SIOUX CITY, Iowa, July 19 /PRNewswire/ -- In a decision released July 13,
2001, a UK subsidiary of Terra Industries Inc. (NYSE: TRA) was found liable
for costs associated with the recall of carbonated beverages, plus interest
and attorney fees. The court's decision relates to claims by a single party;
however there are additional claims yet to be resolved. As a result of the
court's ruling, Terra will record a $14 million charge ($9.8 million after
income tax provisions, or $0.13 per share) against second quarter results to
provide for possible claim costs.
Terra believes that ultimate responsibility for payment of the recall cost
claims lies with its insurance carrier and with the previous owner of Terra's
UK business against whom Terra has filed a warranty claim. Terra will
vigorously pursue recoveries against these parties.
This charge, together with $4 million in second quarter costs related to
an extended mechanical outage at Terra's Canadian facility, will produce
lower-than-expected second quarter 2001 net income. Insurance proceeds for
business interruption claims associated with the Canadian outage will be
reported as income when received.
Last January, Terra Industries announced that it expected to meet its
credit arrangement's covenant that earnings before interest, taxes,
depreciation and amortization (EBITDA) for 2001 must equal or exceed
$90 million. Based on the second quarter charges for product recall claims
and the Courtright outage, as well as much weaker-than-expected fertilizer
demand during the 2001 planting season, Terra's ability to attain $90 million
in EBITDA for calendar 2001 is less certain. Although there can be no
assurances, Terra believes it will be able to negotiate an amendment or waiver
of the EBITDA covenant with its lenders if such is required.
Terra Industries Inc., with 2000 revenues of $1 billion, is a leading
international producer of nitrogen products and methanol.
Information contained in this release, other than historical information,
may be considered forward-looking. Forward-looking information reflects
management's current views of future events and financial performance that
involve a number of risks and uncertainties. The factors that could cause
actual results to differ materially include, but are not limited to, the
following: changes in financial markets, general economic conditions within
the agricultural industry, competitive factors and price changes (principally
selling prices of nitrogen and methanol products and natural gas costs),
changes in product mix, changes in the seasonality of demand patterns, changes
in weather conditions, changes in governmental regulations and other risks
described in the "Factors That Affect Operating Results" section of Terra's
current annual report.
Note: Terra Industries' news announcements are also available on its web
site, http://www.terraindustries.com , and by fax at no charge by calling
800-758-5804, code 437906.
SOURCE Terra Industries Inc.
back to top
