SIOUX CITY, Iowa, July 26 /PRNewswire/ --
Terra Industries Inc. (NYSE symbol: TRA) announced today a net loss of
$21.6 million for the second quarter ended June 30, 2001, or $.29 per share,
on revenues of $321 million. This compares to the 2000 second quarter loss of
$0.8 million, or $.01 per share, on revenues of $286 million. About half of
the net loss increase was due to charges for possible claim costs related to
1998 carbon dioxide sales. The remainder of the net loss increase was due
mainly to lower nitrogen sales volumes, higher natural gas costs and costs
incurred at idled manufacturing facilities, offset partially by higher selling
prices. EBITDA (earnings before interest expense, taxes, depreciation and
amortization) was $12.2 million compared to $40.5 million in the 2000 second
quarter.
The net loss for the 2001 first half was $26.8 million, or $.36 per share,
on revenues of $565 million compared to the 2000 first half loss of
$20.4 million, or $.27 per share, on revenues of $526 million. First half
EBITDA for 2001 and 2000 was $44.1 million and $49.6 million, respectively.
The Nitrogen Products business segment recorded revenues of $252 million
and an operating loss of $4.5 million for the quarter compared with revenues
of $252 million and operating income of $12.1 million for the 2000 second
quarter. For the first half, Nitrogen Products posted revenues of
$452 million and operating income of $0.2 million compared with revenues of
$468 million and operating income of $1.8 million in 2000.
The deterioration in second quarter Nitrogen Products results was due to
lower sales volumes, higher natural gas costs and costs incurred at idled
manufacturing facilities partially offset by higher selling prices. Sales
volumes for ammonia, nitrogen solutions and ammonium nitrate were 21, 38 and
37 percent lower, respectively, than sales volumes achieved in the 2000 second
quarter. Natural gas costs for the quarter were 61 percent higher than in the
2000 second quarter. Terra's forward pricing contracts reduced second quarter
natural gas costs by approximately $2.5 million. The costs incurred at idled
manufacturing facilities, which totaled about $5 million in the 2001 second
quarter, were most significant at Terra's Courtright facility, which was down
most of the quarter because of mechanical problems. That facility has
restarted production. Terra's Blytheville facility, which was idled on June
10 because of its negative cash flow, has not been restarted. Production
rates at most of Terra's other Nitrogen Products manufacturing plants have
been curtailed because of low sales volumes.
Factors that affected Nitrogen Products' first half results were similar
to those in the second quarter. Ammonia, nitrogen solutions and ammonium
nitrate sales volumes were 34, 39 and 57 percent lower, respectively, than in
2000. Natural gas costs increased 91 percent. Forward pricing contracts
reduced 2001 first half natural gas costs by approximately $13.5 million.
The Methanol business segment reported 2001 second quarter revenues of
$69 million and operating income of $1.0 million compared with revenues of
$33 million and operating income of $5.4 million in the 2000 second quarter.
Natural gas cost increases of 67 percent offset the higher sales volumes and
prices realized. Forward pricing contracts increased Methanol's 2001 second
quarter natural gas costs by approximately $1.3 million. Methanol's 2001
first half results were also adversely affected by natural gas costs which
were 92 percent higher than in the 2000 first half. Forward pricing contracts
had no significant effect on first half natural gas costs for methanol
operations.
The 2001 second quarter and first half results includes a $14 million
charge to provide for possible claim costs related to a product recall made by
U.K. carbonated drink producers and distributors. This charge was based on a
court decision released July 13, 2001, that found Terra liable for the 1998
recall as it produced the carbon dioxide included in the carbonated drinks.
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 will vigorously pursue recoveries against these parties.
Michael L. Bennett, President and CEO of Terra, said, "Volatile natural
gas prices and low demand for nitrogen products in most of Terra's markets
produced a very disappointing quarter. Indications are that global nitrogen
fertilizer demand was adversely affected by lower corn, wheat and other
planted acres compounded by some growers reducing nitrogen fertilizer
application rates because of low grain prices and high fertilizer prices.
This difficult environment worsened in the U.S. when imports of urea and other
nitrogen products proved to be excessive.
"We are pleased that North American natural gas costs have moderated. We
are well positioned for continued cost decline as only 14 percent of our
expected North American natural gas requirements for the next 12 months at
June 30, 2001, were covered by fixed price contracts; Terra's total forward
pricing position at June 30, 2001, covered about 18 percent of our next
12 months' requirements at amounts about $6 million below the published prices
at that date. Lower natural gas costs will make us more competitive during
this period of excess nitrogen fertilizer supplies, which we believe will be
of fairly short duration. We are focused on reestablishing our UAN advantage
during the next 12 months."
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 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
June 30, June 30,
(in thousands, except
per share amounts) 2001 2000 2001 2000
Revenues
Nitrogen products $251,620 $252,083 $451,841 $467,709
Methanol 69,364 33,183 113,011 54,285
Other, net of
intercompany
eliminations (189) 1,166 520 4,026
$320,795 $286,432 $565,372 $526,020
Operating income (loss)
Nitrogen products $(4,497) $12,098 $175 $1,812
Methanol 1,034 5,406 (973) (413)
Product claim costs (14,023) -- (14,023) --
Other expense - net 80 822 765 1,013
(17,406) 18,326 (14,056) 2,412
Insurance settlement
costs -- (3,690) -- (4,650)
Interest income 175 87 1,875 859
Interest expense (13,241) (13,024) (25,823) (25,703)
Minority interest 211 (2,978) (317) (4,375)
Income tax benefit 8,675 447 11,496 11,010
Net loss $(21,586) $(832) $(26,825) $(20,447)
Loss Per Share $(0.29) $(0.01) $(0.36) $(0.27)
Weighted average shares 75,131 74,404 74,915 74,167
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 2001 2000
Cash and short-term investments $12,080 $34,216
Accounts receivable, net 116,684 121,347
Inventories 156,519 90,814
Other current assets 29,877 39,492
Total current assets 315,160 285,869
Property, plant and equipment, net 858,546 941,783
Excess of cost over net assets of acquired
businesses 215,099 241,295
Other assets 41,967 54,968
Total assets $1,430,772 $1,523,915
Liabilities and Stockholders' Equity
Debt due within one year $5,047 $6,005
Other current liabilities 120,913 129,342
Total current liabilities 125,960 135,347
Long-term debt 455,273 470,353
Deferred income taxes 140,894 143,580
Other liabilities 48,936 59,228
Minority interest 101,732 107,644
Total liabilities 872,795 916,152
Stockholders' equity 557,977 607,763
Total liabilities and stockholders' equity $1,430,772 $1,523,915
TERRA INDUSTRIES INC.
Summarized Information
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Other Financial Data
(in thousands)
Cost of sales (includes
depreciation & amortization) $313,353 $251,679 $547,828 $498,995
Selling, general and
administrative expense
(includes depreciation
& amortization) 11,018 16,558 17,860 24,913
Depreciation and amortization 29,347 28,828 58,437 56,224
Capital expenditures 4,634 1,360 8,364 6,052
Volumes, Prices and Costs Three Months Ended June 30,
2001 2000
(quantities in thousands) Sales Average Sales Average
Volumes Unit Price Volumes Unit Price
Ammonia (tons) 357 $221 452 $156
Nitrogen solutions (tons) 801 124 1,298 76
Urea (tons) 139 147 105 130
Ammonium nitrate (tons) 115 128 182 112
Methanol (gallons) 97,518 0.71 66,661 0.50
Natural gas costs:(a)
North America $5.07 $3.00
United Kingdom $2.14 $1.91
Six Months Ended June 30,
2001 2000
(quantities in thousands)
Sales Average Sales Average
Volumes Unit Price Volumes Unit Price
Ammonia (tons) 540 $234 819 $145
Nitrogen solutions (tons) 1,335 129 2,179 70
Urea (tons) 229 166 283 127
Ammonium nitrate (tons) 233 135 536 107
Methanol (gallons) 155,996 0.72 131,467 0.41
Natural gas costs:(a)
North America $5.68 $2.75
United Kingdom $2.52 $2.03
(a) Per MMBtu. 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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