EX-99.1 3 t36797_x9973103.txt JULY 31, 2003 PRESS RELEASE Terra Industries Inc. 600 Fourth Street P.O. Box 6000 Sioux City, IA 51102-6000 Telephone: (712) 277-1340 Telefax: (712) 277-7383 www.terraindustries.com ================================================================================ NEWS ================================================================================ For immediate release Contact: Mark Rosenbury (712) 279-8756 TERRA INDUSTRIES INC. REPORTS SECOND QUARTER RESULTS Sioux City, Iowa (July 31, 2003)--Terra Industries Inc. (NYSE symbol: TRA) announced today a net loss of $31.1 million, or $.41 per share, on revenues of $379 million for the second quarter ended June 30, 2003. The net loss excluding the $27.0 million loss for "Impairment of long-lived assets" (representing a $53.1 million impairment charge to operating income less $9.9 million allocated to minority interest and $16.2 million of income tax benefit) was $4.1 million. This compares to the 2002 second quarter loss of $8.5 million, or $.11 per share on revenues of $299 million. Terra announced on June 26, 2003, that it would suspend production at its Blytheville, Ark., manufacturing facility. In response to this action and as required by Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," Terra commenced a review to determine if the Blytheville facility's carrying value was impaired. This review led Terra management to conclude that future market conditions may not justify the ongoing investment in maintenance and replacement capital necessary to extend operations for the remainder of the facility's useful life. Accordingly a $53.1 million charge was recorded during the second quarter as an "Impairment of long-lived assets". Terra currently plans to keep the Blytheville facility in a mothballed condition and may operate the facility from time to time as market conditions allow. For the 2003 first half, Terra posted a net loss of $45.4 million, or $.60 per share, on revenues of $659 million. The loss, excluding the $27.0 million impairment loss, was $18.4 million, compared with a net loss before cumulative effect of change in accounting principle of $17.6 million, or $.23 per share, on revenues of $513 million in the 2002 first half. Cash from operations, before working capital changes, was $17.7 million in the 2003 second quarter, compared to $28.2 million in the 2002 second quarter. Terra's cash and short-term investments balance was $12.4 million at June 30, 2003. Terra had $34.8 million of borrowings outstanding at June 30, 2003, under Terra's revolving credit facility that expires in June 2005. Working capital needs during the quarter, primarily seasonal utilization of customer prepayments, reduced borrowing availability under Terra's bank lines to $67 million at June 30, 2003. Since June 30, Terra has experienced cash needs arising from margin calls on its forward natural gas positions as a result of declining prices, tightened terms by trade creditors and other operating needs. As a result, Terra's ability to meet its bank covenants will depend on future operating cash flows, including working capital needs, receipt of customer prepayments and trade credit terms. Failure to meet these covenants could require additional costs and fees to amend the bank facilities or could result in termination of the facilities. Terra currently anticipates that it will be able to meet its covenants through the end of this year, but that it will be close to the limits imposed by the covenants. While natural gas prices have recently declined, if product margins in the second half of 2003 were to be as depressed as in the first half, or if there were to be any adverse changes in the other factors discussed above, Terra may need a waiver of its bank covenants to meet its 2004 seasonal working capital needs. The Nitrogen Products business segment recorded revenues of $315.7 million and an operating loss of $47.6 million for the quarter, compared with revenues of $258 million and operating income of $2.2 million for the 2002 second quarter. For the first half, Nitrogen Products posted revenues of $544 million and an operating loss of $61.1 million, compared with revenues of $443 million and operating income of $2.9 million in 2002. The $3.3 million improvement, excluding the effect of the impairment charge, in second quarter Nitrogen Products results over the 2002 second quarter was due to higher product selling prices, partially offset by lower sales volumes and higher natural gas costs. Ammonia, nitrogen solutions, ammonium nitrate and urea selling prices for the 2003 second quarter were 60, 42, 18 and 50 percent higher, respectively than 2002 second quarter prices. These higher prices reflect lower ammonia and other nitrogen product supplies in response to higher gas costs. Terra's sales volumes for ammonia, nitrogen solutions and ammonium nitrate were 12, 16 and 19 percent lower, respectively, than sales volumes achieved in the 2002 second quarter. Second quarter urea sales volumes were 4 percent higher in 2002 than in 2003. The lower overall sales volumes were due primarily to the effects weather had on the 2002-2003 fertilizer year as compared to the prior fertilizer year. Natural gas unit costs for the quarter, net of about $2.4 million of cost increases due to forward purchase contracts, were 88 percent higher than in the 2002 second quarter. This increase was due to lower industry-wide natural gas inventories. Factors that affected Nitrogen Products' first half results were similar to those that affected the second quarter. Ammonia, nitrogen solutions, ammonium nitrate and urea selling prices were 60, 35, 9 and 4 percent higher, respectively, than in 2002. Ammonia, nitrogen solutions, ammonium nitrate and urea sales volumes were 15, 5, 8 and 6 percent lower, respectively, than in 2002. Natural gas unit costs, net of about $5.8 million of cost reductions realized from forward purchase contracts, increased 72 percent. The Methanol business segment reported 2003 second quarter revenues of $63 million and operating income of $3.1 million, compared with revenues of $42 million and an operating loss of $0.4 million in the 2002 second quarter. The profit increase was due to 64 percent higher methanol selling prices, partially offset by 8 percent lower sales volumes and higher natural gas costs. Methanol's second quarter natural gas unit costs, net of about $.4 million in cost increases due to forward purchase contracts, increased 72 percent. Methanol's first half results were also due to higher methanol selling prices, partially offset by lower sales volumes and higher natural gas costs which, net of about $2.2 million of cost reductions realized from forward purchase contracts, increased 92 percent. Terra's forward purchase contracts at June 30, 2003, fixed prices for 21 percent of its next 12 months' natural gas needs at about $5.3 million above the published forward market prices at that date. "This was a difficult quarter for Terra," said Michael L. Bennett, Terra's President and CEO. "Due to the delayed North American application season we didn't realize the sales volumes we expected, and selling prices didn't reach the levels we thought we'd achieve. These disappointments were compounded by continuing high natural gas costs, and led us to shut down production at our Blytheville facility at the end of June. "Despite these hurdles," Bennett continued, "we are encouraged by improved business performance in our methanol business and nitrogen markets in the U.K. We're committed to competitively meeting our customers' needs and continuing to improve our cost structure for a faster return to profitability when industry conditions improve." Terra management will conduct a conference call to discuss these second quarter results on July 31, 2003 beginning at 3:00 EDT. A live webcast of the conference call will be available from Terra's web site at www.terraindustries.com, and will be archived for playback for three months. Terra Industries Inc., with 2002 revenues of $1 billion, is a leading international producer of nitrogen products and methanol. This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.'s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.'s most recent report on Form 10-K and Terra Industries Inc.'s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. # # # Note: Terra Industries' news announcements are also available on its web site, www.terraindustries.com. (Tables follow) TERRA INDUSTRIES INC. SUMMARIZED RESULTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ----------------------------- (in thousands except per-unit amounts) 2003 2002 2003 2002 ----------- ----------- ----------- ----------- REVENUES Nitrogen products $ 315,744 $ 257,663 $ 544,285 $ 442,650 Methanol 62,853 41,853 113,967 70,156 Other, net of intercompany eliminations 348 (18) 836 252 ----------- ----------- ----------- ----------- $ 378,945 $ 299,498 $ 659,088 $ 513,058 =========== =========== =========== =========== OPERATING INCOME (LOSS) Nitrogen products $ (47,554) $ 2,204 $ (61,112) $ 2,870 Methanol 3,109 (391) 4,742 (2,914) Other expense--net (1,465) (1,223) (2,798) (734) ----------- ----------- ----------- ----------- (45,910) 590 (59,168) (778) Interest income 192 113 381 161 Interest expense (15,283) (13,348) (27,835) (26,644) Minority interest 10,950 (739) 12,668 (1,285) Income tax benefit 18,960 4,899 28,521 10,964 ----------- ----------- ----------- ----------- Loss from continuing operations (31,091) (8,485) (45,433) (17,582) Cumulative effect of change in accounting principle -- -- -- (205,968) ----------- ----------- ----------- ----------- Net loss $ (31,091) $ (8,485) $ (45,433) $ (223,550) =========== =========== =========== =========== BASIC AND DILUTED LOSS PER SHARE: Loss from continuing operations $ (0.41) $ (0.11) $ (0.60) $ (0.23) Cumulative effect of change in accounting principle -- -- -- (2.74) ----------- ----------- ----------- ----------- Loss per Share $ (0.41) $ (0.11) $ (0.60) $ (2.97) =========== =========== =========== =========== Weighted average shares outstanding 75,715 75,378 75,539 75,203 =========== =========== =========== =========== Because of the seasonal nature and effects of weather-related conditions in several of Terra's marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.
TERRA INDUSTRIES INC. SUMMARIZED FINANCIAL POSITION (in thousands) (unaudited)
June 30, -------------------------------------- 2003 2002 ------------- ------------- ASSETS Cash and short-term investments $ 12,368 $ 12,718 Accounts receivable, less allowance for doubtful accounts of $156 and $436 123,852 105,298 Inventories 96,501 91,986 Other current assets 21,463 22,680 ------------- ------------- Total current assets 254,184 232,682 Property, plant and equipment, net 725,297 802,300 Deferred plant turnaround costs 32,006 19,287 Other assets 36,023 28,030 ------------- ------------- Total assets $ 1,047,510 $ 1,082,299 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Debt due within one year $ 149 $ 135 Other current liabilities 160,631 102,763 ------------- ------------- Total current liabilities 160,780 102,898 ------------- ------------- Long-term debt and capital lease obligations 437,031 400,432 Deferred income taxes 32,457 115,257 Other liabilities 109,750 65,734 Minority interest 85,011 100,453 ------------- ------------- Total liabilities and minority interest 825,029 784,774 Stockholders' Equity 222,481 297,525 ------------- ------------- Total liabilities and stockholders' equity $ 1,047,510 $ 1,082,299 ============= =============
TERRA INDUSTRIES INC. SUMMARIZED CASH FLOWS (in thousands) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ----------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Loss from operations $ (31,091) $ (8,485) $ (45,443) $ (17,852) Non-cash charges and credits: Impairment of long-lived assets 53,091 -- 53,091 -- Depreciation and amortization 27,931 27,396 55,548 52,173 Deferred income taxes (21,301) 8,564 (33,144) (951) Minority interest in earnings (loss) (10,950) 739 (12,668) 1,285 Change in current assets and liabilities (37,760) (8,960) (63,875) 21,410 ----------- ----------- ----------- ----------- Net cash flows from operating activities (20,080) 19,254 (46,481) 56,335 Purchase of property, plant and equipment (2,283) (2,682) (5,861) (9,010) Plant turnaround costs (8,003) (4,801) (20,321) (8,054) Debt borrowings (repayments) 36,714 195 36,679 (36,035) Deferred financing costs (8,138) -- (8,138) -- Distributions to minority interests (1,153) -- (1,153) -- Other 353 (1,311) (836) 2,357 Increase (Decrease) in cash and ----------- ----------- ----------- ----------- short-term investments (2,590) 10,655 (46,111) 5,593 Cash and short-term investments at beginning of period 14,958 2,063 58,479 7,125 Cash and short-term investments at ----------- ----------- ----------- ----------- end of period $ 12,368 $ 12,718 $ 12,368 $ 12,718 =========== =========== =========== ===========
TERRA INDUSTRIES INC. SUMMARIZED INFORMATION (in thousands)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------------------------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- OTHER FINANCIAL DATA Cost of sales $ 362,031 $ 289,214 $ 646,105 $ 495,354 (includes depreciation and amortization) Selling, general & administrative expense 9,733 9,694 19,060 18,482 (includes depreciation and amortization) Impairment of long-lived assets 53,091 -- 53,091 -- VOLUMES AND PRICES Three months Ended June 30, ---------------------------------------------------------------- 2003 2002 ----------------------------- ----------------------------- Sales Average Sales Average Volumes Unit Price(1) Volumes Unit Price(1) ------------ --------------- ------------ ------------ Ammonia (tons) 400 $ 238 452 $ 149 Nitrogen solutions (tons) 1,093 104 1,301 73 Urea (tons) 172 178 166 119 Ammonium nitrate (tons) 169 137 208 116 Methanol (gallons) 82,174 0.77 88,994 0.47 NATURAL GAS COSTS(2) North America $5.98 $3.09 United Kingdom $2.91 $2.07 Six months Ended June 30, ---------------------------------------------------------------- 2003 2002 ----------------------------- ----------------------------- Sales Average Sales Average Volumes Unit Price(1) Volumes Unit Price(1) ------------ --------------- ------------ ------------ Ammonia (tons) 678 $ 227 793 $ 142 Nitrogen solutions (tons) 1,848 96 1,937 71 Urea (tons) 324 168 344 113 Ammonium nitrate (tons) 417 130 451 119 Methanol (gallons) 149,679 0.76 171,645 0.41 NATURAL GAS COSTS(2) North America $5.35 $2.87 United Kingdom $3.18 $2.43 1 After deducting outbound freight costs 2 Per MMBtu. Includes all transportation and other logistical costs and any gains or losses on financial derivatives related to natural gas purchases. Because of the seasonal nature and effects of weather-related conditions in several of its marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.