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, 2024 2023 2024 2023 (in millions, except per share amounts) Net sales $ 1,370 $ 1,273 $ 4,412 $ 5,060 Cost of sales 926 896 2,880 3,016 Gross margin 444 377 1,532 2,044 Selling, general and administrative expenses 78 68 242 213 U.K. operations restructuring — 5 — 7 Acquisition and integration costs — 11 4 27 Other operating—net 4 13 ( 18 ) ( 19 ) Total other operating costs and expenses 82 97 228 228 Equity in earnings (losses) of operating affiliate 2 ( 36 ) 1 ( 12 ) Operating earnings 364 244 1,305 1,804 Interest expense — 39 74 115 Interest income ( 32 ) ( 45 ) ( 90 ) ( 115 ) Other non-operating—net ( 4 ) ( 3 ) ( 8 ) ( 8 ) Earnings before income taxes 400 253 1,329 1,812 Income tax provision 59 23 244 326 Net earnings 341 230 1,085 1,486 Less: Net earnings attributable to noncontrolling interest 65 66 195 235 Net earnings attributable to common stockholders $ 276 $ 164 $ 890 $ 1,251 Net earnings per share attributable to common stockholders: Basic $ 1.55 $ 0.85 $ 4.87 $ 6.44 Diluted $ 1.55 $ 0.85 $ 4.86 $ 6.42 Weighted-average common shares outstanding: Basic 178.4 192.4 182.9 194.4 Diluted 178.6 192.9 183.1 194.9 Dividends declared per common share $ 0.50 $ 0.40 $ 1.50 $ 1.20 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, 2024 2023 2024 2023 (in millions) Net earnings $ 341 $ 230 $ 1,085 $ 1,486 Other comprehensive income (loss): Foreign currency translation adjustment—net of taxes 27 ( 27 ) 5 3 Defined benefit plans—net of taxes ( 4 ) 1 ( 5 ) 2 23 ( 26 ) — 5 Comprehensive income 364 204 1,085 1,491 Less: Comprehensive income attributable to noncontrolling interest 65 66 195 235 Comprehensive income attributable to common stockholders $ 299 $ 138 $ 890 $ 1,256 See accompanying Notes to Unaudited Consolidated Financial Statements. 2 Table of Contents CF INDUSTRIES HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2024 December 31, 2023 (in millions, except share and per share amounts) Assets Current assets: Cash and cash equivalents $ 1,877 $ 2,032 Accounts receivable—net 482 505 Inventories 301 299 Prepaid income taxes 133 167 Other current assets 57 47 Total current assets 2,850 3,050 Property, plant and equipment—net 6,816 7,141 Investment in affiliate 28 26 Goodwill 2,493 2,495 Intangible assets—net 515 538 Operating lease right-of-use assets 272 259 Other assets 869 867 Total assets $ 13,843 $ 14,376 Liabilities and Equity Current liabilities: Accounts payable and accrued expenses $ 562 $ 520 Income taxes payable 3 12 Customer advances 348 130 Current operating lease liabilities 86 96 Other current liabilities 14 42 Total current liabilities 1,013 800 Long-term debt 2,970 2,968 Deferred income taxes 927 999 Operating lease liabilities 194 168 Supply contract liability 732 754 Other liabilities 270 314 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, 2024— 180,427,804 shares issued and 2023— 188,188,401 shares issued 2 2 Paid-in capital 1,351 1,389 Retained earnings 4,533 4,535 Treasury stock—at cost, 2024— 6,102,287 shares and 2023— 0 shares ( 483 ) — Accumulated other comprehensive loss ( 209 ) ( 209 ) Total stockholders’ equity 5,194 5,717 Noncontrolling interest 2,543 2,656 Total equity 7,737 8,373 Total liabilities and equity $ 13,843 $ 14,376 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, 2024 $ 2 $ ( 15 ) $ 1,345 $ 4,360 $ ( 232 ) $ 5,460 $ 2,642 $ 8,102 Net earnings — — — 276 — 276 65 341 Other comprehensive income — — — — 23 23 — 23 Purchases of treasury stock — ( 481 ) — — — ( 481 ) — ( 481 ) Retirement of treasury stock — 15 ( 1 ) ( 14 ) — — — — Acquisition of treasury stock under employee stock plans — ( 2 ) — — — ( 2 ) — ( 2 ) Stock-based compensation expense — — 7 — — 7 — 7 Dividends and dividend equivalents ($ 0.50 per share) — — — ( 89 ) — ( 89 ) — ( 89 ) Distribution declared to noncontrolling interest — — — — — — ( 164 ) ( 164 ) Balance as of September 30, 2024 $ 2 $ ( 483 ) $ 1,351 $ 4,533 $ ( 209 ) $ 5,194 $ 2,543 $ 7,737 Balance as of December 31, 2023 $ 2 $ — $ 1,389 $ 4,535 $ ( 209 ) $ 5,717 $ 2,656 $ 8,373 Net earnings — — — 890 — 890 195 1,085 Purchases of treasury stock — ( 1,140 ) — — — ( 1,140 ) — ( 1,140 ) Retirement of treasury stock — 680 ( 63 ) ( 617 ) — — — — Acquisition of treasury stock under employee stock plans — ( 25 ) — — — ( 25 ) — ( 25 ) Issuance of $ 0.01 par value common stock under employee stock plans — 2 ( 1 ) — — 1 — 1 Stock-based compensation expense — — 26 — — 26 — 26 Dividends and dividend equivalents ($ 1.50 per share) — — — ( 275 ) — ( 275 ) — ( 275 ) Distributions declared to noncontrolling interest — — — — — — ( 308 ) ( 308 ) Balance as of September 30, 2024 $ 2 $ ( 483 ) $ 1,351 $ 4,533 $ ( 209 ) $ 5,194 $ 2,543 $ 7,737 (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, 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 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, 2024 2023 (in millions) Operating Activities: Net earnings $ 1,085 $ 1,486 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 704 640 Deferred income taxes ( 69 ) ( 73 ) Stock-based compensation expense 26 29 Unrealized net gain on natural gas derivatives ( 33 ) ( 65 ) Impairment of equity method investment in PLNL — 43 Gain on sale of emission credits ( 47 ) ( 39 ) Loss on disposal of property, plant and equipment 7 4 Undistributed earnings of affiliate—net of taxes ( 1 ) ( 2 ) Changes in assets and liabilities: Accounts receivable—net 2 165 Inventories ( 9 ) 130 Accrued and prepaid income taxes 23 57 Accounts payable and accrued expenses ( 9 ) ( 116 ) Customer advances 218 53 Other—net ( 46 ) ( 35 ) Net cash provided by operating activities 1,851 2,277 Investing Activities: Additions to property, plant and equipment ( 321 ) ( 311 ) Purchase of Waggaman ammonia production facility 2 — Proceeds from sale of property, plant and equipment — 1 Proceeds from sale of investments held in nonqualified employee benefit trust 1 — Purchase of emission credits ( 2 ) — Proceeds from sale of emission credits 47 39 Net cash used in investing activities ( 273 ) ( 271 ) Financing Activities: Dividends paid on common stock ( 278 ) ( 235 ) Distributions to noncontrolling interest ( 308 ) ( 459 ) Purchases of treasury stock ( 1,134 ) ( 355 ) Proceeds from issuances of common stock under employee stock plans 2 1 Cash paid for shares withheld for taxes ( 25 ) ( 22 ) Net cash used in financing activities ( 1,743 ) ( 1,070 ) Effect of exchange rate changes on cash and cash equivalents 10 ( 5 ) (Decrease) increase in cash and cash equivalents ( 155 ) 931 Cash and cash equivalents at beginning of period 2,032 2,323 Cash and cash equivalents at end of period $ 1,877 $ 3,254 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 low-carbon 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. Products derived from ammonia that are most often used as nitrogen fertilizers include granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). AN is also used extensively by the commercial explosives industry as a component of explosives. Products derived from ammonia that are sold primarily to industrial customers include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia. 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 to CF Industries Holdings, Inc. only 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, 2023, 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, 2023, filed with the SEC on February 22, 2024. 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, the fair values utilized in the allocation of purchase price in an acquisition, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax reserves, including any related interest and penalties, 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. 2. New Accounting Standards In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU is intended to improve reportable segment disclosures through enhanced disclosures about significant segment expenses. The guidance in this ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact that our adoption of this ASU will have on the disclosures in our consolidated financial statements that will first be included in our Annual Report on Form 10-K for the fiscal year ending December 31, 2024. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU adds new guidance that further enhances income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for fiscal 7 Table of Contents CF INDUSTRIES HOLDINGS, INC. years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact that our adoption of this ASU will have on the disclosures in our consolidated financial statements. 3. 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 the destination of our shipment) for the three and nine months ended September 30, 2024 and 2023: Ammonia Granular Urea UAN AN Other Total (in millions) Three months ended September 30, 2024 North America $ 297 $ 328 $ 313 $ 53 $ 94 $ 1,085 Europe and other 56 60 93 53 23 285 Total revenue $ 353 $ 388 $ 406 $ 106 $ 117 $ 1,370 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 Nine months ended September 30, 2024 North America $ 961 $ 1,180 $ 1,108 $ 152 $ 310 $ 3,711 Europe and other 203 72 198 166 62 701 Total revenue $ 1,164 $ 1,252 $ 1,306 $ 318 $ 372 $ 4,412 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 As of September 30, 2024 and December 31, 2023, we had $ 348 million and $ 130 million, respectively, in customer advances on our consolidated balance sheets. During the nine months ended September 30, 2024 and 2023, 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 to purchase additional product. The balances of customer incentives accrued as of September 30, 2024 and December 31, 2023 were not material. We have certain customer contracts with performance obligations where 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, 2024, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 1.8 billion. We expect to recognize approximately 11 % of these performance obligations as revenue in the remainder of 2024, approximately 29 % as revenue during 2025-2027, approximately 17 % as revenue during 2028-2030, and the remainder as revenue thereafter. Subject to the terms and conditions of the applicable contracts, if these 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 $ 1.3 billion as of September 30, 2024. Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially filled at December 31, 2023 were satisfied in 2024. 8 Table of Contents CF INDUSTRIES HOLDINGS, INC. 4. Net Earnings Per Share Net earnings per share were computed as follows: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 (in millions, except per share amounts) Net earnings attributable to common stockholders $ 276 $ 164 $ 890 $ 1,251 Basic earnings per common share: Weighted-average common shares outstanding 178.4 192.4 182.9 194.4 Net earnings attributable to common stockholders $ 1.55 $ 0.85 $ 4.87 $ 6.44 Diluted earnings per common share: Weighted-average common shares outstanding 178.4 192.4 182.9 194.4 Dilutive common shares—stock-based awards 0.2 0.5 0.2 0.5 Diluted weighted-average common shares outstanding 178.6 192.9 183.1 194.9 Net earnings attributable to common stockholders $ 1.55 $ 0.85 $ 4.86 $ 6.42 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, 2024 and the three and nine months ended September 30, 2023. 5. Acquisition of Waggaman Ammonia Production Facility On December 1, 2023, we acquired an ammonia production facility located in Waggaman, Louisiana, from Dyno Nobel Louisiana Ammonia, LLC (DNLA), a U.S. subsidiary of Australia-based Incitec Pivot Limited (IPL), pursuant to an asset purchase agreement with DNLA and IPL. The facility has a nameplate production capacity of 880,000 tons of ammonia annually. Our acquisition of the Waggaman facility expanded our ammonia manufacturing and distribution capacity, including our ability to enable low-carbon ammonia production. In connection with the acquisition, we entered into 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. Under the terms of the asset purchase agreement, $ 425 million of the purchase price of $ 1.675 billion, subject to adjustment, was allocated by the parties to the ammonia offtake agreement. We funded the balance of the initial purchase price on the acquisition date with $ 1.223 billion of cash on hand. The consideration transferred on the acquisition date reflected an estimated net working capital adjustment and other adjustments to the purchase price, which was subject to further adjustment pursuant to the terms of the asset purchase agreement. The purchase price adjustments required under the asset purchase agreement were finalized in the second quarter of 2024, which resulted in a $ 2 million reduction in the purchase price with a corresponding reduction in goodwill. As a result, the final purchase price was $ 1.221 billion, and we finalized our purchase accounting for the Waggaman ammonia production facility in the second quarter of 2024. In the nine months ended September 30, 2024, we incurred $ 4 million of integration costs related to the Waggaman acquisition. In the three and nine months ended September 30, 2023, we incurred $ 9 million and $ 25 million, respectively, of acquisition-related costs related to the Waggaman acquisition. In addition, we incurred $ 2 million of integration costs in both the three and nine months ended September 30, 2023. These costs are included in acquisition and integration costs in our consolidated statements of operations. 9 Table of Contents CF INDUSTRIES HOLDINGS, INC. 6. Inventories Inventories consist of the following: September 30, 2024 December 31, 2023 (in millions) Finished goods $ 252 $ 256 Raw materials, spare parts and supplies 49 43 Total inventories $ 301 $ 299 7. Property, Plant and Equipment—Net Property, plant and equipment—net consists of the following: September 30, 2024 December 31, 2023 (in millions) Land $ 115 $ 114 Machinery and equipment 13,766 13,716 Buildings and improvements 1,014 1,020 Construction in progress 548 394 Property, plant and equipment (1) 15,443 15,244 Less: Accumulated depreciation and amortization 8,627 8,103 Property, plant and equipment—net $ 6,816 $ 7,141 _______________________________________________________________________________ (1) As of September 30, 2024 and December 31, 2023, we had property, plant and equipment that was accrued but unpaid of $ 122 million and $ 68 million, respectively. As of September 30, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of $ 80 million and $ 53 million, respectively. Depreciation and amortization related to property, plant and equipment was $ 229 million and $ 701 million for the three and nine months ended September 30, 2024, respectively, and $ 211 million and $ 633 million for the three and nine months ended September 30, 2023, 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 plant turnarounds are capitalized in property, plant and equipment when incurred. Scheduled replacements and overhauls of plant machinery and equipment during a plant turnaround include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors and heat exchangers and the replacement of catalysts. 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 plant turnarounds. Internal employee costs and overhead amounts are not considered plant turnaround costs and are not capitalized. The following is a summary of capitalized plant turnaround costs: Nine months ended September 30, 2024 2023 (in millions) Net capitalized plant turnaround costs as of January 1 $ 352 $ 312 Additions 120 121 Depreciation ( 134 ) ( 95 ) Effect of exchange rate changes and other — ( 4 ) Net capitalized plant turnaround costs as of September 30 $ 338 $ 334 10 Table of Contents CF INDUSTRIES HOLDINGS, INC. 8. 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 earnings (losses) of operating affiliate on our consolidated statements of operations for the three and nine months ended September 30, 2023. As of September 30, 2024, the total carrying value of our equity method investment in PLNL was $ 28 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 $ 22 million and $ 68 million for the three and nine months ended September 30, 2024, respectively, and $ 20 million and $ 115 million for the three and nine months ended September 30, 2023, respectively. 9. Fair Value Measurements Our cash and cash equivalents and other investments consist of the following: September 30, 2024 Cost Basis Unrealized Gains Unrealized Losses Fair Value (in millions) Cash $ 331 $ — $ — $ 331 Cash equivalents: U.S. and Canadian government obligations 1,045 — — 1,045 Other debt securities 501 — — 501 Total cash and cash equivalents $ 1,877 $ — $ — $ 1,877 Nonqualified employee benefit trusts 15 3 — 18 December 31, 2023 Cost Basis Unrealized Gains Unrealized Losses Fair Value (in millions) Cash $ 208 $ — $ — $ 208 Cash equivalents: U.S. and Canadian government obligations 1,488 — — 1,488 Other debt securities 336 — — 336 Total cash and cash equivalents $ 2,032 $ — $ — $ 2,032 Nonqualified employee benefit trusts 16 1 — 17 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 and also in bank deposits. 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. 11 Table of Contents CF INDUSTRIES HOLDINGS, INC. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present assets and liabilities included in our consolidated balance sheets as of September 30, 2024 and December 31, 2023 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value: September 30, 2024 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 $ 1,546 $ 1,546 $ — $ — Nonqualified employee benefit trusts 18 18 — — Derivative assets 4 — 4 — Derivative liabilities ( 5 ) — ( 5 ) — December 31, 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 $ 1,824 $ 1,824 $ — $ — Nonqualified employee benefit trusts 17 17 — — Derivative assets 1 — 1 — Derivative liabilities ( 35 ) — ( 35 ) — Cash Equivalents Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. As of September 30, 2024 and December 31, 2023, 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. 12 Table of Contents CF INDUSTRIES HOLDINGS, INC. Financial Instruments The carrying amount and estimated fair value of our financial instruments are as follows: September 30, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value (in millions) Long-term debt $ 2,970 $ 2,952 $ 2,968 $ 2,894 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 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 assets and liabilities measured at fair value on a nonrecurring basis rely primarily on Company-specific inputs. 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 8—Equity Method Investment for additional information. 10. Income Taxes For the three months ended September 30, 2024, we recorded an income tax provision of $ 59 million on pre-tax income of $ 400 million, or an effective tax rate of 14.8 %, compared to an income tax provision of $ 23 million on pre-tax income of $ 253 million, or an effective tax rate of 9.1 %, for the three months ended September 30, 2023. For the three months ended September 30, 2024, our income tax provision includes a $ 9 million income tax benefit arising from the finalization of tax return filing positions. 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. For the three months ended September 30, 2024 and 2023, these income tax benefits in relation to pre-tax income of $ 400 million and $ 253 million, respectively, contributed to a lower effective tax rate compared to the U.S. statutory rate of 21%. For the nine months ended September 30, 2024, we recorded an income tax provision of $ 244 million on pre-tax income of $ 1.33 billion, or an effective tax rate of 18.4 %, compared to an income tax provision of $ 326 million on pre-tax income of $ 1.81 billion, or an effective tax rate of 18.0 %, for the nine months ended September 30, 2023. 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, 2024 of 14.8 %, which is based on pre-tax income of $ 400 million, including $ 65 million of earnings attributable to the noncontrolling interest, would be 2.9 percentage points higher if based on pre-tax income exclusive of the $ 65 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 if based on pre-tax income exclusive of the $ 66 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the nine months ended September 30, 2024 of 18.4 %, which is based on pre-tax income of $ 1.33 billion, including $ 195 million of earnings attributable to the noncontrolling interest, would be 3.1 percentage points higher if based on pre-tax income exclusive of the $ 195 million of earnings attributable to the noncontrolling interest. Our 13 Table of Contents CF INDUSTRIES HOLDINGS, INC. 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. Canada Revenue Agency Competent Authority Matter In the second half of 2022, as a result of the conclusion of arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities related to tax years 2006-2011, we paid additional income taxes and related interest of $ 124 million and $ 100 million, respectively, to the Canada Revenue Agency (CRA) and Alberta Tax and Revenue Administration (Alberta TRA). In the third quarter of 2024, we were informed that the CRA granted us discretionary interest relief for certain tax years from 2006 through 2011. Based on current estimates and foreign currency exchange rates as of September 30, 2024, the interest relief from the CRA and Alberta TRA is estimated to be approximately $ 40 million, consisting of interest refunds of $ 37 million and related interest of $ 3 million. As a result, in the third quarter of 2024, we recognized a $ 37 million reduction in interest expense and $ 3 million of interest income in our consolidated statement of operations. 11. Financing Agreements 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 October 26, 2028 and 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 can 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 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. As of September 30, 2024, 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 September 30, 2024 or December 31, 2023, or during the nine months ended September 30, 2024. The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including a financial covenant. As of September 30, 2024, we were in compliance with all covenants under the Revolving Credit Agreement. Letters of Credit Under Bilateral Agreement We are party to a bilateral agreement providing for the issuance of up to $ 425 million of letters of credit. As of September 30, 2024, approximately $ 344 million of letters of credit were outstanding under this agreement. 14 Table of Contents CF INDUSTRIES HOLDINGS, INC. Senior Notes Long-term debt presented on our consolidated balance sheets as of September 30, 2024 and December 31, 2023 consisted of the following debt securities issued by CF Industries: Effective Interest Rate September 30, 2024 December 31, 2023 Principal Carrying Amount (1) Principal Carrying Amount (1) (in millions) Public Senior Notes: 5.150 % due March 2034 5.293 % $ 750 $ 742 $ 750 $ 741 4.950 % due June 2043 5.040 % 750 742 750 742 5.375 % due March 2044 5.478 % 750 741 750 741 Senior Secured Notes: 4.500 % due December 2026 (2) 4.783 % 750 745 750 744 Total long-term debt $ 3,000 $ 2,970 $ 3,000 $ 2,968 _______________________________________________________________________________ (1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $ 6 million and $ 7 million as of September 30, 2024 and December 31, 2023, respectively, and total deferred debt issuance costs were $ 24 million and $ 25 million as of September 30, 2024 and December 31, 2023, 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. 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, 2024 2023 2024 2023 (in millions) Interest on borrowings (1) $ 37 $ 38 $ 112 $ 112 Fees on financing agreements (1) 3 2 7 6 Interest on tax liabilities (2) ( 37 ) 1 ( 37 ) 1 Interest capitalized ( 3 ) ( 2 ) ( 8 ) ( 4 ) Total interest expense $ — $ 39 $ 74 $ 115 _______________________________________________________________________________ (1) See Note 11—Financing Agreements for additional information. (2) See Note 10—Income Taxes for additional information. 15 Table of Contents CF INDUSTRIES HOLDINGS, INC. 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, 2024, we had natural gas derivative contracts covering certain periods through March 2025. As of September 30, 2024, our open natural gas derivative contracts consisted of natural gas basis swaps for 17.5 million MMBtus of natural gas. As of December 31, 2023, we had open natural gas derivative contracts consisting of natural gas fixed price swaps, basis swaps and options for 49.0 million MMBtus of natural gas. For the nine months ended September 30, 2024, we used derivatives to cover approximately 20 % 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 2024 2023 2024 2023 (in millions) Unrealized net (losses) gains on natural gas derivatives Cost of sales $ ( 1 ) $ ( 7 ) $ 33 $ 65 Realized net losses on natural gas derivatives Cost of sales ( 1 ) ( 1 ) ( 39 ) ( 119 ) Net derivative losses $ ( 2 ) $ ( 8 ) $ ( 6 ) $ ( 54 ) The fair values of derivatives on our consolidated balance sheets are shown below. As of September 30, 2024 and December 31, 2023, none of our derivative instruments were designated as hedging instruments. See Note 9—Fair Value Measurements for additional information on derivative fair values. Asset Derivatives Liability Derivatives Balance Sheet Location September 30, 2024 December 31, 2023 Balance Sheet Location September 30, 2024 December 31, 2023 (in millions) (in millions) Natural gas derivatives Other current assets $ 4 $ 1 Other current liabilities $ ( 5 ) $ ( 35 ) 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, 2024 and December 31, 2023, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $ 1 million and $ 34 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, 2024 and December 31, 2023, we had no cash collateral on deposit with counterparties for derivative contracts. 16 Table of Contents CF INDUSTRIES HOLDINGS, INC. The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of September 30, 2024 and December 31, 2023: 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, 2024 Total derivative assets $ 4 $ — $ — $ 4 Total derivative liabilities ( 5 ) — — ( 5 ) Net derivative liabilities $ ( 1 ) $ — $ — $ ( 1 ) December 31, 2023 Total derivative assets $ 1 $ — $ — $ 1 Total derivative liabilities ( 35 ) — — ( 35 ) Net derivative liabilities $ ( 34 ) $ — $ — $ ( 34 ) _______________________________________________________________________________ (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. 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 the noncontrolling interest in our consolidated balance sheets is provided below. 2024 2023 (in millions) Noncontrolling interest: Balance as of January 1 $ 2,656 $ 2,802 Earnings attributable to noncontrolling interest 195 235 Declaration of distributions payable ( 308 ) ( 459 ) Balance as of September 30 $ 2,543 $ 2,578 Distributions payable to noncontrolling interest: Balance as of January 1 $ — $ — Declaration of distributions payable 308 459 Distributions to noncontrolling interest ( 308 ) ( 459 ) 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. 17 Table of Contents CF INDUSTRIES HOLDINGS, INC. 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). The 2021 Share Repurchase Program was completed in the second quarter of 2023. On November 2, 2022, the Board authorized the repurchase of up to $ 3 billion of CF Holdings common stock commencing upon completion of the 2021 Share Repurchase Program and effective through December 31, 2025 (the 2022 Share Repurchase Program). Repurchases under our share repurchase programs may be made from time to time in the open market, through privately negotiated transactions, through block transactions, through accelerated share repurchase programs, 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. Shares Amounts (1) (in millions) Shares repurchased in 2023: Second quarter 0.8 $ 50 Third quarter 1.9 150 Fourth quarter 2.9 225 Total shares repurchased in 2023 5.6 425 Shares repurchased in 2024: First quarter 4.3 347 Second quarter 4.0 305 Third quarter 6.1 476 Total shares repurchased in 2024 14.4 1,128 Shares repurchased as of September 30, 2024 20.0 $ 1,553 ______________________________________________________________________________ (1) As defined in the 2022 Share Repurchase Program, amounts reflect the price paid for the shares of common stock repurchased, excluding commissions paid to brokers and excise taxes. In the nine months ended September 30, 2024, we repurchased approximately 14.4 million shares under the 2022 Share Repurchase Program for $ 1.13 billion, and we retired approximately 8.5 million shares of repurchased stock. As of September 30, 2024, we held approximately 6.1 million shares of treasury stock. In the second quarter 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 we retired approximately 3.3 million shares of repurchased stock. 18 Table of Contents CF INDUSTRIES HOLDINGS, INC. 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, 2023 $ ( 146 ) $ 3 $ ( 66 ) $ ( 209 ) Loss arising during the period — — ( 2 ) ( 2 ) Effect of exchange rate changes and deferred taxes 5 — ( 3 ) 2 Balance as of September 30, 2024 $ ( 141 ) $ 3 $ ( 71 ) $ ( 209 ) 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 ) 19 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, 2024 and 2023 are presented in the table below. Ammonia Granular Urea (1) UAN (1) AN (1) Other (1) Consolidated (in millions) Three months ended September 30, 2024 Net sales $ 353 $ 388 $ 406 $ 106 $ 117 $ 1,370 Cost of sales 270 228 272 82 74 926 Gross margin $ 83 $ 160 $ 134 $ 24 $ 43 444 Total other operating costs and expenses 82 Equity in earnings of operating affiliate 2 Operating earnings $ 364 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 Nine months ended September 30, 2024 Net sales $ 1,164 $ 1,252 $ 1,306 $ 318 $ 372 $ 4,412 Cost of sales 869 711 813 262 225 2,880 Gross margin $ 295 $ 541 $ 493 $ 56 $ 147 1,532 Total other operating costs and expenses 228 Equity in earnings of operating affiliate 1 Operating earnings $ 1,305 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 _______________________________________________________________________________ (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 includes an impairment of our equity method investment in PLNL of $ 43 million. See Note 8—Equity Method Investment for additional information. 20 Table of Contents CF INDUSTRIES HOLDINGS, INC.