Item 1. FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
			(in millions, except per share amounts)
Net sales			$	1,775					$	3,389					$	3,787					$	6,257
Cost of sales			971						1,398						2,120						2,568
Gross margin			804						1,991						1,667						3,689
Selling, general and administrative expenses			71						73						145						137
U.K. long-lived and intangible asset impairment			—						152						—						152
U.K. operations restructuring			—						10						2						10
Transaction costs			3						—						16						—
Other operating—net			3						6						(32)						8
Total other operating costs and expenses			77						241						131						307
Equity in earnings of operating affiliate			7						28						24						54
Operating earnings			734						1,778						1,560						3,436
Interest expense			36						82						76						323
Interest income			(40)						(8)						(70)						(44)
Loss on debt extinguishment			—						8						—						8
Other non-operating—net			(2)						—						(5)						1
Earnings before income taxes			740						1,696						1,559						3,148
Income tax provision			134						357						303						758
Net earnings			606						1,339						1,256						2,390
Less: Net earnings attributable to noncontrolling interest			79						174						169						342
Net earnings attributable to common stockholders			$	527					$	1,165					$	1,087					$	2,048
Net earnings per share attributable to common stockholders:
Basic			$	2.71					$	5.59					$	5.56					$	9.83
Diluted			$	2.70					$	5.58					$	5.55					$	9.78
Weighted-average common shares outstanding:
Basic			194.6						208.2						195.4						208.4
Diluted			195.0						208.9						195.9						209.4
Dividends declared per common share			$	0.40					$	0.40					$	0.80					$	0.70

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
			(in millions)
Net earnings			$	606					$	1,339					$	1,256					$	2,390
Other comprehensive income (loss):
Foreign currency translation adjustment—net of taxes			23						(27)						30						(40)
Defined benefit plans—net of taxes			2						8						1						12
			25						(19)						31						(28)
Comprehensive income			631						1,320						1,287						2,362
Less: Comprehensive income attributable to noncontrolling interest			79						174						169						342
Comprehensive income attributable to common stockholders			$	552					$	1,146					$	1,118					$	2,020

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

			(Unaudited)
			June 30, 2023						December 31, 2022
			(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents			$	3,219					$	2,323
Accounts receivable—net			388						582
Inventories			319						474
Prepaid income taxes			81						215
Other current assets			65						79
Total current assets			4,072						3,673
Property, plant and equipment—net			6,218						6,437
Investment in affiliate			72						74
Goodwill			2,089						2,089
Operating lease right-of-use assets			278						254
Other assets			808						786
Total assets			$	13,537					$	13,313
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses			$	451					$	575
Income taxes payable			47						3
Customer advances			9						229
Current operating lease liabilities			100						93
Other current liabilities			15						95
Total current liabilities			622						995
Long-term debt			2,967						2,965
Deferred income taxes			910						958
Operating lease liabilities			177						167
Other liabilities			341						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—196,248,883 shares issued and 2022—195,604,404 shares issued			2						2
Paid-in capital			1,430						1,412
Retained earnings			4,797						3,867
Treasury stock—at cost, 2023—3,313,189 shares and 2022—0 shares			(226)						—
Accumulated other comprehensive loss			(199)						(230)
Total stockholders’ equity			5,804						5,051
Noncontrolling interest			2,716						2,802
Total equity			8,520						7,853
Total liabilities and equity			$	13,537					$	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 March 31, 2023			$	2					$	(97)					$	1,424					$	4,348					$	(224)					$	5,453					$	2,637					$	8,090
Net earnings			—						—						—						527						—						527						79						606
Other comprehensive income			—						—						—						—						25						25						—						25
Purchases of treasury stock			—						(131)						—						—						—						(131)						—						(131)
Issuance of $0.01 par value common stock under employee stock plans			—						2						(1)						—						—						1						—						1
Stock-based compensation expense			—						—						7						—						—						7						—						7
Dividends and dividend equivalents ($0.40 per share)			—						—						—						(78)						—						(78)						—						(78)
Balance as of June 30, 2023			$	2					$	(226)					$	1,430					$	4,797					$	(199)					$	5,804					$	2,716					$	8,520

Balance as of December 31, 2022			$	2					$	—					$	1,412					$	3,867					$	(230)					$	5,051					$	2,802					$	7,853
Net earnings			—						—						—						1,087						—						1,087						169						1,256
Other comprehensive income			—						—						—						—						31						31						—						31
Purchases of treasury stock			—						(206)						—						—						—						(206)						—						(206)
Acquisition of treasury stock under employee stock plans			—						(22)						—						—						—						(22)						—						(22)
Issuance of $0.01 par value common stock under employee stock plans			—						2						(1)						—						—						1						—						1
Stock-based compensation expense			—						—						19						—						—						19						—						19
Dividends and dividend equivalents ($0.80 per share)			—						—						—						(157)						—						(157)						—						(157)
Distribution declared to noncontrolling interest			—						—						—						—						—						—						(255)						(255)
Balance as of June 30, 2023			$	2					$	(226)					$	1,430					$	4,797					$	(199)					$	5,804					$	2,716					$	8,520

CONSOLIDATED STATEMENTS OF EQUITY

(Continued) (Unaudited)

			Common Stockholders
			$0.01 Par Value Common Stock						Treasury Stock						Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Total Stockholders’ Equity						Noncontrolling Interest						Total Equity
			(in millions, except per share amounts)
Balance as of March 31, 2022			$	2					$	(123)					$	1,482					$	2,907					$	(266)					$	4,002					$	2,751					$	6,753
Net earnings			—						—						—						1,165						—						1,165						174						1,339
Other comprehensive loss			—						—						—						—						(19)						(19)						—						(19)
Purchases of treasury stock			—						(490)						—						—						—						(490)						—						(490)
Retirement of treasury stock			—						281						(23)						(260)						—						(2)						—						(2)
Issuance of $0.01 par value common stock under employee stock plans			—						1						3						—						—						4						—						4
Stock-based compensation expense			—						—						12						—						—						12						—						12
Dividends and dividend equivalents ($0.40 per share)			—						—						—						(83)						—						(83)						—						(83)
Balance as of June 30, 2022			$	2					$	(331)					$	1,474					$	3,729					$	(285)					$	4,589					$	2,925					$	7,514

Balance as of December 31, 2021			$	2					$	(2)					$	1,375					$	2,088					$	(257)					$	3,206					$	2,830					$	6,036
Net earnings			—						—						—						2,048						—						2,048						342						2,390
Other comprehensive loss			—						—						—						—						(28)						(28)						—						(28)
Purchases of treasury stock			—						(590)						—						—						—						(590)						—						(590)
Retirement of treasury stock			—						283						(23)						(260)						—						—						—						—
Acquisition of treasury stock under employee stock plans			—						(23)						—						—						—						(23)						—						(23)
Issuance of $0.01 par value common stock under employee stock plans			—						1						100						—						—						101						—						101
Stock-based compensation expense			—						—						22						—						—						22						—						22
Dividends and dividend equivalents ($0.70 per share)			—						—						—						(147)						—						(147)						—						(147)
Distribution declared to noncontrolling interest			—						—						—						—						—						—						(247)						(247)
Balance as of June 30, 2022			$	2					$	(331)					$	1,474					$	3,729					$	(285)					$	4,589					$	2,925					$	7,514

See accompanying Notes to Unaudited Consolidated Financial Statements.

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

			Six months ended June 30,
			2023						2022
			(in millions)
Operating Activities:
Net earnings			$	1,256					$	2,390
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			427						431
Deferred income taxes			(53)						—
Stock-based compensation expense			19						22
Loss on debt extinguishment			—						8
Unrealized net gain on natural gas derivatives			(72)						(50)
U.K. long-lived and intangible asset impairment			—						152
Gain on sale of emission credits			(36)						(3)
Loss on disposal of property, plant and equipment			1						—
Undistributed earnings of affiliate—net of taxes			—						(3)
Changes in:
Accounts receivable—net			198						(239)
Inventories			140						(99)
Accrued and prepaid income taxes			166						12
Accounts payable and accrued expenses			(138)						223
Customer advances			(220)						(628)
Other—net			(29)						64
Net cash provided by operating activities			1,659						2,280
Investing Activities:
Additions to property, plant and equipment			(164)						(129)
Proceeds from sale of property, plant and equipment			1						1
Distributions received from unconsolidated affiliate			—						4
Purchase of investments held in nonqualified employee benefit trust			—						(1)
Proceeds from sale of investments held in nonqualified employee benefit trust			—						1
Purchase of emission credits			—						(9)
Proceeds from sale of emission credits			36						12
Net cash used in investing activities			(127)						(121)
Financing Activities:
Payments of long-term borrowings			—						(507)
Financing fees			—						(4)
Dividends paid			(158)						(147)
Distributions to noncontrolling interest			(255)						(247)
Purchases of treasury stock			(205)						(577)
Proceeds from issuances of common stock under employee stock plans			1						101
Cash paid for shares withheld for taxes			(22)						(23)
Net cash used in financing activities			(639)						(1,404)
Effect of exchange rate changes on cash and cash equivalents			3						(13)
Increase in cash and cash equivalents			896						742
Cash and cash equivalents at beginning of period			2,323						1,628
Cash and cash equivalents at end of period			$	3,219					$	2,370

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 interim consolidated financial statements and the reported revenues and expenses for the periods presented. Such estimates and assumptions are used for, but are not limited to, net realizable value of inventories, environmental remediation liabilities, environmental and litigation contingencies, plant closure and asset retirement obligations, the cost of emission credits required to meet environmental regulations, the cost of customer incentives, useful lives of property and identifiable intangible assets, the evaluation of potential impairments of property, investments, identifiable intangible assets and goodwill, income tax reserves and the assessment of the realizability of deferred tax assets, the determination of the funded status and annual expense of defined benefit pension and other postretirement plans and the valuation of stock-based compensation awards granted to employees.

CF INDUSTRIES HOLDINGS, INC.

2. Revenue Recognition

We track our revenue by product and by geography. See Note 15—Segment Disclosures for the revenue of each of our reportable segments, which are Ammonia, Granular Urea, UAN, AN and Other. The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and six months ended June 30, 2023 and 2022:

			Ammonia						Granular Urea						UAN						AN						Other						Total
			(in millions)
Three months ended June 30, 2023
North America			$	460					$	460					$	463					$	65					$	120					$	1,568
Europe and other			65						—						85						39						18						207
Total revenue			$	525					$	460					$	548					$	104					$	138					$	1,775
Three months ended June 30, 2022
North America			$	987					$	816					$	877					$	76					$	180					$	2,936
Europe and other			128						17						99						177						32						453
Total revenue			$	1,115					$	833					$	976					$	253					$	212					$	3,389
Six months ended June 30, 2023
North America			$	790					$	1,035					$	982					$	139					$	246					$	3,192
Europe and other			159						36						233						124						43						595
Total revenue			$	949					$	1,071					$	1,215					$	263					$	289					$	3,787
Six months ended June 30, 2022
North America			$	1,570					$	1,552					$	1,890					$	159					$	333					$	5,504
Europe and other			185						46						101						317						104						753
Total revenue			$	1,755					$	1,598					$	1,991					$	476					$	437					$	6,257

As of June 30, 2023 and December 31, 2022, we had $9 million and $229 million, respectively, in customer advances on our consolidated balance sheets. During the six months ended June 30, 2023 and 2022, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

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

We have certain customer contracts with performance obligations under which, if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, the amount of which payment may vary based upon the terms and conditions of the applicable contract. As of June 30, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $845 million. We expect to recognize approximately 27% of these performance obligations as revenue in the remainder of 2023, approximately 36% as revenue during 2024-2026, approximately 17% 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 $255 million as of June 30, 2023. Other than the performance obligations described above, we expect that any performance obligations under our customer contracts that were unfulfilled or partially fulfilled at December 31, 2022 will be satisfied in 2023.

CF INDUSTRIES HOLDINGS, INC.

3. Net Earnings Per Share

Net earnings per share were computed as follows:

			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
			(in millions, except per share amounts)
Net earnings attributable to common stockholders			$	527					$	1,165					$	1,087					$	2,048
Basic earnings per common share:
Weighted-average common shares outstanding			194.6						208.2						195.4						208.4
Net earnings attributable to common stockholders			$	2.71					$	5.59					$	5.56					$	9.83
Diluted earnings per common share:
Weighted-average common shares outstanding			194.6						208.2						195.4						208.4
Dilutive common shares—stock-based awards			0.4						0.7						0.5						1.0
Diluted weighted-average common shares outstanding			195.0						208.9						195.9						209.4
Net earnings attributable to common stockholders			$	2.70					$	5.58					$	5.55					$	9.78

Diluted earnings per common share is calculated using weighted-average common shares outstanding, including the dilutive effect of stock-based awards as determined under the treasury stock method. In the computation of diluted earnings per common share, potentially dilutive stock-based awards are excluded if the effect of their inclusion is anti-dilutive. Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero in both the three and six months ended June 30, 2023 and the three and six months ended June 30, 2022.

4. Inventories

Inventories consist of the following:

			June 30, 2023						December 31, 2022
			(in millions)
Finished goods			$	280					$	437
Raw materials, spare parts and supplies			39						37
Total inventories			$	319					$	474

5. United Kingdom Operations Restructuring

In the second quarter of 2022, we approved and announced our proposed plan to restructure our U.K. operations, including the planned permanent closure of the Ince facility, which had been idled since September 2021, and optimization of the remaining manufacturing operations at our Billingham facility. Pursuant to our proposed plan to restructure our U.K. operations and dispose of the Ince facility assets before we originally intended, we concluded that an evaluation of our long-lived assets and an impairment test was required. Our assessment then identified the U.K. asset groups as U.K. Ammonia, U.K. AN and U.K. Other, comprising our ongoing U.K. operations, and Ince, U.K. In response to this impairment indicator, we compared the undiscounted cash flows expected to result from the use and eventual disposition of the Ince, U.K. asset group to its carrying amount and concluded the carrying amount was not recoverable and should be adjusted to its fair value. As a result, in the second quarter of 2022, we recorded total charges of $162 million related to the Ince facility as follows:

• asset impairment charges of $152 million consisting of the following:

◦an impairment charge of $135 million related to property, plant and equipment that is planned for abandonment at the Ince facility, including a liability of approximately $9 million for the costs of certain asset retirement activities related to the Ince site;

◦an intangible asset impairment charge of $8 million related to trade names; and

CF INDUSTRIES HOLDINGS, INC.

◦an impairment charge of $9 million related to the write-down of spare parts and certain raw materials at the Ince facility;

and

• a charge for post-employment benefits totaling $10 million, which is included in the U.K. operations restructuring line item in our consolidated statements of operations, related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

In August 2022, the final restructuring plan was approved, and decommissioning activities at our Ince facility were initiated. As of June 30, 2023, the decommissioning of our Ince facility and other approved restructuring actions have been completed.

6. Property, Plant and Equipment—Net

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

			June 30, 2023						December 31, 2022
			(in millions)
Land			$	114					$	113
Machinery and equipment			12,740						12,633
Buildings and improvements			923						914
Construction in progress			303						203
Property, plant and equipment(1)			14,080						13,863
Less: Accumulated depreciation and amortization			7,862						7,426
Property, plant and equipment—net			$	6,218					$	6,437

---

(1)As of June 30, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $63 million and $53 million, respectively. As of June 30, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $51 million and $35 million, respectively.

Depreciation and amortization related to property, plant and equipment was $218 million and $422 million for the three and six months ended June 30, 2023, respectively, and $219 million and $424 million for the three and six months ended June 30, 2022, respectively.

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

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.

CF INDUSTRIES HOLDINGS, INC.

The following is a summary of capitalized plant turnaround costs:

			Six months ended June 30,
			2023						2022
			(in millions)
Net capitalized turnaround costs as of January 1			$	312					$	355
Additions			47						26
Depreciation			(62)						(70)
Impairment related to U.K. operations			—						(7)
Effect of exchange rate changes			1						(4)
Net capitalized turnaround costs as of June 30			$	298					$	300

7. Equity Method Investment

We have a 50% ownership interest in Point Lisas Nitrogen Limited (PLNL), which operates an ammonia production facility in the Republic of Trinidad and Tobago. We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the Ammonia segment.

As of June 30, 2023, the total carrying value of our equity method investment in PLNL was $72 million, $32 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 $36 million and $95 million for the three and six months ended June 30, 2023, respectively, and $77 million and $151 million for the three and six months ended June 30, 2022, respectively.

8. Fair Value Measurements

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

			June 30, 2023
			Cost Basis						Unrealized Gains						Unrealized Losses						Fair Value
			(in millions)
Cash			$	183					$	—					$	—					$	183
Cash equivalents:
U.S. and Canadian government obligations			2,792						—						—						2,792
Other debt securities			244						—						—						244
Total cash and cash equivalents			$	3,219					$	—					$	—					$	3,219
Nonqualified employee benefit trusts			16						1						—						17

CF INDUSTRIES HOLDINGS, INC.

			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 June 30, 2023 and December 31, 2022 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

			June 30, 2023
			Total Fair Value						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
			(in millions)
Cash equivalents			$	3,036					$	3,036					$	—					$	—
Nonqualified employee benefit trusts			17						17						—						—
Derivative assets			9						—						9						—
Derivative liabilities			(9)						—						(9)						—

			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 June 30, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities.

CF INDUSTRIES HOLDINGS, INC.

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 12—Derivative Financial Instruments for additional information.

Financial Instruments

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

			June 30, 2023												December 31, 2022
			Carrying Amount						Fair Value						Carrying Amount						Fair Value
			(in millions)
Long-term debt			$	2,967					$	2,767					$	2,965					$	2,764

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

The carrying amounts of cash and cash equivalents, as well as any instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other 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.

CF INDUSTRIES HOLDINGS, INC.

9. Income Taxes

For the three months ended June 30, 2023, we recorded an income tax provision of $134 million on pre-tax income of $740 million, or an effective tax rate of 18.2%, compared to an income tax provision of $357 million on pre-tax income of $1.70 billion, or an effective tax rate of 21.1%, for the three months ended June 30, 2022.

For the six months ended June 30, 2023, we recorded an income tax provision of $303 million on pre-tax income of $1.56 billion, or an effective tax rate of 19.5%, compared to an income tax provision of $758 million on pre-tax income of $3.15 billion, or an effective tax rate of 24.1%, for the six months ended June 30, 2022.

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 June 30, 2023 of 18.2%, which is based on pre-tax income of $740 million, including $79 million of earnings attributable to the noncontrolling interest, would be 2.1 percentage points higher if based on pre-tax income exclusive of the $79 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the three months ended June 30, 2022 of 21.1%, which is based on pre-tax income of $1.70 billion, including $174 million of earnings attributable to the noncontrolling interest, would be 2.4 percentage points higher if based on pre-tax income exclusive of the $174 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2023 of 19.5%, which is based on pre-tax income of $1.56 billion, including $169 million of earnings attributable to the noncontrolling interest, would be 2.3 percentage points higher if based on pre-tax income exclusive of the $169 million of earnings attributable to the noncontrolling interest. Our effective tax rate for the six months ended June 30, 2022 of 24.1%, which is based on pre-tax income of $3.15 billion, including $342 million of earnings attributable to the noncontrolling interest, would be 2.9 percentage points higher if based on pre-tax income exclusive of the $342 million of earnings attributable to the noncontrolling interest.

In addition, for the six months ended June 30, 2022, our income tax provision includes $22 million of income tax benefit due to share-based compensation activity and $78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, 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 six months ended June 30, 2022, as a result of the impact of these events on our Canadian and U.S. federal and state income taxes, we recognized an income tax provision of $78 million, reflecting the net impact of $129 million of accrued income taxes payable to Canada for tax years 2006 through 2011, partially offset by net income tax receivables of approximately $51 million in the United States, and we accrued net interest of $104 million, primarily reflecting the impact of estimated interest payable to Canada. Of the $78 million of income tax provision and $104 million of net interest expense recognized in the six months ended June 30, 2022, $2 million of income tax provision and $5 million of net interest expense was recognized in the three months ended June 30, 2022.

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.

CF INDUSTRIES HOLDINGS, INC.

Transfer pricing positions

As a result of the outcome of the arbitration decision discussed above, we also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after. Based on this evaluation, for the six months ended June 30, 2022, we recorded the following:

• liabilities for unrecognized tax benefits of approximately $314 million, with a corresponding income tax provision, and accrued interest of approximately $116 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of approximately $359 million, with a corresponding income tax benefit, and accrued interest income of approximately $30 million related to the noncurrent income tax receivables.

In the six months ended June 30, 2022, the impact on our consolidated statement of operations of the amounts recorded as a result of this evaluation of transfer pricing positions, including $26 million of net deferred income tax provision for other transfer pricing tax effects, was $19 million of income tax benefit and $86 million of net interest expense before tax ($93 million after tax). Of the $19 million of income tax benefit and $86 million of net interest expense recognized in the six months ended June 30, 2022, $21 million of income tax benefit and $23 million of net interest expense ($24 million after tax) was recognized in the three months ended June 30, 2022.

10. 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 adjusted term Secured Overnight Financing Rate or base rate plus, in either case, a specified margin. We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees. The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

As of June 30, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $750 million and no outstanding letters of credit under the Revolving Credit Agreement. There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2023 or December 31, 2022, or during the six months ended June 30, 2023.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants. As of June 30, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $350 million of letters of credit. As of June 30, 2023, approximately $205 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Senior Notes

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

			Effective Interest Rate						June 30, 2023												December 31, 2022
						Principal						Carrying Amount**(1)**						Principal						Carrying Amount**(1)**
									(in millions)
Public Senior Notes:
5.150% due March 2034			5.293%						750						741						750						741
4.950% due June 2043			5.040%						750						742						750						742
5.375% due March 2044			5.478%						750						741						750						740
Senior Secured Notes:
4.500% due December 2026(2)			4.783%						750						743						750						742
Total long-term debt									$	3,000					$	2,967					$	3,000					$	2,965

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(1)Carrying amount is net of unamortized debt discount and deferred debt issuance costs. Total unamortized debt discount was $7 million as of both June 30, 2023 and December 31, 2022, and total deferred debt issuance costs were $26 million and $28 million as of June 30, 2023 and December 31, 2022, respectively.

(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.

11. Interest Expense

Details of interest expense are as follows:

			Three months ended June 30,												Six months ended June 30,
			2023						2022						2023						2022
			(in millions)
Interest on borrowings(1)			$	37					$	38					$	74					$	80
Fees on financing agreements(1)			2						2						4						4
Interest on tax liabilities(2)			(2)						42						—						240
Interest capitalized			(1)						—						(2)						(1)
Total interest expense			$	36					$	82					$	76					$	323

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(1)See Note 10—Financing Agreements for additional information.

(2)See Note 9—Income Taxes for additional information.

CF INDUSTRIES HOLDINGS, INC.

12. 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 June 30, 2023, we had natural gas derivative contracts covering certain periods through March 2024.

As of June 30, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 43.8 million MMBtus of natural gas. As of 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 six months ended June 30, 2023, we used derivatives to cover approximately 36% of our natural gas consumption.

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

			Gain (loss) recognized in income
									Three months ended June 30,												Six months ended June 30,
			Location						2023						2022						2023						2022
									(in millions)
Unrealized net gains on natural gas derivatives			Cost of sales						$	—					$	17					$	72					$	50
Realized net (losses) gains on natural gas derivatives			Cost of sales						—						(9)						(118)						8
Net derivative gains (losses)									$	—					$	8					$	(46)					$	58

The fair values of derivatives on our consolidated balance sheets are shown below. As of June 30, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments. See Note 8—Fair Value Measurements for additional information on derivative fair values.

			Asset Derivatives																		Liability Derivatives
			Balance Sheet Location						June 30, 2023						December 31, 2022						Balance Sheet Location						June 30, 2023						December 31, 2022
									(in millions)																		(in millions)
Natural gas derivatives			Other current assets						$	9					$	12					Other current liabilities						$	(9)					$	(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 June 30, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero 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 June 30, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts.

CF INDUSTRIES HOLDINGS, INC.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of June 30, 2023 and December 31, 2022:

			Amounts presented in consolidated balance sheets**(1)**						Gross amounts not offset in consolidated balance sheets
						Financial instruments						Cash collateral received (pledged)						Net amount
			(in millions)
June 30, 2023
Total derivative assets			$	9					$	—					$	—					$	9
Total derivative liabilities			(9)						—						—						(9)
Net derivative liabilities			$	—					$	—					$	—					$	—
December 31, 2022
Total derivative assets			$	12					$	—					$	—					$	12
Total derivative liabilities			(85)						—						—						(85)
Net derivative liabilities			$	(73)					$	—					$	—					$	(73)

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(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.

13. 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			169						342
Declaration of distributions payable			(255)						(247)
Balance as of June 30			$	2,716					$	2,925
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 June 30			$	—					$	—

CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices. As a result of its equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN. We are also entitled to semi-annual cash distributions from CFN. The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less

CF INDUSTRIES HOLDINGS, INC.

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.

On July 31, 2023, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2023 in accordance with CFN’s limited liability company agreement. On July 31, 2023, CFN distributed $204 million to CHS for the distribution period ended June 30, 2023.

14. Stockholders’ Equity

Common Stock

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

The following table summarizes the share repurchases under the 2022 Share Repurchase Program and the 2021 Share Repurchase Program.

			2022 Share Repurchase Program												2021 Share Repurchase Program
			Shares						Amounts**(1)**						Shares						Amounts**(1)**
			(in millions)
Shares repurchased in 2022:
First quarter			—						$	—					1.3						$	100
Second quarter			—						—						5.3						490
Third quarter			—						—						6.1						532
Fourth quarter			—						—						2.2						223
Total shares repurchased in 2022			—						—						14.9						1,345
Shares repurchased as of December 31, 2022			—						$	—					14.9						$	1,345
Shares repurchased in 2023:
First quarter			—						$	—					1.1						$	75
Second quarter			0.8						50						1.2						80
Total shares repurchased in 2023			0.8						50						2.3						155
Shares repurchased as of June 30, 2023			0.8						$	50					17.2						$	1,500

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(1)As defined in the share repurchase programs, amounts reflect the price paid for the shares of common stock repurchased, excluding commissions paid to brokers and excise taxes.

In the six months ended June 30, 2023, we completed the 2021 Share Repurchase Program with the repurchase of approximately 2.3 million shares for $155 million, and we repurchased approximately 0.8 million shares under the 2022 Share Repurchase Program for $50 million.

In the six months ended June 30, 2022, we repurchased approximately 6.6 million shares under the 2021 Share Repurchase Program for $590 million, of which $14 million was accrued and unpaid as of June 30, 2022.

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, 2022			$	(179)											$	3					$	(54)					$	(230)
Gain arising during the period			—												—						5						5
Effect of exchange rate changes and deferred taxes			30												—						(4)						26
Balance as of June 30, 2023			$	(149)											$	3					$	(53)					$	(199)
Balance as of December 31, 2021			$	(141)											$	4					$	(120)					$	(257)
Gain arising during the period			—												—						3						3
Reclassification to earnings			—												—						2						2
Effect of exchange rate changes and deferred taxes			(40)												—						7						(33)
Balance as of June 30, 2022			$	(181)											$	4					$	(108)					$	(285)

CF INDUSTRIES HOLDINGS, INC.

15. Segment Disclosures

Our reportable segments consist of Ammonia, Granular Urea, UAN, AN and Other. These segments are differentiated by products. Our management uses gross margin to evaluate segment performance and allocate resources. Total other operating costs and expenses (consisting primarily of selling, general and administrative expenses and other operating—net) and non-operating expenses (consisting primarily of interest and income taxes) are centrally managed and are not included in the measurement of segment profitability reviewed by management. Segment data for sales, cost of sales and gross margin for the three and six months ended June 30, 2023 and 2022 are presented in the table below.

			Ammonia						Granular Urea**(1)**						UAN**(1)**						AN**(1)**						Other**(1)**						Consolidated
			(in millions)
Three months ended June 30, 2023
Net sales			$	525					$	460					$	548					$	104					$	138					$	1,775
Cost of sales			303						222						289						81						76						971
Gross margin			$	222					$	238					$	259					$	23					$	62					804
Total other operating costs and expenses																																	77
Equity in earnings of operating affiliate																																	7
Operating earnings																																	$	734
Three months ended June 30, 2022
Net sales			$	1,115					$	833					$	976					$	253					$	212					$	3,389
Cost of sales			442						360						343						151						102						1,398
Gross margin			$	673					$	473					$	633					$	102					$	110					1,991
Total other operating costs and expenses(2)																																	241
Equity in earnings of operating affiliate																																	28
Operating earnings																																	$	1,778
Six months ended June 30, 2023
Net sales			$	949					$	1,071					$	1,215					$	263					$	289					$	3,787
Cost of sales			583						549						635						185						168						2,120
Gross margin			$	366					$	522					$	580					$	78					$	121					1,667
Total other operating costs and expenses																																	131
Equity in earnings of operating affiliate																																	24
Operating earnings																																	$	1,560
Six months ended June 30, 2022
Net sales			$	1,755					$	1,598					$	1,991					$	476					$	437					$	6,257
Cost of sales			722						630						688						322						206						2,568
Gross margin			$	1,033					$	968					$	1,303					$	154					$	231					3,689
Total other operating costs and expenses(2)																																	307
Equity in earnings of operating affiliate																																	54
Operating earnings																																	$	3,436

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

(2)Total other operating costs and expenses for the three and six months ended June 30, 2022 includes $162 million of asset impairment and restructuring charges related to our U.K. operations. See Note 5—United Kingdom Operations Restructuring for additional information.

CF INDUSTRIES HOLDINGS, INC.

16. 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.