Exhibit 99.1
Terra Industries Inc. | ||
600 Fourth Street | ||
P.O. Box 6000 | ||
Sioux City, IA 51102-6000 | ||
Telephone: (712) 277-1340 | ||
Telefax: (712) 277-7383 | ||
www.terraindustries.com |
NEWS
For immediate release | Contact: Joe A. Ewing | |
(712) 277-7305 | ||
jewing@terraindustries.com |
Terra Industries Inc. reports second quarter results
Q2/2005 operating income up 80 percent over 2004
Summary
Q2/05 vs. Q2/04 results:
• | Revenues up $73 million. |
• | Selling prices for nitrogen solutions up 29 percent. |
• | Cost of sales up 10 percent. |
• | North American natural gas unit cost up 16 percent; U.K. unit cost up 54 percent. |
• | Income from operations up $30.5 million. |
Recent highlights:
• | In 2005 first half, prepaid $125 million of debt. |
• | On April 15, received $22.5 million cash distribution from Trinidad joint venture. |
Third quarter expectations:
• | Strong product demand. |
• | Higher nitrogen products selling prices than realized in Q3/04. |
• | Higher feedstock costs. |
Sioux City, Iowa (July 28, 2005)—Terra Industries Inc. (NYSE: TRA) announced today income available to common shareholders for the quarter ended June 30, 2005, of $20.4 million, or $.20 per share, on revenues of $490 million, compared to net income of $17.9 million, or $.23 per share, on revenues of $417 million for the 2004 second quarter. Net income for the 2005 second quarter was reduced by $10.6 million, or $.10 per share, for the net of a $16.4 million loss on early retirement of debt and a $4.0 million gain on revaluation of warrants.
Operating income for the 2005 second quarter was $69.8 million compared to $39.3 million in the 2004 second quarter. The 2004 second quarter included a $2.4 million credit for the recovery of product claim costs. The improvement was due to higher nitrogen products selling prices and the contributions from acquired Mississippi Chemical operations, partially offset by higher North American and U.K. natural gas costs.
For the 2005 first half, Terra posted income available to common shareholders of $23.6 million, or $.24 per share, on revenues of $940 million, compared to net income of $36.1 million, or $.46 per share, on revenues of $778 million in the 2004 first half. The 2005 first half net income was reduced by a net of $15.6 million, or $.15 per share, for a $27.2 million loss on early retirement of debt and an $8.9 million gain on revaluation of warrants. The 2004 first half net income included $12.2 million, or $.16 per share, from the $17.9 million recovery of product claim costs.
Analysis of second quarter results
The $73 million increase in revenues from the 2004 to 2005 second quarter was due mainly to product sales by acquired Mississippi Chemical operations and higher selling prices, offset by lower sales volumes related to Terra’s 2004 closing its Blytheville, Ark. facility and mothballing its Beaumont, Texas facility. Terra realized average selling prices for ammonia, nitrogen solutions, ammonium nitrate and urea that were 19, 29, 16 and 42 percent higher, respectively, in the 2005 second quarter than in the 2004 second quarter.
Cost of sales for the 2005 second quarter was $38 million, or 10 percent, higher than in 2004 because of higher North American and United Kingdom unit natural gas costs and higher overall sales volumes. Terra’s forward purchase contracts reduced its 2005 second quarter natural gas costs by $2.4 million.
Equity earnings of $4.4 million for the quarter were primarily from Terra’s 50 percent interest in Point Lisas Nitrogen Limited (PLNL) Trinidad ammonia plant. Terra’s share of sales by affiliates accounted for under the equity method was $18.4 million.
Selling, general and administrative expense for the 2005 second quarter was $6.8 million higher than for the 2004 second quarter. Most of the increase was due to incentive accruals associated with higher earnings, recurring expenses related to the Mississippi Chemical acquisition and professional fees related to a possible new Trinidad joint venture.
The $16.4 million 2005 loss on early retirement of debt related to the June 3, 2005, $75 million prepayment of the $125 million term loan assumed with the Mississippi Chemical acquisition. The $4.0 million gain on revaluation of warrants represents the decline in the estimated fair value of outstanding warrants, which allow the holders to purchase until Dec. 21, 2009, 4 million Terra common shares at $5.48 per share. Terra’s shareholders authorized on May 3, 2005, the issuance of common shares in the event the holders exercise the warrants. Consequently, no further revaluation gains or losses will be recorded in Terra’s results of operations.
Analysis of first half results
The $162 million increase in revenues from the 2004 to 2005 first half were generally caused by the same factors as the year-over-year second quarter increase in revenues. Terra realized average selling prices for ammonia, nitrogen solutions, ammonium nitrate and urea that were 10, 24, 7 and 34 percent higher, respectively, in the 2005 first half than in the 2004 first half.
Cost of sales for the 2005 first half was $128 million, or 18 percent, higher than in 2004 because of higher North American and United Kingdom unit natural gas costs and higher overall sales volumes. Terra’s forward purchase contracts increased its 2005 first half natural gas costs by $8.3 million.
Equity earnings of $9.4 million for the 2005 first half were primarily from Terra’s 50 percent interest in PLNL. Equity earnings were reduced by $1.5 million for market value in excess of cost of acquired PLNL inventory that was sold during the half. Terra’s share of sales by affiliates accounted for under the equity method was $40.0 million.
Selling, general and administrative expense for the 2005 first half was $9.9 million higher than for the 2004 first half. In addition to second quarter expense increases, transition expenses related to the Mississippi Chemical acquisition were the primary cause of the expense increase.
The $27.2 million 2005 loss on early retirement of debt related to prepayments of the $125 million term loan assumed with the Mississippi Chemical acquisition. The $8.9 million gain on revaluation of warrants represents the decline in the estimated fair value of outstanding warrants.
Forward natural gas position
Terra’s forward purchase contracts at June 30, 2005, fixed prices for 19.5 percent of its next 12 months’ natural gas needs at about $8 million below the published forward market prices at that date.
CEO’s remarks
“We are very pleased that this year’s second quarter income from operations was, in spite of high natural gas costs in both North America and the U.K., nearly 80% higher than 2004 second quarter results,” said Michael L. Bennett, Terra’s President and CEO. “In addition to strong nitrogen markets, Terra’s smooth integration of the acquired Mississippi Chemical operations and good manufacturing performance also contributed to this profit improvement.
“The repayment of $125 million term debt associated with the MCC acquisition is an important achievement for us,” Bennett continued. “Current demand for our key products—UAN in North America and ammonium nitrate in both North America and the U.K.—continues to be strong and selling prices are higher versus a year ago. Barring natural gas price spikes or unforeseen production interruptions, we expect Terra’s 2005 third quarter operating results to be improved over 2004 third quarter actual results.”
Conference call details
Terra management will conduct a conference call to discuss these second quarter results on July 28, 2005 beginning at 3:00 EDT. A live webcast of the conference call will be available from Terra’s web site at www.terraindustries.com, and will be archived for playback for three months.
About Terra
Terra Industries Inc., with 2004 pro forma revenues of $1.9 billion including the Mississippi Chemical acquisition, is a leading international producer of nitrogen products.
Forward-looking statements
This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.’s most recent report on Form 10-K and Terra Industries Inc.’s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
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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 June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands except per-unit amounts)
| 2005 | 2004 | 2005 | 2004 | ||||||||||||
Revenues | ||||||||||||||||
Nitrogen products | $ | 479,516 | $ | 362,518 | $ | 918,838 | $ | 680,075 | ||||||||
Methanol | 9,866 | 53,746 | 19,953 | 96,650 | ||||||||||||
Other, net of intercompany eliminations | 611 | 504 | 1,214 | 1,072 | ||||||||||||
$ | 489,993 | $ | 416,768 | $ | 940,005 | $ | 777,797 | |||||||||
Costs and expenses | ||||||||||||||||
Cost of sales | 408,587 | 370,578 | 822,330 | 694,225 | ||||||||||||
Equity earnings | (4,401 | ) | — | (9,407 | ) | — | ||||||||||
Selling, general and administrative | 16,046 | 9,295 | 26,499 | 16,604 | ||||||||||||
Recovery of product claim costs | — | (2,389 | ) | — | (17,903 | ) | ||||||||||
Income from operations | 69,761 | 39,284 | 100,583 | 84,871 | ||||||||||||
Interest income | 1,667 | 612 | 3,421 | 989 | ||||||||||||
Interest expense | (14,130 | ) | (13,440 | ) | (29,983 | ) | (26,941 | ) | ||||||||
Loss on early retirement of debt | (16,389 | ) | — | (27,193 | ) | — | ||||||||||
Gain on revaluation of warrants | 3,960 | — | 8,860 | — | ||||||||||||
Income before income taxes and minority interest | 44,869 | 26,456 | 55,688 | 58,919 | ||||||||||||
Income tax provision | (15,975 | ) | (5,025 | ) | (18,160 | ) | (16,325 | ) | ||||||||
Minority interest | (7,192 | ) | (3,566 | ) | (11,395 | ) | (6,499 | ) | ||||||||
Net income | 21,702 | 17,865 | 26,133 | 36,095 | ||||||||||||
Preferred stock dividends | (1,275 | ) | — | (2,550 | ) | — | ||||||||||
Income available to common shareholders | $ | 20,427 | $ | 17,865 | $ | 23,583 | $ | 36,095 | ||||||||
Income per common share | ||||||||||||||||
Basic | $ | 0.22 | $ | 0.24 | $ | 0.26 | $ | 0.48 | ||||||||
Diluted | $ | 0.20 | $ | 0.23 | $ | 0.24 | $ | 0.46 | ||||||||
Basic and diluted weighted average shares outstanding: | ||||||||||||||||
Basic | 91,439 | 75,898 | 91,415 | 75,769 | ||||||||||||
Diluted | 107,123 | 77,879 | 106,780 | 77,663 |
Because of the seasonal nature and effects of weather-related conditions in several of Terra’s marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.
Terra Industries Inc.
Summarized Financial Position
(in thousands)
(unaudited)
June 30, | ||||||
2005 | 2004 | |||||
Assets | ||||||
Cash and short-term investments | $ | 92,451 | $ | 110,944 | ||
Accounts receivable | 161,600 | 129,414 | ||||
Inventories | 150,461 | 90,015 | ||||
Other current assets | 31,195 | 36,739 | ||||
Total current assets | 435,707 | 367,112 | ||||
Property, plant and equipment, net | 779,951 | 677,268 | ||||
Deferred plant turnaround costs | 30,491 | 22,114 | ||||
Equity investments | 187,897 | — | ||||
Other assets | 22,031 | 25,331 | ||||
Total assets | $ | 1,456,077 | $ | 1,091,825 | ||
Liabilities and Stockholders’ Equity | ||||||
Debt due within one year | $ | 113 | $ | 157 | ||
Customer prepayments | 6,223 | 2,099 | ||||
Other current liabilities | 146,651 | 147,638 | ||||
Total current liabilities | 152,987 | 149,894 | ||||
Long-term debt and capital lease obligations | 331,308 | 402,123 | ||||
Deferred income taxes | 74,036 | 31,436 | ||||
Other liabilities | 165,123 | 116,235 | ||||
Minority interest | 98,059 | 93,255 | ||||
Total liabilities and minority interest | 821,513 | 792,943 | ||||
Series A and B preferred shares | 132,519 | — | ||||
Stockholders’ equity | 502,045 | 298,882 | ||||
Total liabilities and stockholders’ equity | $ | 1,456,077 | $ | 1,091,825 | ||
Terra Industries Inc.
Summarized Cash Flows
(in thousands)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Income from operations | $ | 21,702 | $ | 17,865 | $ | 26,133 | $ | 36,095 | ||||||||
Non-cash charges and credits: | ||||||||||||||||
Depreciation and amortization | 30,955 | 24,906 | 60,131 | 50,484 | ||||||||||||
Deferred income taxes | 15,756 | 5,203 | 22,833 | 16,526 | ||||||||||||
Equity in net income of affiliates | (4,400 | ) | — | (9,407 | ) | — | ||||||||||
Loss on early retirement of debt | 17,775 | — | 27,193 | — | ||||||||||||
Other | 4,148 | 3,566 | 5,000 | 6,499 | ||||||||||||
Recovery of product claim costs | — | — | — | (12,874 | ) | |||||||||||
Change in assets and liabilities | (133,693 | ) | (95,806 | ) | (141,115 | ) | (65,188 | ) | ||||||||
Net cash flows from operating activities | (47,757 | ) | (44,266 | ) | (9,232 | ) | 31,542 | |||||||||
Purchase of property, plant and equipment | (3,793 | ) | (2,350 | ) | (10,213 | ) | (3,425 | ) | ||||||||
Plant turnaround costs | (343 | ) | (669 | ) | (7,375 | ) | (819 | ) | ||||||||
Return of investment of unconsolidated affiliates | 23,625 | — | 23,625 | — | ||||||||||||
Debt borrowings (repayments) | (75,042 | ) | (38 | ) | (125,084 | ) | (79 | ) | ||||||||
Distributions to minority interests | (2,537 | ) | (1,153 | ) | (5,535 | ) | (2,306 | ) | ||||||||
Stock issuance | 12 | 133 | 114 | 269 | ||||||||||||
Other | (6,715 | ) | (805 | ) | (7,647 | ) | (1,572 | ) | ||||||||
Increase (Decrease) in cash and short-term investments | (112,550 | ) | (49,148 | ) | (141,347 | ) | 23,610 | |||||||||
Cash and short-term investments at beginning of period | 205,001 | 160,092 | 233,798 | 87,334 | ||||||||||||
Cash and short-term investments at end of period | $ | 92,451 | $ | 110,944 | $ | 92,451 | $ | 110,944 | ||||||||
Terra Industries Inc.
Summarized Information
(in thousands)
Volumes and Prices
Three Months Ended June 30, | ||||||||||
2005 | 2004 | |||||||||
Sales Volumes | Average Unit Price1 | Sales Volumes | Average Unit Price1 | |||||||
Ammonia (tons) | 527 | $ | 294 | 452 | $ | 248 | ||||
Nitrogen solutions (tons) | 1,097 | 162 | 1,108 | 126 | ||||||
Urea (tons) | 40 | 259 | 135 | 183 | ||||||
Ammonium nitrate (tons) | 333 | 201 | 176 | 173 | ||||||
Methanol (gallons) | 9,772 | 0.86 | 74,766 | 0.70 |
Natural gas costs2
North America | $ | 6.55 | $ | 5.67 | ||
United Kingdom | $ | 5.87 | $ | 3.81 |
Six Months Ended June 30, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
Sales Volumes | Average Unit Price1 | Sales Volumes | Average Unit Price1 | |||||||||||||
Ammonia (tons) | 1,018 | $ | 283 | 763 | $ | 257 | ||||||||||
Nitrogen solutions (tons) | 2,185 | 149 | 1,983 | 120 | ||||||||||||
Urea (tons) | 86 | 249 | 292 | 186 | ||||||||||||
Ammonium nitrate (tons) | 738 | 194 | 424 | 182 | ||||||||||||
Methanol (gallons) | 17,036 | 0.85 | 138,672 | 0.67 | ||||||||||||
Natural gas costs2 | ||||||||||||||||
North America | $ | 6.58 | $ | 5.52 | ||||||||||||
United Kingdom | $ | 6.05 | $ | 4.29 |
1 | After deducting outbound freight costs |
2 | Per MMBtu. Includes all transportation and other logistical costs and any gains or losses on financial derivatives related to natural gas purchases. |
Because of the seasonal nature and effects of weather-related conditions in several of its marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.