SIOUX CITY, Iowa, Oct. 24 /PRNewswire-FirstCall/ --
Terra Industries Inc. (NYSE: TRA) announced today a loss from continuing
operations for the third quarter ended September 30, 2002, of $1.9 million, or
$.03 a share, on revenues of $259 million. This compares with the 2001 third
quarter loss of $24.1 million, or $.32 per share, on revenues of $238 million.
The 2002 net loss of $12.9 million, or $.18 a share, includes the previously
announced $11 million charge to increase reserves for discontinued operations.
EBITDA (earnings from continuing operations before net interest expense,
taxes, depreciation and amortization) was $33.8 million compared to
$3.0 million in the 2001 third quarter.
The loss from continuing operations for the nine months ended
September 30, 2002, was $19.5 million, or $.25 per share, on revenues of
$772 million compared to a loss of $51.0 million, or $.68 per share, on
revenues of $803 million in the comparable 2001 period. The net loss for the
first nine months of 2002, which included an $11 million, or $.15 per share,
charge to increase reserves for discontinued operations and 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 $236.5 million, or $3.14 per
share. Goodwill amortization during the 2001 third quarter and first nine
months was $4.7 million and $14.1 million, respectively. EBITDA for the first
nine months of 2002 and 2001 was $80.4 million and $47.1 million,
respectively.
The Nitrogen Products business segment recorded revenues of $211 million
and operating income of $4.2 million for the quarter compared with revenues of
$209 million and an operating loss of $21.3 million for the 2001 third
quarter. For the first nine months, Nitrogen Products posted revenues of
$654 million and operating income of $7.1 million compared with revenues of
$661 million and an operating loss of $21.2 million in the 2001 period. The
Nitrogen Products segment incurred $4.2 million and $12.5 million,
respectively, of goodwill amortization during the 2001 third quarter and first
nine months compared to none in the 2002 periods.
The $25.6 million improvement in third quarter Nitrogen Products results
over the 2001 third quarter was due mainly to absence of the high carryover of
high cost inventory that occurred in 2001 and lower natural gas costs,
partially offset by lower selling prices. The unit costs of Nitrogen
Products' July 1, 2001, inventories were higher than normal because of high
North American natural gas costs during the 2001 first half. In addition,
natural gas unit costs for the quarter, net of about $2.5 million of cost
reductions realized from forward purchase contracts, were 10 percent lower
than in the 2001 third quarter. Ammonia, nitrogen solutions, ammonium nitrate
and urea selling prices for the 2002 third quarter were 9, 9, 5 and 2 percent
lower, respectively, than 2001 third quarter prices. Nitrogen solutions 2002
third quarter sales volumes were adversely affected by the one-month shutdown
of the Port Neal, Iowa, plant for scheduled maintenance. The increase in urea
sales volumes is due to the Blytheville, Ark., plant's operating at near
capacity in the 2002 third quarter; Blytheville's production was suspended in
the 2001 third quarter because of excess industry-wide inventories.
Factors that affected Nitrogen Products' first nine months results were
similar to those that affected the third quarter. Ammonia, nitrogen
solutions, ammonium nitrate and urea sales volumes were 34, 25, 41 and 64
percent higher, respectively, than in 2001. Sales volumes in 2001 were
adversely affected by production curtailments driven primarily by high natural
gas prices and excess industry-wide nitrogen inventories. Natural gas unit
costs, net of about $6.8 million of cost reductions realized from forward
purchase contracts, decreased 36 percent. Ammonia, nitrogen solutions,
ammonium nitrate and urea selling prices were 31, 33, 8 and 25 percent lower,
respectively, than in 2001. The price declines primarily reflect higher
industry-wide inventories at the beginning of 2002 as compared to serious
supply concerns in early 2001 created by North American production
curtailments driven by natural gas prices.
The Methanol business segment reported 2002 third quarter revenues of
$47 million and operating income of $6.7 million compared with revenues of
$28 million and an operating loss of $5.1 million in the 2001 third quarter.
The $11.8 million profit improvement reflected a $.13 per gallon increase in
average selling price, a nearly 19 million gallon increase in sales volume and
lower natural gas unit costs which, net of about $1.1 million of cost
reductions realized from forward purchase contracts, decreased 7 percent. The
selling price and sales volume increases reflect reduced industry-wide
inventories. Methanol's results for the first nine months of 2002 as compared
to the 2001 period benefited from higher sales volumes and lower natural gas
costs which, net of about $1.8 million of cost reductions realized from
forward purchase contracts, decreased 34 percent. Average selling price for
the first nine months of 2002 as compared to the 2001 period declined $.18 per
gallon. North American industry-wide inventories in early 2001 were
abnormally low because of production curtailments driven by natural gas
prices.
The 2002 third quarter and first nine months results included an
$11 million charge related to retained liabilities of discontinued operations.
The charge consisted of a $17 million increase to reserves for future costs
less income tax benefits totaling $6 million. Approximately $13 million of
the reserve increase relates to higher-than-expected future retiree health
care costs of the coal operations Terra sold in 1992. The remaining
$4 million represents the estimated costs to settle remaining obligations of
the distribution operations that Terra sold in 1999.
Terra's forward purchase contracts at September 30, 2002, fixed prices for
11 percent of its next 12 months' natural gas needs at about $5 million below
the published forward market prices at that date. In addition, Terra had
contracts at September 30, 2002, which would reduce, assuming no decrease in
forward natural gas prices at that date, the purchase price of about 4 percent
of its next 12 months' natural gas needs by about $1.3 million.
Michael L. Bennett, Terra's President and CEO, said, "The current pricing
environment for both nitrogen products and methanol is favorable for Terra.
Global ammonia supplies have tightened, leading to a nearly $50-per-ton price
increase for ammonia delivered to U.S. ports. This should lead to higher
prices for other nitrogen products as higher corn prices should encourage U.S.
farmers to focus more on maximizing their 2003 crop yields instead of
minimizing total input costs. The methanol industry supply-demand situation
looks favorable for at least the remainder of 2002.
"We are, however, concerned about the recent run up in North American
natural gas prices. The current forward prices, which seem to be driven more
by speculation than supply/demand fundamentals, do not provide us today
sufficient margin on manufactured nitrogen products. Consequently, we have
fixed the prices for only 10 percent of our next 12 months' natural gas needs.
We believe that the relationship between nitrogen products and natural gas
will improve over the next few months."
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 products and methanol 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 .
Terra Industries Inc.
Summarized Results of Operations
(unaudited)
Three Months Ended Nine Months Ended
(in thousands, except September 30, September 30,
per share amounts) 2002 2001 2002 2001
Revenues
Nitrogen products $211,103 $209,224 $653,753 $661,065
Methanol 46,772 28,000 116,928 141,011
Other, net of
intercompany
eliminations 799 481 1,051 1,001
$258,674 $237,705 $771,732 $803,077
Operating income (loss)
Nitrogen products $4,241 $(21,328) $7,111 $(21,153)
Methanol 6,696 (5,109) 3,782 (6,082)
Product claim costs --- --- --- (14,023)
Other expense - net (1,137) 229 (1,871) 994
9,800 (26,208) 9,022 (40,264)
Interest income 116 977 277 2,852
Interest expense (13,408) (12,034) (40,052) (37,857)
Minority interest (492) 2,785 (1,777) 2,468
Income tax benefit 2,048 10,344 13,012 21,840
Loss from continuing
operations (1,936) (24,136) (19,518) (50,961)
Loss from discontinued
operations, net of
income taxes (11,000) --- (11,000) ---
Cumulative effect of
change in accounting
principle --- --- (205,968) ---
Net loss $(12,936) $(24,136) $(236,486) $(50,961)
Basic and diluted loss
per share:
Loss from continuing
operations $(0.03) $(0.32) $(0.25) $(0.68)
Discontinued operations (0.15) --- (0.15) ---
Cumulative effect of
change in accounting
principle --- --- (2.74) ---
Loss Per Share $(0.18) $(0.32) $(3.14) $(0.68)
Weighted average shares 75,468 75,175 75,276 75,033
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)
September 30,
Assets 2002 2001
Cash and short-term investments $41,879 $44,132
Accounts receivable, net 97,455 97,947
Inventories 86,838 123,627
Other current assets 30,528 32,414
Total current assets 256,700 298,120
Property, plant and equipment, net 792,182 849,188
Excess of cost over net assets of
acquired businesses --- 211,098
Other assets 53,434 39,959
Total assets $1,102,316 $1,398,365
Liabilities and Stockholders' Equity
Debt due within one year $140 $5,108
Other current liabilities 121,438 127,177
Total current liabilities 121,578 132,285
Long-term debt 400,394 453,921
Deferred income taxes 99,626 121,537
Other liabilities 80,898 50,115
Minority interest 100,021 98,947
Total liabilities 802,517 856,805
Stockholders' equity 299,799 541,560
Total liabilities and stockholders' equity $1,102,316 $1,398,365
Terra Industries Inc.
Summarized Information
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Other Financial Data
(in thousands)
Cost of sales (includes
depreciation & amortization) $238,546 $255,519 $733,900 $803,064
Selling, general and
administrative expense
(includes depreciation &
amortization) 10,328 8,394 28,810 26,254
Depreciation and amortization 24,489 26,433 73,109 84,870
Capital expenditures 7,579 2,772 16,589 11,136
Three Months Ended September 30,
2002 2001
Volumes, Prices and Costs Sales Average Sales Average
(quantities in thousands) Volumes Unit Price Volumes Unit Price
Ammonia (tons) 354 $140 315 $154
Nitrogen solutions (tons) 967 73 989 80
Urea (tons) 138 126 65 128
Ammonium nitrate (tons) 239 118 257 124
Methanol (gallons) 83,777 0.56 64,982 0.43
Natural gas costs: (a) Per MMBtu Per MMBtu
North America $3.03 $3.43
United Kingdom $2.12 $2.03
Nine Months Ended September 30,
2002 2001
Sales Average Sales Average
(quantities in thousands) Volumes Unit Price Volumes Unit Price
Ammonia (tons) 1,147 $141 854 $204
Nitrogen solutions (tons) 2,904 72 2,324 108
Urea (tons) 482 117 294 157
Ammonium nitrate (tons) 690 119 490 129
Methanol (gallons) 255,422 0.46 220,978 0.64
Natural gas costs: (a) Per MMBtu Per MMBtu
North America $2.94 $4.90
United Kingdom $2.33 $2.35
(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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