SIOUX CITY, Iowa, July 25 /PRNewswire-FirstCall/ --
Terra Industries Inc. (NYSE: TRA) announced today a net loss of
$8.5 million for the second quarter ended June 30, 2002, or $.11 per share, on
revenues of $299 million. This compares to the 2001 second quarter loss of
$21.6 million, or $.29 per share, on revenues of $321 million. The 2001
second quarter net loss included a $14 million pre-tax charge for possible
claim costs related to 1998 carbon dioxide sales. EBITDA (earnings before
interest expense, taxes, depreciation and amortization) was $25.1 million
compared to $12.2 million in the 2001 second quarter.
The net loss before cumulative effect of change in accounting principle
for the 2002 first half was $17.6 million, or $.23 per share, on revenues of
$513 million compared to the 2001 first half loss of $26.8 million, or $.36
per share, on revenues of $565 million. The net loss for the 2002 first half,
which included a $206.0 million, or $2.74 per share, charge for the cumulative
effect to adopt Financial Accounting Standards Board Statement of Financial
Accounting Standard No. 142, "Goodwill and Other Intangible Assets," was
$223.6 million or $2.97 per share. First half EBITDA for 2002 and 2001 was
$46.6 million and $44.1 million, respectively. EBITDA for the twelve months
ended June 30, 2002, was $62.0 million.
The Nitrogen Products business segment recorded revenues of $258 million
and operating income of $2.2 million for the quarter compared with revenues of
$252 million and an operating loss of $4.5 million for the 2001 second
quarter. For the first half, Nitrogen Products posted revenues of
$443 million and operating income of $2.9 million compared with revenues of
$452 million and operating income of $0.2 million in 2001.
The $6.7 million improvement in second quarter Nitrogen Products results
over the 2001 second quarter was due to higher sales volumes and lower natural
gas costs, partially offset by lower selling prices. Terra's sales volumes
for ammonia, nitrogen solutions, ammonium nitrate and urea were 27, 62, 81 and
19 percent higher, respectively, than sales volumes achieved in the 2001
second quarter. The volume increase was due mainly to farmers in many of
Terra's major market areas planting more crop acres and increasing their
nitrogen fertilizer application rates. Sales volumes in 2001 were unusually
low because of production curtailments in response to unprecedented North
American natural gas prices and record levels of imported nitrogen
fertilizers. Natural gas unit costs for the quarter, net of about
$6.9 million of cost reductions realized from forward purchase contracts, were
36 percent lower than in the 2001 second quarter. Ammonia, nitrogen
solutions, ammonium nitrate and urea selling prices for the 2002 second
quarter were 33, 41, 9 and 19 percent lower, respectively, than 2001 second
quarter prices. The price declines primarily reflect higher industry-wide
inventories at the start of the 2002 spring season as compared to serious
supply concerns in 2001 created by North American production curtailments
driven by natural gas prices.
Factors that affected Nitrogen Products' first half results were similar
to those that affected the second quarter. Ammonia, nitrogen solutions,
ammonium nitrate and urea sales volumes were 47, 45, 94 and 50 percent higher,
respectively, than in 2001. Natural gas unit costs, net of about $4.3 million
of cost reductions realized from forward purchase contracts, decreased 45
percent. Ammonia, nitrogen solutions, ammonium nitrate and urea selling
prices were 39, 45, 12 and 32 percent lower, respectively, than in 2001.
The Methanol business segment reported 2002 second quarter revenues of
$42 million and an operating loss of $0.4 million compared with revenues of
$69 million and operating income of $1.0 million in the 2001 second quarter.
The profit decrease was due to lower selling prices and sales volumes,
partially offset by lower natural gas costs. Methanol's second quarter
natural gas unit costs, net of about $2.1 million of cost reductions realized
from forward purchase contracts, decreased 36 percent. Methanol's 2002 first
half results were also adversely affected by lower selling prices, partially
offset by lower natural gas unit costs which, net of about $0.7 million of
cost reductions realized from forward purchase contracts, decreased
45 percent.
The 2001 second quarter and first half results included a $14 million
charge to provide for possible claim costs related to a 1998 product recall
made by U.K. carbonated drink producers and distributors. While a court
decision found Terra liable for the recall, Terra believes that ultimate
responsibility for the claims lies with its insurance carrier and with the
previous owner of the U.K. business that Terra bought at the end of 1997,
against whom Terra has filed a warranty claim. Terra continues to pursue
recoveries against these parties.
Terra's forward purchase contracts at June 30, 2002, fixed prices for
15 percent of its next 12 months' natural gas needs at about $1.7 million
below the published forward market prices at that date. In addition, Terra
had contracts at June 30, 2002, which would reduce, assuming no decrease in
forward natural gas prices at that date, the purchase price of about 7 percent
of its next 12 months' natural gas needs by about $3.2 million.
Michael L. Bennett, Terra's President and CEO, said, "We are pleased that
improved demand in our key market areas this year allowed us to operate
Terra's manufacturing facilities at near full capacity. We are encouraged by
industry-wide nitrogen fertilizer inventories that are substantially lower
than a year ago. This should result in more reasonable and stable selling
prices compared to the extreme price volatility of the past 18 months.
"We are also pleased that North American natural gas costs have
stabilized. We are well positioned for continued cost declines as only
13 percent of our expected North American natural gas requirements for the
next 12 months at June 30, 2002, were covered by fixed price contracts."
Terra Industries Inc., with 2001 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 agricultural regulations, and other risks
detailed 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.
TERRA INDUSTRIES INC.
Summarized Results of Operations
(unaudited)
Three Months Ended Six Months Ended
(in thousands, except per June 30, June 30,
share amounts) 2002 2001 2002 2001
Revenues
Nitrogen products $257,663 $251,620 $442,650 $451,841
Methanol 41,853 69,364 70,156 113,011
Other, net of intercompany
eliminations (18) (189) 252 520
$299,498 $320,795 $513,058 $565,372
Operating income (loss)
Nitrogen products $2,204 $(4,497) $2,870 $175
Methanol (391) 1,034 (2,914) (973)
Product claim costs --- (14,023) --- (14,023)
Other expense - net (1,223) 80 (734) 765
590 (17,406) (778) (14,056)
Interest income 113 175 161 1,875
Interest expense (13,348) (13,241) (26,644) (25,823)
Minority interest (739) 211 (1,285) (317)
Income tax benefit 4,899 8,675 10,964 11,496
Loss before cumulative effect
of change in accounting
principle (8,485) (21,586) (17,582) (26,825)
Cumulative effect of change
in accounting principle --- --- (205,968) ---
Net loss $(8,485) $(21,586) $(223,550) $(26,825)
Basic and diluted loss
per share:
Loss before cumulative
effect of change in
accounting principle $(0.11) $(0.29) $(0.23) $(0.36)
Cumulative effect of
change in accounting
principle --- --- (2.74) ---
Loss Per Share $(0.11) $(0.29) $(2.97) $(0.36)
Weighted average shares 75,378 75,131 75,203 74,915
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.
TERRA INDUSTRIES INC.
Summarized Financial Position
(in thousands)
(unaudited)
June 30,
Assets 2002 2001
Cash and short-term investments $12,718 $12,080
Accounts receivable, net 105,298 116,684
Inventories 91,986 156,519
Other current assets 22,680 29,877
Total current assets 232,682 315,160
Property, plant and equipment, net 802,300 858,546
Excess of cost over net assets of
acquired businesses 0 215,099
Other assets 47,317 41,967
Total assets $1,082,299 $1,430,772
Liabilities and Stockholders' Equity
Debt due within one year $135 $5,047
Other current liabilities 102,763 120,913
Total current liabilities 102,898 125,960
Long-term debt 400,432 455,273
Deferred income taxes 115,257 140,894
Other liabilities 65,734 48,936
Minority interest 100,453 101,732
Total liabilities 784,774 872,795
Stockholders' equity 297,525 557,977
Total liabilities and stockholders' equity $1,082,299 $1,430,772
TERRA INDUSTRIES INC.
Summarized Information
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Other Financial Data
(in thousands)
Cost of sales
(includes depreciation &
amortization) $289,214 $313,674 $495,354 $547,545
Selling, general and
administrative expense
(includes depreciation &
amortization) 9,694 10,504 18,482 17,860
Depreciation and
amortization 25,221 29,347 48,620 58,437
Capital expenditures 2,682 4,634 9,010 8,364
Volumes, Prices and Costs
Three Months Ended June 30,
2002 2001
(quantities in thousands)
Sales Average Sales Average
Volumes Unit Price Volumes Unit Price
Ammonia (tons) 452 $149 357 $221
Nitrogen solutions (tons) 1,301 73 801 124
Urea (tons) 166 119 139 147
Ammonium nitrate (tons) 208 116 115 128
Methanol (gallons) 88,994 0.47 97,518 0.71
Natural gas costs: (a) Per MMBtu Per MMBtu
North America $3.09 $5.07
United Kingdom $2.08 $2.14
Volumes, Prices and Costs
Six Months Ended June 30,
2002 2001
(quantities in thousands)
Sales Average Sales Average
Volumes Unit Price Volumes Unit Price
Ammonia (tons) 793 $142 540 $234
Nitrogen solutions (tons) 1,937 71 1,335 129
Urea (tons) 344 113 229 166
Ammonium nitrate (tons) 451 119 233 135
Methanol (gallons) 171,645 0.41 155,996 0.72
Natural gas costs: (a) Per MMBtu Per MMBtu
North America $2.88 $5.68
United Kingdom $2.43 $2.52
(a) Includes all transportation and other logistical costs and 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.
SOURCE Terra Industries Inc.
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