-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FmyMSLNefTOuUXCRmcFt7x+OOgU8Wwe8aig8lHXTppwTMHFgw86zWukGjU1vsEBR TZIn5moyjLyXKWxk62F70Q== 0000950131-01-500179.txt : 20010321 0000950131-01-500179.hdr.sgml : 20010321 ACCESSION NUMBER: 0000950131-01-500179 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA INDUSTRIES INC CENTRAL INDEX KEY: 0000722079 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 521145429 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-08520 FILM NUMBER: 1572395 BUSINESS ADDRESS: STREET 1: TERRA CENTRE 600 4TH ST STREET 2: P.O. BOX 6000 CITY: SIOUX CITY STATE: IA ZIP: 51102-6000 BUSINESS PHONE: 7122771340 MAIL ADDRESS: STREET 1: TERRA CENTER STREET 2: 600 4TH ST P O BOX 6000 CITY: SIOUX CITY STATE: IA ZIP: 51102-6000 FORMER COMPANY: FORMER CONFORMED NAME: INSPIRATION RESOURCES CORP DATE OF NAME CHANGE: 19920517 10-K405 1 d10k405.txt FORM 10-K405 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission file number: 1-8520 TERRA INDUSTRIES INC. (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 52-1145429 (I.R.S. Employer Identification No.) Terra Centre 600 Fourth Street P. O. Box 6000 Sioux City, Iowa (Address of principal executive offices) 51102-6000 (Zip Code) Registrant's telephone number, including area code: (712) 277-1340 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Shares, without par value New York Stock Exchange Toronto Stock Exchange 10 3/4% Senior Notes Due 2003 N/A 10 1/2% Senior Notes Due 2005 N/A Securities registered pursuant to Section 12(g) of the Act: None ______________ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the Registrant's voting stock held by non- affiliates of the Registrant, at January 31, 2001, was $120,720,480. The number of shares of Common Shares, without par value, outstanding as of February 26, 2001 was 75,884,687. ================================================================================ DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on April 26, 2001. Certain information therein is incorporated by reference into Part III hereof. TABLE OF CONTENTS PART I ------ Items 1 and 2. Business and properties................................................................................... 1 Item 3. Legal proceedings......................................................................................... 8 Item 4. Submission of matters to a vote of security holders....................................................... 8 Executive officers of Terra............................................................................... 8 PART II ------- Item 5. Market for Terra's common equity and related stockholder matters.......................................... 10 Item 6. Selected financial data................................................................................... 10 Item 7. Management's discussion and analysis of financial condition and results of operations................................................................................. 10 Item 7a. Quantitative and qualitative disclosures about market risk................................................ 10 Item 8. Financial statements and supplementary data............................................................... 10 Item 9. Changes in and disagreements with accountants on accounting and financial disclosure.................................................................................. 10 PART III -------- Item 10. Directors and executive officers of Terra................................................................. 11 Item 11. Executive compensation.................................................................................... 11 Item 12. Security ownership of certain beneficial owners and management............................................ 11 Item 13. Certain relationships and related transactions............................................................ 11 PART IV ------- Item 14. Exhibits, financial statement schedules and reports on Form 8-K........................................... 11 Signatures.................................................................................................................. 17 Index to financial statement schedules, reports and consents................................................................ S-1
PART I ------ Items 1 and 2. BUSINESS AND PROPERTIES. Terra Industries Inc., a Maryland corporation, is referred to as "Terra" throughout this report. References to Terra also include the direct and indirect subsidiaries of Terra Industries Inc. where required by the context. Subsidiaries not wholly-owned by Terra include a limited partnership, Terra Nitrogen Company, L.P., which, through its subsidiary, Terra Nitrogen, L.P., operates Terra's manufacturing facilities in Blytheville, Arkansas and Verdigris, Oklahoma. Terra is the sole general partner and the majority limited partner in Terra Nitrogen Company, L.P. Terra's principal corporate office is located at Terra Centre, 600 Fourth Street, P.O. Box 6000, Sioux City, Iowa 51102-6000 and its telephone number is (712) 277-1340. Business Overview Terra is an industry leader in the production and marketing of both nitrogen products and methanol. Terra is one of the largest producers of anhydrous ammonia and nitrogen solutions in the United States and Canada and is the largest producer of ammonium nitrate in the United Kingdom. In addition, Terra is one of the largest U.S. producers and marketers of methanol. Terra owns eight facilities that produce nitrogen products. Two of these eight facilities also produce methanol. These facilities are located in or near the following locations and have the following production capacities:
============================================================================================== Annual Capacity ------------------------------------------------------------ Location Ammonia/1/ Urea/2/ Methanol/3/ UAN-28/4/ AN/4/ - ---------------------------------------------------------------------------------------------- Beaumont, Texas/5/, /6/ 255,000 280,000,000 - ---------------------------------------------------------------------------------------------- Blytheville, Arkansas 420,000 480,000 30,000 - ---------------------------------------------------------------------------------------------- Port Neal, Iowa 370,000 50,000 810,000 - ---------------------------------------------------------------------------------------------- Verdigris, Oklahoma 1,050,000 2,180,000 - ---------------------------------------------------------------------------------------------- Woodward, Oklahoma/6/ 440,000 25,000 40,000,000 340,000 - ---------------------------------------------------------------------------------------------- Courtright, Ontario 480,000 175,000 400,000 - ---------------------------------------------------------------------------------------------- Severnside, U.K. 265,000 500,000 - ---------------------------------------------------------------------------------------------- Billingham, U.K./7/ 550,000 500,000 - ---------------------------------------------------------------------------------------------- Total 3,830,000 730,000 320,000,000 3,760,000 1,000,000 - ----------------------------------------------------------------------------------------------
1. Measured in gross tons of ammonia produced; net tons available for sale will vary with upgrading requirements. 2. Urea is sold as urea liquor from Port Neal and Woodward and as a granular urea from Blytheville and Courtright. Production capacities for both forms are measured in tons. 3. Measured in gallons. 4. Measured in tons. 5. Terra's Beaumont, Texas facility produced only methanol until completion of an ammonia production loop at that facility in January 2000. 6. Ammonia capacity depends, in part, on the desired rate of methanol production at this facility. 7. Terra's Billingham, England facility also produces merchant nitric acid; 2000 sales were 262,000 product tons. ================================================================================ 1 Until June 30, 1999, Terra also operated retail facilities in the U.S. and Canada for the distribution and marketing of fertilizers, crop protection products, seed and services. Terra sold this business to Agro Distribution, LLC, an affiliate of Cenex/Land O'Lakes Agronomy Company, on that date. Nitrogen Products Nitrogen is a primary nutrient essential for plant growth. Nitrogen fertilizers must be reapplied each year in agricultural areas because of absorption by crops and leaching from the soil. There are currently no substitutes for nitrogen fertilizers in the cultivation of high-yield crops. Terra is a major producer and distributor of nitrogen products, principally fertilizers. Ammonia, urea and urea ammonium nitrate solution ("UAN") are the principal nitrogen products produced and sold by Terra in North America. Terra produces and sells principally ammonia and ammonium nitrate ("AN") in the U.K. A significant portion of Terra's ammonia production is upgraded into other nitrogen products, such as urea, UAN and AN. Other important products manufactured by Terra in both the U.S. and U.K. include nitric acid and carbon dioxide. These products, along with a portion of ammonia and urea sales, are used as industrial feedstocks not tied to the agricultural market. Although these different nitrogen products are interchangeable to some extent, each has its own characteristics which make one product or another preferable to the end-user. These preferences vary according to the crop planted, soil and weather conditions, regional farming practices, relative prices, and the cost and availability of appropriate storage, handling and application equipment. These various nitrogen products are described in greater detail below: Ammonia. Anhydrous ammonia (often referred to simply as "ammonia") is the ------- simplest form of nitrogen fertilizer and is the feedstock for the production of most other nitrogen fertilizers, including urea, UAN and AN. Ammonia is produced when natural gas reacts with steam and air at high temperatures and pressures in the presence of catalysts. Ammonia has a nitrogen content of 82% by weight and is generally the least expensive form of fertilizer per pound of nitrogen. Ammonia has a distinctive pungent odor and requires refrigeration or pressurization for transportation and storage. Urea. Urea is produced for both the animal feed and fertilizer market by ---- converting ammonia and carbon dioxide into liquid urea, which can be processed into a solid, granular form. Urea has a nitrogen content of 46% by weight, the highest level for any solid nitrogen product. Terra produces both a granulated form of solid urea, generally for the fertilizer market, and urea liquor (liquid) for animal feed supplements and industrial applications. UAN. Terra produces UAN at five of its six North American fertilizer --- manufacturing facilities. Terra's Verdigris, Oklahoma facility is one of the largest UAN production facilities in North America. UAN is produced by combining liquid urea, liquid ammonium nitrate and water. The nitrogen content of UAN is approximately 28% to 32% by weight. UAN is a liquid fertilizer and, unlike ammonia, is odorless and does not require refrigeration or pressurization for transportation or storage. UAN may be applied separately or may be mixed with various crop protection products, permitting the application of several materials simultaneously, thus reducing energy and labor costs and accelerating field preparation for planting. In addition, UAN may be applied from ordinary tanks and trucks and can be sprayed or injected into the soil, or applied through irrigation systems, throughout the growing season. UAN is relatively expensive to transport and store because of its high water content. Due to its stable nature, UAN may be used for no-till row crops where fertilizer is spread on the surface of the soil but may be subject to volatilization losses. AN. Terra produces AN at its two facilities in the U.K. AN is produced by -- combining nitric acid and ammonia into a liquid form which is then converted to a solid. The nitrogen content of AN is 34.5% by weight. Plants. All of Terra's North American facilities are integrated facilities for ------ the production of ammonia, liquid urea and UAN (except for the Beaumont, Texas location which produces only ammonia and methanol, and the Verdigris, Oklahoma facility, which produces only ammonia and UAN). In addition, Terra's facilities in Blytheville, Arkansas and Courtright, Ontario produce granular urea and the facility in Woodward, Oklahoma also produces 2 methanol. Terra's two U.K. facilities are integrated facilities for the production of ammonia, ammonium nitrate, liquid carbon dioxide and, at the Billingham location, nitric acid. Terra's eight manufacturing facilities are each designed to operate continuously, except for planned shutdowns (usually biennial) for maintenance and efficiency improvements. Capacity utilization (gross tons produced divided by capacity tons at expected operating rates and on-stream factors) of Terra's fertilizer manufacturing facilities was 93% in 2000, 96% in 1999 and 102% in 1998. Terra's capacity utilization was reduced in 2000 as a result of several plant shutdowns due to natural gas prices increasing faster than nitrogen prices. Terra owns all of its manufacturing facilities in fee, unless otherwise stated below. (See "Methanol - Plants" for a description of leased facilities at the Beaumont, Texas facility.) All Terra manufacturing facilities (including the Beaumont facility) are subject to encumbrances in favor of lenders. Located at the Verdigris, Oklahoma facility are two ammonia plants, two nitric acid plants, two UAN plants and a port terminal. Terra owns the plants in fee, while the port terminal is leased from the Tulsa-Rogers County Port Authority. The leasehold interest on the port terminal is scheduled to expire in April, 2004, and Terra has an option to renew the lease for an additional five-year term. The Blytheville, Arkansas facility consists of an anhydrous ammonia plant, a granular urea plant and a UAN plant. The ammonia plant is leased from the City of Blytheville at a nominal annual rate. The ammonia plant lease is scheduled to expire in November, 2004, and Terra has an option to extend the lease for eleven successive terms of five years each at the same rental rate. Terra has an unconditional option to purchase the plant for a nominal price at the end of the lease term (including any renewal term). The urea plant is also leased from the City of Blytheville. The urea plant lease is scheduled to expire in November, 2005, and Terra has an option to extend the lease for three successive terms of five years each at the same rental rate. Terra also has a similar, unconditional option to purchase the urea plant for a nominal price. In the first quarter of 2000, Terra completed a $61.7 million capital project to add an ammonia production loop to its Beaumont, Texas facility that has added 255,000 tons of annual ammonia production capacity. Marketing and Distribution. Terra's production facilities, combined with -------------------------- significant storage capacity at over 60 locations throughout the major fertilizer consuming regions of the U.S., position Terra to be a major supplier of nitrogen fertilizers. Terra's principal customers for its North American manufactured nitrogen products are independent dealers, national retail chains, cooperatives and industrial customers. In the U.K., revenues are split approximately evenly between agricultural and industrial customers. Overall, industrial customers purchased approximately 21% of Terra's nitrogen product production in each of 2000 and 1999 and approximately 23% of Terra's 1998 production. As part of Terra's sale of its farm service centers and distribution business to Cenex/Land O'Lakes Agronomy Company in the second quarter of 1999, Terra entered into an agreement to supply Cenex/Land O'Lakes nitrogen fertilizer products. Under this agreement, Cenex/Land O'Lakes will for three years purchase from Terra approximately the quantity of product that Terra supplied to both Terra's own distribution business and to Cenex/Land O'Lakes before the sale of the distribution business. Terra sold approximately 12% of its North American production to Cenex/Land O'Lakes under this supply agreement in 1999 and approximately 13% of its North American production to Cenex/Land O'Lakes in 2000. Under an agreement with Imperial Chemical Industries (ICI), Terra may make payments to ICI based on the market price obtained for ammonium nitrate sales by Terra's U.K. business. Over the term of this agreement, Terra must make a payment for any year through 2002 in which the average ammonium nitrate price it receives exceeds certain thresholds, subject to a maximum payment of (Pounds)58 million ($95.7 million at the time the agreement was signed). Because of these payments, Terra will not benefit fully from the U.K. market price of ammonium nitrate over certain thresholds during this agreement's term. Terra did not make any payments to ICI under this agreement in 1998, 1999 or 2000. 3 Methanol Terra possesses approximately 320 million gallons of annual methanol production capacity, representing approximately 21% of total U.S. rated methanol production capacity (1.5 billion gallons) at the end of 2000. Product. Methanol is a liquid petrochemical made primarily from natural gas. ------- It is used as a feedstock in the production of other chemical products such as formaldehyde, acetic acid and chemicals used in the building products industry. Another major market for methanol is as a feedstock in the production of methyl tertiary butyl ether or MTBE, an oxygenate used as an additive in re-formulated gasoline and as an octane enhancer in non-reformulated gasoline. The methanol manufacturing process involves heating natural gas feedstock, mixing it with steam and passing it over a nickel-based catalyst, which breaks it down into carbon monoxide, carbon dioxide and water. This reformed gas is then cooled, compressed and passed over a copper-zinc-based catalyst to produce crude methanol. Crude methanol consists of approximately 80% methanol and 20% water. Crude methanol is distilled to remove water and impurities in order to convert it to high-purity chemical-grade methanol suitable for sale. Plants. Terra's Woodward, Oklahoma facility produced approximately 38 ------ million, 34 million and 36 million gallons of methanol in 1998, 1999 and 2000 respectively and has an annual methanol production capacity of 40 million gallons. Terra's Beaumont, Texas facility is among the largest methanol production plants in the U.S., with approximately 280 million gallons of annual methanol production capacity. This plant produced 258 million, 207 million and 208 million gallons of methanol in 1998, 1999 and 2000 respectively. Terra owns the plant and processing equipment at the Beaumont facility. The land is leased by Terra from E.I. du Pont de Nemours and Company (DuPont) for a nominal annual rate under a lease agreement which expires in 2090. Because the Beaumont facility is entirely contained within an industrial complex owned and operated by DuPont, Terra depends on DuPont for access to the facility as well as certain essential services. Most of the finished methanol product is shipped to customers through wharf facilities located on DuPont property. Lastly, Terra depends on DuPont for access to the pipelines used to transport methanol and to obtain natural gas, as well as for certain utilities, wastewater treatment facilities and other essential services. Marketing and Distribution; Contracts. Terra's methanol customers are ------------------------------------- primarily large, domestic chemical or MTBE producers. Terra has a number of long-term methanol sales contracts, the most significant of which is with DuPont. In 2000, Terra sold over 57% of its production under such contracts. At December 31, 2000, Terra had contracted to sell over 62% of its 2001 scheduled production at prices indexed to published sources. Most of these sales contracts (other than the DuPont contract noted below) cover fixed volumes and have terms of up to three years. Under the DuPont contract, as amended, DuPont has agreed to purchase from Terra 54 million gallons of methanol each year through 2001 (representing 19% of the Beaumont facility's annual production capacity). The price of the methanol delivered under this contract is generally negotiated on the basis of an established index and the previous month's price. The DuPont contract accounted for approximately 20% of Terra's methanol sales Breakdown of Revenue by Product The approximate revenue contributions of Terra's principal products (based upon percentages of Terra's consolidated revenues) for each of the last three years are as follows: Product 2000 1999 1998 ------- ---- ---- ---- Ammonia 23% 22% 23% AN 12% 12% 13% UAN 32% 29% 27% Urea 8% 8% 10% Methanol 14% 11% 11% 4 Credit Terra's credit terms are generally 15-30 days in the U.S. and 30 days in the U.K., but may be extended for longer periods during certain sales seasons consistent with industry practices. Bad debt writeoffs associated with Terra's nitrogen products and methanol manufacturing business have been less than $1 million annually for each of the past three years. Seasonality and Volatility The fertilizer business is seasonal, based upon the planting, growing and harvesting cycles. Nitrogen fertilizer inventories must be accumulated to permit uninterrupted customer deliveries, and require significant storage capacity. This seasonality generally results in higher fertilizer prices during peak periods, with prices normally reaching their highest point in the spring, decreasing in the summer, and increasing again in the fall as depleted inventories are restored. Nitrogen fertilizer prices can also be volatile as a result of a number of other factors. The most important of these factors are: . Weather patterns and field conditions (particularly during periods of high fertilizer consumption); . Quantities of fertilizers imported to and exported from North America and imported to the U.K.; . Current and projected grain inventories and prices, which are heavily influenced by U.S. exports and worldwide grain markets; and . Price fluctuations in natural gas, the principal raw material used to produce nitrogen fertilizer and methanol. Governmental policies may directly or indirectly influence the number of acres planted, the level of grain inventories, the mix of crops planted and crop prices. Nitrogen fertilizer price levels are influenced by world supply and demand for ammonia and nitrogen-based products. Long-term demand is affected by population growth and rising living standards that determine food consumption. Shorter-term demand is affected by world economic conditions and international trade decisions, such as China's cessation of urea imports in recent years. Supply is affected by increasing worldwide capacity and the increasing availability of nitrogen product exports from major producing regions such as the former Soviet Union, the Middle East and South America, where in many instances producers have access to relatively low-cost natural gas supplies. During the mid to late 1990's favorable nitrogen prices in the industry spurred capacity additions in the form of new and expanded production facilities. More recently, depressed U.S. prices and margins for nitrogen products have resulted in some curtailments or shutdowns of capacity in North America. Some, but not all, of these shutdowns are expected to be permanent. Price volatility in North American natural gas markets prompted industry-wide curtailment of both nitrogen fertilizer and methanol production in 2000. Terra idled its Blytheville, Arkansas plant from June through mid-August 2000 and the Blytheville, Arkansas and Beaumont, Texas plants and parts of the Verdigris, Oklahoma plant for the month of December 2000 due to high natural gas costs. During 2000, Terra produced only 89% and 84% of its ammonia and methanol capacity (respectively) because of plant shutdowns due to high natural gas costs and low product selling prices. While most U.S. methanol is sold pursuant to long-term contracts based on market index pricing and fixed volumes, the spot market price of methanol can be volatile. The industry has experienced cycles of oversupply, resulting in depressed prices and idled capacity, followed by periods of shortage and rapidly rising prices. At the end of 1998 and through 1999, methanol sales prices were below the low end of their historic sales price range; however by early 2000 prices had improved to historic levels. Future demand for methanol will depend in part on the regulatory environment with respect to reformulated gasoline. In 1999, the State of California mandated a ban on MTBE starting in 2002. If this ban is implemented, about 5% of the current global methanol supply will need to be curtailed or redirected. Methanol is expected to be the primary energy source for fuel cells used in various applications. The first commercial production of fuel cell-powered automobiles is expected in 2005. Consequently, methanol demand could change sharply over the next several years depending on MTBE use, the scope and rate of fuel cell implementation, and other factors. 5 Raw Materials The principal raw material used to produce manufactured nitrogen products and methanol is natural gas. Natural gas costs in 2000 comprised about 66% of total costs and expenses for the North American nitrogen products business, 23% of total costs and expenses for the U.K. nitrogen products business, and 66% of total costs and expenses associated with the methanol segment. Terra believes there is a sufficient supply of natural gas for the foreseeable future and has entered into firm contracts to minimize the risk of interruption or curtailment of natural gas supplies during the peak-demand winter season. Terra's natural gas hedging policy generally requires Terra to fix or cap the price of approximately 25% to 80% of its natural gas requirements for a rolling one-year period, and up to 50% of its natural gas requirements for the subsequent two-year period, provided that such arrangements would not result in costs that would be greater than the expected selling prices for Terra's finished products. (In response to extremely volatile natural gas costs during the last six months of 2000 and uncertainties regarding the ability of finished goods prices to recover the increases to gas costs, Terra's board of directors amended the hedging policy and eliminated the minimum hedge requirement through the end of 2001.) Capping natural gas prices is accomplished through various supply contracts, financial derivatives and other instruments. A significant portion of global nitrogen products and methanol production occurs at facilities with access to fixed-priced natural gas supplies. These facilities' natural gas costs have been and could continue to be substantially lower than Terra's. If natural gas prices rise, Terra may benefit from its use of forward-pricing techniques. Conversely, if natural gas prices fall, Terra may incur costs above the then-available spot market. The settlement dates of forward-pricing contracts coincide with gas purchase dates. Forward-pricing contracts are based on a designated price, which price is referenced to market natural gas prices or appropriate NYMEX futures contract prices. Transportation Terra uses several modes of transportation to receive materials and distribute product to customers, including railroad cars, common carrier trucks, barges and common carrier pipelines. Terra uses approximately 66 liquid, dry and anhydrous ammonia fertilizer terminal storage facilities in 18 states and one Canadian province. Terra also leases a methanol storage facility in Deer Park, Texas. Terra transports products from this storage facility primarily by marine vessels, rail tank cars and via pipeline to selected customers. Railcars are the major source of transportation at Terra's North American manufacturing facilities. Terra leases approximately 2,120 railcars. Terra also owns 10 nitric acid railcars. In the U.K., Terra's AN production is transported primarily by contract carrier trucks, and its ammonia production is transported primarily by Terra-owned pipelines. Terra transports purchased natural gas to its Woodward, Oklahoma facility via both intrastate and interstate pipelines and to its Verdigris, Oklahoma facility via intrastate pipeline. The intrastate pipelines serving Woodward and Verdigris are not open-access carriers, but are nonetheless part of a widespread regional system through which Woodward and Verdigris can receive natural gas from any major Oklahoma source. Terra also has limited access to out-of-state natural gas supplies for these facilities. The Beaumont, Texas facility purchases delivered natural gas via four intrastate pipelines. The Courtright, Ontario facility purchases natural gas at delivery points at Parkway and Dawn, Ontario, and from there the gas is delivered to the facility by a local utility. Terra transports purchased natural gas for both its Port Neal, Iowa and Blytheville, Arkansas facilities via interstate, open-access pipelines. At Terra's Billingham and Severnside, England locations, purchased natural gas is transported to the facilities via a nationwide, open-access pipeline system. Research and Development Terra does not currently have any significant, ongoing research and development efforts. 6 Competition Nitrogen products are a global commodity, and Terra's customers include distributors and industrial end-users, dealers and other fertilizer producers. Customers base purchasing decisions principally on the delivered price and availability of the product. Terra competes with a number of domestic and foreign producers, including state-owned and government-subsidized entities. Some of Terra's principal competitors may have greater total resources and may be less dependent on earnings from nitrogen fertilizer sales than Terra. Some foreign competitors may have access to lower cost or government-subsidized natural gas supplies, particularly those with facilities in warmer climates. Natural gas comprises a significant portion of the raw materials cost of Terra's nitrogen products. Competitive natural gas purchasing is essential to maintaining a low-cost product position. Terra competes with other manufacturers of nitrogen products on delivery terms and availability of products, as well as on price. The methanol industry, like the nitrogen products industry, is highly competitive and such competition is based largely on price, reliability and deliverability of this global commodity. The relative cost and availability of natural gas and the efficiency of production facilities are important competitive factors. Significant determinants of a methanol manufacturing plant's competitive position are the natural gas acquisition and transportation contracts a plant negotiates with its major suppliers. Domestic competitors for methanol include a number of large, integrated petrochemical producers, many of which are better capitalized than Terra. Environmental and Other Regulatory Matters Terra's operations are subject to various federal, state and local environmental, safety and health laws and regulations, including laws relating to air quality, hazardous and solid wastes and water quality. Terra's operations in Canada are subject to various federal and provincial regulations regarding such matters, including the Canadian Environmental Protection Act administered by Environment Canada, and the Ontario Environmental Protection Act administered by the Ontario Ministry of the Environment. Terra's U.K. operations are subject to similar regulations under a variety of acts governing hazardous chemicals, transportation and worker health and safety. Terra is also involved in the manufacture, handling, transportation, storage and disposal of materials that are or may be classified as hazardous or toxic by federal, state, provincial or other regulatory agencies. Precautions are taken to reduce the likelihood of accidents involving these materials. If such materials have been or are disposed of at sites that are targeted for investigation and remediation by federal or state regulatory authorities, Terra may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or analogous laws for all or part of the costs of such investigation and remediation. Terra has been designated as a potentially responsible party ("PRP") under CERCLA and its state analogues with respect to various sites. Under such laws, all PRPs may be held jointly and severally liable for the costs of investigation and remediation of an environmentally damaged site regardless of fault or legality of original disposal. After consideration of such factors as the number and levels of financial responsibility of other PRPs, the existence of contractual indemnities, the availability of defenses and the speculative nature of the costs involved, Terra believes that its liability with respect to these matters will not be material. Terra retained a small number (less than 10%) of its retail locations after the sale of its distribution business in the second quarter of 1999. Some of these locations were the subject of environmental clean-up activities for which Terra has retained liability. Terra does not believe that such environmental costs and liabilities will have a material effect on its results of operations, financial position or net cash flows. With respect to the Verdigris facility and Blytheville facility, Freeport- McMoRan Resource partners, Limited Partnership (a former owner and operator of these facilities) retained liability for certain environmental matters. With respect to the Beaumont facility, DuPont retains responsibility for certain environmental costs and liabilities stemming from conditions or operations to the extent such conditions or operations existed or occurred prior to the 1991 disposition by DuPont. Likewise, with respect to the Billingham and Severnside, England facilities, the seller, ICI, indemnified Terra for pre-December 31, 1997 environmental contamination associated with the purchased assets. 7 Terra may be required to install additional air and water quality control equipment, such as low nitrous oxide burners, scrubbers, ammonia sensors and continuous emission monitors, at certain of its facilities in order to maintain compliance with Clean Air Act, Clean Water Act and similar requirements. These equipment requirements are also typically applicable to competitors as well. Terra estimates that the cost of complying with these existing requirements in 2001 and beyond will be less than $10 million. Terra endeavors to comply (and has incurred substantial costs in connection with such compliance) in all material respects with applicable environmental, safety and health regulations. Because these regulations are expected to continue to change and generally be more restrictive than current requirements, the costs of compliance will likely increase. Terra does not expect its compliance with such regulations to have a material adverse effect on its results of operations, financial position or net cash flows. Revenues and Assets Terra's revenues from external customers, measure of profit and loss and total assets for the years 1998-2000 are set forth in the Notes to the Consolidated Financial Statements. Terra's revenues and assets according to geography (U.S., Canada and U.K.) are also set forth in the Notes to the Consolidated Financial Statements. Employees Terra had 1,279 full-time employees at December 31, 2000, with only the U.K. employees being covered by anything equivalent to a collective bargaining agreement. Item 3. LEGAL PROCEEDINGS. Various legal proceedings are pending against Terra and its subsidiaries. Terra believes that the aggregate liability resulting from these proceedings will not be material. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No items were submitted to a vote of security holders of the Company during the fourth quarter of 2000. EXECUTIVE OFFICERS OF TERRA The following paragraphs set forth the name, age and offices of each present executive officer of Terra, the period during which each executive officer has served as such and each executive officer's business experience during the past five years: Present positions and offices with the Company and Name and age principal occupations during the past five years ------------ -------------------------------------------------- Michael L. Bennett (47) Executive Vice President and Chief Operating Officer of Terra since February 1997; President and Chief Executive Officer of Terra Nitrogen Division since June 1998; President of Terra Distribution Division from November 1995 to February 1997; Senior Vice President of Terra from February 1995 to February 1997; Senior Vice President, Distribution of Terra International from October 1994 to February 1997. Burton M. Joyce (59) President and Chief Executive Officer of Terra since May 1991. Mark A. Kalafut (47) Vice President and Associate General Counsel of Terra since April, 1997; Vice President and General Counsel of Terra International from April, 1989 to April, 1997. 8 William R. Loomis, Jr. (52) Chairman of the Board of Terra since May 1996 and a director thereof since February 1996; Chief Executive Officer of the investment banking firm Lazard LLC since November 2000; Managing Director thereof from June 1995 to November 2000. Francis G. Meyer (49) Senior Vice President and Chief Financial Officer of Terra since November 1995. W. Mark Rosenbury (53) Senior Vice President and Chief Administrative Officer of Terra since August 1999; Vice President, European Operations of Terra and Managing Director of Terra Nitrogen U.K. from January 1998 to August 1999; Vice President, Business Development and Strategic Planning of Terra from November 1995 to January 1998; President of Terra Nitrogen Corporation from November 1994 to February 1996. Wynn S. Stevenson (46) Vice President, Taxes and Corporate Development of Terra since May 1998; Vice President, Taxes of Terra from April 1996 to May 1998; Director, Taxes thereof from June 1992 to April 1996. George H. Valentine (52) Senior Vice President, General Counsel and Corporate Secretary of Terra since November 1995. There are no family relationships among the executive officers and directors of Terra or arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as such. Officers of Terra are elected annually to serve until their respective successors are elected and qualified. 9 PART II ------- Item 5. MARKET FOR TERRA'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Information with respect to the market for Terra's common equity and related stockholder matters contained in Exhibit 13 hereto (primarily under the headings "Quarterly Financial and Stock Market Data (Unaudited)" and "Stockholders") is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA. Information with respect to selected financial data contained in Exhibit 13 hereto (primarily under the heading "Financial Summary") is incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Information with respect to management's discussion and analysis of financial condition and results of operations contained in Exhibit 13 hereto (primarily under the heading "Financial Review") is incorporated herein by reference. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information with respect to quantitative and qualitative disclosures about market risk contained in Exhibit 13 hereto (primarily under the subheading "Risk Management and Financial Instruments" of the "Financial Review" discussion) is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements, together with the notes thereto and the report of independent auditors thereon, and the information set forth under the heading "Quarterly Financial and Stock Market Data (Unaudited)" contained in Exhibit 13 hereto are incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 10 PART III -------- Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF TERRA. Information with respect to directors of Terra under the caption "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 26, 2001, is incorporated herein by reference. Information with respect to executive officers of Terra appears under the caption "Executive Officers of Terra" in Part I hereof and is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION. Information with respect to executive compensation under the caption "Executive Compensation and Other Information" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 26, 2001, is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information with respect to security ownership of certain beneficial owners and management under the caption "Equity Security Ownership" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 26, 2001, is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information with respect to certain relationships and related transactions under the caption "Certain Relationships and Related Transactions" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 26, 2001, is incorporated herein by reference. PART IV ------- Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements and Financial Statement Schedules. 1. Consolidated Financial Statements of Terra and its subsidiaries (incorporated herein by reference to Exhibit 13 hereof). Consolidated Statements of Financial Position at December 31, 2000 and 1999. Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998. Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998. Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998. Notes to the Consolidated Financial Statements. Responsibility for Financial Statements. Independent Auditors' Report. Quarterly Production Data (Unaudited). Quarterly Financial and Stock Market Data (Unaudited). 11 Volumes and Prices (Unaudited). Stockholders. Financial Summary. 2. Index to Financial Statement Schedules. See Index to Financial Statement Schedules of Terra and its subsidiaries at page S-1. 3. Other Financial Statements. Individual financial statements of Terra's subsidiaries are omitted because all such subsidiaries are included in the consolidated financial statements being filed. Individual financial statements of 50% or less owned persons accounted for on the equity method have been omitted because such 50% or less owned persons considered in the aggregate, as a single subsidiary, would not constitute a significant subsidiary. (b) Executive Compensation Plans and Arrangements. Exhibits 10.1.1 through 10.1.23 are incorporated herein by reference. (c) Reports on Form 8-K Terra did not file any reports on Form 8-K in the fourth quarter of 2000. (d) Exhibits 3.1.1 Articles of Restatement of Terra Industries filed with the State of Maryland on September 11, 1990, filed as Exhibit 3.1 to Terra Industries' Form 10-K for the year ended December 31, 1990, is incorporated herein by reference. 3.1.2 Articles of Amendment of Terra Industries filed with the State of Maryland on May 6, 1992, filed as Exhibit 3.1.2 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 3.1.3 Articles Supplementary of Terra Industries filed with the State of Maryland on October 13, 1994, filed as Exhibit 4.1.3 to Terra Industries' Form 8-K/A dated November 3, 1994, is incorporated herein by reference. 3.2 By-Laws of Terra Industries, as amended through August 7, 1991, filed as Exhibit 3 to Terra Industries' Form 8-K dated September 30, 1991, is incorporated herein by reference. 4.1 Indenture dated as of October 15, 1993 among Terra Industries (as successor by merger to Agricultural Minerals and Chemicals Inc.) and Society National Bank, including form of Senior Note, filed as Exhibit 99.2 to Terra Industries' Registration Statement on Form S- 3, as amended (File No. 33-52493), is incorporated herein by reference. 4.2 Indenture dated as of June 22, 1995 between Terra Industries and First Trust National Association, as trustee, including form of Exchange Note, filed as Exhibit 4.1 to Terra Industries' Registration Statement on Form S-4, as amended (File No. 33-60853), is incorporated herein by reference. 4.3 Amended and Restated Credit Agreement (the "1998 Credit Agreement") dated as of March 31, 1998 among Terra Capital, Inc., Terra Nitrogen, Limited Partnership, Certain Guarantors, Certain Lenders, Certain Issuing Banks and Citibank, N.A. without exhibits or schedules, filed as Exhibit 4.4 to Terra Industries' Form 10-Q for the quarter ended March 31, 1998, is incorporated herein by reference. 12 4.4 Amendment No. 1 dated as of September 30, 1998 to the 1998 Credit Agreement, filed as Exhibit 4.5 to Terra Industries' Form 10-Q for the quarter ended September 30, 1998, is incorporated herein by reference. Other instruments defining the rights of holders of long-term debt are not being filed because the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of Terra Industries and its subsidiaries on a consolidated basis. Terra Industries agrees to furnish a copy of any such instrument to the Commission upon request. 4.5 Limited Waiver dated as of March 22, 1999 to the 1998 Credit Agreement, filed as Exhibit 4.5 to Terra Industries' Form 10-Q for the quarter ended March 31, 1999, is incorporated herein by reference. 4.6 Amended and Restated Credit Agreement dated June 25, 1999 among Terra Capital, Inc., Certain Guarantors, Certain Lenders, Certain Issuing Banks, Salomon Smith Barney Inc., as Arranger, and Citibank, N.A., as Administrative Agent (without exhibits or schedules), filed as Exhibit 4.6 to Terra Industries' Form 10-Q for the quarter ended June 30, 1999, is incorporated herein by reference. 4.7 Credit Agreement dated December 31, 1997 and Amended and Restated June 25, 1999 among Terra International (Canada) Inc., Certain Guarantors, Certain Lenders, Salomon Smith Barney Inc., as Arranger, and Citibank, N.A., as Administrative Agent (without exhibits or schedules), filed as Exhibit 4.7 to Terra Industries' Form 10-Q for the quarter ended June 30, 1999, is incorporated herein by reference. 4.8 Credit Agreement dated April 7, 2000 among Terra Capital, Inc., Terra Nitrogen (U.K.), Limited, Terra Nitrogen, Limited Partnership, Terra Industries, Inc., as guarantor, Certain Lenders, Certain Issuers and Citibank, N.A., as Administrative Agent (without exhibits or schedules) filed as Exhibit 4.8 to Terra Industries' Form 10-Q for the quarter ended March 31, 2000, is incorporated herein by reference. 4.9 Credit Agreement dated December 31, 1997, and Amended and Restated June 25, 1999 and further Amended and Restated April 7, 2000 among Terra International (Canada), Inc., Certain Guarantors, Certain Lenders and Citibank, N.A., as Administrative Agent (without exhibits or schedules) filed as Exhibit 4.9 to Terra Industries' Form 10-Q for the quarter ended March 31, 2000, is incorporated herein by reference. 4.10 * Amendment No. 1 dated as of December 20, 2000 to the Credit Agreement dated April 7, 2000 among Terra Capital, Inc., Terra Nitrogen (U.K.), Limited, Terra Nitrogen, Limited Partnership, Terra Industries, Inc., as guarantor, Certain Lenders, Certain Issuers and Citibank, N.A., as Administrative Agent (without exhibits or schedules). 4.11 * Amendment No. 1 dated as of December 20, 2000 to the Credit Agreement dated December 31, 1997, and Amended and Restated June 25, 1999 and further Amended and Restated April 7, 2000 among Terra International (Canada), Inc., Certain Guarantors, Certain Lenders and Citibank, N.A., as Administrative Agent (without exhibits or schedules). 10.1.1 Resolution adopted by the Personnel Committee of the Board of Directors of Terra Industries with respect to supplemental retirement benefits for certain senior executive officers of Terra Industries, filed as Exhibit 10.4.2 to Terra Industries' Form 10-Q for the fiscal quarter ended March 31, 1991, is incorporated herein by reference. 10.1.2 1992 Stock Incentive Plan of Terra Industries filed as Exhibit 10.1.6 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 10.1.3 Form of Restricted Stock Agreement of Terra Industries under its 1992 Stock Incentive Plan filed as Exhibit 10.1.7 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 13 10.1.4 Form of Incentive Stock Option Agreement of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.8 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 10.1.5 Form of Nonqualified Stock Incentive Agreement of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.9 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 10.1.6 Excess Benefit Plan of Terra Industries, as amended effective as of January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference. 10.1.6.a. * Amendment to the Terra Industries Inc. Excess Benefit Plan, dated July 26, 2000. 10.1.7 Terra Industries Inc. Supplemental Deferred Compensation Plan effective as of December 20, 1993 filed as Exhibit 10.1.9 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference. 10.1.8 Amendment No. 1 to the Terra Industries Inc. Supplemental Deferred Compensation Plan, filed as Exhibit 10.1.15 to Terra Industries' Form 10-Q for the quarter ended September 30, 1995, is incorporated herein by reference. 10.1.8.a. * Amendment No. 2 to the Terra Industries Inc. Supplemental Deferred Compensation Plan, dated July 26, 2000. 10.1.9 Revised Form of Performance Share Award of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.11 to Terra Industries' Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.1.10 Revised Form of Incentive Stock Option Agreement of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.12 to Terra Industries' Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.1.11 Revised Form of Nonqualified Stock Option Agreement of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.1.12 1997 Stock Incentive Plan of Terra Industries, filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended December 31, 1996, is incorporated herein by reference. 10.1.13 Form of Incentive Stock Option Agreement of Terra Industries under its 1997 Stock Incentive Plan filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1999, is incorporated herein by reference. 10.1.14 Form of Nonqualified Stock Option Agreement of Terra Industries under its 1997 Stock Incentive Plan filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended December 31, 1999, is incorporated herein by reference. 10.1.15 Form of Performance Share Award of Terra Industries under its 1997 Stock Incentive Plan, filed as Exhibit 10.1.15 to Terra Industries' Form 10-K for the year ended December 31, 1998, is incorporated herein by reference. 10.1.16 Executive Retention Agreement for William R. Loomis, Jr., filed as Exhibit 10.1.17 to Terra Industries' Form 10-K for the year ended December 31, 1998, is incorporated herein by reference. 10.1.17 Executive Retention Agreement for Burton M. Joyce, filed as Exhibit 10.1.18 to Terra Industries' Form 10-K for the year ended December 31, 1998, is incorporated herein by reference. 14 10.1.18 Form of Executive Retention Agreement for Other Executive Officers, filed as Exhibit 10.1.19 to Terra Industries' Form 10-K for the year ended December 31, 1998, is incorporated herein by reference. 10.1.19 * 2000 Incentive Award Program for Officers and Key Employees of Terra Industries. 10.1.20 Form of Non-Employee Director Stock Option Agreement under the 1997 Stock Incentive Plan, filed as Exhibit 10.2.21 to Terra Industries' Form 10-Q for the quarter ended September 30, 1999, is incorporated herein by reference. 10.1.21 Amendment No. 1 dated as of February 20, 1997 to the 1997 Stock Incentive Plan filed as Exhibit 10.1.21 to Terra Industries' Form 10-K for the year ended December 31, 1999, is incorporated herein by reference. 10.1.22 * Form of Performance Share Award of Terra Industries under its 1997 Stock Incentive Plan, dated February 16, 2000. 10.1.23 * Form of Non-Employee Director Performance Share Award of Terra Industries under its 1997 Stock Incentive Plan, dated May 2, 2000. 10.2 Agreement of Limited Partnership of TNCLP (formerly known as Agricultural Minerals Company, L.P.) dated as of December 4, 1991, filed as Exhibit 99.3 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33-52493), is incorporated herein by reference. 10.3 Agreement of Limited Partnership of TNLP (formerly known as Agricultural Minerals, Limited Partnership) dated as of December 4, 1991, filed as Exhibit 99.4 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33- 52493), is incorporated herein by reference. 10.4 General and Administrative Services Agreement Regarding Services by Terra Industries Inc., filed as Exhibit 10.11 to Terra Industries Inc. Form 10-Q for the quarter ended March 31, 1995, is incorporated herein by reference. 10.5 General and Administrative Services Agreement Regarding Services by Terra Nitrogen Corporation, filed as Exhibit 10.12 to Terra Industries Inc. Form 10-Q for the quarter ended March 31, 1995, is incorporated herein by reference. 10.6 Receivables Purchase Agreement dated as of August 20, 1996 among Terra Funding Corporation, Terra Capital, Inc., Certain Financial Institutions and Bank of America National Trust and Savings Association filed as Exhibit 10.12 to the Terra Industries' Form 10-Q for the quarter ended September 30, 1996, is incorporated herein by reference. 10.7 Purchase and Sale Agreement dated as of August 20, 1996 among Terra International, Inc., Terra Nitrogen, Limited Partnership, Beaumont Methanol, Limited Partnership, Terra Funding Corporation and Terra Capital, Inc., filed as Exhibit 10.13 to the Terra Industries' Form 10-Q for the quarter ended September 30, 1996, is incorporated herein by reference. 10.8 Sale of Business Agreement dated November 20, 1997 between ICI Chemicals & Polymers Limited, Imperial Chemical Industries PLC, Terra Nitrogen (U.K.) Limited (f/k/a Terra Industries Limited) and Terra Industries Inc. filed as Exhibit 2 to Terra Industries' Form 8-K/A dated December 31, 1997, is incorporated herein by reference. 10.9 Ammonium Nitrate Agreement dated December 31, 1997 between Terra International (Canada) Inc and ICI Chemicals & Polymers Limited filed as Exhibit 99 to Terra Industries' Form 8-K/A dated December 31, 1997, is incorporated herein by reference. 15 10.10 ** Second Amended and Restated Agreement of Limited Partnership of Beaumont Methanol, Limited Partnership dated March 31, 1998 by and among Terra Methanol Corporation, BMC Holdings, Inc. and Nova Products LLC, filed as Exhibit 10.11 to Terra Industries' Form 10-Q for the quarter ended March 31, 1998, is incorporated herein by reference. 10.11 Amendment No. 1 dated as of September 30, 1998 to the Second Amended and Restated Agreement of Limited Partnership of Beaumont Methanol, Limited Partnership, filed as Exhibit 10.12 to Terra Industries' Form 10-Q for the quarter ended September 30, 1998, is incorporated herein by reference. 10.12 Asset Sale and Purchase Agreement dated as of May 3, 1999 by and between Terra Industries Inc. and Cenex/Land O'Lakes Agronomy Company, filed as Exhibit 10.12 to Terra Industries' Form 8-K dated May 3, 1999, is incorporated herein by reference. 13 * Financial Review and Consolidated Financial Statements as contained in the Annual Report to Stockholders of Terra Industries for the fiscal year ended December 31, 2000. 21 * Subsidiaries of Terra Industries. 24 * Powers of Attorney. --------------------------------------------------------------------------- * Filed herewith. ** Confidential treatment requested. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TERRA INDUSTRIES INC. Date: March 30, 2001 By: /s/ FRANCIS G. MEYER -------------------- Francis G. Meyer Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title - --------- ----- * Chairman of the Board - -------------------------- William R. Loomis, Jr. /s/ Burton M. Joyce Director, President and Chief Executive Officer - -------------------------- Burton M. Joyce (Principal Executive Officer) /s/ Francis G. Meyer Senior Vice President and Chief Financial Officer - -------------------------- Francis G. Meyer (Principal Financial Officer and Controller/Principal Accounting Officer) * Director - -------------------------- Edward G. Beimfohr * Director - -------------------------- Carole L. Brookins * Director - -------------------------- Edward M. Carson * Director - -------------------------- Thomas H. Claiborne * Director - -------------------------- Eric K. Diack * Director - -------------------------- David E. Fisher * Director - --------------------------- John R. Norton III * Director - --------------------------- Henry R. Slack Date: March 30, 2001 *By: /s/ GEORGE H. VALENTINE ----------------------- George H. Valentine Attorney-in-Fact 17 INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS ------------------------------------------------------------
Page ---- Report of Deloitte & Touche LLP on Financial Statement Schedules.......... S-2 Consent of Deloitte & Touche LLP.......................................... S-2 Schedule No. - ----------------- I Condensed Financial Information of Registrant.............. S-3 II Valuation and Qualifying Accounts: Years Ended December 31, 2000, 1999 and 1998............... S-7
Financial statement schedules not included in this report have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto. S-1 INDEPENDENT AUDITORS' REPORT ON ------------------------------- FINANCIAL STATEMENT SCHEDULES ----------------------------- To the Board of Directors and Stockholders of Terra Industries Inc.: We have audited the consolidated financial statements of Terra Industries Inc. and subsidiaries as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, and have issued our report thereon dated January 25, 2001. Such financial statements and report are included in the 2000 Annual Report to Stockholders of Terra Industries Inc. and are incorporated herein by reference. Our audits also included the Financial Statement Schedules of Terra Industries Inc. and subsidiaries listed in Item 14(a) of this Form 10-K. These Financial Statement Schedules are the responsibility of the management of Terra Industries Inc. Our responsibility is to express an opinion based on our audits. In our opinion, such Financial Statement Schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Omaha, Nebraska January 25, 2001 INDEPENDENT AUDITORS' CONSENT ----------------------------- We consent to the incorporation by reference in Registration Statements Nos. 333-32869, 33-46735, 33-46734, 33-30058 and 33-4939 of Terra Industries Inc. and subsidiaries on Forms S-8 and Registration Statements Nos. 333-31769, 2-90808, 2-84876 and 2-84669 of Terra Industries Inc. and subsidiaries on Form S-3 of our reports dated January 25, 2001, appearing and incorporated by reference in the Annual Report on Form 10-K of Terra Industries Inc. and subsidiaries for the year ended December 31, 2000. DELOITTE & TOUCHE LLP Omaha, Nebraska March 13, 2001 S-2 SCHEDULE I TERRA INDUSTRIES INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT --------------------------------------------- STATEMENTS OF FINANCIAL POSITION
- --------------------------------------------------------------------------- (in thousands) December 31, - --------------------------------------------------------------------------- 2000 1999 ------------------------- Assets Cash and short-term investments $ --- $ 8 Other current assets 8,155 3,972 - --------------------------------------------------------------------------- Total current assets 8,155 3,980 Investment in and advances to subsidiaries 1,141,732 1,115,739 Other assets 5,151 7,425 - --------------------------------------------------------------------------- Total assets $1,155,038 $1,127,144 =========================================================================== Liabilities Accrued and other liabilities $ 9,486 $ 5,209 - --------------------------------------------------------------------------- Total current liabilities 9,486 5,209 Long-term debt 358,755 358,755 Deferred income taxes 150,721 78,705 Other liabilities 25,279 27,473 - --------------------------------------------------------------------------- Total liabilities 544,241 470,142 - --------------------------------------------------------------------------- Stockholders' Equity Capital stock 128,283 127,890 Paid-in capital 554,750 552,903 Accumulated other comprehensive loss (48,115) (9,852) Retained earnings (deficit) (24,121) (13,939) - --------------------------------------------------------------------------- Total stockholders' equity 610,797 657,002 - --------------------------------------------------------------------------- Total liabilities and stockholders' equity $1,155,038 $1,127,144 ===========================================================================
See accompanying Notes to the Condensed Financial Statements. S-3 TERRA INDUSTRIES INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT --------------------------------------------- CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
- ------------------------------------------------------------------------------------------------ (in thousands, except per-share amounts) For the Year Ended December 31, - ------------------------------------------------------------------------------------------------ 2000 1999 1998 --------------------------------------------- Income (Loss) Equity in earnings (loss) of subsidiaries $ 20,232 $(52,479) $ (4,185) Interest and other income 6 729 32 - ------------------------------------------------------------------------------------------------ Total income (loss) 20,238 (51,750) (4,153) - ------------------------------------------------------------------------------------------------ Expenses Selling, general and administrative expense 1,471 5,521 4,874 Interest expense 42,006 38,966 38,861 Income tax benefit (13,057) (26,139) (21,639) - ------------------------------------------------------------------------------------------------ Total expenses 30,420 18,348 22,096 - ------------------------------------------------------------------------------------------------ Loss before extraordinary items and discontinued operations (10,182) (70,098) (26,249) Extraordinary loss on early retirement of debt --- (9,264) --- Loss from discontinued operations --- (10,525) --- - ------------------------------------------------------------------------------------------------ Net loss (10,182) (89,887) (26,249) Cash dividends paid to common stockholders --- (5,283) (14,986) Retained earnings (deficit) - beginning of year (13,941) 81,229 122,464 - ------------------------------------------------------------------------------------------------ Retained earnings (deficit) - end of year $(24,123) $(13,941) $ 81,229 ================================================================================================ Basic Earnings (Loss) Per Share: Income (loss) before extraordinary items $ (0.14) $ (1.14) $ (0.35) Extraordinary loss on early retirement of debt --- (0.06) --- - ------------------------------------------------------------------------------------------------ Net income (loss) $ (0.14) $ (1.20) $ (0.35) ================================================================================================ Diluted Earnings (Loss) Per Share: Income (loss) before extraordinary items $ (0.14) $ (1.14) $ (0.35) Extraordinary loss on early retirement of debt --- (0.06) --- - ------------------------------------------------------------------------------------------------ Net income (loss) $ (0.14) $ (1.20) $ (0.35) ================================================================================================
See accompanying Notes to the Condensed Financial Statements. S-4 TERRA INDUSTRIES INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT --------------------------------------------- STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------ (in thousands) For the Year Ended December 31, - ------------------------------------------------------------------------------------------------ 2000 1999 1998 --------------------------------------------- Operating Activities Net income (loss) $ (10,182) $ (89,887) $ (26,249) Adjustments to reconcile net income to net cash used by operations: Equity in earnings (loss) of subsidiaries (20,232) 52,479 4,185 Extraordinary loss on early retirement of debt --- 9,264 --- Loss from discontinued operations --- 10,524 (17,082) Deferred income taxes 76,326 (13,882) (5,817) Other non-cash items 286 286 556 Change in working capital components (4,422) (18,809) (1,716) Other --- 19,367 19,590 - ------------------------------------------------------------------------------------------------ Net Cash Flows From Operating Activities 41,776 (30,658) (26,533) - ------------------------------------------------------------------------------------------------ Financing Activities Dividends --- (5,283) (14,986) Stock (repurchase) issuance - net 2,240 13 286 Advances from (to) subsidiaries - net (44,024) 29,895 32,281 - ------------------------------------------------------------------------------------------------ Net Cash Flows From Financing Activities (41,784) 24,625 17,581 - ------------------------------------------------------------------------------------------------ Decrease in Cash (8) (6,033) (8,952) Cash and Investments at Beginning of Year 8 6,041 14,993 - ------------------------------------------------------------------------------------------------ Cash and Investments at End of Year $ --- $ 8 $ 6,041 ================================================================================================ Interest Paid $ 41,974 $ 38,966 $ 38,862 ================================================================================================ Income Taxes Received $ (16,323) $ (21,278) $ (17,244) ================================================================================================
See accompanying Notes to the Condensed Financial Statements. S-5 TERRA INDUSTRIES INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT --------------------------------------------- NOTES TO THE CONDENSED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. Basis of Presentation The Condensed Financial Statements include the Registrant only and reflect the equity method of accounting for its beneficially owned subsidiaries, Terra Capital, Inc., Terra International, Inc., Terra Nitrogen Corporation, Beaumont Methanol Limited Partnership and Terra Funding Corporation. 2. Long-Term Debt Long-term debt consisted of the following at December 31:
(in thousands) 2000 1999 - ------------------------------------------------------------------------------- Senior Notes, 10.5%, due 2005 $ 200,000 $ 200,000 Senior Notes, 10.75%, due 2003 158,755 158,755 - ------------------------------------------------------------------------------- 358,755 358,755 Less current maturities --- --- - ------------------------------------------------------------------------------- Total $ 358,755 $ 358,755 ===============================================================================
In 1995, the Registrant issued $200 million unsecured 10.5% Senior Notes due in full June 15, 2005. The 10.5% Senior Notes are redeemable at the option of the Registrant, in whole or part, at any time on or after June 15, 2000, initially at 105.250% of their principal amount, plus accrued interest, declining to 102.625% on or after June 15, 2001, and declining to 100% on or after June 15, 2002. The 10.5% Senior Notes Indenture contains certain restrictions, including the issuance of additional debt, payment of dividends, issuance of capital stock, certain transactions with affiliates, incurrence of liens, sale of assets, and sale-leaseback transactions. The 10.75% unsecured Senior Notes are redeemable at the option of the Registrant, in whole or part, at any time on or after September 30, 1998, initially at 105.375% of their principal amount, plus accrued interest, declining to 102.688% on or after September 30, 1999, and declining to 100% on or after September 30, 2000. The 10.75% Senior Notes Indenture contains restrictions similar to those in the 10.5% Senior Notes Indenture. 3. Commitments and Contingencies The Registrant is contingently liable for retiree medical benefits of employees of coal mining operations sold on January 12, 1993. Under the purchase agreement, the purchaser agreed to indemnify the Registrant against its obligations under certain employee benefit plans. Due to the Coal Industry Retiree Health Benefit Act of 1992, certain retiree medical benefits of union coal miners have become statutorily mandated, and all companies owning 50 percent or more of any company liable for such benefits as of certain specified dates becomes liable for such benefits if the company directly liable is unable to pay them. As a result, if the purchaser becomes unable to pay its retiree medical obligations assumed pursuant to the sale, the Registrant may have to pay such amount. The Registrant has provided reserves adequate to cover the estimated present value of these liabilities at December 31, 2000. 4. Income Taxes The Registrant files a consolidated U.S. federal tax return. Beginning in 1995, the Registrant adopted tax sharing agreements, under which all domestic operating subsidiaries provide for and remit income taxes to the Registrant based on their pretax accounting income, adjusted for permanent differences between pretax accounting income and taxable income. The tax sharing agreements allocate the benefits of operating losses and temporary differences between financial reporting and tax basis income to the Registrant. S-6 SCHEDULE II TERRA INDUSTRIES INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2000, 1999, and 1998 --------------------------------------------- (in thousands)
Additions Less Write-offs, Balance at Charged to and Transfers, Balance Beginning Costs and Net of at End Description of Period Expenses Recoveries of Period Year Ended December 31, 2000: - ----------------------------- Allowance for Doubtful Accounts Continuing operations $ 491 $ 593 $ (195) $ 889 Discontinued operations - Included in other current assets 12,533 0 (6,174) 6,359 $13,024 $ 593 $(6,369) $ 7,248 Year Ended December 31, 1999: - ---------------------------- Allowance for Doubtful Accounts Continuing operations $ 938 $ 104 $ (551) $ 491 Discontinued operations - Included in other current assets 14,196 4,582 (6,245) 12,533 $15,134 $ 4,686 $(6,796) $13,024 Year Ended December 31, 1998: - ---------------------------- Allowance for Doubtful Accounts $13,154 $ 9,633 $(7,653) $15,134
S-7 EX-4.10 2 dex410.txt AMENDMENT #1 - CREDIT AGREEMENT Exhibit 4.10 FIRST AMENDMENT TO REVOLVING AND TERM CREDIT AGREEMENT ------------------------------------------------------ First Amendment (this "Amendment"), dated as of December 20, 2000, to the Credit Agreement, dated as of April 7, 2000 (as amended hereby and as the same may be further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Terra Capital, Inc., a Delaware corporation ("Terra Capital"), Terra Nitrogen (U.K.), Limited, a company incorporated in England and Wales ("Terra UK") and Terra Nitrogen, Limited Partnership, a Delaware limited partnership ("TNLP") (Terra Capital, Terra UK and TNLP each a "Borrower" and, collectively, the "Borrowers"), Terra Industries Inc., a Maryland corporation ("Terra Industries"), the financial institutions from time to time party thereto as lenders (the "Lenders"), the financial institutions from time to time party thereto as issuing banks (the "Issuers"), and Citibank, N.A. ("Citibank"), as agent for the Lenders and the Issuers (in such capacity, the "Administrative Agent"). W I T N E S S E T H: -------------------- WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make Loans to the Borrowers and to issue, and have issued, Letters of Credit for the account of the Borrowers; and WHEREAS, the Borrowers, Terra Industries, the Requisite Lenders and the Administrative Agent have agreed to certain amendments to the Credit Agreement as more specifically set forth below; and WHEREAS, the Borrowers have requested the Requisite Lenders to consent to permitting Terra Industries and certain of its Subsidiaries to repurchase certain industrial revenue bonds; NOW, THEREFORE, in consideration of the premises and the mutual covenants and provisions hereinafter contained, the parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used herein and not defined ------------- herein but defined in the Credit Agreement are used herein as defined in the Credit Agreement. 2. Amendments to the Credit Agreement. As of the Amendment Effective ---------------------------------- Date (as defined in Section 4 below), the Credit Agreement is hereby amended as follows: (a) Amendment to Section 1.1. Section 1.1 is hereby amended ------------------------ by adding the following new definition of "IRB Repurchase" in the correct alphabetical order therein: "IRB Repurchase" means Terra Real Estate Corporation's or TI's repurchase or repayment of the industrial revenue bonds of series 1992 issued pursuant to an agreement between Terra Real Estate Corporation, TI and the City of Sioux City, dated April 22, 1992. (b) Amendment to Section 7.14. Section 7.14 is hereby amended ------------------------- and restated in its entirety to read as follows: Section 7.14. Hedging Contracts. Terra Industries and its ----------------- Subsidiaries shall at all times maintain interest rate and natural gas Hedging Contracts, on terms and with counterparties reasonably satisfactory to the Administrative Agent and in accordance with the hedging policy which has been and will continue to be adopted by the Board of Directors of Terra Industries and as in effect from time to time, to provide protection to Terra Industries and its Subsidiaries against fluctuations in interest rates and natural gas prices. 3. Consent. Notwithstanding Section 8.5 and Section 8.12 of the ------- Credit Agreement or any other provision of the Loan Documents, the Lenders party hereto, constituting the Requisite Lenders, hereby agree that TI and/or Terra Real Estate Corporation may consummate IRB Repurchases from and after the Amendment Effective Date (as defined in Section 4 below); provided, however, that the aggregate dollar amount of the IRB Repurchases shall not exceed at any time $8,000,000. 4. Conditions Precedent to the Effectiveness of this Amendment. This ----------------------------------------------------------- Amendment shall become effective as of the date hereof on the date (the "Amendment Effective Date") when the following conditions precedent have been satisfied: (a) Certain Documents. The Administrative Agent shall have ----------------- received, on or before the Amendment Effective Date, all of the following, all of which shall be in form and substance satisfactory to the Administrative Agent, in sufficient originally executed copies for each of the Lenders: (i) this Amendment, executed by each Borrower, Terra Industries, the Administrative Agent and the Lenders constituting the Requisite Lenders; (ii) the Acknowledgment attached hereto, executed by each Subsidiary Guarantor; and (iii) such additional documentation as the Administrative Agent or the Requisite Lenders may reasonably require. (b) Representations and Warranties. Each of the ------------------------------ representations and warranties made by the Borrowers or Terra Industries in or pursuant to the Credit Agreement, as amended hereby, and the other Loan Documents to which the Borrowers or Terra Industries is a party or by which the Borrowers or Terra Industries is bound, shall be true and correct in all material respects on and as of the Amendment Effective Date (other than representations and warranties in any such Loan Document which expressly speak as of a specific date, which shall have been true and correct in all material respects as of such specific date). (c) Corporate and Other Proceedings. All corporate and ------------------------------- other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Amendment shall be reasonably satisfactory in all respects in form and substance to the Administrative Agent and the Requisite Lenders. 2 (d) No Event of Default. No Event of Default or Default ------------------- shall have occurred and be continuing on the Amendment Effective Date. 5. Representations and Warranties. On and as of the date hereof, and ------------------------------ as of the Amendment Effective Date, after giving effect to this Amendment, each Borrower and Terra Industries hereby represents and warrants to the Lenders as follows: (a) Each of the representations and warranties contained in Article IV of the Credit Agreement, the other Loan Documents or in any certificate, document or financial or other statement furnished at any time under or in connection therewith are true and correct in all material respects on and as of the date as if made on and as of such date, except to the extent that such representations and warranties specifically relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such specific date; provided, however, that references therein to the "Credit Agreement" shall be deemed to include this Amendment; (b) No Default or Event of Default has occurred and is continuing. 6. Continuing Effect; No Other Amendments. Except as expressly -------------------------------------- amended hereby, all of the terms and provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect. The amendments and consents contained herein shall not constitute an amendment or a waiver of any other provision of the Credit Agreement or the other Loan Documents or for any other purpose except as expressly set forth herein. 7. Costs and Expenses. The Borrowers and Terra Industries agree to ------------------ pay on demand all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment and other instruments and documents to be delivered pursuant hereto, including the reasonable and documented fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. 8. Governing Law; Counterparts; Miscellaneous. ------------------------------------------ (a) This Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. (b) This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. (c) Section captions used in this Amendment are for convenience only and shall not affect the construction of this Amendment. (d) From and after the Amendment Effective Date, all references in the Credit Agreement to the "Agreement" shall be deemed to be references to such Agreement as modified hereby and this Amendment and the Credit Agreement shall be read together and construed as a single instrument. 3 IN WITNESS WHEREOF, the undersigned parties have executed this FIRST AMENDMENT TO CREDIT AGREEMENT to be effective for all purposes as of the Amendment Effective Date. Borrowers --------- Terra Capital, Inc. By:_____________________________________ Name: Francis G. Meyer Title: Vice President Terra Nitrogen (U.K.), Limited By:_____________________________________ Name: Francis G. Meyer Title: Director Terra Nitrogen, Limited Partnership By: Terra Nitrogen Corporation, its General Partner By:_____________________________________ Name: George H. Valentine Title: Vice President Guarantor --------- Terra Industries Inc. By:_____________________________________ Name: Francis G. Meyer Title: Sr. Vice President and Chief Financial Officer Administrative Agent -------------------- Citibank, N.A. By:_____________________________________ Name: David Jaffe Title: Vice President Lenders ------- Bankers Trust Company By: _____________________________________ Name: Title: Citibank, N.A. By: _____________________________________ Name: David Jaffe Title: Vice President Fleet Capital Corporation By: _____________________________________ Name: Title: Foothill Capital Corporation By: _____________________________________ Name: Title: Hamilton Bank, NA. By: _____________________________________ Name: Title: Jackson National Life Insurance Company By: _____________________________________ Name: Title: LaSalle Business Credit By: _____________________________________ Name: Title: LaSalle National Bank By: _____________________________________ Name: Title: Winged Foot Funding Trust By: _____________________________________ Name: Title: ACKNOWLEDGMENT -------------- Reference is hereby made to the Loan Documents (as defined in the Credit Agreement) to which each of the undersigned is a party. Each of the undersigned hereby consents to the terms of the foregoing First Amendment to Credit Agreement and agrees that the terms thereof shall not affect in any way its obligations and liabilities under the undersigned's Loan Documents, all of which obligations and liabilities shall remain in full force and effect and each of which is hereby reaffirmed. Terra Capital, Inc. By: __________________________ Name: Title: Terra Nitrogen (UK) Limited By: __________________________ Name: Title: Terra Nitrogen, Limited Partnership By: Terra Nitrogen Corporation, its General Partner By: __________________________ Name: Title: Terra International (Canada) Inc. By: __________________________ Name: Title: Terra Capital Holdings, Inc. By: __________________________ Name: Title: Terra Nitrogen Corporation By: __________________________ Name: Title: Terra Nitrogen Company, L.P. By: Terra Nitrogen Corporation, its General Partner By: __________________________ Name: Title: Terra International, Inc. By: __________________________ Name: Title: Terra International (Oklahoma) Inc. By: __________________________ Name: Title: Port Neal Corporation By: __________________________ Name: Title: Terra Methanol Corporation By: __________________________ Name: Title: BMC Holdings, Inc. By: __________________________ Name: Title: Beaumont Holdings Corporation By: __________________________ Name: Title: Beaumont Methanol, Limited Partnership By: Terra Methanol Corporation, its General Partner By: __________________________ Name: Title: Terra (UK) Holdings, Inc. By: __________________________ Name: Title: Beaumont Ammonia, Inc. By: __________________________ Name: Title: EX-4.11 3 dex411.txt AMENDMENT #1 -CREDIT AGREEMENT DATED 12/20/2000 Exhibit 4.11 FIRST AMENDMENT TO TERRA CANADA CREDIT AGREEMENT ------------------------------------------------ First Amendment (this "Amendment"), dated as of December 20, 2000, to the Credit Agreement, dated as of December 31, 1997 and as most recently amended and restated as of April 7, 2000 (as amended hereby and as the same may be further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Terra International (Canada) Inc., as the "Borrower", certain Guarantors, the financial institutions from time to time party thereto as lenders (the "Lenders"), and Citibank, N.A. ("Citibank"), as agent for the Lenders and the Issuers (in such capacity, the "Administrative Agent"). W I T N E S S E T H: -------------------- WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make Loans to the Borrower; and WHEREAS, the Borrower, the Requisite Lenders and the Administrative Agent have agreed to certain amendments to the Credit Agreement as more specifically set forth below; and WHEREAS, the Borrower has requested the Requisite Lenders to consent to permitting Terra Industries and certain of its Subsidiaries to repurchase certain industrial revenue bonds; NOW, THEREFORE, in consideration of the premises and the mutual covenants and provisions hereinafter contained, the parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used herein and not defined ------------- herein but defined in the Credit Agreement are used herein as defined in the Credit Agreement. 2. Amendments to the Credit Agreement. As of the Amendment Effective ---------------------------------- Date (as defined in Section 4 below), the Credit Agreement is hereby amended as follows: (a) Amendment to Section 1.1. Section 1.1 is hereby amended ------------------------ by adding the following new definition of "IRB Repurchase" in the correct alphabetical order therein: "IRB Repurchase" means Terra Real Estate Corporation's or TI's repurchase or repayment of the industrial revenue bonds of series 1992 issued pursuant to an agreement between Terra Real Estate Corporation, TI and the City of Sioux City, dated April 22, 1992. (b) Amendment to Section 7.14. Section 7.14 is hereby ------------------------- amended and restated in its entirety to read as follows: Section 7.14. Hedging Contracts. Terra Industries and its ----------------- Subsidiaries shall at all times maintain interest rate and natural gas Hedging Contracts, on terms and with counterparties reasonably satisfactory to the Administrative Agent and in accordance with the hedging policy which has been and will continue to be adopted by the Board of Directors of Terra Industries and as in effect from time to time, to provide protection to Terra Industries and its Subsidiaries against fluctuations in interest rates and natural gas prices. 3. Consent. Notwithstanding Section 8.5 and Section 8.12 of the ------- Credit Agreement or any other provision of the Loan Documents, the Lenders party hereto, constituting the Requisite Lenders, hereby agree that TI and/or Terra Real Estate Corporation may consummate IRB Repurchases from and after the Amendment Effective Date (as defined in Section 4 below); provided, however, that the aggregate dollar amount of the IRB Repurchases shall not exceed at any time $8,000,000. 4. Conditions Precedent to the Effectiveness of this Amendment. This ----------------------------------------------------------- Amendment shall become effective as of the date hereof on the date (the "Amendment Effective Date") when the following conditions precedent have been satisfied: (a) Certain Documents. The Administrative Agent shall have ----------------- received, on or before the Amendment Effective Date, all of the following, all of which shall be in form and substance satisfactory to the Administrative Agent, in sufficient originally executed copies for each of the Lenders: (i) this Amendment, executed by the Borrower, the Guarantors, the Administrative Agent and the Lenders constituting the Requisite Lenders; and (ii) such additional documentation as the Administrative Agent or the Requisite Lenders may reasonably require. (b) Representations and Warranties. Each of the ------------------------------ representations and warranties made by the Obligors in or pursuant to the Credit Agreement, as amended hereby, and the other Loan Documents to which any Obligor is a party or by which any Obligor is bound, shall be true and correct in all material respects on and as of the Amendment Effective Date (other than representations and warranties in any such Loan Document which expressly speak as of a specific date, which shall have been true and correct in all material respects as of such specific date). (c) Corporate and Other Proceedings. All corporate and ------------------------------- other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Amendment shall be reasonably satisfactory in all respects in form and substance to the Administrative Agent and the Requisite Lenders. (d) No Event of Default. No Event of Default or Default ------------------- shall have occurred and be continuing on the Amendment Effective Date. 5. Representations and Warranties. On and as of the date hereof, and ------------------------------ as of the Amendment Effective Date, after giving effect to this Amendment, each of the undersigned hereby represents and warrants to the Lenders as follows: (a) Each of the representations and warranties contained in Article IV of the Credit Agreement, the other Loan Documents or in any certificate, document or 2 financial or other statement furnished at any time under or in connection therewith are true and correct in all material respects on and as of the date as if made on and as of such date, except to the extent that such representations and warranties specifically relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such specific date; provided, however, that references therein to the "Credit Agreement" shall be deemed to include this Amendment; (b) No Default or Event of Default has occurred and is continuing. 6. Affirmation of Guaranties. Each of the undersigned hereby agrees ------------------------- that the terms of this Amendment shall not affect in any way its obligations and liabilities under the undersigned's Loan Documents, including, without limitation, the Guaranty, all of which obligations and liabilities shall remain in full force and effect and each of which is hereby reaffirmed. 7. Continuing Effect; No Other Amendments. Except as expressly -------------------------------------- amended hereby, all of the terms and provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect. The amendments and consents contained herein shall not constitute an amendment or a waiver of any other provision of the Credit Agreement or the other Loan Documents or for any other purpose except as expressly set forth herein. 8. Costs and Expenses. The Borrower and Terra Industries agree to ------------------ pay on demand all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment and other instruments and documents to be delivered pursuant hereto, including the reasonable and documented fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. 9. Governing Law; Counterparts; Miscellaneous. ------------------------------------------ (a) This Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. (b) This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. (c) Section captions used in this Amendment are for convenience only and shall not affect the construction of this Amendment. (d) From and after the Amendment Effective Date, all references in the Credit Agreement to the "Agreement" shall be deemed to be references to such Agreement as modified hereby and this Amendment and the Credit Agreement shall be read together and construed as a single instrument. 3 IN WITNESS WHEREOF, the undersigned parties have executed this FIRST AMENDMENT TO CREDIT AGREEMENT to be effective for all purposes as of the Amendment Effective Date. Borrower -------- Terra International (Canada), Inc. By: _______________________________________ Name: Francis G. Meyer Title: Vice President Guarantors ---------- Terra Industries Inc. By: _______________________________________ Name: Francis G. Meyer Title: Sr. Vice President and Chief Financial Officer Terra Capital Holdings, Inc. By: _______________________________________ Name: Francis G. Meyer Title: Vice President Terra Capital, Inc. By: _______________________________________ Name: Francis G. Meyer Title: Vice President Terra Nitrogen Corporation By: _______________________________________ Name: George H. Valentine Title: Vice President Terra International, Inc. By: _______________________________________ Name: Francis G. Meyer Title: Senior Vice President Terra Methanol Corporation By: _______________________________________ Name: Francis G. Meyer Title: Vice President BMC Holdings, Inc. By: _______________________________________ Name: Francis G. Meyer Title: Vice President Beaumont Holdings Corporation By: _______________________________________ Name: George H. Valentine Title: Vice President Terra Nitrogen (U.K.), Limited By: _______________________________________ Name: Francis G. Meyer Title: Director Terra Nitrogen, Limited Partnership By: Terra Nitrogen Corporation, its General Partner By: _______________________________________ Name: George H. Valentine Title: Vice President Beaumont Methanol, Limited Partnership By: Terra Methanol Corporation, its General Partner By: _______________________________________ Name: Francis G. Meyer Title: Vice President Beaumont Ammonia, Inc. By: _______________________________________ Name: George H. Valentine Title: Vice President Port Neal Corporation By: _______________________________________ Name: George H. Valentine Title: Vice President Terra International (Oklahoma) Inc. By: _______________________________________ Name: Francis G. Meyer Title: Vice President Terra (U.K.) Holdings, Inc. By: _______________________________________ Name: George H. Valentine Title: Vice President Administrative Agent -------------------- Citibank, N.A. By: _______________________________________ Name: David Jaffe Title: Vice President Lenders ------- Bankers Trust Company By: _______________________________________ Name: Title: Citibank, N.A. By: _______________________________________ Name: David Jaffe Title: Vice President Fleet Capital Corporation By: _______________________________________ Name: Title: Foothill Capital Corporation By: _______________________________________ Name: Title: Hamilton Bank, NA. By: _______________________________________ Name: Title: Jackson National Life Insurance Company By: _______________________________ Name: Title: LaSalle Business Credit By: _______________________________________ Name: Title: LaSalle National Bank By: _______________________________________ Name: Title: Winged Foot Funding Trust By: _______________________________________ Name: Title: EX-10.1.6.A 4 dex1016a.txt AMENDMENT TO THE EXCESS BENEFIT PLAN Exhibit 10.1.6.a. AMENDMENT TO THE TERRA INDUSTRIES INC. EXCESS BENEFIT PLAN Terra Industries Inc. desires to amend its Excess Benefit Plan as restated as of January 1, 1992 (the "Plan"), all on the terms and conditions herein. Accordingly, the Plan shall be amended by adding the following new Section 9 reading in its entirety as follows: "Section 9. Legal Fees or Expenses. The Company shall reimburse the ---------------------- Participant for any legal fees and expenses reasonably incurred in connection with the enforcement of Participant's rights under this Excess Benefit Plan; provided that the Company shall not be required to reimburse for such fees or expenses unless the resolution of any enforcement action taken by the Participant is substantially in favor of the Participant, whether by adjudication, settlement or otherwise." Except as provided herein or in the accompanying resolutions of the Personnel Committee of the Terra Industries Inc. Board of Directors, the Plan shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer as of the 26/th/ day of July, 2000. TERRA INDUSTRIES INC. By /s/ George H. Valentine -------------------------- Its Senior Vice President -------------------------- EX-10.1.8.A 5 dex1018a.txt AMENDMENT TO THE DEFERRED COMPENSATION PLAN Exhibit 10.1.8.a. AMENDMENT NO. 2 TO THE TERRA INDUSTRIES INC. SUPPLEMENTAL DEFERRED COMPENSATION PLAN Terra Industries Inc. desires to amend its Supplemental Deferred Compensation Plan as amended as of May 1, 1995 (the "Plan"), all on the terms and conditions herein. Accordingly, the Plan is hereby amended as follows: (a) Article VI of the Plan shall be amended by adding the following new section 6.06 therein reading in its entirety as follows: "6.06 Early Distribution. The Participant may elect, before or after ------------------ Participant's Retirement or Termination of Service, to receive a distribution with respect to the value of part or all of the vested portion of the Participant's Bookkeeping Account. Any such distribution shall be equal to the value of the portion of the Participant's Bookkeeping Account elected, less a forfeiture penalty of 20% of that value, and the amount distributed shall be in full satisfaction of the Participant's rights with respect to the portion of the account so elected." (b) Article X of the Plan shall be amended by adding the following new section 10.05 therein reading in its entirety as follows: "10.05. Legal Fees or Expenses. The Company shall reimburse the ---------------------- Participant for any legal fees and expenses reasonably incurred in connection with the enforcement of Participant's rights under this Plan; provided that the Company shall not be required to reimburse for such fees or expenses unless the resolution of any enforcement action taken by the Participant is substantially in favor of the Participant, whether by adjudication, settlement or otherwise." (c) Except as herein provided, the Plan shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer as of the 26/th/ day of July , 2000. ------ ---- TERRA INDUSTRIES INC. By /s/ George H. Valentine ----------------------------- Its Senior Vice President ----------------------------- EX-10.1.19 6 dex10119.txt INCENTIVE AWARD PROGRAM Exhibit 10.1.19 TERRA INDUSTRIES INC. INCENTIVE AWARD PROGRAM FOR OFFICERS & KEY EMPLOYEES 2000 ---- I. Purpose of the Plan ------------------- The purpose of this Incentive Award Program is to motivate and reward officers and key employees of the Company toward achievement of planned annual goals and improved results. II. Eligibility in the Plan ----------------------- Participation in this Incentive Award Program is limited to officers and key employees of Terra Industries Inc. and subsidiaries whose efforts are expected to contribute significantly to the success and accomplishment of the Company's planned goals. III. Special Provisions and Considerations ------------------------------------- Terra's incentive plan year coincides with the Company's fiscal year. The Chief Executive Officer will establish corporate financial goals, which are approved by the Board of Directors, which will be used to establish the 2000 incentive pool. Each officer and key employee participating in this plan will be assigned a target incentive expressed as a percentage of year- end base salary. The Chief Executive Officer, Chief Operating Officer or appropriate Senior Officer, is responsible for approving each plan participant's individual goals as soon as practicable in 2000 (See Section IV below). The importance of each goal is reflected in the weight assigned to it; each participant's goals will sum to one hundred percent (100%). These individual goals will be used in determining the participant's final incentive payment. Each plan participant must periodically report on his/her goal achievement to the Chief Executive Officer. IV. Funding the Officers and Key Employees Incentive Award Program -------------------------------------------------------------- The 2000 Plan divides the incentive awards between a portion based upon Company financial performance and a portion based upon individual performance on personal goals (up to 34% of each participant's target bonus). However, awards for achieving individual performance goals may not be paid if the Personnel Committee of the Board of Directors and the Chief Executive Officer determine that the Company's financial performance does not justify such awards. The funding for the Company's financial performance portion of the incentive award pool is based on Terra Industries Inc.'s actual 2000 net income. The budgeted 2000 net loss, which is based on forecasts of nitrogen products and methanol selling prices and natural gas costs, is substantial and does not justify an award. Consequently, the Company `s financial performance portion of the pool starts to fund at fifty percent (50%) when the Company's actual 2000 net income is $0 and increases by one percent (1%) for each additional $1 million of net income. Any funding for actual 2000 net income which is more than $150 million is at the discretion of the Personnel Committee of the Board of Directors and the Chief Executive Officer. Each participant will develop up to five goals that will be used as the measurement in determining payments under the personal goals section. These goals should be reviewed and approved by the appropriate Senior Officer and the Chief Executive Officer. Accordingly, a participant could earn the portion of his or her bonus based on achieving personal goals even if there is no funding of the Company performance portion of the pool. However, funding of the individual performance awards pool is at the discretion of the Personnel Committee of the Board of Directors and the Chief Executive Officer. V. Basis of the Incentive Award ---------------------------- The starting point in determining each participant's incentive award is the evaluation of the individual goals. The participant's individual raw award is calculated by taking each participant's year-end salary, times his/her targeted incentive percentage and then times his/her individual goal achievement. -2- The sum of all participants' adjusted raw awards creates an adjusted raw pool. This adjusted raw pool is compared with the sum of the plan participant's year-end salary, times their targeted percentage award (or a portion of his/her index used to calculate this pool) which is then adjusted by the Company's financial performance to form the incentive pool. This adjusted raw pool is adjusted up or down to match the incentive pool. All participant incentives are paid from the incentive pool. The Chief Executive Officer has the discretion to adjust any individual's participation up or down to reflect unusual or unplanned events or to reflect the degree of difficulty of the goals. He may adjust amounts between plan participants and may add amounts from any discretionary part of the pool. The Chief Executive Officer may also choose to award less than the full amount of the pool or add as much as 20% to the pool. VI. Review, Revision and Modification of the Goals ---------------------------------------------- Under normal business conditions, the Company goals or individual objectives will not be altered or revised once established for the year. Unexpected and unforeseen developments during the course of the year may prompt re-examination of an officer's or key employee's established goals. It is the responsibility of each officer and key employee to note the conditions of change which would prompt such a review and take timely action. Such action would include review with the Chief Executive Officer for the need for revision of an established goal as soon as possible after the detected change. All changes are subject to final approval of the Chief Executive Officer. VII. Payment of Award ---------------- The incentive award will be paid to each officer and key employee by check as soon as possible after the close of the fiscal year and after approval of the Chief Executive Officer's recommendations by the Personnel Committee of the Board of Directors. To be eligible for full payment, the officer or key employee must have been in the employ of Terra Industries Inc. or one of its subsidiaries as of January 1 of the incentive plan year and must be actively employed by the Company on the date the incentive award is paid. -3- VIII. Special Provision ----------------- A newly elected officer or key employee will participate in this incentive program in proportion to the number of full months worked as an officer or key employee during the incentive program year. A participant who retires, becomes permanently disabled or dies shall cease to participate in this program as of the end of the month coincident with retirement, disability or death. The proportionate incentive award will be paid as soon as possible after the close of the fiscal year. While it is the intent of the Company to make awards under this plan and to continue the plan from year to year, it reserves the right to amend or terminate the plan entirely at its discretion. -4- EX-10.1.22 7 dex10122.txt PERFORMANCE SHARE AWARD Exhibit 10.1.22 PERFORMANCE SHARE AWARD Date of Award: February 16, 2000 Number of Shares Awarded: ________ Dear ___________: We are pleased to inform you that as a key employee of Terra Industries Inc. (the "Corporation") or a Subsidiary thereof, you have been awarded, under the 1997 Stock Incentive Plan (the "Plan"), the number of Common Shares of the Corporation set forth above, subject to certain restrictions, terms and conditions set forth in this letter and in the Plan. The restricted Common Shares issued to you are referred to in this letter as the "Performance Shares." 1. From the date hereof until the restrictions on the Performance Shares terminate (the "Restriction Period"), the Performance Shares shall not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed; provided, however, that any of the Performance Shares may be exchanged for any other Common Shares that are similarly restricted. 2. The Restriction Period shall terminate at the following times: a. The Restriction Period shall terminate with respect to one hundred percent (100%) all of the Performance Shares on the day any one of the following occurs within three (3) years of the Date of Award: (i) any person or group of persons acting in concert (other than Anglo American plc, and its affiliates or a group consisting solely of such persons (the "Anglo American Affiliates")) acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934) of the outstanding securities (the "Voting Shares") of the Corporation in an amount having, or convertible into securities having, 25% or more of the ordinary voting power for the election of directors of the Corporation, provided that this 25% beneficial ownership trigger shall apply only when the Anglo American Affiliates no longer own 50% or more of the Voting Shares; (ii) during a period of not more than 24 months, a majority of the Board of Directors of the Corporation ceases to consist of the existing membership or successors nominated by the existing membership or their similar successors; (iii) all or substantially all of the individuals and entities who were the beneficial owners of the Corporation's outstanding securities entitled to vote do not own more than 60% of such securities in substantially the same proportions following a shareholder approved reorganization, merger, or consolidation; or (iv) shareholder approval of either (A) a complete 1 liquidation or dissolution of the Corporation or (B) a sale or other disposition of all or substantially all of the assets of the Corporation, or a transaction having a similar effect. b. The Restriction Period shall terminate with respect to one hundred percent (100%) of the Performance Shares on the business day following the third anniversary of the Date of Award. c. Notwithstanding the foregoing, if you are or become a "covered employee" within the meaning of Section 162(m) of the Internal Revenue Code, the Restriction Period for any portion of the shares whose vesting would result in a loss of deduction to the Corporation shall continue until the date on which the Performance Shares can be freed of restriction without resulting in the loss of deduction or the date of your retirement or termination without cause. For these purposes "cause" shall have the same meaning as set forth in your 1998 Executive Retention Agreement and "retirement" shall be determined in accordance established policy of the Corporation. The Corporation shall retain possession of the Performance Shares until the later to occur of the termination of the Restriction Period and the termination of the security interest described in Section 6 of this letter. 3. If your employment with the Corporation and all Subsidiaries terminates during the term of this agreement, all Performance Shares subject to the Restriction Period shall automatically be forfeited by you and reconveyed to the Corporation, except as follows: a. If your employment terminates by reason of death, the Performance Shares shall continue to be eligible for vesting pursuant to Section 2 for a period of one year from the date of death (provided that such vesting must occur, if at all, on or before the third anniversary hereof). b. If your employment terminates by reason of Total Disability, the Performance Shares shall continue to be eligible for vesting pursuant to Section 2 (provided that such vesting must occur, if at all, on or before the third anniversary hereof). c. In cases of special circumstances the Personnel Committee may, in its sole discretion when it finds that a waiver would be in the best interests of the Corporation, extend the period for vesting or terminate the Restriction Period with respect to all or a portion of your Performance Shares. 4. This award shall not be effective unless you sign a copy of this letter and deliver it to the Corporate Secretary of the Corporation, Terra Centre, 600 Fourth Street, Sioux City, Iowa 51101, before 4:30 p.m. central time on February 28, 2000. If the Corporate Secretary does not have your properly executed copy of this letter before such time, then, anything in this letter to the contrary notwithstanding, this award shall terminate and be of no effect. Your signing and delivering a copy of this letter shall evidence your acceptance of the Performance Shares upon the terms and conditions of this Award. Attached is a copy of your Stock Certificate and Stock Power. Your execution of the stock power will permit the Corporation to enforce the security interest described in Section 6 of this letter or reconvey the Performance Shares to the Corporation in the event the Award is forfeited. 2 5. Except as set forth in this letter, upon the issuance of the Performance Shares you shall have all of the rights of a stockholder, including the right to vote the Performance Shares and the right to receive dividends thereon. The certificates for any Performance Shares shall bear an appropriate legend reciting the terms, conditions and restrictions applicable thereto, and shall be subject to appropriate stop-transfer orders. The Corporation shall issue your Performance Shares promptly after the Corporation's Corporate Secretary receives the documents set forth in Section 4, the Performance Shares have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange upon which the Common Shares of the Corporation are listed and there has been compliance with such laws and regulations as the Corporation may deem applicable. The Corporation agrees to use its best efforts to effect such listing and compliance. 6. You hereby agree to pay to the Corporation, or otherwise make arrangements satisfactory to the Corporation regarding payment of, any federal, state or local taxes required or authorized by law to be withheld with respect to the award of the Performance Shares or the termination of the Restriction Period (the "Withholding Taxes"). The Corporation shall have, to the extent permitted by law, the right to deduct from any payment of any kind otherwise due to the Employee, any Withholding Taxes and to condition the delivery of the Performance Shares after the termination of the Restriction Period on the payment to the Corporation of the Withholding Taxes. You hereby grant to the Corporation a security interest in the Performance Shares to secure the reconveyance of the Performance Shares to the Corporation upon any forfeiture and to ensure adequate provision for the Withholding Taxes. The Corporation shall release its security interest in respect of any Performance Shares on which (i) the Restriction Period has terminated and (ii) all Withholding Taxes have been paid. In lieu of the payment of such amounts in cash, you may pay all or a portion of the Withholding Taxes by (a) the delivery of Common Shares not subject to any Restriction Period or (b) having the Corporation withhold a portion of the Common Shares otherwise to be delivered upon vesting of the Performance Shares. 7. The Corporation may, in its sole discretion, at any time or from time to time, in lieu of the delivery of all or any portion of your Performance Shares, pay to you cash equal to the Fair Market Value (as defined in the 1997 Stock Incentive Plan) of such shares on the day the Restriction Period terminates. 8. If any distribution is made to the holders of Performance Shares other than a cash dividend and new, different, or additional shares or other securities of the Corporation or of another company are received by the holders of the Performance Shares, or if any recapitalization or reclassification, split-up or consolidation of the Performance Shares shall be effected, or, if in connection with a merger or consolidation of the Corporation or a sale by the Corporation of all or a part of its assets, the Performance Shares are exchanged for a different number or class of shares of stock or other securities of the Corporation or for shares of stock or other securities of any other company, then any such other securities shall be subject to similar restrictions as the Performance Shares, and the number and class of Performance Shares, and the restrictions, terms and other conditions applicable to any such other securities shall be equitably determined by the Committee. 3 9. Nothing in this Agreement shall confer upon the Employee any right to continue in the employ of the Corporation or a Subsidiary, or affect the right of the Corporation or of any Subsidiary to terminate the employment of the Employee, with or without cause. These Performance Shares are awarded pursuant to the Plan and are subject to its terms. Capitalized terms used in this letter have the same meanings as defined in the Plan. A copy of the Plan is being furnished to you with this letter and also is available on request from the Corporate Secretary of the Corporation. Very truly yours, TERRA INDUSTRIES INC. By: ________________________________________ President and Chief Executive Officer By: ________________________________________ Senior Vice President, General Counsel and Corporate Secretary I hereby agree to the terms and conditions set forth above and acknowledge receipt of the 1997 Stock Incentive Plan and the Prospectus covering shares issued under that Plan. - --------------------------- Signature of Employee 4 EX-10.1.23 8 dex10123.txt PERFORMANCE SHARE GRANT Exhibit 10.1.23 PERFORMANCE SHARE GRANT Date of Grant: May 2, 2000 Number of Shares Awarded: ________ Dear ___________: We are pleased to inform you that as a non-employee director of Terra Industries Inc. (the "Corporation"), you have been granted, under the 1997 Stock Incentive Plan (the "Plan"), the number of Common Shares of the Corporation set forth above, subject to certain restrictions, terms and conditions set forth in this letter and in the Plan. The restricted Common Shares issued to you are referred to in this letter as the "Performance Shares." 1. From the date hereof until the restrictions on the Performance Shares terminate (the "Restriction Period"), the Performance Shares shall not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed; provided, however, that any of the Performance Shares may be exchanged for any other Common Shares that are similarly restricted. 2. The Restriction Period shall terminate at the following times: a. The Restriction Period shall terminate with respect to one hundred percent (100%) all of the Performance Shares on the day any one of the following occurs within two (2) years of the Date of Award: (i) any person or group of persons acting in concert (other than Anglo American plc, and its affiliates or a group consisting solely of such persons (the "Anglo American Affiliates")) acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934) of the outstanding securities (the "Voting Shares") of the Corporation in an amount having, or convertible into securities having, 25% or more of the ordinary voting power for the election of directors of the Corporation, provided that this 25% beneficial ownership trigger shall apply only when the Anglo American Affiliates no longer own 50% or more of the Voting Shares; (ii) during a period of not more than 24 months, a majority of the Board of Directors of the Corporation ceases to consist of the existing membership or successors nominated by the existing membership or their similar successors; (iii) all or substantially all of the individuals and entities who were the beneficial owners of the Corporation's outstanding securities entitled to vote do not own more than 60% of such securities in substantially the same proportions following a shareholder approved reorganization, merger, or consolidation; or (iv) shareholder approval of either (A) a complete liquidation or dissolution of the Corporation or (B) a sale or other disposition of all or substantially all of the assets of the Corporation, or a transaction having a similar effect. b. The Restriction Period shall terminate with respect to one hundred percent (100%) of the Performance Shares on the business day following the second anniversary of the Date of Award. The Corporation shall retain possession of the Performance Shares until the later to occur of the termination of the Restriction Period and the termination of the security interest described in Section 6 of this letter. 3. If your service on the Board of Directors of the Corporation terminates during the term of this agreement, all Performance Shares subject to the Restriction Period shall automatically be forfeited by you and reconveyed to the Corporation, except as follows: a. If your service terminates by reason of death, the Performance Shares shall continue to be eligible for vesting pursuant to Section 2 for a period of one year from the date of death (provided that such vesting must occur, if at all, on or before the second anniversary hereof). b. If your service terminates by reason of Total Disability or retirement, with the permission of the Personnel Committee, the Performance Shares shall continue to be eligible for vesting pursuant to Section 2 (provided that such vesting must occur, if at all, on or before the second anniversary hereof). c. In cases of special circumstances the Personnel Committee may, in its sole discretion when it finds that a waiver would be in the best interests of the Corporation, extend the period for vesting or terminate the Restriction Period with respect to all or a portion of your Performance Shares. 4. This award shall not be effective unless you sign a copy of this letter and deliver it to the Corporate Secretary of the Corporation, Terra Centre, 600 Fourth Street, Sioux City, Iowa 51101, on or before May 25, 2000. If the Corporate Secretary does not have your properly executed copy of this letter before such time, then, anything in this letter to the contrary notwithstanding, this award shall terminate and be of no effect. Your signing and delivering a copy of this letter shall evidence your acceptance of the Performance Shares upon the terms and conditions of this Award. Attached is a copy of your Stock Certificate and Stock Power. Your execution of the stock power will permit the Corporation to enforce the security interest described in Section 6 of this letter or reconvey the Performance Shares to the Corporation in the event the Award is forfeited. 5. Except as set forth in this letter, upon the issuance of the Performance Shares you shall have all of the rights of a stockholder, including the right to vote the Performance Shares and the right to receive dividends thereon. The certificates for any Performance Shares shall bear an appropriate legend reciting the terms, conditions and restrictions applicable thereto, and shall be subject to appropriate stop-transfer orders. The Corporation shall issue your Performance Shares promptly after the Corporation's Corporate Secretary receives the documents set forth in Section 4, the 2 Performance Shares have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange upon which the Common Shares of the Corporation are listed and there has been compliance with such laws and regulations as the Corporation may deem applicable. The Corporation agrees to use its best efforts to effect such listing and compliance. 6. You hereby agree to pay to the Corporation, or otherwise make arrangements satisfactory to the Corporation regarding payment of, any federal, state or local taxes required or authorized by law to be withheld with respect to the award of the Performance Shares or the termination of the Restriction Period (the "Withholding Taxes"). The Corporation shall have, to the extent permitted by law, the right to deduct from any payment of any kind otherwise due to the Employee, any Withholding Taxes and to condition the delivery of the Performance Shares after the termination of the Restriction Period on the payment to the Corporation of the Withholding Taxes. You hereby grant to the Corporation a security interest in the Performance Shares to secure the reconveyance of the Performance Shares to the Corporation upon any forfeiture and to ensure adequate provision for the Withholding Taxes. The Corporation shall release its security interest in respect of any Performance Shares on which (i) the Restriction Period has terminated and (ii) all Withholding Taxes have been paid. In lieu of the payment of such amounts in cash, you may pay all or a portion of the Withholding Taxes by (a) the delivery of Common Shares not subject to any Restriction Period or (b) having the Corporation withhold a portion of the Common Shares otherwise to be delivered upon vesting of the Performance Shares. 7. The Corporation may, in its sole discretion, at any time or from time to time, in lieu of the delivery of all or any portion of your Performance Shares, pay to you cash equal to the Fair Market Value (as defined in the 1997 Stock Incentive Plan) of such shares on the day the Restriction Period terminates. 8. If any distribution is made to the holders of Performance Shares other than a cash dividend and new, different, or additional shares or other securities of the Corporation or of another company are received by the holders of the Performance Shares, or if any recapitalization or reclassification, split-up or consolidation of the Performance Shares shall be effected, or, if in connection with a merger or consolidation of the Corporation or a sale by the Corporation of all or a part of its assets, the Performance Shares are exchanged for a different number or class of shares of stock or other securities of the Corporation or for shares of stock or other securities of any other company, then any such other securities shall be subject to similar restrictions as the Performance Shares, and the number and class of Performance Shares, and the restrictions, terms and other conditions applicable to any such other securities shall be equitably determined by the Personnel Committee. 9. Nothing in this Agreement shall confer upon the non-employee Director any right to continue in the service of the Board of Directors of the Corporation, or affect the right of the Board of Directors of the Corporation to terminate the service of such Director, with or without cause. 3 These Performance Shares are awarded pursuant to the Plan and are subject to its terms. Capitalized terms used in this letter have the same meanings as defined in the Plan. A copy of the Plan is being furnished to you with this letter and also is available on request from the Corporate Secretary of the Corporation. Very truly yours, TERRA INDUSTRIES INC. By: _______________________________________ President and Chief Executive Officer By: _______________________________________ Senior Vice President, General Counsel and Corporate Secretary I hereby agree to the terms and conditions set forth above and acknowledge receipt of the 1997 Stock Incentive Plan and the Prospectus covering shares issued under that Plan. - ------------------------------------------ Signature of non-employee Director 4 EX-13 9 dex13.txt 2000 ANNUAL REPORT FINANCIAL SECTION Exhibit 13 TERRA INDUSTRIES INC. 2000 ANNUAL REPORT FINANCIAL SECTION TABLE OF CONTENTS Financial Review Consolidated Statements of Financial Position Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Statements of Changes in Stockholders' Equity Notes to the Consolidated Financial Statements Responsibility for Financial Statements Independent Auditors' Report Quarterly Production Data Quarterly Financial and Stock Market Data Volumes and Prices Stockholders Financial Summary Directors and Management Investor Information FINANCIAL REVIEW OVERVIEW OF CONSOLIDATED RESULTS Terra Industries Inc. (Terra) reported net losses of $10 million in 2000, $90 million in 1999 and $26 million in 1998 with a loss per share of $ 0.14, $1.20 and $0.35, respectively. Revenues from continuing operations totaled $1,001 million in 2000, $774 million in 1999 and $846 million in 1998. During 1999, Terra sold its Distribution business segment which generated a 1999 loss of $10.5 million ($0.14 per share) compared to the segment's net income of $17.1 million ($0.23 per share) for 1998. In addition, 1999 net income was reduced $9.3 million ($0.12 per share) due to the write-off of deferred financing fees in connection with the early retirement of debt. The net loss from continuing operations was $10.2 million in 2000, $70.1 million in 1999 and $43.3 million in 1998. Fluctuations in the net loss from continuing operations from 1998 through 2000 are primarily related to changes in the selling prices of nitrogen products and methanol manufactured by Terra and changes in the cost of natural gas, Terra's primary raw material. FINANCIAL COMPARABILITY On June 30, 1999 Terra sold its Distribution business segment as of March 31, 1999 for net proceeds of $335.1 million as discussed further at Note 2 to the Consolidated Financial Statements. Sale proceeds were used primarily to repay seasonal debt and redeem outstanding minority preferred limited interest in a partnership that operates Terra's methanol plant located at Beaumont, Texas. The Consolidated Financial Statements for prior years contain certain reclassifications to reflect the historical assets and operations of the Distribution business segment as discontinued operations. FACTORS THAT AFFECT OPERATING RESULTS Factors that may affect Terra's future operating results include: changes in financial markets, the relative balance of supply and demand for nitrogen fertilizers, industrial nitrogen and methanol, the availability and cost of natural gas, the number of planted acres - which is affected by both worldwide demand and governmental policies - the types of crops planted, the effects general weather patterns have on the timing and duration of field work for crop planting and harvesting, the effect of environmental legislation on supply and demand for Terra's products, the availability of financing sources to fund seasonal working capital needs, and the potential for interruption to operations due to accident or natural disaster. The principal raw material used to produce nitrogen products and methanol is natural gas. Natural gas costs in 2000 comprised about 66% of total costs and expenses for the North American nitrogen products business, 23% of total costs and expenses for the U.K. nitrogen products business and 66% of total costs and expenses for the Methanol segment. Terra enters into forward pricing arrangements for some of its natural gas requirements provided that such arrangements would not result in costs that would be greater than expected selling prices for Terra's finished products. Under those conditions, Terra's normal natural gas forward pricing policy is to effectively fix or cap the price of between 25% and 80% of its natural gas requirements for a one-year period and up to 50% of its natural gas requirements for the subsequent two-year period through supply contracts, financial derivatives and other instruments. In response to extremely volatile natural gas costs during the last six months of 2000 and uncertainties regarding the ability of finished goods prices to recover the increases to natural gas costs, Terra amended its normal policy and eliminated the minimum hedge requirement through the end of 2001. As a result, December 31, 2000 forward positions declined to approximately 17% of Terra's 2001 natural gas requirements. The significant increase to natural gas costs has also resulted in periodic production curtailments until natural gas, nitrogen or methanol prices change to levels allowing Terra to realize incremental cash flows by restarting the curtailed production. A portion of global nitrogen products and methanol production is at facilities with access to fixed-price natural gas supplies. These facilities' natural gas costs have been and could continue to be substantially lower than Terra's. 1 Prices for nitrogen products are influenced by the world supply and demand balance for ammonia and other nitrogen-based products. Long-term demand is affected by population growth and rising living standards that determine food consumption. Short-term demand is affected by world economic conditions and international trade decisions. Supply is affected by increasing worldwide capacity and the availability of nitrogen product exports from major producing regions such as the former Soviet Union, the Middle East and South America. Since mid-1999, in response to depressed nitrogen prices and the effects of increasing North American natural gas costs on product margins, there have been curtailments and permanent shutdowns of marginal capacity in North America and Western Europe, which has reduced nitrogen supplies in those areas. Methanol is used as a raw material in the production of formaldehyde, methyl tertiary butyl ether (MTBE), acetic acid and numerous other chemical derivatives. The price of methanol is highly influenced by the supply and demand in each of these markets, in particular MTBE, an oxygenate used in reformulated gasoline and an octane enhancer used in non-reformulated gasoline. Initiatives to ban or reduce the use of MTBE as a fuel additive, such as currently underway in California, could significantly affect demand for methanol. Recent reductions to methanol production in North America as the result of increasing natural gas costs has resulted in higher methanol prices, but those price increases have not always covered the higher cash costs of production. Weather can have a significant effect on demand for Terra's products. Weather conditions that delay or intermittently disrupt field work during the planting and growing season may shift demand from or to forms of nitrogen fertilizer that are more or less favorable to Terra. Similar conditions following harvest may delay or eliminate opportunities to apply fertilizer in the fall. Weather can also have an adverse effect on crop yields, which lowers the income of growers and could impair their ability to pay for crop inputs purchased from Terra's dealer customers. Conversely, low crop yields often increases the planted acres in the subsequent season which, in turn, increases the demand for nitrogen fertilizer. Terra's nitrogen business segment is seasonal with the majority of its products used during the second quarter in conjunction with spring planting activity. Due to the seasonality of the business and the relatively brief periods during which products can be used by customers, Terra and/or its customers generally build inventories during the second half of the year in order to ensure timely product availability during the peak sales season. For its current level of sales, Terra requires lines of credit to fund inventory increases and to support customer credit terms. Terra believes that its credit facilities are adequate for expected production levels in 2001. Terra's manufacturing operations may be subject to significant interruption if one or more of its facilities were to experience a major accident or were damaged by severe weather or other natural disaster. Terra currently maintains insurance, including business interruption insurance, and expects that it will continue to do so in an amount which it believes is sufficient to allow Terra to withstand major damage to any of its facilities. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows of Terra due to adverse changes in financial and commodity market prices and rates. Terra uses derivative financial instruments to manage risk in the areas of (a) foreign currency fluctuations, (b) changes in natural gas prices and (c) changes in interest rates. See Note 12 to the Consolidated Financial Statements for additional information on the use of derivative financial instruments. It is the general policy of Terra to avoid unnecessary risk and to limit, to the extent practical, risks associated with operating activities. Management of Terra may not engage in activities that expose Terra to speculative or non- operating risks. Management is expected to limit risks to acceptable levels. The use of derivative financial instruments is consistent with the overall business objectives of Terra. Derivatives are used to manage operating risk within the limits established by Terra's Board of Directors, and in response to identified exposures, provided they qualify as hedge activities. As such, derivative financial instruments are used to manage exposure to interest rate fluctuations, to hedge specific assets and liabilities denominated in foreign currency, to hedge firm commitments and forecasted natural gas purchase transactions, and to protect against foreign exchange rate movements between different currencies that impact revenue and earnings expressed in U.S. dollars. 2 Foreign Currency Fluctuations It is the policy of Terra to manage risk associated with foreign currency fluctuations by entering into exchange forward and option contracts covering specific currency obligations or net foreign currency operating requirements. Such hedging is limited to the amounts and duration of the specific obligations being hedged and, in the case of operating requirements, no more than 75% of the forecast requirements. The primary currencies to which Terra is exposed are the Canadian dollar and the British pound. At December 31, 2000, Terra had no forward positions in any foreign currency. Natural Gas Prices - North American Operations Terra's normal policy is to hedge 25-80% of its natural gas requirements for the upcoming 12 months and up to 50% of its requirements for the following 24 month period provided that such arrangements would not result in costs that would be greater than expected selling prices for Terra's finished products. In response to extremely volatile natural gas costs during the last six months of 2000 and uncertainties regarding the ability of finished goods prices to recover the increases to gas costs, Terra amended its policy and eliminated the minimum hedge requirement through the end of 2001. Natural gas is the principal raw material used to manufacture nitrogen and methanol. Natural gas prices are volatile and Terra manages this volatility through the use of derivative commodity instruments. Annual North American procurement requirements for natural gas are approximately 134 million MMBtu. Terra has hedged 10% of its 2001 North American requirements and none of its requirements beyond December 31, 2001. The fair value of these instruments is estimated based on quoted market prices from brokers, realized gains or losses and computations prepared by Terra. These instruments were at prices $32.1 million lower than published prices for December 31, 2000, forward markets. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10 percent adverse change in price. As of December 31, 2000 Terra's market risk exposure related to future natural gas requirements being hedged was $4.3 million based on a sensitivity analysis. Changes in the market value of these derivative instruments have a high correlation to changes in the spot price of natural gas. This hypothetical adverse impact on natural gas derivative instruments would be more than offset by lower costs for natural gas purchases. Natural Gas Prices - United Kingdom Operations To meet natural gas production requirements at Terra's United Kingdom production facilities, Terra generally enters into one- or two-year gas supply contracts with fixed prices for 25-80% of total volume requirements. Annual procurement requirements for U.K. natural gas are approximately 26 million MMBtu. As of December 31, 2000, Terra had fixed-price contracts for 49% of its 2001 U.K. natural gas requirements and 12% of its 2002 natural gas requirements. Terra's U.K. fixed-price contracts for 2001 and 2002 natural gas were at prices $18.4 million and $2.9 million, respectively, lower than published prices for December 31, 2000 forward markets. Terra does not use derivative commodity instruments for its United Kingdom natural gas needs. Interest Rate Fluctuations It is the policy of Terra to limit the extent of uncapped, variable rate debt to no more than 50% of its total outstanding debt. Terra manages interest rate risk to reduce the potential volatility of earnings that may arise from changes in interest rates. The table below provides information about Terra's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including debt obligations and interest rate swaps. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected maturity dates. Notional amounts are used to calculate contractual payments to be exchanged under the contract. 3
Interest Rate Sensitivity (in millions) Expected Maturity Date ------------------------------------------------------------------------------ 2001 2002 2003 2004 2005 Thereafter Total Fair Value ------ ------ ------ ------ ------ ---------- ------ ---------- Long-Term Debt Senior Notes, fixed rate ($US) $ - $ - $ - $ - $200.0 $ - $200.0 $208.5 Average interest rate 10.50% 10.50% 10.50% 10.50% 10.50% Senior Notes, fixed rate ($US) - - 158.8 - - - 158.8 159.3 Average interest rate 10.75% 10.75% 10.75% Bank Term Notes, LIBOR based ($US) --- --- 59.4 - - - 59.4 59.4 Average interest rate 9.89% 9.89% 9.89% Asset Based Term Facility, LIBOR based ($US) 5.0 3.8 37.5 - - - 46.3 46.3 Average interest rate 10.64% 10.64% 10.64% IDR Bonds, various rates ($US) 0.4 0.4 0.4 0.4 0.6 5.6 7.8 8.5 Average interest rate 6.77% 6.78% 6.78% 6.77% 6.76% 6.55% Other Debt, various rates ($US) 0.1 0.2 0.7 0.1 - - 1.1 1.1 Average interest rate 4.78% 4.20% 3.11% 8.0% ------------------------------------------------------------------------------ Total Long-Term Debt $ 5.5 $ 4.4 $256.8 $ 0.5 $200.6 $ 5.6 $473.4 $483.1 ============================================================================== Short-Term Borrowings Revolving credit facility, notional amount ($US) $115.6 $115.6 $115.6 $ - $ - Variable interest rate: LIBOR based 9.31% 9.31% 9.31% Interest Rate Swap Variable to fixed, notional amount ($US) $100.0 $100.0 $100.0 $ (1.1) Average pay rate 6.05% 6.05% 6.05% Average receive rate LIBOR LIBOR LIBOR ------------------------------------------------------------------------------
RESULTS OF CONTINUING OPERATIONS - 2000 COMPARED WITH 1999 Consolidated Results Terra reported a 2000 net loss from continuing operations of $10.2 million on revenues of $1,001 million compared with a loss of $70.1 million on revenues of $774 million in 1999. Basic and diluted loss per share for 2000 was $0.14 compared with $0.94 for 1999. Lower industry supplies for both nitrogen and methanol products resulted in higher product prices and was the principal factor causing the reduced net loss for 2000. Terra classifies its operations into two business segments: Nitrogen Products and Methanol. The Nitrogen Products segment represents the sale of nitrogen products including that produced at Terra's ammonia manufacturing and upgrading facilities. The Methanol segment represents wholesale sales of methanol including that produced at Terra's two methanol manufacturing facilities. Total revenues and operating income (loss) by segment for the years ended December 31, 2000 and 1999 follow:
(in thousands) 2000 1999 - ------------------------------------------------------------------------------- REVENUES: Nitrogen Products $ 855,107 $ 686,767 Methanol 136,781 85,178 Other revenue 9,270 2,364 - ------------------------------------------------------------------------------- $ 1,001,158 $ 774,309 =============================================================================== OPERATING INCOME (LOSS): Nitrogen Products $ 28,639 $ (43,909) Methanol 12,395 (15,210) Other expense - net 1,773 (3,923) - ------------------------------------------------------------------------------- $ 42,807 $ (63,042) ===============================================================================
4 Nitrogen Products Volumes and prices for 2000 and 1999 follow:
Volumes and Prices - -------------------------------------------------------------------------------- 2000 1999 - -------------------------------------------------------------------------------- Sales Average Sales Average (quantities in thousands of tons) Volumes Unit Price Volumes Unit Price - -------------------------------------------------------------------------------- Ammonia 1,418 $162 1,417 $122 Nitrogen solutions 3,990 79 3,682 62 Urea 474 136 563 99 Ammonium nitrate 1,000 118 833 113 - --------------------------------------------------------------------------------
Nitrogen products revenues increased by $168.3 million to $855.1 million for 2000 in comparison with 1999 primarily as a result of higher prices for all products. Ammonia, nitrogen solutions, urea and ammonium nitrate prices increased by 33%, 27%, 37% and 4%, respectively, causing a $144.3 million increase to revenues. Higher prices for ammonia, nitrogen solution and urea were due to lower North American nitrogen supplies as a result of reduced industry- wide production levels since mid-1999. The closure of nitrogen production facilities that directly competed with Terra plants was the primary reason for the increase to 2000 sales volumes of nitrogen solutions and ammonium nitrate. The nitrogen products segment reported operating income of $28.6 million and an operating loss of $43.9 million for 2000 and 1999, respectively. The $72.5 million improvement was primarily related to $148.6 million realized in 2000 as the result of higher prices, partly offset by a $82.9 million increase to natural gas costs. Natural gas costs, net of forward pricing gains or losses, increased to $3.02/MMBtu in 2000 from $2.32/MMBtu last year. Natural gas cost increases were mitigated by forward pricing contracts that reduced 2000 costs by $76.9 million. Higher sales volumes, reduced freight costs and lower maintenance spending contributed approximately $7.0 million to 2000 operating income. Methanol Methanol revenues were $136.8 million compared with $85.2 million for the years ended December 31, 2000 and 1999, respectively. Average methanol sales prices increased to $0.53 per gallon in 2000 from $0.35 per gallon in 1999 primarily as the result of reduced production rates and permanent closure of marginal North American production facilities in response to high natural gas costs and increased offshore competition. Methanol sales volumes increased by 5% to 257 million gallons for 2000 compared with 1999 primarily as the result of a two month shutdown at the Beaumont plant during the 1999 first quarter. The methanol segment reported operating income of $12.4 million for 2000 compared to an operating loss of $15.2 million for 1999. The improved operating results were primarily due to higher methanol prices which contributed $47.6 million to 2000 revenues. Natural gas costs, net of forward pricing gains or losses, increased to $3.06/MMBtu in 2000 from $2.32/MMBtu during 1999 and increased total 2000 costs by $20.1 million. Natural gas costs for the methanol segment were $17.2 million lower than spot purchase prices as the result of forward pricing contracts. Other Expense - Net Terra had $1.8 million of other operating income in 2000 compared to $3.9 million of other operating expenses in 1999. The 1999 expenses included allocations of $3.5 million in administrative expenses to discontinued Distribution operations sold during the 1999 first half. Insurance Settlement Costs During 2000, Terra incurred $6.0 million of legal and other professional fees in connection with a lawsuit to recover costs from the 1994 explosion at Terra's Port Neal facility. These expenses were related to the insurance recovery gain reported in Terra's 1997 financial statements and, consequently, have been excluded from the determination of 2000 operating income. 5 Interest Expense - Net Net interest expense was $47.6 million in 2000 compared with $44.7 million in 1999. The increase to net interest expense is primarily related to 1999 interest income of $6.3 million realized in connection with the sale of the Distribution business segment. Minority Interest Minority interest represents interest in the earnings of the publicly held common units of Terra Nitrogen Company, L.P. (TNCLP) and a third-party's limited partnership interest in Beaumont Methanol, Limited Partnership (BMLP). Minority interest charges totaled $5.4 million in 2000 and $8.3 million in 1999. Minority interest charges (credits) relating to TNCLP totaled $5.4 million in 2000 and $(1.1) million in 1999. The increased 2000 charge is directly related to higher TNCLP earnings as the result of increasing nitrogen prices. Minority interest charges for the limited partnership interest in BMLP was $9.4 million in 1999. The Corporation redeemed the third-party's BMLP interests on June 30, 1999 and thereby eliminated subsequent charges to earnings related to the BMLP partnership interest. Income Taxes Income tax expense was recorded at an effective rate of 37.1% for 2000 compared with 39.6% for 1999 which were reflective of statutory rates in effect for Terra during both periods. RESULTS OF CONTINUING OPERATIONS - 1999 COMPARED WITH 1998 Consolidated Results Terra reported a 1999 net loss from continuing operations of $70.1 million on revenues of $774 million compared with a net loss of $43.3 million on revenues of $846 million in 1998. Basic and diluted loss per share for 1999 was $0.94 compared with $0.58 for 1998. Worldwide overcapacity in both nitrogen and methanol markets lowered prices and margins for these products which substantially accounts for the decline in 1999 earnings. Total revenues and operating income (loss) by segment for the years ended December 31, 1999 and 1998 follow:
(in thousands) 1999 1998 - ----------------------------------------------------------------- REVENUES: Nitrogen Products $686,767 $751,597 Methanol 85,178 96,547 Other - net of intercompany eliminations 2,364 (2,593) - ----------------------------------------------------------------- $774,309 $845,551 ================================================================= OPERATING INCOME (LOSS): Nitrogen Products $(43,909) $ 39,329 Methanol (15,210) (7,891) Other expense - net (3,923) (21,224) - ----------------------------------------------------------------- $(63,042) $ 10,214 =================================================================
6 Nitrogen Products Volumes and prices for 1999 and 1998 follow:
Volumes and Prices - -------------------------------------------------------------------------------- 1999 1998 - -------------------------------------------------------------------------------- Sales Average Sales Average (quantities in thousands of tons) Volumes Unit Price Volumes Unit Price - -------------------------------------------------------------------------------- Ammonia 1,417 $ 122 1,349 $ 143 Nitrogen solutions 3,682 62 3,548 66 Urea 563 99 631 118 Ammonium nitrate 833 113 809 134 - --------------------------------------------------------------------------------
Nitrogen products revenues declined by $64.8 million to $686.8 million for 1999 in comparison with 1998 primarily as a result of lower prices for all products. Ammonia, nitrogen solutions, urea and ammonium nitrate prices declined by 15%, 7%, 16% and 16%, respectively, causing a $71.5 million reduction to revenues. Excess worldwide production capacity created excess nitrogen supplies and caused prices to fall. Ammonia and nitrogen solutions 1999 sales volumes increased from the prior year as the result of increased demand during the 1999 second half in response to the permanent shutdown of competitor facilities in Terra's market area and increased customer confidence that nitrogen prices had established a floor going into the 2000 planting season. The nitrogen products segment reported operating income (loss) of $(43.9) million and $39.3 million for 1999 and 1998, respectively. Operating income declined by $71.5 million for 1999 as the result of lower prices. In addition, natural gas costs increased by 8% from 1998 which reduced 1999 operating income by $21.1 million from the prior year. These factors were partially offset by lower operating expenses which declined by 3% in comparison with 1998 and higher sales volumes. Terra's use of financial derivatives to forward price a portion of its natural gas needs resulted in cost savings of $5.2 million compared with 1999 spot prices. Methanol Methanol revenues were $85 million compared with $97 million for the years ended December 31, 1999 and 1998, respectively. Average methanol sales prices were $0.35 per gallon and $0.34 per gallon for 1999 and 1998, respectively. Methanol sales volumes declined by 14% to 245 million gallons for 1999 compared with 1998 primarily as the result of a two month shutdown at the Beaumont plant during the 1999 first quarter in response to market prices that were less than the cash cost of production. The methanol segment reported an operating loss of $15.2 million for 1999 and $7.9 million for 1998. The increased operating loss was primarily a result of higher natural gas costs which increased 17% and reduced 1999 operating results by $8.5 million. The increase in natural gas costs is after giving effect to Terra's use of forward pricing instruments to fix natural gas costs which resulted in $1.2 million of savings when compared to spot prices. Other Expense - Net Terra had $3.9 million of other operating expenses in 1999 compared to $21.2 million in 1998. These expenses include allocations of shared service expenses to discontinued Distribution operations sold during the 1999 first half of $3.5 million and $13.8 million in 1999 and 1998, respectively. Other expenses also included $6.1 million in 1998 for vesting of restricted stock grants and professional fees related to efforts to sell Terra's outstanding common stock. Interest Expense - Net Net interest expense was $44.7 million in 1999 compared with $50.8 million in 1998. The decline to net interest expense is primarily related to interest income of $6.3 million realized in connection with the sale of the Distribution business segment. 7 Minority Interest Minority interest represents interest in the earnings of the publicly held common units of Terra Nitrogen Company, L.P. (TNCLP) and a third-party's limited partnership interest in Beaumont Methanol, Limited Partnership (BMLP). Minority interest charges totaled $8.3 million in 1999 and $27.5 million in 1998. Minority interest charges for the limited partnership interest in BMLP was $9.4 million in 1999 and $17.9 million in 1998. The Corporation redeemed the third- party's BMLP interests on June 30, 1999 and thereby eliminated subsequent charges to earnings related to the BMLP partnership interest. Minority interest charges relating to TNCLP totaled $(1.1) million in 1999 and $9.6 million in 1998. The reduced 1999 charge is directly related to lower TNCLP earnings as the result of declining nitrogen prices. Income Taxes Income tax expense was recorded at an effective rate of 39.6% for 1999 compared with 36.4% in 1998 which were reflective of statutory rates in effect for Terra during both periods. LIQUIDITY AND CAPITAL RESOURCES Terra's primary uses of funds will be to fund its working capital requirements, make payments on its indebtedness and other obligations and make capital expenditures. The principal sources of funds will be cash flow from operations and borrowings under available bank facilities. Cash provided from 2000 operations was $132.8 million, comprised of $110.0 million of cash provided from operating activities and $22.8 million from reductions in working capital balances. Cash provided from operating activities was $69.4 million higher than 1999 primarily as the result of the increase to 2000 operating income. Cash from working capital reductions was primarily due to a $28.4 million reduction to inventory balances as a result of curtailed production rates at Terra's North American facilities. In response to high natural gas costs, Terra curtailed its North American production rates of urea, ammonia, methanol and UAN solutions during the 2000 second half by 39%, 15%, 12% and 4%, respectively. Some of the curtailments continued into 2001 until natural gas costs declined to levels that permitted resumption of production. Terra had available a $116 million revolving credit facility for working capital needs at December 31, 2000. As of December 31, 2000, nothing was outstanding under this facility, but $21 million was used to support outstanding letters of credit covering recorded liabilities. Borrowing availability under the credit facility is generally based on 85% of eligible accounts receivable and 65% of eligible inventory and is expected to be adequate to meet the operating cash needs of Terra. The credit facility also requires Terra to adhere to certain limitations on additional debt, capital expenditures, acquisitions, liens, asset sales, investments, prepayments of subordinated indebtedness, changes in lines of business and transactions with affiliates. In addition Terra is required to maintain minimum levels of earnings before interest, income taxes, depreciation and amortization (as defined in the credit facility) computed on a quarterly basis. Failure to meet these covenants would require Terra to incur additional costs to amend the bank facilities or could result in termination of the facilities. Management expects that natural gas costs will decline, and/or nitrogen and methanol prices will increase, from December 31, 2000 to levels that will enable Terra to maintain the 2001 minimum earnings levels required by the credit facility. During 2000, Terra funded plant and equipment purchases of $12.2 million primarily for replacement or stay-in-business capital needs. During 1999, Terra funded capital expenditures of $51.9 million which included $31.7 million to complete construction of a $61.7 million ammonia production loop at the Beaumont, Texas methanol plant that was placed in operation during the 2000 first quarter. Terra expects 2001 plant and equipment purchases to approximate $35 million consisting primarily of the expenditures for routine replacement of equipment at manufacturing facilities. 8 On December 17, 1997, Terra announced that it was resuming purchases of common units of TNCLP on the open market and through privately negotiated transactions. Under an existing authorization of the Board of Directors, Terra may acquire up to five million common units. Terra acquired 316,500, 609,200 and 632,500 common units during 2000, 1999 and 1998, respectively. Terra purchased 183,500 additional common units on January 2, 2001 which was the maximum allowed under the current covenants of Terra's bank credit agreements. During 2000, Terra distributed $1.1 million to the minority TNCLP common unitholders. TNCLP distributions are based on "Available Cash" (as defined in the Partnership Agreement) with no distributions made during 1999 and $17.2 million paid to minority TNCLP common unitholders during 1998. In 1999, Terra distributed a preferred return of $9.4 million to BMLP's minority partner, and paid a dividend of $0.07 per Common Share which totaled $5.3 million. Terra redeemed the BMLP minority interest on June 30, 1999 and thereby eliminated future cash requirements to fund payments to the BMLP minority partner. On August 3, 1999, the Board of Directors suspended Terra's payment of a regular quarterly dividend on common stock. On June 30, 1999 Terra sold its Distribution business segment to Cenex/Land O'Lakes Agronomy Company for $485 million. Sales proceeds, net of increases to Distribution working capital balances and capital expenditures since December 31, 1998, other operating cash items and selling costs, contributed $335.1 million to 1999 cash flows. Net sales proceeds were used to redeem the outstanding minority interest in BMLP for $225 million, fund termination of the accounts receivable securitization program and repay outstanding borrowings under Terra's revolving credit facility. Cash balances at December 31, 2000 were $101.4 million, all of which is unrestricted. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended by SFAS No. 137 and SFAS No 138, requires that all derivative instruments be recorded in the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income, based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. On January 1, 2001, Terra adopted this statement which resulted in a $23.3 million increase in current assets to recognize the value of open natural gas contracts, a $9.2 million reduction in current liabilities to reclassify deferred gains on closed contracts relating to future periods, a $1.1 million increase in long-term debt related to interest rate hedges and a $31.4 million increase to stockholders' equity as a reduction in accumulated other comprehensive losses. Management does not expect the adoption of SFAS 133 to have a material impact on Terra's results of operations or cash flows. PENDING CHANGE OF CONTROL Anglo American plc, through a wholly-owned subsidiary, owns 49.5% of Terra's outstanding shares. Anglo American has announced its intention to dispose of its interest in Terra with the timing based on market and other considerations. FORWARD-LOOKING PRECAUTIONS Information contained in this report, other than historical information, may be considered forward-looking. Forward-looking information reflects Management's current views of future events and financial performance that involve a number of risks and uncertainties. The factors that could cause actual results to differ materially include, but are not limited to, the following: changes in financial markets, general economic conditions within the agricultural industry, competitive factors and price changes (principally, sales prices of nitrogen and methanol products and natural gas costs), changes in product mix, changes in the seasonality of demand patterns, changes in weather conditions, changes in agricultural regulations, and other risks detailed in the "Factors that Affect Operating Results" section of this discussion. 9 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
======================================================================================== At December 31, - ---------------------------------------------------------------------------------------- (in thousands) 2000 1999 - ---------------------------------------------------------------------------------------- Assets Cash and short-term investments $ 101,425 $ 9,790 Accounts receivable, less allowance for doubtful accounts of $889 and $491 107,299 102,776 Inventories 101,526 133,634 Other current assets 17,448 47,482 - --------------------------------------------------------------------------------------- Total current assets 327,698 293,682 - --------------------------------------------------------------------------------------- Property, plant and equipment, net 902,801 997,801 Excess of cost over net assets of acquired businesses 231,372 253,162 Other assets 50,681 56,800 - --------------------------------------------------------------------------------------- Total assets $1,512,552 $1,601,445 ======================================================================================= Liabilities Debt due within one year $ 5,546 $ 17,152 Accounts payable 62,820 88,413 Accrued and other liabilities 60,324 35,158 - --------------------------------------------------------------------------------------- Total current liabilities 128,690 140,723 - --------------------------------------------------------------------------------------- Long-term debt 467,808 469,309 Deferred income taxes 156,475 163,733 Other liabilities 43,508 67,409 Minority interest 105,274 103,269 Commitments and contingencies (Note 11) - --------------------------------------------------------------------------------------- Total liabilities 901,755 944,443 - --------------------------------------------------------------------------------------- Stockholders' Equity Capital stock Common Shares, authorized 133,500 shares; 75,885 and 75,309 shares outstanding 128,283 127,890 Paid-in capital 554,750 552,903 Accumulated other comprehensive loss (48,115) (9,852) Retained deficit (24,121) (13,939) - --------------------------------------------------------------------------------------- Total stockholders' equity 610,797 657,002 - --------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $1,512,552 $1,601,445 =======================================================================================
See accompanying Notes to the Consolidated Financial Statements. 10 CONSOLIDATED STATEMENTS OF OPERATIONS
=============================================================================================================== Year ended December 31, - --------------------------------------------------------------------------------------------------------------- (in thousands, except per-share amounts) 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------- Revenues Net sales $ 991,600 $ 765,858 $840,509 Other income, net 9,558 8,451 5,042 - --------------------------------------------------------------------------------------------------------------- 1,001,158 774,309 845,551 - --------------------------------------------------------------------------------------------------------------- Cost and Expenses Cost of sales 909,861 781,927 772,369 Selling, general and administrative expense 48,490 55,424 62,968 - --------------------------------------------------------------------------------------------------------------- 958,351 837,351 835,337 - --------------------------------------------------------------------------------------------------------------- Income (loss) from operations 42,807 (63,042) 10,214 Insurance settlement costs (5,968) --- --- Interest income 3,869 8,361 326 Interest expense (51,511) (53,076) (51,122) Minority interest (5,379) (8,341) (27,510) - --------------------------------------------------------------------------------------------------------------- Loss from continuing operations before income taxes (16,182) (116,098) (68,092) Income tax benefit (6,000) (46,000) (24,761) - --------------------------------------------------------------------------------------------------------------- Loss from continuing operations (10,182) (70,098) (43,331) Loss from discontinued operations: Income (loss) from operations, net of income taxes --- (5,800) 17,082 Loss on disposition, net of income taxes --- (4,724) --- Extraordinary loss on early retirement of debt, net of income taxes --- (9,265) --- - --------------------------------------------------------------------------------------------------------------- Net Loss $ (10,182) $ (89,887) $(26,249) =============================================================================================================== Basic and Diluted Earnings (Loss) Per Share: Continuing operations $ (0.14) $ (0.94) $ (0.58) Discontinued operations --- (0.14) 0.23 Extraordinary loss on early retirement of debt --- (0.12) --- - --------------------------------------------------------------------------------------------------------------- Net Loss Per Share $ (0.14) $ (1.20) $ (0.35) ===============================================================================================================
See accompanying Notes to the Consolidated Financial Statements. 11 CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================================= Year ended December 31, - -------------------------------------------------------------------------------------------------- (in thousands) 2000 1999 1998 - -------------------------------------------------------------------------------------------------- Operating Activities Net loss $(10,182) $ (89,887) $(26,249) Adjustments to reconcile net loss to net cash flows from operating activities: (Income) loss from discontinued operations --- 10,524 (17,082) Extraordinary loss on early retirement of debt --- 9,265 --- Depreciation and amortization 114,901 101,588 101,053 Deferred income taxes 1,881 2,805 11,319 Minority interest in earnings 5,379 8,341 27,510 Other non-cash items --- --- (2,197) Change in current assets and liabilities, excluding working capital purchased: Accounts receivable (7,644) (5,663) (22,937) Account receivable securitization --- (136,000) (14,000) Inventories 28,388 11,454 (37,460) Other current assets 13,981 1,329 4,044 Accounts payable (22,978) (9,669) (32,017) Accrued and other liabilities 11,078 (62,520) (6,368) Other (1,975) 4,573 7,299 - ------------------------------------------------------------------------------------------------- Net Cash Flows From Operating Activities 132,829 (153,860) (7,085) - ------------------------------------------------------------------------------------------------- Investing Activities Purchase of property, plant and equipment (12,219) (51,899) (55,327) Discontinued operations --- 335,129 96,766 Other (4,962) (4,531) 3,371 - ------------------------------------------------------------------------------------------------- Net Cash Flows From Investing Activities (17,181) 278,699 44,810 - ------------------------------------------------------------------------------------------------- Financing Activities Net short-term borrowings (repayments) (6,000) 6,000 --- Principal payments on long-term debt (7,107) (16,569) (9,538) Stock issuance - net 7 13 286 Distributions to minority interests (1,119) (9,429) (35,052) Repurchase of TNCLP common units (2,414) (5,994) (16,523) Deferred financing costs (6,697) --- --- Redemption of minority interest in subsidiary --- (225,000) --- Dividends --- (5,281) (14,986) - ------------------------------------------------------------------------------------------------- Net Cash Flows From Financing Activities (23,330) (256,260) (75,813) - ------------------------------------------------------------------------------------------------- Effect of Exchange Rate Changes on Cash (683) (432) (331) - ------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Short-Term Investments 91,635 (131,853) (38,419) Cash and Short-Term Investments at Beginning of Year 9,790 141,643 180,062 - ------------------------------------------------------------------------------------------------- Cash and Short-Term Investments at End of Year $101,425 $ 9,790 $141,643 ================================================================================================= Interest Paid $ 50,851 $ 55,379 $ 61,907 ================================================================================================= Income Taxes Received $(14,058) $ (20,285) $ (7,085) =================================================================================================
See accompanying Notes to the Consolidated Financial Statements. 12 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
============================================================================================================================= Accumulated Other Retained Comprehensive Capital Stock Paid-In Comprehensive Earnings --------------------------- (in thousands) Income (Loss) Shares Amount Capital Loss (Deficit) Total - ----------------------------------------------------------------------------------------------------------------------------- January 1, 1998 74,977 $ 127,581 $ 548,772 $ (8,488) $ 122,464 $ 790,329 - ----------------------------------------------------------------------------------------------------------------------------- Comprehensive Income Net loss $ (26,249) --- --- --- (26,249) (26,249) Foreign currency translation adjustments (5,669) --- --- --- (5,669) --- (5,669) --------- Total $ (31,918) ========= Exercise of stock options, net 43 43 243 --- --- 286 Stock Incentive Plan 445 263 3,878 --- --- 4,141 Dividends --- --- --- --- (14,986) (14,986) - ----------------------------------------------------------------------------------------------------------------------------- December 31, 1998 75,465 $ 127,887 $ 552,893 $(14,157) $ 81,229 $ 747,852 - ----------------------------------------------------------------------------------------------------------------------------- Comprehensive Income Net loss $ (89,887) --- --- --- --- (89,887) (89,887) Foreign currency translation adjustments 4,305 --- --- --- 4,305 --- 4,305 --------- Total $ (85,582) ========= Exercise of stock options, net 3 3 10 --- --- 13 Stock Incentive Plan (159) --- --- --- --- --- Dividends --- --- --- --- (5,281) (5,281) - ----------------------------------------------------------------------------------------------------------------------------- December 31, 1999 75,309 $ 127,890 $ 552,903 $ (9,852) $(13,939) $ 657,002 - ----------------------------------------------------------------------------------------------------------------------------- Comprehensive Income Net loss $ (10,182) --- --- --- --- (10,182) (10,182) Foreign currency translation adjustments (38,263) --- --- --- (38,263) --- (38,263) --------- Total $ (48,445) ========= Exercise of stock options, net 5 5 2 --- --- 7 Stock Incentive Plan 571 388 1,845 --- --- 2,233 - ----------------------------------------------------------------------------------------------------------------------------- December 31, 2000 75,885 $ 128,283 $ 554,750 $(48,115) $(24,121) $ 610,797 =============================================================================================================================
See accompanying Notes to the Consolidated Financial Statements. 13 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of presentation: The Consolidated Financial Statements include the accounts of Terra Industries Inc. and all majority owned subsidiaries (Terra). All significant intercompany accounts and transactions have been eliminated. Description of business: Terra produces nitrogen products for agricultural dealers and industrial users, and methanol for industrial users. Foreign exchange: Results of operations for the foreign subsidiaries are translated using average currency exchange rates during the period; assets and liabilities are translated using current rates. Resulting translation adjustments are recorded as foreign currency translation adjustments in accumulated other comprehensive income in stockholders' equity. These translation adjustments are the only component of accumulated other comprehensive income. Cash and short-term investments: Terra considers short-term investments with an original maturity of three months or less to be cash equivalents which are reflected at their approximate fair value. Inventories: Inventories are stated at the lower of average cost or estimated net realizable value. The cost of average inventories is determined using the first-in, first- out method. Property, plant and equipment: Expenditures for plant and equipment additions, replacements and major improvements are capitalized. Related depreciation is charged to expense on a straight-line basis over estimated useful lives ranging from 15 to 20 years for buildings and 3 to 18 years for plant and equipment. Maintenance and repair costs are expensed as incurred. Plant turnaround costs: Costs related to the periodic scheduled major maintenance of continuous process production facilities (plant turnarounds) are deferred and charged to product costs on a straight-line basis during the period until the next scheduled turnaround, generally two years. Excess of costs over net assets of acquired businesses: Terra amortizes costs in excess of fair value of net assets of businesses acquired using the straight-line method over periods ranging from 15 to 18 years. Management periodically evaluates the recoverability of this asset through an assessment of expected cash flows from future operations. Revenue recognition: Revenue is recognized when title to finished product passes to the customer. Revenue is recognized as the net amount to be received after deducting estimated amounts for discounts and trade allowances. Cost of sales and hedging transactions: Realized gains and losses from hedging activities and premiums paid for option contracts are deferred and recognized in the month to which the hedged transactions relate (see Note 12 - Derivative Financial Instruments). Costs associated with settlement of natural gas purchase contracts are included in cost of sales. Stock-based compensation: Terra recognizes compensation costs for stock-based employee compensation plans based on the difference, if any, between the quoted market price of the stock at date of grant and the amount an employee pays to acquire the stock. 14 Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain reclassifications have been made to prior years' financial statements to conform with current year presentation. Per-share results: Basic earnings per share data are based on the weighted-average number of Common Shares outstanding during the period. Diluted earnings per share data are based on the weighted-average number of Common Shares outstanding and the effect of all dilutive potential common shares including stock options, restricted shares and contingent shares. Recently issued accounting standards: In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, requires that all derivative instruments be recorded in the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income, based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. On January 1, 2001, Terra adopted this statement which resulted in a $23.3 million increase in current assets to recognize the value of open natural gas contracts, a $9.2 million reduction in current liabilities to reclassify deferred gains on closed contracts relating to future periods, a $1.1 million increase in long-term debt related to interest rate hedges and a $31.4 million increase to stockholders' equity as a reduction in accumulated other comprehensive losses. Management does not expect the adoption of SFAS 133 to have a material impact on Terra's results of operations or cash flows. 2. Discontinued Operations On June 30, 1999, Terra sold its Distribution business segment to Cenex/Land O'Lakes Agronomy Company ("Buyer") for $335.1 million, net of seasonal working capital increases from December 31, 1998, and closing costs. In the sales transaction, the Buyer acquired all rights to the Distribution business' earnings from April 1, 1999 forward. Included in the sale were Terra's approximately 400 retail farm service centers in the U.S. and Canada, and its 50% ownership position in the Omnium chemical formulation plants. The accompanying consolidated statements of operations, financial position and cash flows have been restated for prior periods to segregate results of operations and net assets associated with the discontinued Distribution business segment. The Buyer and Terra have also entered into a three-year nitrogen fertilizer supply agreement through which the Buyer will purchase approximately the quantity that Terra's Nitrogen Products segment supplied to both the Distribution business and the Buyer. 15 3. Earnings Per Share The following table provides a reconciliation between Basic and Diluted Loss Per Share.
(in thousands, except per-share data) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- Basic and diluted loss per share computation: Loss from continuing operations $ (10,182) $ (70,098) $ (43,331) Earnings (loss) from discontinued operations --- (10,524) 17,082 - ------------------------------------------------------------------------------------------------------------------------- Loss available before extraordinary item (10,182) (80,622) (26,249) Extraordinary loss on debt retirement --- (9,265) --- - ------------------------------------------------------------------------------------------------------------------------- Loss available to common shareholders $ (10,182) $ (89,887) $ (26,249) ========================================================================================================================= Basic and diluted weighted average shares outstanding 74,707 74,703 73,954 ========================================================================================================================= Loss per share from continuing operations $ (0.14) $ (0.94) $ (0.58) Earnings (loss) per share from discontinued operations --- (0.14) 0.23 - ------------------------------------------------------------------------------------------------------------------------- Loss per share before extraordinary item (0.14) (1.08) (0.35) Extraordinary loss per share --- (0.12) --- - ------------------------------------------------------------------------------------------------------------------------- Basic and diluted loss per share $ (0.14) $ (1.20) $ (0.35) =========================================================================================================================
4. Inventories Inventories consisted of the following at December 31:
(in thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Raw materials $ 24,085 $ 37,437 Supplies 20,918 20,335 Finished goods 56,523 75,862 - ------------------------------------------------------------------------------------------------------------------------- Total $ 101,526 $ 133,634 =========================================================================================================================
5. Other Current Assets Other current assets consisted of the following at December 31:
(in thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Deferred tax asset - current $ --- $ 5,238 Income taxes recoverable --- 10,278 Accounts receivable of discontinued operations, less allowance for doubtful accounts of $6,358 and $12,533 1,240 6,238 Other current assets 16,208 25,728 - ------------------------------------------------------------------------------------------------------------------------- Total $ 17,448 $ 47,482 =========================================================================================================================
6. Property, Plant and Equipment, Net Property, plant and equipment, net consisted of the following at December 31:
(in thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Land and buildings $ 69,136 $ 53,875 Plant and equipment 1,216,066 1,170,541 Construction in progress 11,378 98,406 - ------------------------------------------------------------------------------------------------------------------------- 1,296,580 1,322,822 Less accumulated depreciation and amortization (393,779) (325,021) - ------------------------------------------------------------------------------------------------------------------------- Total $ 902,801 $ 997,801 =========================================================================================================================
16 7. Insurance Settlement Costs During 2000, Terra incurred $6.0 million of legal and other professional fees in connection with a lawsuit to recover losses related to a 1994 explosion at Terra's Port Neal facility. These costs were related to an insurance recovery gain reported in Terra's 1997 financial statements which was excluded from the determination of operating income. 8. Debt Due Within One Year Debt due within one year consisted of the following at December 31: (in thousands) 2000 1999 - ------------------------------------------------------------------------------- Short-term borrowings $ --- $ 6,000 Current maturities of long-term debt 5,546 11,152 - ------------------------------------------------------------------------------- Total $ 5,546 $ 17,152 =============================================================================== Weighted average short-term borrowings $ 536 $ 10,699 =============================================================================== Weighted average interest rate 10.75% 10.00% =============================================================================== In April 2000, Terra entered into a $175 million revolving credit facility, which expires in January 2003 and replaced a $62 million revolving credit facility. Borrowings available under the facility are reduced by the amount of the Bank Term Notes (described in Note10), currently $59.4 million, and further limited based on consolidated working capital levels and outstanding letters of credit issued under the facility. At December 31, 2000, there were $21.3 million of outstanding letters of credit under the facility for recorded liabilities. Interest on borrowings is charged at current market rates. A commitment fee is charged on the unused portion of the facility under the credit agreement, currently 0.5 percent. The credit agreement is secured by substantially all assets. The agreement requires Terra to adhere to certain limitations on additional debt, capital expenditures, acquisitions, liens, asset sales, investments, prepayments of subordinated indebtedness, changes in lines of business and transactions with affiliates. In addition, Terra is required to maintain minimum levels of earnings before interest, income taxes, depreciation and amortization (as defined in the credit agreement) computed on a quarterly basis. 9. Accrued and Other Liabilities Accrued and other liabilities consisted of the following at December 31: (in thousands) 2000 1999 - ------------------------------------------------------------------------------ Customer deposits $ 5,82 $ 10,346 Payroll and benefit costs 12,359 3,220 Deferred natural gas hedging gain 9,207 3 Income taxes - state -- 1,360 Other 32,937 20,229 - ------------------------------------------------------------------------------ Total $ 60,32 $ 35,158 ============================================================================== 17 10. Long-Term Debt Long-term debt consisted of the following at December 31:
(in thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------ Senior Notes, 10.5%, due 2005 $200,000 $200,000 Senior Notes, 10.75%, due 2003 158,755 158,755 Bank Term Notes, due 2003 59,375 109,375 Asset based Term Facility, due 2003 46,250 --- Industrial Development Revenue Bonds bearing interest at an average 6.85% with increasing payments from 2000 to 2011 7,820 8,130 Other 1,154 4,201 - ------------------------------------------------------------------------------------------------------ 473,354 480,461 Less current maturities 5,546 11,152 - ------------------------------------------------------------------------------------------------------ Total $467,808 $469,309 ======================================================================================================
Scheduled principal payments for each of the five years 2001 through 2005 are $5.5 million, $4.4 million, $256.8 million, $0.5 million and $200.6 million, respectively. The 10.5% unsecured Senior Notes are redeemable at the option of Terra, in whole or part, at any time at 105.250% of their principal amount, plus accrued interest, declining to 102.625% on or after June 15, 2001, and declining to 100% on or after June 15, 2002. The 10.5% unsecured Senior Notes Indenture contains certain restrictions, including the issuance of additional debt, payment of dividends, issuance of capital stock, certain transactions with affiliates, incurrence of liens, sale of assets, and sale-leaseback transactions. The 10.75% unsecured Senior Notes are redeemable at par at the option of Terra, in whole or part. The 10.75% Senior Notes Indenture contains restrictions similar to those in the 10.5% Senior Notes Indenture. The Bank Term Notes are secured by substantially all assets of Terra Canada, a beneficially owned subsidiary of Terra. The Notes are due in full on January 2, 2003. The Notes bear interest at a rate based on current market rates, 9.89% at December 31, 2000. The Notes include covenants similar to the credit agreement described in Note 8 - Debt Due Within One Year. The Asset Based Term Facility is secured by substantially all assets. The facility requires quarterly payments of $1.25 million through September 2002, with the balance due at maturity. The facility bears interest at a rate based on current market rates, currently 10.64%. The facility has covenants similar to those described in Note 8 - Debt Due Within One Year. The Industrial Development Revenue Bonds due in 2011 are secured by a letter of credit guaranteed by Terra and, along with certain other long-term debt due in 2003, by Terra's headquarters building located in Sioux City, Iowa. 11. Commitments and Contingencies Terra and its subsidiaries are committed to various non-cancelable operating leases for equipment, railcars and production, office and storage facilities expiring on various dates through 2017. Total minimum rental payments are as follows: (in thousands) - -------------------------------------------------------------------------------- 2001 $15,445 2002 11,514 2003 9,838 2004 7,041 2005 and thereafter 16,396 - -------------------------------------------------------------------------------- Total $60,234 ================================================================================ 18 Total rental expense for continuing operations under all leases, including short-term cancelable operating leases, was approximately $18.0 million, $20.6 million and $20.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. Terra is liable for retiree medical benefits of employees of coal mining operations sold in 1993, under the Coal Industry Retiree Health Benefit Act of 1992, which mandated certain retiree medical benefits for union coal miners. Terra has provided reserves adequate to cover the estimated present value of these liabilities at December 31, 2000. Four lawsuits by U.K. soft drink producers and distributors have been filed against Terra and other defendants seeking in excess of (Pounds)13.3 million in damages, plus costs and interest. The lawsuits seek to recover damages following a product recall the plaintiffs initiated in reaction to trace amounts of benzene allegedly found in carbon dioxide used as an ingredient in the recalled products. Terra produced the carbon dioxide at one of its U.K. plants. A fifth lawsuit seeking (Pounds)12.5 million and a sixth lawsuit seeking (Pounds)0.6 million in damages were settled by Terra's insurer in January 2000 and February 2001, respectively, with Terra making no contribution toward the settlements. In addition to the filed lawsuits, certain other soft drink producers have indicated their intention to file claims in unspecified amounts. Terra has denied liability for these lawsuits and claims and intends to vigorously defend its position. Terra believes it has insurance coverage for any damages. Its insurer is paying Terra's defense costs in all cases, has funded the January 2000 and February 2001 settlements, and has extended full coverage in the single case now before the court (wherein damages of (Pounds)9 million are sought), but currently continues to reserve the right to deny coverage in whole or in part for any adverse judgments in the remaining cases. While it is not feasible to predict with certainty the final outcome of these proceedings, management does not believe this matter will have a material adverse effect on Terra's results of operations, financial position or net cash flows. Terra is involved in various legal actions and claims, including environmental matters, arising from the normal course of business. It is the opinion of management that the ultimate resolution of these matters will not have a material adverse effect on the results of operations, financial position or net cash flows of Terra. Terra will be required to make a payment for each year through 2002 if average ammonium nitrate prices exceed certain thresholds during any year, subject to maximum payments of (Pounds)58 ($95.7 million USD at the time of signing) over the term of the agreement. As a result of making any such payments, Terra will not benefit fully from the U.K. price of ammonium nitrate of certain thresholds during the term of this agreement. No payments were due under this agreement in 1998, 1999 or 2000. 12. Derivative Financial Instruments Terra manages risk using derivative financial instruments for (a) changes in natural gas supply prices and (b) interest rate fluctuations and (c) currency. Derivative financial instruments have credit risk and market risk. To manage credit risk, Terra enters into derivative transactions only with counter-parties who are currently rated BBB or better or equivalent as recognized by a national rating agency. Terra will not enter into transactions with a counter-party if the additional transaction will result in credit exposure exceeding $20 million. The credit rating of counter-parties may be modified through guarantees, letters of credit or other credit enhancement vehicles. Terra classifies a derivative financial instrument as a hedge if all of the following conditions are met: 1. The item to be hedged must expose Terra to currency, interest or price risk. 2. It must be probable that the results of the hedge position substantially offset the effects of currency, interest or price changes on the hedged item (e.g., there is a high correlation between the hedge position and changes in market value of the hedge item). 3. The derivative financial instrument must be designated as a hedge of the item at the inception of the hedge. A change in the market value of a derivative financial instrument is recognized as a gain or loss in the period of the change unless the instrument meets the criteria to qualify as a hedge. If the hedge criteria are met, the accounting for the derivative financial instrument is related to the accounting for the hedged item so that changes in the market value of the derivative financial instrument are recognized in income when the effects of related changes in the currency rate, interest rate or price of the hedged item are recognized. 19 A change in the market value of a derivative financial instrument that is a hedge of a firm commitment is included in the measurement of the transaction that satisfies the commitment. Terra accounts for a change in the market value of a derivative financial instrument that hedges an anticipated transaction in the measurement of the subsequent transaction. If a derivative financial instrument that has been accounted for as a hedge is closed before the date of the anticipated transaction, Terra carries forward the accumulated change in value of the contract and includes it in the measurement of the related transaction. Natural Gas Prices - United Kingdom Operations - To meet natural gas production requirements at the Terra's United Kingdom production facilities, Terra enters into one- or two-year term gas supply contracts with fixed prices for generally 25-80% of total volume requirements. As of December 31, 2000, Terra had fixed- price contracts for 49% of its 2001 United Kingdom natural gas requirements and 12% of its 2002 United Kingdom natural gas requirements. Terra does not use derivative financial instruments for its United Kingdom natural gas needs. Natural Gas Prices - North American Operations - Natural gas supplies to meet production requirements at Terra's production facilities are purchased at market prices. Natural gas market prices are volatile and Terra effectively fixes prices for a portion of its natural gas production requirements and inventory through the use of futures contracts, swaps and options. These contracts reference physical natural gas prices or appropriate NYMEX futures contract prices. Contract physical prices are frequently based on prices at the Henry Hub in Louisiana, the most common and financially liquid location of reference for financial derivatives related to natural gas. However, natural gas supplies for Terra's six production facilities are purchased for each plant at locations other than Henry Hub, which often creates a location basis differential between the contract price and the physical price of natural gas. Accordingly, the use of financial derivatives may not exactly offset the change in the price of physical gas. The contracts are traded in months forward and settlement dates are scheduled to coincide with gas purchases during that future period. A swap is a contract between Terra and a third party to exchange cash based on a designated price. Option contracts give the holder the right to either own or sell a futures or swap contract. The futures contracts require maintenance of cash balances generally 10% to 20% of the contract value and option contracts require initial premium payments ranging from 2% to 5% of contract value. Basis swap contracts require payments to or from Terra for the amount, if any, that monthly published gas prices from the source specified in the contract differ from prices of NYMEX natural gas futures during a specified period. There are no initial cash requirements related to the swap and basis swap agreements. The following summarizes open natural gas contracts at December 31, 2000 and 1999: (in thousands) 2000 1999 - -------------------------------------------------------------------------------- Contract Unrealized Contract Unrealized MMBtu Gain (Loss) MMBtu Gain (Loss - -------------------------------------------------------------------------------- Swaps 10,180 $24,399 36,570 $5,810 Options 9,070 (2,280) 36,095 --- - -------------------------------------------------------------------------------- 19,250 $22,119 72,665 $5,810 ================================================================================ Basis swaps 6,590 $ 426 14,470 $ 458 ================================================================================ Annual consolidated production requirements are approximately 160 million MMBtu. Contracts and firm purchase commitments were in place at December 31, 2000 to cover approximately 17.5% of 2001 natural gas requirements. Gains and losses on settlement of these contracts and premium payments on option contracts are credited or charged to cost of sales in the month in which the hedged transaction closes. The risk and reward of outstanding natural gas positions are directly related to increases or decreases in natural gas prices in relation to the underlying NYMEX natural gas contract prices. Realized gains on closed contracts relating to future periods as of December 31, 2000 were $10 million. Cash flows related to natural gas hedging are reported as cash flows from operating activities. During 2000, 1999 and 1998, natural gas hedging activities reduced Terra's North American natural gas costs by approximately $76.8 million, $6.4 million and $15.4 million, respectively, compared with spot prices. 20 Interest Rate Fluctuations -Terra has entered into interest rate swap agreements to fix the interest rate on $100 million of its floating rate obligations at an average base rate of approximately 6.05% per annum. The interest rate swap agreements are designated as hedges. The agreements expire December 31, 2002. The differential paid or received on interest rate swap agreements is recognized as an adjustment to interest expense. Cash flows for the interest rate swap agreements are classified as cash flows from operations. The following table presents the carrying amounts and estimated fair values of Terra's derivative financial instruments at December 31, 2000 and 1999. SFAS 107, "Disclosures about Fair Value of Financial Instruments" defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. 2000 1999 - ------------------------------------------------------------------------------- Carrying Fair Carrying Fair (in millions) Amount Value Amount Value - ------------------------------------------------------------------------------- Natural gas $ 10.0 $ 32.5 $ 0.6 $ 5.7 Interest rate --- (1.1) --- 2.4 =============================================================================== The following methods and assumptions were used to estimate the fair value of each class of derivative financial instrument: Natural gas futures, swaps, options and basis swaps: Estimated based on quoted market prices from brokers, and computations prepared by Terra. Interest rate swap agreements: Estimated based on quotes from the market makers of these instruments. 13. Financial Instruments and Concentrations of Credit Risk The following table presents the carrying amounts and estimated fair values of Terra's financial instruments at December 31, 2000 and 1999. SFAS 107 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. 2000 1999 - ------------------------------------------------------------------------------ Carrying Fair Carrying Fair (in millions) Amount Value Amount Value - ------------------------------------------------------------------------------ Financial Assets Cash and short-term investments $101.4 $101.4 $ 9.8 $ 9.8 Receivables 107.3 107.3 102.7 102.7 Equity and other investments 1.9 1.9 1.8 1.8 Other assets 5.1 4.6 7.1 7.1 Financial Liabilities Short-term borrowings --- --- 6.0 6.0 Long-term debt 473.4 483.1 480.4 474.6 ============================================================================== The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Cash and receivables: The carrying amounts approximate fair value because of the short maturity of those instruments. Equity and other investments: Investments in untraded companies are valued on the basis of management's estimates and, when available, comparisons with similar companies whose shares are publicly traded. Other assets: The amounts reported relate to notes receivable obtained from sale of previous operating assets. The fair value is estimated based on current interest rates and repayment terms of the individual notes. Short-term borrowings and long-term debt: The fair value of Terra's short-term borrowings and long-term debt is estimated based on the quoted market price of these or similar issues or by discounting expected cash flows at the rates currently offered to Terra for debt of the same remaining maturities. 21 Concentration of Credit Risk - Terra is subject to credit risk through trade receivables and short-term investments. Although a substantial portion of its debtors' ability to pay is dependent upon the agribusiness economic sector, credit risk with respect to trade receivables generally is minimized due to its geographic dispersion. Short-term cash investments are placed in short duration corporate and government debt securities funds with well capitalized, high quality financial institutions. By policy, Terra limits the amount of credit exposure in any one type of investment instrument. Financial Instruments - At December 31, 2000, Terra had letters of credit outstanding totaling $21.3 million, guaranteeing various insurance and financing activities. 14. Stockholders' Equity Terra allocates $1.00 per share upon the issuance of Common Shares to the Common Share capital account. At December 31, 2000, 1.1 million Common Shares were reserved for issuance upon award of restricted shares and exercise of employee stock options. Terra has authorized 16,500,000 Trust Shares for issuance. There were no Trust Shares outstanding at December 31, 2000. 15. Stock-Based Compensation Terra accounts for its stock-based compensation under the provisions of Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees", which utilizes the intrinsic value method. Compensation cost related to stock-based compensation was $1.7 million, $0.9 million and $4.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. Terra's 1997 Stock Incentive Plan authorized granting directors and key employees awards in the form of options, rights, performance units or restricted stock. The aggregate number of Common Shares that may be subject to awards under the plan may not exceed 3.8 million shares. There were no outstanding rights or performance units at December 31, 2000. Options generally may not be exercised prior to one year or more than ten years from the date of grant. Stock options and restricted shares vest over specified periods, or in some cases upon the attainment, prior to a termination date, of pre-established market price objectives for Terra's Common Shares. The restricted shares are entitled to normal voting rights and earn dividends as declared during the performance periods. At December 31, 2000, 1.1 million Common Shares were available for grant under the 1997 Plan. A summary of Terra's stock-based compensation activity related to stock options for the years ended December 31 follows:
(options in thousands) - -------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 --------------------- ------------------ -------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Number Price Number Price Number Price - -------------------------------------------------------------------------------------------------------------------------- Outstanding - beginning of year 3,015 $ 6.76 2,151 $10.35 2,428 $10.47 Granted --- --- 1,522 3.32 35 8.47 Expired/terminated 754 11.71 655 10.45 269 11.75 Exercised 5 1.43 3 4.11 43 6.69 - -------------------------------------------------------------------------------------------------------------------------- Outstanding - end of year 2,256 $ 5.16 3,015 $ 6.76 2,151 $10.35 ==========================================================================================================================
22 The following table summarizes information about stock options outstanding and exercisable at December 31, 2000:
(options in thousands) - --------------------------------------------------------------------------------------------------- Options Outstanding Options Exercisable -------------------------------------------- -------------------------- Weighted Weighted Weighted Average Average Average Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price - --------------------------------------------------------------------------------------------------- $ 1.00 $ 3.99 1,518 8.87 years $ 3.35 520 $ 3.34 4.00 7.99 305 2.12 5.06 306 5.06 8.00 14.99 433 5.11 11.58 432 11.58 - --------------------------------------------------------------------------------------------------- Total 2,256 7.20 $ 5.16 1,258 $ 6.59 ===================================================================================================
There were 1,464,000 and 1,312,000 options exercisable at December 31, 1999 and 1998, respectively. The weighted average fair value of options granted was $1.54 per option for 1999 and $2.83 per option for 1998. The fair value of options granted was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: 1999 1998 - -------------------------------------------------------------------------------- Risk-free interest rate 5.95% 5.52% Dividend yield 1.37% 2.30% Expected volatility 57.00% 42.00% Expected life (years) 4.0 4.0 ================================================================================ There were 699,000 restricted shares granted during 2000 with a weighted average fair value of $2.14 per share. There were no restricted shares granted during 1999 and 610,000 restricted shares granted during 1998 with a weighted average fair value of $5.75 per share. The restricted shares granted in 1998 became fully vested in 2000. The pro forma impact on net loss and diluted loss per share of accounting for stock-based compensation using the fair value method required by SFAS 123, "Accounting for Stock-Based Compensation" follows: (in thousands, except per-share data) 2000 1999 1998 - -------------------------------------------------------------------------------- Net loss As reported $(10,182) $(89,887) $(26,249) Pro forma (11,123) (90,754) (28,270) Diluted loss per share As reported $ (0.14) $ (1.20) $ (0.35) Pro forma (0.15) (1.20) (0.38) ================================================================================ The pro forma impact takes into account only stock-based compensation grants since January 1, 1995 and is likely to increase in future years as additional awards are granted and amortized ratably over the vesting period. 16. Retirement Benefit Plans Terra and its subsidiaries maintain pension plans that cover substantially all salaried and hourly employees. Benefits are based on a pay formula for the salaried plans and a flat benefit formula for the hourly plans. The plans' assets consist principally of equity securities and corporate and government debt securities. Terra and its subsidiaries also have certain non-qualified pension plans covering executives, which are unfunded. Terra accrues pension costs based upon annual independent actuarial valuations for each plan and funds these costs in accordance with statutory requirements. The components of net periodic pension expense, including $10.6 million of 1999 curtailment benefits which were included in discontinued operations, follow: 23 (in thousands) 2000 1999 1998 - -------------------------------------------------------------------------------- Service cost $ 6,856 $ 9,185 $ 8,319 Interest cost 11,614 11,325 9,689 Expected return on plan assets (14,361) (13,243) (13,523) Amortization of prior service cost 37 42 79 Amortization of actuarial (gain) loss 1 1,471 (64) Amortization of net asset (314) (306) (307) Curtailment benefit --- (10,556) --- - -------------------------------------------------------------------------------- Pension expense (credit) $ 3,833 $ (2,082) $ 4,193 ================================================================================ The following table reconciles the plans' funded status to amounts included in the Consolidated Statements of Financial Position at December 31: (in thousands) 2000 1999 - -------------------------------------------------------------------------------- Change in Benefit Obligation Benefit Obligation-beginning of year $170,879 $173,925 Service cost 6,856 9,185 Interest cost 11,614 11,325 Participants' contributions 850 435 Curtailment gain --- (9,381) Actuarial (gain) loss 2,410 (9,753) Foreign currency exchange rate changes (6,074) (842) Benefits paid (7,833) (4,015) - -------------------------------------------------------------------------------- Benefit Obligation-end of year 178,702 170,879 - -------------------------------------------------------------------------------- Change in Plan Assets Fair value plan assets-beginning of year 168,133 147,565 Actual return on plan assets 20,892 21,526 Foreign currency exchange rate changes (6,522) (705) Employer contribution 1,127 3,370 Participants' contributions 1,222 391 Benefits paid (7,833) (4,014) - -------------------------------------------------------------------------------- Fair value plan assets-end of year 177,019 168,133 - -------------------------------------------------------------------------------- Funded status (1,683) (2,745) Unrecognized net actuarial (gain) loss (3,391) 715 Unrecognized prior service cost 200 232 Unrecognized net transition asset (678) (985) - -------------------------------------------------------------------------------- Accrued benefit cost $ (5,552) $ (2,783) ================================================================================ The non-qualified pension plans are unfunded and have an Accumulated Benefit Obligation of $4.8 million at December 31, 2000 which is included in other liabilities. The assumptions used to determine the actuarial present value of benefit obligations and pension expense during each of the years in the three-year period ended December 31, 2000 were as follows: 2000 1999 1998 - -------------------------------------------------------------------------------- Weighted average discount rate 6.9% 7.1% 6.7% Long-term per annum compensation increase 4.3% 4.1% 4.2% Long-term return on plan assets 8.8% 8.9% 8.9% ================================================================================ Terra also sponsors a qualified savings plan covering most full-time North American employees. Contributions made by participating employees are matched based on a specified percentage of employee contributions up to 6% of the employees' pay base. The cost of Terra's matching contribution to the savings plan totaled $1.4 million in 2000, $2.9 million in 1999 and $4.9 million in 1998. 24 17. Post-Retirement Benefits Terra also provides health care benefits for eligible retired employees. Participants generally become eligible after reaching retirement age with ten years of service. The plan pays a stated percentage of most medical expenses reduced for any deductible and payments made by government programs. The plan is unfunded. Employees hired prior to January 1, 1990 are eligible to participate in the plan if they elect to on or before January 1, 2002. Participant contributions and co-payments are subject to escalation. The following table indicates the components of the post-retirement medical benefits obligation included in Terra's Consolidated Statements of Financial Position at December 31: (in thousands) 2000 1999 - ------------------------------------------------------------------------------ Change in Benefit Obligation Benefit Obligation-beginning of year $ 3,247 $ 4,372 Service cost 21 85 Interest cost 220 295 Participants' contributions 314 235 Actuarial (gain) loss 885 (916) Foreign currency exchange rate changes (11) 27 Curtailment gain --- (18) Benefits paid (882) (833) - ------------------------------------------------------------------------------ Benefit Obligation-end of year 3,794 3,247 - ------------------------------------------------------------------------------ Change in Plan Assets Fair value plan assets-beginning of year --- --- Employer contribution 568 599 Participants' contributions 314 234 Benefits paid (882) (833) - ------------------------------------------------------------------------------ Fair value plan assets-end of year --- --- - ------------------------------------------------------------------------------ Funded status (3,794) (3,247) Unrecognized net actuarial gain (569) (2,101) Unrecognized prior service cost (170) (446) - ------------------------------------------------------------------------------ Accrued benefit cost $(4,533) $(5,794) ============================================================================== Net periodic post-retirement medical benefit income consisted of the following components: (in thousands) 2000 1999 1998 - -------------------------------------------------------------------------- Service cost $ 21 $ 85 $ 118 Interest cost 220 295 372 Amortization of prior service cost (270) (525) (236) Amortization of actuarial gain (657) (429) (403) Effect of curtailment benefit --- (9) --- - -------------------------------------------------------------------------- Post-retirement medical benefit income $(686) $(583) $(149) ========================================================================== Terra limits its future obligation for post-retirement medical benefits by capping at 5% the annual rate of increase in the cost of claims it assumes under the plan. The weighted average discount rate used in determining the accumulated post-retirement medical benefit obligation was 7.5% in 2000, 7.5% in 1999, and 7.00% in 1998. The assumed annual health care cost trend rate was 5.0% in 2000 and is assumed to remain at that level thereafter. A 1% increase in the assumed health care cost trend rate would increase total service and interest cost by $3,000 while a 1% decline would decrease cost by $27,000. The impact on the benefit obligation of a 1% increase in the assumed health care cost trend rate would be $42,000 while a 1% decline in the rate would decrease the benefit obligation by $41,000. 25 18. Income Taxes Components of the income tax provision (benefit) applicable to continuing operations are as follows: (in thousands) 2000 1999 1998 - -------------------------------------------------------------------------------- Current: Federal $(21,451) $ (18,659) $(35,106) Foreign 215 --- 981 State (1,592) (2,355) (1,955) - -------------------------------------------------------------------------------- (22,828) (21,014) (36,080) - -------------------------------------------------------------------------------- Deferred: Federal 9,612 (20,843) 8,586 Foreign 6,842 (2,940) 2,464 State 374 (1,203) 269 - -------------------------------------------------------------------------------- 16,828 (24,986) 11,319 - -------------------------------------------------------------------------------- Total income tax benefit $ (6,000) $ (46,000) $(24,761) ================================================================================ The following table reconciles the income tax provision (benefit) per the Consolidated Statements of Operations to the federal statutory provision: (in thousands) 2000 1999 1998 - -------------------------------------------------------------------------------- Loss from continuing operations before taxes: Domestic $(36,782) $(102,707) $(78,508) Foreign 20,600 (13,391) 10,416 - -------------------------------------------------------------------------------- $(16,182) $(116,098) $(68,092) ================================================================================ Statutory income tax provision (benefit): Domestic $(12,874) $ (35,947) $(27,844) Foreign 7,107 (4,306) 4,100 - -------------------------------------------------------------------------------- (5,767) (40,253) (23,744) Purchased Canadian tax benefit (1,750) 215 (4,344) Non-deductible expenses, primarily goodwill 6,152 6,125 6,884 State and local income taxes (1,126) (2,688) (700) Benefit of loss carryforwards --- --- (442) Other (3,509) (9,399) (2,415) - -------------------------------------------------------------------------------- Income tax benefit $ (6,000) $ (46,000) $(24,761) ================================================================================ 26 The tax effect of net operating loss (NOL) and tax credit carryforwards and significant temporary differences between reported and taxable earnings that gave rise to net deferred tax (liabilities) assets were as follows: (in thousands) 2000 1999 - --------------------------------------------------------------------------- Current deferred tax asset (liability) Accrued liabilities $ (4,962) $ 4,832 Inventory valuation 652 406 - --------------------------------------------------------------------------- Net current deferred tax asset (liability) (4,310) 5,238 - --------------------------------------------------------------------------- Non-current deferred tax liability Depreciation (187,369) $(182,556) Investments in partnership (26,460) (25,994) U.S. international tax allowance (9,682) (11,432) U.K. intercompany interest (3,815) --- Unfunded employee benefits 12,106 10,826 Discontinued business costs 7,538 18,846 Valuation allowance (21,276) (4,825) NOL, capital loss and tax credit carryforwards 84,464 32,073 Other (11,981) 9,254 - --------------------------------------------------------------------------- Net noncurrent deferred tax liability (156,475) (153,808) - --------------------------------------------------------------------------- Net deferred tax liability $(160,785) $(148,570) =========================================================================== During 1996, after receiving a favorable ruling from Revenue Canada, Terra refreshed its tax basis in plant and equipment at its Canadian subsidiary by entering into a transaction with a Canadian subsidiary of Anglo American, plc, resulting in a deferred tax asset for Terra. The valuation of this tax basis has been challenged by Revenue Canada in 2000. The deferred tax asset related to NOLs includes $21.3 million which the Company's management believes likely will not be realized. Therefore, a valuation allowance of $21.3 million has been provided by the Company. The Company will continue to assess the recoverablility for these NOLs and to the extent it is determined that such valuation allowance is no longer required the tax benefit of these NOLs will be recognized at such time.Components of income tax provision (benefit) included in net income other than from continuing operations are as follows: (in thousands) 2000 1999 1998 - ------------------------------------------------------------------------------ Current: Federal $ --- $(10,655) $9,761 State --- (3,070) --- - ------------------------------------------------------------------------------ $ --- $(13,725) $9,761 19. Industry Segment Data Terra operates in two principal industry segments - Nitrogen Products and Methanol. The Nitrogen Products business produces and distributes ammonia, urea, nitrogen solutions and ammonium nitrate to agricultural and industrial users. The Methanol business manufactures and distributes methanol, which is principally used as a raw material in the production of a variety of chemical derivatives and in the production of methyl tertiary butyl ether (MTBE), an oxygenate and an octane enhancer for gasoline. Management evaluates performance based on operating earnings of each segment. Terra does not allocate interest, income taxes or infrequent items to the business segments. Included in Other are general corporate activities not attributable to a specific industry segment. The following summarizes additional information about Terra's industry segments: 27
Nitrogen (in thousands) Products Methanol Other Total - ------------------------------------------------------------------------------------------------------------ 2000 Revenues $ 855,107 $ 136,781 $ 9,270 $1,001,158 Operating earnings 28,639 12,395 1,773 42,807 Total assets 1,247,678 175,929 88,945 1,512,552 Depreciation and amortization 89,861 12,957 12,083 114,901 Capital expenditures 6,364 3,098 2,757 12,219 Equity earnings 843 --- --- 843 Equity investments 1,865 --- --- 1,865 Minority interest in earnings 5,379 --- --- 5,379 ============================================================================================================ 1999 Revenues $ 686,767 $ 85,178 $ 2,364 $ 774,309 Operating loss (43,909) (15,210) (3,923) (63,042) Total assets 1,413,225 175,151 13,069 1,601,445 Depreciation and amortization 75,082 12,701 13,805 101,588 Capital expenditures 40,626 1,422 9,851 51,899 Equity earnings 787 --- --- 787 Equity investments 1,822 --- --- 1,822 Minority interest in earnings (1,088) 9,429 --- 8,341 ============================================================================================================ 1998 Revenues $ 751,597 $ 96,547 $ (2,593) $ 845,551 Operating earnings (loss) 39,329 (7,891) (21,224) 10,214 Total assets 1,332,765 176,197 528,806 2,037,768 Depreciation and amortization 81,933 12,821 6,299 101,053 Capital expenditures 53,908 1,354 65 55,327 Equity earnings 1,236 --- --- 1,236 Equity investments 1,985 --- --- 1,985 Minority interest in earnings 9,633 17,877 --- 27,510 ============================================================================================================
The following summarizes geographic information about Terra:
Revenues Long-lived Assets --------------------------------------- ----------------------------------------- (in thousands) 2000 1999 1998 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- United States $ 697,209 $488,707 $ 516,103 $ 867,762 $ 938,365 $1,184,793 Canada 35,952 39,734 50,050 49,467 56,897 70,404 United Kingdom 267,997 245,868 279,398 267,625 312,501 315,058 - -------------------------------------------------------------------------------------------------------------------------- $1,001,158 $774,309 $ 845,551 $1,184,854 $1,307,763 $1,570,255 ==========================================================================================================================
20. Agreements of Limited Partnerships Terra Nitrogen Company, L.P. (TNCLP) In accordance with the TNCLP limited partnership agreement, quarterly distributions to unitholders and TNC are made in an amount equal to 100% of its available cash, as defined in the partnership agreement. The General Partner receives a combined minimum 2% of total cash distributions, and as an incentive, the general partner's participation increases if cash distributions exceed specified target levels. 28 If at any time less than 25% of the issued and outstanding units are held by non-affiliates of the general partner, TNCLP may call, or assign to the general partner or its affiliates, its right to acquire all such outstanding units held by non-affiliated persons with at least 30 but not more than 60 days notice of its decision to purchase the outstanding units. The purchase price per unit will be the greater of (1) the average of any previous twenty trading days' closing prices as of the date five days before the purchase is announced or (2) the highest price paid by the general partner or any of its affiliates for any unit within the 90 days preceding the date the purchase is announced. Terra owned 74.1% of the Common Units at December 31, 2000. Subsequent to December 31, 2000, the percentage owned by Terra increased to 75.1%. Beaumont Methanol, Limited Partnership (BMLP) Terra repurchased the limited interest in BMLP on June 30, 1999 for $225 million with proceeds from sale of the Distribution business. The limited BMLP interest had received a first priority return from BMLP approximating an annual rate of LIBOR plus 3.17% on its $225 million investment. The publicly held TNCLP Common Units and the BMLP limited interest are reflected in the financial statements as minority interest. 21. Pending Change of Control Anglo American plc, through a wholly-owned subsidiary, owns 49.5% of Terra's outstanding shares. Anglo American has made public its intention to dispose of its interest in Terra with the timing based on market and other conditions. 29 RESPONSIBILITY FOR FINANCIAL STATEMENTS The accompanying Consolidated Financial Statements of Terra Industries Inc. and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America appropriate in the circumstances. The integrity and objectivity of data in these financial statements and supplemental data, including estimates and judgments related to matters not concluded by year end, are the responsibility of management. Terra has a system of internal accounting controls that provides management with reasonable assurance that transactions are recorded and executed in accordance with its authorizations, that assets are properly safeguarded and accounted for, and that financial records are maintained to permit preparation of financial statements in accordance with generally accepted accounting principles. This system includes written policies and procedures, an organizational structure that segregates duties, and a comprehensive program of periodic audits by the internal auditors. Terra also has instituted policies and guidelines that require employees to maintain the highest level of ethical standards. The Audit Committee of the Board of Directors is responsible for the review and oversight of the financial statements and reporting practices used, as well as the internal audit function. The Audit Committee meets periodically with management, internal auditors and the independent accountants. The independent accountants and internal auditors have access to the Audit Committee and, without management present, have the opportunity to discuss the adequacy of internal accounting controls and to review the quality of financial reporting. The Consolidated Financial Statements contained in this Annual Report have been audited by our independent accountants. Their audits included a review of internal accounting controls to establish a basis for reliance thereon in determining the nature, extent and timing of audit tests applied in their audits of the Consolidated Financial Statements. Burton M. Joyce Francis G. Meyer President and Senior Vice President and Chief Executive Officer Chief Financial Officer 30 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Terra Industries Inc: We have audited the accompanying consolidated statements of financial position of Terra Industries Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, cash flows and changes in stockholders' equity for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of Terra's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Terra Industries Inc. and subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Omaha, Nebraska January 25, 2001 31
QUARTERLY PRODUCTION DATA (unaudited) - ------------------------------------------------------------------------------------------- Quarter Quarter Quarter Quarter Year Ended Ended Ended Ended Ended March 31 June 30 Sept. 30 Dec. 31 Dec. 31 - ------------------------------------------------------------------------------------------- 2000 Net Production (tons): Anhydrous ammonia 321,651 397,667 321,942 273,968 1,315,228 Nitrogen solutions (28% basis) 997,694 937,822 856,018 891,889 3,683,423 Urea 170,187 77,203 66,188 97,757 411,335 Ammonium nitrate 231,278 263,292 263,551 258,878 1,016,999 Methanol (million gallons) 62.6 66.3 66.8 48.3 244.0 - ------------------------------------------------------------------------------------------- 1999 Net Production (tons): Anhydrous ammonia 389,693 391,912 327,153 332,991 1,441,749 Nitrogen solutions (28% basis) 918,003 803,190 836,685 967,742 3,525,620 Urea 135,472 149,434 101,711 143,651 530,268 Ammonium nitrate 288,676 237,010 190,073 183,088 898,847 Methanol (million gallons) 24.3 68.7 68.1 73.7 234.8 ===========================================================================================
QUARTERLY FINANCIAL AND STOCK MARKET DATA (unaudited) (certain items have been reclassified from prior period reporting) - --------------------------------------------------------------------------------------------------- (in thousands, except per-share data and stock prices) March 31, June 30, Sept. 30, Dec. 31, - --------------------------------------------------------------------------------------------------- 2000 Total revenues $222,207 $268,683 $251,640 $258,628 Operating income (loss) (16,874) 14,636 26,378 18,667 Net income (loss) (19,615) (832) 6,196 4,069 Per Share: Basic and diluted earnings (loss) per share $ (0.26) $ (0.01) $ 0.08 0.05 Common Share Price: High $ 3.88 $ 2.88 $ 2.25 $ 2.81 Low 1.94 1.06 1.06 1.75 1999 Total revenues $185,667 $226,257 $173,478 $188,907 Operating loss (22,244) (4,098) (17,860) (18,840) Loss from continuing operations (23,402) (9,135) (16,907) (20,654) Loss before extraordinary item (29,202) (13,858) (16,907) (20,654) Net loss (29,202) (21,153) (16,907) (22,625) Per Share: Loss from continuing operations $ (0.32) $ (0.12) $ (0.23) (0.27) Loss before extraordinary item (0.39) (0.19) (0.23) (0.27) Net loss (0.39) (0.29) (0.23) (0.30) Dividends 0.05 0.02 --- --- Common Share Price: High $ 7.50 $ 5.38 $ 4.06 $ 2.50 Low 4.44 3.38 1.63 .94 ===================================================================================================
32
VOLUMES & PRICES (unaudited) - ----------------------------------------------------------------------------------------- 2000 1999 - ----------------------------------------------------------------------------------------- Sales Realized Sales Realized (quantities in thousands) Volumes Price/unit Volumes Price/unit - ----------------------------------------------------------------------------------------- Anhydrous ammonia (tons) 1,418 $ 162 1,417 $ 122 Nitrogen solutions (tons) 3,990 79 3,682 62 Urea (tons) 474 136 563 99 Ammonium nitrate (tons) 1,000 118 833 113 Methanol (gallons) 256,812 0.53 245,821 0.35 =========================================================================================
STOCKHOLDERS - -------------------------------------------------------------------------------- Terra's Common Shares are traded principally on the New York Stock Exchange. At December 31, 2000, 76 million Common Shares were outstanding and held by 3,820 stockholders. 33
FINANCIAL SUMMARY - ---------------------------------------------------------------------------------------------------- (in thousands, except per-share and employee data) 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------- Financial Position Working capital $ 199,008 $ 152,959 $ 262,283 $ 302,724 $ 187,157 Total assets 1,512,552 1,601,445 2,037,768 2,177,157 1,740,547 Long-term debt 473,354 480,461 497,030 506,568 407,312 Stockholders' equity 610,797 657,002 747,852 790,329 606,092 Results of Operations Revenues $1,001,158 $ 774,309 $ 845,551 $ 797,647 $ 781,451 Costs and expenses (958,351) (837,351) (835,337) (600,872) (527,636) Infrequent item (5,968) --- --- 163,427 --- Interest income 3,869 8,361 326 208 1,231 Interest expense (51,511) (53,076) (51,122) (48,400) (43,623) Minority interest (5,379) (8,341) (27,510) (27,633) (44,485) Income tax benefit (provision) 6,000 46,000 24,761 (104,862) (53,916) - ---------------------------------------------------------------------------------------------------- Income (loss) from continuing operations (10,182) (70,098) (43,331) 179,515 113,022 Income (loss) from discontinued operations --- (10,524) 17,082 30,367 20,929 Extraordinary item --- (9,265) --- (2,995) --- - ---------------------------------------------------------------------------------------------------- Net income (loss) $ (10,182) $ (89,887) $ (26,249) $ 206,887 $ 133,951 ==================================================================================================== Basic Earnings (Loss) Per Share: Continuing operations $ (0.14) $ (0.94) $ (0.58) $ 2.43 $ 1.47 Discontinued operations --- (0.14) 0.23 0.41 0.27 Extraordinary item --- (0.12) --- (0.04) --- - ---------------------------------------------------------------------------------------------------- Net Income (Loss) $ (0.14) $ (1.20) $ (0.35) $ 2.80 $ 1.74 ==================================================================================================== Diluted Earnings (Loss) Per Share: Continuing operations $ (0.14) $ (0.94) $ (0.58) $ 2.39 $ 1.45 Discontinued operations --- (0.14) 0.23 0.41 0.27 Extraordinary item --- (0.12) --- (0.04) --- - ---------------------------------------------------------------------------------------------------- Net Income (Loss) $ (0.14) $ (1.20) $ (0.35) $ 2.76 $ 1.72 ==================================================================================================== Dividends Per Share $ --- $ 0.07 $ 0.20 $ 0.18 $ 0.15 ==================================================================================================== Capital Expenditures $ 12,219 $ 51,899 $ 55,327 $ 48,417 $ 158,339 ==================================================================================================== Full-time employees at end of period 1,279 1,351 4,185 4,435 3,575 ====================================================================================================
34 EX-21 10 dex21.txt SUBSIDIARIES OF TERRA INDUSTRIES Exhibit 21 TERRA INDUSTRIES INC. MAJORITY AND PARTIALLY OWNED SUBSIDIARIES December 31, 2000
Percentage Percentage Name of Company Held by TRA Held by Sub Jurisdiction - --------------- ----------- ----------- ------------ I. Inspiration Coal Inc. 100 Delaware II. Inspiration Consolidated Copper Company 100 Maine which owns ---------- A. Inspiration Development Company 100 Delaware III. Inspiration Gold Incorporated 100 Delaware IV. Terra Capital Holdings, Inc. 100 Delaware which owns ---------- A. Terra Capital, Inc. 100 Delaware which owns ---------- 1. Terra Methanol Corporation 100 Delaware 2. Terra International, Inc. 100 Delaware which owns ---------- a. Terra International (Oklahoma) Inc. 100 Delaware b. Terra Real Estate Corporation 100 Iowa c. Terra Real Estate Development Corporation 100 Iowa d. Terra Express, Inc. 100 Delaware e. Terra International (Canada) Inc. 100 Ontario, Canada which owns ---------- 1. Terra Nitrogen (U.K.) Limited 100 England f. Port Neal Corporation 100 Delaware 3. BMC Holdings, Inc. 100 Delaware which owns ---------- a. Beaumont Holdings Corporation 100 Delaware b. Beaumont Methanol, Limited Partnership/1/ 100 Delaware which owns ---------- 1. Terra (U.K.) Holdings Inc. 100 Delaware which owns ---------- a. Beaumont Ammonia Inc. 100 Delaware
____________________________ /1/ Terra Methanol Corporation is 1% General Partner and Limited Partner interests are owned by TMC, BMCH and Beaumont Holdings Corp. 1 TERRA INDUSTRIES INC. MAJORITY AND PARTIALLY OWNED SUBSIDIARIES December 31, 2000
Percentage Percentage Name of Company Held by TRA Held by Sub Jurisdiction - --------------- ----------- ----------- ------------ 4. Terra Nitrogen Corporation 100 Delaware which owns ---------- a. Terra Nitrogen Company, L.P./2/ 74 Delaware which owns ---------- 1. Terra Nitrogen, Limited Partnership/3/ 100 Delaware a. Oklahoma Co\2\ Partnership 50 Oklahoma
_____________________________ /2/ Terra Nitrogen Corporation's interest includes 1.0101% as General Partner and some of TNCLP is owned directly by Terra Capital, Inc. /3/ Terra Nitrogen Corporation is 1% General Partner. 2 EX-24 11 dex24.txt POWERS OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, EDWARD G. BEIMFOHR hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 28th day of February , 2001. ------ ---------- /s/ Edward G. Beimfohr ----------------------------------------- EDWARD G. BEIMFOHR POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, CAROLE L. BROOKINS hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 28th day of February , 2001. ------ ---------- /s/ Carole L. Brookins ------------------------------------------ CAROLE L. BROOKINS POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, EDWARD M. CARSON hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 28th day of February , 2001. ------ ---------- /s/ Edward M. Carson ----------------------------------------- EDWARD M. CARSON POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, THOMAS H. CLAIBORNE hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 28th day of February , 2001. ------ ---------- /s/ Thomas H. Claiborne ------------------------------------------ THOMAS H. CLAIBORNE POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, ERIC K. DIACK hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 28th day of February , 2001. ------ ---------- /s/ Eric K. Diack ---------------------------------------- ERIC K. DIACK POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, DAVID E. FISHER hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 2nd day of March , 2001. ----- ------- /s/ David E. Fisher ------------------------------------------ DAVID E. FISHER POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, JOHN R. NORTON III hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 27th day of February , 2001. ------ ---------- /s/ John R. Norton III ------------------------------------------ JOHN R. NORTON III POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, HENRY R. SLACK hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 27th day of February , 2001. ------ ---------- /s/ Henry R. Slack ---------------------------------------- HENRY R. SLACK POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, WILLIAM R. LOOMIS, JR. hereby constitute and appoint George H. Valentine, Francis G. Meyer and Burton M. Joyce, or each of them, with full power of substitution and resubstitution, my true and lawful attorney, for me and in my name, place and stead, to sign my name as a director of Terra Industries Inc. (the "Company") to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any amendments or supplements thereto, and to file said Annual Report and any amendment or supplement thereto, with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. I hereby ratify and confirm all that said attorneys, or each of them, or his substitute or substitutes, have done or shall lawfully do by virtue of this Power of Attorney. WITNESS my hand this 28th day of February , 2001. ------ ---------- /s/ William R. Loomis, Jr. ------------------------------------------- WILLIAM R. LOOMIS, JR. -----END PRIVACY-ENHANCED MESSAGE-----