What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-04 · 238 added, 158 removed, 243 unchanged (62% of the section changed)

4 unchanged sentences

Results of Operations

The following table shows the results of operations for the three months ended March 31, 2023 and March 31, 2022:

Three months ended

March 31, 2023-2022

(in millions, except per share data) 2023 2022 Change Percent

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

Three months ended Six months ended

June 30, 2023-2022 June 30, 2023-2022

(in millions, except per share data) 2023 2022 Change Percent 2023 2022 Change Percent

Net sales $ 3,394.0 $ 5,373.1 $ (1,979.1) (37) % $ 6,998.3 $ 9,295.4 $ (2,297.1) (25) %

3 unchanged sentences

Selling, general and administrative expenses 129.9 108.2 21.7 20 % 257.6 240.6 17.0 7 %

Other operating (income) expense (1.9) 50.9 (52.8) NM

Other operating expense 72.0 63.9 8.1 13 % 70.1 114.8 (44.7) (39) %

Operating earnings 369.2 1,674.2 (1,305.0) (78) % 913.8 2,930.0 (2,016.2) (69) %

Interest expense, net (36.0) (34.1) (1.9) 6 % (77.1) (73.4) (3.7) 5 %

Foreign currency transaction gain 51.4 310.7 (259.3) (83) %

Other income (expense) (8.9) 0.2 (9.1) NM

Foreign currency transaction gain 148.5 (227.2) 375.7 NM 199.9 83.5 116.4 139 %

Other expense (7.1) (35.7) 28.6 (80) % (16.0) (35.5) 19.5 (55) %

Earnings from consolidated companies before income taxes 474.6 1,377.2 (902.6) (66) % 1,020.6 2,904.6 (1,884.0) (65) %

3 unchanged sentences

Net earnings including noncontrolling interests 379.1 1,043.8 (664.7) (64) % 838.1 2,229.5 (1,391.4) (62) %

Net earnings attributable to noncontrolling interests 24.2 3.7 20.5 NM

Net earnings attributable to noncontrolling interests 10.1 7.9 2.2 28 % 34.3 11.6 22.7 196 %

Net earnings attributable to Mosaic $ 369.0 $ 1,035.9 $ (666.9) (64) % $ 803.8 $ 2,217.9 $ (1,414.1) (64) %

1 unchanged sentence

Diluted weighted average number of shares outstanding 333.7 363.1 336.2 366.5

Overview of Consolidated Results for the three months ended March 31, 2023 and 2022

For the three months ended March 31, 2023, Mosaic had net income of $434.8 million, or $1.28 per diluted share, compared to net income of $1.2 billion, or $3.19 per diluted share, for the prior year period.

Net sales for the three months ended March 31, 2023 decreased 8% compared to the same period of the prior year, driven by lower average selling prices, as discussed further below.

Net income for the three months ended March 31, 2023 was also impacted by a lower foreign currency transaction gain which decreased 83% compared to the prior year period.

Overview of Consolidated Results for the three months ended June 30, 2023 and 2022

For the three months ended June 30, 2023, Mosaic had net income of $369.0 million, or $1.11 per diluted share, compared to net income of $1.0 billion, or $2.85 per diluted share, for the prior year period.

Net sales for the three months ended June 30, 2023 decreased 37% compared to the same period of the prior year, driven by lower average selling prices, as discussed further below.

Net income for the three months ended June 30, 2023 was also positively impacted by a foreign currency transaction gain of $148.5 million, compared to a foreign currency transaction loss of $227.2 million in the prior year period.

Significant factors affecting our results of operations and financial condition are listed below.

Certain of these factors are discussed in more detail in the following sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

For the three months ended March 31, 2023, operating results in all of our segments were impacted by lower average sales prices compared to the prior year period.

For the three months ended June 30, 2023, operating results in all of our segments were impacted by lower average sales prices compared to the prior year period.

Global markets have softened compared to the prior year period, as buyers have delayed purchases in anticipation of lower prices.

1 unchanged sentence

In addition, the Russian invasion of Ukraine in February 2022 resulted in instability in global commodity markets and significantly reduced the supply of fertilizer and agricultural commodities produced in those geographies, which contributed to rising fertilizer prices in the prior year period.

Our operating results for the three months ended March 31, 2023 were unfavorably impacted in our Phosphate segment compared to the prior year period due to lower average selling prices compared to the prior year period, driven by the factors described above.

Higher raw material costs, primarily ammonia and blended rock, and higher conversion costs also had an unfavorable impact on operating results.

Operating results in the current year period were positively impacted by higher

finished product sales volumes, as the prior year period was impacted by logistical constraints caused by low inventory levels, and longer rail cycle times.

Our operating results for the three months ended March 31, 2023 were unfavorably impacted in our Potash segment by lower average sales prices compared to the prior year period, driven by the factors discussed above.

Current period operating results were favorably impacted by higher sales volumes compared to the prior year period.

Our sales volumes were lower in the prior year period primarily due to longer rail cycle times in North America driven by weather conditions in Canada, and third-party labor issues.

Our operating results for the three months ended March 31, 2023 were unfavorably impacted in our Mosaic Fertilizantes by lower sales prices, which decreased globally compared to the same period in the prior year, as discussed above.

Sales volumes of finished goods, including performance products, were higher in the current year period compared to the same period in the prior year, due to demand recovery.

Additionally, in July 2023, workers at four Canadian West Coast ports went on strike.

This has put additional pressure on the international shipping network and has and may continue to negatively impact Canpotex's ability to ship potash product from the Port of Vancouver in the third quarter.

Canpotex shipments have also been negatively impacted by equipment failure at the Port of Portland.

Our operating results for the three months ended June 30, 2023 were unfavorably impacted in our Phosphate segment compared to the prior year period due to lower average selling prices, driven by the factors described above.

This was partially offset by lower raw material costs, primarily sulfur and ammonia.

Operating results in the current year period were positively impacted by higher finished product sales volumes, as the prior year period was impacted by a condensed spring season caused by adverse weather conditions.

Our operating results for the three months ended June 30, 2023 were unfavorably impacted in our Potash segment due to lower average sales prices compared to the prior year period, driven by the factors discussed above.

Current period operating results were also unfavorably impacted by lower sales volumes compared to the prior year period.

Our sales volumes were lower in the current year period primarily due to the global market softness described above, resulting in lower export sales.

Our operating results for the three months ended June 30, 2023 were unfavorably impacted in our Mosaic Fertilizantes due to lower sales prices, which decreased globally compared to the same period in the prior year, as discussed above.

Sales volumes were up slightly compared to the prior year period due to an increased customer base as a result of our growth strategy to expand our presence in Brazil.

Other Highlights

• In May 2023, we entered into a 10-year senior unsecured term loan facility whereby we can draw up to $700 million.

The term loan matures on May 18, 2033.

As of June 30, 2023, we have not drawn any amounts under this facility.

Overview of Consolidated Results for the six months ended June 30, 2023 and 2022

Net earnings attributable to Mosaic for the six months ended June 30, 2023 was $803.8 million, or $2.39 per diluted share, compared to net earnings of $2.2 billion, or $6.05 per diluted share, for the same period a year ago.

Net income for the three months ended June 30, 2023 was also positively impacted by a foreign currency transaction gain of $199.9 million, compared to $83.5 million in the prior year period.

Results for the six months ended June 30, 2023 and 2022 reflected the factors discussed above in the discussion for the three months ended June 30, 2023 and 2022, in addition to those noted below.

Certain of these factors are discussed in more detail in the following sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Operating results in our Phosphate segment for the six months ended June 30, 2023 were unfavorably impacted compared to the prior year period due to lower average selling prices, driven by the factors described above in the three-month discussion.

This was partially offset by lower raw material costs, primarily sulfur and ammonia.

Operating results in the current year period were positively impacted by higher finished product sales volumes, driven by the factor mentioned above in the three-month discussion.

Operating results in our Potash segment for the six months ended June 30, 2023 were unfavorably impacted by a decrease in the average selling price of potash compared to the prior year period as described above in the three-month discussion.

Current year operating results were also unfavorably impacted by higher idle plant and maintenance turnaround costs due to the temporary idling of our Colonsay, Saskatchewan mine, due to market conditions, and the timing of turnarounds compared to the prior year.

For the six months ended June 30, 2023, operating results in our Mosaic Fertilizantes segment were unfavorably impacted by a decrease in average sales prices in the current year compared to the prior year period as discussed above in the three-month discussion.

Sales volumes of finished goods, including performance products, were higher in the current year period compared to the same period in the prior year, due to an increased customer base as a result of our growth strategy to expand our presence in Brazil.

Sales volumes of other products, primarily gypsum and acids, were lower than the prior year period, driven by unfavorable weather, and sulfuric acid availability in the current year period.

Other Highlights

In addition to the highlight referenced above,

• On January 12, 2023, we completed the sale of the Streamsong Resort ® (the “ Resort ”) and the approximately 7,000 acres on which it sits for net proceeds of $158 million.

4 unchanged sentences

• On February 24, 2023, pursuant to existing stock repurchase authorizations, we entered into an accelerated share repurchase agreement (the “ 2023 ASR Agreement ”) with a third-party financial institution to repurchase $300 million of our Common Stock.

During the quarter ended March 31, 2023, we repurchased 8,690,936 shares of Common Stock in the open market for approximately $448.0 million.

During the six months ended June 30, 2023, we repurchased 8,690,936 shares of Common Stock in the open market for approximately $448.0 million.

This includes 5,624,574 shares purchased under the 2023 ASR Agreement at an average purchase price of $53.34 per share.

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The following table summarizes the Phosphate segment’s net sales, gross margin, sales volume, selling prices and raw material prices:

Three months ended

March 31, 2023-2022

Three months ended Six months ended

June 30, 2023-2022 June 30, 2023-2022

(in millions, except price per tonne or unit)

2023 2022 Change Percent

2023 2022 Change Percent 2023 2022 Change Percent

North America

30 unchanged sentences

Three months ended March 31, 2023 and March 31, 2022

The Phosphate segment’s net sales were $1.4 billion for the three months ended March 31, 2023, compared to $1.5 billion for the three months ended March 31, 2022.

Three months ended June 30, 2023 and June 30, 2022

The Phosphate segment’s net sales were $1.3 billion for the three months ended June 30, 2023, compared to $1.8 billion for the three months ended June 30, 2022.

The decrease in net sales in the current year period was primarily due to lower average finished goods sales prices, which had an unfavorable impact of approximately $700 million compared to the prior year period.

Net sales were also unfavorably impacted by approximately $15 million due to decreased sales of ammonia and sulfur.

This was partially offset by higher finished product sales volumes in the current period, which had a favorable impact on net sales of approximately $230 million compared to the prior year period.

Our average finished product selling price decreased 18% to $717 per tonne for the three months ended March 31, 2023, compared to $877 per tonne in the prior year period, due to the factors discussed in the Overview.

The Phosphate segment’s sales volumes of finished products increased by 11% for the three months ended March 31, 2023, compared to the same period in the prior year, due to the factors discussed in the Overview.

Gross margin for the Phosphate segment decreased to $259.3 million for the three months ended March 31, 2023, from $527.7 million for the three months ended March 31, 2022.

Net sales were also unfavorably impacted by approximately $40 million, due to decreased sales of raw materials of approximately $70 million, which were driven by lower sales volumes and prices.

This impact was partially offset by increased sales from Miski Mayo of approximately $30 million, compared to the prior year period.

Our average finished product selling price decreased 40% to $634 per tonne for the three months ended June 30, 2023, compared to $1,048 per tonne in the prior year period, due to the factors discussed in the Overview.

The Phosphate segment’s sales volumes of finished products increased by 15% for the three months ended June 30, 2023, compared to the same period in the prior year, due to the factors discussed in the Overview.

Gross margin for the Phosphate segment decreased to $216.2 million for the three months ended June 30, 2023, from $641.6 million for the three months ended June 30, 2022.

The decrease in gross margin in the current year period was primarily due to lower sales prices, which unfavorably impacted gross margin by approximately $700 million.

Gross margin was also unfavorably impacted by approximately $40 million, due to increased conversion costs and higher maintenance and turnaround costs.

Increased raw material prices in the current period, largely driven by blended rock and ammonia, unfavorably impacted gross margin by approximately $25 million.

These impacts were partially offset by higher sales volumes, which had a favorable impact of approximately $50 million.

The average consumed price for ammonia for our North America operations increased 14% to $605 per tonne for the three months ended March 31, 2023, from $532 in the same period a year ago.

The average consumed sulfur price for our North America operations decreased 16% to $236 per long ton for the three months ended March 31, 2023, from $281 in the same period a year ago.

Gross margin was also unfavorably impacted by approximately $100 million, due to increased conversion costs, higher cost of blended rock, and other product costs.

This was partially offset by decreased raw material prices in the current period, driven by sulfur and ammonia, which favorably impacted gross margin by approximately $200 million.

In addition, higher sales volumes, which had a favorable impact of approximately $100 million, and lower costs of approximately $50 million primarily related to the timing of idle plant and turnaround costs in the current year period also partially offset this gross margin variance.

The average consumed price for ammonia for our North America operations decreased 25% to $441 per tonne for the three months ended June 30, 2023, from $591 in the same period a year ago.

The average consumed sulfur price for our North America operations decreased 49%, to $195 per long ton, for the three months ended June 30, 2023, from $385 in the same period a year ago.

The purchase prices of these raw materials are driven by global supply and demand.

The consumed ammonia and sulfur prices also include transportation, transformation and storage costs.

The average consumed cost of purchased and produced phosphate rock increased to $77 per tonne for the three months ended March 31, 2023, from $61 for the three months ended March 31, 2022, primarily due to an increase in processing costs and using more Miski Mayo rock in the current year period.

For the three months ended March 31, 2023, our North America phosphate rock production remained steady at 2.1 million tonnes.

The Phosphate segment’s production of crop nutrient dry concentrates and animal feed ingredients increased 5% for the three months ended March 31, 2023 from the prior year period.

Our operating rate for processed phosphate production increased to 74% for the three months ended March 31, 2023, from 70% for the same period in 2022.

The average consumed cost of purchased and produced phosphate rock increased to $79 per tonne for the three months ended June 30, 2023, from $64 for the three months ended June 30, 2022, primarily due to an increase in processing costs and using more Miski Mayo rock in the current year period.

For the three months ended June 30, 2023, our North America phosphate rock production decreased to 2.2 million tonnes from 2.5 million tonnes during the same period of the prior year, due to geology of rock and operational challenges.

The Phosphate segment’s production of crop nutrient dry concentrates and animal feed ingredients increased 1% for the three months ended June 30, 2023 from the prior year period.

Our operating rate for processed phosphate production increased to 67% for the three months ended June 30, 2023, from 66% for the same period in 2022.

Six months ended June 30, 2023 and June 30, 2022

The Phosphate segment’s net sales were $2.7 billion for the six months ended June 30, 2023, compared to $3.3 billion for the six months ended June 30, 2022.

The decrease in net sales was primarily due to lower finished product selling prices in the current year period, which unfavorably impacted net sales by approximately $940 million compared to the prior year period.

This was partially offset by higher sales volumes of finished goods, which favorably impacted net sales by approximately $360 million.

Net sales were also unfavorably impacted by approximately $50 million due to lower sales of raw materials of approximately $110 million, driven by lower sales prices.

This impact was partially offset by favorable sales from Miski Mayo of approximately $60 million compared to the prior year period.

Our average finished product selling price was $674 per tonne for the six months ended June 30, 2023, a decrease of $289 per tonne from the same period a year ago, due to the factors discussed in the Overview.

The Phosphate segment’s sales volumes of finished products increased by 13% for the six months ended June 30, 2023, compared to the same period in the prior year ago, due to the factor discussed in the Overview.

Gross margin for the Phosphate segment decreased to $475.5 million for the six months ended June 30, 2023, from $1.2 billion for the six months ended June 30, 2022.

The decrease in gross margin in the current year period was primarily due to the impact of lower finished product prices of approximately $940 million compared to the prior year period.

Gross margin was also unfavorably impacted by approximately $100 million, due to increased conversion and other costs resulting from higher maintenance and water management costs in the current period.

Increased cost of blended rock unfavorably impacted gross margin by approximately $70 million, due to higher input costs.

These increases were partially offset by lower raw material costs of sulfur and ammonia as discussed below, which impacted gross margin by approximately $200 million.

Gross margin was also favorably impacted by approximately $160 million due to higher sales volumes, and lower costs of approximately $40 million related to the timing of idle plant and turnaround costs in the current year period.

The average consumed price for ammonia for our North America operations was $506 per tonne for the six months ended June 30, 2023, compared to $575 in the same period a year ago.

The average consumed price for sulfur for our North America operations decreased to $210 per long ton for the six months ended June 30, 2023, from $302 in the same period a year ago.

The purchase prices of these raw materials are driven by global supply and demand.

The average consumed cost of purchased and produced phosphate rock increased to $76 per tonne for the six months ended June 30, 2023, compared to $63 per tonne for the prior year period, primarily due to using more Miski Mayo rock in the current year period.

Our North America phosphate rock production decreased to 4.4 million tonnes for the six months ended June 30, 2023, compared to 4.6 million for the six months ended June 30, 2022, due to geology of rock and operational challenges.

The Phosphate segment’s production of crop nutrient dry concentrates and animal feed ingredients increased by 3%, to 3.5 million tonnes for the six months ended June 30, 2023, compared to 3.4 million tonnes in the prior year period.

For the six months ended June 30, 2023, our operating rate for processed phosphate production increased to 70%, compared to 68% in the same period of the prior year.

Potash Net Sales and Gross Margin

The following table summarizes the Potash segment’s net sales, gross margin, sales volume and selling price:

Three months ended

March 31, 2023-2022

Three months ended Six months ended

June 30, 2023-2022 June 30, 2023-2022

(in millions, except price per tonne or unit)

2023 2022 Change Percent

2023 2022 Change Percent 2023 2022 Change Percent

North America

18 unchanged sentences

(b) Includes sales volumes of K-Mag ® , Aspire ® and animal feed ingredients.

Three months ended March 31, 2023 and March 31, 2022

The Potash segment’s net sales decreased to $0.9 billion for the three months ended March 31, 2023, compared to $1.1 billion in the same period a year ago.

The decrease was due to lower selling prices, which had an unfavorable impact on net sales of approximately $230 million, compared to the same period in the prior year.

This was partially offset by higher sales volumes compared to the prior year, which favorably impacted net sales by approximately $70 million.

Our average finished product selling price was $475 per tonne for the three months ended March 31, 2023, compared to $591 per tonne for the same period a year ago, as a result of the factors described in the Overview.

The Potash segment’s sales volumes of finished products increased to 1.9 million tonnes for the three months ended March 31, 2023, compared to 1.8 million tonnes in the same period a year ago, due to the factors discussed in the Overview.

Gross margin for the Potash segment decreased to $413.3 million for the three months ended March 31, 2023, from $578.9 million in the same period of the prior year.

The decrease in gross margin in the current year period is primarily due to a decrease in selling prices, which contributed approximately $230 million to gross margin, compared to the prior year period, and an increase in turnaround costs of approximately $10 million, compared to the prior year.

Gross margin was also unfavorably impacted by increased product costs of approximately $10 million compared to the prior year period, which was driven by lower production volumes.

The decreases were partially offset by $50 million due to higher sales volumes, and a $40 million reduction in Canadian resource taxes and royalties compared to the prior year, as discussed below.

We had expense of $ 120.8 million from Canadian resource taxes for the three months ended March 31, 2023, compared to $157.2 million in the same period a year ago.

Canadian royalty expense decreased to $18.6 million for the three months ended March 31, 2023, compared to $27.0 million for the three months ended March 31, 2022.

Three months ended June 30, 2023 and June 30, 2022

The Potash segment’s net sales decreased to $848.7 million for the three months ended June 30, 2023, compared to $1.6 billion in the same period a year ago.

The decrease was primarily due to lower selling prices, which had an unfavorable impact on net sales of approximately $660 million, compared to the same period in the prior year.

Net sales was also unfavorably impacted by lower sales volumes of approximately $70 million.

Our average finished product selling price was $392 per tonne for the three months ended June 30, 2023, compared to $686 per tonne for the same period a year ago, as a result of the factor described in the Overview.

The Potash segment’s sales volumes of finished products decreased to 2.2 million tonnes for the three months ended June 30, 2023, compared to 2.3 million tonnes in the same period a year ago, due to the factors discussed in the Overview.

Gross margin for the Potash segment decreased to $336.0 million for the three months ended June 30, 2023, from $927.6 million in the same period of the prior year.

The decrease in gross margin in the current year period is primarily due to lower selling prices, which negatively impacted gross margin by approximately $660 million compared to the prior year period, and lower sales volumes, which had an unfavorable impact on gross margin of approximately $75 million.

Higher idle and turnaround costs negatively impacted gross margin by approximately $25 million compared to the prior year, largely due to the idling of our Colonsay, Saskatchewan mine in the current year period as well as maintenance at our Carlsbad, New Mexico mine.

Gross margin was also unfavorably impacted by higher fixed cost absorption of approximately $10 million compared to the prior year period, which was driven by lower production volumes.

The decreases were partially offset by $198 million reduction in Canadian resource taxes and royalties compared to the prior year, as discussed below.

We had expense of $ 95.0 million from Canadian resource taxes for the three months ended June 30, 2023, compared to $274.5 million in the same period a year ago.

Canadian royalty expense decreased to $12.9 million for the three months ended June 30, 2023, compared to $31.5 million for the three months ended June 30, 2022.

The fluctuations in Canadian resource taxes and royalties are a result of a decrease in our sales revenue and margins.

Our operating rate for potash production was 69% for the current year period, compared to 87% in the prior year period.

The decreased operating rate reflects the temporary idling of our Colonsay, Saskatchewan mine during the quarter, due to market conditions.

We expect to restart the mine in the second half of 2023.

The decreased operating rate reflects the temporary idling of our Colonsay, Saskatchewan mine and maintenance turnarounds during the quarter.

In July 2023, we temporarily restarted Colonsay to offset downtime from the summer turnaround at our Esterhazy mine.

Six months ended June 30, 2023 and June 30, 2022

The Potash segment’s net sales decreased to $1.8 billion for the six months ended June 30, 2023, compared to $2.6 billion in the same period a year ago.

The decrease was due to lower selling prices, which had an unfavorable impact on net sales of approximately $900 million.

This was partially offset by sales of other products of approximately $15 million.

Our average potash selling price was $431 per tonne for the six months ended June 30, 2023, compared to $645 per tonne for the same period a year ago, due to the factors discussed above in the Overview.

The Potash segment’s sales volumes for the six months ended June 30, 2023 decreased 1% compared to the same period a year ago.

Gross margin for the Potash segment decreased to $749.3 million for the six months ended June 30, 2023, from $1.5 billion for the same period in the prior year.

Gross margin was unfavorably impacted by approximately $900 million, due to the decrease in average selling prices, and by slightly lower sales volumes, which had an unfavorable impact on net sales of approximately $10 million.

Gross margin was also unfavorably impacted by increased idle and turnaround costs of approximately $30 million, largely due to the idling of our Colonsay mine in the current year period, and higher fixed cost absorption, driven by lower production volumes, and plant spending of approximately $30 million compared to the prior year period.

This was partially offset by lower Canadian resource taxes and royalties of approximately $240 million in the current year period, as discussed below.

We incurred $215.8 million in Canadian resource taxes for the six months ended June 30, 2023, compared to $431.7 million in the same period a year ago.

Canadian royalty expense decreased to $31.6 million for the six months ended June 30, 2023, compared to $58.5 million for the six months ended June 30, 2022.

The fluctuations in Canadian resource taxes and royalties are due to the decreases in our sales revenues and margins.

Our operating rate was 69% for the current year period, compared to 82% in the prior year period.

The decreased operating rate reflects the temporary idling of our Colonsay, Saskatchewan mine during the current year period due to market conditions, and down time for maintenance turnarounds at our Esterhazy, Saskatchewan and Carlsbad, New Mexico mines.

Mosaic Fertilizantes Net Sales and Gross Margin

The following table summarizes the Mosaic Fertilizantes segment’s net sales, gross margin, sales volume and selling price.

Three months ended

March 31, 2023-2022

Three months ended Six months ended

June 30, 2023-2022 June 30, 2023-2022

(in millions, except price per tonne or unit)

2023 2022 Change Percent

2023 2022 Change Percent 2023 2022 Change Percent

Net Sales $ 1,418.8 $ 2,259.7 $ (840.9) (37) % $ 2,762.1 $ 3,748.3 $ (986.2) (26) %

Cost of goods sold 1,406.0 1,809.5 (403.5) (22) % 2,750.4 3,078.8 (328.4) (11) %

Gross margin $ (1.1) $ 219.3 $ (220.4) NM

Gross margin $ 12.8 $ 450.2 $ (437.4) (97) % $ 11.7 $ 669.5 $ (657.8) (98) %

Gross margin as a percent of net sales 1 % 20 % — % 18 %

24 unchanged sentences

(a) Excludes internally produced volumes used in purchased nutrients for distribution.

Three months ended March 31, 2023 and March 31, 2022

The Mosaic Fertilizantes segment’s net sales decreased to $1.3 billion for the three months ended March 31, 2023, from $1.5 billion in the same period a year ago.

The decrease in net sales was due to lower finished product sales prices, which unfavorably impacted net sales by approximately $260 million, and lower sales volumes of other products, primarily gypsum and acids, which unfavorably impacted net sales by approximately $80 million.

Three months ended June 30, 2023 and June 30, 2022

The Mosaic Fertilizantes segment’s net sales decreased to $1.4 billion for the three months ended June 30, 2023, from $2.3 billion in the same period a year ago.

The decrease in net sales was due to lower finished product sales prices, which unfavorably impacted net sales by approximately $770 million, and lower sales volumes of other products, primarily gypsum, which unfavorably impacted net sales by approximately $130 million.

This was partially offset by higher finished goods sales volumes, which had a favorable impact of approximately $60 million.

Our average finished product selling price was $646 per tonne for the three months ended March 31, 2023, compared to $817 per tonne for the same period a year ago, due to the decrease in global sales prices as discussed in the Overview.

The Mosaic Fertilizantes segment’s sales volumes of finished products increased 14% for the three months ended March 31, 2023, compared to the same period a year ago.

Sales volumes were impacted by an increase in market demand for fertilizer products in the current period.

Gross margin for the Mosaic Fertilizantes segment decreased to $(1.1) million for the three months ended March 31, 2023, from $219.3 million in the same period of the prior year.

The decrease in gross margin was primarily due to an unfavorable impact of approximately $260 million related to the decrease in selling prices during the current year period, compared to the prior year

Gross margin was also unfavorably impacted by approximately $30 million, due to lower sales volumes of other products, primarily gypsum and acids, driven by unfavorable weather, and sulfuric acid availability.

Lower costs had a favorable impact of $90 million, driven by a decrease in product costs for our distribution business, and lower sulfur costs in our production business.

The average consumed price for ammonia for our Brazilian operations increased to $1,150 per tonne for the three months ended March 31, 2023, compared to $1,145 per tonne in the prior year period.

The average consumed sulfur price for our Brazilian operations was $278 per long ton for the three months ended March 31, 2023, compared to $337 per long ton in the prior year period.

Our average finished product selling price was $595 per tonne for the three months ended June 30, 2023, compared to $974 per tonne for the same period a year ago, due to the decrease in global sales prices as discussed in the Overview.

The Mosaic Fertilizantes segment’s sales volumes of finished products increased 3% for the three months ended June 30, 2023, compared to the same period a year ago.

Gross margin for the Mosaic Fertilizantes segment decreased to $12.8 million for the three months ended June 30, 2023, from $450.2 million in the same period of the prior year.

The decrease in gross margin was primarily due to an unfavorable impact of

approximately $770 million related to the decrease in selling prices during the current year period, compared to the prior year period.

Gross margin was also unfavorably impacted by approximately $10 million due to lower sales prices of other products, primarily acids, and unfavorable foreign currency impacts of approximately $20 million.

Lo wer costs had a favorable impact of $370 million, driven by a decrease in product costs for our distribution business, and lower sulfur and ammonia costs in our production business.

The average consumed price for ammonia for our Brazilian operations decreased to $912 per tonne for the three months ended June 30, 2023, compared to $1,396 per tonne in the prior year period.

The average consumed sulfur price for our Brazilian operations was $258 per long ton for the three months ended June 30, 2023, compared to $384 per long ton in the prior year period.

The purchase prices of ammonia and sulfur are driven by global supply and demand, and also include transportation, transformation, and storage costs.

The Mosaic Fertilizantes segment's production of crop nutrient dry concentrates and animal feed ingredients decreased 13% for the three months ended March 31, 2023, compared to the prior year period due to down time for plant maintenance.

For the three months ended March 31, 2023, our phosphate operating rate decreased to 78%, compared to 92% in the same period of the prior year.

For the three months ended March 31, 2023, our Brazilian phosphate rock production decreased slightly to 0.86 million tonnes, from 0.93 million tonnes for the prior year period.

The Mosaic Fertilizantes segment's production of crop nutrient dry concentrates and animal feed ingredients decreased 6% for the three months ended June 30, 2023 compared to the prior year period, due to down time for plant maintenance.

For the three months ended June 30, 2023, our phosphate operating rate decreased to 74%, compared to 83% in the same period of the prior year.

For the three months ended June 30, 2023, our Brazilian phosphate rock production was in line with the prior year period, at approximately 1.1 million tonnes.

Six months ended June 30, 2023 and 2022

The Mosaic Fertilizantes segment’s net sales were $2.8 billion for the six months ended June 30, 2023, compared to $3.7 billion in the prior year period.

In the current period, net sales were unfavorably impacted by approximately $1.05 billion due to lower finished goods sales prices, partially offset by the impact of higher finished goods sales volumes of approximately $270 million.

Net sales were also unfavorably impacted by decreased revenues from other products, primarily gypsum, of approximately $210 million.

The average finished product selling price decreased $286 per tonne to $619 per tonne for the six months ended June 30, 2023, compared to $905 per tonne in the prior year period, primarily due to the decrease in global prices mentioned in the Overview.

The Mosaic Fertilizantes segment’s sales volume increased to 4.5 million tonnes for the six months ended June 30, 2023, from 4.1 million tonnes in the same period a year ago, due to increased demand in our distribution business.

Gross margin for the six months ended June 30, 2023, decreased to $11.7 million from $669.5 million in the same period in the prior year.

In the current year period, gross margin was unfavorably impacted by unfavorable sales prices of approximately $1.05 billion, and an unfavorable impact from sales volumes of approximately $20 million.

Gross margin was also unfavorably impacted by lower sales volumes and sales prices of other products, primarily acids, of approximately $40 million, and unfavorable foreign currency impacts of approximately $20 million.

In the current year period, gross margin was favorably impacted by approximately $470 million related to lower product costs, primarily reductions in material purchases by our distribution business and raw materials costs.

The Mosaic Fertilizantes segment’s production of crop nutrient dry concentrates and animal feed ingredients decreased 10% compared to the prior year period due to increased down time for plant maintenance.

For the six months ended June 30, 2023, our phosphate operating rate was 76%, compared to 87% in the same period of the prior year.

For the six month period ended June 30, 2023, our Brazilian phosphate rock production decreased slightly to 1.9 million tonnes, from 2.0 million tonnes for the prior year period.

Corporate, Eliminations and Other

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Corporate, Eliminations and Other includes the results of the China and India distribution businesses, intersegment eliminations, including profit on intersegment sales, unrealized mark-to-market gains and losses on derivatives, and debt expenses.

The prior year period also included the results of operations for the Streamsong Resort®.

For the three months ended March 31, 2023, gross margin for Corporate, Eliminations and Other was $(1.1) million, compared to $113.2 million for the same period in the prior year.

Gross margin was unfavorably impacted by a net unrealized loss on derivatives of approximately $1 million in the current year period, compared to a net unrealized gain of approximately $100 million in the prior year period.

Gross margin was also negatively impacted by approximately $100 million due to unfavorable product costs and inventory adjustments in our distribution operations, primarily in China.

The prior year period also included the results of operations for the Resort.

For the three months ended June 30, 2023, gross margin for Corporate, Eliminations and Other was $6.1 million, compared to $(173.1) million for the same period in the prior year.

Gross margin was favorably impacted by a net unrealized gain on derivatives of approximately $34 million in the current year period, compared to a net unrealized loss of approximately $59 million in the prior year period.

Gross margin was also favorably impacted by lower elimination of profit on intersegment sales in the current year period, which changed from the prior year period by approximately $215 million.

Gross margin was negatively impacted due to unfavorable product costs in our distribution operations in China and India in the current year period.

Sales in China and India, collectively, resulted in revenue of $171.7 million and gross margin of $(44.3) million in the current year period, compared to revenue of $389.9 million and gross margin of $64.4 million in the prior year period.

These changes were partially offset by the favorable impact of lower elimination of profit on intersegment sales in the current year period, which changed from the prior year period by approximately $97.2 million.

For the six months ended June 30, 2023, gross margin for Corporate, Eliminations and Other was $5.0 million, compared to $(59.9) million for the same period in the prior year.

Gross margin was favorably impacted by lower elimination of profit on intersegment sales in the current year period, which changed from the prior year period by approximately $313 million.

Gross margin was also favorably impacted by a net unrealized gain on derivatives of approximately $33 million in the current year period, compared to a net unrealized gain of approximately $41 million in the prior year period.

Gross margin was negatively impacted due to unfavorable product costs in our distribution operations in China and India in the current year period.

Sales in China and India, collectively, resulted in revenue of $438.5 million and gross margin of $(55.1) million in the current year period, compared to revenue of $610.9 million and gross margin of $151.3 million in the prior year period.

The prior year period also included gross margin of approximately $15 million related to the Resort.

Other Income Statement Items

Three months ended

March 31, 2023-2022

(in millions) 2023 2022 Change Percent

Three months ended Six months ended

June 30, 2023-2022 June 30, 2023-2022

(in millions) 2023 2022 Change Percent 2023 2022 Change Percent

Selling, general and administrative expenses $ 129.9 $ 108.2 $ 21.7 20 % $ 257.6 $ 240.6 $ 17.0 7 %

Other operating (income) expense (1.9) 50.9 (52.8) NM

Other operating expense 72.0 63.9 8.1 13 % 70.1 114.8 (44.7) (39) %

Interest expense (47.3) (43.1) (4.2) 10 % (97.5) (87.0) (10.5) 12 %

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Interest expense, net (36.0) (34.1) (1.9) 6 % (77.1) (73.4) (3.7) 5 %

Foreign currency transaction gain 51.4 310.7 (259.3) (83) %

Other income (expense) (8.9) 0.2 (9.1) NM

Foreign currency transaction gain 148.5 (227.2) 375.7 NM 199.9 83.5 116.4 139 %

Other expense (7.1) (35.7) 28.6 (80) % (16.0) (35.5) 19.5 (55) %

Provision for income taxes 108.4 369.3 (260.9) (71) % 226.7 741.7 (515.0) (69) %

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Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2023 decreased $4.7 million compared to the same period of prior year, primarily due to lower incentive compensation costs which decreased by approximately $17 million in the current period compared to the prior year period.

This was partially offset by higher costs of approximately $10 million in consulting and professional services related to executing on our strategic initiatives.

Other Operating (Income) Expense

For the three months ended March 31, 2023, we had other operating income of $1.9 million, compared to expense of $50.9 million for the same period of the prior year.

The current year period includes a gain on the sale of the Resort of approximately $57 million.

Selling, general and administrative expenses for the three months ended June 30, 2023 increased $21.7 million compared to the same period of prior year, primarily due to higher costs of approximately $15 million in consulting and professional services related to executing on our strategic initiatives, and increased compensation and benefits costs, which increased by approximately $8 million in the current period compared to the prior year period.

Selling, general and administrative expenses for the six months ended June 30, 2023 increased $17.0 million compared to the same period of prior year, primarily due to higher costs of approximately $30 million in consulting and professional services related to executing on our strategic initiatives, and increased compensation and benefits costs, which increased by approximately $10 million in the current period compared to the prior year period.

This was partially offset by a decrease in incentive compensation, which decreased by approximately $25 million in the current period compared to the prior year period.

Other Operating Expense

For the three months ended June 30, 2023, we had other operating expense of $72.0 million, compared to $63.9 million for the same period of the prior year.

The change from the prior year was primarily due to approximately $23 million related of upward

revisions in estimated closure costs for our asset retirement obligations (" AROs ") at our closed facilities, and $7 million related to an increase in environmental reserves.

This was partially offset by insurance proceeds of approximately $21 million.

For the six months ended June 30, 2023, we had other operating expense of $70.1 million, compared to $114.8 million for the same period of the prior year.

The change from the prior year period relates to a gain on the sale of the Resort of approximately $57 million and insurance proceeds of $21 million, partially offset by an increase in estimated closure costs for AROs at our closed facilities of approximately $34 million.

Foreign Currency Transaction Gain

We recorded a foreign currency transaction gain of $51.4 million for the three months ended March 31, 2023 compared to $310.7 million for the same period in the prior year.

For the three months ended March 31, 2023, the gain was the result of the effect of the weakening of the U.S.

We recorded a foreign currency transaction gain of $148.5 million for the three months ended June 30, 2023 compared to a loss of $(227.2) million for the same period in the prior year.

For the three months ended June 30, 2023, the gain was the result of the effect of the weakening of the U.S.

dollar relative to the Brazilian real on significant intercompany loans and U.S.

dollar-denominated payables held by our Brazilian subsidiaries.

Other Income (Expense)

For the three months ended March 31, 2023, we had other expense of $8.9 million compared to income of $0.2 million for the same period in the prior year.

The current year expense was primarily related to realized losses on the marketable securities held in the RCRA Trusts of approximately $8 million.

dollar-denominated payables held by our Brazilian subsidiaries, and the weakening of the U.S.

dollar relative to the Canadian dollar on significant intercompany loans.

We recorded a foreign currency transaction gain of $199.9 million for the six months ended June 30, 2023 compared $83.5 million for the same period in the prior year.

For the six months ended June 30, 2023, the gain was the result of the effect of the weakening of the U.S.

dollar relative to the Brazilian real on significant intercompany loans and U.S.

dollar-denominated payables held by our Brazilian subsidiaries, and the weakening of the U.S.

dollar relative to the Canadian dollar on significant intercompany loans.

Other Expense

For the three and six months ended June 30, 2023, we had other expense of $7.1 million and $16.0 million compared to $35.7 million and $35.5 million for the same periods in the prior year.

The current year expense for the three month period primarily related to the write-off of assets of approximately $6 million.

For the six months ended June 30, 2023, other expense primarily related to the write-off of assets of $6 million and realized losses on the marketable securities held in the RCRA Trusts of $6 million.

The prior year expense for the three and six month periods was primarily related to approximately $25 million of realized losses on the marketable securities held in the RCRA Trusts and $12 million related to the write-down of an investment.

Equity in Net Earnings of Nonconsolidated Companies

For the three months ended March 31, 2023, we had equity in net earnings of nonconsolidated companies of $31.3 million compared to $30.7 million for the same period in the prior year.

These results were primarily related to the operations of MWSPC.

For the three and six months ended June 30, 2023, we had equity in net earnings of nonconsolidated companies of $12.9 million and $44.2 million compared to $35.9 million and $66.6 million for the same periods in the prior year.

These results were primarily related to the operations of MWSPC, which was unfavorably impacted by lower selling prices for its products in the current year periods.

Provision for Income Taxes

Three months ended Effective Tax Rate Provision for Income Taxes

March 31, 2023 21.7 % $ 118.3

March 31, 2022 24.4 % $ 372.4

Income tax expense was $118.3 million and the effective tax rate was 21.7% for the three months ended March 31, 2023.

For the three months ended March 31, 2023, discrete tax items recorded in tax expense resulted in a benefit of approximately $13.9 million.

June 30, 2023 22.8 % $ 108.4

June 30, 2022 26.8 % $ 369.3

Six months ended Effective Tax Rate Provision for Income Taxes

June 30, 2023 22.2 % $ 226.7

June 30, 2022 25.5 % $ 741.7

Income tax expense was $108.4 million and $226.7 million, and the effective tax rate was 22.8% and 22.2% for the three and six months ended June 30, 2023.

For the three months ended June 30, 2023, discrete tax items recorded in tax expense was a benefit of approximately $9.9 million.

The net tax benefit consisted primarily of share-based excess benefit, true-up of estimates, and other miscellaneous benefits.

In addition to items specific to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate, by a benefit associated with depletion, a benefit associated with non-U.S.

incentives, changes in valuation allowances, and by the impact of certain entities being taxed in both their foreign jurisdiction and the U.S., including foreign tax credits for various taxes incurred.

For the six months ended June 30, 2023, discrete tax items recorded in tax expense was a benefit of approximately $23.8 million.

The net tax benefit consisted primarily of share-based excess benefit, true-up of estimates, and other miscellaneous costs.

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In preparing the Condensed Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could have a significant impact on the results reported in the Condensed Consolidated Financial Statements.

We base these estimates on

historical experience and other assumptions believed to be reasonable by management under the circumstances.

We base these estimates on historical experience and other assumptions believed to be reasonable by management under the circumstances.

Changes in these estimates could have a material effect on our Condensed Consolidated Financial Statements.

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Liquidity and Capital Resources

As of March 31, 2023, we had cash and cash equivalents of $464.8 million, short-term debt of $854.6 million, long-term debt, including current maturities, of approximately $3.4 billion, and stockholders’ equity of approximately $12.1 billion.

As of June 30, 2023, we had cash and cash equivalents of $626.1 million, short-term debt of $229.0 million, long-term debt, including current maturities, of approximately $3.4 billion, and stockholders’ equity of approximately $12.6 billion.

We have a target liquidity buffer of up to $3.0 billion, including cash and available committed and uncommitted credit lines.

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Our capital allocation priorities include maintaining our target investment grade metrics and financial strength, sustaining our assets, including ensuring the safety of our employees and reliability of our assets, investing to grow our business, either through organic growth or taking advantage of strategic opportunities, and returning excess cash to shareholders, including paying our dividend.

During the three months ended March 31, 2023, we returned cash to shareholders through share repurchases of $456.0 million and cash dividends of $152.4 million, and invested $321.5 million in capital expenditures.

During the six months ended June 30, 2023, we returned cash to shareholders through share repurchases of $456.0 million and cash dividends of $220.1 million, and invested $631.8 million in capital expenditures.

Funds generated by operating activities, available cash and cash equivalents, and our credit facilities continue to be our most significant sources of liquidity.

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There can be no assurance, however, that we will continue to generate cash flows at or above current levels.

As of March 31, 2023, we had $2.49 billion available under our $2.50 billion committed revolving credit facility, approximately $475.0 million available under our uncommitted facilities and had $2.1 billion available under our $2.5 billion commercial paper program, that is backed by, and reduces availability under, the revolving credit facility.

As of June 30, 2023, we had $2.49 billion available under our $2.50 billion committed revolving credit facility, approximately $1.0 billion available under our uncommitted facilities and had $2.3 billion available under our $2.5 billion commercial paper program, that is backed by the revolving credit facility.

We view amounts borrowed under our commercial paper program as a reduction of availability under our revolving credit facility.

Our credit facilities, including the revolving credit facility, require us to maintain certain financial ratios, as discussed in Note 10 of our Notes to Consolidated Financial Statements in our 10-K Report.

We were in compliance with these ratios as of March 31, 2023.

We were in compliance with these ratios as of June 30, 2023.

All of our cash and cash equivalents are diversified in highly rated investment vehicles.

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or held by non-U.S.

subsidiaries and are not subject to significant foreign currency exposures, as the majority are held in investments denominated in U.S.

dollars as of March 31, 2023.

subsidiaries and are not subject to significant foreign currency exposures, as the majority

are held in investments denominated in U.S.

dollars as of June 30, 2023.

These funds may create foreign currency transaction gains or losses, however, depending on the functional currency of the entity holding the cash.

In addition, there are no significant restrictions that would preclude us from bringing these funds back to the U.S., aside from withholding taxes.

The following table represents a comparison of the net cash provided by operating activities, net cash used in investing activities, and net cash used in or provided by financing activities for the three months ended March 31, 2023 and March 31, 2022:

(in millions) Three months ended

March 31, 2023-2022

(in millions) Six months ended

June 30, 2023-2022

Cash Flow 2023 2022 Change Percent

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Operating Activities

During the three months ended March 31, 2023, net cash provided by operating activities was $149.0 million, compared to $506.2 million for the three months ended March 31, 2022.

Our results of operations, after non-cash adjustments to net

earnings, contributed $636.3 million to cash flows from operating activities during the three months ended March 31, 2023, compared to $1.1 billion as computed on the same basis for the prior year period.

During the three months ended March 31, 2023, we had an unfavorable change in assets and liabilities of $487.3 million, compared to an unfavorable change of $639.0 million during the three months ended March 31, 2022.

The change in assets and liabilities for the three months ended March 31, 2023, was primarily driven by a decrease in accounts payable and accrued expenses of $841.6 million, partially offset by favorable impacts from decreases in accounts receivable of $310.7 million and inventories of $241.2 million.

The decrease in accounts payable and accrued liabilities was primarily related to a decrease in raw material purchase prices, a decrease in customer prepayments in Brazil, payment of taxes and the payment of incentive compensation related to 2022.

During the six months ended June 30, 2023, net cash provided by operating activities was $1.2 billion, compared to $2.1 billion for the six months ended June 30, 2022.

Our results of operations, after non-cash adjustments to net earnings, contributed $1.2 billion to cash flows from operating activities during the six months ended June 30, 2023, compared to $2.9 billion as computed on the same basis for the prior year period.

During the six months ended June 30, 2023, we had an favorable change in assets and liabilities of $57.0 million, compared to an unfavorable change of $809.4 million during the six months ended June 30, 2022.

The change in assets and liabilities for the six months ended June 30, 2023, was primarily driven by favorable impacts from decreases in accounts receivable of $536.3 million and inventories of $471.0 million, partially offset by a decrease in accounts payable and accrued expenses of $731.7 million.

The decrease in accounts receivable was primarily related to lower selling prices at the end of the quarter compared to the end of the prior year.

The decrease in inventories was primarily due to lower raw material costs in our Phosphate and Mosaic Fertilizantes segments and lower inventory volumes in North America, due to seasonality.

The decrease in accounts payable and accrued liabilities was primarily related to a decrease in raw material purchase prices, the payment of taxes and payment of incentive compensation related to 2022.

Investing Activities

Net cash used in investing activities was $221.4 million for the three months ended March 31, 2023 compared to $297.2 million for the same period a year ago.

We had capital expenditures of $321.5 million for the three months ended March 31, 2023, compared to $290.5 million in the prior year period.

During the three months ended March 31, 2023, we completed the sale of the Resort for net proceeds of $158.4 million.

We also purchased the other 50% equity of GSS for $41.0 million.

Net cash used in investing activities was $532.9 million for the six months ended June 30, 2023 compared to $561.9 million for the same period a year ago.

We had capital expenditures of $631.8 million for the six months ended June 30, 2023, compared to $553.1 million in the prior year period.

During the six months ended June 30, 2023, we completed the sale of the Resort for net proceeds of $158.4 million.

During that period, we also purchased the other 50% equity of GSS for $41.0 million.

GSS is now wholly owned by Mosaic.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2023, was $209.0 million, compared to $125.0 million for the same period in the prior year.

During the three months ended March 31, 2023, we made repurchases of our Common Stock at an aggregate cost of $456.0 million and paid dividends of $152.4 million.

We also made payments on our structured accounts payable arrangements of $211.4 million and payments on long-term debt of $15.0 million.

We received net proceeds from short term debt of $228.6 million and proceeds of $400.8 million under our inventory financing arrangement.

Net cash used in financing activities for the six months ended June 30, 2023, was $815.6 million, compared to $1.5 billion for the same period in the prior year.

During the six months ended June 30, 2023, we made repurchases of our Common Stock at an aggregate cost of $456.0 million and paid dividends of $220.1 million.

We also made net payments on our structured accounts payable arrangements of $176.5 million and payments on long-term debt of $29.1 million.

We had net collections on behalf of the banks under our receivable purchasing agreement of $90.2 million and received net proceeds from short term debt of $3.9 million.

Debt Instruments, Guarantees and Related Covenants

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Environmental, Health, Safety and Security Matters

Federal Initiatives to Define “ Waters of the United States.

” The 1972 amendments to the Clean Water Act (“ CWA ”) established federal jurisdiction over “navigable waters,” defined in the Act as “waters of the United States” and often abbreviated as “WOTUS.” As it relates to Mosaic’s operations and facilities, the scope of the term WOTUS dictates legal requirements for our National Pollutant Discharge Elimination System wastewater discharge permits and for impacts to surface waters and wetlands associated with our phosphate mining operations.

Federal Jurisdiction Over “ Waters of the United States.

” The Clean Water Act (“ CWA ”)authorizes federal jurisdiction over “navigable waters,” defined in the Act as “waters of the United States” and often abbreviated as “WOTUS.” As it relates to Mosaic’s operations and facilities, the scope of the term WOTUS dictates legal requirements for our national pollutant discharge elimination system wastewater discharge permits and for impacts to surface waters and wetlands associated with our phosphate mining operations.

A broad definition of WOTUS, and thus the scope of federal jurisdiction, increases the time required to identify wetlands and waterways subject to federal regulatory and permitting requirements, and the amount and type of mitigation required to compensate for impacts to jurisdictional WOTUS caused by our mining operations.

The current regulatory definition of WOTUS was promulgated on April 21, 2020, by the U.S.

Environmental Protection Agency (“EPA”) and the U.S.

Army Corps of Engineers and was designated the “Navigable Waters Protection Rule” (“NWPR”).

The NWPR was intended to provide clarity, predictability and consistency so that the regulated community

could better understand where the CWA applies and where it does not.

On June 9, 2021, EPA announced its plans to repeal and replace the NWPR, and in December 2021 issued a proposed regulation to revise the WOTUS definition and replace the NWPR.

On December 30, 2022, EPA and the Corps promulgated a revised, expanded definition of the term WOTUS (the "2022 WOTUS Rule"), which became effective on March 20, 2023.

The 2022 WOTUS Rule asserts a broader geographic scope of federal jurisdiction than either the 2020 NWPR or any previous WOTUS regulatory definition.

Two separate legal challenges to the 2022 WOTUS Rule have been filed in the U.S.

District Court for the Southern District of Texas;

one lawsuit was brought by the State of Texas, and the second by agricultural interests.

A third lawsuit was filed in the U.S.

District Court for District of North Dakota by twenty-four states, several trade associations and tribal entities.

On April 12, 2023, the U.S.

District Court for North Dakota granted a preliminary injunction of the Biden administration's 2022 WOTUS Rule.

The Court’s Order and Preliminary Injunction prevents the 2022 WOTUS Rule from being implemented in 24 states, including Florida.

The case is West Virginia, State of et al v.

Environmental Protection Agency et al., Case NO.

3:23-cv-0032.

The State of Florida and 23 other states were plaintiffs in the suit, as were a number of trade associations and several tribes who intervened in the case.

The broader decision by the North Dakota District followed an earlier decision in March in the U.S.

District Court for the Southern District of Texas preliminarily enjoining the 2022 WOTUS Rule in Texas and Idaho.

Additionally, it is anticipated that EPA and the Corps will be revising the 2022 WOTUS Rule after the U.S.

Supreme Court decides Sackett v.

The Sackett case is expected to clarify Clean Water Act jurisdiction and oral argument was held on October 3, 2022.

A final decision by the Court that interprets the constitutional scope of the term WOTUS is anticipated to be issued during the second quarter of 2023.

On May 25, 2023, the U.S.

Supreme Court issued its opinion in the Sackett v EPA case, which significantly limits the areas that can be considered WOTUS and therefore subject to CWA Section 404 jurisdiction.

The Court held that “the CWA extends only to those wetlands that are “as a practical matter indistinguishable from waters of the United States.” This requires “first, that the adjacent [body of water constitutes] .

‘water[s] of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters);

and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” The Sackett opinion relied on and quoted extensively from the Supreme Court’s 2006 plurality opinion in Rapanos v.

United States , and specifically rejected the “significant nexus” test created by Justice Kennedy in his concurring opinion.

The Supreme Court’s Sackett decision is binding nationwide as to the determination of which wetlands and waters are subject to the CWA.

The Sackett decision invalidated the latest regulatory definition of WOTUS promulgated by Environmental Protection Agency (“ EPA ”) on January 18, 2023;

that regulation had significantly broadened the scope of federal jurisdiction and control over WOTUS.

In response to the Sackett decision and the Court’s invalidation of the 2023 regulation, the EPA has stated its intention to promulgate a new regulation that is “consistent” with the Supreme Court’s holding by September 1, 2023.

Off-Balance Sheet Arrangements and Obligations

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis