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| CFL Selling Price Modifications 12 As of March 31, 2013, CF Industries, Inc. (CF Industries or the Company) owned 49% of the voting common shares and 66% of the non-voting preferred shares of Canadian Fertilizers Limited (CFL), an Alberta, Canada based nitrogen fertilizer manufacturer and purchased 66% of the production of CFL. Viterra, Inc. (Viterra) held 34% of the equity ownership of CFL, purchased the remaining 34% of CFL’s production and was entitled to receive a distribution from CFL equal to 34% of the net earnings. As of March 31, 2013, CFL was a variable interest entity that was consolidated in the Company’s financial statements. CF Industries’ and Viterra’s purchases of nitrogen fertilizer products from CFL were made under product purchase agreements. Under the provisions of these product purchase agreements that were in effect until the fourth quarter of 2012, CFL’s selling prices were based on market prices. An initial portion of the selling price was paid based upon production cost plus an agreed-upon margin once title passed as the product was shipped. The remaining portion of the selling price, representing the difference between the market price and production cost plus an agreed-upon margin, was paid after the end of the year. The sales revenue attributable to this remaining portion of the selling price was accrued on an interim basis. In the Company’s consolidated financial statements, the net sales and accounts receivable attributable to CFL are solely generated by transactions with Viterra, as all transactions with CF Industries are eliminated in consolidation. In the fourth quarter of 2012, the CFL Board of Directors approved an amendment to the product purchase agreements that modified the selling prices that CFL charges for products sold to Viterra and CF Industries. The modified selling price is based on production cost plus an agreed-upon margin and is reflected in the Company’s first quarter 2013 results, whereas, an interim market price accrual of $39.7 million was included in the Company’s first quarter 2012 results. The amendment creates a year-over-year comparability difference for net sales, gross margin, operating earnings, earnings before income taxes and net earnings attributable to noncontrolling interest, but does not impact the comparability of the Company’s net earnings attributable to common stockholders or net cash flows. In order to provide comparable information for the periods presented, the Company has provided certain financial information adjusted as if the modified CFL pricing calculation methodology had been in effect beginning in the first quarter of 2012. The table provided on slide 13 reflects and adjusts for the impact of the change on the Company’s consolidated net sales, gross margin, gross margin as a percent of sales and net earnings attributable to noncontrolling interest. In addition, the table on slide 14 reflects and adjusts for the impact of the change in the CFL pricing calculation methodology on nitrogen segment net sales, gross margin, gross margin as a percent of sales and average selling price per ton of ammonia and urea. In April 2013, CF Industries acquired Viterra’s interest in CFL (including its rights under its product purchase agreement with CFL) for a total purchase price of approximately C$0.9 billion. As a result of the completion of this transaction, CF Industries is entitled to purchase 100% of CFL’s nitrogen fertilizer production. |