Terra Industries Inc.
[logo] 600 Fourth Street
P.O. Box 6000
TERRA Sioux City, IA 51102-6000
Telephone: (712) 277-1340
Telefax: (712) 277-7383
www.terraindustries.com
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NEWS
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For immediate release Contact: Mark Rosenbury
(712) 279-8756
TERRA INDUSTRIES INC. REPORTS THIRD QUARTER RESULTS
Sioux City, Iowa (Oct. 28, 2004)--Terra Industries Inc. (NYSE symbol: TRA)
announced net income of $6.5 million, or $.08 per share, on revenues of $377
million for the third quarter ended Sept. 30, 2004. This compares to the 2003
third quarter net loss of $4.5 million, or $.06 per share on revenues of $325
million.
For the first nine months of 2004 Terra posted net income of $42.5 million, or
$.55 per share, on revenues of $1.2 billion, compared to a net loss of $50.0
million, or $.66 per share, on revenues of $1.0 billion in the comparable 2003
period. The 2004 net income included $11.6 million of earnings attributable to
recovery of product claim costs (representing $17.9 million of operating income
less $6.3 million of related income taxes). The 2003 loss included a $27.0
million charge for "Impairment of long-lived assets" related to the Blytheville
production facility (representing a $53.1 million charge to operating income
less $9.9 million allocated to minority interest and a $16.2 million tax
benefit). Terra permanently closed the Blytheville facility on May 27, 2004.
Cash from operations before working capital changes was $40.8 million in the
2004 third quarter, compared to $21.0 million in the 2003 third quarter. Cash
flow from operations, which consists of "Net cash flows from operating
activities" less "Change in current assets and liabilities", is not a recognized
measure under GAAP, but might be considered a useful measure of cash flows
generated from operations that are available to repay debt and invest in the
business. At Sept. 30, 2004, Terra had cash and short-term investments totaling
$144.6 million.
The Nitrogen Products business segment recorded revenues of $326.0 million and
operating income of $25.2 million for the quarter, compared with revenues of
$277.3 million and operating income of $9.4 million for the 2003 third quarter.
For the 2004 first nine months, Nitrogen Products posted revenues of $1.0
billion and operating income, excluding the $17.9 million recovery of product
claim costs, of $98.7 million, compared with revenues of $0.8 billion and,
excluding the $53.1 million impairment charge, operating income of $1.3 million
in the 2003 first nine months.
The $15.8 million improvement in 2004 third quarter Nitrogen Products results
compared to those of the 2003 third quarter was due to higher product selling
prices, partially offset by higher natural gas costs. Ammonia, nitrogen
solutions, ammonium nitrate and urea selling prices for the 2004 third quarter
were 22, 31, 19 and 21 percent higher, respectively, than 2003 third quarter
prices. These higher prices reflect improved worldwide nitrogen product
supply/demand balances. Nitrogen Products natural gas unit costs for the
quarter, including approximately $4.2 million of cost increases due to forward
purchase contracts, were 21 percent higher than in the 2003 third quarter.
Excluding the 2004 recovery of product claim costs and 2003 impairment charges,
the improvement in 2004 year-to-date Nitrogen Products operating income as
compared to the same 2003 period was due to higher product selling prices
partially offset by higher natural gas costs. Ammonia, nitrogen solutions,
ammonium nitrate and urea selling prices were 17, 27, 30 and 12 percent higher,
respectively. Natural gas unit costs, net of about $8.4 million of cost
reductions realized from forward purchase contracts, increased 12 percent when
compared to the 2003 period.
The Methanol business segment reported 2004 third quarter revenues of $50
million and operating income of $0.6 million, compared with 2003 third quarter
revenues of $47 million and an operating loss of $1.1 million. The profit
increase was due to higher selling prices, partially offset by higher natural
gas costs.
The Methanol segment reported an operating loss for the 2004 first nine months
of $2.3 million, on revenues of $147 million. This compares to operating income
of $3.7 million on revenues of $161 million for the 2003 first nine months. The
decrease was caused by lower selling prices and sales volumes, and higher
natural gas costs.
Terra's forward purchase contracts at Sept. 30, 2004, fixed prices for
approximately 30 percent of its next 12 months' natural gas needs at about $25.6
million below the published forward market prices at the Sept. 30 date.
Said Michael L. Bennett, Terra's President and CEO, "Nitrogen markets remained
strong in the 2004 third quarter; our sales volumes were essentially limited by
our production volumes. The consensus nitrogen industry outlook is for continued
firm demand and favorable selling prices through at least the 2005 first half.
While these market conditions are encouraging, we continue to be concerned about
volatile natural gas markets as we enter the winter heating season.
"In August, Terra agreed to purchase Mississippi Chemical Corporation," Bennett
continued. "We're excited about the strategic opportunities Mississippi Chemical
can provide Terra both in the short- and long-term. We expect the transaction to
close as early as December 2004 and no later than the first quarter of 2005.
"We were also pleased to have completed this month Terra's private offering of
convertible preferred shares," Bennett concluded. "We expect the sale of these
shares to reduce our fixed cash requirements by more than $5 million per year."
Terra management will conduct a conference call to discuss these third quarter
results on Oct. 28, 2004 beginning at 3:00 p.m. (Eastern). 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.
Terra Industries Inc., with 2003 revenues of $1.4 billion, is a leading
international producer of nitrogen products.
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.
# # #
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) 2004 2003 2004 2003
----------- ----------- ------------ -----------
REVENUES
Nitrogen products $ 326,024 $ 277,292 $ 1,006,099 $ 821,577
Methanol 50,123 47,025 146,773 160,992
Other, net of intercompany eliminations 520 525 1,592 1,361
----------- ----------- ------------ -----------
$ 376,667 $ 324,842 $ 1,154,464 $ 983,930
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OPERATING INCOME (LOSS)
Nitrogen products $ 25,184 $ 9,355 $ 98,711 $ (51,757)
Methanol 638 (1,083) (2,332) 3,659
Recovery of product claim costs -- -- 17,903 --
Other expense--net (534) (2,368) (4,123) (5,166)
----------- ----------- ------------ -----------
25,288 5,904 110,159 (53,264)
Interest income 774 48 1,763 429
Interest expense (13,446) (13,829) (40,387) (41,664)
Minority interest (1,651) 234 (8,150) 12,902
Income tax benefit (provision) (4,512) 3,094 (20,837) 31,615
----------- ----------- ------------ -----------
Net income (loss) $ 6,453 $ (4,549) $ 42,548 $ (49,982)
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DILUTED INCOME (LOSS) PER SHARE $ 0.08 $ (0.06) $ 0.55 $ (0.66)
=========== =========== ============ ===========
Basic and diluted weighted average shares outstanding:
Basic 76,166 75,726 75,878 75,602
Diluted 78,210 75,726 77,839 75,602
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,
-------------------------------------------
2004 2003
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ASSETS
Cash and short-term investments $ 144,592 $ 21,278
Accounts receivable 127,882 107,450
Inventories 90,823 87,599
Other current assets 54,294 32,835
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Total current assets 417,591 249,162
Property, plant and equipment, net 665,900 706,610
Deferred plant turnaround costs 25,102 26,029
Other assets 31,585 35,194
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Total assets $ 1,140,178 $ 1,016,995
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LIABILITIES AND STOCKHOLDERS' EQUITY
Debt due within one year $ 161 $ 152
Customer prepayments 21,922 25,663
Other current liabilities 160,623 154,622
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Total current liabilities 182,706 180,437
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Long-term debt and capital lease obligations 402,081 402,242
Deferred income taxes 40,102 27,942
Other liabilities 107,311 108,403
Minority interest 91,446 84,777
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Total liabilities and minority interest 823,646 803,801
Stockholders' Equity 316,532 213,194
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Total liabilities and stockholders' equity $ 1,140,178 $ 1,016,995
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TERRA INDUSTRIES INC.
SUMMARIZED CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Income (Loss) from operations $ 6,453 $ (4,549) $ 42,548 $ (49,982)
Non-cash charges and credits:
Impairment of long-lived assets -- -- -- 53,091
Depreciation and amortization 25,268 26,493 75,752 82,041
Deferred income taxes 7,387 (662) 23,913 (33,806)
Minority interest in earnings (loss) 1,651 (234) 8,150 (12,902)
Recovery of product claim costs -- -- (12,874) --
Change in current assets and liabilities 13,806 24,608 (51,382) (39,267)
----------- ----------- ----------- -----------
Net cash flows from operating activities 54,565 45,656 86,107 (825)
Purchase of property, plant and equipment (4,711) (1,213) (8,136) (7,074)
Plant turnaround costs (14,170) (345) (14,989) (20,666)
Debt borrowings (repayments) (38) (34,786) (117) 1,893
Deferred financing costs -- (443) -- (8,581)
Distributions to minority interests (3,460) -- (5,766) (1,153)
Other 1,132 41 (171) (795)
----------- ----------- ----------- -----------
Increase (Decrease) in cash and
short-term investments 33,318 8,910 56,928 (37,201)
Cash and short-term investments at
beginning of period 110,944 12,368 87,334 58,479
----------- ----------- ----------- -----------
Cash and short-term investments at
end of period $ 144,262 $ 21,278 $ 144,262 $ 21,278
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TERRA INDUSTRIES INC.
SUMMARIZED INFORMATION
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
OTHER FINANCIAL DATA
Cost of sales $ 337,919 $ 308,554 $ 1,032,144 $ 954,659
(includes depreciation and amortization)
Selling, general & administrative expense 13,460 10,384 30,064 29,444
(includes depreciation and amortization)
Impairment of long-lived assets -- -- -- 53,091
VOLUMES AND PRICES
Three Months Ended September 30,
--------------------------------
2004 2003
---- ----
Sales Average Sales Average
Volumes Unit Price(1) Volumes Unit Price(1)
------- ------------- ------- -------------
Ammonia (tons) 324 $ 266 334 $ 219
Nitrogen solutions (tons) 897 128 994 98
Urea (tons) 38 218 73 180
Ammonium nitrate (tons) 342 168 269 141
Methanol (gallons) 68,082 0.72 68,274 0.69
NATURAL GAS COSTS2
North America $5.64 $5.14
United Kingdom $4.41 $2.59
Nine Months Ended September 30,
-------------------------------
2004 2003
---- ----
Sales Average Sales Average
Volumes Unit Price(1) Volumes Unit Price(1)
------- ------------- ------- -------------
Ammonia (tons) 1,077 $ 262 1,012 $ 224
Nitrogen solutions (tons) 2,868 123 2,843 97
Urea (tons) 327 191 397 170
Ammonium nitrate (tons) 766 176 686 135
Methanol (gallons) 206,754 0.69 217,952 0.74
NATURAL GAS COSTS2
North America $5.57 $5.28
United Kingdom $4.33 $2.98
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.