SIOUX CITY, Iowa, July 31 /PRNewswire-FirstCall/ -- Terra Industries Inc.
(NYSE: TRA) announced today a net loss of $31.1 million, or $.41 per share, on
revenues of $379 million for the second quarter ended June 30, 2003. The net
loss excluding the $27.0 million loss for "Impairment of long-lived assets"
(representing a $53.1 million impairment charge to operating income less
$9.9 million allocated to minority interest and $16.2 million of income tax
benefit) was $4.1 million. This compares to the 2002 second quarter loss of
$8.5 million, or $.11 per share on revenues of $299 million.
Terra announced on June 26, 2003, that it would suspend production at its
Blytheville, Ark., manufacturing facility. In response to this action and as
required by Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," Terra commenced a review
to determine if the Blytheville facility's carrying value was impaired. This
review led Terra management to conclude that future market conditions may not
justify the ongoing investment in maintenance and replacement capital
necessary to extend operations for the remainder of the facility's useful
life. Accordingly a $53.1 million charge was recorded during the second
quarter as an "Impairment of long-lived assets". Terra currently plans to keep
the Blytheville facility in a mothballed condition and may operate the
facility from time to time as market conditions allow.
For the 2003 first half, Terra posted a net loss of $45.4 million, or $.60
per share, on revenues of $659 million. The loss, excluding the $27.0 million
impairment loss, was $18.4 million, compared with a net loss before cumulative
effect of change in accounting principle of $17.6 million, or $.23 per share,
on revenues of $513 million in the 2002 first half.
Cash from operations, before working capital changes, was $17.7 million in
the 2003 second quarter, compared to $28.2 million in the 2002 second quarter.
Terra's cash and short-term investments balance was $12.4 million at June 30,
2003. Terra had $34.8 million of borrowings outstanding at June 30, 2003,
under Terra's revolving credit facility that expires in June 2005.
Working capital needs during the quarter, primarily seasonal utilization
of customer prepayments, reduced borrowing availability under Terra's bank
lines to $67 million at June 30, 2003. Since June 30, Terra has experienced
cash needs arising from margin calls on its forward natural gas positions as a
result of declining prices, tightened terms by trade creditors and other
operating needs. As a result, Terra's ability to meet its bank covenants will
depend on future operating cash flows, including working capital needs,
receipt of customer prepayments and trade credit terms. Failure to meet these
covenants could require additional costs and fees to amend the bank facilities
or could result in termination of the facilities.
Terra currently anticipates that it will be able to meet its covenants
through the end of this year, but that it will be close to the limits imposed
by the covenants. While natural gas prices have recently declined, if product
margins in the second half of 2003 were to be as depressed as in the first
half, or if there were to be any adverse changes in the other factors
discussed above, Terra may need a waiver of its bank covenants to meet its
2004 seasonal working capital needs.
The Nitrogen Products business segment recorded revenues of $315.7 million
and an operating loss of $47.6 million for the quarter, compared with revenues
of $258 million and operating income of $2.2 million for the 2002 second
quarter. For the first half, Nitrogen Products posted revenues of $544 million
and an operating loss of $61.1 million, compared with revenues of $443 million
and operating income of $2.9 million in 2002.
The $3.3 million improvement, excluding the effect of the impairment
charge, in second quarter Nitrogen Products results over the 2002 second
quarter was due to higher product selling prices, partially offset by lower
sales volumes and higher natural gas costs. Ammonia, nitrogen solutions,
ammonium nitrate and urea selling prices for the 2003 second quarter were 60,
42, 18 and 50 percent higher, respectively than 2002 second quarter prices.
These higher prices reflect lower ammonia and other nitrogen product supplies
in response to higher gas costs. Terra's sales volumes for ammonia, nitrogen
solutions and ammonium nitrate were 12, 16 and 19 percent lower, respectively,
than sales volumes achieved in the 2002 second quarter. Second quarter urea
sales volumes were 4 percent higher in 2002 than in 2003. The lower overall
sales volumes were due primarily to the effects weather had on the 2002-2003
fertilizer year as compared to the prior fertilizer year. Natural gas unit
costs for the quarter, net of about $2.4 million of cost increases due to
forward purchase contracts, were 88 percent higher than in the 2002 second
quarter. This increase was due to lower industry-wide natural gas inventories.
Factors that affected Nitrogen Products' first half results were similar
to those that affected the second quarter. Ammonia, nitrogen solutions,
ammonium nitrate and urea selling prices were 60, 35, 9 and 4 percent higher,
respectively, than in 2002. Ammonia, nitrogen solutions, ammonium nitrate and
urea sales volumes were 15, 5, 8 and 6 percent lower, respectively, than in
2002. Natural gas unit costs, net of about $5.8 million of cost reductions
realized from forward purchase contracts, increased 72 percent.
The Methanol business segment reported 2003 second quarter revenues of
$63 million and operating income of $3.1 million, compared with revenues of
$42 million and an operating loss of $0.4 million in the 2002 second quarter.
The profit increase was due to 64 percent higher methanol selling prices,
partially offset by 8 percent lower sales volumes and higher natural gas
costs. Methanol's second quarter natural gas unit costs, net of about
$.4 million in cost increases due to forward purchase contracts, increased 72
percent.
Methanol's first half results were also due to higher methanol selling
prices, partially offset by lower sales volumes and higher natural gas costs
which, net of about $2.2 million of cost reductions realized from forward
purchase contracts, increased 92 percent.
Terra's forward purchase contracts at June 30, 2003, fixed prices for 21
percent of its next 12 months' natural gas needs at about $5.3 million above
the published forward market prices at that date.
"This was a difficult quarter for Terra," said Michael L. Bennett, Terra's
President and CEO. "Due to the delayed North American application season we
didn't realize the sales volumes we expected, and selling prices didn't reach
the levels we thought we'd achieve. These disappointments were compounded by
continuing high natural gas costs, and led us to shut down production at our
Blytheville facility at the end of June.
"Despite these hurdles," Bennett continued, "we are encouraged by improved
business performance in our methanol business and nitrogen markets in the U.K.
We're committed to competitively meeting our customers' needs and continuing
to improve our cost structure for a faster return to profitability when
industry conditions improve."
Terra management will conduct a conference call to discuss these second
quarter results on July 31, 2003 beginning at 3:00 EDT. A live webcast of the
conference call will be available from Terra's web site at
http://www.terraindustries.com , and will be archived for playback for three months.
Terra Industries Inc., with 2002 revenues of $1 billion, is a leading
international producer of nitrogen products and methanol.
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, http://www.terraindustries.com .
Terra Industries Inc.
Summarized Results of Operations
(unaudited)
Three Months Ended Six Months Ended
(in thousands except June 30, June 30,
per-unit amounts) 2003 2002 2003 2002
Revenues
Nitrogen products $315,744 $257,663 $544,285 $442,650
Methanol 62,853 41,853 113,967 70,156
Other, net of
intercompany eliminations 348 (18) 836 252
$378,945 $299,498 $659,088 $513,058
Operating income (loss)
Nitrogen products $(47,554) $2,204 $(61,112) $2,870
Methanol 3,109 (391) 4,742 (2,914)
Other expense-net (1,465) (1,223) (2,798) (734)
(45,910) 590 (59,168) (778)
Interest income 192 113 381 161
Interest expense (15,283) (13,348) (27,835) (26,644)
Minority interest 10,950 (739) 12,668 (1,285)
Income tax benefit 18,960 4,899 28,521 10,964
Loss from continuing
operations (31,091) (8,485) (45,433) (17,582)
Cumulative effect of
change in accounting
principle - - - (205,968)
Net loss $(31,091) $(8,485) $(45,433) $(223,550)
Basic and Diluted Loss
per Share:
Loss from continuing
operations $(0.41) $(0.11) $(0.60) $(0.23)
Cumulative effect of
change in accounting
principle - - - (2.74)
Loss per Share $(0.41) $(0.11) $(0.60) $(2.97)
Weighted average shares
outstanding 75,715 75,378 75,539 75,203
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,
2003 2002
Assets
Cash and short-term investments $12,368 $12,718
Accounts receivable, less allowance for
doubtful accounts of $156 and $436 123,852 105,298
Inventories 96,501 91,986
Other current assets 21,463 22,680
Total current assets 254,184 232,682
Property, plant and equipment, net 725,297 802,300
Deferred plant turnaround costs 32,006 19,287
Other assets 36,023 28,030
Total assets $1,047,510 $1,082,299
Liabilities and Stockholders' Equity
Debt due within one year $149 $135
Other current liabilities 160,631 102,763
Total current liabilities 160,780 102,898
Long-term debt and capital lease obligations 437,031 400,432
Deferred income taxes 32,457 115,257
Other liabilities 109,750 65,734
Minority interest 85,011 100,453
Total liabilities and minority interest 825,029 784,774
Stockholders' Equity 222,481 297,525
Total liabilities and stockholders' equity $1,047,510 $1,082,299
Terra Industries Inc.
Summarized Cash Flows
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Loss from operations $(31,091) $(8,485) $(45,443) $(17,852)
Non-cash charges and credits:
Impairment of long-lived
assets 53,091 - 53,091 -
Depreciation and
amortization 27,931 27,396 55,548 52,173
Deferred income taxes (21,301) 8,564 (33,144) (951)
Minority interest in
earnings (loss) (10,950) 739 (12,668) 1,285
Change in current assets and
liabilities (37,760) (8,960) (63,875) 21,410
Net cash flows from operating
activities (20,080) 19,254 (46,481) 56,335
Purchase of property, plant
and equipment (2,283) (2,682) (5,861) (9,010)
Plant turnaround costs (8,003) (4,801) (20,321) (8,054)
Debt borrowings (repayments) 36,714 195 36,679 (36,035)
Deferred financing costs (8,138) - (8,138) -
Distributions to minority
interests (1,153) - (1,153) -
Other 353 (1,311) (836) 2,357
Increase (Decrease) in cash
and short-term investments (2,590) 10,655 (46,111) 5,593
Cash and short-term
investments at beginning of
period 14,958 2,063 58,479 7,125
Cash and short-term
investments at end of period $12,368 $12,718 $12,368 $12,718
Terra Industries Inc.
Summarized Information
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Other Financial Data
Cost of sales $362,031 $289,214 $646,105 $495,354
(includes depreciation
and amortization)
Selling, general &
administrative expense 9,733 9,694 19,060 18,482
(includes depreciation
and amortization)
Impairment of long-lived
assets 53,091 - 53,091 -
Volumes and prices
Three months Ended June 30,
2003 2002
Average Average
Sales Unit Sales Unit
Volumes Price(a) Volumes Price(a)
Ammonia (tons) 400 $238 452 $149
Nitrogen solutions (tons) 1,093 104 1,301 73
Urea (tons) 172 178 166 119
Ammonium nitrate (tons) 169 137 208 116
Methanol (gallons) 82,174 0.77 88,994 0.47
Natural gas costs(b)
North America $5.98 $3.09
United Kingdom $2.91 $2.07
Six months Ended June 30,
2003 2002
Average Average
Sales Unit Sales Unit
Volumes Price(a) Volumes Price(a)
Ammonia (tons) 678 $227 793 $142
Nitrogen solutions (tons) 1,848 96 1,937 71
Urea (tons) 324 168 344 113
Ammonium nitrate (tons) 417 130 451 119
Methanol (gallons) 149,679 0.76 171,645 0.41
Natural gas costs(b)
North America $5.35 $2.87
United Kingdom $3.18 $2.43
(a) After deducting outbound freight costs
(b) 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.
SOURCE Terra Industries Inc.
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