an increase in the income tax provision due primarily to increased profitability.

Additionally, net earnings per diluted share increased due to a 6% reduction in the diluted weighted-average common shares outstanding, which declined from 216.2 million shares for 2021 to 204.2 million shares for 2022, due primarily to repurchases of common shares under our share repurchase programs.

CF INDUSTRIES HOLDINGS, INC.

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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 table presents 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:

Year Ended December 31, 2020 Higher Average Selling Prices (1)

Higher Natural Gas Costs (2)

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 Year Ended December 31, 2021

(dollars in millions)

Net sales $ 4,124 $ 2,757 $ (404) $ — $ — $ — $ 61 $ — $ 6,538

Cost of sales 3,323 — (312) 663 31 494 64 (112) 4,151

Gross margin $ 801 $ 2,757 $ (92) $ (663) $ (31) $ (494) $ (3) $ 112 $ 2,387

Gross margin % 19.4 % 36.5 %

Net sales $ 1,020 $ 792 $ (25) $ — $ — $ — $ — $ — $ 1,787

Cost of sales 850 — (33) 194 9 254 — (112) 1,162

Gross margin $ 170 $ 792 $ 8 $ (194) $ (9) $ (254) $ — $ 112 $ 625

Gross margin % 16.7 % 35.0 %

The following table presents summary operating results by business segment:

Granular Urea (2)

Net sales $ 1,248 $ 814 $ (243) $ — $ — $ — $ 61 $ — $ 1,880

Cost of sales 847 — (155) 144 8 84 64 — 992

Gross margin $ 401 $ 814 $ (88) $ (144) $ (8) $ (84) $ (3) $ — $ 888

Gross margin % 32.1 % 47.2 %

(in millions)

Year ended December 31, 2022

Net sales $ 3,090 $ 2,892 $ 3,572 $ 845 $ 787 $ 11,186

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Gross margin $ 1,599 $ 1,564 $ 2,083 $ 248 $ 367 $ 5,861

Gross margin % 10.7 % 37.4 %

Gross margin percentage 51.7 % 54.1 % 58.3 % 29.3 % 46.6 % 52.4 %

Year ended December 31, 2021

Net sales $ 1,787 $ 1,880 $ 1,788 $ 510 $ 573 $ 6,538

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Gross margin $ 625 $ 888 $ 669 $ 35 $ 170 $ 2,387

Gross margin % 14.3 % 6.9 %

Gross margin percentage 35.0 % 47.2 % 37.4 % 6.9 % 29.7 % 36.5 %

Year ended December 31, 2020

Net sales $ 1,020 $ 1,248 $ 1,063 $ 455 $ 338 $ 4,124

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Gross margin $ 170 $ 401 $ 114 $ 65 $ 51 $ 801

Gross margin % 15.1 % 29.7 %

Gross margin percentage 16.7 % 32.1 % 10.7 % 14.3 % 15.1 % 19.4 %

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

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

(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.

CF INDUSTRIES HOLDINGS, INC.

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

See Note 15—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.

The following is a discussion and analysis of our operating results by business segment for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

CF INDUSTRIES HOLDINGS, INC.

Ammonia Segment

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

Ammonia contains 82% nitrogen and 18% hydrogen.

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

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

We produce ammonia at all of our nitrogen manufacturing complexes.

Our Ammonia segment produces anhydrous ammonia (ammonia), which is the base product that we manufacture, containing 82% nitrogen and 18% hydrogen.

The results of our Ammonia segment consist of sales of ammonia to external customers for its nitrogen content as a fertilizer, in emissions control and in other industrial applications.

In addition, we upgrade ammonia into other nitrogen products such as granular urea, UAN and AN.

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

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Depreciation and amortization $ 166 $ 209 $ 176 $ (43) (21) % $ 33 19 %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 7 $ (2) $ 4 $ 9 N/M $ (6) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 13 $ 7 $ (2) $ 6 86 % $ 9 N/M

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net sales in our ammonia segment increased by $767 million, or 75%, to $1.79 billion in 2021 from $1.02 billion in 2020 due primarily to an 84% increase in average selling prices, partially offset by a 5% decrease in sales volume.

Net sales in our Ammonia segment increased by $1.30 billion, or 73%, to $3.09 billion in 2022 from $1.79 billion in 2021 due primarily to an 88% increase in average selling prices, partially offset by an 8% decrease in sales volume.

Average selling prices increased to $936 per ton in 2022 compared to $498 per ton in 2021.

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 in 2021 due primarily to lower supply availability resulting from reduced inventory and production due to plant turnaround and maintenance activity and from weather-related outages, including the impact of Winter Storm Uri and Hurricane Ida.

The increase in average selling prices was due primarily to the impact of a tighter global nitrogen supply and demand balance, reflecting in part the geopolitical factors described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume was lower in 2022 due primarily to more typical fall ammonia applications in 2022 compared to a stronger prior year fall ammonia season.

Cost of Sales.

Cost of sales in our Ammonia segment averaged $451 per ton in 2022, a 39% increase from $324 per ton in 2021.

The increase is due primarily to higher realized natural gas costs, higher costs related to plant turnaround, maintenance and repair activity, and higher costs for ammonia purchased 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.

The increase is due primarily to higher realized natural gas costs, a higher cost per ton for purchased ammonia from our joint venture in Trinidad and the impact of the $112 million gain in 2021 on the net settlement of certain natural gas contracts as a result of Winter Storm Uri.

Gross Margin .

Gross margin in our ammonia segment increased by $455 million to $625 million in 2021 from $170 million in 2020, and our gross margin percentage was 35.0% in 2021 compared to 16.7% in 2020.

The increase in gross margin was due primarily to an 84% increase in average selling prices, which increased gross margin by $792 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 $254 million net increase in manufacturing, maintenance and other costs, an increase in realized natural gas costs, which decreased gross margin by $194 million, and a 5% decrease in sales volume, which decreased gross margin by $8 million.

Gross margin also includes the impact of a $7 million unrealized net mark-to-market loss on natural gas derivatives in 2021 compared to a $2 million gain in 2020.

Gross margin in our Ammonia segment increased by $974 million to $1.60 billion in 2022 from $625 million in 2021, and our gross margin percentage was 51.7% in 2022 compared to 35.0% in 2021.

The increase in gross margin was due to an 88% increase in average selling prices, which increased gross margin by $1.51 billion.

The increase in average selling prices was partially offset by an increase in realized natural gas costs, which decreased gross margin by $307 million, an 8% decrease in sales volume, which decreased gross margin by $76 million, and a net increase in manufacturing, maintenance and other costs, which decreased gross margin by $34 million.

In addition, the impact of the $112 million gain on the net settlement of certain natural gas contracts is included in gross margin in 2021.

Gross margin also includes the impact of a $13 million unrealized net mark-to-market loss on natural gas derivatives in 2022 compared to a $7 million loss in 2021.

CF INDUSTRIES HOLDINGS, INC.

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Produced from ammonia and carbon dioxide, it has the highest nitrogen content of any of our solid nitrogen fertilizers.

Granular urea is produced at our Donaldsonville, Louisiana;

Medicine Hat, Alberta;

and Port Neal, Iowa nitrogen complexes.

Granular urea is produced at our Donaldsonville, Port Neal and Medicine Hat nitrogen complexes.

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

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Depreciation and amortization $ 272 $ 235 $ 270 $ 37 16 % $ (35) (13) %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 6 $ (2) $ 4 $ 8 N/M $ (6) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 13 $ 6 $ (2) $ 7 117 % $ 8 N/M

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net sales in our granular urea segment increased $632 million, or 51%, to $1.88 billion in 2021 compared to $1.25 billion in 2020 due primarily to an 81% increase in average selling prices, partially offset by a 17% decrease in sales volume.

Net sales in our Granular Urea segment increased $1.01 billion, or 54%, to $2.89 billion in 2022 compared to $1.88 billion in 2021 due primarily to a 45% increase in average selling prices and a 7% increase in sales volume.

Average selling prices increased to $633 per ton in 2022 compared to $438 per ton in 2021.

The increase was 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 weather-related outages.

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

The increase in average selling prices was due primarily to the impact of a tighter global nitrogen supply and demand balance, reflecting in part the geopolitical factors described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume was higher due primarily to higher supply availability resulting from higher production.

Cost of Sales.

Cost of sales in our granular urea segment averaged $231 per ton in 2021, a 41% increase from $164 per ton in 2020, due primarily to higher realized natural gas costs and higher costs related to plant turnaround, maintenance and repair activity due primarily to weather-related outages.

In addition, we purchased $71 million of granular urea in 2021 to meet customer obligations.

Cost of sales in our Granular Urea segment averaged $291 per ton in 2022, a 26% increase from $231 per ton in 2021, due primarily to higher realized natural gas costs.

Gross Margin .

Gross margin in our granular urea segment increased by $487 million to $888 million in 2021 from $401 million in 2020, and our gross margin percentage was 47.2% in 2021 compared to 32.1% in 2020.

The increase in gross margin was driven by an 81% increase in average selling prices, which increased gross margin by approximately $814 million.

The impact of higher average selling prices was partially offset by higher realized natural gas costs, which decreased gross margin by $144 million, a 17% decrease in sales volume, which decreased gross margin by $88 million, and an $84 million net increase in manufacturing, maintenance and other costs.

In addition, we experienced lower production throughout 2021.

As a result, in 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 2.0 percentage points.

Gross margin includes the impact of a $6 million unrealized net mark-to-market loss on natural gas derivatives in 2021 compared to a $2 million gain in 2020.

Gross margin in our Granular Urea segment increased by $676 million to $1.56 billion in 2022 from $888 million in 2021, and our gross margin percentage was 54.1% in 2022 compared to 47.2% in 2021.

The increase in gross margin was driven by a 45% increase in average selling prices, which increased gross margin by approximately $857 million and a 7% increase in sales volume, which increased gross margin by $113 million.

These factors that increased gross margin were partially offset by higher realized natural gas costs, which decreased gross margin by $250 million, and a net increase in manufacturing, maintenance and other costs, which reduced gross margin by $37 million.

Gross margin also includes the impact of a $13 million unrealized net mark-to-market loss on natural gas derivatives in 2022 compared to a $6 million loss in 2021.

CF INDUSTRIES HOLDINGS, INC.

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UAN, a liquid fertilizer product with a nitrogen content that typically ranges from 28% to 32%, is produced by combining urea and ammonium nitrate.

UAN is produced at our nitrogen complexes in Courtright, Ontario;

Donaldsonville, Louisiana;

Port Neal, Iowa;

Verdigris, Oklahoma;

Woodward, Oklahoma;

and Yazoo City, Mississippi.

UAN is produced at our Courtright, Donaldsonville, Port Neal, Verdigris, Woodward, and Yazoo City nitrogen complexes.

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

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Cost of sales 1,489 1,119 949 370 33 % 170 18 %

Gross margin $ 669 $ 114 $ 289 $ 555 N/M $ (175) (61) %

Gross margin $ 2,083 $ 669 $ 114 $ 1,414 211 % $ 555 487 %

Gross margin percentage 58.3 % 37.4 % 10.7 % 20.9 % 26.7 %

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$ 1,663 $ 862 $ 493 $ 801 93 % $ 369 75 %

Gross margin per product ton $ 102 $ 17 $ 42 $ 85 N/M $ (25) (60) %

Gross margin per product ton $ 307 $ 102 $ 17 $ 205 201 % $ 85 500 %

Gross margin per nutrient ton (1)

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Depreciation and amortization $ 269 $ 259 $ 256 $ 10 4 % $ 3 1 %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 5 $ (2) $ 4 $ 7 N/M $ (6) N/M

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 14 $ 5 $ (2) $ 9 180 % $ 7 N/M

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net sales in our UAN segment increased $725 million, or 68%, to $1.79 billion in 2021 compared to $1.06 billion in 2020 due primarily to a 75% increase in average selling prices, partially offset by a 4% decrease in sales volume.

Average selling prices increased to $272 per ton in 2021 compared to $155 per ton in 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 availability from reduced production during the first nine months of 2021 due to plant turnaround and maintenance activity and the impact of weather-related outages.

Net sales in our UAN segment increased $1.78 billion, or 100%, to $3.57 billion in 2022 compared to $1.79 billion in 2021 due primarily to a 93% increase in average selling prices and a 3% increase in sales volume.

Average selling prices increased to $526 per ton in 2022 compared to $272 per ton in 2021 due primarily to the impact of a tighter global nitrogen supply and demand balance, reflecting in part the geopolitical factors described above under “Market Conditions and Current Developments—Geopolitical Environment.” The increase in sales volume was due primarily to greater supply availability from higher beginning inventory.

Cost of Sales.

Cost of sales in our UAN segment averaged $170 per ton in 2021, a 23% increase from $138 per ton in 2020, 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 $219 per ton in 2022, a 29% increase from $170 per ton in 2021, due primarily to the impact of higher realized natural gas costs and higher export freight costs.

Gross Margin.

Gross margin in our UAN segment increased by $555 million to $669 million in 2021 from $114 million in 2020, and our gross margin percentage was 37.4% in 2021 compared to 10.7% in 2020.

The increase in gross margin was due to a 75% increase in average selling prices, which increased gross margin by $756 million.

The impact of higher average selling prices was partially offset by higher realized natural gas costs, which decreased gross margin by $168 million, a $22 million net increase in manufacturing, maintenance and other costs, and a 4% decrease in sales volume, which decreased gross margin by $4 million.

Gross margin includes the impact of a $5 million unrealized net mark-to-market loss on natural gas derivatives in 2021 compared to a $2 million gain in 2020.

Gross margin in our UAN segment increased by $1.41 billion to $2.08 billion in 2022 from $669 million in 2021, and our gross margin percentage was 58.3% in 2022 compared to 37.4% in 2021.

The increase in gross margin was due to a 93% increase in average selling prices, which increased gross margin by $1.77 billion.

The impact of higher average selling prices was partially offset by higher realized natural gas costs, which decreased gross margin by $245 million, a net increase in manufacturing, maintenance and other costs, including freight, which reduced gross margin by $95 million, and a change in location product mix, which reduced gross margin by $9 million.

Gross margin includes the impact of a $14 million unrealized net mark-to-market loss on natural gas derivatives in 2022 compared to a $5 million loss in 2021.

CF INDUSTRIES HOLDINGS, INC.

Antidumping and Countervailing Duty Investigations

On June 30, 2021, we filed petitions with the U.S.

Department of Commerce (Commerce) and the U.S.

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

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.

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.

We expect that Commerce will issue final determinations later in 2022 and, 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 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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AN is used as nitrogen fertilizer and is also used by industrial customers for commercial explosives and blasting systems.

AN is produced at our nitrogen complexes in Yazoo City, Mississippi and Ince and Billingham, United Kingdom.

AN is produced at our Yazoo City and Billingham nitrogen complexes.

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

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Cost of sales 597 475 390 122 26 % 85 22 %

Gross margin $ 35 $ 65 $ 107 $ (30) (46) % $ (42) (39) %

Gross margin $ 248 $ 35 $ 65 $ 213 N/M $ (30) (46) %

Gross margin percentage 29.3 % 6.9 % 14.3 % 22.4 % (7.4) %

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$ 1,550 $ 876 $ 609 $ 674 77 % $ 267 44 %

Gross margin per product ton $ 20 $ 29 $ 51 $ (9) (31) % $ (22) (43) %

Gross margin per product ton $ 156 $ 20 $ 29 $ 136 N/M $ (9) (31) %

Gross margin per nutrient ton (1)

$ 60 $ 87 $ 151 $ (27) (31) % $ (64) (42) %

$ 455 $ 60 $ 87 $ 395 N/M $ (27) (31) %

Depreciation and amortization $ 61 $ 77 $ 100 $ (16) (21) % $ (23) (23) %

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

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

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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.

CF INDUSTRIES HOLDINGS, INC.

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

operations, including the planned permanent closure of our Ince facility.

In August 2022, the final restructuring plan was approved, and decommissioning activities were initiated.

In September 2022, as a result of extremely high and volatile natural gas prices and the lack of a corresponding increase in global nitrogen product market prices, we temporarily idled ammonia production at our Billingham complex.

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location.

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

Net sales in our AN segment increased $335 million, or 66%, to $845 million in 2022 from $510 million in 2021 due primarily to a 78% increase in average selling prices, partially offset by a 7% decrease in sales volume.

Average selling prices increased to $297 per ton in 2021 compared to $205 per ton in 2020 due primarily to the impact of a tighter global nitrogen supply and demand balance.

Sales volume decreased due primarily to lower supply availability as a result of reduced production due to plant turnaround and maintenance activity and idled operations at our Ince facility.

Average selling prices increased to $530 per ton in 2022 compared to $297 per ton in 2021 due primarily to the impact of a tighter global nitrogen supply and demand balance, reflecting in part the geopolitical factors described above under “Market Conditions and Current Developments—Geopolitical Environment.” Sales volume decreased due primarily to lower supply availability as a result of our Ince facility closure.

Cost of Sales.

Cost of sales in our AN segment averaged $277 per ton in 2021, a 57% increase from $176 per ton in 2020, due primarily to higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity, including the impact of the idled Ince facility.

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

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

Cost of sales in our AN segment averaged $374 per ton in 2022, a 35% increase from $277 per ton in 2021, due primarily to higher realized natural gas costs.

Gross Margin .

Gross margin in our AN segment decreased by $30 million to $35 million in 2021 from $65 million in 2020, and our gross margin percentage was 6.9% in 2021 compared to 14.3% in 2020.

The decrease in gross margin was due to an increase in realized natural gas costs, which decreased gross margin by $97 million, a net increase of $67 million in manufacturing, maintenance and other costs, and a 22% decrease in sales volume, which decreased gross margin by $21 million.

These factors were partially offset by a 45% increase in average selling prices, which increased gross margin by $159 million.

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

Gross margin in our AN segment increased by $213 million to $248 million in 2022 from $35 million in 2021, and our gross margin percentage was 29.3% in 2022 compared to 6.9% in 2021.

The increase in gross margin was due primarily to a 78% increase in average selling prices, which increased gross margin by $382 million, and favorable location product mix, which increased gross margin by $28 million.

These factors that increased gross margin were partially offset by an increase in realized natural gas costs, which decreased gross margin by $175 million and a net increase in manufacturing, maintenance and other costs, which reduced gross margin by $28 million.

Gross margin also includes the impact of a $2 million

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unrealized net mark-to-market gain on natural gas derivatives in 2022 compared to a $4 million loss on natural gas derivatives in 2021.

Other Segment

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

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

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

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

CF INDUSTRIES HOLDINGS, INC.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Net sales in our Other segment increased $235 million, or 70%, to $573 million in 2021 from $338 million in 2020 due to a 69% increase in average selling prices.

Average selling prices increased to $247 per ton in 2021 compared to $146 per ton in 2020, due primarily to the impact of a tighter global nitrogen supply and demand balance.

Sales volume was essentially unchanged as higher DEF sales volumes were partially offset by lower NPK sales volumes, as a result of idled operations at our Ince facility, and lower urea liquor sales volumes.

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

operations, including the planned permanent closure of our Ince facility.

In August 2022, the final restructuring plan was approved, and decommissioning activities were initiated.

We produced compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium, only at our Ince facility, and closure of this facility has resulted in our discontinuation of the NPK product line.

Total sales of NPK products were $15 million in the year ended December 31, 2022 and $47 million in the year ended December 31, 2021.

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

Net sales in our Other segment increased $214 million, or 37%, to $787 million in 2022 from $573 million in 2021 due to a 53% increase in average selling prices, partially offset by a 10% decrease in sales volume.

Average selling prices increased to $379 per ton in 2022 compared to $247 per ton in 2021, due primarily to the impact of a tighter global nitrogen supply and demand balance, reflecting in part the geopolitical factors described above under “Market Conditions and Current Developments—Geopolitical Environment.” The decrease in sales volume was due primarily to lower NPK and nitric acid sales volumes, as operations at our Ince manufacturing plant have ceased.

Cost of Sales.

Cost of sales in our Other segment averaged $174 per ton in 2021, a 40% increase from $124 per ton in 2020, due primarily to higher realized natural gas costs and higher costs related to plant turnaround and maintenance activity, including the impact of the idled Ince facility.

Cost of sales in our Other segment averaged $202 per ton in 2022, a 16% increase from $174 per ton in 2021, due primarily to higher realized natural gas costs.

Gross Margin .

Gross margin in our Other segment increased by $197 million to $367 million in 2022 from $170 million in 2021, and our gross margin percentage was 46.6% in 2022 compared to 29.7% in 2021.

The increase in gross margin was due to a 69% increase in average selling prices, which increased gross margin by $236 million, and an increase of $13 million due to product mix.

These factors were partially offset by a $67 million net increase in manufacturing, maintenance and other costs and an increase in realized natural gas costs, which reduced gross margin by $60 million.

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

The increase in gross margin was due primarily to a 53% increase in average selling prices, which increased gross margin by $282 million, and a net

CF INDUSTRIES HOLDINGS, INC.

decrease in manufacturing, maintenance and other costs, which increased gross margin by $3 million.

These factors that increased gross margin were partially offset by an increase in realized natural gas costs, which reduced gross margin by $75 million, and a 10% decrease in sales volume, which reduced gross margin by $13 million.

Liquidity and Capital Resources

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

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

In 2021, we repurchased approximately 8.6 million shares of CF Holdings common stock under the 2019 share repurchase program for $540 million.

See the discussion under “Share Repurchase Programs,” below, for further information.

Our cash and cash equivalents balance was $1.63 billion at December 31, 2021, an increase of $945 million from $683 million at December 31, 2020.

Our cash and cash equivalents balance was $2.32 billion at December 31, 2022, an increase of $695 million from $1.63 billion at December 31, 2021.

At December 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.

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.

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 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.

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.

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

In the second, third and fourth quarters of 2022, quarterly dividends of $0.40 per common share were declared and paid, representing a 33% increase from the quarterly dividend of $0.30 per common share that was declared and paid in the first quarter of 2022.

Cash Equivalents

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Share Repurchase Programs

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

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.

On November 3, 2021, our Board of Directors (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).

On November 2, 2022, the Board authorized the repurchase of up to $3 billion of CF Holdings common stock commencing upon completion of the 2021 Share Repurchase Program and effective through December 31, 2025 (the 2022 Share Repurchase Program).

Repurchases under our share repurchase programs 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.

CF INDUSTRIES HOLDINGS, INC.

The following table summarizes the shares repurchased under the 2019 Share Repurchase Program.

Shares Amounts

(in millions)

Shares repurchased in 2019 7.6 $ 337

Shares repurchased in 2020 2.6 100

Shares repurchased in 2021 8.6 540

Total shares repurchased under the 2019 Share Repurchase Program 18.8 $ 977

Shares repurchased, including those repurchased under share repurchase programs, are retired as approved by the Board.

As of December 31, 2021, we held 27,962 shares of treasury stock.

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).

As of December 31, 2022, we repurchased 14.9 million shares under the 2021 Share Repurchase Program for $1.35 billion.

We held no shares of treasury stock as of December 31, 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was enacted into law.

The IRA made several changes to the U.S.

tax code effective after December 31, 2022, including, but not limited to, an excise tax of 1% tax on the fair market value of net stock repurchases made after December 31, 2022, which will be accounted for in treasury stock.

The impact of this provision will be dependent on the extent of share repurchases made in future periods.

Capital Spending

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

Capital expenditures totaled $514 million in 2021 compared to $309 million in 2020.

The increase in capital expenditures 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 in 2022 are estimated to be in the range of $500 to $550 million, which includes capital expenditures at our Donaldsonville complex related to green and blue ammonia projects.

We make capital expenditures to sustain our asset base, increase our capacity or capabilities, improve plant efficiency, comply with various environmental, health and safety requirements, and invest in our clean energy strategy.

Capital expenditures totaled $453 million in 2022 compared to $514 million in 2021 reflecting lower turnaround activity in 2022.

CF INDUSTRIES HOLDINGS, INC.

Capital expenditures in 2023 are estimated to be in the range of $500 to $550 million, which includes capital expenditures 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.

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The impact of changes in governmental policies or laws or the political or social objectives of a country could have a material impact on fertilizer demand and selling prices and therefore could impact our liquidity.

Emission Credit Activity

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 are also 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 emission credits were no longer applicable for us in the United Kingdom, and we need U.K.

emission credits to offset any 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 emission credits for approximately $20 million and recognized a corresponding gain, 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.

emission credits for approximately $19 million.

During the fourth quarter of 2021, as we have estimated that we have sufficient emission credits for our 2021 obligations, we sold the excess U.K.

emission credits, including those purchased in the third quarter of 2021, for approximately $46 million, and recognized a corresponding gain of $27 million.

Canada Revenue Agency Competent Authority Matter and Transfer Pricing

In connection with the Canada Revenue Agency Competent Authority Matter, which is described above under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter,” in the second half of 2022, we were assessed, and we paid additional tax and interest for tax years 2006 through 2011 of $224 million.

As a result, letters of credit we had posted were cancelled.

Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, we will file amended tax returns with U.S.

federal and state tax authorities for the relevant tax years.

As described above under “Items Affecting Comparability of Results—Transfer pricing positions,” we have unrecognized tax benefits recorded in connection with certain tax years subsequent to 2011 that have been reassessed for transfer pricing matters by the Canadian tax authorities.

In order to mitigate the assessment of future Canadian interest on these Canadian transfer pricing positions, in the fourth quarter of 2022, we made payments to the Canadian taxing authorities of CAD $363 million (approximately $267 million) related to these reassessed tax years while we continue to dispute the reassessments and for certain years that are open for examination.

The payments were recorded as noncurrent income tax receivables.

For the amounts ultimately owed and paid to the Canadian tax authorities upon resolution of these tax years, the Company would seek refunds of related taxes paid in the United States.

United Kingdom Operations

As discussed under “Market Conditions and Current Developments—United Kingdom Operations,” 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.

Shortly thereafter, our Billingham facility resumed operations.

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

operations, including the planned permanent closure of our Ince facility and optimization of the remaining manufacturing operations at our Billingham facility.

As a result, we recognized $152 million of asset impairment charges, primarily related to property, plant and equipment at the Ince facility, and a $10 million charge for post-employment benefits related to contractual and statutory obligations, which are included in the U.K.

operations restructuring line item in our consolidated statements of operations.

In August 2022, the final restructuring plan was approved, and decommissioning activities were initiated.

As a result, in the third and fourth quarters of 2022, we incurred additional charges related to our U.K.

restructuring of $9 million, primarily related to one-time termination benefits.

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

Russian natural gas flows to Europe via the Nord Stream 1 pipeline ceased, causing the United Kingdom to experience unprecedented natural gas prices.

In addition, the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries, further contributing to the uncertainty in European energy markets.

Given these factors and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we temporarily idled ammonia production at our Billingham complex.

As a result, we concluded that an additional impairment test was triggered for the asset

CF INDUSTRIES HOLDINGS, INC.

Canada Revenue Agency Competent Authority Matter

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, 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 entered 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 board regarding the transfer pricing matter with the CRA for tax years 2006 through 2011, as discussed in Note 11—Income Taxes.

We are awaiting further details of the results of the arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities.

We need to decide whether to accept the decision of the arbitration board or pursue other resolution alternatives, which is expected to occur in the first quarter of 2022.

If we were to accept the decision of the arbitration board, the associated letters of credit would be cancelled and we would owe additional tax and interest to Canada, 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 United States to request a refund of tax overpaid.

The receipt of tax overpaid and any related interest would occur in a period later than the settlement of tax and interest owed.

While we are not currently able to estimate the amounts due to, or to be received from, the taxing jurisdictions, each of the individual amounts that would ultimately be paid or received could be material.

Terra Amended Tax Returns

In 2020, we received U.S.

federal income tax refunds, including interest, of $110 million relating to amended tax returns that we had filed in 2012 related to prior tax years.

See discussion under “Items Affecting Comparability of Results—Terra Amended Tax Returns,” above, for further information.

In 2017, we made a Voluntary Disclosures Program filing with the CRA with respect to the Canadian tax aspects of the amended U.S.

tax 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.

groups that comprise the continuing U.K.

operations, which resulted in asset impairment charges of $87 million, primarily related to property, plant and equipment and definite-lived intangible assets.

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 of AN and other nitrogen products continues at our Billingham facility using imported ammonia, a portion of which is imported from our other ammonia production sites.

Persistence of the current levels of energy costs in the United Kingdom could lead to the continued idling of ammonia production at our Billingham facility.

There remains uncertainty regarding the future cost of natural gas and electricity, selling prices for the products we produce in the United Kingdom and U.K.

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

operations and recognition of further losses and could have a material adverse impact on our results of operations and cash flows.

Repatriation of Foreign Earnings and Income Taxes

We have operations in Canada, the United Kingdom and a 50% interest in a joint venture in the Republic of Trinidad and Tobago.

We have operations in Canada, the United Kingdom and a 50% interest in a joint venture in Trinidad.

Historically, the estimated additional U.S.

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As of December 31, 2022, approximately $96 million of our consolidated cash and cash equivalents balance of $2.32 billion was held by our Canadian and United Kingdom subsidiaries.

Historically, and for the current year, the cash balance held by the Canadian subsidiaries represented accumulated earnings of our foreign operations that were not considered to be permanently reinvested.

As of December 31, 2021, we would not expect any additional cash tax cost to repatriate the Canadian and United Kingdom cash balances if we were to repatriate this cash in the future, other than foreign withholding tax.

CF INDUSTRIES HOLDINGS, INC.

As of December 31, 2022, we recorded a deferred tax liability of $12 million on the undistributed earnings of our Canadian affiliates for which the Company does not have an indefinite reinvestment assertion.

We have not provided for deferred taxes on the remainder of undistributed earnings from our foreign affiliates because such earnings would not give rise to additional tax liabilities upon repatriation or are considered to be indefinitely reinvested.

Revolving Credit Agreement

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(i) require that the interest coverage ratio (as defined in the Revolving Credit Agreement) be not less than 2.75:1.00 as of the last day of each fiscal quarter and

CF INDUSTRIES HOLDINGS, INC.

(ii) require that the total net leverage ratio (as defined in the Revolving Credit Agreement) be not greater than 3.75:1.00 (the Maximum Total Net Leverage Ratio) as of the last day of each fiscal quarter, provided that, if any borrower or subsidiary consummates a material acquisition during any fiscal quarter, CF Industries may elect to increase the Maximum Total Net Leverage Ratio to 4.25:1.00 for the period of four consecutive fiscal quarters commencing with such fiscal quarter (and no further such election may be made unless and until the Maximum Total Net Leverage Ratio is less than or equal to 3.75:1.00 as of the end of two consecutive fiscal quarters after the end of such period).

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In addition, there were no borrowings outstanding under the Revolving Credit Agreement as of December 31, 2022 or 2021, or during the year ended December 31, 2022.

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.

Maximum borrowings under the Revolving Credit Agreement during 2020 were $500 million.

The weighted-average annual interest rate of borrowings under the Revolving Credit Agreement during 2020 was 2.05%.

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 letters of credit up to $250 million.

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have capacity to issue up to $350 million of letters of credit, reflecting an increase of $100 million in May 2022, under a bilateral agreement.

As of December 31, 2022, approximately $201 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 December 31, 2022 and 2021 consisted of the following debt securities issued by CF Industries:

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4.500% due December 2026 (2)

4.783% 750 742 750 742

Total long-term debt $ 3,000 $ 2,965 $ 3,500 $ 3,465

Current maturities of long-term debt — — 250 249

Long-term debt, net of current maturities $ 3,500 $ 3,465 $ 3,750 $ 3,712

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Public Senior Notes

The total aggregate redemption price paid in connection with the April 2022 redemption of the 2023 Notes, which was funded with cash on hand, was $513 million, including accrued interest.

CF INDUSTRIES HOLDINGS, INC.

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 in connection with 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, consisting primarily of a premium paid on the redemption of the $250 million principal amount of the 2023 Notes prior to their scheduled maturity.

Under the indentures (including the applicable supplemental indentures) governing our senior notes due 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 aggregate redemption price paid in connection with the redemption 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, consisting primarily of the premium paid on the redemption of the $250 million principal amount of the 2023 Notes prior to their scheduled maturity.

The indentures governing the Public Senior Notes contain covenants that limit, among other things, the ability of CF Holdings and its subsidiaries, including CF Industries, to incur liens on certain assets to secure debt, to engage in sale and leaseback transactions, to merge or consolidate with other entities and to sell, lease or transfer all or substantially all of the assets of CF Holdings and its subsidiaries to another entity.

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Under each indenture governing the Public Senior Notes, in the case of an event of default arising from one of the specified events of bankruptcy or insolvency, the applicable Public Senior Notes would become due and payable immediately, and, in the case of any other event of default (other than an event of default related to CF Industries’ and CF Holdings’ reporting obligations), the trustee or the holders of at least 25% in aggregate principal amount of the applicable Public Senior Notes then outstanding may declare all of such Public Senior Notes to be due and payable immediately.

Under each of the indentures governing the Public Senior Notes, specified changes of control involving CF Holdings or CF Industries, when accompanied by a ratings downgrade, as defined with respect to the applicable series of Public Senior

CF INDUSTRIES HOLDINGS, INC.

Notes, constitute change of control repurchase events.

Upon the occurrence of a change of control repurchase event with respect to a series of Public Senior Notes, unless CF Industries has exercised its option to redeem such Public Senior Notes, CF Industries will be required to offer to repurchase them at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

Senior Secured 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 in the first quarter of 2021, consisting primarily of the premium paid on the redemption of the 2021 Notes prior to their scheduled maturity.

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 on the 2021 Notes in connection with the redemption, which was funded with cash on hand, was $258 million, including accrued interest.

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.

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

The requirement for subsidiary guarantees of the 2026 Notes was eliminated, and all subsidiary guarantees were automatically released, as a result of an investment grade rating event under the terms of the indenture governing the 2026 Notes, on August 23, 2021.

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Under the indenture governing the 2026 Notes, specified changes of control involving CF Holdings or CF Industries, when accompanied by a ratings downgrade, as defined with respect to the 2026 Notes, constitute change of control repurchase events.

Upon the occurrence of a change of control repurchase event with respect to the 2026 Notes, unless CF Industries has exercised its option to redeem such notes, CF Industries will be required to offer to repurchase them at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The indentures governing the 2026 Notes contain covenants that limit, among other things, the ability of CF Holdings and its subsidiaries, including CF Industries, to incur liens on certain assets to secure debt, to engage in sale and leaseback transactions, to merge or consolidate with other entities and to sell, lease or transfer all or substantially all of the assets of CF Holdings and its subsidiaries to another entity.

Upon the occurrence of a change of control repurchase event with respect to the 2026 Notes, unless CF Industries has

CF INDUSTRIES HOLDINGS, INC.

exercised its option to redeem such notes, CF Industries will be required to offer to repurchase them at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The indenture governing the 2026 Notes contains covenants that limit, among other things, the ability of CF Holdings and its subsidiaries, including CF Industries, to incur liens on certain assets to secure debt, to engage in sale and leaseback transactions, to merge or consolidate with other entities and to sell, lease or transfer all or substantially all of the assets of CF Holdings and its subsidiaries to another entity.

The indenture governing the 2026 Notes provides for customary events of default, which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest of the 2026 Notes;

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We offer our customers the opportunity to purchase products from us on a forward basis at prices and on delivery dates we propose.

Therefore, our reported nitrogen fertilizer selling prices and margins may differ from market spot prices and margins available at the time of shipment.

Therefore, our reported nitrogen selling prices and margins may differ from market spot prices and margins available at the time of shipment.

Customer advances, which typically represent a portion of the contract’s value, are received shortly after the contract is executed, with any remaining unpaid amount generally being collected by the time control transfers to the customer, thereby reducing or eliminating the accounts receivable related to such sales.

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As of December 31, 2022 and 2021, we had $229 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 and our customers’ outlook of future market fundamentals.

During periods of declining prices, customers tend to delay purchasing fertilizer in anticipation that prices in the future will be lower than the

CF INDUSTRIES HOLDINGS, INC.

current prices.

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.

During periods of declining prices, customers tend to delay purchasing fertilizer in anticipation that prices in the future will be lower than the current prices.

If the level of sales under our forward sales programs were to decrease in the future, our cash received from customer advances would likely decrease and our accounts receivable balances would likely increase.

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As a result of these factors, natural gas prices have a significant impact on our operating expenses and can thus affect our liquidity.

Natural gas costs in our cost of sales, including the impact of realized natural gas derivatives, increased 71% to $7.18 per MMBtu in 2022 from $4.21 per MMBtu in 2021.

We enter into agreements for a portion of our future natural gas supply and related transportation.

As of December 31, 2021, our natural gas purchase agreements have terms that range from one to two years and a total minimum commitment of approximately $780 million, and our natural gas transportation agreements have terms that range from one to ten years and a total minimum commitment of approximately $165 million.

As of December 31, 2022, our natural gas purchase agreements have terms that range from one to three years and a total minimum commitment of approximately $1.68 billion, and our natural gas transportation agreements have terms that range from one to ten years and a total minimum commitment of approximately $126 million.

Our minimum commitments to purchase and transport natural gas are based on prevailing market-based forward prices excluding reductions for plant maintenance and turnaround activities.

Because most of our nitrogen manufacturing facilities are located in the United States and Canada, the price of natural gas in North America directly impacts a substantial portion of our operating expenses.

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

During 2021, the daily closing price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, reached a low of $2.36 per MMBtu on April 7, 2021 and a high of $23.61 per MMBtu on February 18, 2021.

CF INDUSTRIES HOLDINGS, INC.

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 directly impacts a substantial portion of our operating expenses.

During 2022, the daily closing price at the Henry Hub, the most heavily-traded natural gas pricing point in North America, reached a low of $3.45 per MMBtu on November 10, 2022 and a high of $9.85 per MMBtu on August 23, 2022.

We also have manufacturing facilities located in the United Kingdom.

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

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

During 2021, the daily closing price at NBP reached a low of $5.58 per MMBtu on February 23, 2021 and a high of $60.10 per MMBtu on December 22, 2021.

During the three-year period ended December 31, 2021, the daily closing price at NBP reached a low of $1.04 per MMBtu on May 22, 2020, and a high of $60.10 per MMBtu on December 22, 2021.

Natural gas costs in our cost of sales, including the impact of realized natural gas derivatives, increased 88% to $4.21 per MMBtu in 2021 from $2.24 per MMBtu in 2020.

Our Billingham U.K.

nitrogen manufacturing facility is subject to fluctuations associated with the price of natural gas in Europe.

The major natural gas trading point for the United Kingdom is the NBP.

During 2022, the daily closing price at the NBP reached a low of $1.23 per MMBtu on June 10, 2022 and a high of $67.08 per MMBtu on March 8, 2022.

During the three-year period ended December 31, 2022, the daily closing price at the NBP reached a low of $1.04 per MMBtu on May 22, 2020, and a high of $67.08 per MMBtu on March 8, 2022.

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location;

therefore, our natural gas purchases in the United Kingdom have been insignificant.

Derivative Financial Instruments

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

In 2021 and 2020, we recognized an unrealized net mark-to-market loss (gain) on natural gas derivatives of $25 million and $(6) million, respectively, which is reflected in cost of sales in our consolidated statements of operations.

In 2022 and 2021, we recognized an unrealized net mark-to-market loss on natural gas derivatives of $41 million and $25 million, respectively, which is reflected in cost of sales in our consolidated statements of operations.

Derivatives expose us to counterparties and the risks associated with their ability to meet the terms of the contracts.

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The ISDA agreements for most of our derivative instruments contain credit-risk-related contingent features, such as cross default provisions.

In the event of certain defaults or termination events, our counterparties may request early termination and

CF INDUSTRIES HOLDINGS, INC.

net settlement of certain derivative trades or may require us to collateralize derivatives in a net liability position.

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

As of December 31, 2022 and 2021, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $73 million 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 December 31, 2022, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 66.3 million MMBtus.

As of December 31, 2020, we had open natural gas derivative contracts consisting of natural gas fixed price swaps and basis swaps for 34.1 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.

At both December 31, 2022 and 2021, we had no cash collateral on deposit with counterparties for derivative contracts.

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.

Embedded Derivative Liability

Since 2016, our credit ratings have been below certain levels and, as a result, we made an annual payment of $5 million to CHS in the fourth quarter of each year.

These payments will continue on a yearly basis until the earlier of the date that our credit rating is upgraded to or above certain levels by two of three specified credit rating agencies or February 1, 2026.

This obligation is recognized on our consolidated balance sheets as an embedded derivative.

As of December 31, 2021 and 2020, the embedded derivative liability was $15 million and $18 million, respectively.

See Note 10—Fair Value Measurements for additional information.

Defined Benefit Pension Plans

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In 2023, we expect to contribute approximately $42 million to our pension plans.

In addition, we expect to contribute a total of approximately $68 million to our U.K.

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

In addition, we expect to contribute a total of approximately £30 million (or $36 million) to our U.K.

plans in the two-year period from 2024 to 2025, as agreed with the plans’ trustees.

CF INDUSTRIES HOLDINGS, INC.

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.

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

Under the transaction, the insurance company assumed 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 remeasured the plan's projected benefit obligation and plan assets and recognized a non-cash pre-tax pension settlement loss of $24 million, reflecting the unamortized net unrecognized postretirement benefit costs related to the settled obligations, with a corresponding offset to accumulated other comprehensive loss.

In the fourth quarter of 2022, the final settlement of the non-participating group annuity contract resulted in a refund of $4 million, which decreased the settlement loss by $3 million to $21 million.

In October 2022, we remeasured certain of our defined benefit pension plans due to plan amendments resulting from a revision to our North American retirement plan strategy.

The plan curtailments resulted in a reduction in our benefit obligations of $20 million and curtailment gains of $4 million.

See Note 11—Pension and Other Postretirement Benefits for further information.

Distributions on Noncontrolling Interest in CFN

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Third quarter of 2020 Six months ended June 30, 2020 86

Operating Activities

Net cash provided by operating activities in 2021 was $2.87 billion as compared to $1.23 billion in 2020, an increase of $1.64 billion.

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

Net earnings in 2021 was $1.26 billion compared to $432 million in 2020.

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 2021, net changes in working capital increased cash flow from operations by $448 million, while in 2020 net changes in working capital contributed $12 million to cash flow from operations.

The increased cash flow from working capital changes was primarily driven by an increase in customer advances and accounts payable and accrued expenses, partially offset by changes in accounts receivable and inventory.

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Investing Activities

Net cash used in investing activities was $466 million in 2021 compared to $299 million in 2020, or an increase of $167 million.

This increase was due primarily to higher capital expenditures.

Net cash provided by operating activities in 2022 was $3.86 billion as compared to $2.87 billion in 2021, an increase of $982 million.

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

Net earnings in 2022 was $3.94 billion compared to $1.26 billion in 2021.

The increase in net earnings was due primarily to an increase in gross margin, driven by higher average selling prices, and a decrease in charges related to our U.K.

These factors that increased gross margin were partially offset by increases in natural gas costs, an increase in the income tax provision and an increase in net earnings attributable to noncontrolling interest.

During 2022, net changes in working capital reduced cash flow from operations by $900 million, while in 2021, net changes in working capital contributed $448 million to cash flow from operations.

The decrease in cash flow from working capital changes was attributable primarily to lower levels of customer advances, higher levels of accounts receivable and an increase in income tax payments in 2022 as compared to 2021.

Net cash used in investing activities was $440 million in 2022 compared to $466 million in 2021, or a decrease of $26 million.

During 2022, capital expenditures totaled $453 million compared to $514 million in 2021.

Financing Activities

Net cash used in financing activities was $1.46 billion in 2021 compared to $542 million in 2020.

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

In 2021, we repurchased shares of common stock for $540 million, of which $1 million was accrued and unpaid as of December 31, 2021, compared to share repurchases of $100 million in 2020.

Dividends paid on common stock in 2021 and 2020 were $260 million and $258 million, respectively.

Distributions to noncontrolling interest totaled $194 million in 2021 as compared to $174 million in 2020.

Net cash used in financing activities was $2.70 billion in 2022 compared to $1.46 billion in 2021.

The increase was due primarily to share repurchases in 2022 and higher distributions to noncontrolling interest.

In 2022, we paid $1.35 billion for share repurchases, including $1 million related to shares repurchased in late 2021 that were paid for in 2022, compared to $539 million for share repurchases in 2021.

In 2022, distributions to noncontrolling interest were $619 million compared to $194 million in 2021.

CF INDUSTRIES HOLDINGS, INC.

Critical Accounting Estimates

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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.

Judgment is involved in estimating each of these factors, which include inherent uncertainties.

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We evaluate goodwill for impairment in the fourth quarter at the reporting unit level.

Our evaluation can begin with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value.

Our evaluation generally begins with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value.

If after performing the qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, then no further analysis is necessary.

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If the fair value of the reporting unit is less than its carrying amount, goodwill impairment would be recognized equal to the amount of the carrying value in excess of the reporting unit’s fair value, limited to the total amount of goodwill allocated to the reporting unit.

We identified no goodwill impairment in 2020 or 2019.

CF INDUSTRIES HOLDINGS, INC.

During the third quarter of 2021, in light of the unprecedented increase in natural gas prices in the United Kingdom and its estimated impact on our U.K.

operations, we identified a triggering event indicating possible impairment of goodwill within our U.K.

Ammonia, U.K.

Other reporting units.

Due to the triggering event, we performed an interim quantitative goodwill impairment analysis as of September 30, 2021 for our U.K.

Ammonia, U.K.

Other reporting units.

We estimated the fair value of the reporting units using the income approach described in Note 6—United Kingdom Energy Crisis and Impairment Charges.

Based on the evaluation performed, we determined that the carrying value of all three reporting units exceeded their fair value, which resulted in a goodwill impairment charge totaling $259 million in the third quarter of 2021.

The goodwill impairment was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value.

The continued impacts of the U.K.

energy crisis in the fourth quarter of 2021 triggered an additional impairment test, and we recognized an additional goodwill impairment charge of $26 million.

In 2021, we recognized total goodwill impairment charges of $285 million.

As of December 31, 2021, after the recognition of the $285 million of goodwill impairment charges noted above, we have no remaining goodwill related to our U.K.

As of December 31, 2021, the carrying value of our goodwill was $2.09 billion.

Our annual evaluation of impairment in the fourth quarter of 2021 included a qualitative assessment for our North America reporting units, where the remaining goodwill is allocated, and resulted in no indication of impairment.

As a result of the triggering event described above, we also performed a recoverability test on our long-lived assets within the U.K.

We review property, plant and equipment and other long-lived assets at the asset group level in order to assess recoverability based on expected future undiscounted cash flows.

If the sum of the expected future net undiscounted cash flows is less than the carrying value, an impairment loss would be recognized.

The impairment loss is measured as the amount by which the carrying value exceeds the fair value of the long-lived assets.

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 geopolitical events as a result of Russia’s invasion of Ukraine in February 2022, triggered a 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, which consisted of U.K.

Ammonia, U.K.

Other asset groups, including our definite-lived intangible assets, as of September 30, 2021.

The recoverability test was based on forecasts of undiscounted cash flows, as described in Note 6—United Kingdom Energy Crisis and Impairment Charges.

The results of the recoverability test indicated that the long-lived assets within our U.K.

Previous impairments of these U.K.

asset groups had been recognized in 2021, when the U.K.

energy crisis began.

In the second quarter of 2022, the long-term outlook deteriorated for nitrogen producers in regions that rely on LNG imports to satisfy natural gas demand.

As result, in the second quarter of 2022, we approved and announced our proposed plan to restructure our U.K.

operations, including the planned permanent closure of the Ince facility.

Pursuant to our proposed plan to restructure our U.K.

operations and dispose of the Ince facility assets before we originally intended, we concluded that an evaluation of our long-lived assets and an additional impairment test was required.

Our assessment then identified the U.K.

CF INDUSTRIES HOLDINGS, INC.

asset groups as U.K.

Ammonia, U.K.

Other asset groups were not fully recoverable, and, as a result, long-lived asset impairment charges, inclusive of the definite-lived intangible assets, of $236 million were recorded.

That impairment was allocated to each of the underlying assets, of which $50 million was allocated to definite-lived intangible assets.

As of December 31, 2021 and 2020, the carrying value of our intangible assets was $45 million and $104 million, respectively.

As discussed above, the results of our fourth quarter 2021 long-lived asset impairment test indicated that no additional long-lived asset impairment should be recorded as the undiscounted cash flows were in excess of the carrying values for each of the U.K.

asset groups.

Of the factors discussed above, the assumptions for product selling prices and natural gas costs included in the expected cash flows utilized in the long-lived asset impairment test were more sensitive than others.

Assuming that all other assumptions utilized in our expected cash flows and the other inputs used in our long-lived asset test remained unchanged, a decrease of $5.00 per product ton in the average selling price or an increase of $0.50 per MMBtu in the cost of natural gas would have resulted in long-lived asset impairment for certain of the U.K.

asset groups as the undiscounted cash flows would have been lower than their carrying values, and the resulting long-lived asset impairment charges for the fourth quarter of 2021 would have been as follows:

Long-lived Asset Impairment

Assumption (in millions)

+$5.00 -$5.00

Average Selling Price per Product Ton $ — $ 10

+$0.50 -$0.50

Natural Gas Cost per MMBtu (1)

_______________________________________________________________________________

(1) The sensitivity impact of a $0.50/MMBtu increase or decrease in the cost of natural gas includes any corresponding impact to selling prices from contractually stipulated sales provisions.

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

energy crisis impacts,” “Liquidity and Capital Resources—United Kingdom Energy Crisis,” above, Note 6—United Kingdom Energy Crisis and Impairment Charges, Note 7—Property, Plant and Equipment—Net and Note 8—Goodwill and Other Intangible Assets for further information.

PLNL is our joint venture investment in the Republic of Trinidad and Tobago and operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by the National Gas Company of Trinidad and Tobago Limited (NGC).

Other, comprising our ongoing U.K.

operations, and Ince, U.K.

In response to this impairment indicator, we compared the undiscounted cash flows expected to result from the use and eventual disposition of the Ince, U.K.

asset group to its carrying amount and concluded the carrying amount was not recoverable and should be adjusted to its fair value.

As a result, we recorded asset impairment charges related to the Ince, U.K.

asset group totaling $152 million, which are included in the U.K.

long-lived and intangible asset impairment line item in our consolidated statement of operations for the year ended December 31, 2022 and are further described under “Market Conditions and Current Developments—United Kingdom Operations,” above.

There was no additional asset impairment indicated for the three asset groups that comprise the continuing U.K.

operations as the undiscounted estimated future cash flows were in excess of the carrying values for each of these asset groups.

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

Russian natural gas flows to Europe via the Nord Stream 1 pipeline ceased, causing the United Kingdom to experience unprecedented natural gas prices.

In addition, the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries, further contributing to the uncertainty in European energy markets.

Given these factors and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we temporarily idled ammonia production at our Billingham complex.

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

The results of our impairment test indicated that the carrying values for our U.K.

Ammonia and U.K.

AN asset groups exceeded the undiscounted estimated future cash flows.

As a result, we recognized asset impairment charges of $87 million, primarily related to property, plant and equipment and definite-lived intangible assets, which are included in the U.K.

long-lived and intangible asset impairment line item in our consolidated statement of operations for the year ended December 31, 2022.

The expected cash flows used in the long-lived asset impairment analysis reflected assumptions about product selling prices and natural gas costs, as well as estimates of future production and sales volumes, operating rates, operating expenses, inflation, tax rates, capital spending and the impact that future market dynamics and geopolitical events could have on these factors.

For the asset groups that comprise the continuing U.K.

operations, the fair value of our property, plant and equipment utilized in the long-lived asset impairment analyses was estimated using the indirect method of the cost approach by determining the reproduction cost new, or replacement cost, of the assets and applying appropriate adjustments for depreciation including an inutility adjustment based on the cash flows expected to be generated by those asset groups.

For property, plant and equipment within the Ince, U.K.

asset group, an asset group planned for abandonment, we first considered use of a market or income-based valuation method.

However, given that a secondary market did not exist and the assets had been idled with a planned abandonment and therefore would not generate future cash flows from operations, we estimated the fair value of the asset group by determining the replacement cost of the underlying assets, which included inflationary adjustments to original asset costs, and then adjusting each of the asset categories to an estimated salvage value utilizing industry recognized price publications.

See “Liquidity and Capital Resources—United Kingdom Operations” above, Note 5—United Kingdom Operations Restructuring and Impairment Charges, Note 6—Property, Plant and Equipment—Net and Note 7—Goodwill and Other Intangible Assets for further information.

PLNL is our joint venture investment in Trinidad and operates an ammonia plant that relies on natural gas supplied, under a Gas Sales Contract (the NGC Contract), by the National Gas Company of Trinidad and Tobago Limited (NGC).

The joint venture is accounted for under the equity method.

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The NGC Contract had an initial expiration date of September 2018 and was extended on the same terms until September 2023.

Any NGC commitment to supply gas beyond 2023 will be based on new agreements.

Any NGC commitment to supply gas beyond September 2023 will be based on new agreements.

If NGC does not make sufficient quantities of natural gas available to PLNL at prices that permit profitable operations, PLNL may cease operating its facility and we would write off the remaining investment in PLNL.

The carrying value of our equity method investment in PLNL at December 31, 2021 is $82 million.

CF INDUSTRIES HOLDINGS, INC.

The carrying value of our equity method investment in PLNL at December 31, 2022 was $74 million.

Projected Benefit Obligations

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Declines in comparable bond yields would increase our PBO.

For our United Kingdom plans, the 3.3% RPI used to calculate our PBO is developed using the Bank of England implied retail price inflation curve, which is based on the difference between yields on fixed interest government bonds and index-linked government bonds.

For our United Kingdom plans, the 3.2% RPI used to

CF INDUSTRIES HOLDINGS, INC.

calculate our PBO is developed using a U.K.

government gilt prices only retail price inflation curve, which is based on the difference between yields on fixed interest government bonds and index-linked government bonds.

For North America qualified pension plans, our PBO was $274 million as of December 31, 2022, which was $1 million higher than pension plan assets.

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These tax laws are complex, and how they apply to our facts is sometimes open to interpretation.

We recognize the effect of income tax positions only if sustaining those positions is more likely than not.

Tax positions that meet the more likely than not recognition threshold but are not highly certain are measured based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement with the taxing authority.

Differences in interpretation of the tax laws and regulations, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state and international tax audits, can result in differences in taxes paid, which may be higher or lower than our estimates.

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We adjust our income tax provision in the period in which these changes occur.

As of December 31, 2022, we have recorded a reserve for unrecognized tax benefits, including penalties and interest, of $243 million.

We also engage in a significant amount of cross border transactions.

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We work closely with regulators to reach a common understanding and conclusion regarding the taxability of cross border transactions.

Recent Accounting Pronouncements

See Note 3—New Accounting Standards for a discussion of recent accounting pronouncements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis