Item 1. FINANCIAL STATEMENTS.

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Item 1. FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,
		2023		2022
		(in millions, except per share amounts)
Net sales		$	2,012	$	2,868
Cost of sales		1,149		1,170
Gross margin		863		1,698
Selling, general and administrative expenses		74		64




U.K. operations restructuring		2		—
Transaction costs		13		—
Other operating—net		(35)		2
Total other operating costs and expenses		54		66

Equity in earnings of operating affiliate		17		26
Operating earnings		826		1,658
Interest expense		40		241
Interest income		(30)		(36)

Other non-operating—net		(3)		1
Earnings before income taxes		819		1,452
Income tax provision		169		401

Net earnings		650		1,051
Less: Net earnings attributable to noncontrolling interest		90		168
Net earnings attributable to common stockholders		$	560	$	883
Net earnings per share attributable to common stockholders:
Basic		$	2.86	$	4.23
Diluted		$	2.85	$	4.21
Weighted-average common shares outstanding:
Basic		196.2		208.6
Diluted		196.9		209.9
Dividends declared per common share		$	0.40	$	0.30

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended March 31,
		2023		2022
		(in millions)
Net earnings		$	650	$	1,051
Other comprehensive income (loss):
Foreign currency translation adjustment—net of taxes		7		(13)


Defined benefit plans—net of taxes		(1)		4
		6		(9)
Comprehensive income		656		1,042
Less: Comprehensive income attributable to noncontrolling interest		90		168
Comprehensive income attributable to common stockholders		$	566	$	874

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	March 31, 2023		December 31, 2022
	(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	2,825	$	2,323

Accounts receivable—net	482		582
Inventories	430		474

Prepaid income taxes	69		215
Other current assets	42		79
Total current assets	3,848		3,673
Property, plant and equipment—net	6,294		6,437
Investment in affiliate	81		74
Goodwill	2,089		2,089
Operating lease right-of-use assets	288		254
Other assets	798		786
Total assets	$	13,398	$	13,313
Liabilities and Equity
Current liabilities:

Accounts payable and accrued expenses	$	452	$	575
Income taxes payable	10		3
Customer advances	284		229
Current operating lease liabilities	104		93

Other current liabilities	12		95
Total current liabilities	862		995
Long-term debt	2,966		2,965
Deferred income taxes	933		958
Operating lease liabilities	182		167
Other liabilities	365		375
Equity:
Stockholders’ equity:
Preferred stock—$0.01 par value, 50,000,000 shares authorized	—		—
Common stock—$0.01 par value, 500,000,000 shares authorized, 2023—196,237,302 shares issued and 2022—195,604,404 shares issued	2		2
Paid-in capital	1,424		1,412
Retained earnings	4,348		3,867
Treasury stock—at cost, 2023—1,319,380 shares and 2022—0 shares	(97)		—
Accumulated other comprehensive loss	(224)		(230)
Total stockholders’ equity	5,453		5,051
Noncontrolling interest	2,637		2,802
Total equity	8,090		7,853
Total liabilities and equity	$	13,398	$	13,313

See accompanying Notes to Unaudited Consolidated Financial Statements.

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 December 31, 2022	$	2	$	—	$	1,412	$	3,867	$	(230)	$	5,051	$	2,802	$	7,853
Net earnings	—		—		—		560		—		560		90		650
Other comprehensive income	—		—		—		—		6		6		—		6
Purchases of treasury stock	—		(75)		—		—		—		(75)		—		(75)

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


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

Dividends and dividend equivalents ($0.40 per share)	—		—		—		(79)		—		(79)		—		(79)



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

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

























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



Net earnings	—		—		—		883		—		883		168		1,051
Other comprehensive loss	—		—		—		—		(9)		(9)		—		(9)
Purchases of treasury stock	—		(100)		—		—		—		(100)		—		(100)
Retirement of treasury stock	—		2		—		—		—		2		—		2
Acquisition of treasury stock under employee stock plans	—		(23)		—		—		—		(23)		—		(23)
Issuance of $0.01 par value common stock under employee stock plans	—		—		97		—		—		97		—		97

Stock-based compensation expense	—		—		10		—		—		10		—		10

Dividends and dividend equivalents ($0.30 per share)	—		—		—		(64)		—		(64)		—		(64)



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

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended March 31,
	2023		2022
	(in millions)
Operating Activities:
Net earnings	$	650	$	1,051
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	206		208
Deferred income taxes	(26)		(2)
Stock-based compensation expense	12		10


Unrealized net gain on natural gas derivatives	(72)		(33)




Gain on sale of emission credits	(35)		—

Undistributed earnings of affiliate—net of taxes	(7)		(2)
Changes in:
Accounts receivable—net	101		(185)
Inventories	39		(66)
Accrued and prepaid income taxes	153		387
Accounts payable and accrued expenses	(135)		76
Customer advances	55		(102)
Other—net	6		49
Net cash provided by operating activities	947		1,391
Investing Activities:
Additions to property, plant and equipment	(69)		(63)
Proceeds from sale of property, plant and equipment	—		1






Purchase of emission credits	—		(9)
Proceeds from sale of emission credits	35		9

Net cash used in investing activities	(34)		(62)
Financing Activities:




Financing fees	—		(4)
Dividends paid	(79)		(64)

Distributions to noncontrolling interest	(255)		(247)
Purchases of treasury stock	(54)		(98)
Proceeds from issuances of common stock under employee stock plans	—		97
Cash paid for shares withheld for taxes	(22)		(23)

Net cash used in financing activities	(410)		(339)
Effect of exchange rate changes on cash and cash equivalents	(1)		(1)
Increase in cash and cash equivalents	502		989
Cash and cash equivalents at beginning of period	2,323		1,628
Cash and cash equivalents at end of period	$	2,825	$	2,617

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Background and Basis of Presentation

Our mission is to provide clean energy to feed and fuel the world sustainably. With our employees focused on safe and reliable operations, environmental stewardship, and disciplined capital and corporate management, we are on a path to decarbonize our ammonia production network – the world’s largest – to enable green and blue hydrogen and nitrogen products for energy, fertilizer, emissions abatement and other industrial activities. Our nitrogen manufacturing complexes in the United States, Canada and the United Kingdom, an extensive storage, transportation and distribution network in North America, and logistics capabilities enabling a global reach underpin our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy. Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users. Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen. Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers.

All references to “CF Holdings,” “the Company,” “we,” “us” and “our” refer to CF Industries Holdings, Inc. and its subsidiaries, except where the context makes clear that the reference is only to CF Industries Holdings, Inc. itself and not its subsidiaries. All references to “CF Industries” refer to CF Industries, Inc., a 100% owned subsidiary of CF Industries Holdings, Inc.

The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2022, in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting. In the opinion of management, these statements reflect all adjustments, consisting only of normal and recurring adjustments, that are necessary for the fair representation of the information for the periods presented. The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Operating results for any period presented apply to that period only and are not necessarily indicative of results for any future period.

The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023. The preparation of the unaudited interim consolidated financial statements requires us to make use of estimates and assumptions that may significantly affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the unaudited consolidated financial statements and the reported revenues and expenses for the periods presented. Such estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, plant closure and asset retirement obligations, the cost of emission credits required to meet environmental regulations, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax reserves and the assessment of the realizability of deferred tax assets, the determination of the funded status and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

CF INDUSTRIES HOLDINGS, INC.

2. Revenue Recognition

We track our revenue by product and by geography. See Note 14—Segment Disclosures for the revenue of each of our reportable segments, which are Ammonia, Granular Urea, UAN, AN and Other. The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three months ended March 31, 2023 and 2022:


	Ammonia		Granular Urea		UAN		AN		Other		Total
	(in millions)











Three months ended March 31, 2023
North America	$	330	$	575	$	519	$	74	$	126	$	1,624
Europe and other	94		36		148		85		25		388

Total revenue	$	424	$	611	$	667	$	159	$	151	$	2,012
Three months ended March 31, 2022
North America	$	583	$	736	$	1,013	$	83	$	153	$	2,568
Europe and other	57		29		2		140		72		300
Total revenue	$	640	$	765	$	1,015	$	223	$	225	$	2,868

As of March 31, 2023 and December 31, 2022, we had $284 million and $229 million, respectively, in customer advances on our consolidated balance sheets. The revenue recognized during the three months ended March 31, 2023 and 2022 that was included in our customer advances at the beginning of each respective period amounted to approximately $160 million and $560 million, respectively.

We offer cash incentives to certain customers generally based on the volume of their purchases over the fertilizer year ending June 30. Our cash incentives do not provide an option to the customer for additional product. The balances of customer incentives accrued as of March 31, 2023 and December 31, 2022 were not material.

We have certain customer contracts with performance obligations under which, if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, the amount of which payment may vary based upon the terms and conditions of the applicable contract. As of March 31, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $1.0 billion. We expect to recognize approximately 34% of these performance obligations as revenue in the remainder of 2023, approximately 33% as revenue during 2024-2026, approximately 15% as revenue during 2027-2029, and the remainder thereafter. Subject to the terms and conditions of the applicable contracts, if the customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under such contracts, in the aggregate, was approximately $280 million as of March 31, 2023. Other than the performance obligations described above, any performance obligations with our customers that were unfulfilled or partially fulfilled at December 31, 2022 will be satisfied in 2023.

CF INDUSTRIES HOLDINGS, INC.

3. Net Earnings Per Share

Net earnings per share were computed as follows:


	Three months ended March 31,
		2023		2022
		(in millions, except per share amounts)
Net earnings attributable to common stockholders		$	560	$	883
Basic earnings per common share:
Weighted-average common shares outstanding		196.2		208.6
Net earnings attributable to common stockholders		$	2.86	$	4.23
Diluted earnings per common share:
Weighted-average common shares outstanding		196.2		208.6
Dilutive common shares—stock-based awards		0.7		1.3
Diluted weighted-average common shares outstanding		196.9		209.9
Net earnings attributable to common stockholders		$	2.85	$	4.21

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 months ended March 31, 2023 and 2022.

4. Inventories

Inventories consist of the following:


	March 31, 2023		December 31, 2022
	(in millions)
Finished goods	$	393	$	437
Raw materials, spare parts and supplies	37		37
Total inventories	$	430	$	474

5. Property, Plant and Equipment—Net

Property, plant and equipment—net consists of the following:


	March 31, 2023		December 31, 2022
	(in millions)
Land	$	113	$	113
Machinery and equipment	12,672		12,633
Buildings and improvements	920		914
Construction in progress	226		203
Property, plant and equipment(1)	13,931		13,863
Less: Accumulated depreciation and amortization	7,637		7,426
Property, plant and equipment—net	$	6,294	$	6,437

(1)As of March 31, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $45 million and $53 million, respectively. As of March 31, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $22 million and $35 million, respectively.

CF INDUSTRIES HOLDINGS, INC.

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

Plant turnarounds—Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds. The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred.

Scheduled replacements and overhauls of plant machinery and equipment during a plant turnaround include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors and heat exchangers and the replacement of catalysts when a full plant shutdown occurs. Scheduled inspections, including required safety inspections which entail the disassembly of various components such as steam boilers, pressure vessels and other equipment requiring safety certifications, are also conducted during full plant shutdowns. Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.

The following is a summary of capitalized plant turnaround costs:


	Three months ended March 31,
	2023		2022
	(in millions)
Net capitalized turnaround costs as of January 1	$	312	$	355
Additions	7		5
Depreciation	(31)		(36)

Effect of exchange rate changes	—		(1)
Net capitalized turnaround costs as of March 31	$	288	$	323

6. 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.

As of March 31, 2023, the total carrying value of our equity method investment in PLNL was $81 million, $34 million more than our share of PLNL’s book value. The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment. The increased basis for property, plant and equipment is being amortized over a remaining period of approximately 10 years. Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of this basis difference.

We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50% of the ammonia produced by PLNL at current market prices. Our ammonia purchases from PLNL totaled $59 million and $74 million for the three months ended March 31, 2023 and 2022, respectively.

CF INDUSTRIES HOLDINGS, INC.

7. Fair Value Measurements

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


	March 31, 2023
	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Cash	$	217	$	—	$	—	$	217
Cash equivalents:
U.S. and Canadian government obligations	2,314		—		—		2,314
Other debt securities	294		—		—		294
Total cash and cash equivalents	$	2,825	$	—	$	—	$	2,825

Nonqualified employee benefit trusts	16		1		—		17


	December 31, 2022
	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Cash	$	153	$	—	$	—	$	153
Cash equivalents:
U.S. and Canadian government obligations	1,902		—		—		1,902
Other debt securities	268		—		—		268
Total cash and cash equivalents	$	2,323	$	—	$	—	$	2,323

Nonqualified employee benefit trusts	16		—		—		16

Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the U.S. and Canadian federal governments; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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


	March 31, 2023
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash equivalents	$	2,608	$	2,608	$	—	$	—

Nonqualified employee benefit trusts	17		17		—		—
Derivative assets	4		—		4		—
Derivative liabilities	(5)		—		(5)		—

CF INDUSTRIES HOLDINGS, INC.


	December 31, 2022
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash equivalents	$	2,170	$	2,170	$	—	$	—

Nonqualified employee benefit trusts	16		16		—		—
Derivative assets	12		—		12		—
Derivative liabilities	(85)		—		(85)		—

Cash Equivalents

Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less. As of March 31, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities.

Nonqualified Employee Benefit Trusts

We maintain trusts associated with certain nonqualified supplemental pension plans. The fair values of the trust assets are based on daily quoted prices in an active market, which represent the net asset values of the shares held in the trusts, and are included on our consolidated balance sheets in other assets. Debt securities are accounted for as available-for-sale securities, and changes in fair value are reported in other comprehensive income. Changes in the fair value of available-for-sale equity securities in the trust assets are recognized through earnings.

Derivative Instruments

The derivative instruments that we use are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter markets with multi-national commercial banks, other major financial institutions or large energy companies. The natural gas derivative contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods. The natural gas derivative contracts settle using primarily a NYMEX futures price index. To determine the fair value of these instruments, we use quoted market prices from NYMEX and standard pricing models with inputs derived from or corroborated by observable market data such as forward curves supplied by an industry-recognized independent third party. See Note 11—Derivative Financial Instruments for additional information.

Financial Instruments

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


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Long-term debt	$	2,966	$	2,770	$	2,965	$	2,764

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

The carrying amounts of cash and cash equivalents, as well as 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

CF INDUSTRIES HOLDINGS, INC.

intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment. The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets. Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.

8. Income Taxes

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

Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended March 31, 2023 of 20.6%, which is based on pre-tax income of $819 million, including $90 million of earnings attributable to the noncontrolling interest, would be 2.6 percentage points higher if based on pre-tax income exclusive of the $90 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended March 31, 2022 of 27.6%, which is based on pre-tax income of $1.45 billion, including $168 million of earnings attributable to the noncontrolling interest, would be 3.7 percentage points higher if based on pre-tax income exclusive of the $168 million of earnings attributable to the noncontrolling interest.

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

Canada Revenue Agency Competent Authority Matter

In 2016, the Canada Revenue Agency (CRA) and Alberta Tax and Revenue Administration (Alberta TRA) issued Notices of Reassessment for tax years 2006 through 2009 to one of our Canadian affiliates asserting a disallowance of certain patronage deductions. We filed Notices of Objection with respect to the Notices of Reassessment with the CRA and Alberta TRA and posted letters of credit in lieu of paying the additional tax liability assessed. The letters of credit served as security until the matter was resolved, as discussed below. In 2018, the matter, including the related transfer pricing topic regarding the allocation of profits between Canada and the United States, was accepted for consideration under the bilateral settlement provisions of the U.S.-Canada tax treaty (the Treaty) by the United States and Canadian competent authorities, and included tax years 2006 through 2011. In the second quarter of 2021, the Company submitted the transfer pricing aspect of the matter into the arbitration process under the terms of the Treaty.

In February 2022, we were informed that a decision was reached by the arbitration panel for tax years 2006 through 2011. In March 2022, we received further details of the results of the arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities, and we accepted the decision of the arbitration panel. Under the terms of the arbitration decision, additional income for tax years 2006 through 2011 was subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years.

In the three months ended March 31, 2022, as a result of the impact of these events on our Canadian and U.S. federal and state income taxes, we recognized an income tax provision of $76 million, reflecting the net impact of $127 million of accrued income taxes payable to Canada for tax years 2006 through 2011, partially offset by net income tax receivables of approximately $51 million in the United States, and we accrued net interest of $99 million, primarily reflecting the impact of estimated interest payable to Canada.

In the second half of 2022, this tax liability and the related interest were assessed and paid, resulting in total payments of $224 million, which also reflect the impact of changes in foreign currency exchange rates. As a result, the letters of credit we had posted in lieu of paying the additional tax liability assessed by the Notices of Reassessment were cancelled. Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, the Company has filed amended tax returns in the United States to request a refund of taxes paid.

Transfer pricing positions

In the first quarter of 2022, as a result of the outcome of the arbitration decision discussed above, we also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after. Based on this evaluation for the three months ended March 31, 2022, we recorded the following:

CF INDUSTRIES HOLDINGS, INC.

liabilities for unrecognized tax benefits of approximately $319 million, with a corresponding income tax provision, and accrued interest of approximately $91 million related to the liabilities for unrecognized tax benefits, and
noncurrent income tax receivables of approximately $329 million, with a corresponding income tax benefit, and accrued interest income of approximately $28 million related to the noncurrent income tax receivables.

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

9. 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 December 5, 2024. The Revolving Credit Agreement includes a letter of credit sub-limit of $125 million. Borrowings under the Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions, share repurchases and other general corporate purposes.

Borrowings under the Revolving Credit Agreement may be denominated in U.S. dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to, at our option, an applicable eurocurrency rate or base rate plus, in either case, a specified margin. We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

As of March 31, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit. There were no borrowings outstanding under the Revolving Credit Agreement as of March 31, 2023 or December 31, 2022, or during the three months ended March 31, 2023.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of March 31, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $350 million of letters of credit. As of March 31, 2023, approximately $201 million of letters of credit were outstanding under this agreement.

Senior Notes

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


	Effective Interest Rate		March 31, 2023						December 31, 2022
		Principal			Carrying Amount(1)			Principal			Carrying Amount(1)
			(in millions)
Public Senior Notes:



5.150% due March 2034	5.293%		750			741			750			741
4.950% due June 2043	5.040%		750			742			750			742
5.375% due March 2044	5.478%		750			740			750			740
Senior Secured Notes:

4.500% due December 2026(2)	4.783%		750			743			750			742
Total long-term debt			$	3,000		$	2,966		$	3,000		$	2,965

(1)Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $7 million as of both March 31, 2023 and December 31, 2022, and total deferred debt issuance costs were $27 million and $28 million as of March 31, 2023 and December 31, 2022, respectively.

CF INDUSTRIES HOLDINGS, INC.

(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.

10. Interest Expense

Details of interest expense are as follows:


	Three months ended March 31,
		2023		2022
		(in millions)
Interest on borrowings(1)		$	37	$	42
Fees on financing agreements(1)		2		2
Interest on tax liabilities(2)		2		198
Interest capitalized		(1)		(1)
Total interest expense		$	40	$	241

(1)See Note 9—Financing Agreements for additional information.

(2)See Note 8—Income Taxes for additional information.

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

As of March 31, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 18.9 million MMBtus of natural gas. As of December 31, 2022, we had open natural gas derivative contracts consisting of natural gas fixed price swaps, basis swaps and options for 66.3 million MMBtus of natural gas. For the three months ended March 31, 2023, we used derivatives to cover approximately 69% of our natural gas consumption.

CF INDUSTRIES HOLDINGS, INC.

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


	Gain (loss) recognized in income
		Three months ended March 31,
	Location		2023		2022
			(in millions)


Unrealized net gains on natural gas derivatives	Cost of sales		$	72	$	33
Realized net (losses) gains on natural gas derivatives	Cost of sales		(118)		17

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

The fair values of derivatives on our consolidated balance sheets are shown below. As of March 31, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments. See Note 7—Fair Value Measurements for additional information on derivative fair values.


	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	March 31, 2023		December 31, 2022		Balance Sheet Location	March 31, 2023		December 31, 2022
		(in millions)					(in millions)


Natural gas derivatives	Other current assets	$	4	$	12	Other current liabilities	$	(5)	$	(85)

Most of our International Swaps and Derivatives Association (ISDA) agreements contain credit-risk-related contingent features such as cross default provisions. In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades, or under certain ISDA agreements, may require us to collateralize derivatives in a net liability position. As of March 31, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $1 million and $73 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event. As of March 31, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts.

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


	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)
March 31, 2023
Total derivative assets	$	4		$	—		$	—		$	4
Total derivative liabilities	(5)			—			—			(5)
Net derivative liabilities	$	(1)		$	—		$	—		$	(1)
December 31, 2022
Total derivative assets	$	12		$	—		$	—		$	12
Total derivative liabilities	(85)			—			—			(85)
Net derivative liabilities	$	(73)		$	—		$	—		$	(73)

(1)We report the fair values of our derivative assets and liabilities on a gross basis on our consolidated balance sheets. As a result, the gross amounts recognized and net amounts presented are the same.

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

CF INDUSTRIES HOLDINGS, INC.

12. Noncontrolling Interest

We have a strategic venture with CHS Inc. (CHS) under which CHS owns an equity interest in CFN, a subsidiary of CF Holdings, which represents approximately 11% of the membership interests of CFN. We own the remaining membership interests. Under the terms of CFN’s limited liability company agreement, each member’s interest will reflect, over time, the impact of the profitability of CFN, any member contributions made to CFN and withdrawals and distributions received from CFN. For financial reporting purposes, the assets, liabilities and earnings of the strategic venture are consolidated into our financial statements. CHS’ interest in the strategic venture is recorded in noncontrolling interest in our consolidated financial statements.

A reconciliation of the beginning and ending balances of noncontrolling interest and distributions payable to noncontrolling interest in our consolidated balance sheets is provided below.



	2023		2022

	(in millions)
Noncontrolling interest:
Balance as of January 1	$	2,802	$	2,830

Earnings attributable to noncontrolling interest	90		168
Declaration of distributions payable	(255)		(247)


Balance as of March 31	$	2,637	$	2,751
Distributions payable to noncontrolling interest:
Balance as of January 1	$	—	$	—
Declaration of distributions payable	255		247
Distributions to noncontrolling interest	(255)		(247)

Balance as of March 31	$	—	$	—

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.

13. Stockholders’ Equity

Common Stock

On November 3, 2021, our Board of Directors (the Board) authorized the repurchase of up to $1.5 billion of CF Holdings common stock through December 31, 2024 (the 2021 Share Repurchase Program). On November 2, 2022, the Board authorized the repurchase of up to $3 billion of CF Holdings common stock commencing upon completion of the 2021 Share Repurchase Program and effective through December 31, 2025 (the 2022 Share Repurchase Program). Repurchases under these programs may be made from time to time in the open market, through privately negotiated transactions, through block transactions or otherwise. The manner, timing and amount of repurchases will be determined by our management based on the evaluation of market conditions, stock price, and other factors.

In the three months ended March 31, 2023, we repurchased approximately 1.1 million shares under the 2021 Share Repurchase Program for $75 million, of which $21 million was accrued and unpaid as of March 31, 2023. As of March 31, 2023, there was approximately $80 million of authorization remaining under the 2021 Share Repurchase Program.

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

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, 2021	$	(141)	$	4	$	(120)	$	(257)



Reclassification to earnings	—		—		1		1

Effect of exchange rate changes and deferred taxes	(13)		—		3		(10)
Balance as of March 31, 2022	$	(154)	$	4	$	(116)	$	(266)

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






Effect of exchange rate changes and deferred taxes	7		—		(1)		6
Balance as of March 31, 2023	$	(172)	$	3	$	(55)	$	(224)

14. 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 months ended March 31, 2023 and 2022 are presented in the table below.



	Ammonia		Granular Urea(1)		UAN(1)		AN(1)		Other(1)		Consolidated
	(in millions)















Three months ended March 31, 2023
Net sales	$	424	$	611	$	667	$	159	$	151	$	2,012
Cost of sales	280		327		346		104		92		1,149
Gross margin	$	144	$	284	$	321	$	55	$	59	863
Total other operating costs and expenses											54
Equity in earnings of operating affiliate											17
Operating earnings											$	826
Three months ended March 31, 2022
Net sales	$	640	$	765	$	1,015	$	223	$	225	$	2,868
Cost of sales	280		270		345		171		104		1,170
Gross margin	$	360	$	495	$	670	$	52	$	121	1,698
Total other operating costs and expense											66

Equity in earnings of operating affiliate											26
Operating earnings											$	1,658

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

CF INDUSTRIES HOLDINGS, INC.

15. Agreement To Purchase Ammonia Production Facility

On March 20, 2023, we entered into an asset purchase agreement with Dyno Nobel Louisiana Ammonia, LLC (DNLA), a U.S. subsidiary of Australian-based Incitec Pivot Limited (IPL), and IPL. Under the terms of the agreement, we will purchase DNLA’s ammonia production complex located in Waggaman, Louisiana for a purchase price of $1.675 billion, subject to adjustment. The facility has a nameplate capacity of 880,000 tons of ammonia annually. The parties will allocate $425 million of the purchase price to a long-term ammonia offtake agreement providing for us to supply up to 200,000 tons of ammonia per year to IPL’s Dyno Nobel, Inc. subsidiary. We expect to fund the balance of the purchase price, representing the $1.675 billion purchase price, as adjusted, less $425 million, with cash on hand.

The consummation of the transaction is subject to the satisfaction or waiver of customary conditions, including, among others, the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The agreement includes certain customary termination rights, including the right of either party to terminate the agreement if the closing has not occurred by March 20, 2025. We have agreed to pay a termination fee of $75 million if the agreement is terminated in certain circumstances and certain regulatory approvals are not obtained.

CF INDUSTRIES HOLDINGS, INC.

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