United Kingdom Operations, Proposed Restructuring and Impairment Charges

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

United Kingdom Operations, Proposed Restructuring and Impairment Charges

During the third quarter of 2021, the United Kingdom began experiencing an energy crisis that included a substantial increase in the price of natural gas. The U.K. energy crisis necessitated evaluations in the third and fourth quarters of 2021, of the long-lived assets, including definite-lived intangible assets, and goodwill of our U.K. operations to determine if their fair value had declined to below their carrying value. The evaluations resulted in total goodwill impairment charges of $285 million, and total long-lived and intangible asset impairment charges of $236 million, in 2021. As of December 31, 2021, after the recognition of the goodwill impairment charges, no goodwill related to our U.K. operations remained.

During the first quarter of 2022, we concluded that the continued impacts of the U.K. energy crisis, including further increases and volatility in natural gas prices due in part to geopolitical events as a result of Russia’s invasion of Ukraine in February 2022, triggered an additional long-lived asset impairment test. The results of this test indicated that no additional long-lived asset impairment existed as the undiscounted estimated future cash flows were in excess of the carrying values for each of the U.K. asset groups. The U.K. asset groups consist of U.K. Ammonia, U.K. AN and U.K. Other.

In June 2022, we approved and announced our proposed plan to restructure our U.K. operations, which includes our manufacturing complexes in Ince and Billingham. This plan includes permanently closing the Ince facility and optimizing the remaining manufacturing operations at the Billingham facility. The Ince facility has been idled since September 15, 2021. As a result, in the three months ended June 30, 2022, we recorded total charges of $162 million, as follows:

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

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

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

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

and

•a charge for post-employment benefits totaling $10 million related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

These amounts are included in the U.K. operations restructuring line item in our consolidated statements of operations for the three and six months ended June 30, 2022. We are working with customers, vendors, regulators and others to finalize closure plans, and we expect substantially all of the restructuring activities will be completed within the next twelve months.

As a result of the proposed restructuring of our U.K. operations, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K. operations, consisting of U.K. Ammonia, U.K. AN and U.K. Other. The results of this long-lived asset impairment test indicated that no additional asset impairment should be recorded as the undiscounted estimated future cash flows for the continuing U.K. operations were in excess of the carrying values for each of the U.K. asset groups.