CF Industries Holdings, Inc. (CF) FY 2024 MD&A

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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:

•Overview of CF Holdings

•Market Conditions

•Financial Executive Summary

•Acquisition of Waggaman Ammonia Production Facility

•Items Affecting Comparability of Results

•Consolidated Results of Operations

•Operating Results by Business Segment

•Liquidity and Capital Resources

•Critical Accounting Estimates

•Recent Accounting Pronouncements

Overview of CF Holdings

Our Company

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.

Our principal assets as of December 31, 2024 include:

•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);

•two Canadian manufacturing facilities, located in Medicine Hat, Alberta (the largest ammonia production complex in Canada) and Courtright, Ontario;

•a United Kingdom manufacturing facility located in Billingham;

•an extensive system of terminals and associated transportation equipment located primarily in the Midwestern United States; and

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•a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia production joint venture located in Trinidad and Tobago (Trinidad) that we account for under the equity method.

Our Strategy

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 NH3. 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.

We execute our strategy across four dimensions:

•decarbonizing our existing network to accelerate the availability of low-carbon ammonia and upgraded nitrogen products for traditional agricultural and industrial applications;

•evaluating new low-carbon ammonia capacity growth to supply emerging opportunities from power generation and marine shipping, among others;

•forging partnerships to accelerate our timeline, reducing risks and bridging gaps in areas where we do not have expertise; and

•collaborating to build understanding of ammonia’s clean energy capability, safety track record and regulatory environment.

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 (CO2) dehydration and compression units to enable process CO2 captured from the ammonia production process to be transported and sequestered, which prevents approximately 60% of the CO2 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 CO2 in permanent geologic storage. At Donaldsonville, CCS is expected to commence in 2025 and annually will sequester up to approximately 2 million metric tons of CO2 that would otherwise have been emitted to the atmosphere. At Yazoo City, CCS is expected to commence in 2028 and annually will sequester up to approximately 500,000 metric tons of CO2 that would otherwise have been emitted to the atmosphere. Each project is expected to qualify under Section 45Q of the Internal Revenue Code for tax credits per metric ton of sequestered CO2.

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 CO2 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 CO2 emissions, is expected to reduce CO2 emissions from the ammonia

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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.

Industry Factors

We operate in a highly competitive, global industry. Our operating results are influenced by a broad range of factors, including those outlined below.

Global Supply and Demand Factors

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.

Global Trade in Fertilizer

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.

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Farmers’ Economics

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.

Market Conditions

Nitrogen Selling Prices and Sales Volume

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.

Sales volume for our products in 2024, 2023 and 2022 is shown in the table below.

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(1)Other segment products primarily include DEF, urea liquor, nitric acid and aqua ammonia.

Natural Gas

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

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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.

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 following table presents the average daily market price of natural gas at the Henry Hub for the years ended December 31, 2024, 2023 and 2022:

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.

Financial Executive Summary

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.

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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.

Acquisition of Waggaman Ammonia Production Facility

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.

Items Affecting Comparability of Results

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.

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(1)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.

(2)Included in cost of sales in our consolidated statements of operations.

(3)Included in cost of sales and selling, general and administrative expenses in our consolidated statement of operations.

(4)Included in equity in earnings (loss) of operating affiliate in our consolidated statement of operations.

(5)Included in interest expense and interest income in our consolidated statement of operations.

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Unrealized net mark-to-market gain on natural gas derivatives

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.

Impact of employee benefit plan policy change

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.

U.K. operations restructuring

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.

Acquisition and integration costs

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.

Impairment of equity method investment in PLNL

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.

Canada Revenue Agency Competent Authority Matter

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.

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Consolidated Results of Operations

The following table presents our consolidated results of operations and certain supplemental data for the years ended December 31, 2024, 2023 and 2022:

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N/M—Not Meaningful

(1)Includes the cost of natural gas used for production and related transportation that is included in cost of sales during the period under the first-in, first-out inventory cost method.

(2)Includes realized gains and losses on natural gas derivatives settled during the period. Excludes unrealized mark-to-market gains and losses on natural gas derivatives.

(3)Gross ammonia production, including amounts subsequently upgraded on-site into granular urea, UAN, or AN.

(4)UAN product tons assume a 32% nitrogen content basis for production volume.

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.

Net Sales

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.

Gross ammonia production for 2024 increased to approximately 9.8 million tons compared to 9.5 million tons in 2023. We expect gross ammonia production for 2025 will be approximately 10 million tons.

Cost of Sales

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 also includes the impact of a $35 million unrealized net mark-to-market gain on natural gas derivatives in 2024 compared to a $39 million gain in 2023.

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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.

Selling, General and Administrative Expenses

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.

U.K. Operations Restructuring

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.

Acquisition and Integration Costs

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

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

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

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.”

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Interest Income

Interest income includes amounts earned on our cash, cash equivalents, and investments and any interest earned related to income tax refunds.

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.”

Income Tax Provision

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.

Both 2024 and 2023 were impacted by additional discrete tax items. See Note 12—Income Taxes for additional information.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest includes the net earnings attributable to the approximately 11% CHS minority equity interest in CFN, a subsidiary of CF Holdings.

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.

Diluted Net Earnings Per Share Attributable to Common Stockholders

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.

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Operating Results by Business Segment

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:

_______________________________________________________________________________

(1)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.

(2)The cost of ammonia and other products that are upgraded in the production of Granular Urea, UAN, AN and Other products is transferred at cost into the results of those products.

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.

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Ammonia Segment

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 following table presents summary operating data for our Ammonia segment:

_______________________________________________________________________________

N/M—Not Meaningful

(1)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.

(2)Ammonia represents 82% nitrogen content. Nutrient tons represent the tons of nitrogen within the product tons.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Sales. 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. 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.

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Gross Margin.  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.

Granular Urea Segment

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.

The following table presents summary operating data for our Granular Urea segment:

______________________________________________________________________________

N/M—Not Meaningful

(1)Granular urea represents 46% nitrogen content. Nutrient tons represent the tons of nitrogen within the product tons.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Sales. 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. 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.

Gross Margin.  Gross margin in our Granular Urea segment decreased by $139 million, or 17%, to $674 million in 2024 from $813 million in 2023, and our gross margin percentage was 42.1% in 2024 compared to 44.6% in 2023. The

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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.

UAN Segment

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.

The following table presents summary operating data for our UAN segment:

______________________________________________________________________________

N/M—Not Meaningful

(1)UAN represents between 28% and 32% of nitrogen content, depending on the concentration specified by the customer. Nutrient tons represent the tons of nitrogen within the product tons.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Sales. 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. 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.  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.

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AN Segment

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.

The following table presents summary operating data for our AN segment:

_______________________________________________________________________________

(1)AN represents between 29% and 35% of nitrogen content. Nutrient tons represent the tons of nitrogen within the product tons.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Sales. 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. 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.  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.

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Other Segment

Our Other segment primarily includes the following products:

•diesel exhaust fluid (DEF), an aqueous urea solution typically made with 32.5% or 50% high-purity urea and the remainder deionized water;

•urea liquor, a liquid product that we sell in concentrations of 40%, 50% and 70% high-purity urea as a chemical intermediate; and

•nitric acid, a nitrogen-based mineral acid that is used in the production of nitrate-based fertilizers, nylon precursors and other specialty chemicals.

The following table presents summary operating data for our Other segment:

_______________________________________________________________________________

N/M—Not Meaningful

(1)Nutrient tons represent the tons of nitrogen within the product tons.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Sales. 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. 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.  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.

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Liquidity and Capital Resources

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

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.

Capital Spending

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.

Acquisition of Waggaman Ammonia Production Facility

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.

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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.

Share Repurchase Programs

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.

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

______________________________________________________________________________

(1)As defined in the 2022 Share Repurchase Program, amounts reflect the price paid for the shares of common stock repurchased, excluding commissions paid to brokers and excise taxes.

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.

Government Policies

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.

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Canada Revenue Agency Competent Authority Matter

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.

Repatriation of Foreign Earnings and Income Taxes

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.

Cash balances held by our joint venture are maintained at sufficient levels to fund local operations as accumulated earnings are repatriated from the joint venture on a periodic basis.

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.

Debt

Revolving Credit Agreement

We have a senior unsecured revolving credit agreement (the Revolving Credit Agreement), which provides for a revolving credit facility of up to $750 million with a maturity of 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).

As of December 31, 2024, we were in compliance with all covenants under the Revolving Credit Agreement.

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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.

Letters of Credit Under Bilateral 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.

Senior Notes

Long-term debt presented on our consolidated balance sheets as of December 31, 2024 and 2023 consisted of the following debt securities issued by CF Industries:

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(1)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.

(2)Effective August 23, 2021, these notes are no longer secured, in accordance with the terms of the applicable indenture.

Public Senior Notes

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.

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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.

Senior Secured Notes

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.

Forward Sales and Customer Advances

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.

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Natural Gas

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.

Derivative Financial Instruments

We use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future. Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based products. From time to time, we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates. 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.

Defined Benefit Pension Plans

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.

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Distributions to Noncontrolling Interest in CFN

The CFN Board of Managers approved semi-annual distribution payments for the years ended December 31, 2024, 2023 and 2022, in accordance with CFN’s limited liability company agreement, as follows:

Cash Flows

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.

Critical Accounting Estimates

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.

Recoverability of Long-Lived Assets, Goodwill and Investment in Unconsolidated Affiliate

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

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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.

Projected Benefit Obligations

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:

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n/a—not applicable

See Note 13—Pension and Other Postretirement Benefits for further discussion of our pension plans.

Income Taxes

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.

Recent Accounting Pronouncements

See Note 3—New Accounting Standards for a discussion of recent accounting pronouncements.

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