EX-99.3 4 c71693exv99w3.htm EXHIBIT 99.3 Filed by Bowne Pure Compliance
 

PRO FORMA FINANCIAL INFORMATION FOR SIX MONTHS ENDED JUNE 30, 2007
Exhibit 99.3
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 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 and the unaudited financial statements on filed on Form 10-Q.
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 the six months ended June 30, 2007 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 June 30, 2007.
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 Six Months Ended June 30, 2007
(in thousands)
                         
    Terra Industries Inc.     Unaudited     Pro-Forma  
    consolidated     Terra Nitrogen     Terra Industries Inc.  
    as reported     UK Ltd     consolidated  
 
                        
ASSETS
                        
Cash
   $ 286,950     $ (10,507 )   $ 276,443  
Accounts receivable, net
     242,415       (69,144 )     173,271  
Inventories
     169,674       (45,933 )     123,741  
Other current assets
     23,342       (3,268 )     20,074  
 
                  
Total current assets
     722,381       (128,852 )     593,529  
 
                  
Property, plant and equipment, net
     702,106       (222,715 )     479,391  
Equity investments
     165,201       278,898       444,099  
Other assets
     69,378       (22,619 )     46,759  
 
                  
Total assets
   $ 1,659,066     $ (95,288 )   $ 1,563,778  
 
                  
 
                        
LIABILITIES
                        
Accounts payable
   $ 143,904     $ (41,771 )   $ 102,133  
Customer prepayments
     25,166       ¯       25,166  
Other current liabilities
     110,390       (3,805 )     106,585  
 
                  
Total current liabilities
     279,460       (45,576 )     233,884  
 
                  
Long-term debt and capital lease obligations
     330,000       ¯       330,000  
Pension liabilities
     119,407       (67,266 )     52,141  
Other liabilities
     157,801       (25,718 )     132,083  
Minority interest
     105,549       ¯       105,549  
 
                  
Total liabilities and minority interest
     992,217       (138,560 )     853,657  
 
                  
Total preferred stock and stockholders’ equity
     666,849       43,272       710,121  
 
                  
Total liabilities and stockholders’ equity
   $ 1,659,066     $ (95,288 )   $ 1,563,778  
 
                  
See accompanying schedules for footnotes and explanation of pro forma adjustments.

 

 

 

Terra Industries Inc.
Unaudited Pro Forma Consolidated Condensed Statement of Operations
for the Six Months Ended June 30, 2007
(in thousands)
                                 
    Terra Industries Inc.     Unaudited     Pro Forma     Pro-Forma  
    consolidated as     Terra Nitrogen     GrowHow UK     Terra Industries Inc.  
    reported     UK Ltd     Limited     consolidated  
 
                                
REVENUES
                                
Product revenues
   $ 1,190,794     $ (211,017 )   $ —     $ 979,777  
Other revenues
     5,307       ¯       ¯       5,307  
 
                        
Total revenues
     1,196,101       (211,017 )     ¯       985,084  
 
                                
COSTS AND EXPENSES
                                
Cost of sales
     962,219       (187,385 )     ¯       774,834  
Selling, general and administrative expense
     45,251       (4,826 )     ¯       40,425  
Equity in earnings of unconsolidated affiliates
     (4,813 )     ¯       ¯       (4,813 )
 
                        
Total cost and expenses
     1,002,657       (192,211 )     ¯       810,446  
 
                        
Income (loss) from operations
     193,444       (18,806 )     ¯       174,638  
Equity earnings of unconsolidated affiliates
     ¯       ¯       720       720  
Interest income
     6,369       (995 )     ¯       5,374  
Interest expense
     (15,780 )     ¯       ¯       (15,780 )
Loss on early retirement of debt
     (38,836 )     ¯       ¯       (38,836 )
 
                        
Income before income taxes and minority interest
     145,197       (19,801 )     720       126,116  
 
                        
 
                                
Income taxes provision
     (44,757 )     5,623       ¯       (39,134 )
Minority interest
     (22,576 )     ¯       ¯       (22,576 )
 
                        
Net income
   $ 77,864     $ (14,178 )     720     $ 64,406  
 
                        
 
                                
Preferred share dividends
     (2,550 )     ¯       ¯       (2,550 )
 
                        
 
                                
Net loss available to common shareholders
   $ 75,314     $ (14,178 )   $ 720     $ 61,856  
 
                        
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 six months ending June 30, 2007 are:
                         
            Kemira GrowHow        
    Terra Nitrogen     Holdings     GrowHow UK  
(in thousands)   (UK) Limited     Limited     Limited  
 
                        
Revenues
   $ 211,017     $ 168,003     $ 379,020  
 
                        
Cost of sales
     187,385       167,737       355,122  
Selling, general and administrative expense
     4,826       10,839       15,665  
 
                  
Total cost and expenses
     192,211       178,576       370,787  
 
                  
 
                        
Income (loss) from operations
     18,806       (10,573 )     8,233  
Interest income
     995       8,329       9,324  
Interest expense
     ¯       (9,915 )     (9,915 )
 
                  
Income (loss) before taxes
     19,801       (12,159 )     7,642  
Income tax provision
     (5,623 )     (479 )     (6,102 )
 
                  
Net income (loss)
   $ 14,178     $ (12,638 )   $ 1,540  
 
                  
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 income in GrowHow UK Limited was $0.7 million. The net loss of $12.6 million by Kemira GrowHow Holdings Limited includes a charge of approximately $15.0 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 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.