CF Industries Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 (in millions, except per share amounts) Net sales $ 1,273 $ 2,321 $ 5,060 $ 8,578 Cost of sales 896 1,405 3,016 3,973 Gross margin 377 916 2,044 4,605 Selling, general and administrative expenses 68 66 213 203 U.K. long-lived and intangible asset impairment — 87 — 239 U.K. operations restructuring 5 8 7 18 Transaction costs 11 — 27 — Other operating—net 13 25 ( 19 ) 33 Total other operating costs and expenses 97 186 228 493 Equity in (losses) earnings of operating affiliate ( 36 ) 20 ( 12 ) 74 Operating earnings 244 750 1,804 4,186 Interest expense 39 46 115 369 Interest income ( 45 ) ( 12 ) ( 115 ) ( 56 ) Loss on debt extinguishment — — — 8 Other non-operating—net ( 3 ) 23 ( 8 ) 24 Earnings before income taxes 253 693 1,812 3,841 Income tax provision 23 155 326 913 Net earnings 230 538 1,486 2,928 Less: Net earnings attributable to noncontrolling interest 66 100 235 442 Net earnings attributable to common stockholders $ 164 $ 438 $ 1,251 $ 2,486 Net earnings per share attributable to common stockholders: Basic $ 0.85 $ 2.19 $ 6.44 $ 12.09 Diluted $ 0.85 $ 2.18 $ 6.42 $ 12.04 Weighted-average common shares outstanding: Basic 192.4 200.2 194.4 205.6 Diluted 192.9 200.9 194.9 206.5 Dividends declared per common share $ 0.40 $ 0.40 $ 1.20 $ 1.10 See accompanying Notes to Unaudited Consolidated Financial Statements. 1 Table of Contents CF INDUSTRIES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 (in millions) Net earnings $ 230 $ 538 $ 1,486 $ 2,928 Other comprehensive (loss) income: Foreign currency translation adjustment—net of taxes ( 27 ) ( 9 ) 3 ( 49 ) Defined benefit plans—net of taxes 1 24 2 36 ( 26 ) 15 5 ( 13 ) Comprehensive income 204 553 1,491 2,915 Less: Comprehensive income attributable to noncontrolling interest 66 100 235 442 Comprehensive income attributable to common stockholders $ 138 $ 453 $ 1,256 $ 2,473 See accompanying Notes to Unaudited Consolidated Financial Statements. 2 Table of Contents CF INDUSTRIES HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2023 December 31, 2022 (in millions, except share and per share amounts) Assets Current assets: Cash and cash equivalents $ 3,254 $ 2,323 Accounts receivable—net 417 582 Inventories 318 474 Prepaid income taxes 147 215 Other current assets 54 79 Total current assets 4,190 3,673 Property, plant and equipment—net 6,156 6,437 Investment in affiliate 32 74 Goodwill 2,089 2,089 Operating lease right-of-use assets 277 254 Other assets 799 786 Total assets $ 13,543 $ 13,313 Liabilities and Equity Current liabilities: Accounts payable and accrued expenses $ 497 $ 575 Income taxes payable 20 3 Customer advances 282 229 Current operating lease liabilities 101 93 Other current liabilities 26 95 Total current liabilities 926 995 Long-term debt 2,967 2,965 Deferred income taxes 882 958 Operating lease liabilities 179 167 Other liabilities 288 375 Equity: Stockholders’ equity: Preferred stock—$ 0.01 par value, 50,000,000 shares authorized — — Common stock—$ 0.01 par value, 500,000,000 shares authorized, 2023— 192,963,252 shares issued and 2022— 195,604,404 shares issued 2 2 Paid-in capital 1,416 1,412 Retained earnings 4,681 3,867 Treasury stock—at cost, 2023— 1,911,732 shares and 2022— 0 shares ( 151 ) — Accumulated other comprehensive loss ( 225 ) ( 230 ) Total stockholders’ equity 5,723 5,051 Noncontrolling interest 2,578 2,802 Total equity 8,301 7,853 Total liabilities and equity $ 13,543 $ 13,313 See accompanying Notes to Unaudited Consolidated Financial Statements. 3 Table of Contents CF INDUSTRIES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) Common Stockholders $0.01 Par Value Common Stock Treasury Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Noncontrolling Interest Total Equity (in millions, except per share amounts) Balance as of June 30, 2023 $ 2 $ ( 226 ) $ 1,430 $ 4,797 $ ( 199 ) $ 5,804 $ 2,716 $ 8,520 Net earnings — — — 164 — 164 66 230 Other comprehensive loss — — — — ( 26 ) ( 26 ) — ( 26 ) Purchases of treasury stock — ( 151 ) — — — ( 151 ) — ( 151 ) Retirement of treasury stock — 226 ( 24 ) ( 202 ) — — — — Stock-based compensation expense — — 10 — — 10 — 10 Dividends and dividend equivalents ($ 0.40 per share) — — — ( 78 ) — ( 78 ) — ( 78 ) Distribution declared to noncontrolling interest — — — — — — ( 204 ) ( 204 ) Balance as of September 30, 2023 $ 2 $ ( 151 ) $ 1,416 $ 4,681 $ ( 225 ) $ 5,723 $ 2,578 $ 8,301 Balance as of December 31, 2022 $ 2 $ — $ 1,412 $ 3,867 $ ( 230 ) $ 5,051 $ 2,802 $ 7,853 Net earnings — — — 1,251 — 1,251 235 1,486 Other comprehensive income — — — — 5 5 — 5 Purchases of treasury stock — ( 357 ) — — — ( 357 ) — ( 357 ) Retirement of treasury stock — 226 ( 24 ) ( 202 ) — — — — Acquisition of treasury stock under employee stock plans — ( 22 ) — — — ( 22 ) — ( 22 ) Issuance of $ 0.01 par value common stock under employee stock plans — 2 ( 1 ) — — 1 — 1 Stock-based compensation expense — — 29 — — 29 — 29 Dividends and dividend equivalents ($ 1.20 per share) — — — ( 235 ) — ( 235 ) — ( 235 ) Distributions declared to noncontrolling interest — — — — — — ( 459 ) ( 459 ) Balance as of September 30, 2023 $ 2 $ ( 151 ) $ 1,416 $ 4,681 $ ( 225 ) $ 5,723 $ 2,578 $ 8,301 (Continued) 4 Table of Contents CF INDUSTRIES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF EQUITY (Continued) (Unaudited) Common Stockholders $0.01 Par Value Common Stock Treasury Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Noncontrolling Interest Total Equity (in millions, except per share amounts) Balance as of June 30, 2022 $ 2 $ ( 331 ) $ 1,474 $ 3,729 $ ( 285 ) $ 4,589 $ 2,925 $ 7,514 Net earnings — — — 438 — 438 100 538 Other comprehensive income — — — — 15 15 — 15 Purchases of treasury stock — ( 532 ) — — — ( 532 ) — ( 532 ) Issuance of $0.01 par value common stock under employee stock plans — — 4 — — 4 — 4 Stock-based compensation expense — — 10 — — 10 — 10 Cash dividends ($0.40 per share) — — — ( 80 ) — ( 80 ) — ( 80 ) Distribution declared to noncontrolling interest — — — — — — ( 372 ) ( 372 ) Balance as of September 30, 2022 $ 2 $ ( 863 ) $ 1,488 $ 4,087 $ ( 270 ) $ 4,444 $ 2,653 $ 7,097 Balance as of December 31, 2021 $ 2 $ ( 2 ) $ 1,375 $ 2,088 $ ( 257 ) $ 3,206 $ 2,830 $ 6,036 Net earnings — — — 2,486 — 2,486 442 2,928 Other comprehensive loss — — — — ( 13 ) ( 13 ) — ( 13 ) Purchases of treasury stock — ( 1,122 ) — — — ( 1,122 ) — ( 1,122 ) Retirement of treasury stock — 283 ( 23 ) ( 260 ) — — — — Acquisition of treasury stock under employee stock plans — ( 23 ) — — — ( 23 ) — ( 23 ) Issuance of $ 0.01 par value common stock under employee stock plans — 1 104 — — 105 — 105 Stock-based compensation expense — — 32 — — 32 — 32 Cash dividends ($ 1.10 per share) — — — ( 227 ) — ( 227 ) — ( 227 ) Distributions declared to noncontrolling interest — — — — — — ( 619 ) ( 619 ) Balance as of September 30, 2022 $ 2 $ ( 863 ) $ 1,488 $ 4,087 $ ( 270 ) $ 4,444 $ 2,653 $ 7,097 See accompanying Notes to Unaudited Consolidated Financial Statements. 5 Table of Contents CF INDUSTRIES HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, 2023 2022 (in millions) Operating Activities: Net earnings $ 1,486 $ 2,928 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 640 652 Deferred income taxes ( 73 ) ( 7 ) Stock-based compensation expense 29 32 Loss on debt extinguishment — 8 Unrealized net gain on natural gas derivatives ( 65 ) ( 39 ) Impairment of equity method investment in PLNL 43 — U.K. long-lived and intangible asset impairment — 239 Pension settlement loss — 24 Gain on sale of emission credits ( 39 ) ( 6 ) Loss on disposal of property, plant and equipment 4 1 Undistributed earnings of affiliate—net of taxes ( 2 ) ( 10 ) Changes in: Accounts receivable—net 165 ( 245 ) Inventories 130 ( 131 ) Accrued and prepaid income taxes 57 ( 168 ) Accounts payable and accrued expenses ( 116 ) 111 Customer advances 53 ( 188 ) Other—net ( 35 ) 69 Net cash provided by operating activities 2,277 3,270 Investing Activities: Additions to property, plant and equipment ( 311 ) ( 319 ) Proceeds from sale of property, plant and equipment 1 1 Distributions received from unconsolidated affiliate — 4 Purchase of investments held in nonqualified employee benefit trust — ( 1 ) Proceeds from sale of investments held in nonqualified employee benefit trust — 1 Purchase of emission credits — ( 9 ) Proceeds from sale of emission credits 39 15 Net cash used in investing activities ( 271 ) ( 308 ) Financing Activities: Payments of long-term borrowings — ( 507 ) Financing fees — ( 4 ) Dividends paid ( 235 ) ( 227 ) Distributions to noncontrolling interest ( 459 ) ( 619 ) Purchases of treasury stock ( 355 ) ( 1,096 ) Proceeds from issuances of common stock under employee stock plans 1 106 Cash paid for shares withheld for taxes ( 22 ) ( 23 ) Net cash used in financing activities ( 1,070 ) ( 2,370 ) Effect of exchange rate changes on cash and cash equivalents ( 5 ) ( 28 ) Increase in cash and cash equivalents 931 564 Cash and cash equivalents at beginning of period 2,323 1,628 Cash and cash equivalents at end of period $ 3,254 $ 2,192 See accompanying Notes to Unaudited Consolidated Financial Statements. 6 Table of Contents CF INDUSTRIES HOLDINGS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Background and Basis of Presentation Our mission is to provide clean energy to feed and fuel the world sustainably. With our employees focused on safe and reliable operations, environmental stewardship, and disciplined capital and corporate management, we are on a path to decarbonize our ammonia production network – the world’s largest – to enable green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities. Our nitrogen manufacturing complexes in the United States, Canada and the United Kingdom, an extensive storage, transportation and distribution network in North America, and logistics capabilities enabling a global reach underpin our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy. Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users. Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen. Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers. All references to “CF Holdings,” “the Company,” “we,” “us” and “our” refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to “CF Industries” refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc. The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2022, in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting. In the opinion of management, these statements reflect all adjustments, consisting only of normal and recurring adjustments, that are necessary for the fair representation of the information for the periods presented. The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Operating results for any period presented apply to that period only and are not necessarily indicative of results for any future period. The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023. The preparation of the unaudited interim consolidated financial statements requires us to make use of estimates and assumptions that may significantly affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited interim consolidated financial statements and the reported revenues and expenses for the periods presented. Such estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, plant closure and asset retirement obligations, the cost of emission credits required to meet environmental regulations, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax reserves and the assessment of the realizability of deferred tax assets, the determination of the funded status and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees. 7 Table of Contents CF INDUSTRIES HOLDINGS, INC. 2. Revenue Recognition We track our revenue by product and by geography. See Note 16—Segment Disclosures for the revenue of each of our reportable segments, which are Ammonia, Granular Urea, UAN, AN and Other. The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and nine months ended September 30, 2023 and 2022: Ammonia Granular Urea UAN AN Other Total (in millions) Three months ended September 30, 2023 North America $ 165 $ 340 $ 330 $ 50 $ 111 $ 996 Europe and other 70 20 105 64 18 277 Total revenue $ 235 $ 360 $ 435 $ 114 $ 129 $ 1,273 Three months ended September 30, 2022 North America $ 367 $ 571 $ 531 $ 70 $ 132 $ 1,671 Europe and other 164 118 205 110 53 650 Total revenue $ 531 $ 689 $ 736 $ 180 $ 185 $ 2,321 Nine months ended September 30, 2023 North America $ 955 $ 1,375 $ 1,312 $ 189 $ 357 $ 4,188 Europe and other 229 56 338 188 61 872 Total revenue $ 1,184 $ 1,431 $ 1,650 $ 377 $ 418 $ 5,060 Nine months ended September 30, 2022 North America $ 1,937 $ 2,123 $ 2,421 $ 229 $ 465 $ 7,175 Europe and other 349 164 306 427 157 1,403 Total revenue $ 2,286 $ 2,287 $ 2,727 $ 656 $ 622 $ 8,578 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. During the nine months ended September 30, 2023 and 2022, substantially all of the customer advances at the beginning of each respective period were recognized as revenue. We offer cash incentives to certain customers generally based on the volume of their purchases over the fertilizer year ending June 30. Our cash incentives do not provide an option to the customer for additional product. The balances of customer incentives accrued as of September 30, 2023 and December 31, 2022 were not material. We have certain customer contracts with performance obligations under which, if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, the amount of which payment may vary based upon the terms and conditions of the applicable contract. As of September 30, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 910 million. We expect to recognize approximately 14 % of these performance obligations as revenue in the remainder of 2023, approximately 52 % as revenue during 2024-2026, approximately 15 % as revenue during 2027-2029, and the remainder thereafter. Subject to the terms and conditions of the applicable contracts, if the customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under such contracts, in the aggregate, was approximately $ 280 million as of September 30, 2023. Other than the performance obligations described above, we expect that any performance obligations under our customer contracts that were unfulfilled or partially fulfilled at December 31, 2022 will be satisfied in 2023. 8 Table of Contents CF INDUSTRIES HOLDINGS, INC. 3. Net Earnings Per Share Net earnings per share were computed as follows: Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 (in millions, except per share amounts) Net earnings attributable to common stockholders $ 164 $ 438 $ 1,251 $ 2,486 Basic earnings per common share: Weighted-average common shares outstanding 192.4 200.2 194.4 205.6 Net earnings attributable to common stockholders $ 0.85 $ 2.19 $ 6.44 $ 12.09 Diluted earnings per common share: Weighted-average common shares outstanding 192.4 200.2 194.4 205.6 Dilutive common shares—stock-based awards 0.5 0.7 0.5 0.9 Diluted weighted-average common shares outstanding 192.9 200.9 194.9 206.5 Net earnings attributable to common stockholders $ 0.85 $ 2.18 $ 6.42 $ 12.04 Diluted earnings per common share is calculated using weighted-average common shares outstanding, including the dilutive effect of stock-based awards as determined under the treasury stock method. In the computation of diluted earnings per common share, potentially dilutive stock-based awards are excluded if the effect of their inclusion is anti-dilutive. Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero in both the three and nine months ended September 30, 2023 and the three and nine months ended September 30, 2022. 4. Inventories Inventories consist of the following: September 30, 2023 December 31, 2022 (in millions) Finished goods $ 279 $ 437 Raw materials, spare parts and supplies 39 37 Total inventories $ 318 $ 474 5. United Kingdom Operations Restructuring In the second quarter of 2022, we approved and announced our proposed plan to restructure our U.K. operations, including the planned permanent closure of the Ince facility, which had been idled since September 2021, and optimization of the remaining manufacturing operations at our Billingham facility. Pursuant to our proposed plan to restructure our U.K. operations and dispose of the Ince facility assets before we originally intended, we concluded that an evaluation of our long-lived assets and an impairment test was required. Our assessment then identified the U.K. asset groups as U.K. Ammonia, U.K. AN and U.K. Other, comprising our ongoing U.K. operations, and Ince, U.K. In response to this impairment indicator, we compared the undiscounted cash flows expected to result from the use and eventual disposition of the Ince, U.K. asset group to its carrying amount and concluded the carrying amount was not recoverable and should be adjusted to its fair value. As a result, in the second quarter of 2022, we recorded total charges of $ 162 million related to the Ince facility as follows: • asset impairment charges of $ 152 million consisting of the following: ◦ an impairment charge of $ 135 million related to property, plant and equipment that is planned for abandonment at the Ince facility, including a liability of approximately $ 9 million for the costs of certain asset retirement activities related to the Ince site; ◦ an intangible asset impairment charge of $ 8 million related to trade names; and 9 Table of Contents CF INDUSTRIES HOLDINGS, INC. ◦ an impairment charge of $ 9 million related to the write-down of spare parts and certain raw materials at the Ince facility; and • a charge for post-employment benefits totaling $ 10 million, which is included in the U.K. operations restructuring line item in our consolidated statements of operations, related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan. In August 2022, the final restructuring plan for our U.K. operations was approved, and decommissioning activities at our Ince facility were initiated. As a result, in the third quarter of 2022, we incurred additional charges related to our U.K. restructuring of $ 8 million, primarily related to one-time termination benefits, which are included in the U.K. operations restructuring line item in our consolidated statement of operations. As of June 30, 2023, the decommissioning of our Ince facility and other approved restructuring actions had been completed. In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices. Russian natural gas pipeline flows to Europe via the Nord Stream 1 pipeline ceased, causing the United Kingdom to experience unprecedented natural gas prices. In addition, the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries, further contributing to the uncertainty in European energy markets. Given these factors and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we idled ammonia production at our Billingham complex. As a result, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K. operations. The results of our impairment test indicated that the carrying values for our U.K. Ammonia and U.K. AN asset groups exceeded the undiscounted estimated future cash flows. As a result, we recognized asset impairment charges of $ 87 million, primarily related to property, plant and equipment and definite-lived intangible assets, which are included in the U.K. long-lived and intangible asset impairment line item in our consolidated statement of operations. In July 2023, we approved and announced our proposed plan to permanently close the Billingham ammonia plant, and, in September 2023, the final plan was approved. As a result, in the third quarter of 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 whose employment would be terminated. 6. Property, Plant and Equipment—Net Property, plant and equipment—net consists of the following: September 30, 2023 December 31, 2022 (in millions) Land $ 114 $ 113 Machinery and equipment 12,716 12,633 Buildings and improvements 923 914 Construction in progress 339 203 Property, plant and equipment (1) 14,092 13,863 Less: Accumulated depreciation and amortization 7,936 7,426 Property, plant and equipment—net $ 6,156 $ 6,437 _______________________________________________________________________________ (1) As of September 30, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $ 80 million and $ 53 million, respectively. As of September 30, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $ 60 million and $ 35 million, respectively. Depreciation and amortization related to property, plant and equipment was $ 211 million and $ 633 million for the three and nine months ended September 30, 2023, respectively, and $ 219 million and $ 643 million for the three and nine months ended September 30, 2022, respectively. Plant turnarounds —Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds. The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred. 10 Table of Contents CF INDUSTRIES HOLDINGS, INC. Scheduled replacements and overhauls of plant machinery and equipment during a plant turnaround include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors and heat exchangers and the replacement of catalysts when a full plant shutdown occurs. Scheduled inspections, including required safety inspections which entail the disassembly of various components such as steam boilers, pressure vessels and other equipment requiring safety certifications, are also conducted during full plant shutdowns. Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized. The following is a summary of capitalized plant turnaround costs: Nine months ended September 30, 2023 2022 (in millions) Net capitalized turnaround costs as of January 1 $ 312 $ 355 Additions 121 84 Depreciation ( 95 ) ( 101 ) Impairment related to U.K. operations — ( 21 ) Effect of exchange rate changes and other ( 4 ) ( 7 ) Net capitalized turnaround costs as of September 30 $ 334 $ 310 7. Equity Method Investment We have a 50 % ownership interest in Point Lisas Nitrogen Limited (PLNL), which operates an ammonia production facility in the Republic of Trinidad and Tobago. We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the Ammonia segment. PLNL 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. As of September 30, 2023, the total carrying value of our equity method investment in PLNL was $ 32 million. We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50 % of the ammonia produced by PLNL at current market prices. Our ammonia purchases from PLNL totaled $ 20 million and $ 115 million for the three and nine months ended September 30, 2023, respectively, and $ 61 million and $ 212 million for the three and nine months ended September 30, 2022, respectively. 11 Table of Contents CF INDUSTRIES HOLDINGS, INC. 8. Fair Value Measurements Our cash and cash equivalents and other investments consist of the following: September 30, 2023 Cost Basis Unrealized Gains Unrealized Losses Fair Value (in millions) Cash $ 193 $ — $ — $ 193 Cash equivalents: U.S. and Canadian government obligations 2,687 — — 2,687 Other debt securities 374 — — 374 Total cash and cash equivalents $ 3,254 $ — $ — $ 3,254 Nonqualified employee benefit trusts 16 — — 16 December 31, 2022 Cost Basis Unrealized Gains Unrealized Losses Fair Value (in millions) Cash $ 153 $ — $ — $ 153 Cash equivalents: U.S. and Canadian government obligations 1,902 — — 1,902 Other debt securities 268 — — 268 Total cash and cash equivalents $ 2,323 $ — $ — $ 2,323 Nonqualified employee benefit trusts 16 — — 16 Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present assets and liabilities included in our consolidated balance sheets as of September 30, 2023 and December 31, 2022 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value: September 30, 2023 Total Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Cash equivalents $ 3,061 $ 3,061 $ — $ — Nonqualified employee benefit trusts 16 16 — — Derivative assets 8 — 8 — Derivative liabilities ( 16 ) — ( 16 ) — 12 Table of Contents CF INDUSTRIES HOLDINGS, INC. December 31, 2022 Total Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Cash equivalents $ 2,170 $ 2,170 $ — $ — Nonqualified employee benefit trusts 16 16 — — Derivative assets 12 — 12 — Derivative liabilities ( 85 ) — ( 85 ) — Cash Equivalents Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less. As of September 30, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities. Nonqualified Employee Benefit Trusts We maintain trusts associated with certain nonqualified supplemental pension plans. The fair values of the trust assets are based on daily quoted prices in an active market, which represent the net asset values of the shares held in the trusts, and are included on our consolidated balance sheets in other assets. Debt securities are accounted for as available-for-sale securities, and changes in fair value are reported in other comprehensive income. Changes in the fair value of available-for-sale equity securities in the trust assets are recognized through earnings. Derivative Instruments The derivative instruments that we use are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter markets with multi-national commercial banks, other major financial institutions or large energy companies. The natural gas derivative contracts represent anticipated natural gas needs for future periods, and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods. The natural gas derivative contracts settle using primarily a NYMEX futures price index. To determine the fair value of these instruments, we use quoted market prices from NYMEX and standard pricing models with inputs derived from or corroborated by observable market data such as forward curves supplied by an industry-recognized independent third party. See Note 13—Derivative Financial Instruments for additional information. Financial Instruments The carrying amount and estimated fair value of our financial instruments are as follows: September 30, 2023 December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value (in millions) Long-term debt $ 2,967 $ 2,656 $ 2,965 $ 2,764 The fair value of our long-term debt was based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs and value drivers are observable and, as a result, they are classified as Level 2 inputs. The carrying amounts of cash and cash equivalents, as well as any instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other 13 Table of Contents CF INDUSTRIES HOLDINGS, INC. intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment. The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets. Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy. In the third quarter of 2023, we determined the carrying value of our equity method investment in PLNL exceeded its fair value and recorded an impairment of our equity method investment in PLNL of $ 43 million. See Note 7—Equity Method Investment for additional information. 9. Income Taxes 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 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. For the three and 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 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. In addition, for the nine months ended September 30, 2022, our income tax provision includes $ 22 million of income tax benefit due to share-based compensation activity and $ 78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, as discussed below. Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended 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 if based on pre-tax income exclusive of the $ 66 million of earnings attributable to the noncontrolling interest. 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 if based on pre-tax income exclusive of the $ 100 million of earnings attributable to the noncontrolling interest. 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 if based on pre-tax income exclusive of the $ 235 million of earnings attributable to the noncontrolling interest. 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 if based on pre-tax income exclusive of the $ 442 million of earnings attributable to the noncontrolling interest. Canada Revenue Agency Competent Authority Matter In 2016, the Canada Revenue Agency (CRA) and Alberta Tax and Revenue Administration (Alberta TRA) issued Notices of Reassessment for tax years 2006 through 2009 to one of our Canadian affiliates asserting a disallowance of certain patronage deductions. We filed Notices of Objection with respect to the Notices of Reassessment with the CRA and Alberta TRA and posted letters of credit in lieu of paying the additional tax liability assessed. The letters of credit served as security until the matter was resolved, as discussed below. In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between Canada and the United States, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011. In the second quarter of 2021, the Company submitted the transfer pricing aspect of the matter into the arbitration process under the terms of the Treaty. In February 2022, we were informed that a decision was reached by the arbitration panel for tax years 2006 through 2011. In March 2022, we received further details of the results of the arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities, and we accepted the decision of the arbitration panel. Under the terms of 14 Table of Contents CF INDUSTRIES HOLDINGS, INC. the arbitration decision, additional income for tax years 2006 through 2011 was subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years. In the 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 $ 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. In the second half of 2022, this tax liability and the related interest were assessed and paid, resulting in total payments of $ 224 million, which also reflect the impact of changes in foreign currency exchange rates. As a result, the letters of credit we had posted in lieu of paying the additional tax liability assessed by the Notices of Reassessment were cancelled. Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, the Company has filed amended tax returns in the United States to request a refund of taxes paid. Transfer pricing positions As a result of the outcome of the arbitration decision discussed above, we also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after. Based on this evaluation, we recorded the following in the nine months ended September 30, 2022: • 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 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. 10. Pension Retiree Annuity Purchase On July 15, 2022, we entered into an agreement with an insurance company to purchase a non-participating group annuity contract and transfer approximately $ 375 million of our primary U.S. defined benefit pension plan’s projected benefit obligation. The transaction closed on July 22, 2022 and was funded with plan assets. Under the transaction, the insurance company assumed responsibility for pension benefits and annuity administration for approximately 4,000 retirees or their beneficiaries. As a result of this transaction, in the third quarter of 2022, we remeasured the plan's projected benefit obligation and plan assets and recognized a non-cash pre-tax pension settlement loss of $ 24 million, reflecting the unamortized net unrecognized postretirement benefit costs related to the settled obligations, with a corresponding offset to accumulated other comprehensive loss. In the fourth quarter of 2022, the final settlement of the non-participating group annuity contract resulted in a refund of $ 4 million, which decreased the settlement loss by $ 3 million to $ 21 million. 15 Table of Contents CF INDUSTRIES HOLDINGS, INC. 11. Financing Agreements Revolving Credit Agreement 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). See Note 18—Subsequent Event for additional information. The Prior Revolving Credit Agreement provided for a revolving credit facility of up to $ 750 million with a maturity of December 5, 2024 and included a letter of credit sub-limit of $ 125 million. Borrowings under the Prior Revolving Credit Agreement could be used for working capital, capital expenditures, acquisitions, share repurchases and other general corporate purposes. Borrowings under the Prior Revolving Credit Agreement could be denominated in U.S. dollars, Canadian dollars, euros and British pounds. Borrowings in U.S. dollars bore 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 were required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Prior Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depended on CF Holdings’ credit rating at the time. The Prior Revolving Credit Agreement contained representations and warranties and affirmative and negative covenants, including financial covenants. As of September 30, 2023, we were in compliance with all covenants under the Prior Revolving Credit Agreement. 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. 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. Senior Notes 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) Principal Carrying Amount (1) (in millions) Public Senior Notes: 5.150 % due March 2034 5.293 % 750 741 750 741 4.950 % due June 2043 5.040 % 750 742 750 742 5.375 % due March 2044 5.478 % 750 741 750 740 Senior Secured Notes: 4.500 % due December 2026 (2) 4.783 % 750 743 750 742 Total long-term debt $ 3,000 $ 2,967 $ 3,000 $ 2,965 _______________________________________________________________________________ (1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs. 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. Under the indentures (including the applicable supplemental indentures) governing the senior notes due 2034, 2043 and 2044 identified in the table above (the Public Senior Notes), each series of Public Senior Notes is guaranteed by CF Holdings. Under the terms of the indenture governing the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes are guaranteed by CF Holdings. 16 Table of Contents CF INDUSTRIES HOLDINGS, INC. 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. 12. Interest Expense Details of interest expense are as follows: Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 (in millions) Interest on borrowings (1) $ 38 $ 38 $ 112 $ 118 Fees on financing agreements (1) 2 2 6 6 Interest on tax liabilities (2) 1 6 1 246 Interest capitalized ( 2 ) — ( 4 ) ( 1 ) Total interest expense $ 39 $ 46 $ 115 $ 369 _______________________________________________________________________________ (1) See Note 11—Financing Agreements for additional information. (2) See Note 9—Income Taxes for additional information. 13. Derivative Financial Instruments We use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future. Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based products. From time to time, we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates. The derivatives that we use to reduce our exposure to changes in prices for natural gas are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter markets. These natural gas derivatives settle using primarily a NYMEX futures price index, which represents the basis for fair value at any given time. We enter into natural gas derivative contracts with respect to natural gas to be consumed by us in the future, and settlements of those derivative contracts are scheduled to coincide with our anticipated purchases of natural gas used to manufacture nitrogen products during those future periods. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. As a result, changes in fair value of these contracts are recognized in earnings. As of September 30, 2023, we had natural gas derivative contracts covering certain periods through March 2024. 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, we had open natural gas derivative contracts consisting of natural gas fixed price swaps, basis swaps and options for 66.3 million MMBtus of natural gas. For the nine months ended September 30, 2023, we used derivatives to cover approximately 27 % of our natural gas consumption. The effect of derivatives in our consolidated statements of operations is shown in the table below. Gain (loss) recognized in income Three months ended September 30, Nine months ended September 30, Location 2023 2022 2023 2022 (in millions) Unrealized net (losses) gains on natural gas derivatives Cost of sales $ ( 7 ) $ ( 11 ) $ 65 $ 39 Realized net (losses) gains on natural gas derivatives Cost of sales ( 1 ) 12 ( 119 ) 20 Net derivative (losses) gains $ ( 8 ) $ 1 $ ( 54 ) $ 59 17 Table of Contents CF INDUSTRIES HOLDINGS, INC. The fair values of derivatives on our consolidated balance sheets are shown below. As of September 30, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments. See Note 8—Fair Value Measurements for additional information on derivative fair values. Asset Derivatives Liability Derivatives Balance Sheet Location September 30, 2023 December 31, 2022 Balance Sheet Location September 30, 2023 December 31, 2022 (in millions) (in millions) Natural gas derivatives Other current assets $ 8 $ 12 Other current liabilities $ ( 16 ) $ ( 85 ) Most of our International Swaps and Derivatives Association (ISDA) agreements contain credit-risk-related contingent features such as cross default provisions. In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades or, under certain ISDA agreements, may require us to collateralize derivatives in a net liability position. As of September 30, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $ 8 million and $ 73 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event. As of September 30, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts. The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of September 30, 2023 and December 31, 2022: Amounts presented in consolidated balance sheets (1) Gross amounts not offset in consolidated balance sheets Financial instruments Cash collateral received (pledged) Net amount (in millions) September 30, 2023 Total derivative assets $ 8 $ — $ — $ 8 Total derivative liabilities ( 16 ) — — ( 16 ) Net derivative liabilities $ ( 8 ) $ — $ — $ ( 8 ) December 31, 2022 Total derivative assets $ 12 $ — $ — $ 12 Total derivative liabilities ( 85 ) — — ( 85 ) Net derivative liabilities $ ( 73 ) $ — $ — $ ( 73 ) _______________________________________________________________________________ (1) We report the fair values of our derivative assets and liabilities on a gross basis on our consolidated balance sheets. As a result, the gross amounts recognized and net amounts presented are the same. We do not believe the contractually allowed netting, close-out netting or setoff of amounts owed to, or due from, the counterparties to our ISDA agreements would have a material effect on our financial position. 18 Table of Contents CF INDUSTRIES HOLDINGS, INC. 14. Noncontrolling Interest We have a strategic venture with CHS Inc. (CHS) under which CHS owns an equity interest in CFN, a subsidiary of CF Holdings, which represents approximately 11 % of the membership interests of CFN. We own the remaining membership interests. Under the terms of CFN’s limited liability company agreement, each member’s interest will reflect, over time, the impact of the profitability of CFN, any member contributions made to CFN and withdrawals and distributions received from CFN. For financial reporting purposes, the assets, liabilities and earnings of the strategic venture are consolidated into our financial statements. CHS’ interest in the strategic venture is recorded in noncontrolling interest in our consolidated financial statements. A reconciliation of the beginning and ending balances of noncontrolling interest and distributions payable to noncontrolling interest in our consolidated balance sheets is provided below. 2023 2022 (in millions) Noncontrolling interest: Balance as of January 1 $ 2,802 $ 2,830 Earnings attributable to noncontrolling interest 235 442 Declaration of distributions payable ( 459 ) ( 619 ) Balance as of September 30 $ 2,578 $ 2,653 Distributions payable to noncontrolling interest: Balance as of January 1 $ — $ — Declaration of distributions payable 459 619 Distributions to noncontrolling interest ( 459 ) ( 619 ) Balance as of September 30 $ — $ — CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. As a result of its equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN. We are also entitled to semi-annual cash distributions from CFN. The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts. 15. Stockholders’ Equity Common Stock On November 3, 2021, our Board of Directors (the Board) authorized the repurchase of up to $ 1.5 billion of CF Holdings common stock through December 31, 2024 (the 2021 Share Repurchase Program). On November 2, 2022, the Board authorized the repurchase of up to $ 3 billion of CF Holdings common stock commencing upon completion of the 2021 Share Repurchase Program and effective through December 31, 2025 (the 2022 Share Repurchase Program). Repurchases under these programs may be made from time to time in the open market, through privately negotiated transactions, through block transactions or otherwise. The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors. The following table summarizes the share repurchases under the 2022 Share Repurchase Program and the 2021 Share Repurchase Program. 19 Table of Contents CF INDUSTRIES HOLDINGS, INC. 2022 Share Repurchase Program 2021 Share Repurchase Program Shares Amounts (1) Shares Amounts (1) (in millions) Shares repurchased in 2022: First quarter — $ — 1.3 $ 100 Second quarter — — 5.3 490 Third quarter — — 6.1 532 Fourth quarter — — 2.2 223 Total shares repurchased in 2022 — — 14.9 1,345 Shares repurchased as of December 31, 2022 — $ — 14.9 $ 1,345 Shares repurchased in 2023: First quarter — $ — 1.1 $ 75 Second quarter 0.8 50 1.2 80 Third quarter 1.9 150 — — Total shares repurchased in 2023 2.7 200 2.3 155 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. 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 and retired approximately 3.3 million shares of repurchased stock. We held approximately 1.9 million shares of treasury stock as of September 30, 2023. In the nine months ended September 30, 2022, we repurchased approximately 12.7 million shares under the 2021 Share Repurchase Program for $ 1.12 billion, of which $ 27 million was accrued and unpaid as of September 30, 2022. In the nine months ended September 30, 2022, we retired approximately 3.2 million shares of repurchased stock. Accumulated Other Comprehensive Loss Changes to accumulated other comprehensive loss and the impact on other comprehensive income (loss) are as follows: Foreign Currency Translation Adjustment Unrealized Gain on Derivatives Defined Benefit Plans Accumulated Other Comprehensive Income (Loss) (in millions) Balance as of December 31, 2022 $ ( 179 ) $ 3 $ ( 54 ) $ ( 230 ) Gain arising during the period — — 5 5 Reclassification to earnings — — ( 1 ) ( 1 ) Effect of exchange rate changes and deferred taxes 3 — ( 2 ) 1 Balance as of September 30, 2023 $ ( 176 ) $ 3 $ ( 52 ) $ ( 225 ) Balance as of December 31, 2021 $ ( 141 ) $ 4 $ ( 120 ) $ ( 257 ) Gain arising during the period — — 3 3 Reclassification to earnings (1) — — 26 26 Effect of exchange rate changes and deferred taxes ( 49 ) — 7 ( 42 ) Balance as of September 30, 2022 $ ( 190 ) $ 4 $ ( 84 ) $ ( 270 ) _______________________________________________________________________________ (1) Reclassifications out of accumulated other comprehensive loss to the consolidated statements of operations during the three and nine months ended September 30, 2022 include a non-cash pre-tax pension settlement loss of $ 24 million. See Note 10—Pension Retiree Annuity Purchase for additional information. 20 Table of Contents CF INDUSTRIES HOLDINGS, INC. 16. Segment Disclosures Our reportable segments consist of Ammonia, Granular Urea, UAN, AN and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting primarily of selling, general and administrative expenses and other operating—net) and non-operating expenses (consisting primarily of interest and income taxes) are centrally managed and are not included in the measurement of segment profitability reviewed by management. Segment data for sales, cost of sales and gross margin for the three and nine months ended September 30, 2023 and 2022 are presented in the table below. Ammonia Granular Urea (1) UAN (1) AN (1) Other (1) Consolidated (in millions) Three months ended September 30, 2023 Net sales $ 235 $ 360 $ 435 $ 114 $ 129 $ 1,273 Cost of sales 214 226 302 79 75 896 Gross margin $ 21 $ 134 $ 133 $ 35 $ 54 377 Total other operating costs and expenses 97 Equity in losses of operating affiliate (2) ( 36 ) Operating earnings $ 244 Three months ended September 30, 2022 Net sales $ 531 $ 689 $ 736 $ 180 $ 185 $ 2,321 Cost of sales 353 394 414 136 108 1,405 Gross margin $ 178 $ 295 $ 322 $ 44 $ 77 916 Total other operating costs and expenses (3) 186 Equity in earnings of operating affiliate 20 Operating earnings $ 750 Nine months ended September 30, 2023 Net sales $ 1,184 $ 1,431 $ 1,650 $ 377 $ 418 $ 5,060 Cost of sales 797 775 937 264 243 3,016 Gross margin $ 387 $ 656 $ 713 $ 113 $ 175 2,044 Total other operating costs and expenses 228 Equity in losses of operating affiliate (2) ( 12 ) Operating earnings $ 1,804 Nine months ended September 30, 2022 Net sales $ 2,286 $ 2,287 $ 2,727 $ 656 $ 622 $ 8,578 Cost of sales 1,075 1,024 1,102 458 314 3,973 Gross margin $ 1,211 $ 1,263 $ 1,625 $ 198 $ 308 4,605 Total other operating costs and expenses (3) 493 Equity in earnings of operating affiliate 74 Operating earnings $ 4,186 _______________________________________________________________________________ (1) The cost of the products that are upgraded into other products is transferred at cost into the upgraded product results. (2) Equity in losses of operating affiliate for the three and nine months ended September 30, 2023 include an impairment of our equity method investment in PLNL of $ 43 million. See Note 7—Equity Method Investment for additional information. (3) Total other operating costs and expenses for the three and nine months ended September 30, 2022 include $ 95 million and $ 257 million, respectively, of asset impairment and restructuring charges related to our U.K. operations. See Note 5—United Kingdom Operations Restructuring for additional information. 21 Table of Contents CF INDUSTRIES HOLDINGS, INC. 17. Agreement To Purchase Ammonia Production Facility On March 20, 2023, we entered into an asset purchase agreement with Dyno Nobel Louisiana Ammonia, LLC (DNLA), a U.S. subsidiary of Australian-based Incitec Pivot Limited (IPL), and IPL. Under the terms of the agreement, we will purchase DNLA’s ammonia production complex located in Waggaman, Louisiana for a purchase price of $ 1.675 billion, subject to adjustment. The facility has a nameplate capacity of 880,000 tons of ammonia annually. 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. subsidiary. 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. 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. We have agreed to pay a termination fee of $ 75 million if the agreement is terminated in certain circumstances and certain regulatory approvals are not obtained. 18. Subsequent Event On October 26, 2023, we entered into the New Revolving Credit Agreement, which replaced the Prior Revolving Credit Agreement that was scheduled to mature on December 5, 2024. 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. See Note 11—Financing Agreements for additional information on the Prior Revolving Credit Agreement. 22 Table of Contents CF INDUSTRIES HOLDINGS, INC.