EX-99.1 2 c76272exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
Exhibit 99.1
(LETTERHEAD)
Terra Industries Inc. Exhibit 99.1 600 Fourth Street P.O. Box 6000 Sioux City, IA 51102-6000 Telephone: (712) 277-1340 Fax: (712) 277-7383 www.terraindustries.com NEWS For immediate release Contact: Joe A. Ewing (712) 277-7305 jewing@terraindustries.com
Terra Industries Inc. triples quarterly earnings, declares dividend
SUMMARY
Q3/08 vs. Q3/07:
•   Operating income up 87 million, or 71%.
 
•   North American revenues up $318 million, or 67%.
 
•   Ammonia, UAN and AN selling prices up 94%, 47% and 56%.
Outlook:
•   Softer global nitrogen prices accompanied by a decline in energy prices.
 
•   Economic slowdown could affect industrial nitrogen demand.
 
•   Grain inventories remain near historical lows, supporting strong demand for nitrogen fertilizers.
Sioux City, Iowa (October 23, 2008)—Terra Industries Inc. (NYSE: TRA) announced today income available to common shareholders for the 2008 third quarter of $164.9 million ($1.64 per diluted share), up from $53.1 million ($.51 per diluted share) for the same period in 2007. For the 2008 first nine months, Terra reported income available to common shareholders of $467.2 million ($4.54 per diluted share), up from $128.4 million ($1.24 per diluted share) in the 2007 first nine months.
Terra also declared a dividend of $.10 per common share, payable Dec. 12, 2008, to holders of record as of Nov. 24, 2008.
Analysis of third quarter results
Revenues for the 2008 third quarter totaled $790.2 million, compared to $580.5 million for the 2007 third quarter. The 2007 revenues included $108.1 million from Terra’s UK operations that were later contributed to a joint venture. Excluding the 2007 UK results, revenues increased $317.8 million from the 2007 to the 2008 third quarter, primarily due to higher nitrogen products selling prices. Ammonia, urea ammonium nitrate (UAN) and ammonium nitrate (AN) selling prices increased 94, 47 and 56 percent, respectively, over those of the same period last year. The improved selling prices reflect strong nitrogen products demand resulting from low grain inventories and strong commodity grain prices. North American sales volumes for UAN and AN increased by 8 and 30 percent, respectively, while ammonia sales volumes decreased 4 percent from those of the same period last year. The significantly higher AN sales volumes were due to the 2007 third quarter volumes having been reduced when the Yazoo City manufacturing facility undertook an extended nitric acid turnaround.
During the third quarter Terra restarted its Donaldsonville, Louisiana ammonia plant. Due to mechanical and weather-related issues the plant operated intermittently in August and through mid-September. As a result, the plant incurred start-up costs of approximately $7.5 million ($5.5 million or $0.05 per share, after tax). These costs are included in cost of sales for the 2008 third quarter. The plant has operated well since late September.
Third quarter equity earnings of affiliates of $42.1 million reflect Terra’s interest in earnings from the GrowHow UK joint venture.
Earnings per share for the third quarter were reduced by $0.05 per share as a result of the $5.2 million inducement payments associated with the conversion of preferred shares.

 

 

 

Analysis of year-to-date results
Revenues for the 2008 first nine months totaled $2.2 billion compared to $1.8 billion for the 2007 period. The 2007 revenues included $319.1 million from Terra’s UK operations that were later contributed to a joint venture. Excluding the 2007 UK results, revenues increased $753.2 million from the 2007 to the 2008 first nine months, mostly due to higher nitrogen products selling prices. Ammonia, UAN and AN selling prices increased 59, 50 and 40 percent, respectively, over those of the same period last year. Selling prices for the first nine months improved for substantially the same reasons as they did for the third quarter. North American sales volumes for ammonia and AN increased by 5 and 8 percent respectively, from those of the same period last year, while sales volumes for UAN remained stable. Sales volumes for the first nine months were generally affected by the same factors affecting those of the third quarter.
Year-to-date equity earnings of affiliates of $89.0 million reflect Terra’s interest in earnings from the GrowHow UK joint venture.
Forward natural gas position
Terra’s forward purchase contracts at Sept. 30, 2008, fixed prices for about 36 percent of its next 12 months’ natural gas needs at about $188 million above the published forward market prices at that date. These forward positions hedge production costs primarily associated with product that Terra has sold and plans to ship in the 2008 fourth quarter and 2009 first quarter.
Cash balances, customer prepayments and share buybacks
Cash balances, including about $195 million in customer prepayments, totaled $681 million at Sept. 30, 2008. Terra expects to ship products under customer prepay agreements during the 2008 fourth quarter and 2009 first quarter.
During the 2008 third quarter, Terra repurchased approximately 2.4 million of its common shares under its share buyback program at an average price of $41.69 per share and a total cost of $100 million. The program authorizes Terra to repurchase approximately 12.8 million shares (14 percent of its current outstanding shares) and extends through June 30, 2010. At Sept. 30, 2008, approximately 10.3 million shares remained available for repurchase under the program.
CEO’s remarks
Said Terra President and CEO Mike Bennett, “We are pleased with Terra’s third quarter performance. We also expect strong fourth quarter performance, in part because we have secured margins on substantial volumes of forward sales against which we have locked in natural gas purchases.”
Bennett continued, “As we look ahead to 2009, industry projections indicate an increase in nitrogen fertilizer demand driven by increased demand for grain. It remains to be seen what effect the broad economic slowdown will have on our industrial customers. To date, credit issues have not had a notable impact on our customer base.
“While current global urea prices are sharply lower than they were in the summer, domestic natural gas prices have also dropped dramatically, continuing to support favorable projected margins.”
Conference call details
Terra management will conduct a conference call to discuss these third quarter results this afternoon at 3:00 ET. A live webcast of the conference call will be available from Terra’s Web site at www.terraindustries.com, and will be archived for playback for three months.
About Terra
Terra Industries Inc., with 2007 revenues of $2.4 billion, is a leading international producer of nitrogen products.
Forward-looking statements
Certain statements in this new release may constitute “forward-looking” statements within the meaning of the Private Litigation Reform Act of 1995. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and Terra undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions are used to identify these forward-looking statements. These include, among others, statements relating to:
  •   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),
 
  •   product mix,
 
  •   the seasonality of demand patterns,
 
  •   weather conditions,
 
  •   environmental and other government regulation, and
 
  •   agricultural regulations.
Additional information as to these factors can be found in Terra’s 2007 Annual Report/10-K, in the sections entitled “Business,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Notes to the consolidated financial statements.
# # #
Note: Terra Industries’ news announcements are also available on its Web site, www.terraindustries.com.
(Tables follow.)

 

 

 

Terra Industries Inc.
Summarized Results of Operations
(unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
(in thousands except per-unit amounts)   2008     2007     2008     2007  
 
Revenues
                                
Product revenues
   $ 788,272     $ 577,916     $ 2,198,398     $ 1,768,377  
Other
     1,942       2,560       9,617       5,558  
 
                        
Total revenues
   $ 790,214     $ 580,476     $ 2,208,015     $ 1,773,935  
 
                                
Costs and expenses
                                
Cost of sales
     578,310       441,863       1,532,369       1,396,480  
Selling, general and administrative costs
     18,301       21,936       58,238       67,187  
Equity earnings of unconsolidated affiliates
     (15,857 )     (5,566 )     (45,665 )     (10,379 )
 
                        
 
                                
Total costs and expenses
     580,754       458,233       1,544,942       1,453,288  
 
                                
Income from operations
     209,460       122,243       663,073       320,647  
 
                                
Interest income
     5,409       4,709       19,330       11,078  
Interest expense
     (6,773 )     (6,905 )     (20,587 )     (22,685 )
Loss on early retirement of debt
     —       —       —       (38,836 )
 
                        
 
                                
Income before income taxes and minority interest
     208,096       120,047       661,816       270,204  
 
                                
Income tax provision
     (63,169 )     (40,654 )     (229,742 )     (87,390 )
Minority interest
     (15,748 )     (11,144 )     (52,369 )     (33,720 )
Equity earnings of unconsolidated affiliates
     42,091       2,202       88,986       2,202  
 
                        
 
                                
Income from continuing operations
     171,270       70,451       468,691       151,296  
 
                                
Income (loss) from discontinued operations net of tax
     141       (16,071 )     7,612       (19,052 )
 
                        
 
                                
Net income
     171,411       54,380       476,303       132,244  
Inducement of preferred stock
     (5,248 )     —       (5,248 )     —  
Preferred stock dividends
     (1,275 )     (1,275 )     (3,825 )     (3,825 )
 
                        
 
                                
Income available to common shareholders
   $ 164,888     $ 53,105     $ 467,230     $ 128,419  
 
                        
 
                                
Income per common share:
                                
Basic—continuing operations
   $ 1.75     $ 0.77     $ 5.01     $ 1.62  
Basic—discontinued operations
     —       (0.18 )     0.08       (0.21 )
 
                        
Net income
   $ 1.75     $ 0.59     $ 5.09     $ 1.41  
 
                        
 
                                
Diluted—continuing operations
   $ 1.64     $ 0.66     $ 4.47     $ 1.41  
Diluted—discontinued operations
     —       (0.15 )     0.07       (0.17 )
 
                        
Net income
   $ 1.64     $ 0.51     $ 4.54     $ 1.24  
 
                        
 
                                
Weighted average shares outstanding:
                                
Basic
     94,259       90,092       91,821       91,143  
Diluted
     104,605       105,946       104,851       106,899  
Because of the seasonal nature and effects of weather-related conditions in several of Terra’s marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.

 

 

 

Terra Industries Inc.
Summarized Financial Position
(in thousands)
(unaudited)
                 
    September 30,  
    2008     2007  
Assets
                
Cash and cash equivalents
   $ 680,666     $ 360,478  
Accounts receivable, net
     235,587       159,660  
Inventories
     175,920       123,950  
Margin deposits with derivative counterparties
     132,058       538  
Other current assets
     62,193       12,503  
Current assets held for sale—discontinued operations
     45,607       2,475  
 
            
Total current assets
     1,332,031       659,604  
 
                
Property, plant and equipment, net
     407,037       392,891  
Equity method investments
     382,606       369,605  
Deferred plant turnaround costs—net
     29,303       35,029  
Other assets
     31,965       20,335  
Noncurrent assets held for sale—discontinued operations
     —       43,029  
 
            
Total assets
   $ 2,182,942     $ 1,520,493  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Accounts payable
   $ 124,138     $ 80,293  
Customer prepayments
     195,039       85,313  
Derivative hedge liabilities
     218,652       26,167  
Accrued and other current liabilities
     113,042       65,354  
Current liabilities held for sale—discontinued operations
     2,749       4,833  
 
            
Total current liabilities
     653,620       261,960  
 
            
 
                
Long-term debt
     330,000       330,000  
Deferred taxes
     53,135       49,691  
Pension liabilities
     10,018       38,041  
Other liabilities
     78,779       88,342  
Minority interest
     105,456       102,854  
Noncurrent liabilities held for sale—discontinued operations
     —       1,849  
 
            
Total liabilities and minority interest
     1,231,008       872,737  
 
                
Series A preferred shares
     2,027       115,800  
 
                
Stockholders’ equity
     949,907       531,956  
 
            
Total liabilities and stockholders’ equity
   $ 2,182,942     $ 1,520,493  
 
            

 

 

 

Terra Industries Inc.
Summarized Cash Flows
(in thousands)
(unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2008     2007     2008     2007  
 
                        
Net income
   $ 171,411     $ 54,381     $ 476,303     $ 132,244  
Income from (loss on) discontinued operations
     141       (16,071 )     7,612       (19,052 )
 
                        
Income from continuing operations
     171,270       70,452       468,691       151,296  
 
                                
Non-cash charges and credits:
                                
Depreciation of property, plant and equipment and amortization of deferred plant turnaround costs
     18,957       26,697       58,406       75,025  
Loss on sale of property, plant and equipment
     1,508       —       2,235       —  
Deferred income taxes
     (100,712 )     24,669       (51,772 )     61,629  
Minority interest in earnings
     15,748       11,144       52,369       33,720  
Distributions in excess of (less than) equity earnings
     (1,357 )     8,934       2,524       5,121  
Equity earnings GrowHow UK Limited
     (42,091 )     (2,202 )     (88,986 )     (2,202 )
Non-cash loss (gain) on derivatives
     3,344       (448 )     (1,610 )     176  
Share-based compensation
     561       3,157       10,333       16,838  
Amortization of intangible and other assets
     2,123       2,170       6,193       6,655  
Non-cash loss on early retirement of debt
     —       —       —       4,662  
 
                                
Change in operating assets and liabilities:
                                
Accounts receivable
     36       11,357       (65,639 )     (29,137 )
Inventories
     (5,743 )     1,281       (42,221 )     49,473  
Accounts payable and customer prepayments
     80,845       40,536       (90,559 )     (25,023 )
Margins deposits with derivative counterparties
     (132,020 )     6,362       (131,420 )     (501 )
Other assets and liabilities, net
     82,645       (9,263 )     67,471       19,433  
 
                        
Net cash flows from operating activities—continuing operations
     95,114       194,846       196,015       367,165  
Net cash flows from operating activities—discontinued operations
     (612 )     4,050       9,439       14,572  
 
                        
Net cash flows from operating activities
     94,502       198,896       205,454       381,737  
 
                        
 
                                
Investing Activities
                                
Capital expenditures and plant turnaround expenditures
     (34,207 )     (25,293 )     (70,123 )     (59,109 )
Cash retained by GrowHow UK Limited
     —       (17,249 )     —       (17,249 )
Proceeds from sale of property, plant and equipment
     28       —       1,660       —  
Distributions received from unconsolidated affiliates
     —       —       7,196       —  
Contribution settlement received from GrowHow UK Limited
     (628 )     —       27,427       —  
 
                        
Net cash flow from investing activities
     (34,807 )     (42,542 )     (33,840 )     (76,358 )
 
                        
 
                                
Financing Activities
                                
Issuance of debt
     —       —       —       330,000  
Payments under borrowing arrangements
     —       —       —       (331,300 )
Payments for debt issuance costs
     —       (5 )     —       (6,403 )
Preferred share dividends paid
     (1,275 )     (1,275 )     (3,825 )     (3,825 )
Inducement payment to preferred shareholders
     (5,248 )     —       (5,248 )     —  
Common stock dividends paid
     (9,097 )     —       (18,299 )     —  
Common stock issuances and vestings
     (2,997 )     (317 )     (9,839 )     89  
Excess tax benefits from equity compensation plans
     4,305       —       12,122       —  
Payments under share repurchase program
     (100,000 )     (68,215 )     (107,500 )     (87,426 )
Distributions to minority interests
     (16,743 )     (13,840 )     (56,642 )     (25,554 )
 
                        
Net cash flows from financing activities
     (131,055 )     (83,652 )     (189,231 )     (124,419 )
 
                        
Effect of exchange rate changes on cash
     18       826       45       501  
 
                        
Increase (decrease) to cash and cash equivalents
     (71,342 )     73,528       (17,572 )     181,461  
Cash and cash equivalents at beginning of period
     752,008       286,950       698,238       179,017  
 
                        
Cash and cash equivalents at end of period
     680,666       360,478       680,666       360,478  
 
                        

 

 

 

Terra Industries Inc.
Summarized Information
(volumes in thousands)
North America Volumes and Prices
Note: All UAN data for 2008 and 2007 are expressed on a 32% nitrogen basis.
                                                 
    Three Months Ended September 30,  
    2008     2007  
    Sales             Average     Sales             Average  
    Volumes             Unit Price1     Volumes             Unit Price1  
Ammonia (tons) 2
     392             $ 598       410               308  
UAN (tons)
     1,055               349       974               238  
Urea (tons)
     21               432       24               298  
Ammonium nitrate (tons) 2
     172               388       132               248  
Methanol (gallons)
     8,658               1.28       6,238               0.85  
 
Natural gas cost3
           $ 9.94                     $ 7.12          
                                                 
    Nine Months Ended September 30,  
    2008     2007  
    Sales             Average     Sales             Average  
    Volumes             Unit Price1     Volumes             Unit Price1  
Ammonia (tons) 2
     1,303             $ 532       1,245             $ 334  
UAN (tons)
     3,072               326       3,060               218  
Urea (tons)
     75               422       88               305  
Ammonium nitrate (tons) 2
     539               339       499               243  
Methanol (gallons)
     23,244               1.42       24,789               1.05  
 
Natural gas cost3
           $ 8.74                     $ 6.95          
     
1   After deducting outbound freight costs.
 
2   2007 ammonia and AN sales volumes and prices have been adjusted to exclude Terra’s UK operations for accurate comparison to 2008 volumes and prices.
 
3   Per MMBtu. Includes all transportation and other logistical costs and any gains or losses on financial derivatives related to North American natural gas purchases.
Because of the seasonal nature and effects of weather-related conditions in several of its marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.