EX-99.2 3 c71693exv99w2.htm EXHIBIT 99.2 Filed by Bowne Pure Compliance
 

PRO FORMA FINANCIAL INFORMATION FOR YEAR ENDED DECEMBER 31, 2006
Exhibit 99.2
Unaudited Pro Forma Consolidated Condensed Financial Information
On September 14, 2007, Terra Industries Inc. (Terra) closed the formation of GrowHow UK Limited, a joint venture between Terra and Kemira GrowHow Oyj (Kemira GrowHow). Pursuant to the joint venture agreement, Terra contributed its United Kingdom subsidiary (Terra Nitrogen (UK) Limited) to the joint venture for a 50% interest in GrowHow UK Limited, and Kemira GrowHow contributed its UK subsidiary (Kemira GrowHow Holdings Limited) for the remaining 50% interest. Terra will account for its investment in GrowHow UK Limited as an equity method investment.
The following unaudited pro forma consolidated condensed financial information gives effect to Terra’s contribution of its UK subsidiary to the joint venture and its receipt of a 50% interest in the joint venture. The unaudited pro forma consolidated condensed financial information should be read in conjunction with the audited financial statements of Terra filed on Form 10-K.
The unaudited pro forma consolidated condensed statements of operations give effect to the joint venture formation as if it had occurred at the beginning of the period. The unaudited pro forma combined condensed statements of operations for the twelve months ended December 31, 2006 adjust the historical consolidated statement of operations of Terra to eliminate the operating results of its United Kingdom subsidiary and record its 50% equity interest in the operating results of GrowHow UK Limited. The unaudited pro forma combined condensed balance sheet gives effect to the joint venture formation as if it had occurred on December 31, 2006.
The unaudited pro forma consolidated condensed financial information does not give effect to any potential fair value adjustments of contributed assets and liabilities that may be required upon final valuation of the assets, or to any potential costs or savings or other changes that may occur from the transaction and operation of the joint venture.
The unaudited pro forma financial information and accompanying notes are based upon preliminary estimates and assumptions that the management of Terra believes are reasonable and appropriate, however these assumptions may be revised at a later date. The unaudited pro forma consolidated condensed financial information is presented for illustrative purposes only and does not purport to be indicative of the assets, liabilities or operating results that would have actually occurred if the joint venture had been in effect on the date indicated, nor is it necessarily indicative of future operating results of Terra or the joint venture.

 

 

 

Terra Industries Inc.
Unaudited Pro Forma Consolidated Condensed Balance Sheet
as of December 31, 2006
(in thousands)
                         
    Terra Industries Inc.     Unaudited     Pro-Forma  
    consolidated     Terra Nitrogen     Terra Industries Inc.  
    as reported     UK Ltd     consolidated  
 
                        
ASSETS
                        
Cash
   $ 179,017     $ (2,356 )   $ 176,661  
Accounts receivable, net
     198,791       (74,572 )     124,219  
Inventories
     211,017       (72,155 )     138,862  
Other current assets
     31,680       (7,507 )     24,173  
 
                  
Total current assets
     620,505       (156,590 )     463,915  
 
                  
Property, plant and equipment, net
     720,897       (223,214 )     497,683  
Equity investments
     164,099       288,257       452,356  
Other assets
     67,212       (15,361 )     51,851  
 
                  
Total assets
   $ 1,572,713     $ (106,908 )   $ 1,465,805  
 
                  
 
                        
LIABILITIES
                        
Accounts payable
   $ 156,493     $ (52,061 )   $ 104,432  
Customer prepayments
     77,091       ¯       77,091  
Other current liabilities
     75,863       (11,689 )     64,174  
 
                  
Total current liabilities
     309,447       (63,750 )     245,697  
 
                  
Long-term debt and capital lease obligations
     331,300       ¯       331,300  
Pension liabilities
     134,444       (67,266 )     67,178  
Other liabilities
     104,039       (19,164 )     84,875  
Minority interest
     94,687       ¯       94,687  
 
                  
Total liabilities and minority interest
     973,917       (150,180 )     823,737  
 
                  
Total preferred stock and stockholders’ equity
     598,796       43,272       642,068  
 
                  
Total liabilities and stockholders’ equity
   $ 1,572,713     $ (106,908 )   $ 1,465,805  
 
                  
See accompanying schedules for footnotes and explanation of pro forma adjustments.

 

 

 

Terra Industries Inc.
Unaudited Pro Forma Consolidated Condensed Statement of Operations
for the Twelve Months Ended December 31, 2006
(in thousands)
                                 
    Terra Industries Inc.     Unaudited     Pro Forma     Pro-Forma  
    consolidated     Terra Nitrogen     GrowHow UK     Terra Industries Inc.  
    as reported     UK Ltd     Limited     consolidated  
 
                                
REVENUES
                                
Product revenues
   $ 1,828,714     $ (374,826 )   $ —     $ 1,453,888  
Other revenues
     8,008       ¯       ¯       8,008  
 
                        
Total revenues
     1,836,722       (374,826 )     ¯       1,461,896  
 
                                
COSTS AND EXPENSES
                                
Cost of sales
     1,732,222       (368,522 )     ¯       1,363,700  
Selling, general and administrative expense
     55,233       (9,518 )     ¯       45,715  
Equity in loss (earnings) of unconsolidated affiliates
     (17,013 )     ¯       ¯       (17,013 )
 
                        
Total cost and expenses
     1,770,442       (378,040 )     ¯       1,392,402  
 
                        
 
                                
Income (loss) from operations
     66,280       3,214       ¯       69,494  
Equity loss of unconsolidated affiliates
     ¯       ¯       (18,226 )     (18,226 )
Interest income
     6,457       (3,021 )     ¯       3,436  
Interest expense
     (47,991 )     ¯       ¯       (47,991 )
 
                        
Income (loss) before income taxes and minority interest
     24,746       193       (18,226 )     6,713  
 
                        
 
                                
Income taxes (provision) benefit
     (9,247 )     (1,787 )     ¯       (11,034 )
Minority interest
     (11,286 )     ¯       ¯       (11,286 )
 
                        
Net income
     4,213       (1,594 )     (18,226 )     (15,607 )
 
                        
 
                                
Preferred share dividends
     (5,100 )     ¯       ¯       (5,100 )
 
                        
 
                                
Net loss available to common shareholders
   $ (887 )   $ (1,594 )   $ (18,226 )   $ (20,707 )
 
                        
See accompanying schedules for footnotes and explanation of pro forma adjustments.

 

 

 

Terra Industries Inc.
Notes to Unaudited Pro Forma Adjustments
On September 14, 2007, Terra Industries Inc. (“Terra”) executed with Kemira GrowHow Oyj (“Kemira”), a Joint Venture Contribution Agreement and a Shareholder Agreement, with simultaneous closing thereof, establishing a joint venture company, GrowHow UK Limited. Terra contributed its wholly owned subsidiary Terra Nitrogen (UK) Limited in exchange for a 50% interest in the joint venture company. Kemira contributed its GrowHow Holdings Limited subsidiary in exchange for the remaining 50% interest in the joint venture company.
The unaudited pro forma financial statements are based upon:
  1.   The historical consolidated financial statements of Terra.
 
  2.   The historical financial statements of Terra Nitrogen (UK) Limited.
 
  3.   The historical consolidated financial statements of Kemira GrowHow Holdings Limited.
 
  4.   The pro forma combined statements of operations for GrowHow UK Limited are derived from the historical financial statements of Terra Nitrogen (UK) Limited and Kemira GrowHow Holdings Limited. The pro forma condensed combined statements of operations for GrowHow UK Limited for the twelve months ending December 31, 2006 are:
                         
            Kemira GrowHow        
    Terra Nitrogen     Holdings     GrowHow UK  
(in thousands)   (UK) Limited     Limited     Limited  
 
                        
Revenues
   $ 374,826     $ 264,659     $ 639,485  
 
                        
Cost of sales
     368,522       267,490       636,012  
Selling, general and administrative expense
     9,518       27,340       36,858  
 
                  
Total cost and expenses
     378,040       294,830       672,870  
 
                  
 
                        
Income (loss) from operations
     (3,214 )     (30,171 )     (33,385 )
Interest income
     3,021       13,565       16,586  
Interest expense
     ¯       (19,012 )     (19,012 )
 
                  
Income (loss) before taxes
     (193 )     (35,618 )     (35,811 )
Income tax provision
     1,787       (2,429 )     (642 )
 
                  
Net income (loss)
   $ 1,594     $ (38,047 )   $ (36,453 )
 
                  
The pro forma combined statements of operation do not include amortization of Terra’s excess basis in GrowHow UK Limited, which is approximately $1.9 million per year. Terra’s 50% proportionate share of the pro forma net loss in GrowHow UK Limited was approximately $18.2 million. The net loss of $38 million by Kemira GrowHow Holdings Limited includes a charge of approximately $8.0 million related to fair value adjustments to derivatives that have not been designated for hedge accounting treatment under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities". The $38 million net loss also includes costs associated with operational inefficiencies related to a turnaround that significantly exceeded the anticipated completion schedule.
The pro forma consolidated condensed balance sheet has been adjusted for the assets and liabilities contributed to GrowHow UK Limited by Terra.
The pro forma financial statements do not give effect to any potential costs or savings or other changes that may occur from the transaction and operation of the joint venture.
The unaudited pro forma financial information and accompanying notes are based upon preliminary estimates and assumptions that the management of Terra believes are reasonable and appropriate, however these assumptions may be revised at a later date. The unaudited pro forma consolidated condensed financial information is presented for illustrative purposes only and does not purport to be indicative of the assets, liabilities or operating results that would have actually occurred if the joint venture had been in effect on the date indicated, nor is it necessarily indicative of future operating results of Terra or the joint venture.