FinanceLooker

Excrept from filing document 2024-12-31

The aggregate market value of the registrant s common stock held by non affiliates as of June 30 2024 the last business day of the registrant s most recently completed second fiscal quarter computed by reference to the closing sale price of the registrant s common stock was 13 288 724 410
Portions of the registrant s definitive proxy statement for its 2025 annual meeting of shareholders Proxy Statement are incorporated by reference into Part III of this Annual Report on Form 10 K The Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the 2024 fiscal year or if the registrant does not file the Proxy Statement within such 120 day period the registrant will amend this Annual Report on Form 10 K to include the information required under Part III of Form 10 K not later than the end of such 120 day period
All references to CF Holdings we us our and the Company refer to CF Industries Holdings Inc and its subsidiaries except where the context makes clear that the reference is to CF Industries Holdings Inc only and not its subsidiaries All references to CF Industries refer to CF Industries Inc a 100 owned subsidiary of CF Industries Holdings Inc References to tons refer to short tons Notes referenced throughout this document refer to consolidated financial statement note disclosures that are found in Item 8 Financial Statements and Supplementary Data Notes to Consolidated Financial Statements
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 low carbon hydrogen and nitrogen products for energy fertilizer emissions abatement and other industrial activities Our 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 retailers independent fertilizer distributors traders wholesalers and industrial users Our core product is anhydrous ammonia ammonia which contains 82 nitrogen and 18 hydrogen Products derived from ammonia that are most often used as nitrogen fertilizers include granular urea urea ammonium nitrate solution UAN and ammonium nitrate AN AN is also used extensively by the commercial explosives industry as a component of explosives Products derived from ammonia that are sold primarily to industrial customers include diesel exhaust fluid DEF urea liquor nitric acid and aqua ammonia
six U S manufacturing facilities located in Donaldsonville Louisiana the largest ammonia production complex in the world Sergeant Bluff Iowa our Port Neal complex Yazoo City Mississippi Claremore Oklahoma our Verdigris complex Woodward Oklahoma and Waggaman Louisiana The Waggaman facility is wholly owned by us and the other five U S manufacturing facilities are wholly owned directly or indirectly by CF Industries Nitrogen LLC CFN of which we own approximately 89 and CHS Inc CHS owns the remainder
We have a strategic venture with 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 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 minority 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 See Note 19 Noncontrolling Interest for additional information on our strategic venture with CHS
all of our reports on Forms 10 K 10 Q and 8 K and all amendments to those reports as soon as reasonably practicable after such material is filed electronically with or furnished to the Securities and Exchange Commission SEC Copies of our Corporate Governance
Guidelines Code of Corporate Conduct and charters for the Audit Committee Compensation and Management Development Committee Corporate Governance and Nominating Committee and Environmental Sustainability and Community Committee of our Board of Directors the Board are also available on our Internet website We will provide electronic or paper copies of these documents free of charge upon request The SEC also maintains a website at
At our core CF Industries is a producer of ammonia We use the Haber Bosch process to fix atmospheric nitrogen with hydrogen from natural gas to produce anhydrous ammonia whose chemical composition is NH
We sell the ammonia itself or upgrade it to products such as granular urea UAN and DEF A majority of the ammonia and ammonia derived products we manufacture are used as fertilizer as the nitrogen content provides energy essential for crop growth Other important uses of our products include emissions control
Our strategy is to leverage our unique capabilities to accelerate the world s transition to clean energy We believe this strategy builds upon our leadership in ammonia production to capture emerging opportunities to produce ammonia with a lower carbon intensity low carbon ammonia than that of ammonia produced through traditional processes These opportunities include traditional applications in agriculture to help reduce the carbon footprint of food production and the life cycle carbon intensity of ethanol production enabling production of sustainable aviation fuel among other purposes These opportunities also include new growth opportunities from energy intensive industries such as power generation and marine shipping as ammonia represents an efficient mechanism to both ship and store hydrogen as well as a clean energy fuel source in its own right as ammonia does not contain or emit carbon when combusted Our strategy also strengthens our existing business
At our Donaldsonville and Yazoo City complexes our decarbonization projects are leveraging carbon capture and sequestration CCS to enable us to convert a portion of our existing ammonia production to low carbon ammonia CCS requires the construction of carbon dioxide CO
generated by ammonia production from being emitted to the atmosphere Construction of the dehydration and compression unit at our Donaldsonville complex is in advanced stages with an estimated total cost of approximately 200 million over the life of the project Construction of the dehydration and compression unit at our Yazoo City complex is expected to cost approximately 100 million over the life of the project For each facility we have contracted with ExxonMobil to transport and sequester the captured CO
Decarbonization projects in our existing network also include our electrolyzer project at our Donaldsonville complex to produce ammonia with hydrogen sourced from an electrolysis process that produces no CO
emissions Commissioning of the 20 megawatt alkaline water electrolysis plant to produce hydrogen was suspended due to an issue experienced in the fourth quarter of 2024 Upon identification and remediation of the issue we expect to resume commissioning activities At full electrolyzer capacity we will be able to produce approximately 20 000 tons of low carbon ammonia per year
Our decarbonization projects also include front end engineering and design FEED studies to inform our evaluation of whether and how best to invest in export oriented low carbon ammonia capacity at our Blue Point complex in Ascension Parish Louisiana to supply developing clean energy markets and traditional ammonia markets where demand for low carbon product is emerging
In the fourth quarter of 2024 we received results from a FEED study evaluating the use of autothermal reforming ATR ammonia production technology alongside CCS to enable the production of low carbon ammonia ATR technology when combined with CCS to capture and sequester process CO
emissions from the ammonia production process by more than 90 compared to conventional ammonia plants The FEED study results estimate the costs of a project with these attributes to be approximately 4 billion for the approximately 1 4 million metric ton capacity greenfield ATR ammonia facility and CCS technologies Additionally we estimate approximately 500 million would be required for the scalable common infrastructure for our Blue Point complex such as ammonia storage and a vessel loading dock
We have entered into joint development agreements JDAs with two potential partners Mitsui Co Ltd and JERA Co Inc for the development of the greenfield low carbon ammonia capacity Our evaluation includes assessing whether the ammonia production technology under consideration will satisfy carbon intensity and other requirements for potential end users Should a positive final investment decision FID be reached to construct greenfield low carbon ammonia capacity at our Blue Point complex construction and commissioning is expected to take approximately four years from a positive FID
In addition to discussions with existing customers who have interest in using low carbon ammonia for traditional applications we are engaged in discussions regarding the supply of low carbon ammonia for new applications We are evaluating and are in various stages of discussions with other companies for long term offtake and or potential joint investments related to new and traditional applications for low carbon ammonia These discussions continue to advance as we gain greater clarity regarding demand for low carbon ammonia including associated carbon intensity requirements government incentives and regulatory developments
We were founded in 1946 as Central Farmers Fertilizer Company and were owned by a group of regional agriculture cooperatives for the first 59 years of our existence Central Farmers became CF Industries in 1970
Originally established as a fertilizer brokerage company we expanded owning and operating fertilizer manufacturing and distribution facilities in the early 1950s with a principal objective of assured supply for our owners At various times in our history we manufactured and or distributed nitrogen phosphate and potash fertilizers
We operated as a traditional manufacturing and supply cooperative until 2002 when we adopted a new business model that established financial performance as our principal objective rather than assured supply for our owners A critical aspect of the new business model was to establish a more economically driven approach to the marketplace
In August 2005 we completed the initial public offering IPO of our common stock which is listed on the New York Stock Exchange In connection with the IPO we consummated a reorganization transaction whereby we ceased to be a cooperative and our pre IPO owners equity interests in CF Industries were cancelled in exchange for all of the proceeds of the offering and shares of our common stock At the time of the IPO our assets consisted of one wholly owned nitrogen manufacturing facility in Louisiana United States a joint venture nitrogen manufacturing facility in Alberta Canada of which we owned 66 percent a phosphate mining and manufacturing operation in Florida United States and distribution facilities throughout North America
In April 2010 we acquired Terra Industries Inc Terra a leading North American producer and marketer of nitrogen fertilizer products for a purchase price of 4 6 billion which was paid in cash and shares of our common stock As a result of the Terra acquisition we acquired five nitrogen fertilizer manufacturing facilities an approximately 75 3 interest in Terra Nitrogen Company L P TNCLP a publicly traded limited partnership and certain joint venture interests
Prior to April 30 2013 we owned 66 percent of Canadian Fertilizers Limited CFL a joint venture nitrogen manufacturing facility in Alberta Canada On April 30 2013 CF Industries acquired all of the outstanding interests in CFL that it did not already own and CFL became our wholly owned subsidiary
In March 2014 we exited our phosphate mining and manufacturing business which was located in Florida through a sale to The Mosaic Company As a result we became focused solely on nitrogen manufacturing and distribution
In July 2015 we acquired the remaining 50 equity interest in CF Fertilisers UK Group Limited formerly known as GrowHow UK Group Limited CF Fertilisers UK not previously owned by us and CF Fertilisers UK became wholly owned by us This transaction added CF Fertilisers UK s nitrogen manufacturing complexes in Ince United Kingdom and Billingham United Kingdom to our consolidated manufacturing capacity Due to the substantial increase in the cost of natural gas in the United Kingdom in 2022 we closed the Ince facility and in 2023 we ceased operations of the ammonia plant at the Billingham facility which was idled in September 2022 Since that time we have imported ammonia for upgrade into AN and other nitrogen products at the Billingham facility
In February 2016 our strategic venture with CHS commenced at which time CHS made a capital contribution of 2 8 billion to CFN in exchange for membership interests in CFN which represented approximately 11 of the total membership interests of CFN
In late 2015 and 2016 we completed capacity expansion projects at our Donaldsonville complex in Louisiana and our Port Neal complex in Iowa These projects originally announced in 2012 included the construction of new ammonia urea and UAN plants at our Donaldsonville complex and new ammonia and urea plants at our Port Neal complex These plants increased our overall production capacity by approximately 25 improved our product mix flexibility at Donaldsonville and improved our ability to serve upper Midwest urea customers from our Port Neal location The total capital cost of the capacity expansion projects was 5 2 billion
Prior to April 2 2018 Terra Nitrogen Limited Partnership which owns and operates our Verdigris nitrogen manufacturing facility in Oklahoma was a subsidiary of TNCLP On April 2 2018 Terra Nitrogen GP Inc the sole general partner of TNCLP and an indirect wholly owned subsidiary of CF Holdings completed its purchase of all of the publicly traded common units of TNCLP the Purchase Upon completion of the Purchase CF Holdings owned through its subsidiaries 100 percent of the general and limited partnership interests of TNCLP
On December 1 2023 we acquired an ammonia production facility located in Waggaman Louisiana from Dyno Nobel Louisiana Ammonia LLC DNLA a U S subsidiary of Australia based Incitec Pivot Limited IPL pursuant to an asset purchase agreement with DNLA and IPL The facility has a nameplate capacity of 880 000 tons of ammonia annually In connection with the closing of the acquisition on December 1 2023 we entered into a long term ammonia offtake agreement providing for us to supply up to 200 000 tons of ammonia per year to IPL s Dyno Nobel Inc subsidiary Under the terms of the asset purchase agreement 425 million of the 1 675 billion purchase price subject to adjustment was allocated by the parties to the ammonia offtake agreement We funded the balance of the final purchase price after adjustment with 1 221 billion of cash on hand
Unless otherwise stated we measure our production and sales volume in this Annual Report on Form 10 K in product tons which represents the weight of the product measured in short tons one short ton is equal to 2 000 pounds References to UAN product tons assume a 32 nitrogen content basis for production volume
We also provide certain supplementary volume information measured in nutrient tons Nutrient tons represent the weight of the product s nitrogen content which varies by product Ammonia represents 82 nitrogen content granular urea represents 46 nitrogen content UAN represents between 28 and 32 nitrogen content and AN represents between 29 and 35 nitrogen content
Our reportable segments consist of the following segments Ammonia Granular Urea UAN AN and Other These segments are differentiated by products We use 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 See Note 22 Segment Disclosures for additional information
Our primary products are ammonia granular urea UAN and AN Our historical sales by segment are shown in the following table Net sales do not reflect amounts used internally such as ammonia in the manufacture of other products
We own and operate eight manufacturing facilities in North America including six manufacturing facilities in the United States and two in Canada As of December 31 2024 the combined production capacity of these eight facilities represented approximately 40 40 44 and 19 of North American ammonia granular urea UAN and AN production capacity respectively Each of our manufacturing facilities in North America has on site storage to provide flexibility to manage the flow of outbound shipments without impacting production Our United Kingdom manufacturing facility produces AN and primarily serves the agricultural and industrial markets in the United Kingdom
Gross ammonia capacity includes ammonia used to produce upgraded products Net ammonia capacity is gross ammonia capacity less ammonia used to produce upgraded products based on the product mix shown in the table
Includes product tons of urea liquor and DEF from the Donaldsonville Port Neal Woodward Yazoo City and Courtright facilities and nitric acid from the Billingham facility Production of DEF can be increased by reducing urea and or UAN production
The Donaldsonville facility capacities present an estimated production mix This facility is capable of producing between 2 4 million and 3 3 million tons of granular urea and between 1 2 million and 4 3 million tons of UAN annually The facility is also capable of producing up to 1 2 million product tons of 32 5 DEF
The Yazoo City facility s production capacity depends on product mix With the facility maximizing the production of AN products 160 000 tons of UAN can be produced UAN production can be increased to 450 000 tons by reducing the production of AN to 900 000 tons
The Donaldsonville facility is the world s largest and most flexible ammonia production complex It has six ammonia plants five urea plants four nitric acid plants three UAN plants and one DEF plant The complex which is located on the Mississippi River includes deep water docking facilities access to an ammonia pipeline and truck and railroad loading capabilities The complex has on site storage for 139 000 tons of ammonia 202 000 tons of UAN measured on a 32 nitrogen content basis and 130 000 tons of granular urea
The Medicine Hat facility located in southeast Alberta is the largest ammonia production complex in Canada It has two ammonia plants and one urea plant The complex has on site storage for 55 000 tons of ammonia and 55 000 tons of granular urea
The Port Neal facility is located approximately 12 miles south of Sioux City Iowa on the Missouri River in Sergeant Bluff Iowa The facility consists of two ammonia plants three urea plants two nitric acid plants and one UAN plant The location has on site storage for 82 000 tons of ammonia 130 000 tons of granular urea and 100 000 tons of 32 UAN
The Verdigris facility is located northeast of Tulsa Oklahoma near the Verdigris River in Claremore Oklahoma It is the second largest UAN production facility in North America The facility consists of two ammonia plants two nitric acid plants two UAN plants and a port terminal We lease the port terminal from the Tulsa Rogers County Port Authority The complex has on site storage for 57 000 tons of ammonia and 102 000 tons of 32 UAN
The Waggaman facility is located near New Orleans Louisiana on the Mississippi River approximately 60 miles southeast of the Donaldsonville facility The facility consists of one ammonia plant has access to an ammonia pipeline and has on site storage for approximately 39 000 tons of ammonia
The Woodward facility is located in rural northwest Oklahoma and consists of one ammonia plant two nitric acid plants two urea plants and two UAN plants The facility has on site storage for 34 000 tons of ammonia and 84 000 tons of 32 UAN
The Yazoo City facility is located in central Mississippi and includes one ammonia plant four nitric acid plants one AN plant two urea plants one UAN plant and a dinitrogen tetroxide production and storage facility The site has on site storage for 48 000 tons of ammonia 47 000 tons of 32 UAN and 10 000 tons of AN and related products
The Courtright facility is located south of Sarnia Ontario near the St Clair River The facility consists of an ammonia plant a UAN plant a nitric acid plant and a urea plant The location has on site storage for 61 000 tons of ammonia and 16 000 tons of 32 UAN
The Billingham facility located in the Teesside chemical area in northeastern England is geographically split among three primary locations the main site which contains three nitric acid plants the Portrack site approximately two miles away which contains one AN fertilizer plant and the North Tees site approximately seven miles away which contains an ammonia storage area These locations collectively have on site storage for 37 000 tons of ammonia and 138 000 tons of AN In addition we previously operated an ammonia plant at the main site of the Billingham facility However in September 2022 we idled ammonia production at the facility Since that time we have imported ammonia for upgrade at the facility into AN and other nitrogen products In the third quarter of 2023 we approved our plan to permanently close the ammonia plant at the Billingham facility
The Point Lisas facility in Trinidad is owned jointly through a 50 50 venture with Koch Fertilizer LLC This facility has the capacity to produce 720 000 tons of ammonia annually from natural gas supplied under a contract with The National Gas Company of Trinidad and Tobago Limited NGC
Natural gas is the principal raw material and primary fuel source used in the ammonia production process at our nitrogen manufacturing facilities In 2024 natural gas accounted for approximately 28 of our total production costs for nitrogen products Our nitrogen manufacturing facilities have access to abundant competitively priced natural gas through a reliable network of pipelines that are connected to major natural gas trading hubs Our facilities utilize the following natural gas hubs Henry Hub in Louisiana SONAT and TETCO ELA in Mississippi ONEOK in Oklahoma AECO in Alberta Ventura in Iowa Demarcation in Kansas Welcome in Minnesota Dawn and Parkway in Ontario and the National Balancing Point NBP in the United Kingdom
In 2024 our manufacturing facilities consumed in the aggregate approximately 345 million MMBtus of natural gas We employ a combination of daily spot and term purchases from a variety of quality suppliers to maintain a reliable competitively priced supply of natural gas We also use certain financial instruments to hedge natural gas prices See Note 17 Derivative Financial Instruments for additional information about our natural gas hedging activities
The safe efficient and economical distribution of nitrogen products is critical for successful operations Our nitrogen production facilities have access to multiple transportation modes by which we ship products to terminals warehouses and customers Each of our production facilities has a unique distribution pattern based on its production capacity and location
Our North American nitrogen production facilities can ship products via truck and rail to customers and to our storage facilities in the U S and Canada with access to our leased railcar fleet of approximately 4 800 tank and hopper cars as well as railcars provided by rail carriers Our United Kingdom nitrogen production facility mainly ships products via truck
The North American waterway system is also used extensively to ship products from our Donaldsonville Verdigris and Yazoo City facilities To ship ammonia and UAN we employ a fleet of up to eleven tow boats and thirty six river barges which are primarily leased We also utilize contract marine services to move granular urea and AN We can also export nitrogen products via seagoing vessels from our Donaldsonville and Billingham manufacturing facilities
The Donaldsonville and Waggaman facilities are connected to the 2 000 mile long Sunoco ammonia pipeline through which we have the ability to transport ammonia to ten Company owned terminals and additional shipping points in the Midwestern U S corn belt
As of December 31 2024 we owned or leased space at 41 in market storage terminals and warehouses located in a 19 state region of the United States Canada and the United Kingdom Including storage at our production facilities we have an aggregate storage capacity for approximately 2 8 million tons of product Our storage capabilities are summarized in the following table
The principal customers for our nitrogen products are cooperatives retailers independent fertilizer distributors traders wholesalers and industrial users Sales are generated by our internal marketing and sales force CHS was our largest customer in 2024 and accounted for approximately 12 of our consolidated net sales We have a strategic venture with CHS under which CHS has a minority equity interest in CFN See Note 19 Noncontrolling Interest for additional information on our strategic venture with CHS
Our markets are global and intensely competitive based primarily on delivered price and to a lesser extent on reliability customer service and product quality During the peak demand periods product availability and delivery time also play a role in the buying decisions of customers
Our primary competitors with North American operations include Nutrien Ltd Koch Fertilizer LLC LSB Industries CVR Partners LP and Yara International There is also significant competition from products sourced from other regions of the world including some with lower natural gas or other feedstock costs which may include the benefit of government subsidies Because ammonia urea and UAN are widely traded fertilizer products and there are limited barriers to entry we experience competition from foreign sourced products continuously Producers of nitrogen based fertilizers located in the Middle East Trinidad Africa and Russia have been major exporters to North America in recent years
Our primary United Kingdom competition comes from imported products supplied by companies including Yara International Origin Fertilisers Ameropa and Thomas Bell Sons Ltd Urea and UAN are not produced in the United Kingdom but along with AN are widely traded fertilizer products with limited barriers to entry
The fertilizer business is seasonal The degree of seasonality of our business can change significantly from year to year due to weather conditions in the agricultural industry and other factors The strongest demand for our products in North America occurs during the spring planting season with a second period of strong demand following the fall harvest However we and other fertilizer producers generally manufacture and distribute products throughout the year As a result we and or our customers generally build inventories during the low demand periods of the year to ensure timely product availability during the peak sales seasons Seasonality is greatest for ammonia due to the short application season and the limited ability of our
customers and their customers to store significant quantities of this product The seasonality of fertilizer demand generally results in our sales volumes and net sales being the highest during the spring and our working capital requirements being the highest just prior to the start of the spring planting season Our quarterly financial results can vary significantly from one year to the next due to weather related shifts in planting and application schedules and purchasing patterns as well as import timing import and distribution costs and logistical limitations such as river conditions
We are subject to numerous environmental health and safety laws and regulations in the United States Canada the United Kingdom Trinidad and other locations including laws and regulations relating to the generation handling and disposal of hazardous substances and wastes the cleanup of hazardous substance releases the discharge of regulated substances to air or water and the demolition of existing plant sites upon permanent closure In the United States these laws include the Clean Air Act the Clean Water Act the Resource Conservation and Recovery Act RCRA the Comprehensive Environmental Response Compensation and Liability Act CERCLA the Toxic Substances Control Act TSCA the Occupational Safety and Health Act OSHA and various other federal state and local statutes Violations of environmental health and safety laws can result in substantial penalties court orders to install pollution control equipment civil and criminal sanctions permit revocations and facility shutdowns In addition environmental health and safety laws and regulations may impose joint and several liability without regard to fault for cleanup costs on potentially responsible parties who have released or disposed of hazardous substances into the environment or who own or operate property where hazardous substances have been released or disposed of by other parties We may be subject to more stringent enforcement of existing or new environmental health and safety laws in the future In addition we are also subject to certain environmental health and safety laws of jurisdictions where we introduce products chemicals or substances into a market
Our environmental health and safety capital expenditures in 2024 totaled approximately 30 million We estimate that we will have approximately 49 million of environmental health and safety capital expenditures in 2025 In addition to support safe and reliable operations at our continuous process manufacturing facilities we conduct scheduled inspections replacements and overhauls of our plant machinery and equipment which are referred to as turnarounds or outages A further description of turnaround activities is included in Note 8 Property Plant and Equipment Net in the notes to consolidated financial statements included in Item 8 of this report Environmental health and safety laws and regulations are complex and change frequently We expect that continued government and public emphasis on environmental issues will result in increased future expenditures for environmental controls at our manufacturing and distribution facilities Such expenditures could have a material adverse effect on our business financial condition results of operations and cash flows Additionally future environmental health and safety laws and regulations or reinterpretation of current laws and regulations may require us to make substantial expenditures Our costs to comply with or any liabilities under these laws and regulations could have a material adverse effect on our business financial condition results of operations and cash flows
From time to time we receive notices from governmental agencies or third parties alleging that we are a potentially responsible party at certain cleanup sites under CERCLA or other environmental cleanup laws In 2011 we received a notice from the Idaho Department of Environmental Quality IDEQ that alleged that we were a potentially responsible party for the cleanup of a former phosphate mine site we owned in the late 1950s and early 1960s located in Georgetown Canyon Idaho The current owner of the property and a former mining contractor received similar notices for the site In 2014 we and the current property owner entered into a Consent Order with IDEQ and the U S Forest Service to conduct a remedial investigation and feasibility study of the site The remedial investigation was submitted to the agencies in 2021 The next step will be a risk assessment followed by a feasibility study and then a decision on remediation at the site In 2015 we and several other parties received a notice that the U S Department of the Interior and other trustees intended to undertake a natural resource damage assessment for 18 former phosphate mines and three former processing facilities in southeast Idaho The Georgetown Canyon former mine and processing facility was included in the group of former mines and processing facilities identified by the trustees In June 2021 we received another notice from the U S Department of the Interior that the natural resource damage trustees were commencing a subsequent phase of the natural resource damage assessment but no further details were provided with respect to said assessment Because the former Georgetown Canyon mine site is still in the risk assessment and feasibility study stage we are not able to estimate at this time our potential liability if any with respect to the cleanup of the site or a possible claim for natural resource damages However based on the results of the site investigation conducted to date we do not expect the remedial or financial obligations to which we may be subject involving this or other cleanup sites will have a material adverse effect on our consolidated financial position results of operations or cash flows
Our U K manufacturing plant is required to report GHG emissions annually to the United Kingdom Environment Agency pursuant to its site Environmental Permits and Climate Change Agreement which specifies energy efficiency targets Failure to meet efficiency targets may require the plant to purchase CO
emissions allowances Our U K manufacturing plant is subject to the UK Emissions Trading Scheme UK ETS which generally requires us to hold or obtain emission allowances to offset GHG emissions from those aspects of our operations that are subject to regulation under this program
In Canada we are required to conduct an annual review of our operations with respect to compliance with Environment Canada s National Pollutant Release Inventory Ontario s Mandatory Monitoring and Reporting Regulation and the GHG Reporting Regulation In addition our manufacturing plants in Alberta and Ontario are subject to provincial or federal laws that impose a price on excess GHG emissions Each of these laws establishes carbon dioxide equivalent CO
e emissions standards applicable to our facilities in terms of emissions per unit of production with the provincial laws and the federal law using different formulas for establishing the intensity based limits and the reductions in these limits over time The federal law is the Greenhouse Gas Pollution Pricing Act which came into effect in 2018 and is intended to function only as a backstop to the provincial programs if such programs do not meet minimum federal criteria In 2022 the federal government found that both the Alberta and Ontario programs for 2023 2030 met such minimum criteria and therefore the provincial laws apply Effective January 1 2023 these provincial regulations increased in stringency from 2022 levels and we expect that the regulations will continue to increase in stringency going forward as Canada continues to work toward its stated goal of net zero GHG emissions by 2050 If a facility s CO
e emissions exceed the applicable limit the excess emissions must be offset either through obtaining qualifying emission credits or by making a payment for each ton of excess emissions For calendar year 2025 the excess emissions fee under the federal Alberta and Ontario regulatory programs is CAD 95 per metric ton which fee will increase by CAD 15 per metric ton per year reaching CAD 170 per metric ton by 2030
In the United States GHG regulation is evolving at state regional and federal levels although some of the more significant developments to date including efforts of the United States Environmental Protection Agency EPA to regulate GHG emissions from fossil fuel fired power plants do not directly impose obligations on our facilities Pursuant to an EPA GHG reporting rule all of our U S manufacturing facilities which are considered large emitters of GHGs are required to monitor GHG emissions and report the previous year s emissions annually In addition if we seek to modify or expand any of our major facilities and as a result are required to obtain a Prevention of Significant Deterioration PSD construction permit applicable to such facilities we could be subject to pollution control requirements applicable to GHGs in addition to requirements applicable to conventional air pollutants Such requirements may result in increased costs or delays in completing such projects Other than the states implementation of this permitting requirement none of the states where our U S production facilities are located Iowa Louisiana Mississippi and Oklahoma has proposed control regulations limiting GHG emissions
Increasing concern over the impacts of climate change is driving countries to establish ever more ambitious GHG reduction targets Approximately 200 countries including the United States Canada the United Kingdom and the members of the EU have joined the Paris Agreement an international agreement intended to provide a framework pursuant to which the parties to the agreement will attempt to hold the increase in global average temperatures to below 2 C above pre industrial levels and to pursue efforts to limit the temperature increase to 1 5 C above pre industrial levels Each signatory is required to develop its own national plan to attain this objective In December 2020 the United Kingdom announced a target to reduce GHG emissions 68 from the baseline year of 1990 by 2030 Canada has increased its emissions reduction target under the Paris Agreement to 40 45 below 2005 levels by 2030 up from 30 While the United States has previously been a party to the Paris Agreement and as recently as April 2021 increased its goal to reduce GHG emissions to 50 52 below 2005 levels by 2030 the Trump Administration issued executive orders on January 20 2025 that seek to undo many of the preceding administration s climate focused initiatives and to expand the use of fossil energy including ordering the withdrawal of the United States from the Paris Agreement revoking prior climate focused executive orders directing the EPA to submit a report on the legality and continuing applicability of its 2009 endangerment finding related to GHGs under the Clean Air Act and to issue guidance on the social cost of carbon including whether it should be eliminated and pausing clean energy disbursement under the Inflation Reduction Act of 2022 There exists significant uncertainty with respect to how climate policy and GHG regulation will develop in the United States in the coming years
We hold numerous environmental and other governmental permits and approvals authorizing operations at each of our facilities A decision by a government agency to deny or delay issuing a new or renewed regulatory material permit or approval or to revoke or substantially modify an existing material permit or approval could have a material adverse effect on our ability to continue operations at the affected facility Any future expansion of our existing operations is also predicated upon securing the necessary environmental or other permits or approvals More stringent environmental standards may impact our ability to obtain such permits
Our long term success depends on our people We are dedicated to creating a workplace where employees are proud to work and grow and where everyone feels empowered to do their best work We do this by investing in extensive recruitment training and professional development opportunities for our employees and fostering a culture of inclusion and engagement
We employed approximately 2 800 employees at December 31 2024 of which 79 were located in the United States 15 in Canada and 6 in the United Kingdom As of December 31 2024 approximately 10 of our employees have worked for the Company more than 20 years 25 of our employees have worked for the Company between 11 and 20 years 22 of our employees have worked for the Company between 6 and 10 years and 43 of our employees have worked at the Company for less than 6 years Full time employees represented nearly 100 of our workforce as of December 31 2024 and approximately 6 were covered by collective bargaining agreements We supplement our workforce with contractors with specialized skill sets during periods of peak activity such as during turnarounds and maintenance events
Operating in a safe and responsible manner is a core value and an integral part of what sets the Company apart We believe that focusing on leading indicators such as the behavioral safety practices we have incorporated into our annual incentive plan to drive and measure activities that prevent safety incidents results in our industry leading safety record As of December 31 2024 our employee 12 month rolling average recordable incident rate RIR was 0 31 incidents per 200 000 work hours and during the year ended December 31 2024 our total recordable injury illness count was nine including one fatality For the year ended December 31 2024 our days away restricted or transferred DART incident rate was 0 17 injuries per 200 000 work hours and our lost time incident rate was 0 07 injuries per 200 000 work hours
In addition to the other information contained in this Annual Report on Form 10 K you should carefully consider the factors discussed below in evaluating the Company and before deciding to invest in any of our securities These risks and uncertainties individually or in combination could materially and adversely affect our business financial condition results of operations and cash flows Additional risks and uncertainties not presently known to us or that we currently do not believe to be material could also adversely affect our business financial condition results of operations and cash flows
Our industry is cyclical and our operating results are highly dependent upon and fluctuate based upon changes in supply and demand of nitrogen products and our business financial condition results of operations and cash flows tend to be negatively affected in periods of industry oversupply
Selling prices for our products which are global commodities or derived from global commodities have fluctuated in response to periodic changes in supply and demand conditions Supply of nitrogen products is affected primarily by available production capacity and operating rates raw material costs and availability energy prices government policies and global trade Demand for nitrogen products is affected by planted acreage crop selection and fertilizer application rates driven by population changes economic growth changes in dietary habits and non food use of crops such as production of ethanol and other biofuels Demand also includes industrial uses of nitrogen for example chemical manufacturing and emissions reductants such as diesel exhaust fluid DEF Many factors affecting supply and demand of global nitrogen products are out of our control and could significantly impact our business financial condition results of operations and cash flows
Periods or anticipated periods of strong demand high capacity utilization or increasing operating margins tend to stimulate global investment in production capacity In the past nitrogen manufacturers including the Company have built new production facilities or expanded capacity of existing production assets or announced plans to do so The construction of new nitrogen manufacturing capacity in the industry and improvements to increase output from existing production assets increase nitrogen supply availability and place downward pressure on nitrogen selling prices particularly when supply growth outpaces demand growth For example in the two year period ended December 31 2017 additional production capacity came online and the average selling price for our products declined 34 from 314 per ton in 2015 to 207 per ton in 2017
Additional nitrogen production capacity is expected to come online over the next 12 months In addition we and other companies have announced plans to build new facilities for low carbon ammonia such as our proposed plans for an export oriented greenfield low carbon ammonia production facility in Louisiana We cannot predict the impact of this additional capacity on nitrogen selling prices Also global or local economic political and financial conditions or changes in such conditions or other factors may cause acceleration of announced and or ongoing projects Similarly lower energy prices can spur increases in production in high cost regions which would result in increased supply and pressure on selling prices Additionally if imports increase into an oversupplied region that region could experience lower prices
During periods of industry oversupply our financial condition results of operations and cash flows tend to be affected negatively due to a decline in the price at which we sell our products As a result we may experience reduced profit margins write downs in the value of our inventory and temporary or permanent curtailments of production Due to the cyclical nature of our industry we have experienced periods of industry oversupply which impacted our financial performance credit ratings and the trading price for our common stock We cannot predict the timing or duration of such periods of industry oversupply or the degree to which oversupply conditions would impact our business financial condition results of operations and cash flows
We are subject to intense price competition from other producers The nitrogen products that we produce are global commodities or are derived from global commodities with little or no product differentiation Customers tend to make their purchasing decisions of these products principally on the basis of delivered price and to a lesser extent customer service and product quality As a consequence conditions in the global market including pricing competition for nitrogen products significantly influence our operating results
We compete with many producers including state owned and government subsidized entities Some of our competitors have greater total resources and are less dependent on earnings from nitrogen product sales which make them less vulnerable to fertilizer and other nitrogen product industry downturns and better positioned to pursue new expansion and development opportunities In addition some of these entities may have access to lower cost natural gas supplies financing transportation and government subsidies and tax incentives which could place us at a competitive disadvantage Furthermore state owned competitors may be willing to accept lower prices and profitability on their products or may have their production inputs or consumption subsidized in order to support domestic employment or to foster other political or social goals We may not be
able to be competitive with these entities including if we are not able to expand our own resources to a similar extent either through investments in new or existing operations or through acquisitions or joint ventures
China the world s largest producer and consumer of nitrogen fertilizers currently has surplus capacity and many high cost plants As a result the domestic nitrogen industry in China is operating at less than full capacity In addition the Chinese government is currently limiting exports through a variety of measures A number of factors could encourage China to increase product capacity utilization or expand exports of nitrogen fertilizers including changes in Chinese government policy devaluation of the Chinese renminbi the relaxation of Chinese environmental standards or decreases in Chinese producers underlying costs such as the price of Chinese coal Any increase in production or export volume could adversely affect the balance between global supply and demand and put downward pressure on global fertilizer prices which could materially adversely affect our business financial condition results of operations and cash flows
We also face competition from other fertilizer producers in the Middle East Europe Latin America and Africa These producers depending on market conditions fluctuating input prices geographic location and freight economics may take actions at times with respect to price or selling volumes that adversely affect our business financial condition results of operations and cash flows Some of these producers also benefit from non market or government set rates for natural gas pricing which has resulted in significant volumes of exports to the United States For example the 2016 revocations of U S antidumping measures on solid urea and fertilizer grade ammonium nitrate from Russia allowed for increased imports from that country into the United States in recent years In addition in recent years high volumes of urea ammonium nitrate solution UAN imports from Russia and Trinidad and Tobago Trinidad have negatively affected U S producers UAN profitability Government policies in these regions may also stimulate future ammonia or hydrogen investments Recently many proposed low carbon ammonia projects have been announced or considered and future hydrogen energy or environmental carbon policies may support development of additional nitrogen production in locations outside North America including Europe Australia India and the Middle East
Global competition for nitrogen products is also influenced by other factors including currency exchange rates including the relative value of the U S dollar and its impact on the cost of importing nitrogen products into the United States foreign agricultural policies the existence of or changes in import or foreign currency exchange barriers in certain foreign jurisdictions and the laws and policies of the regions in which we operate including the imposition of new duties tariffs or quotas that affect foreign trade and investment For example the imposition of duties tariffs or quotas in a region can directly impact product pricing in that region which can lead to changes in global trade flows and impact the global supply and demand balance and pricing Market participants customarily move product between regions of the world or adjust trade flows in response to these factors North America where we manufacture and sell most of our products is one of the largest and most accessible nitrogen trading regions in the world As a result other manufacturers traders and other market participants have historically moved nitrogen products to North America when there is uncertainty associated with the supply and demand balance in other regions or when duties tariffs or quotas impact prices or trade flows in other regions However proposed tariffs on imports into the United States potential retaliatory tariffs on U S exports and potential renegotiation of trade deals may also impact prices or trade flows Any such duties tariffs and quotas can lead to uncertainty in the global marketplace and impact the supply and demand balance in many regions which could adversely affect our business financial condition results of operations and cash flows For example in October 2019 the European Commission the Commission imposed definitive anti dumping duties on imports to the European Union EU of UAN manufactured in Russia Trinidad and the United States The European Commission launched its five year review of these duties in October 2024 which continues into 2025 How long and at what level these duties will remain in effect and their long term impact on the global market for nitrogen products are uncertain
Conditions in the United States Europe India Brazil China and other countries and regions of global significance in agricultural production significantly impact our operating results Agricultural planted areas and production can be affected by a number of factors including weather patterns and field conditions current and projected grain inventories and prices crop disease and or livestock disease demand for agricultural products and governmental policies regarding production of or trade in agricultural products These factors are outside of our control
Governmental policies and changes thereto including farm and biofuel subsidies commodity support programs and tariffs environmental and greenhouse gas GHG policies as well as the prices of fertilizer products may also directly or indirectly influence the number of acres planted the mix of crops planted and the use of fertilizers for particular agricultural applications For example ethanol production in the United States contributes significantly to corn demand representing approximately 40 of total U S corn demand and is impacted by federal legislation mandating renewable fuels use Mandated
increases in ethanol production have led to an increase in the amount of corn grown in the United States and to increased fertilizer usage for corn Other U S policies have had similar impacts on other crops including grains and soybeans Conversely while the current Renewable Fuel Standard encourages continued high levels of corn based ethanol production various interested parties have called to eliminate or reduce the renewable fuel mandate or to eliminate or reduce corn based ethanol as part of the renewable fuel mandate Additionally other factors that drive the ethanol market include the prices of ethanol gasoline and corn Lower gasoline prices and fewer aggregate miles driven by increased automobile fuel efficiency and the expansion of electric vehicle use may put pressure on ethanol prices that could result in reduced profitability and lower production for the ethanol industry This could have an adverse effect on corn based ethanol production planted corn acreage and fertilizer demand Additionally government incentives and other policies and recent increased investment in renewable biodiesel and associated soybean crush capacity may drive higher soybean oil prices resulting in more planted acres allocated to soybeans and other oil crops and displacing some acreage traditionally planted to more nitrogen intensive crops such as grains and cotton
Developments in crop technology such as nitrogen fixation the conversion of atmospheric nitrogen into compounds that plants can assimilate or nitrogen efficient varieties or developments in alternatives to traditional animal feed or alternative proteins could also reduce the use of nitrogen fertilizers and adversely affect the demand for our products Widespread adoption of emerging application technologies or alternative farming techniques could disrupt traditional application practices affecting the volume or types of fertilizer products used and timing of applications In addition from time to time various foreign governments and U S state legislatures have considered limitations on the use and application of nitrogen fertilizers due to concerns about the negative impact that the application of these products can have on the environment For example the United Kingdom has implemented an assurance scheme beginning in 2024 to limit the use of unprotected or uninhibited urea products between January and March of every year While CF Fertilisers UK Limited does not sell solid urea fertilizer in the United Kingdom limitations on fertilizer use have been and may be considered by other jurisdictions In addition Canada has announced a target of reducing emissions from fertilizers by 30 below 2020 levels by 2030 and is supporting implementation through improved nitrogen management and optimizing fertilizer use These or other more stringent limitations on GHG emissions applicable to farmers the end users of our nitrogen fertilizers could reduce the demand for our fertilizer products to the extent their use of our products increases farm level emissions Any reduction in the demand for our nitrogen fertilizer products including as a result of technological developments or limitations on the use and application of nitrogen fertilizers could have a material adverse effect on our business financial condition results of operations and cash flows
Nitrogen from the atmosphere and hydrogen from natural gas coal and other carbon energy feedstocks or from the electrolysis of water are the fundamental building blocks of nitrogen products Energy feedstock costs comprise a significant portion of the total production cost of nitrogen products and relative to the industry s marginal producers that set the global price of nitrogen generally determine profitability for nitrogen producers Our manufacturing processes utilize natural gas as the principal raw material used in our production of nitrogen products We use natural gas both as a chemical feedstock and as a fuel to produce ammonia granular urea UAN AN and other nitrogen products
Most of our nitrogen manufacturing facilities are located in the United States and Canada As a result North American natural gas comprises a significant portion of the total production cost of our products The price of natural gas in North America has historically been volatile The price has declined on average due in part to the development of significant natural gas reserves including shale gas and the rapid improvement in shale gas extraction techniques such as hydraulic fracturing and horizontal drilling However shifts in the supply of and demand for natural gas due to market and regulatory changes can lead to extended periods of higher natural gas prices
In recent years the cost of North American natural gas for the production of nitrogen fertilizers has been significantly lower than the cost of natural gas in other parts of the world where the industry s marginal nitrogen producers are located Any increases in the volume of liquefied natural gas LNG exported from the United States to other regions or increases in natural gas development outside the United States particularly in regions where nitrogen products are produced could increase our natural gas costs and or lower natural gas costs for our competitors In recent years LNG export capabilities of the United States have expanded and LNG exports from the United States have increased resulting in the United States becoming the leading exporter of LNG globally as of 2023 and such expanded capabilities and increases in exports are expected to continue following the resumption of U S export permitting in 2025 If natural gas prices outside of North America were to decrease or North American natural gas prices were to increase our favorable energy cost differentials relative to the industry s marginal nitrogen producers could significantly erode which could have a material adverse effect on our business financial condition results of operations and cash flows
Certain of our operating facilities are located near natural gas hubs that have experienced increased natural gas development and have favorable price differences as compared to other North American hubs Favorable price differences in certain regions may dissipate over time due to increases in natural gas pipeline or storage capacity in those regions Additionally price differentials may become materially unfavorable due to a lack of inbound gas pipeline or storage capacity in other regions during periods of unusually high demand Increased demand for natural gas particularly in the Gulf Coast Region due to increased industrial demand and increased natural gas exports could result in increased natural gas prices If reduced production increased demand or changes in price were to occur or if other developments adversely impact the supply and demand balance for natural gas in North America or elsewhere natural gas prices could rise which could have a material adverse effect on our business financial condition results of operations and cash flows
Adverse weather conditions may decrease demand for our fertilizer products increase the cost of natural gas or materially disrupt our operations Adverse weather conditions could become more frequent and or more severe as a result of climate change
Adverse weather conditions which may be impacted by climate change have in the past and may in the future have various negative impacts on our business financial condition results of operations and cash flows Weather conditions that delay or disrupt field work during the planting growing harvesting or application periods may cause agricultural customers to use different forms of nitrogen fertilizer which may adversely affect demand for the forms that we sell or may impede farmers from applying our fertilizers until the following application period resulting in lower seasonal demand for our products
Adverse weather conditions during or following harvest may delay or eliminate opportunities to apply fertilizer in the fall Weather can also have an adverse effect on crop yields which could lower the income of growers and impair their ability to purchase fertilizer from our customers Adverse weather conditions could also impact transportation of fertilizer which could disrupt our ability to deliver our products to customers on a timely basis Our quarterly financial results can vary significantly from one year to the next due to weather related shifts in fertilizer applications planting schedules and purchasing patterns Over the longer term changes in weather patterns may shift the periods of demand for products and even the regions to which our products are distributed which could require us to evolve our distribution system
In addition we use the North American waterway system extensively to ship products from some of our manufacturing facilities to our distribution facilities and our customers We also export nitrogen fertilizer products via seagoing vessels from deep water docking facilities at certain of our manufacturing sites on the U S river system near the U S Gulf Therefore persistent significant changes in river or ocean water levels either up or down such as a result of flooding drought or climate change for example may require changes to our operating and distribution activities and or significant capital improvements to our facilities For example recent low water levels on the U S river system and in the Panama Canal have delayed shipping in these locations resulting in an increase in shipping costs
Weather conditions or in certain cases weather forecasts can also disrupt our operations and can affect the price of natural gas the principal raw material used to make our nitrogen products Colder and or longer than normal winters and warmer than normal summers increase the demand for natural gas for residential and industrial use and for power generation which can increase the cost and or decrease the availability of natural gas In addition adverse weather events such as storms hurricanes tornadoes or floods not only can cause loss of power or other impacts to our facilities or damage to or delays in logistics capabilities disrupting our operations but also can impact the supply of natural gas and utilities and cause prices to rise
All of the adverse weather conditions described above including those impacting our customers and our operations such as the physical risk from storms hurricanes tornadoes or floods could become more frequent and or more severe as a result of climate change
Our Donaldsonville and Waggaman complexes are located in an area of the United States that experiences a relatively high level of hurricane or high wind activity and several of our complexes are located in areas that experience extreme weather events for which insurance may be insufficient or unavailable
In the last several years there has been an increase in the frequency and severity of adverse weather conditions including in the geographic areas where we have operations Any significant adverse weather event or combination of adverse weather events could decrease demand for our fertilizer products increase the cost of natural gas or materially disrupt our operations
Our operating results fluctuate due to seasonality Our inability to predict future seasonal fertilizer demand accurately could result in our having excess inventory potentially at costs in excess of market value
The fertilizer business is seasonal The degree of seasonality of our business can change significantly from year to year due to conditions in the agricultural industry and other factors The strongest demand for our products in North America occurs during the spring planting season with a second period of strong demand following the fall harvest In contrast we and other
fertilizer producers generally manufacture and distribute products throughout the year As a result we and or our customers generally build inventories during the low demand periods of the year to facilitate timely product availability during the peak demand periods Seasonality is greatest for ammonia due to the short application seasons and the limited ability of our customers and their customers to store significant quantities of this product The seasonality of fertilizer demand generally results in our sales volumes and net sales being the highest during the spring and our working capital requirements to build inventory being the highest just prior to the start of the spring planting season
If seasonal demand is less than we expect we may be left with excess inventory that would need to be stored in which case our results of operations would be negatively affected by any related increased storage costs or liquidated in which case the selling price could be below our production procurement and storage costs The risks associated with excess inventory and product shortages are exacerbated by the volatility of nitrogen fertilizer prices the constraints of our storage capacity and the relatively brief periods during which farmers can apply nitrogen fertilizers If prices for our products rapidly decrease we may be required to write down the value of our inventory adversely affecting our operating results
A change in the volume of products that our customers purchase on a forward basis or the percentage of our sales volume that is sold to our customers on a forward basis could increase our exposure to fluctuations in our profit margins and working capital and materially adversely affect our business financial condition results of operations and cash flows
We offer our customers the opportunity to purchase products from us on a forward basis at prices and delivery dates we propose Under our forward sales programs customers generally make an initial cash down payment at the time of order and pay the remaining portion of the contract sales value in advance of the shipment date Our forward sales improve our liquidity by reducing our working capital needs due to the upfront cash payments received from customers and facilitate more efficient production planning and utilization of our manufacturing and distribution assets Any cash payments received in advance from customers in connection with forward sales are reflected on our consolidated balance sheets as a current liability until the related orders are shipped which can take up to several months
We believe the ability to purchase products on a forward basis is more appealing to our customers during periods of generally increasing prices for nitrogen fertilizers Our customers may be less willing or even unwilling to purchase products on a forward basis during periods of generally decreasing or stable prices or when there is an expectation of lower prices in the future In addition our customers may be unwilling to purchase products on a forward basis due to their limited capital resources Fixing the selling prices of our products often months in advance of their ultimate delivery to customers typically causes our reported selling prices and margins to differ from spot market prices and margins available at the time of shipment In periods of rising fertilizer prices selling our nitrogen fertilizers on a forward basis may result in lower profit margins than if we had not sold fertilizer on a forward basis
We use raw materials primarily natural gas and utilities such as electricity in the manufacture of our nitrogen products We purchase raw materials and utilities from third party suppliers Our natural gas is transported by pipeline to our facilities by third party transportation providers or through the use of facilities owned by third parties and certain of our plants are reliant on only one natural gas pipeline Delays or interruptions in the delivery of raw materials and utilities may be caused by among other things adverse weather conditions or natural disasters unscheduled downtime labor difficulties or shortages insolvency of our suppliers or their inability to meet existing contractual arrangements deliberate sabotage and terrorist incidents unplanned maintenance or mechanical failures In addition the transport of natural gas by pipeline is subject to additional risks including delays or interruptions caused by capacity constraints leaks or ruptures Any delay or interruption in the delivery of raw materials or utilities even for a limited period could have a material adverse effect on our business financial condition results of operations and cash flows
Our transportation and distribution activities rely on third party providers and are subject to environmental safety and regulatory oversight This exposes us to risks and uncertainties beyond our control that may adversely affect our operations and exposes us to additional liability
We rely on natural gas pipelines to transport raw materials to our manufacturing facilities In addition we rely on railroad barge truck vessel and pipeline companies to coordinate and deliver finished products to our distribution system and to ship finished products to our customers We also lease rail cars in order to ship finished products These transportation operations equipment and services are subject to various hazards and other sources of disruption including adverse operating conditions
on the inland waterway system or on the seas with respect to oceangoing vessels adverse weather conditions system failures unscheduled downtime labor difficulties or shortages shutdowns delays accidents such as spills and derailments vessel groundings and other accidents and operating hazards Additionally due to the aging infrastructure of certain rail lines bridges roadways pipelines river locks and equipment that our third party service providers utilize we may experience delays in both the receipt of raw materials or the shipment of finished product while repairs maintenance or replacement activities are conducted Also certain third party service providers such as railroads have from time to time experienced service delays or shutdowns due to capacity constraints in their systems operational and maintenance difficulties blockades organized labor strikes weather or safety related embargoes and delays and other events which could impact the shipping of our products and cause disruption in our operations and supply chain
These transportation operations equipment and services are also subject to environmental safety and regulatory oversight These operations are currently subject to stringent regulatory requirements due to concerns related to accidents discharges or other releases of hazardous substances terrorism or the potential use of fertilizers as explosives Governmental entities could implement new or more stringent regulatory requirements affecting the transportation of raw materials or finished products
If shipping of our products is delayed or we are unable to obtain raw materials as a result of these transportation companies failure to operate properly if new and more stringent regulatory requirements were implemented affecting transportation operations or equipment or if there were significant increases in the cost of these services or equipment our revenues and cost of operations could be adversely affected In addition increases in our transportation costs or changes in such costs relative to transportation costs incurred by our competitors could have a material adverse effect on our business financial condition results of operations and cash flows
In the United States and Canada the railroad industry continues various efforts to limit its potential liability with respect to transportation of Toxic Inhalation Hazard materials such as the anhydrous ammonia we transport to and from our manufacturing and distribution facilities For example various railroads shift liability to shippers by contract purport to shift liability to shippers by tariff or otherwise seek to require shippers to indemnify and defend the railroads from and against liabilities including in negligence strict liability or statutory liability that may arise from certain acts or omissions of the railroads third parties that may have insufficient resources or the Company or from unknown causes or acts of god These initiatives could materially and adversely affect our operating expenses and potentially our ability to transport anhydrous ammonia and increase our liability for releases of our anhydrous ammonia while in the care custody and control of the railroads third parties or us for which our insurance may be insufficient or unavailable New or more stringent regulatory requirements also could be implemented affecting the equipment used to ship our raw materials or finished products Restrictions on service increases in transportation costs or changes in such costs relative to transportation costs incurred by our competitors and any railroad industry initiatives that may impact our ability to transport our products could have a material adverse effect on our business financial condition results of operations and cash flows
Our nitrogen manufacturing facilities are located at nine separate nitrogen complexes the largest of which is the Donaldsonville complex which represented approximately 40 of our ammonia production capacity as of December 31 2024 The suspension of operations at any of these complexes could adversely affect our ability to produce our products and fulfill our commitments and could have a material adverse effect on our business financial condition results of operations and cash flows Operational disruptions could occur for many reasons including natural disasters adverse weather conditions unplanned maintenance and other manufacturing problems such as mechanical failures disease strikes or other labor unrest or transportation interruptions For example our Donaldsonville and Waggaman complexes are located in an area of the United States that experiences extreme weather events including a relatively high level of hurricane or high wind activity and several of our other complexes are also located in areas that experience extreme weather events Extreme weather events including temperature extremes depending on their severity and location have the potential not only to damage our facilities and disrupt our operations but also to affect adversely the shipping and distribution of our products Moreover our facilities may be subject to failure of equipment that may be difficult to replace or have long delivery lead times due in part to a limited number of suppliers and could result in operational disruptions
We rely on internal and third party information technology and computer control systems in many aspects of our business including internal and external communications the management of our accounting financial and supply chain functions and plant operations some of which are within our control and some of which are within the control of third parties to accumulate process store and transmit large amounts of confidential information If we do not allocate and effectively manage the resources necessary to build implement and sustain the proper technology infrastructure we could be subject to transaction errors inaccurate financial reporting processing inefficiencies the loss of customers business disruptions or the loss of or damage to our confidential business information due to a security breach In addition our information technology systems may be damaged disrupted or shut down due to attacks by computer hackers computer viruses employee error or malfeasance power outages hardware failures telecommunication or utility failures catastrophes or other unforeseen events and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate Security breaches of our systems or the systems of our customers suppliers or other business partners could result in the misappropriation destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees business partners customers or suppliers and may subject us to legal liability
As with most large systems our information technology systems and those of our business partners and other third parties have in the past been and in the future likely will be subject to computer viruses malicious codes unauthorized access and other cyberattacks and we expect the sophistication and frequency of such attacks to continue to increase Any of the attacks breaches or other disruptions or damage described above could result in an operational interruption or failure at one or more sites damage our operations delay production and shipments expose us to ransom payment other demands or paralyze our operations result in the theft of our and our customers intellectual property and trade secrets damage customer and business partner relationships and our reputation result in legal claims and proceedings liability and penalties under privacy or other laws including for unauthorized disclosure of personally identifiable information or increased costs for security and remediation or raise concerns regarding our accounting for transactions Each of these consequences could have an adverse effect on our business reputation and our financial statements some of which could be material From time to time we update transition acquire or expand use of our and third party information technology systems which may result in additional vulnerability
Our business involves the use storage and transmission of information about our employees customers and suppliers The protection of such information as well as our proprietary information is critical to us The regulatory environment surrounding information security and privacy is increasingly demanding with frequent imposition of new requirements and changes to existing requirements Breaches of our security measures or the accidental loss inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our employees customers or suppliers including the potential loss or disclosure of such information or data as a result of fraud trickery or other forms of deception could expose us or our employees customers suppliers or other individuals or entities affected to a risk of loss or misuse of this information which could ultimately result in litigation and potential legal and financial liability These events could also damage our reputation or otherwise harm our business
To date we are not aware of any significant impact on our operations or financial results from such attempts however unauthorized access or other types of cyberattacks could disrupt our business operations result in the loss of assets and have a material adverse effect on our business financial condition or results of operations Measures we implement in an effort to protect detect respond to and minimize or prevent these risks may not be successful and we may fail to detect or remediate system inadequacies inadequate controls or procedures operating failures unauthorized access service interruptions or failures security breaches malicious intrusions theft exfiltration ransomware cyberattacks or other compromises of our systems Any of these events could result in material financial operational legal business or reputational harm to our business
Like other companies with major industrial facilities we may be targets of terrorist activities Many of our plants and facilities store significant quantities of ammonia and other materials that can be dangerous if mishandled Any damage to infrastructure facilities such as electric generation transmission and distribution facilities or injury to employees who could be direct targets or indirect casualties of an act of terrorism may affect our operations Any disruption of our ability to produce or distribute our products could result in a significant decrease in revenues and require significant additional costs to replace repair or insure our assets which could have a material adverse effect on our business financial condition results of operations and cash flows
Due to concerns related to terrorism the toxic properties of ammonia or the potential use of certain nitrogen products as explosives we are subject to various security laws and regulations In the United States these security laws include the
Maritime Transportation Security Act of 2002 and the Chemical Facility Anti Terrorism Standards although this legislation is currently expired as Congress works to reauthorize it Governmental entities could implement new or impose more stringent regulations affecting the security of our plants terminals and warehouses or the transportation and use of fertilizers and other nitrogen products These regulations could result in higher operating costs or limitations on the sale of our products and could result in significant unanticipated costs lower revenues and reduced profit margins It is also possible that governmental entities in the United States or elsewhere could impose additional limitations on the use sale or distribution of the specific nitrogen products that can be used as explosives thereby limiting our ability to manufacture or sell those products or exposing us to legal liability if our products were used illicitly
Our operations and the production and handling of our products involve significant risks and hazards We are not fully insured against all potential hazards and risks incident to our business and as a result may not be able to adequately cover our losses
Our operations are subject to hazards inherent in the manufacture transportation storage and distribution of chemical products including ammonia which is highly toxic and can be corrosive and ammonium nitrate which is explosive These hazards include explosions fires extreme weather and natural disasters train derailments collisions vessel groundings and other transportation and maritime incidents leaks and ruptures involving storage tanks pipelines and rail cars spills discharges and releases of toxic or hazardous substances or gases deliberate sabotage and terrorist incidents mechanical failures unscheduled plant downtime labor difficulties and other risks Some of these hazards can cause bodily injury and loss of life severe damage to or destruction of property and equipment and environmental damage and may result in suspension of operations for an extended period of time and or the imposition of civil or criminal penalties and liabilities
Our exposure to these risks and hazards is exemplified by a fire and explosion that occurred at a fertilizer storage and distribution facility in West Texas in 2013 The fire and explosion resulted in 15 fatalities and claims of injuries to approximately 200 people and damaged or destroyed a number of homes and buildings around the facility We did not own or operate the facility or directly sell our products to the facility but products that we manufactured and sold to others were delivered to the facility and may have been stored at the facility at the time of the incident We were named as defendants along with other companies in lawsuits in which the claims against us have since been resolved alleging various theories of negligence strict liability and breach of warranty in connection with the incident
We maintain property business interruption casualty and liability insurance policies but we are not fully insured against all potential hazards and risks incident to our business and certain hazards and risks associated with our operations may not be insurable If we were to incur significant liability for which we were not fully insured it could have a material adverse effect on our business financial condition results of operations and cash flows We are subject to various self insured retentions deductibles and limits under these insurance policies The policies also contain exclusions and conditions that could have a material adverse impact on our ability to receive indemnification thereunder Our policies are generally renewed annually As a result of market conditions our premiums self insured retentions and deductibles for certain insurance policies can increase substantially and in some instances certain insurance may become unavailable or available only for reduced amounts of coverage In addition significantly increased costs could lead us to decide to reduce or possibly eliminate coverage We may be unable to buy and maintain insurance with adequate limits and reasonable pricing terms and conditions
Our international business operations are subject to numerous risks and uncertainties including difficulties and costs associated with complying with a wide variety of complex laws treaties and regulations unexpected or conflicting changes in regulatory environments currency fluctuations tax rates that may exceed those in the United States earnings that may be subject to withholding requirements and the imposition of tariffs embargoes exchange controls or other restrictions
Changes in governmental trade policies can lead to the imposition of new taxes levies duties tariffs or quotas affecting agricultural commodities fertilizer or industrial products These can alter or impact costs trade flows demand for our products access to raw materials capital equipment and other supplies and regional supply and demand balances for our products Proposed tariffs on imports into the United States potential retaliatory tariffs on U S exports and potential renegotiation of trade deals may impact our existing operations or our planned strategic ventures and could adversely affect our business financial condition results of operations and cash flows
Our principal reporting currency is the U S dollar and our business operations and investments outside the United States increase our risk related to fluctuations in foreign currency exchange rates The main currencies to which we are exposed besides the U S dollar are the Canadian dollar the British pound and the euro These exposures may change over time as business practices evolve and economic conditions change We may selectively reduce some foreign currency exchange rate
risk by among other things requiring contracted purchases of our products to be settled in or indexed to the U S dollar or a currency freely convertible into U S dollars or hedging through foreign currency derivatives These efforts however may not be effective and could have a material adverse effect on our business financial condition results of operations and cash flows
We are subject to anti corruption laws and regulations and economic sanctions programs in various jurisdictions including the following U S Foreign Corrupt Practices Act of 1977 the United Kingdom Bribery Act 2010 the Canadian Corruption of Foreign Public Officials Act regulations under the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010 and economic sanctions programs administered by the United Nations UN the EU and the Office of Foreign Assets Control of the U S Department of the Treasury As a result of doing business internationally we are exposed to risks of violating anti corruption laws and sanctions regulations applicable in those countries where we our partners or our agents operate Violations of anti corruption and sanctions laws and regulations are punishable by civil penalties including fines denial of export privileges injunctions asset seizures debarment from government contracts and termination of existing contracts and revocations or restrictions of licenses as well as criminal fines and imprisonment The violation of applicable laws by our employees consultants agents or partners could subject us to penalties and could have a material adverse effect on our business financial condition results of operations and cash flows
We are subject to antitrust and competition laws in various countries throughout the world We cannot predict how these laws or their interpretation administration and enforcement will change over time Changes in antitrust laws globally or in their interpretation administration or enforcement may limit our existing or future operations and growth
As of December 31 2024 we had approximately 3 0 billion of total funded indebtedness consisting primarily of unsecured senior notes with varying maturity dates between 2026 and 2044 or approximately 28 of our total capitalization total debt plus total equity and an additional 750 million of unsecured senior borrowing availability reflecting no outstanding borrowings and no outstanding letters of credit for general corporate purposes under our revolving credit agreement the Revolving Credit Agreement Our debt service obligations will have an impact on our earnings and cash flow for so long as the indebtedness is outstanding
Our indebtedness could as a result of our debt service obligations or through the operation of the financial and other restrictive covenants to which we are subject under the agreements and instruments governing that indebtedness and otherwise have important consequences For example it could
make it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions because any related decrease in revenues could cause us not to have sufficient cash flows from operations to make our scheduled debt payments
We consider options to refinance our outstanding indebtedness from time to time Our ability to obtain any financing whether through the issuance of new debt securities or otherwise and the terms of any such financing are dependent on among other things our financial condition financial market conditions within our industry and generally interest rate fluctuations credit ratings and numerous other factors including factors beyond our control Consequently in the event that we need to access the credit markets including to refinance our debt there can be no assurance that we will be able to obtain financing on
acceptable terms or within an acceptable timeframe if at all An inability to obtain financing with acceptable terms when needed could have a material adverse effect on our business financial condition results of operations and cash flows
The terms of our existing indebtedness allow us to incur significant additional debt If we incur additional indebtedness the risks that we face as a result of our leverage could intensify If our financial condition or operating results deteriorate our relations with our creditors including the holders of our outstanding debt securities the lenders under the Revolving Credit Agreement and our suppliers may be materially and adversely affected
We are subject to taxes in the United States where most of our operations are located and in several foreign jurisdictions where our subsidiaries are organized or conduct business Tax laws or rates including tax credits relating to decarbonization projects in the various jurisdictions in which we operate may be subject to significant change Our future effective tax rate could also be affected by changes in our mix of earnings from jurisdictions with differing statutory tax rates and tax systems changes in valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation
On August 16 2022 the Inflation Reduction Act of 2022 IRA was enacted into law which among other things expanded production tax credits for carbon sequestration and introduced clean hydrogen production tax credits The change in U S presidential administration and regulatory leadership may result in changes to the underlying legislation or the final guidance issued and impact our ability to receive anticipated tax credits for our low carbon ammonia projects
We are also subject to regular reviews examinations and audits by the Internal Revenue Service IRS and other taxing authorities in jurisdictions where we conduct business Although we believe our tax estimates are reasonable if a taxing authority disagrees with the positions we have taken we could face additional tax liabilities including interest and penalties There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our financial condition results of operations and cash flows
We have used the cash we generate outside the United States primarily to fund development of our business in non U S jurisdictions If the funds generated by our U S business are not sufficient to meet our need for cash in the United States or if cash generated outside the United States exceeds the needs of such non U S operations we may repatriate a portion of our future international earnings to the United States Under the tax laws of the foreign countries in which we operate those international earnings could be subject to withholding taxes when repatriated therefore the repatriation of those earnings could result in an increase in our worldwide effective tax rate and an increase in our use of cash to pay these taxes
We also need to comply with other new evolving or revised tax laws and regulations The enactment of or increases in carbon taxes tariffs or value added taxes or other changes in the application of existing taxes in markets in which we are currently active or may be active in the future or on specific products that we sell or with which our products compete could have an adverse effect on our financial condition and results of operations
From time to time we utilize natural gas derivatives to hedge our financial exposure to the price volatility of natural gas the principal raw material we use in the production of nitrogen based products We may use natural gas futures swaps and option contracts traded in over the counter markets or on exchanges In addition from time to time we may use fixed price physical purchase and sales contracts to hedge our exposure to natural gas price volatility To manage our exposure to changes in foreign currency exchange rates we may from time to time use foreign currency derivatives primarily forward exchange contracts
Our use of derivatives can result in volatility in reported earnings due to the unrealized mark to market adjustments that occur from changes in the value of the derivatives that do not qualify for or to which we do not apply hedge accounting To the extent that our derivative positions lose value we may be required to post collateral with our counterparties adversely affecting our liquidity
Hedging arrangements are imperfect and unhedged risks will always exist In addition our hedging activities may themselves give rise to various risks that could adversely affect us For example we are exposed to counterparty credit risk when our derivatives are in a net asset position The counterparties to our derivatives are multi national commercial banks major financial institutions or large energy companies
Our liquidity could be negatively impacted by a counterparty default on settlement of one or more of our derivative financial instruments or by the triggering of any cross default provisions or credit support requirements against us Additionally
the International Swaps and Derivative Association master netting arrangements for most of our derivative instruments contain credit risk related contingent features such as cross default provisions and credit support requirements In the event of certain defaults or a credit ratings downgrade our counterparty may request early termination and net settlement of certain derivative trades or may require us to collateralize derivatives in a net liability position
At other times we may not utilize derivatives or derivative strategies to hedge certain risks or to reduce the financial exposure of price volatility As a result we may not prevent certain material adverse impacts that could have been mitigated through the use of derivative strategies
We are subject to numerous environmental health and safety laws regulations and permitting requirements as well as potential environmental liabilities which may require us to make substantial expenditures or modify business plans
We are subject to numerous environmental health and safety laws and regulations in the United States Canada the United Kingdom Trinidad and other locations including laws and regulations relating to the generation handling and disposal of hazardous substances and wastes the introduction of new chemicals or substances into a market the cleanup of hazardous substance releases the discharge of regulated substances to land air or water and the demolition and cleanup of plant sites upon permanent closure In the United States these laws include the Clean Air Act the Clean Water Act the Resource Conservation and Recovery Act the Comprehensive Environmental Response Compensation and Liability Act CERCLA the Toxic Substances Control Act and various other federal state provincial local and international laws In November 2021 the Infrastructure Investment and Jobs Act reinstated and doubled the Superfund tax on chemicals including ammonia and nitric acid These taxes were put in place from July 1 2022 through December 31 2031 and apply to both the domestic production and import of ammonia and nitric acid products except to the extent such products are used in fertilizer or animal feed used as fuel or exported
As a producer of nitrogen products working with hazardous substances our business faces risks of spills discharges or other releases of those substances into the environment Certain environmental laws including CERCLA impose joint and several liability without regard to fault for cleanup costs on persons who have disposed of or released hazardous substances into the environment or who own or operate property where hazardous substances have been released or disposed of by other parties Given the nature of our business we have incurred are incurring currently and are likely to incur periodically in the future liabilities under CERCLA and other environmental cleanup laws at our current facilities or facilities previously owned or operated by us or other acquired businesses adjacent or nearby third party facilities or offsite disposal locations Because liability under CERCLA and various U S state analogues can be joint and several a party may be required to bear more than its proportional share of cleanup costs at a site where it has liability if payments cannot be obtained from other responsible parties The costs associated with future cleanup activities that we may be required to conduct or finance may be material Additionally we may become liable to third parties for damages including personal injury and property damage resulting from the disposal or release of hazardous substances into the environment
Violations of environmental health and safety laws can result in substantial penalties court or administrative orders to undertake capital improvements such as installing pollution control equipment civil and criminal sanctions permit revocations and facility shutdowns Environmental health and safety laws change regularly and could become more stringent over time As a result we have not always been and may not always be in compliance with all environmental health and safety laws and regulations We may be subject to more stringent enforcement of existing or new environmental health and safety laws in the future Additionally future environmental health and safety laws and regulations or reinterpretation of or changes to current laws and regulations may require us to make substantial expenditures or modify business plans In addition the extent and nature of existing proposed and future environmental health and safety regulations are increasingly uncertain in light of recent U S Supreme Court decisions including
that limit deference to regulatory agencies in the context of certain regulatory decisions Our costs to comply with or any liabilities under these laws and regulations could have a material adverse effect on our business financial condition results of operations and cash flows
From time to time our production distribution or storage of anhydrous ammonia and other hazardous or regulated substances has resulted in accidental releases that have temporarily disrupted our operations and or resulted in liability for administrative penalties cleanup costs and or claims for personal injury To date our costs to resolve these liabilities have not been material However we could incur significant costs if we experience a significant accidental release and our liability coverage is not sufficient to pay for all or a large part of any judgments against us or if our insurance carrier refuses coverage for these losses
We hold numerous environmental and other governmental permits and approvals authorizing operations at each of our facilities Expansion or modification of our existing operations or development of new operations is predicated upon securing
necessary environmental or other permits or approvals and in some cases the ability of our partners lessors and other third party providers as applicable to secure such permits or approvals More stringent environmental health and safety laws and regulations a reinterpretation of or changes to current laws and regulations or community opposition to permits and approvals could make it more difficult to obtain necessary governmental permits including renewals thereof or approvals In addition a focus on local and community effects of industrial operations including chemical plants and pipelines could impact decisions relating to the issuance of new or renewal of existing permits A decision by a government agency to deny or delay issuing a new or renewed regulatory permit or approval or to revoke or substantially modify an existing permit or approval a legal challenge to our permits or a determination that we have violated a law or permit could have a material adverse effect on our ability to continue operations at our facilities and on our business financial condition results of operations and cash flows
Regulatory or legislative restrictions on GHG emissions in the jurisdictions in which we operate or conduct business could materially adversely affect our business financial condition results of operations and cash flows
and nitrous oxide and natural gas a fossil fuel that releases methane when extracted from the earth is a primary raw material used in our nitrogen production process Because conventional ammonia production generates CO
as an unavoidable chemical byproduct ammonia production globally is considered an emissions and energy intensive industry We are subject to GHG regulations in the United Kingdom Canada and the United States In the United States our existing facilities which are considered large emitters of GHGs currently are only subject to GHG emissions reporting obligations New facilities that we build or existing facilities that we modify in the future could also be subject to GHG emissions standards included in their air permits
Concern over the effects of climate change has driven many countries to establish ever more ambitious GHG reduction targets and initiatives to achieve them These targets and initiatives are subject to significant change based on political leadership For example the new U S presidential administration and regulatory leadership have proposed and may propose further policy regulatory and enforcement changes that may result in the narrowing and or repeal of environmental and climate change related laws regulations and implementation thereof These changes and any administrative and judicial challenges to them or further changes by future administrations create uncertainty for our business For example changes to the IRA may impact our ability to receive anticipated tax credits for our low carbon ammonia projects which in turn could negatively affect the profitability of these projects Moreover lowering of GHG reduction targets and the efforts to achieve them in or outside the United States may prevent or significantly reduce the development of demand for our low carbon ammonia products
e emissions exceed the applicable standards the excess emissions must be offset either by obtaining qualifying emission credits or offsets or making a payment for each metric ton of excess emissions the regulated price of which will increase annually through 2030
The EU finalized its overall carbon border adjustment mechanism in May 2023 During the interim phase covering imports including nitrogenous fertilizers entering the EU from the fourth quarter of 2023 through the fourth quarter of 2025 importers must file quarterly reports on the emissions intensity of covered products For imports that enter the EU starting in 2026 charges will be required for emissions over certain thresholds with the EU still to set forth additional details Other governments are also considering border taxes for carbon intensive products The imposition of any such taxes may impact investment and trade flows which could adversely impact our business
and nitrous oxide and because natural gas a fossil fuel that releases methane when extracted from the earth is a primary raw material used in our nitrogen production process Regulation of GHGs may require us to make changes in our operating activities that would increase our operating costs reduce our efficiency limit our output require us to make capital improvements to our facilities increase our costs for or limit the availability of energy raw materials or transportation or otherwise materially adversely affect our business financial condition results of operations and cash flows Changes could also be made to tax or other regulatory policies related to decarbonization electricity generation or clean energy that could impact our business and investment decisions In addition to the extent that GHG restrictions are not imposed in countries where our competitors operate or are less stringent than regulations that may be imposed in the United States Canada or the United Kingdom our competitors may have cost or other competitive advantages over us
In addition to regulations restricting the emission of GHGs many jurisdictions have implemented or are considering regulations requiring the disclosure of certain climate and other sustainability information including related to companies efforts to reduce GHG emissions impacts on the environment and risks associated with climate change These disclosure requirements could inform future regulatory action or influence demand for our products in a manner that could negatively impact us
The market for low carbon ammonia may be slow to develop may not develop to the size expected or may not develop at all Moreover we may not be successful in the development and implementation of our low carbon ammonia projects in a timely or economic manner or at all due to a number of factors many of which are beyond our control
We have made and expect to continue to make significant investments in our clean energy strategy including our low carbon ammonia projects that may not create any or our expected value if demand for low carbon ammonia does not develop and mature to the size and at the rate we expect Such market is dependent in part on the developing market for low carbon hydrogen for which ammonia can serve as a transport and storage mechanism These markets are heavily influenced by demand for clean energy technology evolution and federal state and local government laws regulations and policies concerning carbon emissions renewable electricity clean energy and corporate accountability in the United States and abroad These factors may also affect the market criteria for low carbon ammonia including the degree of reduction of direct GHG emissions and the requirements of renewable electricity
We believe the demand for low carbon ammonia could take several years to materialize and then ten or more years to fully develop and mature and we cannot be certain that this market or the market for low carbon hydrogen will grow to the size or at the rate we expect or at all Hydrogen currently accounts for approximately 1 of the world s energy needs
The recognition and acceptance of low carbon ammonia as a transport and storage mechanism for low carbon hydrogen the use of low carbon ammonia as a fuel in its own right the use of low carbon ammonia as a fertilizer and the development and growth of end market demand and applications for low carbon hydrogen and low carbon ammonia are uncertain and dependent on a number of factors outside of our control These factors include among others the extent to which and rate at which cost competitive global renewable energy capacity increases the pricing of traditional and alternative sources of energy the realization of technological improvements required to increase the efficiency and lower the costs of production of low carbon ammonia the regulatory environments the rate and extent of infrastructure investment and development which may be affected by the relevant parties ability to obtain permits for these investments the availability of tax benefits and other incentives the implementation of policy in foreign jurisdictions providing economic support for or otherwise mandating decarbonization and our ability to provide low carbon ammonia offerings cost effectively In addition further development of alternative decarbonization technologies may result in viable alternatives to the use of low carbon ammonia for many potential decarbonization applications resulting in lower than expected market demand growth relative to our current expectations If a sustainable market for low carbon ammonia or hydrogen fails to develop develops more slowly than we anticipate or develops in a way that is not viable to serve with our assets and capabilities we may decide not to implement or may not be successful in implementing one or more elements of our multi year strategic plan or may have committed to investments involving substantial capital expenditures which might not yield returns required to justify such investments
Our clean energy strategy also depends on the realization of certain technical improvements required to increase the efficiency and lower the costs of production of low carbon ammonia Over time as we seek to convert additional existing facilities to low carbon production and further expand our low carbon ammonia production capacity we may face operational difficulties and execution risks related to the design development and construction If our assumptions about the engineering and project execution requirements necessary to successfully build or convert the facility capacity that we are contemplating and to scale up to larger production quantities prove to be incorrect we may be unable to produce substantial quantities of low carbon ammonia and the cost to construct such low carbon ammonia facilities or the production costs associated with the operation of such facilities may be higher than we project The production of low carbon ammonia depends to a large extent upon the ability of third parties to develop class VI carbon sequestration wells and CO
transportation pipelines which currently do not exist at large scale and are subject to a permitting process and operational risks which may result in delays impact viability in some or all situations or create long term liabilities
Recently many proposed low carbon ammonia projects have been announced or considered and future hydrogen energy or environmental carbon policies may support development of additional nitrogen production in locations outside North America including Europe Australia and the Middle East In the event that the growth in supply of low carbon ammonia and low carbon hydrogen exceeds the growth in demand for those products the resulting unfavorable supply and demand balance could lead to lower selling prices than we expect for many of our products which could negatively affect our business financial condition results of operations and cash flows
Demand for low carbon ammonia is also incentivized by the availability of environmental attributes credits and incentives for such projects including tax credits There is no assurance that programs for these environmental attributes and markets for them will continue to be available or exist With respect to the voluntary trade of environmental attributes there is a risk that purchasers may elect to cease such purchases for various reasons that are inherent to their business plans or because of changing economic political contexts or other conditions that cannot be controlled by us including shifting preferences for
types of environmental attributes The pricing and value of certain environmental attributes is also difficult to determine and may fluctuate Several factors may affect the price of environmental attributes that are beyond our control including but not limited to the underlying markets and legislative and regulatory changes including the level of commitment to the goals of multinational climate commitments by both governments and corporations and other private and public initiatives aimed at reducing GHG emissions and the Company s and its partners technologies to reduce carbon intensity
If we fail to successfully enter into or close collaborations joint ventures partnerships or acquisitions or successfully manage such transactions it could adversely affect our business and growth opportunities
From time to time we consider possible expansions of our business both within the United States and elsewhere Major investments in our business including acquisitions partnerships joint ventures business combination transactions or other major investments such as our low carbon ammonia projects require significant managerial resources the diversion of which from our other activities or opportunities may negatively affect the existing operations of our business We may be unable to identify or successfully compete for certain acquisition targets which may hinder or prevent us from acquiring a target or completing other transactions The risks of any expansion of our business through investments acquisitions partnerships joint ventures or business combination transactions may increase due to the significant capital and other resources that we may have to commit to any such expansion which may not be recoverable if the expansion initiative to which they were devoted is ultimately not implemented In addition these efforts may require capital resources that could otherwise be used for the improvement and expansion of our existing business As a result of these and other factors including general economic risk we may not be able to realize our projected returns or other expected benefits from acquisitions partnerships joint ventures business combination transactions or other major investments Among the risks associated with the pursuit and consummation of acquisitions partnerships joint ventures or other major investments or business combinations are those involving
potential impairment charges related to the goodwill intangible assets or other assets to which any such transaction relates in the event that the economic benefits of such transaction prove to be less than anticipated
International acquisitions partnerships joint ventures investments or business combinations and other international expansions of our business involve additional risks and uncertainties including the impact of tariffs on the import of industrial goods and the export of nitrogen products exchange controls or other restrictions nationalization of properties by foreign governments and difficulties and costs of complying with a wide variety of complex laws treaties and regulations
Some of our largest contemplated projects involve joint ventures For example we have entered into joint development agreements JDAs with two potential partners Mitsui Co Ltd and JERA Co Inc The JDAs guide our evaluation of potential joint ventures to build a greenfield ammonia plant to supply low carbon ammonia to developing energy markets and traditional ammonia markets where demand for low carbon product is emerging These JDAs and other joint venture arrangements we may enter into may involve significant risks and uncertainties including the ability of us and our strategic partners to cooperate our strategic partners having interests or goals that are inconsistent with ours ours and our partners ability to realize tax financial and other programs incentivizing low carbon production and the potential that our strategic partners may be unable to meet their financial or other obligations to the joint venture which may negatively impact the expected benefits of the joint venture and cause us to incur additional expense or suffer reputational damage In addition due to the nature of these arrangements we may have limited ability to direct or influence the management of the joint venture which
may limit our ability to assist and oversee the design and implementation of the joint venture s business as well as its accounting legal governance human resources information technology and other administrative systems This may expose us to additional risks and uncertainties because we may be dependent upon and subject to liability losses or reputational damage relating to systems controls and personnel that are not under our control These risks may be exacerbated when the joint venture is operating outside the United States due to geopolitical and political uncertainty and differences in language culture and regulation as well as the factors listed above that are relevant to our international operations
Moreover legal proceedings or other risks from acquisitions and other business combinations may arise years after a transaction has been completed and may involve matters unrelated to the business acquired For example in 2022 we were named along with other parties in certain product liability actions relating to a product containing the herbicide paraquat which was allegedly sold manufactured distributed and or marketed by Terra Industries Inc Terra before it exited such lines of business which exit occurred more than ten years before CF Holdings acquired Terra in April 2010
In addition most major capital projects are dependent on the availability and performance of engineering firms construction firms equipment and material suppliers transportation providers and other vendors necessary to design and implement those projects on a timely basis and on acceptable terms Major investments such as capital improvements at our facilities are subject to a number of risks any of which could prevent us from completing capital projects in a timely or economic manner or at all including without limitation cost overruns non performance of third parties slowdowns or other delays in contemplated construction timelines modularization of certain components the inability to obtain necessary permits or other permitting matters adverse weather defects in materials and workmanship labor and raw material shortages transportation constraints changes to international trade related policy engineering and construction change orders errors in design construction or start up and other unforeseen difficulties
If we finance acquisitions partnerships joint ventures business combination transactions or other major investments by issuing equity or convertible or other debt securities or loans our existing stockholders may be diluted or we could face constraints under the terms of and as a result of the repayment and debt service obligations under the additional indebtedness A business combination transaction between us and another company could result in our stockholders receiving cash or shares of another entity on terms that such stockholders may not consider desirable Moreover the regulatory approvals associated with a business combination may result in divestitures or other changes to our business the effects of which are difficult to predict
We may implement technologies which are beyond our experience base in the ammonia production process at designs and at scales beyond what has been successfully done previously Adapting these technologies for new applications can create nontraditional performance risks to our operations For example we are in the process of determining whether to make an affirmative final investment decision to develop at our Blue Point complex a low carbon ammonia plant using autothermal reforming ATR with carbon capture and sequestration CCS While ATR s are widely used today for the production of hydrogen they have not been widely used for ammonia production and not at the scale we are evaluating While extensive preparation and diligence goes into making an investment decision of a world scale ammonia plant new operational challenges may arise with the introduction of ATR technology and a failure of CCS technology to successfully capture transport and sequester CO
Failure of our and our business partners technologies to work as predicted or unintended consequences of new designs or uses could lead to cost overruns project delays financial penalties or damage to our reputation We may face difficulties marketing products produced using new technologies including but not limited to low carbon ammonia which may adversely impact our sales and financial results In addition certain large scale projects may contain processes or technologies that we have not operated at the same scale or in the same combination and although such projects generally include technologies and processes that have been demonstrated previously by others such technologies or processes may be new to us and may introduce new risks to our operations Additionally there is a risk that our and our business partners new technologies may fail to deliver expected benefits become obsolete or be replaced by other market alternatives Performance difficulties on these larger projects may have a material adverse effect on our operations and financial results In addition performance challenges may adversely affect our reputation and our ability to obtain future contracts Further CCS providers and carbon transporters may experience increased demand for their services which may limit availability and increase costs for these services which may adversely affect our ability to continue deployment of CCS for our low carbon ammonia projects
From time to time in this Annual Report on Form 10 K as well as in other written reports and oral statements we make forward looking statements that are not statements of historical fact and may involve a number of risks and uncertainties These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable These statements may also relate to our prospects future developments and business strategies We use the words anticipate believe could estimate expect intend may plan predict project will or would and similar terms and phrases including references to assumptions to identify forward looking statements These forward looking statements are made based on currently available competitive financial and economic data our current expectations estimates forecasts and projections about the industries and markets in which we operate and management s beliefs and assumptions concerning future events affecting us These statements are not guarantees of future performance and are subject to risks uncertainties and factors relating to our operations and business environment all of which are difficult to predict and many of which are beyond our control Therefore our actual results may differ materially from what is expressed in or implied by any forward looking statements We caution you not to place undue reliance on any forward looking statements We do not undertake any responsibility to release publicly any revisions to these forward looking statements to take into account events or circumstances that occur after the date of this document Additionally we do not undertake any responsibility to provide updates regarding the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward looking statements contained in this document
Important factors that could cause actual results to differ materially from our expectations are disclosed under Risk Factors and elsewhere in this Annual Report on Form 10 K Such factors include among others
Cybersecurity risk management including our processes for assessing identifying and managing material risks from cybersecurity threats is an integral part of our overall enterprise risk management ERM program The ERM program includes an annual assessment process designed to identify risks including those from cybersecurity threats that could affect achievement of our business operations and strategic objectives and to understand assess and prioritize those risks The ERM program also intends to facilitate the implementation of risk management strategies and risk mitigation processes across the Company that are responsive to the Company s risk profile overall business strategies and specific material risk exposures The ERM program seeks to integrate consideration of risk and risk management into business decision making throughout the Company including through the implementation of policies and procedures intended to ensure that necessary information with respect to material risks including material risks from cybersecurity threats is appropriately communicated to senior executives and the Board of Directors Board or relevant committees The Board regularly reviews and discusses with members of management responsible for risk management the guidelines and policies governing the ERM process This includes the key risks identified in the ERM process the likelihood of occurrence and the potential impact assigned to those risks by management in addition to the risk mitigation strategies in each instance
The Audit Committee of the Board oversees management s cybersecurity risk management efforts Our chief information officer oversees information technology cybersecurity risk and efforts to prevent and mitigate such risks The Audit Committee receives periodic reports summarizing threat detection and mitigation plans audits of internal controls summaries of training activities and certification achievements assessments of cybersecurity program effectiveness and reports on other cybersecurity priorities and initiatives This is in addition to management s periodic updates on cybersecurity incidents involving the Company or other industry and global participants The Audit Committee also receives regular updates on the efficacy of our cybersecurity program and risk management from our chief information officer and other members of management that are tasked with monitoring cybersecurity risks Our chief information officer has over 10 years of experience overseeing cybersecurity teams at both the Company and two other public companies Our chief information officer is supported by a dedicated team of certified cybersecurity professionals with an average of over 13 years of relevant experience
Our cybersecurity strategy prioritizes governance protection detection analysis and response to known anticipated or unexpected cyber threats effective management of cyber risks and resilience against cyber incidents We maintain a formal cybersecurity program structured around the National Institute of Standards and Technology NIST Cybersecurity Framework CSF a voluntary framework created by industry and the U S government to promote the protection of our infrastructure from cybersecurity risks We contract with an external auditing firm to assess our cybersecurity controls relative to industry peers using the NIST CSF which has six functions govern identify protect detect respond and recover We consistently evaluate the threat landscape adopting a multifaceted approach to cybersecurity risks that through a zero trust strategy focusing on prevention detection and mitigation which includes the following programs and practices
Our cybersecurity team conducts an annual review of cybersecurity risks at the ERM level integrating significant cybersecurity risks into our overall ERM program We remain committed to increasing investments in cybersecurity which includes providing additional training for end users adopting a zero trust methodology identifying and safeguarding critical assets and reinforcing monitoring and alerting capabilities Our proactive approach involves regular testing of defenses through simulations and penetration tests both technically and through a comprehensive review of operational policies and procedures At the managerial level our cybersecurity team consistently monitors alerts and holds regular meetings to discuss threat levels trends and remediation strategies Additionally we conduct periodic external penetration tests and maturity testing to assess the effectiveness of our security controls including processes procedures and our readiness to face the evolving threat landscape
We consider and assess the cybersecurity risks associated with the utilization of third party service providers including cybersecurity vendors consultants and auditors under our third party risk management program Pursuant to the program we evaluate security and data privacy controls prior to sharing or authorizing the hosting of sensitive data in computing environments managed by third parties In addition our standard terms and conditions with third party service providers feature contractual provisions mandating specific security protections
Our cybersecurity incident response plan is designed to detect and address potential threats that may impact the confidentiality integrity and availability of our technology systems The response plan includes coordinated processes for handling security and data privacy incidents encompassing communication and effective response and as appropriate escalation to the Audit Committee or the Board
To date we have not identified any risks from cybersecurity threats including as a result of any previous cybersecurity incidents that have materially affected or that we believe are reasonably likely to materially affect our business strategy results of operations or financial condition We cannot however eliminate all risks from cybersecurity threats or provide assurances that we have not experienced an undetected cybersecurity incident For more information about these risks see the disclosure in Item 1A Risk Factors under Operational Risks Failure inadequacy breach of or unauthorized access to our information technology systems or those of third party service providers or customers could negatively affect our business and operations
Average price paid per share of CF Industries Holdings Inc CF Holdings common stock repurchased under the 2022 Share Repurchase Program as defined below is the execution price excluding commissions paid to brokers and excise taxes
On November 2 2022 we announced that our Board of Directors authorized the repurchase of up to 3 billion of CF Holdings common stock which is effective through December 31 2025 the 2022 Share Repurchase Program This share repurchase program is discussed in Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Share Repurchase Programs and in Note 20 Stockholders Equity in the notes to consolidated financial statements included in Item 8 Financial Statements and Supplementary Data
You should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes included in Item 8 Financial Statements and Supplementary Data All references to CF Holdings we us our and the Company refer to CF Industries Holdings Inc and its subsidiaries except where the context makes clear that the reference is to CF Industries Holdings Inc only and not its subsidiaries All references to CF Industries refer to CF Industries Inc a 100 owned subsidiary of CF Industries Holdings Inc References to tons refer to short tons Notes referenced in this discussion and analysis refer to the notes to consolidated financial statements that are found in Item 8 Financial Statements and Supplementary Data Notes to Consolidated Financial Statements For a discussion and analysis of the year ended December 31 2023 compared to the year ended December 31 2022 see Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10 K filed with the Securities and Exchange Commission SEC on February 22 2024 The following is an outline of the discussion and analysis included herein
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 low carbon hydrogen and nitrogen products for energy fertilizer emissions abatement and other industrial activities Our 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 retailers independent fertilizer distributors traders wholesalers and industrial users Our core product is anhydrous ammonia ammonia which contains 82 nitrogen and 18 hydrogen Products derived from ammonia that are most often used as nitrogen fertilizers include granular urea urea ammonium nitrate solution UAN and ammonium nitrate AN AN is also used extensively by the commercial explosives industry as a component of explosives Products derived from ammonia that are sold primarily to industrial customers include diesel exhaust fluid DEF urea liquor nitric acid and aqua ammonia
six U S manufacturing facilities located in Donaldsonville Louisiana the largest ammonia production complex in the world Sergeant Bluff Iowa our Port Neal complex Yazoo City Mississippi Claremore Oklahoma our Verdigris complex Woodward Oklahoma and Waggaman Louisiana The Waggaman facility is wholly owned by us and the other five U S manufacturing facilities are wholly owned directly or indirectly by CF Industries Nitrogen LLC CFN of which we own approximately 89 and CHS Inc CHS owns the remainder see Note 19 Noncontrolling Interest for additional information on our strategic venture with CHS
At our core CF Industries is a producer of ammonia We use the Haber Bosch process to fix atmospheric nitrogen with hydrogen from natural gas to produce anhydrous ammonia whose chemical composition is NH
We sell the ammonia itself or upgrade it to products such as granular urea UAN and DEF A majority of the ammonia and ammonia derived products we manufacture are used as fertilizer as the nitrogen content provides energy essential for crop growth Other important uses of our products include emissions control
Our strategy is to leverage our unique capabilities to accelerate the world s transition to clean energy We believe this strategy builds upon our leadership in ammonia production to capture emerging opportunities to produce ammonia with a lower carbon intensity low carbon ammonia than that of ammonia produced through traditional processes These opportunities include traditional applications in agriculture to help reduce the carbon footprint of food production and the life cycle carbon intensity of ethanol production enabling production of sustainable aviation fuel among other purposes These opportunities also include new growth opportunities from energy intensive industries such as power generation and marine shipping as ammonia represents an efficient mechanism to both ship and store hydrogen as well as a clean energy fuel source in its own right as ammonia does not contain or emit carbon when combusted Our strategy also strengthens our existing business
At our Donaldsonville and Yazoo City complexes our decarbonization projects are leveraging carbon capture and sequestration CCS to enable us to convert a portion of our existing ammonia production to low carbon ammonia CCS requires the construction of carbon dioxide CO
generated by ammonia production from being emitted to the atmosphere Construction of the dehydration and compression unit at our Donaldsonville complex is in advanced stages with an estimated total cost of approximately 200 million over the life of the project Construction of the dehydration and compression unit at our Yazoo City complex is expected to cost approximately 100 million over the life of the project For each facility we have contracted with ExxonMobil to transport and sequester the captured CO
Decarbonization projects in our existing network also include our electrolyzer project at our Donaldsonville complex to produce ammonia with hydrogen sourced from an electrolysis process that produces no CO
emissions Commissioning of the 20 megawatt alkaline water electrolysis plant to produce hydrogen was suspended due to an issue experienced in the fourth quarter of 2024 Upon identification and remediation of the issue we expect to resume commissioning activities At full electrolyzer capacity we will be able to produce approximately 20 000 tons of low carbon ammonia per year
Our decarbonization projects also include front end engineering and design FEED studies to inform our evaluation of whether and how best to invest in export oriented low carbon ammonia capacity at our Blue Point complex in Ascension Parish Louisiana to supply developing clean energy markets and traditional ammonia markets where demand for low carbon product is emerging
In the fourth quarter of 2024 we received results from a FEED study evaluating the use of autothermal reforming ATR ammonia production technology alongside CCS to enable the production of low carbon ammonia ATR technology when combined with CCS to capture and sequester process CO
production process by more than 90 compared to conventional ammonia plants The FEED study results estimate the costs of a project with these attributes to be approximately 4 billion for the approximately 1 4 million metric ton capacity greenfield ATR ammonia facility and CCS technologies Additionally we estimate approximately 500 million would be required for the scalable common infrastructure for our Blue Point complex such as ammonia storage and a vessel loading dock
We have entered into joint development agreements JDAs with two potential partners Mitsui Co Ltd and JERA Co Inc for the development of the greenfield low carbon ammonia capacity Our evaluation includes assessing whether the ammonia production technology under consideration will satisfy carbon intensity and other requirements for potential end users Should a positive final investment decision FID be reached to construct greenfield low carbon ammonia capacity at our Blue Point complex construction and commissioning is expected to take approximately four years from a positive FID
In addition to discussions with existing customers who have interest in using low carbon ammonia for traditional applications we are engaged in discussions regarding the supply of low carbon ammonia for new applications We are evaluating and are in various stages of discussions with other companies for long term offtake and or potential joint investments related to new and traditional applications for low carbon ammonia These discussions continue to advance as we gain greater clarity regarding demand for low carbon ammonia including associated carbon intensity requirements government incentives and regulatory developments
Our products are global commodities or derived from global commodities and are subject to price competition The customers for our products make their purchasing decisions principally on the basis of delivered price and to a lesser extent on reliability customer service and product quality The selling prices of our products fluctuate in response to global market conditions changes in supply and demand and cost factors
Historically global fertilizer demand has been driven primarily by population growth gross domestic product growth changes in dietary habits planted acreage and application rates among other things We expect these key variables to continue to have major impacts on long term fertilizer demand for the foreseeable future Short term fertilizer demand growth may depend on global economic conditions farm sector income weather patterns the level of global grain stocks relative to consumption fertilizer application rates and governmental regulations including fertilizer subsidies or requirements mandating increased use of bio fuels or industrial nitrogen products such as DEF Geopolitical factors such as temporary disruptions in fertilizer trade related to government intervention shipping delays and or cost increases resulting from regional conflicts or changes in the buying selling patterns of key exporting consuming countries including China India Russia and Brazil among others often play a major role in shaping near term market fundamentals The economics of nitrogen based fertilizer manufacturing play a key role in decisions to increase or reduce production capacity Supply of fertilizers is generally driven by available capacity and operating rates raw material costs and availability government policies and global trade Raw materials are dependent on energy sources such as natural gas or coal therefore supply costs are affected by the supply of and demand for those commodities
Profitability of our products within a particular geographic region is determined not only by the relationship between global supply and demand but also by the supply demand balance within that region Regional supply and demand can be influenced significantly by factors affecting trade within regions Some of these factors include the relative cost to produce and deliver product relative currency values the availability of credit agricultural supply and demand industrial product demand and policies such as emissions abatement government support for manufacturers or purchasers and governmental nitrogen product trade policies including the imposition of duties tariffs or quotas that affect foreign trade or investment Government energy or carbon policies may also affect regional nitrogen supply and demand The development of additional natural gas reserves in North America has decreased natural gas costs in North America relative to the rest of the world making North American nitrogen fertilizer producers more competitive Changes in currency values may also alter our cost competitiveness relative to producers in other regions of the world
The North American nitrogen fertilizer market for certain products is dependent on imports to balance supply and demand and imports traditionally account for a significant portion of nitrogen fertilizer products consumed in North America Producers of nitrogen based fertilizers located in the Middle East Trinidad Africa and Russia have been major exporters to North America in recent years
The demand for fertilizer is affected by the aggregate crop planting decisions and fertilizer application rate decisions of individual farmers Individual farmers make planting decisions based largely on prospective profitability of a harvest while the specific varieties and amounts of fertilizer they apply depend on factors like their current liquidity soil conditions weather patterns crop and fertilizer prices fertilizer products used and timing of applications expected yields and the types of crops planted
Our nitrogen products are globally traded commodities with selling prices that fluctuate in response to global market conditions changes in supply and demand and other cost factors including domestic and local conditions Intense global competition reflected in import volumes and prices strongly influences delivered prices for nitrogen fertilizers In general the prevailing global prices for nitrogen products must be at a level to incent the high cost marginal producer to produce product at a breakeven or above price or else they would cease production and leave a portion of global demand unsatisfied
Average selling prices for all of our major products were lower in 2024 than in 2023 as lower global energy costs reduced the global market clearing price required to meet global demand The average selling price for our products was 313 per ton in 2024 compared to 347 per ton in 2023 The 10 decrease in the average selling price for our products in 2024 compared to 2023 resulted in a year over year decrease in net sales of approximately 716 million
Our total sales volume was 1 lower in 2024 than in 2023 due primarily to lower sales volume in our UAN AN and Other segments partially offset by higher sales volume in our Ammonia segment as a result of the Waggaman acquisition on December 1 2023 We shipped 18 9 million tons of product in 2024 compared to 19 1 million tons in 2023
In January 2024 a winter storm produced extremely cold temperatures that impacted our operations including the temporary shut down and lost production at certain of our plants Due to the impact of plant downtime resulting from the adverse weather and additional plant maintenance activity in the first quarter of 2024 we purchased and resold approximately 62 000 tons of ammonia and 48 000 tons of granular urea at near breakeven margins in order to fulfill sales commitments The plant downtime led to approximately 75 million of additional costs in the first quarter of 2024 for maintenance repairs and certain unabsorbed fixed costs
The acquisition of the Waggaman ammonia production facility closed on December 1 2023 and therefore provided incremental net sales in the first eleven months of 2024 As a result the Waggaman acquisition increased our 2024 sales volume by 644 000 tons and increased our net sales by 249 million due to the incremental eleven months of ownership compared to 2023
Natural gas is the principal raw material used to produce our nitrogen products Natural gas is both a chemical feedstock and a fuel used to produce nitrogen products Natural gas is a significant cost component of our manufactured nitrogen products representing approximately 28 and 40 respectively of our production costs in 2024 and 2023 Most of our
In the first quarter of 2024 warmer than normal average temperatures in North America drove lower heating demand for natural gas in spite of a short lived period of extremely cold temperatures in January 2024 that affected most of North America North American natural gas supply remained strong through the quarter with a decline in supply occurring near the end of the quarter as producers responded to a weaker price environment In addition although the higher cost for natural gas outside of North America incentivized liquefaction facilities in the United States to export domestic natural gas during the first quarter of 2024 an outage at the Freeport liquefied natural gas facility limited total gas exports supporting domestic supply
During the second quarter of 2024 there was a decline in natural gas supply as producers responded to a weaker price environment limiting the domestic supply available to be injected into storage during the quarter In addition natural gas demand for power generation reached record levels in the second quarter of 2024 as higher than normal temperatures drove increased cooling demand
In the third quarter of 2024 the decline in natural gas supply continued as producers curtailed production in response to low natural gas prices Natural gas demand from the power generation sector set records despite increased solar and wind generation as low natural gas prices increased demand for gas fired power Liquefied natural gas exports were steady through the quarter as delays on commissioning of new facilities and maintenance activities at existing plants held exports at levels reached during the second quarter of 2024 Natural gas in storage remained above historical levels despite continued below average injections into storage during the third quarter
During the fourth quarter of 2024 natural gas supply increased as producers responded to higher prices by restarting previously curtailed production After a warm start to the quarter December temperatures turned colder than normal raising demand for heat and power generation Liquefied natural gas exports increased to the highest level of the year due to strong global demand for natural gas and the startup of a new liquefaction facility in the U S Gulf The higher demand decreased the storage surplus compared to historical levels The average daily market price of natural gas at the Henry Hub the most heavily traded natural gas pricing point in North America was 4 25 per MMBtu for the period from January 1 2025 through February 14 2025
The total cost of natural gas used for production at our manufacturing facilities which includes the impact of realized natural gas derivatives decreased 35 to 2 40 per MMBtu in 2024 from 3 67 per MMBtu in 2023 The decrease in natural gas costs in 2024 as compared to 2023 resulted in an increase in gross margin of approximately 436 million excluding the impact of the Waggaman acquisition
We reported net earnings attributable to common stockholders of 1 22 billion in 2024 compared to 1 53 billion in 2023 a decrease in net earnings of 20 or 307 million The decrease in net earnings primarily reflects a decrease in gross margin partially offset by a lower income tax provision and a decrease in net earnings attributable to the noncontrolling interest
Gross margin decreased by 489 million or 19 to 2 06 billion for the year ended December 31 2024 compared to 2 55 billion for the year ended December 31 2023 The decrease in gross margin was due primarily to a 10 decrease in average selling prices to 313 per ton in 2024 from 347 per ton in 2023 which decreased gross margin by 716 million excluding the impact of the Waggaman acquisition and a decrease in sales volume which decreased gross margin by 123 million excluding the impact of the Waggaman acquisition These factors that decreased gross margin were partially offset by i lower natural gas costs which increased gross margin by 436 million excluding the impact of the Waggaman acquisition and ii the impact of the Waggaman acquisition completed on December 1 2023 which increased our 2024 gross margin by 57 million due to the incremental eleven months of ownership compared to 2023
Lower gross margin was partially offset by a decrease in the income tax provision of 125 million due primarily to lower pre tax earnings in 2024 and a decrease of 54 million in net earnings attributable to the noncontrolling interest
Diluted net earnings per share attributable to common stockholders decreased 1 13 per share to 6 74 per share in 2024 compared to 7 87 per share in 2023 due primarily to lower net earnings partially offset by lower weighted average common shares outstanding as a result of shares repurchased under our share repurchase programs Diluted weighted average common shares outstanding were 180 7 million shares for the year ended December 31 2024 a decrease of 7 compared to diluted weighted average common shares outstanding of 193 8 million shares for the year ended December 31 2023
On December 1 2023 we acquired an ammonia production facility located in Waggaman Louisiana from Dyno Nobel Louisiana Ammonia LLC DNLA a U S subsidiary of Australia based Incitec Pivot Limited IPL pursuant to an asset purchase agreement with DNLA and IPL The facility has a nameplate production capacity of 880 000 tons of ammonia annually Our acquisition of the Waggaman facility expanded our ammonia manufacturing and distribution capacity
In connection with the acquisition we entered into a long term ammonia offtake agreement providing for us to supply up to 200 000 tons of ammonia per year to IPL s Dyno Nobel Inc subsidiary Under the terms of the asset purchase agreement 425 million of the purchase price of 1 675 billion subject to adjustment was allocated by the parties to the ammonia offtake agreement We funded the balance of the initial purchase price on the acquisition date with 1 223 billion of cash on hand
The consideration transferred on the acquisition date reflected an estimated net working capital adjustment and other adjustments to the purchase price which was subject to further adjustment pursuant to the terms of the asset purchase agreement The purchase price adjustments required under the asset purchase agreement were finalized in the second quarter of 2024 which resulted in a 2 million reduction in the purchase price with a corresponding reduction in goodwill As a result the final purchase price was 1 221 billion
In connection with recording the acquisition we recognized among other items goodwill intangible assets and a supply contract liability See Note 6 Acquisition of Waggaman Ammonia Production Facility for additional information
During the years ended December 31 2024 and 2023 we reported net earnings attributable to common stockholders of 1 22 billion and 1 53 billion respectively In addition to the impact of market conditions and the acquisition of the Waggaman ammonia production facility discussed above certain items affected the comparability of our financial results during the years ended December 31 2024 and 2023 The following table and related discussion outline these items and their impact on the comparability of our financial results for these periods The descriptions of items below that refer to amounts in the table refer to the pre tax amounts unless otherwise noted
The tax impact is calculated utilizing a marginal effective rate of 23 6 and 23 5 in 2024 and 2023 respectively except for acquisition and integration costs related to the Waggaman acquisition which reflects a 24 0 and 26 2 marginal effective rate in 2024 and 2023 respectively
Natural gas is the largest and most volatile single component of the manufacturing cost for our nitrogen based products At certain times we have managed the risk of changes in natural gas prices through the use of derivative financial instruments The derivatives that we use for this purpose are primarily natural gas fixed price swaps basis swaps and options We use natural gas derivatives as an economic hedge of natural gas price risk but without the application of hedge accounting This can result in volatility in reported earnings due to the unrealized mark to market adjustments that occur from changes in the value of the derivatives which are reflected in cost of sales in our consolidated statements of operations In 2024 and 2023 we recognized unrealized net mark to market gains on natural gas derivatives of 35 million and 39 million respectively
In 2024 we recognized income of 16 million pertaining to a policy change to an employee benefit plan that is included in both cost of sales and selling general and administrative expenses in our consolidated statement of operations
In 2023 we recognized total charges of 10 million consisting primarily of the recognition of an asset retirement obligation and post employment benefits related to contractual and statutory obligations due to employees as a result of our approved plan to permanently close the ammonia plant at our Billingham complex
On December 1 2023 we acquired an ammonia production facility located in Waggaman Louisiana as described above under Acquisition of Waggaman Ammonia Production Facility In 2024 we incurred approximately 4 million of integration costs related to the Waggaman acquisition In 2023 we incurred 36 million of acquisition related costs and 3 million of integration costs related to the Waggaman acquisition These costs are included in acquisition and integration costs in our consolidated statements of operations
PLNL our joint venture in Trinidad operates an ammonia plant that relies on natural gas supplied under a gas sales contract the NGC Contract by The National Gas Company of Trinidad and Tobago Limited NGC The NGC Contract had an expiration date of September 2023 In the third quarter of 2023 PLNL entered into a new gas sales contract with NGC the New NGC Contract which is effective October 2023 through December 2025
In the third quarter of 2023 and due to the terms of the New NGC Contract we assessed our investment in PLNL for impairment and determined that the carrying value of our equity method investment in PLNL exceeded its fair value As a result we recorded an impairment of our equity method investment in PLNL of 43 million which is reflected in equity in earnings loss of operating affiliate in our consolidated statement of operations for the year ended December 31 2023
In the second half of 2022 as a result of the conclusion of arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities related to tax years 2006 through 2011 we paid additional income taxes and related interest of 124 million and 100 million respectively to the Canada Revenue Agency CRA and Alberta Tax and Revenue Administration Alberta TRA In the third quarter of 2024 we were informed that the CRA granted us discretionary interest relief for certain tax years from 2006 through 2011 In the fourth quarter of 2024 we received the CRA portion of the interest relief consisting of interest refunds of 21 million and related interest of 2 million The interest relief from the Alberta TRA is estimated to be approximately 16 million consisting of interest refunds of 15 million and related interest of 1 million based on current estimates and foreign currency exchange rates as of December 31 2024 As a result in our consolidated statement of operations for the year ended December 31 2024 we recognized 39 million of income consisting of a 36 million reduction in interest expense and 3 million of interest income
The following is a discussion and analysis of our consolidated results of operations for the year ended December 31 2024 compared to the year ended December 31 2023 For a discussion and analysis of our consolidated results of operations for the year ended December 31 2023 compared to the year ended December 31 2022 see Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10 K filed with the SEC on February 22 2024
Our net sales are derived primarily from the sale of nitrogen products and are determined by the quantities of nitrogen products we sell and the selling prices we realize The volumes mix and selling prices we realize are determined to a great extent by a combination of global and regional supply and demand factors Net sales also include shipping and handling costs that are billed to our customers Sales incentives are reported as a reduction in net sales
Our total net sales decreased 695 million or 10 to 5 94 billion in 2024 compared to 6 63 billion in 2023 The change in our net sales reflects i the impact of the Waggaman acquisition completed on December 1 2023 which increased our net sales by 249 million and ii a 944 million or 14 decline in our net sales excluding the impact of the Waggaman acquisition due to a 10 decrease in average selling prices and a 4 decrease in sales volume
Our average selling price was 313 per ton in 2024 compared to 347 per ton in 2023 a decrease of 10 due to lower average selling prices across all of our segments as lower global energy costs reduced the global market clearing price required to meet global demand The impact of lower average selling prices excluding the impact of the Waggaman acquisition was a decrease in net sales of approximately 716 million for 2024 compared to 2023
Our total sales volume of 18 9 million product tons in 2024 was 1 lower compared to 19 1 million product tons in 2023 due primarily to lower sales volume in our UAN AN and Other segments partially offset by higher sales volume in our Ammonia segment driven by the impact of the Waggaman acquisition which increased our 2024 sales volume by 644 000 tons due to the incremental eleven months of ownership compared to 2023 Excluding the impact of the Waggaman acquisition the impact of lower sales volume was a decrease in net sales of approximately 228 million
Our cost of sales includes manufacturing costs purchased product costs distribution and storage costs and freight Manufacturing costs the most significant element of cost of sales consist primarily of raw materials realized and unrealized gains and losses on natural gas derivatives maintenance direct labor depreciation and other plant overhead expenses Purchased product costs primarily include the cost to purchase nitrogen fertilizers to augment or replace production at our facilities Distribution costs consist of the cost of freight required to transport finished products from our manufacturing facilities to our distribution facilities which are recognized in cost of sales when the product is sold to our customers Storage costs consist of costs incurred prior to final shipment to customers Freight consists of shipping and handling costs incurred by us to deliver the product to our customer s intended destination
Our total cost of sales decreased 206 million or 5 to 3 88 billion in 2024 as compared to 4 09 billion in 2023 The decrease in our cost of sales primarily reflects lower realized natural gas costs including the impact of realized derivatives The impact of lower realized natural gas costs decreased cost of sales by 436 million excluding the impact of the Waggaman acquisition The impact of lower realized natural gas costs was partially offset by higher costs for planned and unplanned maintenance and repair activities in 2024 including the impact of the adverse weather in January 2024 as discussed above under Nitrogen Selling Prices and Sales Volume and the impact of the Waggaman acquisition which increased our cost of sales by 192 million due to the incremental eleven months of ownership compared to 2023
Cost of sales averaged 204 per ton in 2024 a 5 decrease from 214 per ton in 2023 Our cost of natural gas including the impact of realized derivatives decreased 35 to 2 40 per MMBtu in 2024 from 3 67 per MMBtu in 2023
Our selling general and administrative expenses consist primarily of corporate office expenses such as salaries and other payroll related costs for our executive administrative legal financial IT and sales functions as well as certain taxes and insurance and other professional service fees including those for corporate initiatives and amortization of definite lived intangible assets
Selling general and administrative expenses increased 31 million to 320 million in 2024 compared to 289 million in 2023 The increase was due primarily to an increase of 21 million in amortization expense related to the customer relationships recognized in conjunction with the Waggaman acquisition on December 1 2023 and an increase in costs related to certain corporate initiatives
In 2023 related to our U K operations we recognized total charges of 10 million consisting primarily of the recognition of an asset retirement obligation and post employment benefits related to contractual and statutory obligations due to employees as a result of our approved plan to permanently close the ammonia plant at our Billingham complex See Note 7 United Kingdom Operations Restructuring and Impairment Charges for further discussion of the Billingham ammonia plant closure
On December 1 2023 we acquired an ammonia production facility located in Waggaman Louisiana as described above under Acquisition of Waggaman Ammonia Production Facility In 2024 we incurred 4 million of integration costs related to the Waggaman acquisition In 2023 we incurred 36 million of acquisition related costs and 3 million of integration costs
Other operating net includes administrative costs that do not relate directly to our central operations and can include foreign currency transaction gains and losses unrealized gains and losses on foreign currency derivatives litigation expenses gains and losses on the disposal of fixed assets and FEED study costs related to our clean energy initiatives
Other operating net was 10 million of income in 2024 compared to 31 million of income in 2023 In both 2024 and 2023 the income recognized consists primarily of gains on sales of emission credits partially offset by FEED study costs for our clean energy initiatives See Our Strategy above for additional information related to our clean energy initiatives
Equity in earnings loss of operating affiliate consists of our 50 ownership interest in PLNL We include our share of the net earnings from our equity method investment in PLNL as an element of earnings from operations because this investment provides additional production and is integrated with our other supply chain and sales activities
Equity in earnings loss of operating affiliate was 4 million of earnings in 2024 compared to an 8 million loss in 2023 which includes an impairment of our equity method investment in PLNL of 43 million recognized in the third quarter of 2023 See Items Affecting Comparability of Results Impairment of equity method investment in PLNL above for further discussion Lower equity in earnings of operating affiliate in 2024 compared to 2023 excluding the impact from the impairment charge primarily reflects a decrease in the operating results of PLNL as a result of a plant turnaround in the second quarter of 2024 at the PLNL facility in Trinidad lower ammonia selling prices higher natural gas costs and lower operating rates at PLNL due to lower availability of natural gas
Interest expense includes interest on our long term debt amortization of the related fees required to execute financing agreements annual fees pursuant to our revolving credit agreement and interest on tax liabilities Capitalized interest relating to the construction of major capital projects reduces interest expense as the interest is capitalized and amortized over the estimated useful lives of the related assets
Interest expense was 121 million in 2024 compared to 150 million in 2023 The decrease of 29 million was due primarily to a reduction in interest on tax liabilities driven by a 36 million reduction in interest expense recognized in 2024 related to discretionary interest relief granted to us by Canadian taxing authorities that is further described above under Items Affecting Comparability of Results Canada Revenue Agency Competent Authority Matter
Interest income was 123 million in 2024 compared to 158 million in 2023 The decrease of 35 million was due primarily to a 52 million decrease in interest income on short term investments in 2024 partially offset by 3 million of interest income in 2024 related to discretionary interest relief that is further described above under Items Affecting Comparability of Results Canada Revenue Agency Competent Authority Matter
Our income tax provision for 2024 was 285 million on pre tax income of 1 76 billion or an effective tax rate of 16 2 compared to an income tax provision of 410 million on pre tax income of 2 25 billion or an effective tax rate of 18 3 in 2023
Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in 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 2024 of 16 2 which is based on pre tax income of 1 76 billion would be 2 8 percentage points higher or 19 0 if based on pre tax income exclusive of the earnings attributable to the noncontrolling interest of 259 million Our effective tax rate for 2023 of 18 3 which is based on pre tax income of 2 25 billion would be 2 9 percentage points higher or 21 2 if based on pre tax income exclusive of the earnings attributable to the noncontrolling interest of 313 million
Net earnings attributable to noncontrolling interest decreased 54 million or 17 to 259 million in 2024 compared to 313 million in 2023 due to lower earnings of CFN driven by lower average selling prices as described above under Net Sales partially offset by lower natural gas costs
Net earnings per share attributable to common stockholders decreased 14 to 6 74 per diluted share in 2024 from 7 87 per diluted share in 2023 This decrease was due primarily to a decrease in gross margin driven by lower average selling prices partially offset by lower natural gas costs Lower gross margin was partially offset by a decrease in the income tax provision resulting from lower profitability and a decrease in net earnings attributable to the noncontrolling interest Additionally diluted weighted average common shares outstanding declined 7 from 193 8 million shares for 2023 to 180 7 million shares for 2024 due primarily to repurchases of common shares under our share repurchase programs
Our reportable segment structure reflects how our chief operating decision maker as defined in accounting principles generally accepted in the United States U S GAAP assesses the performance of our reportable segments and makes decisions about resource allocation 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 The following table presents summary operating results by business segment
The financial results of the Waggaman facility are included in the Ammonia segment from the Waggaman acquisition date of December 1 2023 See Acquisition of Waggaman Ammonia Production Facility for additional information
The following is a discussion and analysis of our operating results by business segment for the year ended December 31 2024 compared to the year ended December 31 2023 For a discussion and analysis of our operating results by business segment for the year ended December 31 2023 compared to the year ended December 31 2022 see Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10 K filed with the SEC on February 22 2024
Our Ammonia segment produces anhydrous ammonia ammonia which is the base product that we manufacture containing 82 nitrogen and 18 hydrogen The results of our Ammonia segment consist of sales of ammonia to external customers for its nitrogen content as a fertilizer in emissions control and in other industrial applications In addition we upgrade ammonia into other nitrogen products such as granular urea UAN and AN
The financial results of the Waggaman facility are included in the Ammonia segment from the Waggaman acquisition date of December 1 2023 See Acquisition of Waggaman Ammonia Production Facility for additional information
Net sales in our Ammonia segment increased by 57 million or 3 to 1 74 billion in 2024 from 1 68 billion in 2023 The increase in our net sales reflects a 15 increase in sales volume including the impact of the Waggaman acquisition completed on December 1 2023 partially offset by a 10 decrease in average selling prices Average selling prices decreased to 425 per ton in 2024 compared to 473 per ton in 2023 as lower global energy costs reduced the global market clearing price required to meet global demand
In January 2024 a winter storm produced extremely cold temperatures that impacted our operations including the temporary shut down of certain of our plants As a result of the adverse weather we incurred additional maintenance costs in the first quarter of 2024 Due to the impact of plant downtime resulting from the adverse weather and additional plant maintenance activity in the first quarter of 2024 we purchased and resold 62 000 tons of ammonia at near breakeven margins in order to fulfill sales commitments
Ammonia sales volume in 2024 was 4 1 million tons an increase of 15 compared to 3 5 million tons in 2023 The increase in sales volume reflects both the impact of the Waggaman acquisition completed on December 1 2023 which increased our ammonia sales volume in 2024 by 644 000 tons due to the incremental eleven months of ownership compared to 2023 and 62 000 tons of ammonia purchased and resold as described above partially offset by lower demand due to lower spring ammonia applications in North America compared to the prior year as a result of unfavorable weather
Cost of sales in our Ammonia segment averaged 304 per ton in 2024 a 5 decrease from 320 per ton in 2023 The decrease was due primarily to lower realized natural gas costs including the impact of realized derivatives partially offset by higher costs for maintenance repairs and certain unabsorbed fixed costs as a result of plant downtime including the impact of the adverse weather in January 2024 as discussed above The impact of the Waggaman acquisition on our cost of sales per ton in our Ammonia segment was not material
Gross margin in our Ammonia segment decreased by 48 million or 9 to 493 million in 2024 from 541 million in 2023 and our gross margin percentage was 28 4 in 2024 compared to 32 2 in 2023 The decrease in gross margin was due primarily to a 10 decrease in average selling prices which decreased gross margin by 160 million a net increase in manufacturing maintenance and other costs which decreased gross margin by 121 million and excluding the impact of the Waggaman acquisition a decrease in sales volume which decreased gross margin by 8 million These factors that decreased gross margin were partially offset by the impact of a decrease in realized natural gas costs including the impact of realized derivatives which increased gross margin by 182 million and the impact of the Waggaman acquisition which increased gross margin by 57 million Gross margin also includes the impact of a 13 million unrealized net mark to market gain on natural gas derivatives in 2024 compared to an 11 million gain in 2023
Our Granular Urea segment produces granular urea which contains 46 nitrogen Produced from ammonia and carbon dioxide it has the highest nitrogen content of any of our solid nitrogen fertilizers Granular urea is produced at our Donaldsonville Port Neal and Medicine Hat complexes
Net sales in our Granular Urea segment decreased 223 million or 12 to 1 60 billion in 2024 compared to 1 82 billion in 2023 due primarily to an 11 decrease in average selling prices Average selling prices decreased to 354 per ton in 2024 compared to 399 per ton in 2023 as lower global energy costs reduced the global market clearing price required to meet global demand Sales volume in 2024 was 4 5 million tons a decrease of 1 compared to 4 6 million tons in 2023 Lower sales volume in the first quarter of 2024 which was due primarily to a reduction in ammonia available for upgrade and lower supply availability from the impact of severe weather that caused urea plant outages was largely offset by higher sales volume in the second and third quarters of 2024 due primarily to a production mix that favored granular urea production Sales volume in 2024 includes the impact of 48 000 tons of granular urea purchased and resold in the first quarter of 2024 due to the impact of the severe weather described above
Cost of sales in our Granular Urea segment averaged 205 per ton in 2024 a 7 decrease from 221 per ton in 2023 due primarily to lower realized natural gas costs including the impact of realized derivatives partially offset by higher costs associated with maintenance activity in 2024
decrease in gross margin was driven by an 11 decrease in average selling prices which decreased gross margin by approximately 185 million a net increase in manufacturing maintenance and other costs which decreased gross margin by 37 million and a 1 decrease in sales volume which decreased gross margin by 21 million These factors that decreased gross margin were partially offset by lower realized natural gas costs including the impact of realized derivatives which increased gross margin by 106 million Gross margin also includes the impact of a 9 million unrealized net mark to market gain on natural gas derivatives in 2024 compared to an 11 million gain in 2023
Our UAN segment produces urea ammonium nitrate solution UAN UAN a liquid fertilizer product with a nitrogen content that typically ranges from 28 to 32 is produced by combining urea and ammonium nitrate UAN is produced at our Courtright Donaldsonville Port Neal Verdigris Woodward and Yazoo City complexes
Net sales in our UAN segment decreased 390 million or 19 to 1 68 billion in 2024 compared to 2 07 billion in 2023 due primarily to a 13 decrease in average selling prices and a 6 decrease in sales volume Average selling prices decreased to 248 per ton in 2024 compared to 286 per ton in 2023 due primarily to lower global energy costs reducing the global market clearing price required to meet global demand The decrease in sales volume was due primarily to lower supply availability resulting from lower beginning inventory entering 2024 and the impact of a production mix that favored granular urea production
Cost of sales in our UAN segment averaged 158 per ton in 2024 a 9 decrease from 173 per ton in 2023 due primarily to the impact of lower realized natural gas costs including the impact of realized derivatives
Gross margin in our UAN segment decreased by 208 million or 25 to 609 million in 2024 from 817 million in 2023 and our gross margin percentage was 36 3 in 2024 compared to 39 5 in 2023 The decrease in gross margin was due primarily to a 13 decrease in average selling prices which decreased gross margin by 274 million and a 6 decrease in sales volume which decreased gross margin by 57 million These factors that decreased gross margin were partially offset by a decrease in realized natural gas costs including the impact of realized derivatives which increased gross margin by 113 million and a net decrease in manufacturing maintenance and other costs which increased gross margin by 11 million Gross margin also includes the impact of a 10 million unrealized net mark to market gain on natural gas derivatives in 2024 compared to an 11 million gain in 2023
Our AN segment produces ammonium nitrate AN AN which has a nitrogen content between 29 and 35 is produced by combining anhydrous ammonia and nitric acid AN is used as nitrogen fertilizer and is also used extensively by the commercial explosives industry as a component of explosives AN is produced at our Yazoo City and Billingham complexes
Net sales in our AN segment decreased 78 million or 16 to 419 million in 2024 from 497 million in 2023 due primarily to a 9 decrease in average selling prices and a 7 decrease in sales volume Average selling prices decreased to 286 per ton in 2024 compared to 316 per ton in 2023 as lower global energy costs reduced the global market clearing price required to meet global demand Sales volume declined due primarily to lower supply availability resulting from lower production in 2024
Cost of sales in our AN segment averaged 232 per ton in 2024 a 2 increase from 228 per ton in 2023 The increase was due primarily to higher costs for maintenance activity in North America which was partially offset by the impact of lower realized natural gas costs including the impact of realized derivatives and for our United Kingdom operations a lower cost per ton for purchased ammonia used for upgrading into AN
Gross margin in our AN segment decreased by 59 million or 43 to 79 million in 2024 from 138 million in 2023 and our gross margin percentage was 18 9 in 2024 compared to 27 8 in 2023 The decrease in gross margin was due primarily to a 9 decrease in average selling prices which decreased gross margin by 65 million and a 7 decrease in sales volume which decreased gross margin by 14 million These factors that decreased gross margin were partially offset by a decrease in realized natural gas costs including the impact of realized derivatives which increased gross margin by 12 million and a net decrease in manufacturing maintenance and other costs which increased gross margin by 9 million The net decrease in manufacturing maintenance and other costs primarily reflects lower costs for purchased ammonia in the United Kingdom partially offset by higher costs for maintenance activity in North America Gross margin also includes the impact of a 1 million unrealized net mark to market gain on natural gas derivatives in 2024 compared to a 2 million gain in 2023
Net sales in our Other segment decreased 61 million or 11 to 503 million in 2024 from 564 million in 2023 due to a 7 decrease in average selling prices and a 5 decrease in sales volume Average selling prices decreased to 239 per ton in 2024 compared to 256 per ton in 2023 as lower global energy costs reduced the global market clearing price required to meet global demand The decrease in sales volume was due primarily to lower DEF sales volume partially offset by higher nitric acid sales volume
Cost of sales in our Other segment averaged 143 per ton in 2024 a 4 decrease from 149 per ton in 2023 due primarily to the impact of lower realized natural gas costs including the impact of realized derivatives partially offset by higher costs for maintenance activity
Gross margin in our Other segment decreased by 35 million or 15 to 201 million in 2024 from 236 million in 2023 and our gross margin percentage was 40 0 in 2024 compared to 41 8 in 2023 The decrease in gross margin was due primarily to a 7 decrease in average selling prices which decreased gross margin by 32 million a 5 decrease in sales volume which decreased gross margin by 23 million and a net increase in manufacturing maintenance and other costs which decreased gross margin by 1 million These factors that decreased gross margin were partially offset by a decrease in realized natural gas costs including the impact of realized derivatives which increased gross margin by 23 million Gross margin includes the impact of a 2 million unrealized net mark to market gain on natural gas derivatives in 2024 compared to a 4 million gain in 2023
Our primary uses of cash are generally for operating costs working capital capital expenditures debt service investments taxes share repurchases dividends and our clean energy initiatives Our working capital requirements are affected by several factors including demand for our products selling prices raw material costs freight costs and seasonal factors inherent in the business We may also utilize our cash to fund acquisitions In addition we may from time to time seek to retire or purchase our outstanding debt through cash purchases in open market or privately negotiated transactions or otherwise Such repurchases if any will depend on prevailing market conditions our liquidity requirements contractual restrictions and other factors The amounts involved may be material
Generally our primary source of cash is cash from operations which includes cash generated by customer advances We may also from time to time access the capital markets or engage in borrowings under our revolving credit agreement
As of December 31 2024 our cash and cash equivalents balance was 1 61 billion a decrease of 418 million from 2 03 billion at December 31 2023 At December 31 2024 we were in compliance with all applicable covenant requirements under our revolving credit agreement and senior notes and unused borrowing capacity under our revolving credit agreement was 750 million
In each of the quarters of 2024 quarterly dividends of 0 50 per common share were declared and paid representing a 25 increase from the quarterly dividends of 0 40 per common share that were declared and paid in each of the quarters of 2023
Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less 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
We make capital expenditures to sustain our asset base increase our capacity or capabilities improve plant efficiency comply with various environmental health and safety requirements and invest in our clean energy strategy Capital expenditures totaled 518 million in 2024 compared to 499 million in 2023
Capital expenditures in 2025 are estimated to be in the range of 500 million to 550 million Planned capital expenditures are generally subject to change due to delays in regulatory approvals or permitting unanticipated increases in cost changes in scope and completion time performance of third parties delays in the receipt of equipment adverse weather defects in materials and workmanship labor or material shortages transportation constraints acceleration or delays in the timing of the work and other unforeseen difficulties Any of these changes in planned capital expenditures individually or in the aggregate could have a material impact on our results of operations and cash flows
In addition our decarbonization projects include FEED studies to inform our evaluation of whether and how best to invest in an export oriented low carbon ammonia capacity at our Blue Point complex in Ascension Parish Louisiana to supply developing energy markets and traditional ammonia markets where demand for low carbon product is emerging Our estimated capital expenditures for 2025 which are described above exclude any amounts that would be required in connection with this project and such amounts could be significant See Overview of CF Holdings Our Strategy above for additional information on our clean energy initiatives
On December 1 2023 we acquired an ammonia production facility located in Waggaman Louisiana from Dyno Nobel Louisiana Ammonia LLC DNLA a U S subsidiary of Australia based Incitec Pivot Limited IPL pursuant to an asset purchase agreement with DNLA and IPL In connection with the acquisition we entered into a long term ammonia offtake agreement providing for us to supply up to 200 000 tons of ammonia per year to IPL s Dyno Nobel Inc subsidiary Under the terms of the asset purchase agreement 425 million of the purchase price of 1 675 billion subject to adjustment was allocated by the parties to the ammonia offtake agreement We funded the balance of the initial purchase price on the acquisition date with 1 223 billion of cash on hand
The consideration transferred on the acquisition date reflected an estimated net working capital adjustment and other adjustments to the purchase price which was subject to further adjustment pursuant to the terms of the asset purchase agreement The purchase price adjustments required under the asset purchase agreement were finalized in the second quarter of 2024 which resulted in a 2 million reduction in the purchase price As a result the final purchase price was 1 221 billion
On November 3 2021 our Board of Directors the Board authorized the repurchase of up to 1 5 billion of CF Holdings common stock through December 31 2024 the 2021 Share Repurchase Program The 2021 Share Repurchase Program was completed in the second quarter of 2023 On November 2 2022 the Board authorized the repurchase of up to 3 billion of CF Holdings common stock commencing upon completion of the 2021 Share Repurchase Program and effective through December 31 2025 the 2022 Share Repurchase Program Repurchases under our share repurchase programs may be made from time to time in the open market through privately negotiated transactions through block transactions through accelerated share repurchase programs or otherwise The manner timing and amount of repurchases will be determined by our management based on the evaluation of market conditions stock price and other factors
In 2024 we repurchased approximately 18 8 million shares under the 2022 Share Repurchase Program for approximately 1 51 billion of which 10 million was accrued and unpaid as of December 31 2024 In 2024 we retired approximately 18 7 million shares of repurchased stock and we held approximately 0 4 million shares of treasury stock as of December 31 2024
In 2023 we completed the 2021 Share Repurchase Program with the repurchase of approximately 2 3 million shares for 155 million and we repurchased 5 6 million shares under the 2022 Share Repurchase Program for 425 million
The policies or laws of governments around the world can result in the imposition of taxes duties tariffs or other restrictions or regulatory requirements on imports and exports of raw materials finished goods or services from a particular country or region of the world The policies and laws of governments can also impact the subsidization of natural gas prices and subsidies or quotas applied to domestic producers or farmers Due to the critical role that fertilizers play in food production the construction and operation of fertilizer plants often are influenced by economic political and social objectives Additionally the import or export of fertilizer can be subject to local taxes imposed by governments which can have the effect of either encouraging or discouraging import and export activity The impact of changes in governmental policies or laws or the political or social objectives of a country could have a material impact on fertilizer demand and selling prices and therefore could impact our liquidity In addition changing political leadership including the new U S presidential administration and regulatory leadership have proposed and may propose further policy regulatory and enforcement changes which are and may continue to be subject to administrative and judicial challenges that create additional uncertainty for our business
In connection with the matter described above under Items Affecting Comparability of Results Canada Revenue Agency Competent Authority Matter in the third quarter of 2024 we were informed that the CRA granted us discretionary interest relief for certain tax years from 2006 through 2011 In the fourth quarter of 2024 we received interest relief from the CRA consisting of interest refunds of 21 million and related interest of 2 million In addition interest relief from the Alberta TRA is estimated to be approximately 16 million consisting of interest refunds of 15 million and related interest of 1 million based on current estimates and foreign currency exchange rates as of December 31 2024 We expect to receive the interest refunds from the Alberta TRA in the first half of 2025
We have operations in Canada the United Kingdom and a 50 interest in a joint venture in Trinidad Historically the estimated additional U S and foreign income taxes due upon repatriation of the earnings of these foreign operations to the United States were recognized in our consolidated financial statements as the earnings were recognized unless the earnings were considered to be permanently reinvested based upon our then current plans However the cash payment of the income tax liabilities associated with repatriation of earnings from foreign operations occurred at the time of the repatriation As a result the recognition of income tax expense related to foreign earnings as applicable and the payment of taxes resulting from repatriation of those earnings could occur in different periods
In light of changes made by the Tax Cuts and Jobs Act commencing with the 2018 tax year the United States no longer taxes earnings of foreign subsidiaries even when such earnings are earned or repatriated to the United States unless such earnings are subject to U S rules on passive income or certain anti abuse provisions Foreign subsidiary earnings may still be subject to withholding taxes when repatriated to the United States
As of December 31 2024 approximately 346 million of our consolidated cash and cash equivalents balance of 1 61 billion was held by our Canadian and United Kingdom subsidiaries As of December 31 2024 we recorded a deferred tax liability of 14 million on the undistributed earnings of our Canadian subsidiaries for which the Company does not have an indefinite reinvestment assertion We have not provided for deferred taxes on the remainder of undistributed earnings from our foreign subsidiaries because such earnings would not give rise to additional tax liabilities upon repatriation
We have a senior unsecured revolving credit agreement the Revolving Credit Agreement which provides for a revolving credit facility of up to 750 million with a maturity of October 26 2028 and includes a letter of credit sub limit of 125 million Borrowings under the Revolving Credit Agreement may be used for working capital capital expenditures acquisitions share repurchases and other general corporate purposes CF Industries is the lead borrower and CF Holdings is the sole guarantor under the Revolving Credit Agreement
Borrowings under the Revolving Credit Agreement can be denominated in U S dollars Canadian dollars euros and British pounds Borrowings in U S dollars bear interest at a per annum rate equal to at our option an applicable adjusted term Secured Overnight Financing Rate or base rate plus in either case a specified margin We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees The specified margin and the amount of the commitment fee depend on CF Holdings credit rating at the time
The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants including one financial covenant The financial covenant requires that the total net leverage ratio as defined in the Revolving Credit Agreement be not greater than 3 75 1 00 the Maximum Total Net Leverage Ratio as of the last day of each fiscal quarter provided that if any borrower or subsidiary consummates a material acquisition during any fiscal quarter CF Industries may elect to increase the Maximum Total Net Leverage Ratio to 4 25 1 00 for the period of four consecutive fiscal quarters commencing with such fiscal quarter and no further such election may be made unless and until the Maximum Total Net Leverage Ratio is less than or equal to 3 75 1 00 as of the end of two consecutive fiscal quarters after the end of such period
The Revolving Credit Agreement contains events of default with notice requirements and cure periods as applicable customary for a financing of this type including but not limited to non payment of principal interest or fees inaccuracy of representations and warranties in any material respect and failure to comply with specified covenants Upon the occurrence and during the continuance of an event of default under the Revolving Credit Agreement and after any applicable cure period subject to specified exceptions the administrative agent may and at the request of the requisite lenders is required to accelerate the loans under the Revolving Credit Agreement or terminate the lenders commitments under the Revolving Credit Agreement
As of December 31 2024 we had unused borrowing capacity under the Revolving Credit Agreement of 750 million and no outstanding letters of credit under the Revolving Credit Agreement As of December 31 2024 and 2023 and during the years then ended there were no borrowings outstanding under the Revolving Credit Agreement
We are party to a bilateral agreement providing for the issuance of up to 425 million of letters of credit As of December 31 2024 approximately 324 million of letters of credit were outstanding under this agreement
Carrying amount is net of unamortized debt discount and deferred debt issuance costs Total unamortized debt discount was 6 million and 7 million as of December 31 2024 and 2023 respectively and total deferred debt issuance costs were 23 million and 25 million as of December 31 2024 and 2023 respectively
Under the indentures including the applicable supplemental indentures governing our 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 Interest on the Public Senior Notes is payable semiannually and the Public Senior Notes are redeemable at our option in whole at any time or in part from time to time at specified make whole redemption prices
The indentures governing the Public Senior Notes contain covenants that limit among other things the ability of CF Holdings and its subsidiaries including CF Industries to incur liens on certain assets to secure debt to engage in sale and leaseback transactions to merge or consolidate with other entities and to sell lease or transfer all or substantially all of the assets of CF Holdings and its subsidiaries to another entity Each of the indentures governing the Public Senior Notes provides for customary events of default which include subject in certain cases to customary grace and cure periods among others nonpayment of principal or interest on the applicable Public Senior Notes failure to comply with other covenants or agreements under the indenture certain defaults on other indebtedness the failure of CF Holdings guarantee of the applicable Public Senior Notes to be enforceable and specified events of bankruptcy or insolvency Under each indenture governing the Public Senior Notes in the case of an event of default arising from one of the specified events of bankruptcy or insolvency the applicable Public Senior Notes would become due and payable immediately and in the case of any other event of default other than an event of default related to CF Industries and CF Holdings reporting obligations the trustee or the holders of at least 25 in aggregate principal amount of the applicable Public Senior Notes then outstanding may declare all of such Public Senior Notes to be due and payable immediately
Under each of the indentures governing the Public Senior Notes specified changes of control involving CF Holdings or CF Industries when accompanied by a ratings downgrade as defined with respect to the applicable series of Public Senior Notes constitute change of control repurchase events Upon the occurrence of a change of control repurchase event with respect to a series of Public Senior Notes unless CF Industries has exercised its option to redeem such Public Senior Notes CF Industries will be required to offer to repurchase them at a price equal to 101 of the principal amount thereof plus accrued and unpaid interest if any to but not including the date of repurchase
Under the terms of the indenture governing the 4 500 senior secured notes due 2026 the 2026 Notes the 2026 Notes are guaranteed by CF Holdings Interest on the 2026 Notes is payable semiannually 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
Under the indenture governing the 2026 Notes specified changes of control involving CF Holdings or CF Industries when accompanied by a ratings downgrade as defined with respect to the 2026 Notes constitute change of control repurchase events Upon the occurrence of a change of control repurchase event with respect to the 2026 Notes unless CF Industries has exercised its option to redeem such notes CF Industries will be required to offer to repurchase them at a price equal to 101 of the principal amount thereof plus accrued and unpaid interest if any to but not including the date of repurchase
The indenture governing the 2026 Notes contains covenants that limit among other things the ability of CF Holdings and its subsidiaries including CF Industries to incur liens on certain assets to secure debt to engage in sale and leaseback transactions to merge or consolidate with other entities and to sell lease or transfer all or substantially all of the assets of CF Holdings and its subsidiaries to another entity The indenture governing the 2026 Notes provides for customary events of default which include subject in certain cases to customary grace and cure periods among others nonpayment of principal or interest of the 2026 Notes failure to comply with other covenants or agreements under the indenture certain defaults on other indebtedness the failure of CF Holdings guarantee of the 2026 Notes to be enforceable and specified events of bankruptcy or insolvency Under the indenture governing the 2026 Notes in the case of an event of default arising from one of the specified events of bankruptcy or insolvency the 2026 Notes would become due and payable immediately and in the case of any other event of default other than an event of default related to CF Industries and CF Holdings reporting obligations the trustee or the holders of at least 25 in aggregate principal amount of the 2026 Notes then outstanding may declare all of such notes to be due and payable immediately
We offer our customers the opportunity to purchase products from us on a forward basis at prices and on delivery dates we propose Therefore our reported fertilizer selling prices and margins may differ from market spot prices and margins available at the time of shipment
Customer advances which typically represent a portion of the contract s value are received shortly after the contract is executed with any remaining unpaid amount generally being collected by the time control transfers to the customer thereby reducing or eliminating the accounts receivable related to such sales Any cash payments received in advance from customers in connection with forward sales contracts are reflected on our consolidated balance sheets as a current liability until control transfers and revenue is recognized As of December 31 2024 and 2023 we had 118 million and 130 million respectively in customer advances on our consolidated balance sheets
While customer advances are generally a significant source of liquidity the level of forward sales contracts is affected by many factors including current market conditions our customers outlook of future market fundamentals and seasonality During periods of declining prices customers tend to delay purchasing fertilizer in anticipation that prices in the future will be lower than the current prices If the level of sales under our forward sales programs were to decrease in the future our cash received from customer advances would likely decrease and our accounts receivable balances would likely increase Additionally borrowing under the Revolving Credit Agreement could become necessary Due to the volatility inherent in our business and changing customer expectations we cannot estimate the amount of future forward sales activity
Under our forward sales programs a customer may delay delivery of an order due to weather conditions or other factors These delays generally subject the customer to potential charges for storage or may be grounds for termination of the contract by us Such a delay in scheduled shipment or termination of a forward sales contract due to a customer s inability or unwillingness to perform may negatively impact our reported sales
Natural gas is the principal raw material used to produce our nitrogen products We use natural gas both as a chemical feedstock and as a fuel to produce ammonia granular urea UAN AN and other products Expenditures on natural gas are a significant portion of our production costs representing approximately 28 of our total production costs in 2024 As a result of these factors natural gas prices have a significant impact on our operating expenses and can thus affect our liquidity Natural gas costs in our cost of sales including the impact of realized natural gas derivatives decreased 35 to 2 40 per MMBtu in 2024 from 3 67 per MMBtu in 2023
We enter into agreements for a portion of our future natural gas supply and related transportation As of December 31 2024 our natural gas purchase agreements have remaining terms that range from five months to five years and a total minimum commitment of approximately 2 64 billion and our natural gas transportation agreements have terms that range from one to eight years and a total minimum commitment of approximately 62 million Our minimum commitments to purchase and transport natural gas are based on prevailing market based forward prices excluding reductions for plant maintenance and turnaround activities
Most of our nitrogen manufacturing facilities are located in the United States and Canada As a result the price of natural gas in North America directly impacts a substantial portion of our operating expenses During the three year period ended December 31 2024 the daily closing price at the Henry Hub the most heavily traded natural gas pricing point in North America reached a low of 1 23 per MMBtu on four consecutive days in November 2024 and a high of 12 97 per MMBtu on four consecutive days in January 2024
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 Volatility in reported quarterly earnings can result from the unrealized mark to market adjustments in the value of the derivatives In 2024 and 2023 we recognized unrealized net mark to market gains on natural gas derivatives of 35 million and 39 million respectively which is reflected in cost of sales in our consolidated statements of operations
Derivatives expose us to counterparties and the risks associated with their ability to meet the terms of the contracts For derivatives that are in net asset positions we are exposed to credit loss from nonperformance by the counterparties We control our credit risk through the use of multiple counterparties that are multinational commercial banks other major financial institutions or large energy companies and the use of International Swaps and Derivatives Association ISDA master netting arrangements The ISDA agreements are master netting arrangements commonly used for over the counter derivatives that mitigate exposure to counterparty credit risk in part by creating contractual rights of netting and setoff the specifics of which vary from agreement to agreement
The ISDA agreements for most of our derivative instruments 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 may require us to collateralize derivatives in a net liability position As of December 31 2024 and 2023 the aggregate fair value of the derivative instruments with credit risk related contingent features in net liability positions was zero and 34 million respectively which also approximates the fair value of the assets that may be needed to settle the obligations if the credit risk related contingent features were triggered at the reporting dates
As of December 31 2024 our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 16 0 million MMBtus As of December 31 2023 our open natural gas derivative contracts consisted of natural gas fixed price swaps basis swaps and options for 49 0 million MMBtus At both December 31 2024 and 2023 we had no cash collateral on deposit with counterparties for derivative contracts 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
We made cash contributions of 22 million to our pension plans in 2024 We expect to contribute approximately 6 million in total to our U S and U K pension plans in 2025 and as currently agreed with the plans trustees approximately 13 million to our U K pension plans in 2026
Net cash provided by operating activities in 2024 was 2 27 billion a decrease of 486 million compared to 2 76 billion in 2023 The decrease in cash flow from operations was due primarily to lower net earnings Net earnings in 2024 was 1 48 billion a decrease of 361 million compared to 1 84 billion in 2023 The decrease in net earnings was due primarily to a decrease in gross margin driven by lower average selling prices partially offset by lower natural gas costs a lower income tax provision and a decrease in net earnings attributable to noncontrolling interest During 2024 net changes in working capital also impacted cash flow from operations by contributing 63 million more toward net cash from operations in 2024 than in 2023 These changes primarily occurred in changes in accounts payable accrued expenses and customer advances partially offset by changes in inventories
Net cash used in investing activities was 469 million in 2024 compared to 1 68 billion in 2023 or a decrease of 1 21 billion The decrease was due primarily to the consideration paid of 1 223 billion for the Waggaman acquisition in 2023 See Acquisition of Waggaman Ammonia Production Facility above for additional information During 2024 capital expenditures totaled 518 million compared to 499 million in 2023
Net cash used in financing activities was 2 21 billion in 2024 compared to 1 37 billion in 2023 The increase was due primarily to an increase in share repurchases and dividends paid partially offset by a decrease in distributions to the noncontrolling interest In 2024 we paid 1 51 billion for share repurchases compared to 580 million for share repurchases in 2023 In 2024 dividends paid on common stock were 364 million compared to 311 million in 2023 The increase in dividends paid on common stock reflects quarterly dividends of 0 50 per common share declared and paid in 2024 compared to quarterly dividends of 0 40 per common share that were declared and paid in 2023 In 2024 distributions to the noncontrolling interest were 308 million compared to 459 million in 2023 due to lower earnings of CFN
Our discussion and analysis of our financial condition results of operations liquidity and capital resources is based upon our consolidated financial statements which have been prepared in accordance with U S GAAP U S GAAP requires that we select policies and make estimates and judgments that affect the reported amounts of assets liabilities revenues expenses and related disclosure of contingent assets and liabilities On an ongoing basis we evaluate our estimates We base our estimates on historical experience technological assessment opinions of appropriate outside experts and the most recent information available to us Actual results may differ from these estimates Changes in estimates that may have a material impact on our results are discussed in the context of the underlying financial statements to which they relate The following discussion presents information about our most critical accounting estimates
We review the carrying values of our property plant and equipment and other long lived assets including our finite lived intangible assets goodwill and our investment in an unconsolidated affiliate in accordance with U S GAAP in order to assess recoverability Factors that we must estimate when performing impairment tests include production and sales volumes selling prices raw material costs operating rates operating expenses inflation discount rates exchange rates tax rates capital spending and the impact that future market dynamics and geopolitical events could have on these factors Judgment is involved in estimating each of these factors which include inherent uncertainties The factors we use are consistent with those used in our internal planning process The recoverability of the values associated with our goodwill long lived assets and our investment in an unconsolidated affiliate is dependent upon future operating performance of the specific businesses to which
they are attributed Certain of the operating assumptions are particularly sensitive to the cyclical nature of the fertilizer industry Adverse changes in demand for our products increases in supply and the availability and costs of key raw materials could significantly affect the results of our review
The recoverability and impairment tests of long lived assets are required only when conditions exist that indicate the carrying value may not be recoverable For goodwill impairment tests are required at least annually or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable Our investment in an unconsolidated affiliate is reviewed for impairment whenever events or circumstances indicate that its carrying value may not be recoverable When circumstances indicate that the fair value of our investment is less than its carrying value and the reduction in value is other than temporary the reduction in value would be recognized immediately in earnings
We evaluate goodwill for impairment in the fourth quarter at the reporting unit level Our evaluation generally begins with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value If after performing the qualitative assessment we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount including goodwill then no further analysis is necessary However if it is unclear based on the results of the qualitative test we perform a quantitative test which involves comparing the fair value of a reporting unit with its carrying amount including goodwill We use an income based valuation method determining the present value of future cash flows to estimate the fair value of a reporting unit If the fair value of a reporting unit exceeds its carrying amount no further testing is necessary If the fair value of the reporting unit is less than its carrying amount goodwill impairment would be recognized equal to the amount of the carrying value in excess of the reporting unit s fair value limited to the total amount of goodwill allocated to the reporting unit
We review property plant and equipment and other long lived assets at the asset group level in order to assess recoverability based on expected future undiscounted cash flows If the sum of the expected future net undiscounted cash flows is less than the carrying value an impairment loss would be recognized The impairment loss is measured as the amount by which the carrying value exceeds the fair value of the long lived assets
PLNL is our joint venture investment in Trinidad and operates an ammonia plant that relies on natural gas supplied under a gas sales contract by the National Gas Company of Trinidad and Tobago Limited NGC The joint venture is accounted for under the equity method The joint venture experienced past curtailments in the supply of natural gas from NGC which reduced the ammonia production at PLNL The prior gas sales contract had an expiration date of September 2023 In the third quarter of 2023 PLNL entered into a new gas sales contract with NGC the New NGC Contract which is effective October 2023 through December 2025 In the third quarter of 2023 and due to the terms of the New NGC Contract we assessed our investment in PLNL for impairment and determined that the carrying value of our equity method investment in PLNL exceeded its fair value As a result we recorded an impairment of our equity method investment in PLNL of 43 million which is reflected in equity in earnings loss of operating affiliate in our consolidated statement of operations for the year ended December 31 2023
Any NGC commitment to supply gas beyond December 2025 will be based on new agreements If NGC does not make sufficient quantities of natural gas available to PLNL at prices that permit profitable operations PLNL may cease operating its facility and we would write off the remaining investment in PLNL The carrying value of our equity method investment in PLNL at December 31 2024 was 29 million
The projected benefit obligations PBOs for our defined benefit pension plans are affected by plan design actuarial estimates and discount rates Key assumptions that affect our PBO are discount rates and in addition for our United Kingdom plans inflation rates including an adjusted U K retail price index RPI
The December 31 2024 PBO was computed based on a weighted average discount rate of 5 2 for our North America plans and 5 5 for our United Kingdom plans which were based on yields for high quality AA rated or better fixed income debt securities that match the timing and amounts of expected benefit payments as of the measurement date of December 31 2024 Declines in comparable bond yields would increase our PBO For our United Kingdom plans the 3 1 RPI used to calculate our PBO is developed using a U K government gilt prices only retail price inflation curve which is based on the difference between yields on fixed interest government bonds and index linked government bonds
For North America qualified pension plans our PBO was 278 million as of December 31 2024 which was 21 million lower than pension plan assets For our United Kingdom pension plans our PBO was 317 million as of December 31 2024 which was 28 million lower than pension plan assets The table below estimates the impact of a 50 basis point increase or decrease in the key assumptions on our December 31 2024 PBO
We are subject to the income tax laws of the many jurisdictions in which we operate and we recognize expense assets and liabilities based on estimates of amounts that ultimately will be determined to be taxable or deductible in tax returns filed in various jurisdictions These tax laws are complex and how they apply to our facts is sometimes open to interpretation We recognize the effect of income tax positions only if sustaining those positions is more likely than not Tax positions that meet the more likely than not recognition threshold but are not highly certain are measured based on the largest amount of benefit that is greater than 50 likely of being realized upon settlement with the taxing authority Differences in interpretation of the tax laws and regulations including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal state and international tax audits can result in differences in taxes paid which may be higher or lower than our estimates The judgments made at a point in time may change from previous conclusions based on the outcome of tax audits as well as changes to or further interpretations of tax laws and regulations and these changes could significantly impact the provision for income taxes the amount of taxes payable and the deferred tax asset and liability balances We adjust our income tax provision in the period in which these changes occur As of December 31 2024 we have recorded a reserve for unrecognized tax benefits including penalties and interest of 285 million
We also engage in a significant amount of cross border transactions The taxability of cross border transactions has received an increasing level of scrutiny among regulators across the globe including the jurisdictions in which we operate The tax rules and regulations of the various jurisdictions in which we operate are complex and in many cases there is not symmetry between the rules of the various jurisdictions As a result there are instances where regulators within the jurisdictions involved in a cross border transaction may reach different conclusions regarding the taxability of the transaction in their respective jurisdictions based on the same set of facts and circumstances We work closely with regulators to reach a common understanding and conclusion regarding the taxability of cross border transactions
To manage such risks we may from time to time utilize derivatives that enable us to mitigate the adverse effects of financial market risk Our use of derivatives can result in volatility in reported earnings due to the unrealized mark to market adjustments that occur from changes in the value of the derivatives to which we do not apply hedge accounting To the extent that our derivative positions lose value 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 adversely affecting our liquidity
Our gross margin cash flows and estimates of future cash flows related to nitrogen based products are sensitive not only to selling prices of our products but also to changes in market prices of natural gas and other raw materials A 1 00 per MMBtu change in the price of natural gas would change the cost to produce a ton of ammonia granular urea UAN assuming a 32 nitrogen content and AN by approximately 33 22 14 and 16 respectively
Natural gas is the largest and most volatile component of the manufacturing cost for nitrogen based products From time to time we utilize natural gas derivatives to hedge our financial exposure to the price volatility of natural gas the principal raw material we use in the production of nitrogen based products We may use natural gas futures swaps and option contracts traded in over the counter markets or on exchanges These derivatives settle using primarily a NYMEX futures price index which represents the basis for fair value at any given time The contracts represent anticipated natural gas needs for future periods and settlements are scheduled to coincide with anticipated natural gas purchases during those future periods As of December 31 2024 we had natural gas derivative contracts covering certain periods through March 2025
As of December 31 2024 and 2023 we had open natural gas derivative contracts for 16 0 million MMBtus and 49 0 million MMBtus respectively A 1 00 per MMBtu increase in the forward curve prices of natural gas at December 31 2024 would result in a favorable change in the fair value of these derivative positions of approximately 14 million and a 1 00 per MMBtu decrease in the forward curve prices of natural gas would change their fair value unfavorably by approximately 14 million
As of December 31 2024 we had four series of senior notes totaling 3 00 billion of principal outstanding with maturity dates of December 1 2026 March 15 2034 June 1 2043 and March 15 2044 The senior notes have fixed interest rates As of December 31 2024 the carrying value and fair value of our senior notes was approximately 2 97 billion and 2 83 billion respectively
Our primary exposure to interest rate risk results from borrowings under the Revolving Credit Agreement if any which bear current market rates of interest plus a specified margin As of and during the years ended December 31 2024 and 2023 there were no borrowings outstanding under the Revolving Credit Agreement
We are directly exposed to changes in the value of the Canadian dollar the British pound and the euro We generally do not maintain any exchange rate derivatives or hedges related to these currencies but we may from time to time use foreign currency derivatives primarily forward exchange contracts to mitigate foreign currency exchange rate risk
We have audited the accompanying consolidated balance sheets of CF Industries Holdings Inc and subsidiaries the Company as of December 31 2024 and 2023 the related consolidated statements of operations comprehensive income equity and cash flows for each of the years in the three year period ended December 31 2024 and the related notes collectively the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company as of December 31 2024 and 2023 and the results of its operations and its cash flows for each of the years in the three year period ended December 31 2024 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of December 31 2024 based on criteria established in
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20 2025 expressed an unqualified opinion on the effectiveness of the Company s internal control over financial reporting
These consolidated financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on these consolidated financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the consolidated financial statements and 2 involved our especially challenging subjective or complex judgments The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As discussed in Note 13 to the consolidated financial statements the Company s projected benefit obligation PBO associated with its defined benefit pension plans established in North America and the United Kingdom was 278 million and 317 million respectively as of December 31 2024 The Company s PBO represents an actuarially determined estimate of the present value of the vested benefits to which each eligible employee is currently entitled based on the employee s expected date of separation or retirement Determining the PBO requires the Company to make assumptions including the selection of a discount rate for each of the North America and United Kingdom plans
We identified the evaluation of the Company s measurements of the PBO as a critical audit matter Specialized skills were needed to evaluate the discount rates utilized in the measurement of the PBO for each of the North America and United Kingdom plans In addition subjective auditor judgment was required to evaluate these discount rates as minor changes to these discount rates could have a significant impact on the PBO
The following are the primary procedures we performed to address this critical audit matter We evaluated the design and tested the operating effectiveness of certain internal controls over the Company s PBO accounting process including controls related to the determination of discount rates We involved actuarial professionals with specialized skills and knowledge who assisted in
independently developing a single equivalent discount rate for the North America plans using the PBO cash flows and publicly available yield curves for pension plans in North America and comparing that to the Company s selected discount rates for the North America plans
evaluating discount rates using benchmark yield curves for the United Kingdom adjusted for the assessment of the timing of payments expected to be made to beneficiaries under the Company s United Kingdom pension plans and comparing those to the Company s selected discount rates for the United Kingdom plans
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 low carbon hydrogen and nitrogen products for energy fertilizer emissions abatement and other industrial activities Our 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 retailers independent fertilizer distributors traders wholesalers and industrial users Our core product is anhydrous ammonia ammonia which contains 82 nitrogen and 18 hydrogen Products derived from ammonia that are most often used as nitrogen fertilizers include granular urea urea ammonium nitrate solution UAN and ammonium nitrate AN AN is also used extensively by the commercial explosives industry as a component of explosives Products derived from ammonia that are sold primarily to industrial customers include diesel exhaust fluid DEF urea liquor nitric acid and aqua ammonia
All references to CF Holdings the Company we us and our refer to CF Industries Holdings Inc and its subsidiaries except where the context makes clear that the reference is to CF Industries Holdings Inc only and not its subsidiaries All references to CF Industries refer to CF Industries Inc a 100 owned subsidiary of CF Industries Holdings Inc
six U S manufacturing facilities located in Donaldsonville Louisiana Sergeant Bluff Iowa our Port Neal complex Yazoo City Mississippi Claremore Oklahoma our Verdigris complex Woodward Oklahoma and Waggaman Louisiana The Waggaman facility is wholly owned by us and the other five U S manufacturing facilities are wholly owned directly or indirectly by CF Industries Nitrogen LLC CFN of which we own approximately 89 and CHS Inc CHS owns the remainder See Note 19 Noncontrolling Interest for additional information on our strategic venture with CHS
The consolidated financial statements of CF Holdings include the accounts of CF Industries and all majority owned subsidiaries All significant intercompany transactions and balances have been eliminated
We own approximately 89 of the membership interests in CFN and consolidate CFN in our financial statements CHS minority equity interest in CFN is included in noncontrolling interest in our consolidated financial statements See Note 19 Noncontrolling Interest for additional information
The preparation of financial statements in conformity with U S GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of 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 asset retirement obligations the cost of emission credits required to meet
environmental regulations the cost of customer incentives the fair values utilized in the allocation of purchase price in an acquisition useful lives of property and identifiable intangible assets the evaluation of potential impairments of property investments identifiable intangible assets and goodwill income tax reserves and the assessment of the realizability of deferred tax assets measurement of the fair values of investments for which markets are not active 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
We follow a five step model for revenue recognition The five steps are 1 identification of the contract s with the customer 2 identification of the performance obligation s in the contract s 3 determination of the transaction price 4 allocation of the transaction price to the performance obligation s and 5 recognition of revenue when or as each performance obligation is satisfied Control of our products transfers to our customers when the customer is able to direct the use of and obtain substantially all of the benefits from our products which occurs at the later of when title or risk of loss transfers to the customer Control generally transfers to the customer at a point in time upon loading of our product onto transportation equipment or delivery to a customer destination Revenue from forward sales programs is recognized on the same basis as other sales regardless of when the customer advances are received
In situations where we have agreed to arrange delivery of the product to the customer s intended destination and control of the product transfers upon loading of our product we have elected to not identify delivery of the product as a performance obligation We account for freight income associated with the delivery of these products as freight revenue since this activity fulfills our obligation to transfer the product to the customer Shipping and handling costs incurred by us are included in cost of sales
Cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less The carrying value of cash and cash equivalents approximates fair value
Short term investments and noncurrent investments are accounted for primarily as available for sale securities reported at fair value Changes in the fair value of available for sale debt securities are recognized in other comprehensive income Changes in the fair value of available for sale equity securities are recognized through earnings The carrying values of short term investments if any approximate fair values because of the short maturities and the highly liquid nature of these investments
Inventories are reported at the lower of cost and net realizable value with cost determined on a first in first out and average cost basis Inventory includes the cost of materials production labor and production overhead Inventory at warehouses and terminals also includes distribution costs to move inventory to the distribution facilities Net realizable value is reviewed at least quarterly Fixed production costs related to idle capacity are not included in the cost of inventory but are charged directly to cost of sales in the period incurred
The equity method of accounting is used for our investment in an affiliate that we do not consolidate but over which we have the ability to exercise significant influence Our equity method investment for which the results are included in operating earnings consists of our 50 ownership interest in PLNL which operates an ammonia production facility in Trinidad Our share of the net earnings from this investment is reported as an element of earnings from operations because PLNL s operations provide additional production and are integrated with our supply chain and sales activities in the Ammonia segment
Profits resulting from sales or purchases with equity method investees are eliminated until realized by the investee or investor respectively Investments in affiliates are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable If circumstances indicate that the fair value of an investment in an affiliate is less than its carrying value and the reduction in value is other than temporary the reduction in value would be recognized immediately in earnings
Property plant and equipment are stated at cost Depreciation and amortization are computed using the straight line method and are recorded over the estimated useful life of the property plant and equipment Useful lives are as follows
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 Plant turnarounds are accounted for under the deferral method as opposed to the direct expense or built in overhaul methods Under the deferral method expenditures related to turnarounds are capitalized in property plant and equipment when incurred and amortized to production costs on a straight line basis over the period benefited which is until the next scheduled turnaround in up to five years If the direct expense method were used all turnaround costs would be expensed as incurred Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized Turnaround costs are classified as investing activities and included in capital expenditures in our consolidated statements of cash flows See Note 8 Property Plant and Equipment Net for additional information
We review property plant and equipment and other long lived assets at the asset group level in order to assess recoverability based on expected future undiscounted cash flows whenever events or circumstances indicate that the carrying value may not be recoverable If the sum of the expected future net undiscounted cash flows is less than the carrying value an impairment loss would be recognized The impairment loss is measured as the amount by which the carrying value exceeds the fair value of the asset For property plant and equipment that is planned for abandonment we first consider a market or income based valuation method In situations where a secondary market does not exist and the assets have been idled and planned for abandonment and therefore will not generate future cash flows from operations we estimate a salvage value for those assets See Note 7 United Kingdom Operations Restructuring and Impairment Charges and Note 8 Property Plant and Equipment Net for additional information
Goodwill represents the excess of the purchase price of an acquired entity over the amounts assigned to the assets acquired and liabilities assumed Goodwill is not amortized but is reviewed for impairment annually or more frequently whenever events or circumstances indicate that the carrying value may not be recoverable We perform our annual goodwill impairment review in the fourth quarter of each year at the reporting unit level Our evaluation generally begins with a qualitative assessment of the factors that could impact the significant inputs used to estimate fair value If after performing the qualitative assessment we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount including goodwill then no further analysis is necessary However if the results of the qualitative test are unclear we perform a quantitative test which involves comparing the fair value of a reporting unit with its carrying amount including goodwill We use an income based valuation method determining the present value of future cash flows to estimate the fair value of a reporting unit If the fair value of a reporting unit exceeds its carrying amount no further analysis is necessary If the fair value of the reporting unit is less than its carrying amount goodwill impairment would be recognized equal to the amount of the carrying value in excess of the reporting unit s fair value limited to the total amount of goodwill allocated to the reporting unit See Note 9 Goodwill and Other Intangible Assets for additional information regarding our goodwill
Right of use ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term The discount rate used to calculate the present value represents our secured incremental borrowing rate and is calculated based on the treasury yield curve commensurate with the term of each lease and a spread representative of our secured borrowing costs Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option
Leases may be classified as either operating leases or finance leases We have made an accounting policy election to not include leases with an initial term of 12 months or less on the balance sheet For finance leases if any ROU assets are amortized over the lease term on a straight line basis and interest expense is recognized using the effective interest method and based on the lease liability at period end For operating leases rental payments including rent holidays leasehold incentives and scheduled rent increases are expensed on a straight line basis Leasehold improvements are amortized over the shorter of the depreciable lives of the corresponding fixed assets or the lease term including any applicable renewals For our rail car leases barge tow charters and terminal and warehouse storage agreements we have made an accounting policy election to not separate lease and non lease components such as operating costs and maintenance due to sufficient data not being available As a result the non lease components are included in the ROU assets and lease liabilities on our consolidated balance sheet See Note 25 Leases for additional information
Income taxes are accounted for under the asset and liability method Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are projected to be recovered or settled Realization of deferred tax assets is dependent on our ability to generate sufficient taxable income of an appropriate character in future periods A valuation allowance is established if it is determined to be more likely than not that a deferred tax asset will not be realized Significant judgment is applied in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets
We record our tax expense for Global Intangible Low Taxed Income GILTI as an expense in the period in which incurred and as such do not record a deferred tax liability for taxes that may be due in future periods
Customer advances represent cash received from customers following acceptance of orders under our forward sales programs Under such advances the customer prepays a portion of the value of the sales contract prior to obtaining control of the product thereby reducing or eliminating accounts receivable from customers Revenue is recognized when the customer obtains control of the product
Natural gas is the principal raw material used to produce nitrogen based products We manage the risk of changes in natural gas prices primarily through the use of derivative financial instruments The derivative instruments that we use are primarily natural gas fixed price swaps basis swaps and options traded in the over the counter OTC markets The derivatives reference primarily a NYMEX futures price index which represent the basis for fair value at any given time These derivatives are traded in months forward and settlements are scheduled to coincide with anticipated gas purchases during those future periods From time to time we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates We do not use derivatives for trading purposes and are not a party to any leveraged derivatives
Derivative financial instruments are accounted for at fair value and recognized as current or noncurrent assets and liabilities on our consolidated balance sheets 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 The fair values of derivative instruments and any related cash collateral are reported on a gross basis rather than on a net basis Cash flows related to natural gas derivatives are reported as operating activities
Costs associated with the issuance of debt are recorded on the balance sheet as a direct deduction from the carrying amount of the related debt liability Costs associated with entering into revolving credit facilities are recorded as an asset in noncurrent assets All debt issuance costs are amortized over the term of the related debt using the effective interest rate method Debt issuance discounts are netted against the related debt and are amortized over the term of the debt using the effective interest method See Note 14 Financing Agreements for additional information
Environmental expenditures that relate to current operations are expensed or capitalized as appropriate Expenditures that relate to an existing condition caused by past operations are expensed Expenditures that increase the capacity or extend the useful life of an asset improve the safety or efficiency of the operations or mitigate or prevent future environmental contamination are capitalized Liabilities are recorded when it is probable that an obligation has been incurred and the costs can be reasonably estimated Environmental liabilities are not discounted
regulatory programs From time to time we may also purchase emission credits We have elected to account for emission credits using the intangible asset model Under this model emission credits that are purchased are measured at their cost basis and tested for impairment annually We do not recognize any internally generated emission credits under the intangible asset model until a monetary transaction occurs such as a sale of the emission credits If a facility exceeds regulatory emissions allowance levels and offsetting credits are not held by us our obligation is recognized as an operating expense and a liability at the fair value of the emissions allowance deficit
We grant stock based compensation awards under our equity and incentive plans The awards that have been granted to date are nonqualified stock options restricted stock awards restricted stock units and performance restricted stock units The cost of employee services received in exchange for the awards is measured based on the fair value of the award on the grant date and is recognized as expense on a straight line basis over the period during which the employee is required to provide the services We have elected to recognize equity award forfeitures as they occur in determining the compensation cost to be recognized in each period See Note 21 Stock based Compensation for additional information
We periodically retire treasury shares acquired through repurchases of our common stock and return those shares to the status of authorized but unissued We account for treasury stock transactions under the cost method For each reacquisition of common stock the number of shares and the acquisition price for those shares is added to the treasury stock count and total value When treasury shares are retired we allocate the excess of the repurchase price over the par value of shares acquired to both retained earnings and paid in capital The portion allocated to paid in capital is determined by applying the average paid in capital per share and the remaining portion is recorded to retained earnings Payments of excise taxes associated with treasury stock repurchases are classified as a financing activity in our consolidated statements of cash flows
From time to time we are subject to ordinary routine legal proceedings related to the usual conduct of our business We may also be involved in proceedings regarding public utility and transportation rates environmental matters taxes and permits relating to the operations of our various plants and facilities Accruals for such contingencies are recorded to the extent management concludes their occurrence is probable and the financial impact of an adverse outcome is reasonably estimable Legal fees are recognized as incurred and are not included in accruals for contingencies Disclosure for specific legal contingencies is provided if the likelihood of occurrence is at least reasonably possible and the exposure is considered material to the consolidated financial statements
In making determinations of likely outcomes of litigation matters many factors are considered These factors include but are not limited to history scientific and other evidence and the specifics and status of each matter If the assessment of various factors changes the estimates may change Predicting the outcome of claims and litigation and estimating related costs and exposure involves substantial uncertainties that could cause actual costs to vary materially from estimates and accruals
We translate the financial statements of our foreign subsidiaries with non U S dollar functional currencies using period end exchange rates for assets and liabilities and weighted average exchange rates for each period for revenues and expenses The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income loss within stockholders equity
Foreign currency denominated assets and liabilities are remeasured into U S dollars at exchange rates existing at the respective balance sheet dates Gains and losses resulting from these foreign currency transactions are included in other operating net in our consolidated statements of operations Gains and losses resulting from intercompany foreign currency transactions that are of a long term investment nature if any are reported in other comprehensive income
In November 2023 the Financial Accounting Standards Board FASB issued Accounting Standards Update ASU No 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment s profit or loss and assets that are currently required annually Additionally it requires a public entity to disclose the title and position of the Chief Operating Decision Maker CODM We adopted this ASU effective December 31 2024 See Note 22 Segment Disclosures which includes the additional disclosures required by this ASU
In December 2023 the FASB issued ASU No 2023 09 Income Taxes Topic 740 Improvements to Income Tax Disclosures This ASU adds new guidance that further enhances income tax disclosures primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction The amendments are effective for fiscal years beginning after December 15 2024 with early adoption permitted We are continuing to evaluate the impact that our adoption of this ASU will have on the disclosures in our consolidated financial statements
In November 2024 the FASB issued ASU No 2024 03 Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures Subtopic 220 40 Disaggregation of Income Statement Expenses This ASU requires disclosure within the footnotes to the financial statements of specified costs and expenses disaggregated from the amounts presented on consolidated statements of operations The guidance in this ASU is effective for fiscal years beginning after December 15 2026 and interim periods within fiscal years beginning after December 15 2027 with early adoption permitted We are currently evaluating the impact that our adoption of this ASU will have on the disclosures in our consolidated financial statements
Our performance obligations under a customer contract correspond to each shipment of product that we make to our customer under the contract As a result each contract may have more than one performance obligation based on the number of products ordered the quantity of product to be shipped and the mode of shipment requested by the customer When we enter into a contract with a customer we are obligated to provide the product in that contract during a mutually agreed upon time period Depending on the terms of the contract either we or the customer arranges delivery of the product to the customer s intended destination When we arrange delivery of the product and control of the product transfers upon loading we recognize freight revenue which was 78 million for 2024 92 million for 2023 and 91 million for 2022
Certain of our contracts require us to supply products on a continuous basis to the customer We recognize revenue on these contracts based on the quantity of products transferred to the customer during the period For 2024 2023 and 2022 the total amount of revenue for these contracts was 115 million 61 million and 65 million respectively
From time to time we will enter the marketplace to purchase product in order to satisfy the obligations of our customer contracts When we purchase product for this purpose we are the principal in the transaction and recognize revenue on a gross basis As discussed in Note 10 Equity Method Investment 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 Other than products purchased from PLNL products purchased in the marketplace in order to satisfy the obligations of our customers were not material during 2024 2023 and 2022
We agree with our customers on the selling price of each transaction This transaction price is generally based on the product market conditions including supply and demand balances freight arrangements including where control transfers and customer incentives In our contracts with customers we allocate the entire transaction price to the sale of product to the customer which is the basis for the determination of the relative standalone selling price allocated to each performance obligation Any sales tax value added tax and other tax we collect concurrently with our revenue producing activities are excluded from revenue Returns of our product by our customers are permitted only when the product is not to specification Returns were not material during 2024 2023 and 2022
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 Accrual of these incentives involves the use of estimates including how much product the customer will purchase and whether the customer will achieve a certain level of purchases within the incentive period The balances of customer incentives accrued at December 31 2024 and 2023 were not material
We track our revenue by product and by geography See Note 22 Segment Disclosures for our revenue by reportable segment 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 2024 2023 and 2022
Our customers purchase our products through sales on credit or forward sales Products sold to our customers on credit are recorded as accounts receivable when the customer obtains control of the product Customers that purchase our products on credit are required to pay in accordance with our customary payment terms which are generally less than 30 days For 2024 2023 and 2022 the amount of customer bad debt expense recognized was not material
For forward sales the customer prepays a portion of the value of the sales contract prior to obtaining control of the product These prepayments when received are recorded as customer advances and are recognized as revenue when the customer obtains control of the product Forward sales are customarily offered for periods of less than one year in advance of when the customer obtains control of the product As of December 31 2024 and 2023 we had 118 million and 130 million respectively in customer advances on our consolidated balance sheets The decrease in the balance of customer advances was due primarily to lower average selling prices in 2024 compared to 2023 All of our customer advances that were recorded as of December 31 2023 were recognized as revenue in 2024
We have certain customer contracts with performance obligations where if the customer does not take the required amount of product specified in the contract then the customer is required to make a payment to us the amount of which may vary based upon the terms and conditions of the applicable contract As of December 31 2024 excluding contracts with original durations of less than one year and based on the minimum product tonnage to be sold and current market price estimates our remaining performance obligations under these contracts were approximately 2 2 billion We expect to
recognize approximately 24 of these performance obligations as revenue in 2025 approximately 26 as revenue during 2026 2028 approximately 17 as revenue during 2029 2031 and the remainder as revenue thereafter Subject to the terms and conditions of the applicable contracts if these customers do not satisfy their purchase obligations under such contracts the minimum amount that they would be required to pay to us under such contracts in the aggregate was approximately 1 2 billion as of December 31 2024 Other than the performance obligations described above any performance obligations with our customers that were unfulfilled or partially filled at December 31 2024 will be satisfied in 2025
All of our contracts require that the period between the payment for goods and the transfer of those goods to the customer occur within normal contractual terms that do not exceed one year therefore we have elected the practical expedient and not adjusted the transaction price of any of our contracts to recognize a significant financing component We have also elected the practical expedient to not capitalize any incremental costs associated with obtaining a contract that has a duration of less than one year and there were no costs capitalized during 2024 2023 or 2022
In connection with our acquisition of the Waggaman ammonia production facility we entered into a long term ammonia offtake agreement providing for us to supply up to 200 000 tons of ammonia per year to Dyno Nobel Inc the Supply Contract The terms of the Supply Contract were determined to be unfavorable compared to market as of the acquisition date As a result we recorded an intangible liability with an acquisition date fair value of 757 million which is being amortized to net sales over the estimated life of the Supply Contract of 25 years For the years ended December 31 2024 and 2023 we amortized 30 million and 3 million respectively of the Supply Contract liability into net sales As of December 31 2024 and 2023 we had 724 million and 754 million respectively in Supply Contract liability on our consolidated balance sheets Estimated amortization of the Supply Contract liability for each of the fiscal years from 2025 to 2029 is approximately 30 million See Note 6 Acquisition of Waggaman Ammonia Production Facility for additional information
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 for the years ended December 31 2024 2023 and 2022
On December 1 2023 we acquired an ammonia production facility located in Waggaman Louisiana from Dyno Nobel Louisiana Ammonia LLC DNLA a U S subsidiary of Australia based Incitec Pivot Limited IPL pursuant to an asset purchase agreement with DNLA and IPL The facility has a nameplate production capacity of 880 000 tons of ammonia annually Our acquisition of the Waggaman facility expanded our ammonia manufacturing and distribution capacity
In connection with the acquisition we entered into a long term ammonia offtake agreement providing for us to supply up to 200 000 tons of ammonia per year to IPL s Dyno Nobel Inc subsidiary the Supply Contract Under the terms of the asset
purchase agreement 425 million of the purchase price of 1 675 billion subject to adjustment was allocated by the parties to the ammonia offtake agreement We funded the balance of the initial purchase price on the acquisition date with 1 223 billion of cash on hand
The consideration transferred on the acquisition date reflected an estimated net working capital adjustment and other adjustments to the purchase price which was subject to further adjustment pursuant to the terms of the asset purchase agreement The purchase price adjustments required under the asset purchase agreement were finalized in the second quarter of 2024 which resulted in a 2 million reduction in the purchase price with a corresponding reduction in goodwill As a result the final purchase price was 1 221 billion and we finalized our purchase accounting for the Waggaman ammonia production facility in the second quarter of 2024
In connection with the Waggaman acquisition we incurred 4 million of integration costs in 2024 and 3 million and 36 million respectively of integration costs and acquisition related costs in 2023 which are included in acquisition and integration costs in our consolidated statements of operations
We accounted for the acquisition as a business combination The following table summarizes the allocation of the acquisition date fair value of the consideration transferred to the assets acquired and liabilities assumed The estimated fair value of the assets acquired and liabilities assumed was based on the estimated net realizable value for inventory a replacement cost approach for property plant and equipment and the income approach for intangible assets and the Supply Contract liability
Current assets acquired included accounts receivable of 32 million and inventory of 5 million The acquired property plant and equipment is being depreciated over a period consistent with our fixed assets depreciation policy
The acquisition resulted in the recognition of 404 million of goodwill which is recognized in our ammonia segment Goodwill arising from the acquisition is expected to be deductible for tax reporting purposes Other assets acquired included intangible assets of 526 million including 455 million of customer relationships and 71 million related to a favorable personal property tax agreement The acquired intangible assets are being amortized over a period consistent with our existing intangible asset amortization policy See Note 9 Goodwill and Other Intangible Assets for additional information related to goodwill and the acquired intangible assets
In addition the terms of the Supply Contract were determined to be unfavorable compared to market as of the acquisition date As a result we recorded an intangible liability reflected as Supply Contract liability in the table above with an acquisition date fair value of 757 million which is being amortized to net sales over the estimated life of the Supply Contract of 25 years
Financial results of the Waggaman facility are included in our consolidated statements of operations from the acquisition date of December 1 2023 For the year ended December 31 2023 the amount of net sales and net earnings of the Waggaman facility included in our consolidated statement of operations was 28 million and 7 million respectively
The valuation of the assets acquired and liabilities assumed as a result of our acquisition of the Waggaman ammonia production facility on December 1 2023 required us to make significant estimates and assumptions
We estimated the fair value of the customer relationships of 455 million using the multi period excess earnings method of the income approach which incorporated the estimated future cash flows associated with the net earnings attributable to the acquired customer relationships The estimated future cash flows were discounted to their present value using an appropriate risk adjusted discount rate from the perspective of a market participant Key assumptions used in estimating future cash flows included forecasted product selling prices future production and sales volumes probability of renewal projected natural gas costs operating rates operating expenses inflation tax rates capital spending and contributory asset charges among other factors The discount rate utilized in estimating the fair value of the customer relationships was 9 0 and was derived using a capital asset pricing model and publicly available data for comparable companies to estimate the cost of equity financing We used Moody s Baa corporate bonds as a benchmark to estimate the cost of debt Additional assumptions utilized in the valuation of the customer relationships included the duration of the forecasted cash flows and the tax amortization benefit among other factors
The terms of the Supply Contract were determined to be unfavorable compared to market as of the acquisition date Therefore we estimated the fair value of the Supply Contract liability of 757 million using the with and without method of the income approach This method included estimating the future cash flows by applying both a market price and the contract price in determining the respective forecasted sales The difference in the estimated future cash flows using the resulting forecasted sales was then discounted to present value at the date of acquisition using an appropriate risk adjusted discount rate from the perspective of a market participant Key assumptions used in estimating future cash flows included forecasted product selling price specifically the market price in excess of the contract price future production and sales volumes probability of renewal and inflation among other factors The discount rate utilized in estimating the fair value of the Supply Contract liability was 6 2 and was derived based on the historical cost of our issued debt and treasury and corporate bond yields as of the acquisition date Additional assumptions utilized in the valuation of the Supply Contract liability included the duration of the forecasted cash flows among other factors
During the third quarter of 2021 the United Kingdom began experiencing an energy crisis that included a substantial increase in the price of natural gas The U K energy crisis necessitated evaluations of the long lived assets including definite lived intangible assets and goodwill of our U K operations to determine if their fair value had declined to below their carrying value For the full year ended December 31 2021 these evaluations resulted in goodwill and long lived and intangible asset impairment charges As of December 31 2021 no goodwill related to our U K reporting units remained
During the first quarter of 2022 we concluded that the continued impacts of the U K energy crisis including further increases and volatility in natural gas prices due in part to geopolitical events as a result of Russia s invasion of Ukraine in February 2022 triggered an additional long lived asset impairment test The results of this test indicated that no additional long lived asset impairment existed as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U K asset groups
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 additional 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
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
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
There was no additional asset impairment indicated for the three asset groups that comprise the continuing U K operations as the undiscounted estimated future cash flows were in excess of the carrying values for each of these asset groups
In the third quarter of 2022 the United Kingdom continued to experience extremely high and volatile natural gas prices Russian natural gas flows to Europe via the Nord Stream 1 pipeline ceased causing the United Kingdom to experience unprecedented natural gas prices In addition the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries further contributing to the uncertainty in European energy markets Given these factors and the lack of a corresponding increase in global nitrogen product market prices in September 2022 we temporarily idled ammonia production at our Billingham complex As a result we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U K operations The results of our impairment test indicated that the carrying values for our U K Ammonia and U K AN asset groups exceeded the undiscounted estimated future cash flows As a result we recognized asset impairment charges of 87 million primarily related to property plant and equipment and definite lived intangible assets
In August 2022 the final restructuring plan for our U K operations was approved and decommissioning activities were initiated As a result in the third quarter of 2022 we incurred additional charges related to our U K restructuring of 8 million primarily related to one time termination benefits In the fourth quarter of 2022 we incurred additional charges related to our U K restructuring of 1 million primarily related to one time termination benefits
For the full year ended December 31 2022 as a result of the above we recognized total impairment and restructuring charges of 258 million consisting of long lived and intangible asset impairment charges of 239 million and restructuring charges of 19 million
In July 2023 we approved and announced our proposed plan to permanently close the ammonia plant at our Billingham complex and in September 2023 the final plan was approved As a result in 2023 we recognized total charges of 10 million which is included in the U K operations restructuring line item in our consolidated statements of operations consisting primarily of the recognition of an asset retirement obligation and post employment benefits related to contractual and statutory obligations due to employees whose employment would be terminated
The valuation of our asset groups and reporting units required significant judgment in evaluating recent indicators of market activity and estimating future cash flows discount rates and other factors The expected cash flows used in the long lived asset impairment tests reflected assumptions about product selling prices and natural gas costs as well as estimated future production and sales volumes operating rates operating expenses inflation discount rates tax rates and capital spending The valuations also incorporated assumptions regarding the time it could take for the U K energy crisis to be resolved In addition assumptions were used to estimate the fair value of the long lived assets in our asset groups which included replacement cost and for the Ince U K asset group that is planned for abandonment salvage value
The discount rates utilized to discount the cash flows in calculating long lived asset impairment were derived using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing The discount rates were commensurate with the risks and uncertainties inherent in the business and in the United Kingdom and our cash flow forecasts updated for recent events at that time
Additional assumptions utilized in the long lived asset impairment analyses were royalty rates and attrition rates in estimating the fair value of our definite lived intangible assets consisting of trade names and customer relationships for which we used the relief from royalty method of the income approach and the multi period excess earnings method respectively
For the asset groups that comprise the continuing U K operations the fair value of our property plant and equipment utilized in the long lived asset impairment analyses was estimated using the indirect method of the cost approach by determining the reproduction cost new or replacement cost of the assets and applying appropriate adjustments for depreciation including an inutility adjustment based on the cash flows expected to be generated by those asset groups For property plant and equipment within the Ince U K asset group an asset group planned for abandonment we first considered use of a market or income based valuation method However given that a secondary market did not exist and the assets had been idled with a planned abandonment and therefore would not generate future cash flows from operations we estimated the fair value of the asset group by determining the replacement cost of the underlying assets and then adjusting each of the asset categories to an estimated salvage value utilizing industry recognized price publications
Scheduled inspections replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds The expenditures related to plant turnarounds are capitalized in property plant and equipment when incurred
Scheduled replacements and overhauls of plant machinery and equipment during a plant turnaround include the dismantling repair or replacement and installation of various components including piping valves motors turbines pumps compressors and heat exchangers and the replacement of catalysts Scheduled inspections including required safety inspections which entail the disassembly of various components such as steam boilers pressure vessels and other equipment requiring safety certifications are also conducted during plant turnarounds Internal employee costs and overhead amounts are not considered plant turnaround costs and are not capitalized
In connection with our acquisition of the Waggaman ammonia production facility on December 1 2023 we recorded 526 million of intangible assets including 455 million of customer relationships and 71 million related to a favorable personal property tax agreement See Note 6 Acquisition of Waggaman Ammonia Production Facility for additional information
Our customer relationships are being amortized over a weighted average life of approximately 20 years For the years ended December 31 2024 2023 and 2022 amortization expense of our customer relationships was 26 million 5 million and 3 million respectively Estimated amortization expense related to customer relationships for each of the fiscal years from 2025 to 2029 is approximately 26 million
The intangible asset related to the favorable personal property tax agreement is being amortized over the agreement s remaining term of approximately 12 years Estimated amortization expense related to this intangible asset for each of the fiscal years from 2025 to 2029 is approximately 6 million
In June 2022 we approved and announced our proposed plan to restructure our U K operations including the planned permanent closure of our Ince facility and optimization of the remaining manufacturing operations at our Billingham facility As a result in the second quarter of 2022 we recorded an intangible asset impairment charge of 8 million related to trade names
In the third quarter of 2022 the United Kingdom continued to experience extremely high and volatile natural gas prices Given the increase in the price of natural gas in the United Kingdom and the lack of a corresponding increase in global nitrogen product market prices in September 2022 we temporarily idled ammonia production at our Billingham complex As a result we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U K operations which resulted in asset impairment charges of 87 million in our U K Ammonia and U K AN asset groups of which 15 million related to intangible assets consisting of 6 million related to customer relationships and 9 million related to trade names As a result of these impairment charges intangible assets related to our U K operations were fully written off See Note 7 United Kingdom Operations Restructuring and Impairment Charges for additional information
We have a 50 ownership interest in PLNL which operates an ammonia production facility in Trinidad We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the Ammonia segment
PLNL operates an ammonia plant that relies on natural gas supplied under a gas sales contract the NGC Contract by The National Gas Company of Trinidad and Tobago Limited NGC The NGC Contract had an expiration date of September 2023 In the third quarter of 2023 PLNL entered into a new gas sales contract with NGC the New NGC Contract which is effective October 2023 through December 2025
In the third quarter of 2023 and due to the terms of the New NGC Contract we assessed our investment in PLNL for impairment and determined that the carrying value of our equity method investment in PLNL exceeded its fair value As a result we recorded an impairment of our equity method investment in PLNL of 43 million which is reflected in equity in earnings loss of operating affiliate on our consolidated statement of operations for the year ended December 31 2023 As of December 31 2024 the total carrying value of our equity method investment in PLNL was 29 million
We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50 of the ammonia produced by PLNL at current market prices Our ammonia purchases from PLNL totaled 90 million 142 million and 259 million in 2024 2023 and 2022 respectively
Under our short term investment policy we may invest our cash balances either directly or through mutual funds in several types of investment grade securities including notes and bonds issued by governmental entities or corporations and also in bank deposits Securities issued by governmental entities include those issued directly by the U S and Canadian federal governments those issued by state local or other governmental entities and those guaranteed by entities affiliated with governmental entities
The following tables present assets and liabilities included in our consolidated balance sheets as of December 31 2024 and 2023 that are recognized at fair value on a recurring basis and indicate the fair value hierarchy utilized to determine such fair value
Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less As of December 31 2024 and 2023 our cash equivalents consisted primarily of U S and Canadian government obligations and money market mutual funds that invest in U S government obligations and other investment grade securities
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 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
The derivative instruments that we use are primarily natural gas fixed price swaps basis swaps and options traded in the OTC 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 17 Derivative Financial Instruments for additional information
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
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 a recurring basis but are subject to fair value adjustments in certain circumstances such as when there is evidence of impairment when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement These include long lived assets goodwill and other intangible assets and investments in unconsolidated subsidiaries such as equity method investments which may be written down to fair value as a result of impairment The fair value measurements related to assets and liabilities measured at fair value on a nonrecurring basis rely primarily on Company specific inputs Since certain of the Company s assumptions would involve inputs that are not observable these fair values would reside within Level 3 of the fair value hierarchy
On December 1 2023 we acquired the Waggaman ammonia production facility See Note 6 Acquisition of Waggaman Ammonia Production Facility for information on the inputs utilized in the allocation of purchase price to the fair value of assets acquired and liabilities assumed
In the third quarter of 2023 we determined the carrying value of our equity method investment in PLNL exceeded its fair value and recorded an impairment of our equity method investment in PLNL of 43 million See Note 10 Equity Method Investment for additional information
Differences in the expected income tax provision based on statutory rates applied to earnings before income taxes and the income tax provision reflected in the consolidated statements of operations are summarized below
Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CFN as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest As a result earnings attributable to the noncontrolling interest of 259 million 313 million and 591 million in 2024 2023 and 2022 respectively which are included in earnings before income taxes impacted the effective tax rate in all three years See Note 19 Noncontrolling Interest for additional information
The foreign tax rate differential is impacted by the inclusion of equity earnings from our equity method investment in PLNL a foreign operating affiliate which are included in pre tax earnings on an after tax basis
U S tax on foreign earnings is inclusive of the U S tax on our 50 ownership in PLNL current year tax on GILTI benefit from the GILTI Section 250 deduction and foreign tax credits as well as adjustments to prior year amounts for these items
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 subsidiaries 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 of approximately 129 million
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 to 2011 partially offset by net income tax receivables of approximately 51 million in the United States and we accrued net interest of 102 million primarily reflecting the estimated interest payable to Canada The 69 million in the effective tax rate table above excludes the state income tax liability of 9 million which is included in the line State income tax net of federal
In the second half of 2022 this tax liability and the related interest was 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 we filed amended tax returns in the United States to request a refund of taxes paid
In the third quarter of 2024 we were informed that the CRA granted us discretionary interest relief for certain tax years from 2006 through 2011 In the fourth quarter of 2024 we received the CRA portion of the interest relief consisting of interest refunds of 21 million and related interest of 2 million Based on current estimates and foreign currency exchange rates as of December 31 2024 the interest relief from the Alberta TRA is estimated to be approximately 16 million consisting of interest refunds of 15 million and related interest of 1 million As a result in our consolidated statement of operations for the year ended December 31 2024 we recognized 39 million of income consisting of a 36 million reduction in interest expense and 3 million of interest income
The Company does not have an indefinite reinvestment assertion in any of our foreign subsidiaries As of December 31 2024 we recorded a deferred tax liability of 14 million on the undistributed earnings of our Canadian subsidiaries We have not provided for deferred taxes on the remainder of our undistributed earnings from our foreign subsidiaries because such earnings would not give rise to additional tax liabilities upon repatriation
As of December 31 2024 our net operating loss and capital loss carryforwards consist primarily of state net operating loss carryforwards of 56 million of which 15 million will expire at various dates between 2036 and 2044 and the remaining 41 million can be carried forward indefinitely and foreign capital loss carryforwards of 49 million which can be carried forward indefinitely Our foreign subsidiaries have operations that do not normally generate capital gains and have no practical plans to do so in the future As a result we have recorded a full valuation allowance against all foreign capital loss carryforwards
In 2024 the net decrease in the valuation allowance is primarily attributable to a reduction of 83 million in a capital loss carryforward and the associated valuation allowance for one of our foreign subsidiaries in Canada Additionally based on income generated in the United Kingdom and the reversal of deferred tax assets the remaining valuation allowance originally recorded in 2022 for one of our foreign subsidiaries in the United Kingdom was released in 2024 resulting in an 11 million decrease to the valuation allowance Both of these decreases were partially offset by the impact of changes in foreign currency exchange rates
In 2023 the net increase in the valuation allowance is primarily attributable to excess foreign tax credits associated with certain U S taxed foreign branch income and the impact of changes in foreign currency exchange rates partially offset by the utilization of deferred tax assets of one of our foreign subsidiaries in the United Kingdom The excess foreign tax credits carried forward subject to U S foreign tax credit limitation rules are not expected to be utilized prior to expiration and have a full valuation allowance of 55 million reflecting an increase of 11 million in 2023 Based on recent income generated in the United Kingdom a portion of the deferred tax assets for which a full valuation allowance had been recorded in 2022 was
In 2022 the net increase in the valuation allowance is primarily attributable to excess foreign tax credits associated with certain U S taxed foreign branch income and the reversal of future deductible temporary differences of one of our foreign subsidiaries in the United Kingdom partially offset by the impact of changes in foreign currency exchange rates The excess foreign tax credits carried forward subject to U S foreign tax credit limitation rules are not expected to be utilized prior to expiration and have a full valuation allowance of 44 million reflecting an increase of 26 million in 2022 Based on recent losses generated in the United Kingdom and projections for future income over the period for which the deferred tax assets will reverse we believe it is more likely than not that the foreign subsidiary in the United Kingdom will not realize the deferred tax assets and therefore have recorded a full valuation allowance of 24 million See Note 7 United Kingdom Operations Restructuring and Impairment Charges for additional detail
In 2024 we increased the amount of our unrecognized tax benefit by 8 million which primarily relates to transfer pricing positions As of December 31 2024 we had 230 million of unrecognized tax benefits The majority of our unrecognized tax benefits relate to transfer pricing positions which have a corollary receivable for the other jurisdiction impacted by the transfer pricing relationship Recognizing these unrecognized tax benefits would result in additional tax expense of 49 million in the future These receivables are included in other assets on our consolidated balance sheet
In 2023 we increased the amount of our unrecognized tax benefits by 74 million which primarily relates to refunds claimed on the U S amended returns filed during the year as discussed above under Canada Revenue Agency Competent Authority Matter In addition we reduced the amount of unrecognized tax benefits by 33 million reflecting primarily the settlement of issues raised on state and Canadian income tax audits for various open tax years
In 2022 we increased the amount of our unrecognized tax benefits by 154 million which relates primarily to the Canada Revenue Agency Competent Authority Matter discussed above As a result of the outcome of the arbitration decision we evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after In order to mitigate the assessment of future Canadian interest on these Canadian transfer pricing positions in the fourth quarter of 2022 we made payments to the Canadian taxing authorities of CAD 363 million approximately 267 million which were recorded as noncurrent income tax receivables and included in other assets on our consolidated balance sheet For the amounts ultimately owed and paid to the Canadian tax authorities upon resolution of these tax years we would seek refunds of related taxes paid in the United States
We file federal provincial state and local income tax returns principally in the United States Canada and the United Kingdom as well as in certain other foreign jurisdictions In general filed tax returns remain subject to examination by United States tax jurisdictions for years 2017 and thereafter by Canadian tax jurisdictions for years 2012 and thereafter and by the United Kingdom for years 2022 and thereafter As a result of uncertainties regarding tax audits and their possible outcomes an estimate of the range of possible impacts to unrecognized tax benefits in the next twelve months cannot be made at this time
Interest expense and penalties related to our unrecognized tax benefits of 8 million 4 million and 66 million were recorded for the years ended December 31 2024 2023 and 2022 respectively Amounts recognized in our consolidated balance sheets for accrued interest and penalties related to our unrecognized tax benefits of 55 million and 51 million as of December 31 2024 and 2023 respectively are included in other liabilities
three in North America one U S plan and two Canadian plans and two in the United Kingdom Both U K pension plans are closed to new employees and future accruals All of our North American plans are closed to new employees As a result of plan amendments in the fourth quarter of 2022 as further described below one of the Canadian plans ceased future accruals effective December 31 2023 and the cash balance portion of the U S plan that provided benefits based on years of service and interest credits was closed to new employees effective December 31 2022 We also provide group medical insurance benefits which vary by group and location to certain retirees in North America
On July 15 2022 we entered into an agreement with an insurance company to purchase a non participating group annuity contract and transfer approximately 375 million of our primary U S defined benefit pension plan s projected benefit obligation The transaction closed on July 22 2022 and was funded with plan assets Under the transaction the insurance company assumed responsibility for pension benefits and annuity administration for approximately 4 000 retirees or their beneficiaries As a result of this transaction in the third quarter of 2022 we remeasured the plan s projected benefit obligation and plan assets and recognized a non cash pre tax pension settlement loss of 24 million reflecting the unamortized net unrecognized postretirement benefit costs related to the settled obligations with a corresponding offset to accumulated other comprehensive loss In the fourth quarter of 2022 the final settlement of the non participating group annuity contract resulted in a refund of 4 million which decreased the settlement loss by 3 million to 21 million
In the fourth quarter of 2022 we remeasured certain of our defined benefit pension plans due to plan amendments resulting from a revision to our North American retirement plan strategy which among other things closed the cash balance portion of the U S plan that was previously open to new employees and established effective dates for each of the three North America plans to freeze future benefit accruals through the end of 2025 The plan curtailments resulted in a reduction in our benefit obligations of 20 million and curtailment gains of 4 million which are reflected in other non operating net in our consolidated statement of operations
Our plan assets benefit obligations funded status and amounts recognized on our consolidated balance sheets for our North America and United Kingdom plans as of the December 31 measurement date are as follows
For our North America pension plans the line titled change in assumptions and other for 2024 primarily reflects the impact of gains due to the increase in discount rates partially offset by the increase in the interest crediting rate for the cash balance portion of the U S plan and for 2023 primarily reflects losses due to the decrease in discount rates
Service cost is recognized in cost of sales and selling general and administrative expenses and the other components of net periodic benefit cost are recognized in other non operating net in our consolidated statements of operations
The accumulated benefit obligation ABO in aggregate for the defined benefit pension plans in North America was approximately 277 million and 290 million as of December 31 2024 and 2023 respectively The ABO in aggregate for the defined benefit pension plans in the United Kingdom was approximately 317 million and 367 million as of December 31 2024 and 2023 respectively
The following table presents aggregated information for those individual defined benefit pension plans that have an ABO in excess of plan assets as of December 31 which excludes all five of the defined benefit pension plans in 2024 and for 2023 excludes all three of the North America defined benefit pension plans as each had plan assets in excess of its ABO
The following table presents aggregated information for those individual defined benefit pension plans that have a projected benefit obligation PBO in excess of plan assets as of December 31 which excludes all five of the defined benefit pension plans in 2024 and for 2023 excludes two North America defined benefit pension plans as each had plan assets in excess of its PBO
Our pension funding policy in North America is to contribute amounts sufficient to meet minimum legal funding requirements plus discretionary amounts that we may deem to be appropriate Actual contributions may vary from estimated amounts depending on changes in assumptions actual returns on plan assets changes in regulatory requirements and funding decisions
In accordance with United Kingdom pension legislation our United Kingdom pension funding policy is to contribute amounts sufficient to meet the funding level target agreed between the employer and the trustees of the United Kingdom plans Actual contributions are usually agreed with the plan trustees in connection with each triennial valuation and may vary following each such review depending on changes in assumptions actual returns on plan assets changes in regulatory requirements and funding decisions
We currently estimate that our consolidated pension funding cash contributions for 2025 will be approximately 1 million for our North American plans and as agreed with the plans trustees 5 million for our United Kingdom plans
The discount rates for all plans are developed by plan using spot rates derived from a hypothetical yield curve of high quality AA rated or better fixed income debt securities as of the year end measurement date to calculate discounted cash flows the projected benefit obligation and solving for a single equivalent discount rate that produces the same projected benefit obligation In determining our benefit obligation we use the actuarial present value of the vested benefits to which each eligible employee is currently entitled based on the employee s expected date of separation or retirement
For our North America plans the expected long term rate of return on assets is based on analysis of historical rates of return achieved by equity and non equity investments and current market characteristics adjusted for estimated plan expenses and weighted by target asset allocation percentages As of January 1 2025 our weighted average expected long term rate of
For our United Kingdom plans the expected long term rate of return on assets is based on the expected long term performance of the underlying investments adjusted for investment managers fees and estimated plan expenses As of January 1 2025 our weighted average expected long term rate of return on assets for our United Kingdom plans is 6 1 which will be used in determining net periodic benefit cost for our United Kingdom plans for 2025
The retail price index for our United Kingdom plans is developed using a U K Government Gilt Prices Only retail price inflation curve which is based on the difference between yields on fixed interest government bonds and index linked government bonds
For the measurement of the benefit obligation at December 31 2024 for our primary U S retiree medical benefit plans the assumed health care cost trend rates for pre age 65 retirees start with an 8 4 increase in 2025 followed by a gradual decline in increases to 4 5 for
nd thereafter For the measurement of the benefit obligation at December 31 2023 for our primary U S retiree medical benefit plans the assumed health care cost trend rates for pre age 65 retirees started with an 8 0 increase in 2024 followed by a gradual decline in increases to 4 5 for 2033 and thereafter For post age 65 retirees the assumed health care cost trend rates started with an 8 4 increase in 2024 followed by a gradual decline in increases to 4 5 for 2033 and thereafter
The objectives of the investment policies governing the pension plans are to administer the assets of the plans for the benefit of the participants in compliance with all laws and regulations and to establish an asset mix that provides for diversification and considers the risk of various different asset classes with the purpose of generating favorable investment returns The investment policies consider circumstances such as participant demographics time horizon to retirement and liquidity needs and provide guidelines for asset allocation planning horizon general portfolio issues and investment manager evaluation criteria The investment strategies for the plans including target asset allocations and investment vehicles are subject to change within the guidelines of the policies
The target asset allocation for our U S pension plan is 80 non equity and 20 equity which has been determined based on analysis of actual historical rates of return and plan needs and circumstances The equity investments are tailored to exceed the growth of the benefit obligation and are a combination of U S and non U S total stock market index mutual funds The non equity investments consist primarily of investments in debt securities and money market instruments that are selected based on investment quality and duration to mitigate volatility of the funded status and annual required contributions The non equity investments have a duration profile that is similar to the benefit obligation in order to mitigate the impact of interest rate changes on the funded status This investment strategy is achieved through the use of mutual funds and individual securities
The target asset allocation for both of the Canadian plans is 100 non equity This investment strategy is achieved through the use of individual securities The investments consist primarily of investments in debt securities that are selected based on investment quality and duration to mitigate volatility of the funded status and annual required contributions The investments have a duration profile that is similar to the benefit obligation in order to mitigate the impact of interest rate changes on the funded status
The pension assets in the United Kingdom plans are each administered by a Board of Trustees consisting of employer nominated trustees member nominated trustees and an independent trustee with a requirement that member nominated trustees represent at least one third of each Board of Trustees It is the responsibility of the trustees to ensure prudent management and investment of the assets in the plans The trustees meet on a quarterly basis to review and discuss fund performance and other administrative matters The trustees investment objectives are to hold assets that generate returns sufficient to cover prudently each plan s liability without exposing the plans to unacceptable risk This is accomplished through the asset allocation strategy of each plan For both plans if the asset allocation moves more than plus or minus 5 from the target allocation the plans appointed investment manager would amend the asset allocation The trustees formally review the investment strategy on an annual basis which includes taking account of the latest actuarial data such as changes to member experience A full review is also completed of the investment strategy at every triennial actuarial valuation to ensure that the strategy remains consistent with its funding principles The trustees may review the strategy more frequently if opportunities arise to reduce risk within the investments without jeopardizing the funding position
Assets of the United Kingdom plans are invested in pooled funds managed by the appointed investment manager The assets are allocated between a growth portfolio and a matching portfolio The growth portfolio seeks a return premium on investments across multiple asset classes Growth portfolio funds may include among others traditional equities and bonds growth fixed income and hedged funds and may use derivatives The matching portfolio seeks to align asset changes with
changes in liabilities due to interest rates and inflation expectations Matching portfolio funds are composed of corporate bonds U K gilts and liability driven investment funds and generally invest in fixed income debt securities including government bonds gilts gilt repurchase agreements swaps and investment grade corporate bonds and may use derivatives The target asset allocation for one of the United Kingdom plans was reduced to 25 from 46 in the growth portfolio and increased to 75 from 54 in the matching portfolio The target asset allocation for the other United Kingdom plan was reduced to 30 from 57 in the growth portfolio and increased to 70 from 43 in the matching portfolio The change in the target asset allocations reflected the reduction in the funding deficits In 2024 the legacy holding in an actively managed property fund was fully redeemed and invested back into the plan s portfolio
The index equity funds are mutual funds that utilize a passively managed investment approach designed to track specific equity indices They are valued at quoted market prices in an active market which represent the net asset values NAVs of the shares held by the plan
The fixed income mutual funds invest primarily in high quality longer duration fixed income securities which include bonds debt securities and other similar instruments The funds are priced based on a daily published NAV
Corporate bonds and notes including private placement securities are valued by institutional bond pricing services which gather information from market sources and integrate credit information observed market movements and sector news into their pricing applications and models
Government and agency securities consist of U S municipal bonds and Canadian provincial bonds that are valued by institutional bond pricing services which gather information on current trading activity market movements trends and specific data on specialty issues
Other includes primarily mortgage backed asset backed securities and U S Treasury strips Mortgage backed and asset backed securities are valued by institutional pricing services which gather information from market sources and integrate credit information observed market movements and sector news into their pricing applications and models U S Treasury strips are valued using stripped interest and stripped principal yield curves based on data obtained from various dealer contacts and live data sources
Pooled equity funds invest in a broad array of global equity equity related securities a range of diversifiers and may use derivatives for efficient portfolio management The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund
Pooled diversified funds invest in a broad array of asset classes and a range of diversifiers including the use of derivatives The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund
Pooled U K government fixed and index linked securities funds invest primarily in Sterling denominated fixed income and inflation linked fixed income securities issued or guaranteed by the U K government and may use derivatives for efficient portfolio management The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund
Pooled global debt funds invest in a broad array of debt securities from corporate and government bonds to emerging markets and high yield fixed and floating rate securities of varying maturities and may use derivatives for efficient portfolio management The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund
Pooled liability driven investment funds primarily invest either through a sub fund or directly in gilt repurchase agreements physical U K government gilts other inflation linked fixed income securities and derivatives to provide exposure to interest rates and inflation thus hedging these elements of risk associated with pension liabilities The funds are valued at NAV as determined by the fund managers based on the value of the underlying net assets of the fund
Funds measured at NAV as a practical expedient include funds of funds with return strategies with exposure to varying asset classes and credit strategies as well as alternative investment strategies not precluding multi asset credit strategies global macro strategies commodities fixed income equities and currency and funds that invest primarily in freehold and leasehold property in the United Kingdom The funds are valued using NAV as determined by the fund managers based on the value of the underlying assets of the fund
We have defined contribution plans covering substantially all employees in North America and the United Kingdom Depending on the specific provisions of each plan qualified employees receive company contributions based on a percentage of base salary or base salary and incentive pay matching of employee contributions up to specified limits or a combination of both In 2024 2023 and 2022 we recognized expense related to our contributions to the defined contribution plans of 37 million 34 million and 19 million respectively
In addition to our qualified defined benefit pension plans we also maintain certain nonqualified supplemental pension plans for highly compensated employees as defined under federal law The amounts recognized in accrued expenses and other liabilities in our consolidated balance sheets for these plans were 1 million and 9 million respectively as of December 31 2024 and 1 million and 10 million respectively as of December 31 2023 We recognized expense for these plans of 1 million in each of the years ended December 31 2024 2023 and 2022
We have a senior unsecured revolving credit agreement the Revolving Credit Agreement which provides for a revolving credit facility of up to 750 million with a maturity of October 26 2028 and includes a letter of credit sub limit of 125 million Borrowings under the Revolving Credit Agreement may be used for working capital capital expenditures acquisitions share repurchases and other general corporate purposes CF Industries is the lead borrower and CF Holdings is the sole guarantor under the Revolving Credit Agreement
Borrowings under the Revolving Credit Agreement can be denominated in U S dollars Canadian dollars euros and British pounds Borrowings in U S dollars bear interest at a per annum rate equal to at our option an applicable adjusted term Secured Overnight Financing Rate or base rate plus in either case a specified margin We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees The specified margin and the amount of the commitment fee depend on CF Holdings credit rating at the time
As of December 31 2024 we had unused borrowing capacity under the Revolving Credit Agreement of 750 million and no outstanding letters of credit under the Revolving Credit Agreement As of December 31 2024 and 2023 and during the years then ended there were no borrowings outstanding under the Revolving Credit Agreement
The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants including a financial covenant As of December 31 2024 we were in compliance with all covenants under the Revolving Credit Agreement
We are party to a bilateral agreement providing for the issuance of up to 425 million of letters of credit As of December 31 2024 approximately 324 million of letters of credit were outstanding under this agreement
Carrying amount is net of unamortized debt discount and deferred debt issuance costs Total unamortized debt discount was 6 million and 7 million as of December 31 2024 and 2023 respectively and total deferred debt issuance costs were 23 million and 25 million as of December 31 2024 and 2023 respectively
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
On April 21 2022 we redeemed in full all of the 500 million outstanding principal amount of the 3 450 senior notes due June 2023 the 2023 Notes in accordance with the optional redemption provisions in the indenture governing the 2023 Notes The total aggregate redemption price paid in connection with the April 2022 redemption of the 2023 Notes which was funded with cash on hand was 513 million including accrued interest As a result we recognized a loss on debt extinguishment of 8 million consisting primarily of the premium paid on the redemption of the 500 million principal amount of the 2023 Notes prior to their scheduled maturity
Interest on tax liabilities for the year ended December 31 2024 primarily relates to discretionary interest relief granted from the CRA and the Alberta TRA Interest on tax liabilities for the year ended December 31 2022 consists primarily of interest accrued on reserves for unrecognized tax benefits related to Canadian transfer pricing See Note 12 Income Taxes for additional information
Loss on foreign currency transactions consists of foreign currency exchange rate impacts on foreign currency denominated transactions including the impact of changes in foreign currency exchange rates on intercompany loans that were not permanently invested
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 OTC 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 December 31 2024 we had natural gas derivative contracts covering certain periods through March 2025
As of December 31 2024 our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 16 0 million MMBtus of natural gas As of December 31 2023 we had open natural gas derivative contracts consisting of natural gas fixed price swaps basis swaps and options for 49 0 million MMBtus of natural gas For the year ended December 31 2024 we used derivatives to cover approximately 15 of our natural gas consumption
The fair values of derivatives on our consolidated balance sheets are shown below As of December 31 2024 and 2023 none of our derivative instruments were designated as hedging instruments See Note 11 Fair Value Measurements for additional information on derivative fair values
The counterparties to our derivative contracts are multinational commercial banks major financial institutions and large energy companies Our derivative contracts are executed with several counterparties under International Swaps and Derivatives Association ISDA agreements The ISDA agreements are master netting arrangements commonly used for OTC derivatives that mitigate exposure to counterparty credit risk in part by creating contractual rights of netting and setoff the specifics of which vary from agreement to agreement These rights are described further below
Settlement netting generally allows us and our counterparties to net into a single net payable or receivable ordinary settlement obligations arising between us and our counterparties under the ISDA agreement on the same day in the same currency for the same types of derivative instruments and through the same pairing of offices
Close out netting rights are provided in the event of a default or other termination event as defined in the ISDA agreements including bankruptcy Depending on the cause of early termination the non defaulting party may elect to terminate all or some transactions outstanding under the ISDA agreement The values of all terminated transactions and certain other payments under the ISDA agreement are netted resulting in a single net close out amount payable to or by the non defaulting party
Setoff rights are provided by certain of our ISDA agreements and generally allow a non defaulting party to elect to set off against the final net close out payment other matured and contingent amounts payable between us and our
counterparties under the ISDA agreement or otherwise Typically these setoff rights arise upon the early termination of all transactions outstanding under an ISDA agreement following a default or specified termination event
Most of our 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 December 31 2024 and 2023 the aggregate fair value of the derivative instruments with credit risk related contingent features in net liability positions was zero and 34 million respectively which also approximates the fair value of the assets that may be needed to settle the obligations if the credit risk related contingent features were triggered at the reporting dates The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event As of December 31 2024 and 2023 we had no cash collateral on deposit with counterparties for derivative contracts
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
Tax related assets include long term receivables related to U S and Canadian transfer pricing and the related interest and certain payments to Canadian taxing authorities See Note 12 Income Taxes for additional information
As of December 31 2024 and 2023 accrued capital expenditures totaled 101 million and 68 million respectively of which 42 million and 20 million respectively are included within accounts payable in the table above
Benefit plans and deferred compensation include liabilities for pensions retiree medical benefits and the noncurrent portion of incentive plans See Note 13 Pension and Other Postretirement Benefits for additional information
We have a strategic venture with 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 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
On January 31 2025 the CFN Board of Managers approved semi annual distribution payments for the distribution period ended December 31 2024 in accordance with CFN s limited liability company agreement On January 31 2025 CFN distributed 129 million to CHS for the distribution period ended December 31 2024
Our Board of Directors the Board has authorized certain programs to repurchase shares of our common stock These programs have generally permitted repurchases to be made from time to time in the open market through privately negotiated transactions through block transactions through accelerated share repurchase programs or otherwise The manner timing and amount of repurchases will be determined by our management based on the evaluation of market conditions stock price and other factors
On November 3 2021 the Board authorized the repurchase of up to 1 5 billion of CF Holdings common stock through December 31 2024 the 2021 Share Repurchase Program The 2021 Share Repurchase Program was completed in the second quarter of 2023 On November 2 2022 the Board authorized the repurchase of up to 3 billion of CF Holdings common stock commencing upon completion of the 2021 Share Repurchase Program and effective through December 31 2025 the 2022 Share Repurchase Program
In 2024 we repurchased approximately 18 8 million shares under the 2022 Share Repurchase Program for approximately 1 51 billion of which 10 million was accrued and unpaid as of December 31 2024 In 2023 we completed the 2021 Share Repurchase Program with the repurchase of approximately 2 3 million shares for 155 million and we repurchased approximately 5 6 million shares under the 2022 Share Repurchase Program for 425 million
The shares we repurchase are held as treasury stock If the Board authorizes us to retire the shares they are returned to the status of authorized but unissued shares As part of the retirements we reduce our treasury stock paid in capital and retained earnings balances In 2024 we retired 18 7 million shares of repurchased stock In 2023 we retired 8 1 million shares of repurchased stock including shares repurchased under the 2021 Share Repurchase Program and the 2022 Share Repurchase Program We held 354 264 shares of treasury stock as of December 31 2024 and no shares of treasury stock as of December 31 2023
CF Holdings is authorized to issue 50 million shares of 0 01 par value preferred stock Our Third Amended and Restated Certificate of Incorporation authorizes the Board without any further stockholder action or approval to issue these shares in one or more classes or series and except in the case of our Series A Junior Participating Preferred Stock 500 000 shares of which are authorized and the terms of which were specified in the original certificate of incorporation of CF Holdings to fix the rights preferences and privileges of the shares of each wholly unissued class or series and any of its qualifications limitations or restrictions The Series A Junior Participating Preferred Stock had been established in CF Holdings original certificate of incorporation in connection with our former stockholder rights plan that expired in 2015 No shares of preferred stock have been issued
In May 2022 our shareholders approved the CF Industries Holdings Inc 2022 Equity and Incentive Plan the 2022 Equity and Incentive Plan including 2 5 million new shares of the Company s common stock available for grant thereunder as part of our pay for performance compensation program which we use to provide incentives that are aligned with the interests of our shareholders The 2022 Equity and Incentive Plan replaced the CF Industries Holdings Inc 2014 Equity and Incentive Plan the 2014 Equity and Incentive Plan and permits grants of stock options stock appreciation rights restricted stock restricted stock units and other stock based awards which in each case may be conditioned on performance criteria to employees and certain consultants of the Company and its subsidiaries and non employee directors of the Company
The maximum number of shares reserved for the grant of awards under the 2022 Equity and Incentive Plan is the sum of i 2 5 million shares plus ii the number of shares that remain available for new grants under the 2014 Equity and Incentive Plan when the 2022 Equity and Incentive Plan was approved by shareholders plus iii the number of shares subject to stock options granted under the 2014 Equity and Incentive Plan or the CF Industries Holdings Inc 2009 Equity and Incentive Plan that were outstanding when the 2022 Equity and Incentive Plan was approved by shareholders but only to the extent such awards terminate or expire without the delivery of shares plus iv 1 61 times the number of shares subject to restricted stock or restricted stock unit awards including performance restricted stock unit awards granted under the 2014 Equity and Incentive Plan that were outstanding when the 2022 Equity and Incentive Plan was approved by shareholders but only to the extent such awards terminate or expire without the delivery of shares In no event will the number of shares available for issuance under the 2022 Equity and Incentive Plan exceed 10 615 515 shares Shares issued with respect to all awards granted under the 2022 Equity and Incentive Plan are counted against the share reserve on a one for one basis The shares subject to any outstanding award under the 2022 Equity and Incentive Plan will be available for subsequent award and issuance under the 2022 Equity and Incentive Plan to the extent those awards subsequently expire are forfeited or cancelled or terminate for any reason prior to issuance of the shares subject to those awards In addition shares tendered or withheld in payment of the exercise price of an award and shares withheld by the Company to satisfy tax withholding obligations related to an award will be available for subsequent award under the 2022 Equity and Incentive Plan As of December 31 2024 we had approximately 6 6 million shares available for future awards under the 2022 Equity and Incentive Plan The 2022 Equity and Incentive Plan provides that no more than 5 0 million shares may be issued pursuant to the exercise of incentive stock options subject to adjustment upon certain capitalization events
The fair value of a restricted stock award RSA or a restricted stock unit RSU is equal to the number of shares subject to the award multiplied by the closing market price of our common stock on the date of grant We estimated the fair value of each performance restricted stock unit PSU on the date of grant using a Monte Carlo simulation Generally RSUs vest in three equal annual installments following the date of grant PSUs are granted to key employees and generally vest three years from the date of grant subject to the attainment of applicable performance goals during the performance period The RSAs awarded to non management members of the Board vest the earlier of one year from the date of the grant or the date of the next annual stockholder meeting During the vesting period the holders of the RSAs are entitled to dividends and voting rights During the vesting period the holders of the RSUs are paid dividend equivalents in cash to the extent we pay cash dividends PSUs accrue dividend equivalents to the extent we pay cash dividends on our common stock during the performance and vesting periods Upon vesting of the PSUs holders are paid the cash equivalent of the dividends paid during the performance and vesting periods based on the shares of common stock if any delivered in settlement of PSUs Holders of RSUs and PSUs are not entitled to voting rights unless and until the awards have vested
The actual tax benefit realized from restricted stock vested in each of the years ended December 31 2024 2023 and 2022 was 14 million 13 million and 14 million respectively The fair value of restricted stock vested was 62 million 55 million and 60 million for the years ended December 31 2024 2023 and 2022 respectively
Under the 2014 Equity and Incentive Plan and our other predecessor plans we granted to plan participants nonqualified stock options to purchase shares of our common stock The exercise price of these options was equal to the market price of our common stock on the date of grant The contractual life of each option was ten years and generally one third of the options vested on each of the first three anniversaries of the date of grant No stock option awards were granted under the 2014 Equity and Incentive Plan or our other predecessor plans after 2017 and no stock option awards have been granted under the 2022 Equity and Incentive Plan
The aggregate intrinsic value represents the total pre tax intrinsic value based on our closing stock price of 85 32 as of December 31 2024 which would have been received by the option holders had all option holders exercised their options as of that date
As of December 31 2024 pre tax unrecognized compensation cost was 22 million for RSAs and RSUs which will be recognized over a weighted average period of 1 8 years and 3 million for PSUs which will be recognized over a weighted average period of 1 6 years
Excess tax benefits realized from the vesting of restricted stock or stock option exercises are recognized as an income tax benefit in our consolidated statements of operations and are required to be reported as an operating cash inflow rather than a reduction of taxes paid The excess tax benefits realized in 2024 2023 and 2022 were 8 million 19 million and 96 million respectively
Our reportable segments consist of Ammonia Granular Urea UAN AN and Other These segments are differentiated by products Our chief operating decision maker CODM is our President and Chief Executive Officer who uses gross margin to evaluate segment performance and allocate resources The CODM meets periodically with other members of senior management to analyze segment performance including comparing actual results to projected results with consideration to the costs incurred to produce and deliver the product In addition our CODM uses gross margin by reportable segment to make key operating decisions such as the determination of capital expenditures and the allocation of operating budgets to help guide strategic decisions to align with company wide goals 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 the CODM The ammonia and other products that are upgraded into Granular Urea UAN AN and Other products are transferred at cost into the results of those products
Our assets with the exception of goodwill are not monitored by or reported to our CODM by segment therefore we do not present total assets by segment Goodwill by segment is presented in Note 9 Goodwill and Other Intangible Assets
For the years ended December 31 2024 2023 and 2022 depreciation and amortization does not include 34 million 13 million and 15 million respectively of depreciation and amortization allocated to Corporate which includes amortization of definite lived intangible assets For the years ended December 31 2024 and 2023 depreciation and amortization does not include 30 million and 3 million respectively related to amortization of the supply contract liability which is recognized in net sales See Note 6 Acquisition of Waggaman Ammonia Production Facility and Note 9 Goodwill and Other Intangible Assets for additional information
Distribution and storage costs consist of the cost of freight required to transport finished products from our manufacturing facilities to our distribution facilities and the costs to operate our network of distribution facilities in North America
Freight costs consist of the costs incurred by us to deliver products from one of our plants or distribution facilities to the customer Freight costs are generally charged to the customer and included in net sales In situations when control of the product transfers upon loading and the customer requests that we arrange delivery of the product the amount of freight included in net sales is considered freight revenue See Note 4 Revenue Recognition for additional information
Total other operating costs and expenses for the year ended December 31 2022 include 258 million of asset impairment and restructuring charges related to our U K operations See Note 7 United Kingdom Operations Restructuring and Impairment Charges for additional information
Equity in loss of operating affiliate for the year ended December 31 2023 includes an impairment of our equity method investment in PLNL of 43 million See Note 10 Equity Method Investment for additional information
Our principal customers are cooperatives retailers independent fertilizer distributors traders wholesalers and industrial users In 2024 2023 and 2022 CHS accounted for approximately 12 13 and 13 of our consolidated net sales respectively See Note 19 Noncontrolling Interest for additional information
Interest net of interest capitalized for the year ended December 31 2024 includes a reduction of approximately 21 million reflecting interest relief received from the CRA related to tax years 2006 through 2011 Interest net of interest capitalized for the year ended December 31 2022 includes interest paid to Canadian taxing authorities of approximately 100 million related to tax years 2006 through 2011 See Note 12 Income Taxes Canada Revenue Agency Competent Authority Matter
Income taxes net of refunds for the year ended December 31 2022 includes certain payments of CAD 363 million approximately 267 million to Canadian taxing authorities which are reflected in the line Other net within operating activities in our consolidated statement of cash flows These payments were made in order to mitigate the assessment of future Canadian interest on transfer pricing positions See Note 12 Income Taxes Unrecognized Tax Benefits for additional information
Asset retirement obligations AROs are legal obligations associated with the retirement of long lived assets that result from the acquisition construction development or normal operation of such assets AROs are initially recognized as incurred when sufficient information exists to estimate fair value We have AROs at our nitrogen manufacturing complexes and at our distribution and storage facilities that are conditional upon cessation of operations These AROs include certain decommissioning activities as well as the removal and disposal of certain chemicals waste materials structures equipment vessels piping and storage tanks Also included are reclamation of land and the closure of certain effluent ponds and or waste storage areas The most recent estimate of the aggregate cost of conditional AROs for our complexes and facilities expressed in 2024 dollars is approximately 139 million which excludes recorded AROs discussed below
We have not recorded a liability for these conditional AROs as of December 31 2024 because we do not believe there is currently a reasonable basis for estimating a date or range of dates of cessation of operations at our nitrogen manufacturing facilities or our distribution and storage facilities which is necessary in order to estimate fair value In reaching this conclusion we considered the historical performance of each complex or facility and considered factors such as planned maintenance asset replacements and upgrades of plant and equipment which if conducted as in the past can extend the physical lives of our nitrogen manufacturing facilities and our distribution and storage facilities indefinitely We also considered the possibility of changes in technology risk of obsolescence and availability of raw materials in arriving at our conclusion
We have recorded AROs for certain assets for which a fair value can be estimated As of December 31 2024 AROs recorded in other current liabilities and other liabilities in our consolidated balance sheet was approximately 5 million
We have operating leases for certain property and equipment under various noncancelable agreements the most significant of which are rail car leases and barge tow charters for the distribution of our products The rail car leases currently have minimum terms ranging from one to eleven years and the barge tow charter commitments range from one to six years Our rail car leases and barge tow charters commonly contain provisions for automatic renewal that can extend the lease term unless cancelled by either party We also have operating leases for terminal and warehouse storage for our distribution system some of which contain minimum throughput requirements The storage agreements contain minimum terms generally ranging from one to four years and commonly contain provisions for automatic renewal thereafter unless cancelled by either party The renewal provisions for our rail car leases barge tow charters and terminal and warehouse storage agreements are not reasonably certain to be exercised
As of December 31 2024 we have entered into four additional leases that have not yet commenced with future minimum lease payments totaling 37 million with minimum terms ranging from five to seven years
The Company s management with the participation of the Company s principal executive officer and principal financial officer has evaluated the effectiveness of the Company s disclosure controls and procedures as such term is defined in Rules 13a 15 e and 15d 15 e under the Securities Exchange Act of 1934 as amended the Exchange Act as of the end of the period covered by this report Based on such evaluation the Company s principal executive officer and principal financial officer have concluded that as of the end of such period the Company s disclosure controls and procedures are effective in i ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms and ii ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company s management including the Company s principal executive officer and principal financial officer as appropriate to allow timely decisions regarding required disclosure
The Company s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a 15 f and 15d 15 f under the Exchange Act for the Company Under the supervision and with the participation of our senior management including our principal executive officer and principal financial officer we assessed the effectiveness of our internal control over financial reporting as of December 31 2024 using the criteria set forth in the
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 Based on this assessment management has concluded that our internal control over financial reporting is effective as of December 31 2024 KPMG LLP the independent registered public accounting firm that audited the Company s consolidated financial statements has issued an attestation report on the Company s internal control over financial reporting as of December 31 2024 which appears on the following page
There have not been any changes in the Company s internal control over financial reporting as such term is defined in Rules 13a 15 f and 15d 15 f under the Exchange Act during the quarter ended December 31 2024 that have materially affected or are reasonably likely to materially affect the Company s internal control over financial reporting
While there was no impact on the Company s internal control over financial reporting during the quarter ended December 31 2024 beginning in the second quarter of 2025 the Company is implementing a new procurement and plant asset management system As a result related changes in its internal control over financial reporting are expected due to the implementation
issued by the Committee of Sponsoring Organizations of the Treadway Commission In our opinion the Company maintained in all material respects effective internal control over financial reporting as of December 31 2024 based on criteria established in
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of December 31 2024 and 2023 the related consolidated statements of operations comprehensive income equity and cash flows for each of the years in the three year period ended December 31 2024 and the related notes collectively the consolidated financial statements and our report dated February 20 2025 expressed an unqualified opinion on those consolidated financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audit also included performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
During the quarter ended December 31 2024 there were no Rule 10b5 1 trading arrangements as defined in Item 408 a of Regulation S K or non Rule 10b5 1 trading arrangements as defined in Item 408 c of Regulation S K adopted or terminated by any director or officer as defined in Rule 16a 1 f under the Exchange Act of CF Industries Holdings Inc
Information appearing in the Proxy Statement under the headings Proposal 1 Election of Directors Director Nominees Proposal 1 Election of Directors Director Nominee Biographies Executive Officers Corporate Governance Committees of the Board Audit Committee and if required Delinquent Section 16 a Reports is incorporated herein by reference
We have adopted a Code of Corporate Conduct that applies to our employees directors and officers including our principal executive officer principal financial officer and principal accounting officer The Code of Corporate Conduct is posted on our corporate website
We will provide an electronic or paper copy of this document free of charge upon request In the event of any amendments to or waivers from a provision of the Code of Corporate Conduct affecting the chief executive officer chief financial officer controller or persons performing similar functions we intend to promptly post on our corporate website a description of the amendment or waiver as required under applicable SEC rules
We have adopted a Policy on Insider Trading applicable to our directors officers employees and certain other persons and entities collectively covered persons that we believe is reasonably designed to promote compliance with insider trading laws rules and regulations and any applicable listing standard Among other things our insider trading policy prohibits covered persons who are aware of any material nonpublic information about the Company from directly or indirectly through family members or other persons or entities as described in the policy i transacting in Company securities except as provided for therein or ii recommending the purchase or sale of any Company securities A copy of our Policy on Insider Trading is filed as Exhibit 19 with this Annual Report on Form 10 K
During the last completed fiscal year John W Eaves Javed Ahmed Stephen J Hagge Anne P Noonan and Michael J Toelle served as the members of the Compensation and Management Development Committee of the Board
Information appearing under the following headings of the Proxy Statement is incorporated herein by reference Compensation Discussion and Analysis Compensation Discussion and Analysis Compensation Discussion and Analysis In Detail Other Compensation Governance Practices and Considerations Compensation and Benefits Risk Analysis Compensation Committee Report Executive Compensation and Corporate Governance Director Compensation
Information appearing under the following headings of the Proxy Statement is incorporated herein by reference Common Stock Ownership Common Stock Ownership of Certain Beneficial Owners and Common Stock Ownership Common Stock Ownership of Directors and Management
We currently issue stock based compensation under the CF Industries Holdings Inc 2022 Equity and Incentive Plan the 2022 Equity and Incentive Plan which permits grants of stock options stock appreciation rights restricted stock restricted stock units and other stock based awards which in each case may be conditioned on performance criteria to employees and certain consultants of the Company and its subsidiaries and non employee directors of the Company
Includes 76 645 shares issuable pursuant to outstanding nonqualified stock options 471 657 shares issuable pursuant to restricted stock units RSUs and 1 024 846 shares issuable pursuant to performance restricted stock units PSUs under the 2022 Equity and Incentive Plan the CF Industries Holdings Inc 2014 Equity and Incentive Plan the 2014 Equity and Incentive Plan and the CF Industries Holdings Inc 2009 Equity Incentive Plan PSUs are subject to attainment of the applicable performance goals during the three year performance period and are reflected at their maximum potential payout The PSUs included in this table reflect the full amount awarded to plan participants in 2022 2023 and 2024 The three year performance periods for the PSUs awarded in 2022 2023 and 2024 are in each case composed of three one year periods with performance goals set annually Because accounting rules require performance goals to be set before a PSU is determined for accounting purposes to have been granted the number of PSUs reported as outstanding as of December 31 2024 in Note 21 Stock based Compensation reflects all of the PSUs awarded in 2022 but only two thirds of the PSUs awarded in 2023 and one third of the PSUs awarded in 2024
Under the 2022 Equity and Incentive Plan upon the grant of an award the number of shares available for issuance is reduced by one share for each share subject to or issued in respect of such awards Under the 2022 Equity and Incentive Plan shares withheld for taxes on awards are added to the number of shares available for issuance If any restricted stock units including any performance restricted stock units granted under the 2014 Equity and Incentive Plan terminates or expires without delivery of shares the number of shares available for issuance under the 2022 Equity and Incentive Plan is increased by 1 61 shares for each share that had been subject to such restricted stock unit at the time of such termination or expiration
Information appearing in the Proxy Statement under the headings Proposal 3 Ratification of Selection of Independent Registered Public Accounting Firm for 2025 Audit and Non Audit Fees and Proposal 3 Ratification of Selection of Independent Registered Public Accounting Firm for 2025 Pre Approval of Audit and Non Audit Services is incorporated herein by reference
Agreement and Plan of Merger dated as of July 21 2005 by and among CF Industries Holdings Inc CF Merger Corp and CF Industries Inc incorporated by reference to Exhibit 2 1 to Amendment No 3 to CF Industries Holdings Inc s Registration Statement on Form S 1 filed with the SEC on July 26 2005 File No 333 124949
Agreement and Plan of Merger dated as of March 12 2010 by and among CF Industries Holdings Inc Composite Merger Corporation and Terra Industries Inc incorporated by reference to Exhibit 2 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on March 12 2010
Asset Purchase Agreement dated October 28 2013 among CF Industries Holdings Inc CF Industries Inc and The Mosaic Company incorporated by reference to Exhibit 2 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on November 1 2013
Second Amended and Restated Limited Liability Company Agreement of CF Industries Nitrogen LLC dated as of December 18 2015 by and between CF Industries Sales LLC and CHS Inc incorporated by reference to Exhibit 2 4 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 24 2022
First Amendment to the Second Amended and Restated Limited Liability Company Agreement of CF Industries Nitrogen LLC dated as of March 30 2018 by and among CF Industries Nitrogen LLC CF Industries Sales LLC CF USA Holdings LLC and CHS Inc incorporated by reference to Exhibit 2 1 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 3 2018
Asset Purchase Agreement dated as of March 20 2023 by and among Dyno Nobel Louisiana Ammonia LLC CF Industries East Point LLC and solely for the purposes of Article X Incitec Pivot Limited and CF Industries Holdings Inc incorporated by reference to Exhibit 2 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on March 20 2023
Fifth Amended and Restated Bylaws of CF Industries Holdings Inc effective December 13 2022 incorporated by reference to Exhibit 3 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on December 15 2022
Indenture dated as of May 23 2013 among CF Industries Inc CF Industries Holdings Inc and Computershare Trust Company N A as successor trustee incorporated by reference to Exhibit 4 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on May 23 2013
Second Supplemental Indenture dated as of May 23 2013 among CF Industries Inc CF Industries Holdings Inc and Computershare Trust Company N A as successor trustee relating to CF Industries Inc s 4 950 Senior Notes due 2043 includes form of note the 2043 Notes Supplement incorporated by reference to Exhibit 4 3 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on May 23 2013
First Supplement dated as of November 21 2016 relating to the 2043 Notes Supplement incorporated by reference to Exhibit 4 12 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 23 2017
Second Supplement dated as of March 29 2018 relating to the 2043 Notes Supplement incorporated by reference to Exhibit 4 3 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 3 2018
Third Supplement dated as of March 22 2019 relating to the 2043 Notes Supplement incorporated by reference to Exhibit 4 3 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 2 2019
Fourth Supplement dated as of January 28 2022 relating to the 2043 Notes Supplement incorporated by reference to Exhibit 4 4 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on February 1 2022
Third Supplemental Indenture dated as of March 11 2014 among CF Industries Inc CF Industries Holdings Inc and Computershare Trust Company N A as successor trustee relating to CF Industries Inc s 5 150 Senior Notes due 2034 includes form of note the 2034 Notes Supplement incorporated by reference to Exhibit 4 2 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on March 11 2014
First Supplement dated as of November 21 2016 relating to the 2034 Notes Supplement incorporated by reference to Exhibit 4 14 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 23 2017
Second Supplement dated as of March 29 2018 relating to the 2034 Notes Supplement incorporated by reference to Exhibit 4 4 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 3 2018
Third Supplement dated as of March 22 2019 relating to the 2034 Notes Supplement incorporated by reference to Exhibit 4 4 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 2 2019
Fourth Supplement dated as of January 28 2022 relating to the 2034 Notes Supplement incorporated by reference to Exhibit 4 3 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on February 1 2022
Fourth Supplemental Indenture dated as of March 11 2014 among CF Industries Inc CF Industries Holdings Inc and Computershare Trust Company N A as successor trustee relating to CF Industries Inc s 5 375 Senior Notes due 2044 includes form of note the 2044 Notes Supplement incorporated by reference to Exhibit 4 3 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on March 11 2014
First Supplement dated as of November 21 2016 relating to the 2044 Notes Supplement incorporated by reference to Exhibit 4 16 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 23 2017
Second Supplement dated as of March 29 2018 relating to the 2044 Notes Supplement incorporated by reference to Exhibit 4 5 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 3 2018
Third Supplement dated as of March 22 2019 relating to the 2044 Notes Supplement incorporated by reference to Exhibit 4 5 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 2 2019
Fourth Supplement dated as of January 31 2022 relating to the 2044 Notes Supplement incorporated by reference to Exhibit 4 5 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on February 1 2022
Indenture dated as of November 21 2016 among CF Industries Holdings Inc CF Industries Inc the Subsidiary Guarantors as defined therein party thereto and Computershare Trust Company N A as successor trustee relating to CF Industries Inc s 4 500 Senior Secured Notes due 2026 includes form of note the 2026 Notes Indenture incorporated by reference to Exhibit 4 2 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on November 22 2016
First Supplemental Indenture dated as of March 29 2018 relating to the 2026 Notes Indenture incorporated by reference to Exhibit 4 7 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 3 2018
Second Supplemental Indenture dated as of March 22 2019 relating to the 2026 Notes Indenture incorporated by reference to Exhibit 4 7 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 2 2019
Third Supplemental Indenture dated as of January 28 2022 relating to the 2026 Notes Indenture incorporated by reference to Exhibit 4 2 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on February 1 2022
Change in Control Severance Agreement effective as of September 1 2009 amended as of October 20 2010 and amended further and restated as of February 17 2014 by and between CF Industries Holdings Inc and Christopher D Bohn incorporated by reference to Exhibit 10 3 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 27 2014
Change in Control Severance Agreement effective as of November 21 2008 by and between CF Industries Holdings Inc and Bert A Frost incorporated by reference to Exhibit 10 11 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 26 2009
Change in Control Severance Agreement effective as of November 19 2007 and amended and restated as of March 6 2009 by and between CF Industries Holdings Inc and Richard A Hoker incorporated by reference to Exhibit e 9 to CF Industries Holdings Inc s Solicitation Recommendation Statement on Schedule 14D 9 filed with the SEC on March 23 2009
Change in Control Severance Agreement effective as of October 9 2017 by and between CF Industries Holdings Inc and Susan L Menzel incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on November 2 2017
Change in Control Severance Agreement effective as of April 24 2007 amended as of July 24 2007 and amended further and restated as of February 17 2014 by and between CF Industries Holdings Inc and W Anthony Will incorporated by reference to Exhibit 99 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on February 20 2014
Change in Control Severance Agreement effective as of February 2 2012 and amended and restated as of September 1 2019 by and between CF Industries Holdings Inc and Ashraf K Malik incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on October 31 2019
Change in Control Severance Agreement effective as of February 27 2020 by and between CF Industries Holdings Inc and Linda M Dempsey incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 7 2020
Change in Control Severance Agreement effective as of October 17 2023 by and between CF Industries Holdings Inc and Michael P McGrane incorporated by reference to Exhibit 10 2 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on November 2 2023
Change in Control Severance Agreement effective as of June 17 2024 by and between CF Industries Holdings Inc and Gregory D Cameron incorporated by reference to Exhibit 10 2 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on August 8 2024
Form of Indemnification Agreement with Officers and Directors incorporated by reference to Exhibit 10 10 to Amendment No 2 to CF Industries Holdings Inc s Registration Statement on Form S 1 filed with the SEC on July 20 2005 File No 333 124949
CF Industries Holdings Inc 2009 Equity and Incentive Plan incorporated by reference to Appendix A to CF Industries Holdings Inc s Definitive Proxy Statement on Schedule 14A filed with the SEC on March 16 2009
Amendment dated as of July 21 2016 to the CF Industries Holdings Inc 2009 Equity and Incentive Plan incorporated by reference to Exhibit 10 3 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on August 4 2016
CF Industries Holdings Inc 2014 Equity and Incentive Plan incorporated by reference to Appendix C to CF Industries Holdings Inc s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 3 2014
Amendment dated as of July 21 2016 to the CF Industries Holdings Inc 2014 Equity and Incentive Plan incorporated by reference to Exhibit 10 4 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on August 4 2016
CF Industries Holdings Inc 2022 Equity and Incentive Plan incorporated by reference to Appendix B to CF Industries Holdings Inc s definitive proxy statement on Schedule 14A filed with the SEC on March 30 2022
CF Industries Holdings Inc Supplemental Benefit and Deferral Plan incorporated by reference to Exhibit 10 16 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 23 2023
First Amendment of CF Industries Holdings Inc Supplemental Benefit and Deferral Plan incorporated by reference to Exhibit 10 17 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 23 2023
Second Amendment of CF Industries Holdings Inc Supplemental Benefit and Deferral Plan incorporated by reference to Exhibit 10 18 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 23 2023
Third Amendment of CF Industries Holdings Inc Supplemental Benefit and Deferral Plan incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on October 31 2024
Form of Amendment to Non Qualified Stock Option Award Agreements incorporated by reference to Exhibit 10 5 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on May 7 2015
Form of Non Qualified Stock Option Award Amendment Letter Agreement dated as of July 19 2018 incorporated by reference to Exhibit 10 2 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on August 2 2018
Form of Restricted Stock Unit Award Agreement under CF Industries Holdings Inc 2022 Equity and Incentive Plan incorporated by reference to Exhibit 10 3 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on May 13 2022
Form of Non Employee Director Restricted Stock Award Agreement under CF Industries Holdings Inc 2022 Equity and Incentive Plan incorporated by reference to Exhibit 10 2 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on May 13 2022
Form of Equity Award Amendment Letter Agreement dated as of July 21 2016 incorporated by reference to Exhibit 10 5 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on August 4 2016
CF Industries Holdings Inc Annual Incentive Plan effective as of January 1 2019 incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on December 14 2018
CF Industries Holdings Inc Annual Incentive Plan as amended and restated effective as of January 1 2023 incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on December 15 2022
Amended and Restated Nitrogen Fertilizer Purchase Agreement dated December 18 2015 between CF Industries Nitrogen LLC and CHS Inc incorporated by reference to Exhibit 10 37 to CF Industries Holdings Inc s Annual Report on Form 10 K filed with the SEC on February 24 2022
Revolving Credit Agreement dated as of October 26 2023 by and among CF Industries Holdings Inc CF Industries Inc Citibank N A as administrative agent the issuing banks from time to time party thereto and the lenders from time to time party thereto incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Current Report on Form 8 K filed with the SEC on October 27 2023
Amendment No 1 to the Revolving Credit Agreement dated as of May 29 2024 among CF Industries Inc and Citibank N A as administrative agent incorporated by reference to Exhibit 10 1 to CF Industries Holdings Inc s Quarterly Report on Form 10 Q filed with the SEC on August 8 2024
The following financial information from CF Industries Holdings Inc s Annual Report on Form 10 K for the fiscal year ended December 31 2024 formatted in Inline XBRL eXtensible Business Reporting Language 1 Consolidated Statements of Operations 2 Consolidated Statements of Comprehensive Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Equity 5 Consolidated Statements of Cash Flows and 6 Notes to Consolidated Financial Statements
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	CF Industries Holdings, Inc. Vist SEC web-site
Category	AGRICULTURE CHEMICALS
Trading Symbol	CF