What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 370 added, 332 removed, 585 unchanged (55% of the section changed)

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

Our principal assets as of June 30, 2023 include:

Our principal assets as of September 30, 2023 include:

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

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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 byproduct removed through carbon capture and sequestration (CCS).

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 the ammonia process 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, is expected to finish in late 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.

Fabrication and delivery of most major equipment is complete, and installation of the new electrolyzer unit is in progress.

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

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(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 later in 2023.

We and Mitsui are expecting to complete the front-end engineering and design (FEED) study for the project in the fourth quarter of 2023, with a final investment decision on the proposed facility to follow.

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

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The MOU will guide LOTTE and us in a joint exploration of the development of clean ammonia production in the United States, in addition to the quantification of expected clean ammonia demand in South Korea and long-term clean ammonia offtake volumes into South Korea.

In September 2023, we and POSCO Holdings Inc.

(POSCO) signed a joint development agreement term sheet to evaluate an export-oriented blue ammonia facility to be located at our new Blue Point complex.

Should the project move forward, POSCO expects to import low-carbon clean ammonia from the facility into South Korea to support decarbonization of POSCO’s own and third-party coal-based power generation facilities.

We and POSCO are initiating a joint FEED study in the fourth quarter of 2023 for the blue ammonia plant utilizing an autothermal reforming (ATR) ammonia production technology and are expecting to complete the FEED study in the second half of 2024.

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

We are currently executing 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 for the construction of the dehydration and compression unit continue to advance, procurement of major equipment for the facility is in progress, and fabrication of the CO 2 compressors has begun.

Engineering activities for the construction of the dehydration and compression unit continue to advance, all major equipment for the facility has been procured, and fabrication of the CO 2 compressors is proceeding.

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

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Start-up for the project is planned for 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.

Under current regulations, the project

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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.

Agreement to Purchase Ammonia Production Facility

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The facility has a nameplate capacity of 880,000 tons of ammonia annually.

The parties will allocate $425 million

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of the purchase price to a long-term ammonia offtake agreement providing for us to supply up to 200,000 tons of ammonia per year to IPL’s Dyno Nobel, Inc.

The parties will allocate $425 million of the purchase price to a long-term ammonia offtake agreement providing for us to supply up to 200,000 tons of ammonia per year to IPL’s Dyno Nobel, Inc.

We expect to fund the balance of the purchase price, representing the $1.675 billion purchase price, as adjusted, less $425 million, with cash on hand.

The consummation of the transaction is subject to the satisfaction or waiver of customary conditions, including, among others, the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

We expect to close the transaction on December 1, 2023.

The agreement includes certain customary termination rights, including the right of either party to terminate the agreement if the closing has not occurred by March 20, 2025.

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In September 2022, in response to the high prices for natural gas in the United Kingdom, we idled ammonia production at our Billingham complex and since that time have been importing ammonia from one of our North American manufacturing facilities or from purchases in the open market for upgrade into AN and other nitrogen products at that location.

The geopolitical developments relating to the war in Ukraine 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.

Furthermore, the subsequent closure of a pipeline historically transporting ammonia from Russia through Ukraine for export has been a large contributor to reduced global exportable ammonia supply.

In the third quarter of 2023, we approved our plan to permanently close the Billingham ammonia plant.

The geopolitical developments that began in 2022 relating to the war in Ukraine also led to some supply chain disruptions for Russian and other producers of fertilizer, contributing to reduced global nitrogen fertilizer supply.

In particular, disruptions in nitrogen exports from Russia, a leading exporter of nitrogen fertilizer products globally, and nitrogen production in Europe, as a result of higher and more volatile natural gas prices as Russian-sourced natural gas supply declined, contributed to reduced nitrogen supply globally.

In addition, Russia and Ukraine have been large exporters of commodity grains such as wheat, corn and soybeans.

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

All of these geopolitical developments further contributed to an already tight global supply and demand balance for nitrogen fertilizers.

These factors caused changes in global trade flows as both manufacturers and customers reacted to the changing market dynamics.

All of these geopolitical developments further contributed to an already tight global supply and demand balance for nitrogen fertilizers, causing changes in global trade flows as both manufacturers and customers reacted to the changing market dynamics.

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

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As Russian-sourced natural gas supply declined due to geopolitical factors, European purchasers of natural gas increased imports from the liquified natural gas (LNG) market to build storage levels leading up to the winter 2022/2023 peak demand season.

As storage levels of natural gas increased due to the increased LNG imports, in conjunction with a warmer than expected winter in Europe, prices for natural gas first stabilized and then fell during the first half of 2023.

As storage levels of natural gas increased due to the increased LNG imports, in conjunction with a warmer than expected winter in Europe, prices for natural gas fell during the first half of 2023 and then stabilized during the third quarter of 2023.

As natural gas prices decreased, certain nitrogen producers restarted previously idled production, leading to an increase in global nitrogen production operating rates.

The increased global nitrogen product supply availability resulting from the increase in operating rates, in addition to new global production coming on line and an increase in Russian imports of UAN into the United States, resulted in an increase in supply and lower average selling prices in the first half of 2023 compared to average selling prices realized in 2022.

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The increased global nitrogen product supply availability resulting from the increase in operating rates, in addition to new global production coming on line and an increase in Russian imports of UAN into the United States, resulted in an increase in supply and lower average selling prices in the first nine months of 2023 compared to average selling prices realized in 2022.

Nitrogen Selling Prices

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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.

In the second quarter of 2023, the average selling price for our products was $359 per ton, a decrease of 49% compared to $701 per ton in the second quarter of 2022, reflecting lower average selling prices across all our segments, which drove a decrease in net sales of approximately $1.66 billion for the second quarter of 2023 compared to the second quarter of 2022.

The decrease in average selling prices reflects the impact of an increase in global supply availability as lower global energy costs drove higher global operating rates.

In addition, higher average selling prices in 2022 were driven in part by the geopolitical environment experienced in 2022, as described above.

In the six months ended June 30, 2023, the average selling price for our products was $400 per ton, or 39% lower compared to $661 per ton in the six months ended June 30, 2022.

This resulted in a decrease in net sales of approximately $2.47 billion for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

In the third quarter of 2023, the average selling price for our products was $268 per ton, a decrease of 49% compared to $527 per ton in the third quarter of 2022, reflecting lower average selling prices across all our segments, which drove a decrease in net sales of approximately $1.22 billion for the third quarter of 2023 compared to the third quarter of 2022.

In the nine months ended September 30, 2023, the average selling price for our products was $356 per ton, or 42% lower compared to $619 per ton in the nine months ended September 30, 2022.

This resulted in a decrease in net sales of approximately $3.68 billion for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease in average selling prices reflects the impact of an increase in global supply availability due to higher global inventories entering 2023 and lower global energy costs, which drove higher global operating rates.

In addition, higher average selling prices in 2022 were driven in part by the geopolitical environment, as described above.

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

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

Natural gas is a significant cost component of our manufactured nitrogen products, representing approximately 50% of our production costs in both the first six months of 2023 and in the year ended December 31, 2022.

Natural gas is a significant cost component of our manufactured nitrogen products, representing approximately 40% and 50%, respectively, of our production costs in the first nine months of 2023 and the year ended December 31, 2022.

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:

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 v.

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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 were lower on average during the first six months of 2023 than during the first six months of 2022.

Average North American natural gas prices were lower during the first nine months of 2023 than during the first nine months of 2022.

Warmer-than-normal temperatures in the first quarter of 2023 drove lower heating demand for natural gas, while North American supply remained strong, as there were few weather-related production disruptions.

In addition, although the higher cost for natural gas outside of North America incentivized liquefaction facilities in the United States to export domestic natural gas during the first half of 2023, the ongoing outage at the Freeport LNG facility as well as planned maintenance at several other LNG facilities limited total gas exports, supporting domestic supply.

As a result, North America entered the second quarter of 2023 with above-average volumes of gas in storage and was able to inject at higher-than-average rates, leading to end-of-quarter storage levels that were 25% higher than one year ago and 15% higher than the five-year average.

For July 2023, the average daily market price of natural gas at the Henry Hub was $2.54 per MMBtu.

In addition, although the higher cost for natural gas outside of North America incentivized liquefaction facilities in the United States to export domestic natural gas during the first nine months of 2023, the outage at the Freeport LNG facility in the first quarter of 2023 as well as planned maintenance in 2023 at several other LNG facilities limited total gas exports, resulting in greater domestic supply availability.

As North America entered the 2023 summer season, natural gas demand for power generation increased due in part to coal-fired power plant retirements and lower natural gas costs.

As a result, despite entering the third quarter of 2023 with well above-average volumes of gas in storage, which were 25% higher than one year ago and 15% higher than the five-year average, injection rates in the United States during the third quarter lagged historical averages, leading to end-of-quarter storage levels that were 12% higher than one year ago and 5% higher than the five-year average.

Our Billingham U.K.

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Russia’s invasion of Ukraine in February 2022 disrupted European energy markets and threatened security of supply, driving natural gas prices in Europe upward to unprecedented levels.

In the three and six months ended June 30, 2022, the average daily market price of natural gas at the National Balancing Point (NBP), the major trading point for natural gas in the United Kingdom, was $16.00 per MMBtu and $23.06 per MMBtu, respectively.

In the three and nine months ended September 30, 2022, the average daily market price of natural gas at the National Balancing Point (NBP), the major trading point for natural

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gas in the United Kingdom, was $32.54 per MMBtu and $26.26 per MMBtu, respectively.

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 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.

In the second quarter of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 61% to $2.75 per MMBtu from $7.05 per MMBtu in the second quarter of 2022.

This decrease in natural gas costs resulted in an increase in gross margin of approximately $360 million compared to the second quarter of 2022.

In the first half of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 33% to $4.56 per MMBtu from $6.79 per MMBtu in the first half of 2022.

This decrease in natural gas costs resulted in an increase in gross margin of approximately $332 million compared to the first half of 2022.

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In the third quarter of 2023, we approved our plan to permanently close the Billingham ammonia plant.

As a result, we will continue to import ammonia for upgrade.

In the third quarter of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 70% to $2.54 per MMBtu from $8.35 per MMBtu in the third quarter of 2022.

This decrease in natural gas costs resulted in an increase in gross margin of $496 million compared to the third quarter of 2022.

In the first nine months of 2023, our cost of natural gas used for production, which includes the impact of realized natural gas derivatives, decreased 46% to $3.90 per MMBtu from $7.28 per MMBtu in the first nine months of 2022.

This decrease in natural gas costs resulted in an increase in gross margin of $828 million compared to the first nine months of 2022.

Financial Executive Summary

We reported net earnings attributable to common stockholders of $527 million for the three months ended June 30, 2023 compared to $1.17 billion for the three months ended June 30, 2022, a decrease in net earnings of $638 million.

The decrease in net earnings for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 reflects a decrease of $1.19 billion in gross margin to $804 million for the three months ended June 30, 2023.

The decrease in gross margin was due primarily to a 49% decrease in average selling prices to $359 per ton in the second quarter of 2023 from $701 per ton in the second quarter of 2022, which decreased gross margin by $1.66 billion.

The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by approximately $360 million.

In addition, lower gross margin was partially offset by pre-tax impairment and restructuring charges related to our U.K.

operations of $162 million in the second quarter of 2022 that did not recur in the second quarter of 2023 and a decrease in the income tax provision of $223 million due primarily to lower earnings in the second quarter of 2023.

Diluted net earnings per share attributable to common stockholders decreased $2.88 per share, to $2.70 per share, in the second quarter of 2023 compared to $5.58 per share in the second quarter of 2022 due primarily to lower net earnings, partially offset by lower weighted-average common shares outstanding as a result of shares repurchased under our share repurchase programs.

We reported net earnings attributable to common stockholders of $164 million for the three months ended September 30, 2023 compared to $438 million for the three months ended September 30, 2022, a decrease in net earnings of $274 million.

The decrease in net earnings for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 reflects a decrease in gross margin, partially offset by a lower income tax provision in the third quarter of 2023 as compared to the third quarter of 2022 and impairment charges related to our U.K.

operations in the third quarter of 2022 that did not recur in the third quarter of 2023.

Gross margin decreased by $539 million to $377 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

The decrease in gross margin was due primarily to a 49% decrease in average selling prices to $268 per ton in the third quarter of 2023 from $527 per ton in the third quarter of 2022, which decreased gross margin by $1.22 billion.

The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by $496 million, and a decrease in the income tax provision of $132 million due primarily to lower pre-tax earnings in the third quarter of 2023.

In addition, pre-tax impairment and restructuring charges related to our U.K.

operations of $95 million were recognized in the third quarter of 2022 compared to $5 million in the third quarter of 2023.

Diluted net earnings per share attributable to common stockholders decreased $1.33 per share, to $0.85 per share, in the third quarter of 2023 compared to $2.18 per share in the third quarter of 2022 due primarily to lower net earnings, partially offset by lower weighted-average common shares outstanding as a result of shares repurchased under our share repurchase programs.

Items Affecting Comparability of Results

For the three months ended June 30, 2023 and 2022, we reported net earnings attributable to common stockholders of $527 million and $1.17 billion, respectively.

For the six months ended June 30, 2023 and 2022, we reported net earnings attributable to common stockholders of $1.09 billion and $2.05 billion, respectively.

In addition to the impact of market conditions discussed above, certain items affected the comparability of our financial results for the three and six months ended June 30, 2023 and 2022.

For the three months ended September 30, 2023 and 2022, we reported net earnings attributable to common stockholders of $164 million and $438 million, respectively.

For the nine months ended September 30, 2023 and 2022, we reported net earnings attributable to common stockholders of $1.25 billion and $2.49 billion, respectively.

In addition to the impact of market conditions discussed above, certain items affected the comparability of our financial results for the three and nine months ended September 30, 2023 and 2022.

The following table and related discussion outline these items and their impact on the comparability of our financial results for these periods.

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

Three Months Ended June 30, Six Months Ended June 30,

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

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(in millions)

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

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

$ 7 $ 5 $ 11 $ 7 $ (65) $ (50) $ (39) $ (31)

(Gain) loss on foreign currency transactions, including intercompany loans (2)

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

7 5 27 21 5 4 38 29

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Transaction costs related to acquisition agreement 11 9 — — 27 21 — —

Impairment of equity method investment in PLNL (3)

43 33 — — 43 33 — —

Pension settlement loss (4)

— — 24 18 — — 24 18

Canada Revenue Agency Competent Authority Matter and transfer pricing positions:

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Interest income — — (3) (2) — — (41) (31)

Income tax (benefit) provision (3)

Income tax provision (5)

— — — 2 — — — 54

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

(3) For the three months ended June 30, 2022, the after-tax income tax benefit amount of $20 million reflects an income tax benefit of $19 million, consisting of the $2 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $21 million of income tax benefit referenced below under “Transfer pricing positions,” net of $1 million of income tax provision that is reflected in the after-tax interest income amount shown in this table.

For the six months ended June 30, 2022, the after-tax income tax provision amount of $52 million reflects an income tax provision of $59 million, consisting of the $78 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $19 million of income tax

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benefit referenced below under “Transfer pricing positions,” net of $7 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 gain on natural gas derivatives

(3) Included in equity in (losses) earnings of operating affiliate in our consolidated statements of operations.

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

(5) For the three months ended September 30, 2022, the after-tax income tax provision amount of $2 million reflects the $3 million of income tax provision referenced below under “Transfer pricing positions,” net of $1 million of income tax provision that is reflected in the after-tax interest income amount shown in this table.

For the nine months ended September 30, 2022, the after-tax income tax provision amount of $54 million reflects an income tax provision of $62 million, consisting of the $78 million income tax provision referenced below under “Canada Revenue Agency Competent Authority Matter” and the $16 million of income tax benefit referenced below under “Transfer pricing positions,” net of $8 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 (gain) on natural gas derivatives

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

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

In the three months ended June 30, 2022, we recognized an unrealized net mark-to-market gain of $17 million.

In the six months ended June 30, 2023 and 2022, we recognized unrealized net mark-to-market gains of $72 million and $50 million, respectively.

(Gain) loss on foreign currency transactions, including intercompany loans

In the six months ended June 30, 2023 and 2022, we recognized a (gain) loss on foreign currency transactions of $(2) million and $11 million, respectively.

Gains and losses on foreign currency transactions 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.

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.

As a result, 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;

◦ 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 the three months ended September 30, 2023 and 2022, we recognized unrealized net mark-to-market losses of $7 million and $11 million, respectively.

In the nine months ended September 30, 2023 and 2022, we recognized unrealized net mark-to-market gains of $65 million and $39 million, respectively.

Loss on foreign currency transactions, including intercompany loans

In the three months ended September 30, 2023 and 2022, we recognized losses on foreign currency transactions of $7 million and $27 million, respectively.

In the nine months ended September 30, 2023 and 2022, we recognized losses on foreign currency transactions of $5 million and $38 million, respectively.

Loss on foreign currency transactions 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 are not permanently invested.

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In the three and nine months ended September 30, 2023, we recognized total charges of $5 million and $7 million, respectively, consisting primarily of the recognition of an asset retirement obligation and post-employment benefits related to contractual and statutory obligations due to employees as a result of our approved plan to permanently close the Billingham ammonia plant.

In the three and nine months ended September 30, 2022, we recognized total charges of $95 million and $257 million, respectively, consisting primarily of asset impairment charges related to property, plant and equipment at our Billingham and Ince facilities and definite-lived intangible assets.

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

In the six months ended June 30, 2023, we incurred restructuring costs of $2 million related to the permanent closure of our Ince facility.

Transaction costs related to acquisition agreement

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three and six months ended June 30, 2023, we incurred $3 million and $16 million, respectively, of transaction costs related to the acquisition agreement.

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three and nine months ended September 30, 2023, we incurred $11 million and $27 million, respectively, of transaction costs related to the acquisition agreement.

Impairment of equity method investment in PLNL

PLNL, our joint venture in Trinidad, 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 NGC Contract had an expiration date of September 2023.

In the third quarter of 2023, PLNL entered into a new gas sales contract with NGC (the New NGC Contract), which is effective October 2023 through December 2025.

In the third quarter of 2023 and due to the terms of the New NGC Contract, we assessed our investment in PLNL for impairment and determined that the carrying value of our equity method investment in PLNL exceeded its fair value.

As a result, we recorded an impairment of our equity method investment in PLNL of $43 million, which is reflected in equity in (losses) earnings of operating affiliate on our consolidated statements of operations for the three and nine months ended September 30, 2023.

Pension settlement loss

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.

Canada Revenue Agency Competent Authority Matter

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The letters of credit served as security until the matter was resolved.

In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between

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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 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.

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See Note 9—Income Taxes for additional information.

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

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In the nine months ended September 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 $103 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.

Of the $78 million of income tax provision and $103 million of net interest expense recognized in the nine months ended September 30, 2022, a reduction of $1 million of net interest expense was recognized in the three months ended September 30, 2022.

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:

Based on this evaluation, for the nine months ended September 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 $123 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 $33 million related to the noncurrent income tax receivables.

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.

In the nine months ended September 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 $29 million of net deferred income tax provision for other transfer pricing tax effects, was $16 million of income tax benefit and $90 million of net interest expense before tax ($98 million after tax).

Of the $16 million of income tax benefit and $90 million of net interest expense recognized in the nine months ended September 30, 2022, $3 million of income tax provision and $4 million of net interest expense ($5 million after tax) was recognized in the three months ended September 30, 2022.

Loss on debt extinguishment

4 unchanged sentences

Consolidated Results of Operations

The following table presents our consolidated results of operations for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

The following table presents our consolidated results of operations for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 v.

11 unchanged sentences

Total other operating costs and expenses 97 186 (89) (48) % 228 493 (265) (54) %

Equity in earnings of operating affiliate 7 28 (21) (75) % 24 54 (30) (56) %

Equity in (losses) earnings of operating affiliate (36) 20 (56) N/M (12) 74 (86) N/M

Operating earnings 244 750 (506) (67) % 1,804 4,186 (2,382) (57) %

16 unchanged sentences

CF INDUSTRIES HOLDINGS, INC.

The following table presents certain supplemental data for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

The following table presents certain supplemental data for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 v.

5 unchanged sentences

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

0.01 0.10 (0.09) (90) % 0.70 (0.04) 0.74 N/M

0.01 (0.15) 0.16 N/M 0.47 (0.08) 0.55 N/M

Cost of natural gas used for production in cost of sales $ 2.54 $ 8.35 $ (5.81) (70) % $ 3.90 $ 7.28 $ (3.38) (46) %

Average daily market price of natural gas Henry Hub (Louisiana) $ 2.58 $ 7.96 $ (5.38) (68) % $ 2.46 $ 6.66 $ (4.20) (63) %

Unrealized net mark-to-market gain on natural gas derivatives $ — $ (17) $ 17 (100) % $ (72) $ (50) $ (22) (44) %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 7 $ 11 $ (4) (36) % $ (65) $ (39) $ (26) (67) %

Depreciation and amortization $ 213 $ 221 $ (8) (4) % $ 640 $ 652 $ (12) (2) %

13 unchanged sentences

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

Second Quarter of 2023 Compared to Second Quarter of 2022

Our total net sales decreased $1.61 billion, or 48%, to $1.78 billion in the second quarter of 2023 compared to $3.39 billion in the second quarter of 2022 due primarily to a decrease in average selling prices.

Our average selling price was $359 per ton in the second quarter of 2023, or 49% lower compared to $701 per ton in the second quarter of 2022, due to lower average selling prices across all of our segments.

The impact of lower average selling prices was a decrease in net sales of approximately $1.66 billion for the second quarter of 2023 compared to the second quarter of 2022.

Third Quarter of 2023 Compared to Third Quarter of 2022

Our total net sales decreased $1.05 billion, or 45%, to $1.27 billion in the third quarter of 2023 compared to $2.32 billion in the third quarter of 2022 due primarily to a decrease in average selling prices, partially offset by an increase in sales volume.

Our average selling price was $268 per ton in the third quarter of 2023, or 49% lower compared to $527 per ton in the third quarter of 2022, due to lower average selling prices across all of our segments.

The impact of lower average selling prices was a decrease in net sales of approximately $1.22 billion for the third quarter of 2023 compared to the third quarter of 2022.

The decrease in average selling prices reflects the impact of an increase in global supply availability as lower global energy costs drove higher global operating rates.

Our total sales volume of 4.9 million product tons in the second quarter of 2023 was 2% higher compared to 4.8 million product tons in the second quarter of 2022 due primarily to higher sales volume in our UAN segment, partially offset by lower sales volume in our AN segment.

Gross ammonia production for the three and six months ended June 30, 2023 was 2.4 million tons and 4.7 million tons, respectively.

We expect gross ammonia production for 2023 will be in a range of 9.0 million to 9.5 million tons as we have a proposed plan to permanently close the ammonia plant at our Billingham, U.K.

Cost of Sales

Our total cost of sales decreased $427 million, or 31%, to $971 million in the second quarter of 2023 from $1.40 billion in the second quarter of 2022.

The decrease in our cost of sales was due primarily to lower costs for natural gas, which

Our total sales volume of 4.7 million product tons in the third quarter of 2023 was 8% higher compared to 4.4 million product tons in the third quarter of 2022 due primarily to higher sales volume in our UAN, Ammonia, and Other segments, partially offset by lower sales volume in our Granular Urea segment.

Gross ammonia production for the three and nine months ended September 30, 2023 was 2.2 million tons and 7.0 million tons, respectively.

We expect gross ammonia production for 2023 will be in a range of 9.0 million to 9.5 million tons as we have an approved plan to permanently close the ammonia plant at our Billingham, U.K.

CF INDUSTRIES HOLDINGS, INC.

decreased cost of sales by $360 million, including the impact of realized derivatives, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

Lower natural gas costs were partially offset by the cost to import ammonia in the second quarter of 2023 for our U.K.

Cost of sales averaged $196 per ton in the second quarter of 2023 compared to $289 per ton in the second quarter of 2022.

Our cost of natural gas decreased 61% to $2.75 per MMBtu in the second quarter of 2023 from $7.05 per MMBtu in the second quarter of 2022.

Cost of Sales

Our total cost of sales decreased $509 million, or 36%, to $896 million in the third quarter of 2023 from $1.41 billion in the third quarter of 2022.

The decrease in our cost of sales was due primarily to lower costs for natural gas, including the impact of realized derivatives, which decreased cost of sales by $496 million, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

Lower natural gas costs include the benefit of no longer purchasing natural gas in the United Kingdom for ammonia production.

The decrease in our cost of sales from lower natural gas costs was partially offset by the cost to import ammonia in the third quarter of 2023 for our U.K.

Cost of sales averaged $189 per ton in the third quarter of 2023 compared to $319 per ton in the third quarter of 2022.

Our cost of natural gas decreased 70% to $2.54 per MMBtu in the third quarter of 2023 from $8.35 per MMBtu in the third quarter of 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $71 million in the second quarter of 2023, essentially unchanged from $73 million in the second quarter of 2022.

In the three months ended June 30, 2022, we recognized total charges of $162 million consisting of $152 million of asset impairment charges primarily related to property, plant and equipment at our Ince, U.K.

facility and $10 million of post-employment benefits related to contractual and statutory obligations.

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

operations,” above, for further discussion.

Selling, general and administrative expenses were $68 million in the third quarter of 2023, a 3% increase from $66 million in the third quarter of 2022.

In the three months ended September 30, 2023, we recognized total charges of $5 million, consisting primarily of the recognition of an asset retirement obligation and post-employment benefits related to contractual and statutory obligations due to employees as a result of our approved plan to permanently close the Billingham ammonia plant.

In the three months ended September 30, 2022, we recognized total charges of $95 million consisting of $87 million of asset impairment charges primarily related to property, plant and equipment at our Billingham, U.K.

facility and definite-lived intangible assets and $8 million of restructuring charges primarily related to one-time termination benefits.

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

Transaction Costs

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three months ended June 30, 2023, we incurred $3 million of transaction costs related to the acquisition agreement.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $7 million in the second quarter of 2023 compared to $28 million in the second quarter of 2022.

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

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the three months ended September 30, 2023, we incurred $11 million of transaction costs related to the acquisition agreement.

Other Operating—Net

Other operating—net was $13 million of expense in the third quarter of 2023 compared to $25 million of expense in the third quarter of 2022.

The decrease of $12 million in other operating—net was due primarily to a loss on foreign currency transactions of $7 million in the third quarter of 2023 compared to $27 million in the third quarter of 2022.

Equity in (Losses) Earnings of Operating Affiliate

Equity in (losses) earnings of operating affiliate was $36 million of losses in the third quarter of 2023 compared to $20 million of earnings in the third quarter of 2022.

The $36 million of losses in the third quarter of 2023 includes an impairment of our equity method investment in PLNL of $43 million.

See “Items Affecting Comparability of Results—Impairment of equity method investment in PLNL,” above, for further discussion.

Lower equity in earnings of operating affiliate also reflects a decrease in the operating results of PLNL as a result of lower ammonia selling prices, partially offset by lower natural gas costs.

Interest Expense

Interest expense was $36 million in the second quarter of 2023 compared to $82 million in the second quarter of 2022.

The decrease of $46 million was due primarily to $42 million of tax-related interest expense recorded in the second quarter of 2022, including $30 million of interest expense related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

Interest expense was $39 million in the third quarter of 2023 compared to $46 million in the third quarter of 2022.

The decrease of $7 million was due primarily to $6 million of tax-related interest expense recorded in the third quarter of 2022 that did not recur in the third quarter of 2023 and was related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

CF INDUSTRIES HOLDINGS, INC.

Interest Income

Interest income was $40 million in the second quarter of 2023 compared to $8 million in the second quarter of 2022.

The increase of $32 million was due primarily to higher interest income on short-term investments, which are included in cash and cash equivalents in our consolidated balance sheet.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million in the second quarter of 2022 is described under “Items Affecting Comparability of Results—Loss on debt extinguishment,” above.

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.

Interest income was $45 million in the third quarter of 2023 compared to $12 million in the third quarter of 2022.

The increase of $33 million reflects higher interest income on short-term investments due primarily to higher interest rates.

Short-term investments are included in cash and cash equivalents in our consolidated balance sheet.

Other Non-Operating—Net

Other non-operating—net was $3 million of income in the third quarter of 2023 compared to $23 million of expense in the third quarter of 2022.

The $23 million of expense in the third quarter of 2022 was due primarily to a pension settlement loss of $24 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, which is more fully described under “Items Affecting Comparability of Results—Pension settlement loss,” above.

For the three months ended September 30, 2023, we recorded an income tax provision of $23 million on pre-tax income of $253 million, or an effective tax rate of 9.1%, compared to an income tax provision of $155 million on pre-tax income of $693 million, or an effective tax rate of 22.3%, for the three months ended September 30, 2022.

For the three months ended September 30, 2023, our income tax provision includes a $9 million income tax benefit arising from the finalization of tax return filing positions and adjustments to accrued withholding taxes as a result of changes reflected on our filed U.S.

federal return.

This income tax benefit in relation to pre-tax income of $253 million contributed to a lower effective tax rate in the third quarter of 2023 compared to the U.S.

statutory rate of 21%.

For the three months ended September 30, 2022, our income tax provision includes $18 million of income tax expense to record a valuation allowance in the United Kingdom due to the uncertainty surrounding the realization of the deferred tax assets as a result of the impairment described in Note 5—United Kingdom Operations Restructuring.

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

Our effective tax rate for the three months ended 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, or 20.3%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $79 million.

Our effective tax rate for the

CF INDUSTRIES HOLDINGS, INC.

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, or 23.5%, if based on pre-tax income exclusive of the $174 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended September 30, 2023 of 9.1%, which is based on pre-tax income of $253 million, including $66 million of earnings attributable to the noncontrolling interest, would be 3.2 percentage points higher, or 12.3%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $66 million.

Our effective tax rate for the three months ended September 30, 2022 of 22.3%, which is based on pre-tax income of $693 million, including $100 million of earnings attributable to the noncontrolling interest, would be 3.7 percentage points higher, or 26.0%, if based on pre-tax income exclusive of the $100 million of earnings attributable to the noncontrolling interest.

See Note 14—Noncontrolling Interest for additional information.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest decreased $95 million to $79 million in the second quarter of 2023 compared to $174 million in the second quarter of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Net earnings attributable to noncontrolling interest decreased $34 million to $66 million in the third quarter of 2023 compared to $100 million in the third quarter of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased $2.88 to $2.70 per diluted share in the second quarter of 2023 from $5.58 per diluted share in the second quarter of 2022.

This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices.

The impact of lower selling prices was partially offset by lower natural gas costs, which increased gross margin by approximately $360 million.

In addition, lower gross margin was partially offset by pre-tax impairment and restructuring charges related to our U.K.

operations of $162 million in the second quarter of 2022 that did not recur in the second quarter of 2023 and a decrease in the income tax provision resulting from lower profitability.

Additionally, diluted weighted-average common shares outstanding declined 7% from 208.9 million shares for the three months ended June 30, 2022 to 195.0 million shares for the three months ended June 30, 2023, due primarily to repurchases of common shares under our share repurchase programs.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Our total net sales decreased $2.47 billion, or 39%, to $3.79 billion in the first six months of 2023 as compared to $6.26 billion in the first six months of 2022 due primarily to a decrease in average selling prices.

Our average selling price was $400 per ton in the first six months of 2023, or 39% lower compared to $661 per ton in the first six months of 2022, due to lower average selling prices across all of our segments, primarily driven by an increase in global supply availability as lower global energy costs drove higher global operating rates.

The impact of lower average selling prices was a decrease in net sales of approximately $2.47 billion for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Diluted net earnings per share attributable to common stockholders decreased $1.33 to $0.85 per share in the third quarter of 2023 from $2.18 per share in the third quarter of 2022.

This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices, partially offset by lower natural gas costs.

Lower gross margin was partially offset by a decrease in the income tax provision resulting from lower profitability and pre-tax impairment and restructuring charges related to our U.K.

operations of $95 million in the third quarter of 2022 compared to $5 million in the third quarter of 2023.

Additionally, diluted weighted-average common shares outstanding declined 4% from 200.9 million shares for the three months ended September 30, 2022 to 192.9 million shares for the three months ended September 30, 2023, due primarily to repurchases of common shares under our share repurchase programs.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Our total net sales decreased $3.52 billion, or 41%, to $5.06 billion in the first nine months of 2023 compared to $8.58 billion in the first nine months of 2022 due primarily to a 42% decrease in average selling prices.

CF INDUSTRIES HOLDINGS, INC.

Our average selling price was $356 per ton in the first nine months of 2023 compared to $619 per ton in the first nine months of 2022, due to lower average selling prices across all of our segments, primarily driven by an increase in global supply availability due to higher global inventories entering 2023 and lower global energy costs, which drove higher global operating rates.

The impact of lower average selling prices was a decrease in net sales of approximately $3.68 billion for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Cost of Sales

Our total cost of sales decreased $448 million, or 17%, to $2.12 billion in the first six months of 2023 from $2.57 billion in the first six months of 2022.

The decrease in our cost of sales was due primarily to lower costs for natural gas, which decreased cost of sales by $332 million, including the impact of realized derivatives, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

Lower natural gas costs were partially offset by the cost to import ammonia in the first six months of 2023 for our U.K.

Cost of sales also includes the impact of a $72 million unrealized net mark-to-market gain on natural gas derivatives in the first six months of 2023 compared to a $50 million gain in the first six months of 2022.

Cost of sales averaged $224 per ton in the first six months of 2023 compared to $271 per ton in the first six months of 2022.

Our cost of natural gas decreased 33% to $4.56 per MMBtu in the first six months of 2023 from $6.79 per MMBtu in the first six months of 2022.

Our total cost of sales decreased $957 million, or 24%, to $3.02 billion in the first nine months of 2023 from $3.97 billion in the first nine months of 2022.

The decrease in our cost of sales was due primarily to lower costs for natural gas, including the impact of realized derivatives, which decreased cost of sales by $828 million, and lower costs for ammonia purchased from PLNL, our joint venture in Trinidad.

Lower natural gas costs include the benefit of no longer purchasing natural gas in the United Kingdom for ammonia production.

The decrease in our cost of sales from lower natural gas costs was partially offset by the cost to import ammonia in the first nine months of 2023 for our U.K.

Cost of sales also includes the impact of a $65 million unrealized net mark-to-market gain on natural gas derivatives in the first nine months of 2023 compared to a $39 million gain in the first nine months of 2022.

Cost of sales averaged $212 per ton in the first nine months of 2023 compared to $287 per ton in the first nine months of 2022.

Our cost of natural gas decreased 46% to $3.90 per MMBtu in the first nine months of 2023 from $7.28 per MMBtu in the first nine months of 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $8 million to $145 million in the first six months of 2023 as compared to $137 million in the first six months of 2022.

Selling, general and administrative expenses increased $10 million to $213 million in the first nine months of 2023 compared to $203 million in the first nine months of 2022.

The increase was due primarily to higher costs related to certain corporate initiatives, including higher amortization due to our recently implemented enterprise resource planning (ERP) system.

In the first six months of 2022, we recognized total charges of $162 million consisting of $152 million of asset impairment charges primarily related to property, plant and equipment at our Ince, U.K.

facility and $10 million of post-employment benefits related to contractual and statutory obligations.

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

operations,” above, for further discussion.

CF INDUSTRIES HOLDINGS, INC.

In the first nine months of 2023, we recognized total charges of $7 million, consisting primarily of the recognition of an asset retirement obligation and post-employment benefits related to contractual and statutory obligations due to employees as a result of our approved plan to permanently close the Billingham ammonia plant in the third quarter of 2023.

In the first nine months of 2022, we recognized total charges of $257 million, consisting of $239 million of asset impairment charges primarily related to property, plant and equipment at our Billingham and Ince facilities and $18 million of restructuring charges primarily related to post-employment benefits related to contractual and statutory obligations and one-time termination benefits.

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

Transaction Costs

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the six months ended June 30, 2023, we incurred $16 million of transaction costs related to the acquisition agreement.

On March 20, 2023, we entered into an asset purchase agreement with DNLA and IPL to acquire DNLA’s ammonia production complex located in Waggaman, Louisiana, as described above under “Agreement to Purchase Ammonia Production Facility.” In the nine months ended September 30, 2023, we incurred $27 million of transaction costs related to the acquisition agreement.

Other Operating—Net

Other operating—net was $32 million of income in the first six months of 2023 compared to $8 million of expense in the first six months of 2022.

The $32 million of income in the first six months of 2023 consists primarily of gains on the sales of emission credits.

Equity in Earnings of Operating Affiliate

Equity in earnings of operating affiliate was $24 million in the first six months of 2023 compared to $54 million in the first six months of 2022.

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

Other operating—net was $19 million of income in the first nine months of 2023 compared to $33 million of expense in the first nine months of 2022.

The $19 million of income in the first nine months of 2023 consists primarily of gains on the sales of emission credits, partially offset by FEED study costs for our proposed plans to construct an export-oriented blue ammonia facility with Mitsui, and a loss on foreign currency transactions of $5 million.

See “Our Commitment to a Clean Energy Economy,” above, for additional information related to our proposed joint venture with Mitsui.

The $33 million of expense in the first nine months of 2022 consists primarily of a loss on foreign currency transactions of $38 million.

Equity in (Losses) Earnings of Operating Affiliate

Equity in (losses) earnings of operating affiliate was $12 million of losses in the first nine months of 2023 compared to $74 million of earnings in the first nine months of 2022.

The $12 million of losses in the first nine months of 2023 includes an

CF INDUSTRIES HOLDINGS, INC.

impairment of our equity method investment in PLNL of $43 million recognized in the third quarter of 2023.

See “Items Affecting Comparability of Results—Impairment of equity method investment in PLNL,” above, for further discussion.

Lower equity in earnings of operating affiliate also reflects a decrease in the operating results of PLNL as a result of lower ammonia selling prices, partially offset by lower natural gas costs.

Interest Expense

Interest expense was $76 million in the first six months of 2023 compared to $323 million in the first six months of 2022.

The decrease of $247 million was due primarily to $240 million of tax-related interest expense recorded in the first six months of 2022, including $228 million of interest expense related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

Interest expense was $115 million in the first nine months of 2023 compared to $369 million in the first nine months of 2022.

The decrease of $254 million was due primarily to $246 million of tax-related interest expense recorded in the first nine months of 2022, including $234 million of interest expense related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

In addition, the decrease in interest expense was due to lower interest expense on borrowings due to the redemption of $500 million principal amount of the 2023 Notes in April 2022 prior to their scheduled maturity.

Interest Income

Interest income was $70 million in the first six months of 2023 compared to $44 million in the first six months of 2022.

The increase of $26 million was due primarily to a $52 million increase in interest income on short-term investments in the first six months of 2023 and interest income recorded in the first six months of 2022 that did not recur in the first six months of 2023, which was related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

Interest income was $115 million in the first nine months of 2023 compared to $56 million in the first nine months of 2022.

The increase of $59 million reflects an $84 million increase in interest income on short-term investments in the first nine months of 2023 due primarily to higher interest rates.

Partially offsetting this was interest income recorded in the first nine months of 2022 that did not recur in the first nine months of 2023, which was related to income tax matters described under “Items Affecting Comparability of Results—Canada Revenue Agency Competent Authority Matter” and “Items Affecting Comparability of Results—Transfer pricing positions,” above.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million in the first six months of 2022 is described under “Items Affecting Comparability of Results—Loss on debt extinguishment,” above.

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.

Loss on debt extinguishment of $8 million in the first nine months of 2022 is described under “Items Affecting Comparability of Results—Loss on debt extinguishment,” above.

For the nine months ended September 30, 2023, we recorded an income tax provision of $326 million on pre-tax income of $1.81 billion, or an effective tax rate of 18.0%, compared to an income tax provision of $913 million on pre-tax income of $3.84 billion, or an effective tax rate of 23.8%, for the nine months ended September 30, 2022.

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, or 21.8%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $169 million.

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, or 27.0%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $342 million.

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, which is described above under “Items Affecting Comparability of Results.”

CF INDUSTRIES HOLDINGS, INC.

Our effective tax rate for the nine months ended September 30, 2023 of 18.0%, which is based on pre-tax income of $1.81 billion, including $235 million of earnings attributable to the noncontrolling interest, would be 2.7 percentage points higher, or 20.7%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $235 million.

Our effective tax rate for the nine months ended September 30, 2022 of 23.8%, which is based on pre-tax income of $3.84 billion, including $442 million of earnings attributable to the noncontrolling interest, would be 3.1 percentage points higher, or 26.9%, if based on pre-tax income exclusive of the earnings attributable to the noncontrolling interest of $442 million.

In addition, for the nine months ended September 30, 2022, our income tax provision includes $18 million of income tax expense to record a valuation allowance in the United Kingdom, $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, which is described above under “Items Affecting Comparability of Results.”

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest decreased $173 million to $169 million in the first six months of 2023 compared to $342 million in the first six months of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Net earnings attributable to noncontrolling interest decreased $207 million to $235 million in the first nine months of 2023 compared to $442 million in the first nine months of 2022 due to lower earnings of CFN driven by lower average selling prices as described above under “Net Sales.”

Diluted Net Earnings Per Share Attributable to Common Stockholders

Net earnings per share attributable to common stockholders decreased $4.23 to $5.55 per diluted share in the first six months of 2023 from $9.78 per diluted share in the first six months of 2022.

This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices.

Lower gross margin was partially offset by a decrease in interest expense due primarily to interest expense on tax liabilities in the first half of 2022 related to Canadian-U.S.

transfer pricing matters that did not recur in the first half of 2023, a decrease in the income tax provision resulting from lower profitability, and pre-tax impairment and restructuring charges related to our U.K.

operations of $162 million in the first half of 2022 that did not recur in the first half of 2023.

Additionally, diluted weighted-average common shares outstanding declined 6% from 209.4 million shares for the six months ended June 30, 2022 to 195.9 million shares for the six months ended June 30, 2023, due primarily to repurchases of common shares under our share repurchase programs.

Diluted net earnings per share attributable to common stockholders decreased $5.62 to $6.42 per share in the first nine months of 2023 from $12.04 per share in the first nine months of 2022.

This decrease was due primarily to a decrease in gross margin, driven by lower average selling prices, partially offset by lower costs for natural gas.

Lower gross margin was partially offset by a decrease in the income tax provision resulting from lower profitability, a decrease in interest expense due primarily to interest expense on tax liabilities in the first nine months of 2022 related to Canadian-U.S.

transfer pricing matters that did

CF INDUSTRIES HOLDINGS, INC.

not recur in the first nine months of 2023, and pre-tax impairment and restructuring charges related to our U.K.

operations of $257 million in the first nine months of 2022 compared to $7 million in the first nine months of 2023.

Additionally, diluted weighted-average common shares outstanding declined 6% from 206.5 million shares for the nine months ended September 30, 2022 to 194.9 million shares for the nine months ended September 30, 2023, due primarily to repurchases of common shares under our share repurchase programs.

Operating Results by Business Segment

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(dollars in millions)

Three months ended June 30, 2023

Three months ended September 30, 2023

Net sales $ 235 $ 360 $ 435 $ 114 $ 129 $ 1,273

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Gross margin percentage 8.9 % 37.2 % 30.6 % 30.7 % 41.9 % 29.6 %

Three months ended June 30, 2022

Three months ended September 30, 2022

Net sales $ 531 $ 689 $ 736 $ 180 $ 185 $ 2,321

2 unchanged sentences

Gross margin percentage 33.5 % 42.8 % 43.8 % 24.4 % 41.6 % 39.5 %

Six months ended June 30, 2023

Nine months ended September 30, 2023

Net sales $ 1,184 $ 1,431 $ 1,650 $ 377 $ 418 $ 5,060

2 unchanged sentences

Gross margin percentage 32.7 % 45.8 % 43.2 % 30.0 % 41.9 % 40.4 %

Six months ended June 30, 2022

Nine months ended September 30, 2022

Net sales $ 2,286 $ 2,287 $ 2,727 $ 656 $ 622 $ 8,578

10 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 v.

15 unchanged sentences

Depreciation and amortization $ 39 $ 35 $ 4 11 % $ 117 $ 119 $ (2) (2) %

Unrealized net mark-to-market gain on natural gas derivatives $ — $ (2) $ 2 100 % $ (21) $ (10) $ (11) (110) %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 2 $ 4 $ (2) 50 % $ (19) $ (6) $ (13) (217) %

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1 unchanged sentence

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

Second Quarter of 2023 Compared to Second Quarter of 2022

Net sales in our Ammonia segment decreased by $590 million, or 53%, to $525 million in the second quarter of 2023 from $1.12 billion in the second quarter of 2022 due to a 54% decrease in average selling prices, partially offset by a 2% increase in sales volume.

Average selling prices decreased to $499 per ton in the second quarter of 2023 compared to $1,077 per ton in the second quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume was higher due primarily to higher beginning inventory.

Third Quarter of 2023 Compared to Third Quarter of 2022

Net sales in our Ammonia segment decreased by $296 million, or 56%, to $235 million in the third quarter of 2023 from $531 million in the third quarter of 2022 due to a 63% decrease in average selling prices, partially offset by a 19% increase in sales volume.

Average selling prices decreased to $308 per ton in the third quarter of 2023 compared to $826 per ton in the third quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due primarily to higher supply availability resulting from higher beginning inventory.

Cost of Sales.

Cost of sales in our Ammonia segment averaged $288 per ton in the second quarter of 2023, a 33% decrease from $427 per ton in the second quarter of 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives, and a lower cost per ton for ammonia purchased from PLNL, our joint venture in Trinidad.

Cost of sales in our Ammonia segment averaged $281 per ton in the third quarter of 2023, a 49% decrease from $549 per ton in the third quarter of 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives, a lower cost per ton for ammonia purchased from PLNL, our joint venture in Trinidad, and lower manufacturing and maintenance costs.

Gross Margin .

Gross margin in our Ammonia segment decreased by $451 million to $222 million in the second quarter of 2023 from $673 million in the second quarter of 2022, and our gross margin percentage was 42.3% in the second quarter of 2023 compared to 60.4% in the second quarter of 2022 .

The decrease in gross margin was due primarily to the following:

(i) a 54% decrease in average selling prices, which decreased gross margin by $605 million, (ii) the impact of changes in sales volume and mix, which decreased gross margin by $28 million, and (iii) an $8 million net increase in manufacturing, maintenance and other costs.

These factors that decreased gross margin were partially offset by a lower cost per ton for purchased product, which increased gross margin by $109 million, and a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $83 million.

Gross margin in the second quarter of 2022 included the impact of a $2 million unrealized net mark-to-market gain on natural gas derivatives.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our Ammonia segment decreased by $806 million, or 46%, to $949 million in the six months ended June 30, 2023 from $1.76 billion in the six months ended June 30, 2022 due to a 44% decrease in average selling prices and a 3% decrease in sales volume.

Average selling prices decreased to $557 per ton in the six months ended June 30, 2023 compared to $996 per ton in the six months ended June 30, 2022 due primarily to an increase in global supply availability as

Gross margin in our Ammonia segment decreased by $157 million to $21 million in the third quarter of 2023 from $178 million in the third quarter of 2022, and our gross margin percentage was 8.9% in the third quarter of 2023 compared to 33.5% in the third quarter of 2022 .

The decrease in gross margin was due primarily to a 63% decrease in average selling prices, which decreased gross margin by $391 million.

This decrease in gross margin was partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $121 million, a net decrease in manufacturing, maintenance and other costs, which increased gross margin by $57 million, and an increase in sales volume, which increased gross margin by $54 million.

Gross margin in the third quarter of 2023 also includes the impact of a $2 million unrealized net mark-to-market loss on natural gas derivatives compared to a $4 million loss in the third quarter of 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales in our Ammonia segment decreased by $1.10 billion, or 48%, to $1.18 billion in the nine months ended September 30, 2023 from $2.29 billion in the nine months ended September 30, 2022 due to a 50% decrease in average selling prices, partially offset by a 3% increase in sales volume.

Average selling prices decreased to $480 per ton in the nine

CF INDUSTRIES HOLDINGS, INC.

lower global energy costs drove higher global operating rates.

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

months ended September 30, 2023 compared to $951 per ton in the nine months ended September 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Cost of Sales.

Cost of sales in our Ammonia segment averaged $342 per ton in the six months ended June 30, 2023, a 17% decrease from $410 per ton in the six months ended June 30, 2022.

The decrease was due primarily to a lower cost per ton for ammonia purchased from PLNL, our joint venture in Trinidad, and lower realized natural gas costs, including the impact of realized derivatives.

Cost of sales in our Ammonia segment averaged $323 per ton in the nine months ended September 30, 2023, a 28% decrease from $447 per ton in the nine months ended September 30, 2022.

Gross Margin .

Gross margin in our Ammonia segment decreased by $667 million to $366 million in the six months ended June 30, 2023 from $1.03 billion in the six months ended June 30, 2022, and our gross margin percentage was 38.6% in the six months ended June 30, 2023 compared to 58.9% in the six months ended June 30, 2022 .

The decrease in gross margin was due primarily to a 44% decrease in average selling prices, which decreased gross margin by $749 million, a 3% decrease in sales volume, which decreased gross margin by $91 million, and a $12 million net increase in manufacturing, maintenance and other costs.

These factors that decreased gross margin were partially offset by a lower cost per ton for purchased product, which increased gross margin by $138 million, and a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $36 million.

Gross margin also includes the impact of a $21 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to a $10 million gain in the six months ended June 30, 2022.

Gross margin in our Ammonia segment decreased by $824 million to $387 million in the nine months ended September 30, 2023 from $1.21 billion in the nine months ended September 30, 2022, and our gross margin percentage was 32.7% in the nine months ended September 30, 2023 compared to 53.0% in the nine months ended September 30, 2022 .

The decrease in gross margin was due primarily to a 50% decrease in average selling prices, which decreased gross margin by $1.14 billion, and the impact of changes in sales volume and mix, which decrease d gross margin by $37 million.

These factors that decreased gross margin were partially offset by a net decrease in manufacturing, maintenance and other costs, which increased gross margin by $183 million, and a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $157 million.

Gross margin also includes the impact of a $19 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2023 compared to a $6 million gain in the nine months ended September 30, 2022.

Granular Urea Segment

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

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 v.

15 unchanged sentences

Depreciation and amortization $ 66 $ 79 $ (13) (16) % $ 216 $ 213 $ 3 1 %

Unrealized net mark-to-market gain on natural gas derivatives $ — $ (1) $ 1 100 % $ (20) $ (8) $ (12) (150) %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 2 $ 4 $ (2) (50) % $ (18) $ (4) $ (14) (350) %

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1 unchanged sentence

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

Second Quarter of 2023 Compared to Second Quarter of 2022

Net sales in our Granular Urea segment decreased $373 million, or 45%, to $460 million in the second quarter of 2023 from $833 million in the second quarter of 2022 due primarily to a 43% decrease in average selling prices and a 3% decrease in sales volume.

Average selling prices decreased to $401 per ton in the second quarter of 2023 compared to $705 per ton in the second quarter of 2022, due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and new global production came on line.

Sales volume was lower due primarily to lower supply availability resulting from lower beginning inventory and lower production.

Third Quarter of 2023 Compared to Third Quarter of 2022

Net sales in our Granular Urea segment decreased $329 million, or 48%, to $360 million in the third quarter of 2023 from $689 million in the third quarter of 2022 due primarily to a 38% decrease in average selling prices and a 16% decrease in sales volume.

Average selling prices decreased to $339 per ton in the third quarter of 2023 compared to $546 per ton in the third quarter of 2022, due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and new global production came on line.

Sales volume was lower due primarily to lower supply availability resulting from lower production and lower beginning inventory.

CF INDUSTRIES HOLDINGS, INC.

Cost of Sales.

Cost of sales in our Granular Urea segment averaged $194 per ton in the second quarter of 2023 compared to $304 per ton in the second quarter of 2022.

Cost of sales in our Granular Urea segment averaged $213 per ton in the third quarter of 2023 compared to $312 per ton in the third quarter of 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our Granular Urea segment decreased by $235 million to $238 million in the second quarter of 2023 from $473 million in the second quarter of 2022, and our gross margin percentage was 51.7% in the second quarter of 2023 compared to 56.8% in the second quarter of 2022.

The decrease in gross margin was due primarily to a 43% decrease in average selling prices, which decreased gross margin by $360 million.

The decrease in average selling prices was partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $106 million, the impact of volume and price mix, which increased gross margin by $15 million, and a $5 million net decrease in manufacturing, maintenance and other costs.

Gross margin in the second quarter of 2022 included the impact of an unrealized net mark-to-market gain on natural gas derivatives of $1 million.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our Granular Urea segment decreased $527 million, or 33%, to $1.07 billion in the six months ended June 30, 2023 from $1.60 billion in the six months ended June 30, 2022 due primarily to a 38% decrease in average selling prices, partially offset by an 8% increase in sales volume.

Average selling prices decreased to $434 per ton in the six months ended June 30, 2023 compared to $702 per ton in the six months ended June 30, 2022, due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and new global production came on line.

Sales volume was higher due primarily to greater supply availability resulting from higher production and higher beginning inventory.

Gross margin in our Granular Urea segment decreased by $161 million to $134 million in the third quarter of 2023 from $295 million in the third quarter of 2022, and our gross margin percentage was 37.2% in the third quarter of 2023 compared to 42.8% in the third quarter of 2022.

The decrease in gross margin was due primarily to a 38% decrease in average selling prices, which decreased gross margin by $217 million, a 16% decrease in sales volume, which decreased gross margin by $54 million, and a net increase in manufacturing, maintenance and other costs, which decreased gross margin by $4 million.

These factors that decreased gross margin were partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $112 million.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales in our Granular Urea segment decreased $856 million, or 37%, to $1.43 billion in the nine months ended September 30, 2023 from $2.29 billion in the nine months ended September 30, 2022 due primarily to a 37% decrease in average selling prices.

Average selling prices decreased to $405 per ton in the nine months ended September 30, 2023 compared to $646 per ton in the nine months ended September 30, 2022, due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and new global production came on line.

Cost of Sales.

Cost of sales in our Granular Urea segment averaged $223 per ton in the six months ended June 30, 2023 compared to $277 per ton in the six months ended June 30, 2022.

Cost of sales in our Granular Urea segment averaged $219 per ton in the nine months ended September 30, 2023 compared to $289 per ton in the nine months ended September 30, 2022.

The decrease was due primarily to lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our Granular Urea segment decreased by $446 million to $522 million in the six months ended June 30, 2023 from $968 million in the six months ended June 30, 2022, and our gross margin percentage was 48.7% in the six months ended June 30, 2023 compared to 60.6% in the six months ended June 30, 2022.

Gross margin in our Granular Urea segment decreased by $607 million to $656 million in the nine months ended September 30, 2023 from $1.26 billion in the nine months ended September 30, 2022, and our gross margin percentage was 45.8% in the nine months ended September 30, 2023 compared to 55.2% in the nine months ended September 30, 2022.

The decrease in gross margin was due primarily to a 37% decrease in average selling prices, which decreased gross margin by $890 million.

The decrease in average selling prices was partially offset by an 8% increase in sales volume, which increased gross margin by $119 million , a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $87 million, and a $9 million net decrease in manufacturing, maintenance and other costs.

Gross margin also includes the impact of a $20 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to an $8 million gain in the six months ended June 30, 2022.

The decrease in average selling prices was partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $199 million, the impact of changes in sales volume and mix, which increased gross margin by $65 million, and a net decrease in manufacturing, maintenance and other costs, which increased gross margin by $5 million.

Gross margin also includes the impact of an $18 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2023 compared to a $4 million gain in the nine months ended September 30, 2022.

CF INDUSTRIES HOLDINGS, INC.

3 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 v.

15 unchanged sentences

Depreciation and amortization $ 78 $ 73 $ 5 7 % $ 214 $ 208 $ 6 3 %

Unrealized net mark-to-market gain on natural gas derivatives $ — $ — $ — — % $ (21) $ (8) $ (13) (163) %

Unrealized net mark-to-market loss (gain) on natural gas derivatives $ 3 $ 4 $ (1) (25) % $ (18) $ (4) $ (14) (350) %

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1 unchanged sentence

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

Second Quarter of 2023 Compared to Second Quarter of 2022

Net sales in our UAN segment decreased $428 million, or 44%, to $548 million in the second quarter of 2023 from $976 million in the second quarter of 2022 due to a 50% decrease in average selling prices, partially offset by an 11% increase in sales volume.

Average selling prices decreased to $303 per ton in the second quarter of 2023 compared to $600 per ton in the second quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and an increase in Russian imports into the United States.

Sales volume was higher due primarily to the impact on second quarter 2022 sales volume of delayed crop planting and fertilizer application driven by unfavorable weather conditions in the second quarter of 2022.

Third Quarter of 2023 Compared to Third Quarter of 2022

Net sales in our UAN segment decreased $301 million, or 41%, to $435 million in the third quarter of 2023 from $736 million in the third quarter of 2022 due to a 50% decrease in average selling prices, partially offset by a 19% increase in sales volume.

Average selling prices decreased to $223 per ton in the third quarter of 2023 compared to $448 per ton in the third quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due primarily to higher supply availability resulting from higher production.

Cost of Sales.

Cost of sales in our UAN segment averaged $160 per ton in the second quarter of 2023, a 24% decrease from $211 per ton in the second quarter of 2022, due primarily to the impact of lower realized natural gas costs, including the impact of realized derivatives.

Cost of sales in our UAN segment averaged $155 per ton in the third quarter of 2023, a 38% decrease from $252 per ton in the third quarter of 2022, due primarily to the impact of lower realized natural gas costs, including the impact of realized derivatives, and lower manufacturing and maintenance costs.

Gross Margin .

Gross margin in our UAN segment decreased by $374 million to $259 million in the second quarter of 2023 from $633 million in the second quarter of 2022, and our gross margin percentage was 47.3% in the second quarter of 2023 compared to 64.9% in the second quarter of 2022.

The decrease in gross margin was due primarily to a 50% decrease in average selling prices, which decreased gross margin by $539 million, and a net increase in manufacturing, maintenance and other costs, which reduced gross margin by $2 million.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our UAN segment decreased $776 million, or 39%, to $1.22 billion in the six months ended June 30, 2023 from $1.99 billion in the six months ended June 30, 2022 due primarily to a 39% decrease in average selling prices.

Average selling prices decreased to $350 per ton in the six months ended June 30, 2023 compared to $576 per ton in the six months ended June 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and an increase in Russian imports into the United States.

Gross margin in our UAN segment decreased by $189 million to $133 million in the third quarter of 2023 from $322 million in the third quarter of 2022, and our gross margin percentage was 30.6% in the third quarter of 2023 compared to 43.8% in the third quarter of 2022.

The decrease in gross margin was due primarily to a 50% decrease in average selling prices, which decreased gross margin by $446 million.

This decrease in gross margin was partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $142 million, a 19% increase in sales volume, which increased gross margin by $84 million, and a net decrease in manufacturing, maintenance and other costs, which increased gross margin by $30 million.

Gross margin in the third quarter of 2023 also includes the impact of a $3 million unrealized net mark-to-market loss on natural gas derivatives compared to a $4 million loss in the third quarter of 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales in our UAN segment decreased $1.08 billion, or 39%, to $1.65 billion in the nine months ended September 30, 2023 from $2.73 billion in the nine months ended September 30, 2022 due primarily to a 43% decrease in average selling prices, partially offset by a 6% increase in sales volume.

Average selling prices decreased to $304 per ton in the nine months ended September 30, 2023 compared to $535 per ton in the nine months ended September 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates and an increase in

CF INDUSTRIES HOLDINGS, INC.

Russian imports into the United States.

The increase in sales volume was due primarily to higher supply availability resulting from higher production.

Cost of Sales.

Cost of sales in our UAN segment averaged $183 per ton in the six months ended June 30, 2023, an 8% decrease from $199 per ton in the six months ended June 30, 2022, due primarily to the impact of lower realized natural gas costs, including the impact of realized derivatives, partially offset by higher production costs.

Cost of sales in our UAN segment averaged $173 per ton in the nine months ended September 30, 2023, a 20% decrease from $216 per ton in the nine months ended September 30, 2022, due primarily to the impact of lower realized natural gas costs, including the impact of realized derivatives.

Gross Margin .

Gross margin in our UAN segment decreased by $723 million to $580 million in the six months ended June 30, 2023 from $1.30 billion in the six months ended June 30, 2022, and our gross margin percentage was 47.7% in the six months ended June 30, 2023 compared to 65.4% in the six months ended June 30, 2022.

The decrease in gross margin was due primarily to a 39% decrease in average selling prices, which decreased gross margin by $798 million, and a net increase in manufacturing, maintenance and other costs, which decreased gross margin by $13 million.

The factors that decreased gross margin were partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $58 million, and an increase in sales volume, which increased gross margin by $17 million .

Gross margin also includes the impact of a $21 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to an $8 million gain in the six months ended June 30, 2022.

Gross margin in our UAN segment decreased by $912 million to $713 million in the nine months ended September 30, 2023 from $1.63 billion in the nine months ended September 30, 2022, and our gross margin percentage was 43.2% in the nine months ended September 30, 2023 compared to 59.6% in the nine months ended September 30, 2022.

The decrease in gross margin was due primarily to a 43% decrease in average selling prices, which decreased gross margin by $1.24 billion.

This decrease in gross margin was partially offset by a decrease in realized natural gas costs, including the impact of realized derivatives, which increased gross margin by $200 million, a 6% increase in sales volume, which increased gross margin by $101 million, and a net decrease in manufacturing, maintenance and other costs, which increased gross margin by $17 million.

Our AN segment produces ammonium nitrate (AN).

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

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 v.

19 unchanged sentences

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

Second Quarter of 2023 Compared to Second Quarter of 2022

Third Quarter of 2023 Compared to Third Quarter of 2022

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

Net sales in our AN segment decreased $149 million, or 59%, to $104 million in the second quarter of 2023 from $253 million in the second quarter of 2022 due to a 51% decrease in average selling prices and a 15% decrease in sales volume.

Average selling prices decreased to $282 per ton in the second quarter of 2023 compared to $580 per ton in the second quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume declined due primarily to weak domestic demand in the United Kingdom.

Cost of Sales.

Cost of sales in our AN segment averaged $220 per ton in the second quarter of 2023, a 36% decrease from $346 per ton in the second quarter of 2022.

The decrease was due primarily to lower production costs for our Billingham complex in the second quarter of 2023 as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the second quarter of 2022.

In addition, the decrease in cost of sales

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location, including nitric acid and aqua ammonia, which are included in our Other segment.

In the third quarter of 2023, we approved our plan to permanently close the ammonia plant at our Billingham complex.

Net sales in our AN segment decreased $66 million, or 37%, to $114 million in the third quarter of 2023 from $180 million in the third quarter of 2022 due to a 45% decrease in average selling prices, partially offset by a 14% increase in sales volume.

Average selling prices decreased to $275 per ton in the third quarter of 2023 compared to $496 per ton in the third quarter of 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume increased due primarily to higher supply availability resulting from higher production.

CF INDUSTRIES HOLDINGS, INC.

per ton reflects lower realized natural gas costs in North America in the second quarter of 2023 compared to the second quarter of 2022.

Cost of Sales.

Cost of sales in our AN segment averaged $190 per ton in the third quarter of 2023, a 49% decrease from $375 per ton in the third quarter of 2022.

The decrease was due primarily to lower production costs for our Billingham complex in the third quarter of 2023, as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the third quarter of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the third quarter of 2023 compared to the third quarter of 2022.

Gross Margin .

Gross margin in our AN segment decreased $79 million to $23 million in the second quarter of 2023 from $102 million in the second quarter of 2022, and our gross margin percentage was 22.1% in the second quarter of 2023 compared to 40.3% in the second quarter of 2022.

Gross margin in our AN segment decreased $9 million to $35 million in the third quarter of 2023 from $44 million in the third quarter of 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 51%, which decreased gross margin by $84 million;

• a decrease in sales volume of 15%, which decreased gross margin by $27 million;

• a decrease in realized natural gas costs, which increased gross margin by $51 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $8 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• the impact of an $11 million unrealized net mark-to-market gain on natural gas derivatives in the second quarter of 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our AN segment decreased $213 million, or 45%, to $263 million in the six months ended June 30, 2023 from $476 million in the six months ended June 30, 2022 due to a 36% decrease in average selling prices and a 14% decrease in sales volume.

Average selling prices decreased to $354 per ton in the six months ended June 30, 2023 compared to $551 per ton in the six months ended June 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

Sales volume declined due primarily to weak domestic demand in the United Kingdom.

• a decrease in average selling prices of 45%, which decreased gross margin by $88 million, partially offset by an increase in sales volume of 14%, which increased gross margin by $5 million;

• a decrease in realized natural gas costs, which increased gross margin by $77 million, due primarily to the closure of our Billingham ammonia plant, partially offset by a net increase in manufacturing, maintenance and other costs of $2 million, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• the impact of a $1 million unrealized net mark-to-market gain on natural gas derivatives in the third quarter of 2022.

Our gross margin percentage was 30.7% in the third quarter of 2023 compared to 24.4% in the third quarter of 2022.

The increase was due primarily to lower production costs for our Billingham complex in the third quarter of 2023 as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the third quarter of 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales in our AN segment decreased $279 million, or 43%, to $377 million in the nine months ended September 30, 2023 from $656 million in the nine months ended September 30, 2022 due to a 39% decrease in average selling prices and a 6% decrease in sales volume.

Average selling prices decreased to $326 per ton in the nine months ended September 30, 2023 compared to $535 per ton in the nine months ended September 30, 2022 due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

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

Cost of Sales.

Cost of sales in our AN segment averaged $249 per ton in the six months ended June 30, 2023, a 33% decrease from $373 per ton in the six months ended June 30, 2022.

The decrease was due primarily to lower production costs for our Billingham complex in the first half of 2023 as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the first half of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the first half of 2023 compared to the first half of 2022.

Cost of sales in our AN segment averaged $228 per ton in the nine months ended September 30, 2023, a 39% decrease from $374 per ton in the nine months ended September 30, 2022.

The decrease was due primarily to lower production costs for our Billingham complex in the first nine months of 2023, as purchased ammonia was used for upgrading into AN as compared to the higher-cost natural gas used to produce ammonia to upgrade into AN in the first nine months of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the first nine months of 2023 compared to the first nine months of 2022.

Gross Margin .

Gross margin in our AN segment decreased $76 million to $78 million in the six months ended June 30, 2023 from $154 million in the six months ended June 30, 2022, and our gross margin percentage was 29.7% in the six months ended June 30, 2023 compared to 32.4% in the six months ended June 30, 2022.

Gross margin in our AN segment decreased $85 million to $113 million in the nine months ended September 30, 2023 from $198 million in the nine months ended September 30, 2022, and our gross margin percentage was 30.0% in the nine months ended September 30, 2023 compared to 30.2% in the nine months ended September 30, 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 36%, which decreased gross margin by $110 million;

• a decrease in realized natural gas costs, which increased gross margin by $106 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $33 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• a decrease in sales volume of 14%, which decreased gross margin by $25 million;

• the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the six months ended June 30, 2023 compared to a $17 million gain in the six months ended June 30, 2022.

• a decrease in average selling prices of 39%, which decreased gross margin by $198 million, and a decrease in sales volume of 6%, which decreased gross margin by $20 million;

• a decrease in realized natural gas costs, which increased gross margin by $183 million, due primarily to the closure of our Billingham ammonia plant, partially offset by a net increase of $35 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the nine months ended September 30, 2023 compared to an $18 million gain in the nine months ended September 30, 2022.

CF INDUSTRIES HOLDINGS, INC.

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

Three Months Ended June 30, Six Months Ended June 30,

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

2023 2022 2023 v.

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

Second Quarter of 2023 Compared to Second Quarter of 2022

Third Quarter of 2023 Compared to Third Quarter of 2022

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

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

Net sales in our Other segment decreased by $74 million, or 35%, to $138 million in the second quarter of 2023 from $212 million in the second quarter of 2022 due to a 35% decrease in average selling prices, partially offset by a 1% increase in sales volume.

Since that time, we have imported ammonia for upgrade into AN and other nitrogen products at that location, including nitric acid and aqua ammonia, which are included in our Other segment.

In the third quarter of 2023, we approved our plan to permanently close the ammonia plant at our Billingham complex.

Net sales in our Other segment decreased by $56 million, or 30%, to $129 million in the third quarter of 2023 from $185 million in the third quarter of 2022 due to a 37% decrease in average selling prices, partially offset by an 11% increase in sales volume.

The decrease in average selling prices was due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

The increase in sales volume was due to higher DEF and nitric acid sales volumes, partially offset by lower urea liquor sales volume.

Cost of Sales.

Cost of sales in our Other segment averaged $135 per ton in the second quarter of 2023, a 27% decrease from $184 per ton in the second quarter of 2022, due primarily to lower production costs for our Billingham complex in the second quarter of 2023 as purchased ammonia was used for upgrading into other nitrogen products as compared to the higher-cost natural gas used to produce ammonia to upgrade into other nitrogen products in the second quarter of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the second quarter of 2023 compared to the second quarter of 2022.

Cost of sales in our Other segment averaged $136 per ton in the third quarter of 2023, a 38% decrease from $218 per ton in the third quarter of 2022, due primarily to lower production costs for our Billingham complex in the third quarter of 2023, as purchased ammonia was used for upgrading into other nitrogen products as compared to the higher-cost natural gas used to produce ammonia to upgrade into other nitrogen products in the third quarter of 2022.

In addition, the decrease in cost of sales per ton reflects lower realized natural gas costs in North America in the third quarter of 2023 compared to the third quarter of 2022.

CF INDUSTRIES HOLDINGS, INC.

Gross Margin .

Gross margin in our Other segment decreased by $48 million to $62 million in the second quarter of 2023 from $110 million in the second quarter of 2022, and our gross margin percentage was 44.9% in the second quarter of 2023 compared to 51.9% in the second quarter of 2022.

Gross margin in our Other segment decreased by $23 million to $54 million in the third quarter of 2023 from $77 million in the third quarter of 2022, and our gross margin percentage was 41.9% in the third quarter of 2023 compared to 41.6% in the third quarter of 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 35%, which decreased gross margin by $76 million;

• a decrease in realized natural gas costs, which increased gross margin by $33 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $6 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• an increase in sales volume of 1%, which increased gross margin by $4 million;

• the impact of a $3 million unrealized net mark-to-market gain on natural gas derivatives in the second quarter of 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net sales in our Other segment decreased by $148 million, or 34%, to $289 million in the six months ended June 30, 2023 from $437 million in the six months ended June 30, 2022 due to a 33% decrease in average selling prices and a 2% decrease in sales volume.

• a decrease in average selling prices of 37%, which decreased gross margin by $74 million, partially offset by an increase in sales volume of 11%, which increased gross margin by $8 million;

• a decrease in realized natural gas costs, which increased gross margin by $44 million, due primarily to the closure of our Billingham ammonia plant, partially offset by a net increase of $1 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Net sales in our Other segment decreased by $204 million, or 33%, to $418 million in the nine months ended September 30, 2023 from $622 million in the nine months ended September 30, 2022 due to a 34% decrease in average selling prices partially offset by a 2% increase in sales volume.

The decrease in average selling prices was due primarily to an increase in global supply availability as lower global energy costs drove higher global operating rates.

The decrease in sales volume was due primarily to lower nitric acid, NPK and urea liquor sales volumes in the six months ended June 30, 2023, partially offset by higher DEF sales volumes.

Cost of Sales.

Cost of sales in our Other segment averaged $155 per ton in the six months ended June 30, 2023, a 17% decrease from $187 per ton in the six months ended June 30, 2022, due primarily to lower production costs for our Billingham complex in the first half of 2023 as purchased ammonia was used for upgrading into other nitrogen products as compared to the higher-cost natural gas used to produce ammonia to upgrade into other nitrogen products in the first half of 2022.

Cost of sales in our Other segment averaged $149 per ton in the nine months ended September 30, 2023, a 24% decrease from $196 per ton in the nine months ended September 30, 2022, due primarily to lower production costs for our Billingham complex in the first nine months of 2023, as purchased ammonia was used for upgrading into other nitrogen products as compared to the higher-cost natural gas used to produce ammonia to upgrade into other nitrogen products in the first nine months of 2022.

Gross Margin .

Gross margin in our Other segment decreased by $110 million to $121 million in the six months ended June 30, 2023 from $231 million in the six months ended June 30, 2022, and our gross margin percentage was 41.9% in the six months ended June 30, 2023 compared to 52.9% in the six months ended June 30, 2022.

Gross margin in our Other segment decreased by $133 million to $175 million in the nine months ended September 30, 2023 from $308 million in the nine months ended September 30, 2022, and our gross margin percentage was 41.9% in the nine months ended September 30, 2023 compared to 49.5% in the nine months ended September 30, 2022.

The decrease in gross margin reflects the following:

• a decrease in average selling prices of 33%, which decreased gross margin by $138 million;

• a decrease in realized natural gas costs, which increased gross margin by $45 million, due primarily to the idling of our Billingham ammonia plant;

• a net increase of $19 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs;

• a decrease in sales volume of 2%, which increased gross margin by $2 million due to favorable product mix.

• a decrease in average selling prices of 34%, which decreased gross margin by $212 million, partially offset by an increase in sales volume of 2%, which increased gross margin by $10 million;

• a decrease in realized natural gas costs, which increased gross margin by $89 million, due primarily to the closure of our Billingham ammonia plant, partially offset by a net increase of $20 million in manufacturing, maintenance and other costs, driven by the cost for purchased ammonia for upgrade at our Billingham complex, partially offset by lower production costs.

CF INDUSTRIES HOLDINGS, INC.

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

As of June 30, 2023, our cash and cash equivalents balance was $3.22 billion, an increase of $896 million from $2.32 billion at December 31, 2022.

At June 30, 2023, 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.

As of September 30, 2023, our cash and cash equivalents balance was $3.25 billion, an increase of $931 million from $2.32 billion at December 31, 2022.

At September 30, 2023, 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.

Cash Equivalents

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Second quarter 0.8 50 1.2 80

Third quarter 1.9 150 — —

Total shares repurchased in 2023 2.7 200 2.3 155

Shares repurchased as of June 30, 2023

Shares repurchased as of September 30, 2023

2.7 $ 200 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.

CF INDUSTRIES HOLDINGS, INC.

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.

In the six months ended June 30, 2023, we repurchased approximately 0.8 million shares under the 2022 Share Repurchase Program for $50 million.

(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 first half of 2023, we completed the 2021 Share Repurchase Program with the repurchase of approximately 2.3 million shares for $155 million.

In the nine months ended September 30, 2023, we repurchased approximately 2.7 million shares under the 2022 Share Repurchase Program for $200 million.

Capital Spending

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 $164 million in the first six months of 2023 compared to $129 million in the first six months of 2022.

Capital expenditures totaled $311 million in the first nine months of 2023 compared to $319 million in the first nine months of 2022.

We currently anticipate that capital expenditures for the full year 2023 will be in the range of $450 to $500 million, which includes capital expenditures related to green and blue ammonia projects.

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We expect to close the transaction on December 1, 2023.

The agreement includes certain customary termination rights, including the right of either party to terminate the agreement if the closing has not occurred by March 20, 2025.

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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.

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.

operations and resulted in the halt of operations at both our Ince and Billingham manufacturing facilities.

Shortly thereafter, our Billingham facility resumed operations.

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

In the third quarter of 2022, we approved our plan to restructure our U.K.

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

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.

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

With the ammonia plant idled since September 2022, production of AN and other nitrogen products has continued at our Billingham facility using imported ammonia, a portion of which is imported from our other ammonia production sites.

In July 2023, we approved and announced our proposed plan to permanently close the Billingham ammonia plant.

In the third quarter of 2023, we approved our plan to permanently close the ammonia plant at our Billingham complex.

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

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Revolving Credit Agreement

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

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

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

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

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

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.

On October 26, 2023, we entered into a new senior unsecured revolving credit agreement (the New Revolving Credit Agreement), which replaced our prior senior unsecured revolving credit agreement (the Prior Revolving Credit Agreement) that was scheduled to mature on December 5, 2024.

The Prior Revolving Credit Agreement provided for a revolving credit facility of up to $750 million and included a letter of credit sub-limit of $125 million.

The New Revolving Credit Agreement provides for a revolving credit facility of up to $750 million with a maturity of October 26, 2028 and includes a letter of credit sub-limit of $125 million.

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

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

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

dollars, Canadian dollars, euros and British pounds.

Borrowings in U.S.

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

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

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

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

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

See Note 11—Financing Agreements for additional information on the Prior Revolving Credit Agreement.

Letters of Credit Under Bilateral Agreement

We are party to a bilateral agreement providing for the issuance of up to $350 million of letters of credit.

As of September 30, 2023, approximately $200 million of letters of credit were outstanding under this agreement.

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

Effective Interest Rate September 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 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.

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

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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.

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

CF INDUSTRIES HOLDINGS, INC.

Forward Sales and Customer Advances

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Any cash payments received in advance from customers in connection with forward sales contracts are reflected on our consolidated balance sheets as a current liability until control transfers and revenue is recognized.

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

As of September 30, 2023 and December 31, 2022, we had $282 million and $229 million, respectively, in customer advances on our consolidated balance sheets.

While customer advances are generally a significant source of liquidity, the level of forward sales contracts is affected by many factors, including current market conditions, our customers’ outlook of future market fundamentals and seasonality.

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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.

Additionally, borrowing under the Revolving Credit Agreement could become necessary.

Additionally, borrowing under the New Revolving Credit Agreement could become necessary.

Due to the volatility inherent in our business and changing customer expectations, we cannot estimate the amount of future forward sales activity.

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

As of 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 September 30, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 65.3 million MMBtus of natural gas.

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 of natural gas.

Defined Benefit Pension Plans

We contributed $13 million to our pension plans in the six months ended June 30, 2023.

We contributed $38 million to our pension plans in the nine months ended September 30, 2023.

Over the remainder of 2023, we expect to contribute approximately $6 million to our pension plans, which would result in our making total contributions of approximately $44 million to our pension plans for the full year 2023.

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On January 31, 2023, CFN distributed $255 million to CHS for the distribution period ended December 31, 2022.

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.

Net cash provided by operating activities during the first six months of 2023 was $1.66 billion, a decrease of $621 million compared to $2.28 billion in the first six months of 2022.

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

Net earnings for the first six months of 2023 was $1.26 billion compared to $2.39 billion for the first six months of 2022, a decrease of $1.13 billion.

The decrease in net earnings was due primarily to a decrease in gross margin, driven by lower average selling prices.

During the first six months of 2023, net changes in working capital increased cash flow from operations by $146 million, while in the first six months of 2022, net changes in working capital reduced cash flow from operations by $731 million.

The increase in cash flow from working capital changes was attributable primarily to favorable movements in accounts receivable, inventory and customer advances in the first six

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, and on July 31, 2023, CFN distributed $204 million to CHS for this distribution period.

The estimate of the partnership distribution earned by CHS, but not yet declared, for the third quarter of 2023 is approximately $66 million.

CF INDUSTRIES HOLDINGS, INC.

months of 2023 as compared to the first six months of 2022.

Net cash used in investing activities was $127 million in the first six months of 2023 as compared to $121 million in the first six months of 2022.

Capital expenditures totaled $164 million during the first six months of 2023 compared to $129 million in the first six months of 2022.

Proceeds from the sale of emission credits was $36 million in the first six months of 2023 compared to $12 million in the first six months of 2022.

Net cash used in financing activities was $639 million in the first six months of 2023 compared to $1.40 billion in the first six months of 2022.

Net cash provided by operating activities during the first nine months of 2023 was $2.28 billion, a decrease of $993 million compared to $3.27 billion in the first nine months of 2022.

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

Net earnings for the first nine months of 2023 was $1.49 billion compared to $2.93 billion for the first nine months of 2022, a decrease of $1.44 billion.

The decrease in net earnings was due primarily to a decrease in gross margin, driven by lower average selling prices, partially offset by lower natural gas costs.

During the first nine months of 2023, net changes in working capital increased cash flow from operations by $289 million, while in the first nine months of 2022, net changes in working capital reduced cash flow from operations by $621 million.

The increase in cash flow from working capital changes was attributable primarily to favorable movements in accounts receivable, inventory and customer advances in the first nine months of 2023 as compared to the first nine months of 2022.

Net cash used in investing activities was $271 million in the first nine months of 2023 compared to $308 million in the first nine months of 2022.

Capital expenditures totaled $311 million during the first nine months of 2023 compared to $319 million in the first nine months of 2022.

Proceeds from the sale of emission credits was $39 million in the first nine months of 2023 compared to $15 million in the first nine months of 2022.

Net cash used in financing activities was $1.07 billion in the first nine months of 2023 compared to $2.37 billion in the first nine months of 2022.

The decrease was due primarily to a decrease in share repurchases.

In the first six months of 2023, we paid $205 million for share repurchases compared to $577 million paid for share repurchases in the first six months of 2022.

In addition, we paid $507 million in connection with the redemption of the 2023 Notes in the first six months of 2022.

In the first nine months of 2023, we paid $355 million for share repurchases compared to $1.10 billion paid for share repurchases in the first nine months of 2022.

In addition, we paid $507 million in connection with the redemption of the 2023 Notes in the first nine months of 2022.

Critical Accounting Estimates

During the first six months of 2023, there were no material changes to our critical accounting estimates as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

During the first nine months of 2023, there were no material changes to our critical accounting estimates as described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Forward-Looking Statements

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the risk that the pendency or completion of the proposed transactions with IPL, including integration of the Waggaman ammonia production complex into the Company’s operations, disrupt current operations or harm relationships with customers, employees and suppliers;

the risk that integration of the Waggaman ammonia production complex with the Company’s current operations will be more costly or difficult than expected or may otherwise be unsuccessful;

the risk that integration of the Waggaman ammonia

CF INDUSTRIES HOLDINGS, INC.

production complex with the Company’s current operations will be more costly or difficult than expected or may otherwise be unsuccessful;

diversion of management time and attention to issues relating to the proposed transactions with IPL;

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• the seasonality of the fertilizer business;

CF INDUSTRIES HOLDINGS, INC.

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

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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-Q

Item 2. Management’s Discussion and Analysis