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Item 1. Financial Statements

2023-08-03 compared with 2023-05-02 · 209 added, 76 removed, 494 unchanged (37% of the section changed)

2 unchanged sentences

Three months ended

June 30, Six months ended

2023 2022 2023 2022

(in millions, except per share amounts)

3 unchanged sentences

Selling, general and administrative expenses 71 73 145 137

long-lived and intangible asset impairment — 152 — 152

operations restructuring — 10 2 10

6 unchanged sentences

Interest income ( 40 ) ( 8 ) ( 70 ) ( 44 )

Loss on debt extinguishment — 8 — 8

Other non-operating—net ( 2 ) — ( 5 ) 1

15 unchanged sentences

Three months ended

June 30, Six months ended

2023 2022 2023 2022

(in millions)

3 unchanged sentences

Defined benefit plans—net of taxes 2 8 1 12

25 ( 19 ) 31 ( 28 )

Comprehensive income 631 1,320 1,287 2,362

55 unchanged sentences

(in millions, except per share amounts)

Balance as of March 31, 2023 $ 2 $ ( 97 ) $ 1,424 $ 4,348 $ ( 224 ) $ 5,453 $ 2,637 $ 8,090

Net earnings — — — 527 — 527 79 606

Other comprehensive income — — — — 25 25 — 25

Purchases of treasury stock — ( 131 ) — — — ( 131 ) — ( 131 )

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

— 2 ( 1 ) — — 1 — 1

Stock-based compensation expense — — 7 — — 7 — 7

Dividends and dividend equivalents ($ 0.40 per share)

— — — ( 78 ) — ( 78 ) — ( 78 )

Balance as of June 30, 2023 $ 2 $ ( 226 ) $ 1,430 $ 4,797 $ ( 199 ) $ 5,804 $ 2,716 $ 8,520

Balance as of December 31, 2022 $ 2 $ — $ 1,412 $ 3,867 $ ( 230 ) $ 5,051 $ 2,802 $ 7,853

3 unchanged sentences

Acquisition of treasury stock under employee stock plans — ( 22 ) — — — ( 22 ) — ( 22 )

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

— 2 ( 1 ) — — 1 — 1

Stock-based compensation expense — — 19 — — 19 — 19

2 unchanged sentences

Distribution declared to noncontrolling interest — — — — — — ( 255 ) ( 255 )

Balance as of June 30, 2023 $ 2 $ ( 226 ) $ 1,430 $ 4,797 $ ( 199 ) $ 5,804 $ 2,716 $ 8,520

CONSOLIDATED STATEMENTS OF EQUITY

(Continued) (Unaudited)

Common Stockholders

Stock Treasury

Stock Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Stockholders’ Equity Noncontrolling

Interest Total

(in millions, except per share amounts)

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

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

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

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

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

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

— 1 3 — — 4 — 4

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

Dividends and dividend equivalents ($ 0.40 per share)

— — — ( 83 ) — ( 83 ) — ( 83 )

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

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

10 unchanged sentences

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

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

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Six months ended

(in millions)

5 unchanged sentences

Stock-based compensation expense 19 22

Loss on debt extinguishment — 8

Unrealized net gain on natural gas derivatives ( 72 ) ( 50 )

long-lived and intangible asset impairment — 152

Gain on sale of emission credits ( 36 ) ( 3 )

Loss on disposal of property, plant and equipment 1 —

Undistributed earnings of affiliate—net of taxes — ( 3 )

9 unchanged sentences

Proceeds from sale of property, plant and equipment 1 1

Distributions received from unconsolidated affiliate — 4

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

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

Purchase of emission credits — ( 9 )

2 unchanged sentences

Financing Activities:

Payments of long-term borrowings — ( 507 )

Financing fees — ( 4 )

32 unchanged sentences

The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023.

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

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

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

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See Note 15—Segment Disclosures for the revenue of each of our reportable segments, which are Ammonia, Granular Urea, UAN, AN and Other.

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three months ended March 31, 2023 and 2022:

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and six months ended June 30, 2023 and 2022:

Ammonia Granular Urea UAN AN Other Total

(in millions)

Three months ended March 31, 2023

Three months ended June 30, 2023

North America $ 460 $ 460 $ 463 $ 65 $ 120 $ 1,568

1 unchanged sentence

Total revenue $ 525 $ 460 $ 548 $ 104 $ 138 $ 1,775

Three months ended March 31, 2022

Three months ended June 30, 2022

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

1 unchanged sentence

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

As of March 31, 2023 and December 31, 2022, we had $ 284 million and $ 229 million, respectively, in customer advances on our consolidated balance sheets.

The revenue recognized during the three months ended March 31, 2023 and 2022 that was included in our customer advances at the beginning of each respective period amounted to approximately $ 160 million and $ 560 million, respectively.

Six months ended June 30, 2023

North America $ 790 $ 1,035 $ 982 $ 139 $ 246 $ 3,192

Europe and other 159 36 233 124 43 595

Total revenue $ 949 $ 1,071 $ 1,215 $ 263 $ 289 $ 3,787

Six months ended June 30, 2022

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

Europe and other 185 46 101 317 104 753

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

As of June 30, 2023 and December 31, 2022, we had $ 9 million and $ 229 million, respectively, in customer advances on our consolidated balance sheets.

During the six months ended June 30, 2023 and 2022, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

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

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

The balances of customer incentives accrued as of March 31, 2023 and December 31, 2022 were not material.

The balances of customer incentives accrued as of June 30, 2023 and December 31, 2022 were not material.

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

As of March 31, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 1.0 billion.

As of June 30, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 845 million.

We expect to recognize approximately 27 % of these performance obligations as revenue in the remainder of 2023, approximately 36 % as revenue during 2024-2026, approximately 17 % as revenue during 2027-2029, and the remainder thereafter.

Subject to the terms and conditions of the applicable contracts, if the customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under such contracts, in the aggregate, was approximately $ 280 million as of March 31, 2023.

Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially fulfilled at December 31, 2022 will be satisfied in 2023.

Other than the performance obligations described above, we expect that any performance obligations under our customer contracts that were unfulfilled or partially fulfilled at December 31, 2022 will be satisfied in 2023.

CF INDUSTRIES HOLDINGS, INC.

2 unchanged sentences

Three months ended

June 30, Six months ended

2023 2022 2023 2022

(in millions, except per share amounts)

10 unchanged sentences

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

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero in both the three months ended March 31, 2023 and 2022.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero in both the three and six months ended June 30, 2023 and the three and six months ended June 30, 2022.

Inventories consist of the following:

4 unchanged sentences

Total inventories $ 319 $ 474

United Kingdom Operations Restructuring

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, which had been idled since September 2021, and optimization of the remaining manufacturing operations at our Billingham 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 impairment test was required.

Our assessment then identified the U.K.

asset groups as U.K.

Ammonia, U.K.

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, in the second quarter of 2022, we recorded total charges of $ 162 million related to the Ince facility as follows:

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

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

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

CF INDUSTRIES HOLDINGS, INC.

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

• a charge for post-employment benefits totaling $ 10 million, which is included in the U.K.

operations restructuring line item in our consolidated statements of operations, related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

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

As of June 30, 2023, the decommissioning of our Ince facility and other approved restructuring actions have been completed.

Property, Plant and Equipment—Net

11 unchanged sentences

_______________________________________________________________________________

(1) As of March 31, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $ 45 million and $ 53 million, respectively.

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

CF INDUSTRIES HOLDINGS, INC.

Depreciation and amortization related to property, plant and equipment was $ 204 million and $ 205 million for the three months ended March 31, 2023 and 2022, respectively.

(1) As of June 30, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $ 63 million and $ 53 million, respectively.

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

Depreciation and amortization related to property, plant and equipment was $ 218 million and $ 422 million for the three and six months ended June 30, 2023, respectively, and $ 219 million and $ 424 million for the three and six months ended June 30, 2022, respectively.

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

3 unchanged sentences

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

CF INDUSTRIES HOLDINGS, INC.

The following is a summary of capitalized plant turnaround costs:

Three months ended

Six months ended

(in millions)

2 unchanged sentences

Depreciation ( 62 ) ( 70 )

Impairment related to U.K.

operations — ( 7 )

Effect of exchange rate changes 1 ( 4 )

Net capitalized turnaround costs as of March 31

Net capitalized turnaround costs as of June 30

Equity Method Investment

1 unchanged sentence

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

As of March 31, 2023, the total carrying value of our equity method investment in PLNL was $ 81 million, $ 34 million more than our share of PLNL’s book value.

As of June 30, 2023, the total carrying value of our equity method investment in PLNL was $ 72 million, $ 32 million more than our share of PLNL’s book value.

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

2 unchanged sentences

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

Our ammonia purchases from PLNL totaled $ 59 million and $ 74 million for the three months ended March 31, 2023 and 2022, respectively.

CF INDUSTRIES HOLDINGS, INC.

Our ammonia purchases from PLNL totaled $ 36 million and $ 95 million for the three and six months ended June 30, 2023, respectively, and $ 77 million and $ 151 million for the three and six months ended June 30, 2022, respectively.

Fair Value Measurements

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

March 31, 2023

June 30, 2023

Cost Basis Unrealized

8 unchanged sentences

Nonqualified employee benefit trusts 16 1 — 17

CF INDUSTRIES HOLDINGS, INC.

December 31, 2022

15 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities included in our consolidated balance sheets as of March 31, 2023 and December 31, 2022 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

March 31, 2023

The following tables present assets and liabilities included in our consolidated balance sheets as of June 30, 2023 and December 31, 2022 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

June 30, 2023

Value Quoted Prices

6 unchanged sentences

Derivative liabilities ( 9 ) — ( 9 ) —

CF INDUSTRIES HOLDINGS, INC.

December 31, 2022

9 unchanged sentences

Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less.

As of March 31, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S.

As of June 30, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S.

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

government obligations and other investment-grade securities.

CF INDUSTRIES HOLDINGS, INC.

Nonqualified Employee Benefit Trusts

11 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Amount Fair Value Carrying

3 unchanged sentences

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

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

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

1 unchanged sentence

that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement.

These include long-lived assets, goodwill and other

CF INDUSTRIES HOLDINGS, INC.

intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment.

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

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

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

For the three months ended March 31, 2023, we recorded an income tax provision of $ 169 million on pre-tax income of $ 819 million, or an effective tax rate of 20.6 %, compared to an income tax provision of $ 401 million on pre-tax income of $ 1.45 billion, or an effective tax rate of 27.6 %, for the three months ended March 31, 2022.

CF INDUSTRIES HOLDINGS, INC.

For the three months ended June 30, 2023, we recorded an income tax provision of $ 134 million on pre-tax income of $ 740 million, or an effective tax rate of 18.2 %, compared to an income tax provision of $ 357 million on pre-tax income of $ 1.70 billion, or an effective tax rate of 21.1 %, for the three months ended June 30, 2022.

For the six months ended June 30, 2023, we recorded an income tax provision of $ 303 million on pre-tax income of $ 1.56 billion, or an effective tax rate of 19.5 %, compared to an income tax provision of $ 758 million on pre-tax income of $ 3.15 billion, or an effective tax rate of 24.1 %, for the six months ended June 30, 2022.

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

Our effective tax rate for the three months ended March 31, 2023 of 20.6 %, which is based on pre-tax income of $ 819 million, including $ 90 million of earnings attributable to the noncontrolling interest, would be 2.6 percentage points higher if based on pre-tax income exclusive of the $ 90 million of earnings attributable to the noncontrolling interest.

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

In addition, for the three months ended March 31, 2022, our income tax provision includes $ 20 million of income tax benefit due to share-based compensation activity and $ 78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter and certain transfer pricing reserves recorded in the period, as discussed below.

Our effective tax rate for the three months ended June 30, 2023 of 18.2 %, which is based on pre-tax income of $ 740 million, including $ 79 million of earnings attributable to the noncontrolling interest, would be 2.1 percentage points higher if based on pre-tax income exclusive of the $ 79 million of earnings attributable to the noncontrolling interest.

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

Our effective tax rate for the six months ended June 30, 2023 of 19.5 %, which is based on pre-tax income of $ 1.56 billion, including $ 169 million of earnings attributable to the noncontrolling interest, would be 2.3 percentage points higher if based on pre-tax income exclusive of the $ 169 million of earnings attributable to the noncontrolling interest.

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

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

Canada Revenue Agency Competent Authority Matter

7 unchanged sentences

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.

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

In the six months ended June 30, 2022, as a result of the impact of these events on our Canadian and U.S.

federal and state income taxes, we recognized an income tax provision of $ 78 million, reflecting the net impact of $ 129 million of accrued income taxes payable to Canada for tax years 2006 through 2011, partially offset by net income tax receivables of approximately $ 51 million in the United States, and we accrued net interest of $ 104 million, primarily reflecting the impact of estimated interest payable to Canada.

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

In the second half of 2022, this tax liability and the related interest were assessed and paid, resulting in total payments of $ 224 million, which also reflect the impact of changes in foreign currency exchange rates.

1 unchanged sentence

Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, the Company has filed amended tax returns in the United States to request a refund of taxes paid.

Transfer pricing positions

In the first quarter of 2022, 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 for the three months ended March 31, 2022, we recorded the following:

CF INDUSTRIES HOLDINGS, INC.

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, for the six months ended June 30, 2022, we recorded the following:

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

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

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

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

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

Financing Agreements

4 unchanged sentences

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

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

dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to, at our option, an applicable adjusted term Secured Overnight Financing Rate or base rate plus, in either case, a specified margin.

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

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

As of March 31, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit.

There were no borrowings outstanding under the Revolving Credit Agreement as of March 31, 2023 or December 31, 2022, or during the three months ended March 31, 2023.

As of June 30, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit under the Revolving Credit Agreement.

There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2023 or December 31, 2022, or during the six months ended June 30, 2023.

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

As of March 31, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

As of June 30, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $ 350 million of letters of credit.

As of March 31, 2023, approximately $ 201 million of letters of credit were outstanding under this agreement.

Long-term debt presented on our consolidated balance sheets as of March 31, 2023 and December 31, 2022 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate March 31, 2023 December 31, 2022

As of June 30, 2023, approximately $ 205 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Long-term debt presented on our consolidated balance sheets as of June 30, 2023 and December 31, 2022 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate June 30, 2023 December 31, 2022

Principal Carrying Amount (1)

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

Total unamortized debt discount was $ 7 million as of both March 31, 2023 and December 31, 2022, and total deferred debt issuance costs were $ 27 million and $ 28 million as of March 31, 2023 and December 31, 2022, respectively.

CF INDUSTRIES HOLDINGS, INC.

Total unamortized debt discount was $ 7 million as of both June 30, 2023 and December 31, 2022, and total deferred debt issuance costs were $ 26 million and $ 28 million as of June 30, 2023 and December 31, 2022, respectively.

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

5 unchanged sentences

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June 30, Six months ended

2023 2022 2023 2022

(in millions)

Interest on borrowings (1)

$ 37 $ 38 $ 74 $ 80

Fees on financing agreements (1)

Interest on tax liabilities (2)

( 2 ) 42 — 240

Interest capitalized ( 1 ) — ( 2 ) ( 1 )

3 unchanged sentences

(2) See Note 9—Income Taxes for additional information.

CF INDUSTRIES HOLDINGS, INC.

Derivative Financial Instruments

7 unchanged sentences

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

As of March 31, 2023, we had natural gas derivative contracts covering certain periods through March 2024.

As of March 31, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 18.9 million MMBtus of natural gas.

As of June 30, 2023, we had natural gas derivative contracts covering certain periods through March 2024.

As of June 30, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 43.8 million MMBtus of natural gas.

As of December 31, 2022, we had open natural gas derivative contracts consisting of natural gas fixed price swaps, basis swaps and options for 66.3 million MMBtus of natural gas.

For the three months ended March 31, 2023, we used derivatives to cover approximately 69 % of our natural gas consumption.

CF INDUSTRIES HOLDINGS, INC.

For the six months ended June 30, 2023, we used derivatives to cover approximately 36 % of our natural gas consumption.

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

1 unchanged sentence

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June 30, Six months ended

Location 2023 2022 2023 2022

2 unchanged sentences

Realized net (losses) gains on natural gas derivatives Cost of sales — ( 9 ) ( 118 ) 8

Net derivative (losses) gains $ ( 46 ) $ 50

Net derivative gains (losses) $ — $ 8 $ ( 46 ) $ 58

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

As of March 31, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments.

As of June 30, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments.

See Note 8—Fair Value Measurements for additional information on derivative fair values.

Asset Derivatives Liability Derivatives

Balance Sheet Location March 31,

Balance Sheet Location June 30,

2023 December 31, 2022 Balance Sheet

Location March 31,

Location June 30,

2023 December 31, 2022

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

As of March 31, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $ 1 million and $ 73 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

As of June 30, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 73 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

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

As of March 31, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of March 31, 2023 and December 31, 2022:

As of June 30, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts.

CF INDUSTRIES HOLDINGS, INC.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of June 30, 2023 and December 31, 2022:

Amounts presented in consolidated

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(in millions)

March 31, 2023

June 30, 2023

Total derivative assets $ 9 $ — $ — $ 9

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We do not believe the contractually allowed netting, close-out netting or setoff of amounts owed to, or due from, the counterparties to our ISDA agreements would have a material effect on our financial position.

CF INDUSTRIES HOLDINGS, INC.

Noncontrolling Interest

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Declaration of distributions payable ( 255 ) ( 247 )

Balance as of March 31 $ 2,637 $ 2,751

Balance as of June 30 $ 2,716 $ 2,925

Distributions payable to noncontrolling interest:

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Distributions to noncontrolling interest ( 255 ) ( 247 )

Balance as of March 31 $ — $ —

Balance as of June 30 $ — $ —

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

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We are also entitled to semi-annual cash distributions from CFN.

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

CF INDUSTRIES HOLDINGS, INC.

a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts.

On July 31, 2023, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2023 in accordance with CFN’s limited liability company agreement.

On July 31, 2023, CFN distributed $ 204 million to CHS for the distribution period ended June 30, 2023.

Stockholders’ Equity

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

In the three months ended March 31, 2023, we repurchased approximately 1.1 million shares under the 2021 Share Repurchase Program for $ 75 million, of which $21 million was accrued and unpaid as of March 31, 2023.

As of March 31, 2023, there was approximately $ 80 million of authorization remaining under the 2021 Share Repurchase Program.

In the three months ended March 31, 2022, we repurchased approximately 1.3 million shares under the 2021 Share Repurchase Program for $ 100 million and we retired 27,962 shares of repurchased stock, including shares repurchased under the share repurchase program that expired on December 31, 2021.

The following table summarizes the share repurchases under the 2022 Share Repurchase Program and the 2021 Share Repurchase Program.

2022 Share Repurchase Program 2021 Share Repurchase Program

Shares Amounts (1)

(in millions)

Shares repurchased in 2022:

First quarter — $ — 1.3 $ 100

Second quarter — — 5.3 490

Third quarter — — 6.1 532

Fourth quarter — — 2.2 223

Total shares repurchased in 2022 — — 14.9 1,345

Shares repurchased as of December 31, 2022 — $ — 14.9 $ 1,345

Shares repurchased in 2023:

First quarter — $ — 1.1 $ 75

Second quarter 0.8 50 1.2 80

Total shares repurchased in 2023 0.8 50 2.3 155

Shares repurchased as of June 30, 2023

0.8 $ 50 17.2 $ 1,500

______________________________________________________________________________

(1) As defined in the share repurchase programs, amounts reflect the price paid for the shares of common stock repurchased, excluding commissions paid to brokers and excise taxes.

In the six months ended June 30, 2023, we completed the 2021 Share Repurchase Program with the repurchase of approximately 2.3 million shares for $ 155 million, and we repurchased approximately 0.8 million shares under the 2022 Share Repurchase Program for $ 50 million.

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

CF INDUSTRIES HOLDINGS, INC.

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Balance as of December 31, 2022 $ ( 179 ) $ 3 $ ( 54 ) $ ( 230 )

Reclassification to earnings — — 1 1

Gain arising during the period — — 5 5

Effect of exchange rate changes and deferred taxes 30 — ( 4 ) 26

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

Balance as of June 30, 2023 $ ( 149 ) $ 3 $ ( 53 ) $ ( 199 )

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

Gain arising during the period — — 3 3

Reclassification to earnings — — 2 2

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

Balance as of March 31, 2023 $ ( 172 ) $ 3 $ ( 55 ) $ ( 224 )

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

CF INDUSTRIES HOLDINGS, INC.

Segment Disclosures

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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.

Segment data for sales, cost of sales and gross margin for the three months ended March 31, 2023 and 2022 are presented in the table below.

Segment data for sales, cost of sales and gross margin for the three and six months ended June 30, 2023 and 2022 are presented in the table below.

Ammonia Granular Urea (1)

(in millions)

Three months ended March 31, 2023

Three months ended June 30, 2023

Net sales $ 525 $ 460 $ 548 $ 104 $ 138 $ 1,775

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Operating earnings $ 734

Three months ended March 31, 2022

Three months ended June 30, 2022

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

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Gross margin $ 673 $ 473 $ 633 $ 102 $ 110 1,991

Total other operating costs and expense 66

Total other operating costs and expenses (2)

Equity in earnings of operating affiliate 28

Operating earnings $ 1,778

Six months ended June 30, 2023

Net sales $ 949 $ 1,071 $ 1,215 $ 263 $ 289 $ 3,787

Cost of sales 583 549 635 185 168 2,120

Gross margin $ 366 $ 522 $ 580 $ 78 $ 121 1,667

Total other operating costs and expenses 131

Equity in earnings of operating affiliate 24

Operating earnings $ 1,560

Six months ended June 30, 2022

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

Cost of sales 722 630 688 322 206 2,568

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

Total other operating costs and expenses (2)

Equity in earnings of operating affiliate 54

Operating earnings $ 3,436

_______________________________________________________________________________

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

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

See Note 5—United Kingdom Operations Restructuring for additional information.

CF INDUSTRIES HOLDINGS, INC.

11 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements