þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 52-1145429 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
Terra Centre | ||
P.O. Box 6000 | ||
600 Fourth Street | ||
Sioux City, Iowa | 51102-6000 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if smaller reporting company) |
Common Shares, without par value | 99,700,706 shares |
3 | ||||||||
4 | ||||||||
5 | ||||||||
7 | ||||||||
8 | ||||||||
36 | ||||||||
43 | ||||||||
44 | ||||||||
45 | ||||||||
45 | ||||||||
45 | ||||||||
45 | ||||||||
45 | ||||||||
45 | ||||||||
46 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 10.2 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
March 31, | December 31, | March 31, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
Assets |
||||||||||||
Cash and cash equivalents |
$ | 1,020,020 | $ | 966,700 | $ | 817,197 | ||||||
Accounts receivable, less allowance for
doubtful accounts of $613, $290 and $267 |
119,280 | 130,390 | 159,418 | |||||||||
Inventories |
160,339 | 197,091 | 210,237 | |||||||||
Margin deposits with derivative counterparties |
| 36,945 | 38 | |||||||||
Other current assets |
39,250 | 61,338 | 44,733 | |||||||||
Current assets of discontinued operations (Note 19) |
| | 45,593 | |||||||||
Total current assets |
1,338,889 | 1,392,464 | 1,277,216 | |||||||||
Property, plant and equipment, net |
406,844 | 403,313 | 379,746 | |||||||||
Equity method investments |
253,624 | 270,915 | 330,678 | |||||||||
Deferred plant turnaround costs, net |
27,053 | 23,467 | 34,753 | |||||||||
Other assets |
24,598 | 22,858 | 29,528 | |||||||||
Total assets |
$ | 2,051,008 | $ | 2,113,017 | $ | 2,051,921 | ||||||
Liabilities |
||||||||||||
Accounts payable |
$ | 98,556 | $ | 99,893 | $ | 160,661 | ||||||
Customer prepayments |
176,544 | 111,592 | 282,397 | |||||||||
Derivative hedge liabilities |
27,274 | 125,925 | 902 | |||||||||
Accrued and other current liabilities |
65,240 | 127,770 | 67,577 | |||||||||
Current liabilities of discontinued operations (Note 19) |
| | 16,764 | |||||||||
Total current liabilities |
367,614 | 465,180 | 528,301 | |||||||||
Long-term debt |
330,000 | 330,000 | 330,000 | |||||||||
Deferred taxes |
74,618 | 61,443 | 137,837 | |||||||||
Pension liabilities |
9,322 | 9,170 | 9,594 | |||||||||
Other liabilities |
78,452 | 78,553 | 80,172 | |||||||||
Total liabilities |
860,006 | 944,346 | 1,085,904 | |||||||||
Preferred Shares - liquidation value of $1,600; $1,600 and
$120,000 (Note 8) |
1,544 | 1,544 | 115,800 | |||||||||
Common Stockholders Equity |
||||||||||||
Capital stock |
||||||||||||
Common Shares, authorized 133,500 shares;
99,701; 99,330 and 91,382 outstanding |
152,481 | 152,111 | 143,964 | |||||||||
Paid-in capital |
580,035 | 579,164 | 619,384 | |||||||||
Accumulated other comprehensive loss |
(172,065 | ) | (175,529 | ) | (28,407 | ) | ||||||
Retained earnings |
527,557 | 507,299 | 4,841 | |||||||||
Total common stockholders equity |
1,088,008 | 1,063,045 | 739,782 | |||||||||
Noncontrolling interest (Note 2) |
101,450 | 104,082 | 110,435 | |||||||||
Total equity |
1,189,458 | 1,167,127 | 850,217 | |||||||||
Total liabilities and equity |
$ | 2,051,008 | $ | 2,113,017 | $ | 2,051,921 | ||||||
3
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Revenues |
||||||||
Product revenues |
$ | 418,362 | $ | 573,202 | ||||
Other income |
1,391 | 1,502 | ||||||
Total revenues |
419,753 | 574,704 | ||||||
Cost and Expenses |
||||||||
Cost of sales |
342,957 | 406,989 | ||||||
Selling, general and administrative expense |
20,268 | 12,704 | ||||||
Equity earnings of North American affiliates (Note 12) |
(3,252 | ) | (13,290 | ) | ||||
Total cost and expenses |
359,973 | 406,403 | ||||||
Income from operations |
59,780 | 168,301 | ||||||
Interest income |
1,810 | 8,408 | ||||||
Interest expense |
(6,728 | ) | (7,058 | ) | ||||
Income before income taxes, noncontrolling interest and equity
earnings (loss) of GrowHow UK Limited |
54,862 | 169,651 | ||||||
Income tax provision |
(12,585 | ) | (59,504 | ) | ||||
Equity earnings (loss) of GrowHow UK Limited (Note 12) |
(4,374 | ) | 9,284 | |||||
Income from continuing operations, net of tax |
37,903 | 119,431 | ||||||
Income from discontinued operations, net of tax (Note 19) |
| 152 | ||||||
Net income before noncontrolling interest |
37,903 | 119,583 | ||||||
Less: Net income attributable to the noncontrolling interest |
(7,908 | ) | (18,126 | ) | ||||
Net income attributable to Terra Industries Inc. |
29,995 | 101,457 | ||||||
Less: Net income attributable to preferred share dividends |
(17 | ) | (1,275 | ) | ||||
Income Available to Common Stockholders |
$ | 29,978 | $ | 100,182 | ||||
Basic income per common share attributable to Terra Industries Inc.: |
||||||||
Continued operations |
$ | 0.30 | $ | 1.11 | ||||
Discontinued operations (Note 19) |
| | ||||||
Basic income per common share |
$ | 0.30 | $ | 1.11 | ||||
Diluted income per common share attributable to Terra Industries Inc.: |
||||||||
Continuing operations |
$ | 0.30 | $ | 0.97 | ||||
Discontinued operations (Note 19) |
| | ||||||
Diluted income per common share |
$ | 0.30 | $ | 0.97 | ||||
Weighted average shares outstanding: |
||||||||
Basic |
99,040 | 90,165 | ||||||
Diluted |
99,760 | 104,429 | ||||||
Amounts attributable to Terra Industries Inc.: |
||||||||
Income from continuing operations, net of tax |
$ | 29,995 | $ | 101,305 | ||||
Income from discontinued operations, net of tax |
| 152 | ||||||
Net income attributable to Terra Industries Inc. |
$ | 29,995 | 101,457 | |||||
4
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Operating Activities |
||||||||
Net income attributable to Terra Industries Inc. |
$ | 29,995 | $ | 101,457 | ||||
Income from discontinued operations |
| 152 | ||||||
Income from continuing operations |
29,995 | 101,305 | ||||||
Adjustments to reconcile income from continuing operations
to net cash flows from operating activities: |
||||||||
Depreciation of property, plant and equipment and
amortization of deferred plant turnaround costs |
20,145 | 19,853 | ||||||
Loss on sale of property, plant and equipment |
235 | 477 | ||||||
Deferred income taxes |
(2,359 | ) | 37,901 | |||||
Noncontrolling interest in earnings |
7,908 | 18,126 | ||||||
Distributions in excess of (less than) equity earnings |
475 | (332 | ) | |||||
Equity (earnings) loss of GrowHow UK Limited |
4,374 | (9,284 | ) | |||||
Non-cash (gain) loss on derivatives |
621 | (661 | ) | |||||
Share-based compensation |
7,170 | 1,264 | ||||||
Amortization of intangible and other assets |
2,340 | 1,938 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
10,640 | 10,890 | ||||||
Inventories |
35,907 | (85,084 | ) | |||||
Accounts payable and customer prepayments |
64,112 | 32,805 | ||||||
Margin deposits with derivative counterparties |
36,945 | 600 | ||||||
Other assets and liabilities, net |
(133,385 | ) | (31,261 | ) | ||||
Net cash flows from operating activities continuing operations |
85,123 | 98,537 | ||||||
Net cash flows from operating activities discontinued operations |
| 11,037 | ||||||
Net cash flows from operating activities |
85,123 | 109,574 | ||||||
Investing Activities |
||||||||
Capital expenditures and plant turnaround expenditures |
(28,632 | ) | (7,099 | ) | ||||
Proceeds from sale of property, plant and equipment |
| 1,614 | ||||||
Distributions received from unconsolidated affiliates |
4,473 | 6,927 | ||||||
Contribution settlement received from GrowHow UK Limited |
| 27,890 | ||||||
Balancing consideration and other payments from GrowHow UK Limited |
5,230 | | ||||||
Net cash flows from investing activities |
(18,929 | ) | 29,332 | |||||
Financing Activities |
||||||||
Preferred share dividends paid |
(17 | ) | (1,275 | ) | ||||
Common stock issuances and vestings |
(5,270 | ) | (5,873 | ) | ||||
Excess tax benefits from equity compensation plans |
3,921 | 7,695 | ||||||
Distributions to noncontrolling interests |
(13,705 | ) | (20,526 | ) | ||||
Net cash flows from financing activities |
(15,071 | ) | (19,979 | ) | ||||
Effect of exchange rate changes on cash |
2,197 | 32 | ||||||
Increase to cash and cash equivalents |
53,320 | 118,959 | ||||||
Cash and cash equivalents at beginning of period |
966,700 | 698,238 | ||||||
Cash and cash equivalents at end of period |
$ | 1,020,020 | $ | 817,197 | ||||
5
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Supplemental cash flow information: |
||||||||
Interest paid |
$ | 11,829 | $ | 11,850 | ||||
Income tax refunds received |
766 | | ||||||
Income taxes paid |
66,532 | 5,527 | ||||||
Supplemental schedule of unconsolidated affiliates
distributions received from GrowHow UK Limited: |
||||||||
Contribution settlement payments, balancing consideration
and other payments received from GrowHow UK Limited |
$ | 5,230 | $ | 27,890 | ||||
Supplemental schedule of unconsolidated affiliates
distributions received from North America: |
||||||||
Equity in earnings of unconsolidated affiliates |
$ | 3,252 | $ | 13,290 | ||||
Distribution in excess of (less than) equity earnings |
475 | (332 | ) | |||||
Distributions received from unconsolidated affiliates |
4,473 | 6,927 | ||||||
Total cash distributions received from North American
unconsolidated affiliates |
$ | 8,200 | $ | 19,885 | ||||
6
Accumulated | (Accumulated | |||||||||||||||||||||||||||
Other | Deficit) | |||||||||||||||||||||||||||
Common | Paid-In | Comprehensive | Noncontrolling | Retained | Comprehensive | |||||||||||||||||||||||
Stock | Capital | Loss | Interest | Earnings | Total | Income | ||||||||||||||||||||||
Balance at January 1, 2009 |
$ | 152,111 | $ | 579,164 | $ | (175,529 | ) | $ | 104,082 | $ | 507,299 | $ | 1,167,127 | |||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||
Net income |
| | | 7,908 | 29,995 | 37,903 | $ | 37,903 | ||||||||||||||||||||
Foreign currency
translation adjustment |
| | (17,859 | ) | | | (17,859 | ) | (17,859 | ) | ||||||||||||||||||
Change in fair value of
derivatives, net of taxes
of $15,533 |
| | 21,323 | 3,165 | | 24,488 | 24,488 | |||||||||||||||||||||
Comprehensive income
before noncontrolling
interest |
$ | 44,532 | ||||||||||||||||||||||||||
Distributions to
noncontrolling interest |
| | | (13,705 | ) | | (13,705 | ) | ||||||||||||||||||||
Preferred share dividends |
| | | (17 | ) | (17 | ) | |||||||||||||||||||||
Common stock dividends |
| | | (9,987 | ) | (9,987 | ) | |||||||||||||||||||||
Excess tax benefit |
| 3,921 | | | 3,921 | |||||||||||||||||||||||
Nonvested stock |
370 | (5,640 | ) | | | (5,270 | ) | |||||||||||||||||||||
Share-based compensation |
| 2,590 | | | 2,590 | |||||||||||||||||||||||
Other |
| | | | 267 | 267 | ||||||||||||||||||||||
Balance March 31, 2009 |
$ | 152,481 | $ | 580,035 | $ | (172,065 | ) | $ | 101,450 | $ | 527,557 | $ | 1,189,458 | |||||||||||||||
Accumulated | (Accumulated | |||||||||||||||||||||||||||
Other | Deficit) | |||||||||||||||||||||||||||
Common | Paid-In | Comprehensive | Noncontrolling | Retained | Comprehensive | |||||||||||||||||||||||
Stock | Capital | Loss | Interest | Earnings | Total | Income | ||||||||||||||||||||||
Balance at January 1, 2008 |
$ | 142,170 | $ | 618,874 | $ | (44,180 | ) | $ | 108,581 | $ | (95,341 | ) | $ | 730,104 | ||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||
Net income |
| | | 18,126 | 101,457 | 119,583 | $ | 119,583 | ||||||||||||||||||||
Foreign currency
translation adjustment |
| | (2,886 | ) | | | (2,886 | ) | (2,886 | ) | ||||||||||||||||||
Change in fair value of
derivatives, net of taxes
of $12,337 |
| | 18,659 | 4,254 | | 22,913 | 22,913 | |||||||||||||||||||||
Comprehensive income
before noncontrolling
interest |
$ | 139,610 | ||||||||||||||||||||||||||
Distributions to
noncontrolling interest |
| | | (20,526 | ) | | (20,526 | ) | ||||||||||||||||||||
Preferred share dividends |
| | | | (1,275 | ) | (1,275 | ) | ||||||||||||||||||||
Exercise of stock options |
11 | 23 | | | | 34 | ||||||||||||||||||||||
Nonvested stock |
297 | 1,491 | | | | 1,788 | ||||||||||||||||||||||
Conversion of warrants |
1,486 | (1,486 | ) | | | | | |||||||||||||||||||||
Share-based compensation |
| 482 | | | | 482 | ||||||||||||||||||||||
Balance March 31, 2008 |
$ | 143,964 | $ | 619,384 | $ | (28,407 | ) | $ | 110,435 | $ | 4,841 | $ | 850,217 | |||||||||||||||
7
1. | Background and Basis of Presentation |
|
Terra Industries Inc. together with its subsidiaries (Terra, we, our, or us) is a leading
North American producer and marketer of nitrogen products made from natural gas. We also
operate production assets in Trinidad, and the United Kingdom, through joint
venture agreements. Our six North American and two international production locations,
along with a robust distribution capability, provide us with the ability to effectively
serve key agricultural, industrial and environmental markets. Our principal products are
anhydrous ammonia (ammonia), ammonium nitrate solutions (UAN), ammonium nitrate (AN), and
urea. Our principal customers are national agricultural retail chains, farm cooperatives,
independent dealers and industrial customers. We operate in one principal industry
segment Nitrogen Products, which is based upon the guidance provided in Statement of
Financial Accounting Standards (SFAS) 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131). As a wholesale nitrogen producer, we do not report industry
segments in a separate disclosure because our only reportable industry segment is nitrogen. |
||
The accompanying unaudited consolidated financial statements and notes thereto have been
prepared in accordance with the requirements of the U.S. Securities and Exchange Commission
for interim reporting. They do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. Therefore,
these financial statements should be read in conjunction with our audited consolidated
financial statements and notes thereto for the year ended December 31, 2008, included in
our 2008 Annual Report on Form 10-K. |
||
Terras significant accounting policies are described in the notes to consolidated
financial statements in our Annual Report on Form 10-K for the year ended December 31,
2008. Management is responsible for the unaudited consolidated financial statements
included in this document. The consolidated financial statements included in this document
are unaudited; however, they contain all normal recurring adjustments that, in the opinion
of management, are necessary for a fair presentation of Terras financial position, results
of operations and cash flows for the periods presented. |
||
Because of the seasonal nature of our operations and effects of weather-related conditions
in several of its marketing areas, results of any interim reporting period should not be
considered as indicative of results for future quarters or the full year. |
||
2. | New Accounting Pronouncements |
|
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS 141R,
Business Combinations (SFAS 141R), which changes the way we account for business
acquisitions. SFAS 141R requires the acquiring entity in a business combination to
recognize all (and only) the assets acquired and liabilities assumed in the transaction and
establishes the acquisition-date fair value as the measurement objective for all assets
acquired and liabilities assumed in a business combination. Certain provisions of SFAS 141R
will, among other things, impact the determination of acquisition-date fair value of
consideration paid in a business combination (including contingent consideration); exclude
transaction costs from acquisition accounting; and change accounting practices for acquired
contingencies, acquisition-related restructuring costs, in-process research and
development, indemnification assets, and tax benefits. SFAS 141R became effective for us on
January 1, 2009 and the adoption did not have an impact on our financial statements. |
8
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 improves the
comparability and transparency of financial statements when reporting minority interest.
Entities with a noncontrolling interest are required to clearly identify and present the
ownership interest in the consolidated statement of financial position within equity, but
separate from the parents equity. The amount of consolidated net income attributable to
the parent and to the noncontrolling interest is identified and presented on the face of
the consolidated statement of income. The statement offers further guidance on changes in
ownership interest, deconsolidation, and required disclosures. SFAS 160 became effective
for Terra on January 1, 2009. The adoption of SFAS 160 recharacterized minority interest as
noncontrolling interest and reclassified minority interest as a component of equity on our
financial statements. The adoption also recharacterized a portion of other comprehensive
income (loss) by allocating a portion of other comprehensive income (loss) to the
noncontrolling interest. Prior year amounts relating to noncontrolling interests have been
reclassified to conform to the current year presentation as required by SFAS 160. |
||
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161). SFAS 161 is an amendment of SFAS 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). To address concerns that the
existing disclosure requirements of SFAS 133 do not provide adequate information, SFAS 161
requires enhanced disclosures about an entitys derivative and hedging activities and
thereby improves the transparency of financial reporting. SFAS 161 became effective for
Terra on January 1, 2009 and we have included the additional disclosure information
required by SFAS 161 within Note 6, Derivative Financial Instruments, of the Notes to the
Consolidated Financial Statements. |
||
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating Securities (FSP
EITF 03-6-1). The FASB decided that unvested share-based payout awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of EPS pursuant to the
two-class method under SFAS 128, Earnings per Share. FSP EITF 03-6-1 became effective for Terra
on January 1, 2009 and the adoption did not have an impact on our financial statements. |
||
In December 2008, the FASB issued FSP 132(R)-1, Employers Disclosures about Postretirement
Benefit Plan Assets, which amends Statement 132(R) to require more detailed disclosures
about employers pension plan assets. New disclosures will include more information on
investment strategies, major categories of plan assets, concentrations of risk within plan
assets and valuation techniques used to measure the fair value of plan assets. This new
standard requires new disclosures only, and will have no impact on our consolidated
financial position, results of operations or cash flows. These new disclosures will be
required for us beginning in our Form 10-K for the 2009 fiscal year. |
||
In April 2009, the FASB issued FASB Staff Position No. 107-1 (FSP FAS 107-1) and APB 28-1
(APB 28-1), which amends FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments and APB Opinion No. 28, Interim Financial Reporting, to require disclosures
about the fair value of financial instruments for interim reporting periods. FSP FAS 107-1
and APB 28-1 will be effective for interim reporting periods ending after June 15, 2009. We
are currently evaluating the future impacts and disclosures of this staff position. |
||
In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Whether a Market
is not Active and a Transaction is not Distressed (FSP FAS 157-4), which provides
additional guidance in accordance with FASB No. 157, Fair Value Measurements, when the
volume and level of activity for
the asset or liability has significantly decreased. FSP FAS 157-4 shall be effective for
interim and annual reporting periods ending after June 15, 2009. We are currently
evaluating the future impacts and disclosures of this staff position. |
9
3. | Unsolicited Exchange Offer by CF Industries Holdings, Inc. |
|
On January 15, 2009, CF Industries Holdings, Inc. (CF) presented a letter to our Board of
Directors proposing CFs acquisition of Terra in an all-stock transaction. Terras Board
rejected the proposal on the grounds that it was not in the best interest of Terra or its
stockholders and substantially undervalued the Company. CF Industries subsequently
announced that they remained committed to the proposal, and on February 3, 2009, announced
that they would nominate three director candidates to Terras Board and commence an
exchange offer for all of Terras outstanding common shares. |
||
On February 23, 2009, CF announced that it had commenced an unsolicited exchange offer to
acquire all of the outstanding common shares of Terra at a fixed exchange ratio of 0.4235
CF shares for each Terra common share. In response, Terras Board of Directors announced on
February 23, 2009, that it would review and consider CFs exchange offer and make a formal
recommendation to shareholders within ten business days, and further advised Terras
shareholders to take no action pending the review of the proposed exchange offer by Terras
Board. On March 3, 2009, Terras Board of Directors unanimously concluded that CFs offer
did not present a compelling case to create additional value for the stockholders of either
Terra or CF, substantially undervalues Terra on an absolute basis and relative to CF and is
not in the best interests of Terra and its stockholders. |
||
On March 9, 2009, CF sent a letter to Terras Board of Directors stating CF would be
prepared to enter into a negotiated merger agreement with Terra on the basis of an exchange
ratio based on $27.50 for each Terra common share, with an exchange ratio of not less than
0.4129 of a CF common share and not more than 0.4539 of a CF common share. On March 11,
2009, Terras Board of Directors unanimously concluded that CFs proposal continues to run
counter to Terras strategic objectives, substantially undervalues Terra both absolutely
and relative to CF, and would deliver less value to Terras stockholders than would owning
Terra on a stand-alone basis. |
||
On March 23, 2009, CF sent a letter to Terras Board of Directors stating CF would be
prepared to enter into a negotiated merger agreement with Terra on the basis of an exchange
ratio based on $30.50 for each Terra share, with an exchange ratio of not less than 0.4129
of a CF common share and not more than 0.4539 of a CF common share, the same collar as CFs
proposal of March 9, 2009. On March 24, 2009, Terras Board of Directors unanimously
concluded CFs proposal continues to run counter to Terras strategic objectives,
substantially undervalues Terra both absolutely and relative to CF and would deliver less
value to Terras stockholders than would owning Terra on a stand-alone basis. |
||
4. | Income (Loss) Per Share |
|
Basic income (loss) per share data is based on the weighted-average number of common shares
outstanding during the period. Diluted income (loss) per share data is based on the
weighted-average number of common shares outstanding and the effect of all dilutive
potential common shares including stock options, nonvested shares, convertible preferred
shares and common stock warrants. Nonvested stock carries dividend and voting rights, but
is not included in the weighted average number of common shares outstanding used to compute
basic income (loss) per share since they are contingently returnable. |
10
The following table provides a reconciliation between basic and diluted income (loss) per
share attributable to Terra Industries Inc. for the three-month periods ended March 31,
2009 and 2008: |
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands, except per-share amounts) | 2009 | 2008 | ||||||
Basic income per common share
attributable to Terra Industries Inc.: |
||||||||
Income from continuing operations |
$ | 29,995 | $ | 101,305 | ||||
Less: Preferred share dividends |
(17 | ) | (1,275 | ) | ||||
Income from continuing operations
available to common stockholders |
29,978 | 100,030 | ||||||
Income from discontinued operations
available to common stockholders |
| 152 | ||||||
Income available to
common stockholders |
$ | 29,978 | $ | 100,182 | ||||
Weighted average shares outstanding |
99,040 | 90,165 | ||||||
Income per share continuing operations |
$ | 0.30 | $ | 1.11 | ||||
Income per share discontinued operations |
| | ||||||
Net income per share |
$ | 0.30 | $ | 1.11 | ||||
Diluted income per common share
attributable to Terra Industries Inc.: |
||||||||
Income from continuing operations
available to common stockholders |
$ | 29,978 | $ | 100,030 | ||||
Add: Preferred share dividends |
17 | 1,275 | ||||||
Income available to common
stockholders and assumed conversions |
$ | 29,995 | $ | 101,305 | ||||
Weighted average shares outstanding |
99,040 | 90,165 | ||||||
Add incremental shares from
assumed conversions: |
||||||||
Preferred shares |
161 | 12,048 | ||||||
Non vested stock |
559 | 397 | ||||||
Common stock warrants |
| 1,815 | ||||||
Common stock options |
| 4 | ||||||
Dilutive potential common shares |
99,760 | 104,429 | ||||||
Income per
share continuing operations |
$ | 0.30 | $ | 0.97 | ||||
Income per share discontinued operations |
| | ||||||
Net income per share |
$ | 0.30 | $ | 0.97 | ||||
11
5. | Inventories |
|
Inventories consisted of the following: |
March 31, | December 31, | March 31, | ||||||||||
(in thousands) | 2009 | 2008 | 2008 | |||||||||
Raw materials |
$ | 16,544 | $ | 17,805 | $ | 15,766 | ||||||
Supplies |
34,012 | 33,825 | 33,736 | |||||||||
Finished goods |
109,783 | 145,461 | 160,735 | |||||||||
Total |
$ | 160,339 | $ | 197,091 | $ | 210,237 | ||||||
Production costs include the cost of direct labor and materials, depreciation and
amortization, and overhead costs related to manufacturing activities. We allocate fixed
production overhead costs based on the normal capacity of our production facilities and
unallocated overhead costs are recognized as expense in the period incurred. We determine
the cost of inventories using the first-in, first-out method. |
||
Inventories are stated at the lower of cost or market. Market is defined as current
replacement cost, except that market should not exceed the net realizable value and should
not be less than net realizable value reduced by an allowance for an approximately normal
profit margin. The cost of inventories is determined using the first-in, first-out method.
We perform a monthly analysis of our inventory balances to determine if the carrying amount
of inventories exceeds our net realizable value. Our determination of estimated net
realizable value is based on customer orders, market trends and historical pricing. If the
carrying amount exceeds the estimated net realizable value, the carrying amount is reduced
to the estimated net realizable value. |
||
We estimate a reserve for obsolescence and excess of our materials and supplies inventory.
Inventory is stated net of the reserve. |
||
6. | Derivative Financial Instruments |
|
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161). SFAS 161 is an amendment of SFAS 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). This statement requires enhanced
disclosures about an entitys derivative and hedging activities and thereby improves the
transparency of financial reporting. SFAS 161 became effective for Terra on January 1, 2009
and we have incorporated the additional disclosure information for SFAS 161 below. |
||
We enter into derivative financial instruments, including swaps, basis swaps, purchased put
and call options and sold call options, to manage the effect of changes in natural gas
costs and the price of our nitrogen products. We report the fair value of the derivatives
on our balance sheet. If the derivative is not designated as a hedging instrument, changes
in fair value are recognized in earnings in the period of change. If the derivative is
designated as a cash flow hedge, and to the extent such hedge is determined to be
effective, changes in fair value are reported as a component of accumulated other
comprehensive income (loss) in the period of change, and subsequently recognized in our
statement of operations in the period the offsetting hedged transaction occurs. If an
instrument or the hedged item is settled early, we evaluate whether the hedged forecasted
transaction is still probable of occurring when determining whether to reclassify any gains
or losses immediately in cost of sales or wait until the forecasted transaction occurs. |
12
Until our derivatives settle, we test derivatives for ineffectiveness. This includes
assessing the correlation of New York Mercantile Exchange(NYMEX) pricing, which is commonly used as an index in natural
gas derivatives, to the natural gas pipelines pricing at our manufacturing facilities.
This assessment requires management judgment to determine the statistically-and
industry-appropriate analysis of prior operating relationships between the NYMEX prices and
the natural gas pipelines prices at our facilities. |
||
To the extent possible, we base our market value calculations on third party data. Due to
multiple types of settlement methods available, not all settlement methods for future
period trades are available from third party sources. In the event that a derivative is
measured for fair value based on a settlement method that is not readily available, we
estimate the fair value based on forward pricing information for similar types of
settlement methods. |
||
We manage risk using derivative financial instruments for changes in natural gas supply
prices and changes in nitrogen prices. Derivative financial instruments have credit risk
and market risk. |
||
To manage credit risk, we enter into derivative transactions only with counter-parties who
are currently rated as BBB or better or equivalent as recognized by a national rating
agency. We will not enter into transactions with a counter-party if the additional
transaction will result in credit exposure exceeding $20 million. The credit rating of
counter-parties may be modified through guarantees, letters of credit or other credit
enhancement vehicles. As of March 31, 2009, we did not have any credit risk related
contingent features that would require us to settle the derivative instruments or to post
collateral upon the occurrence of a credit event. |
||
We classify a derivative financial instrument as a hedge if all of the following conditions
are met: |
1. | The item to be hedged must expose us to currency, interest or price risk; |
||
2. | It must be probable that the results of the hedge position substantially
offset the effects of currency, interest or price changes on the hedged item (e.g.,
there is a high correlation between the hedge position and changes in market value
of the hedge item); and |
||
3. | The derivative financial instrument must be designated as a hedge of the item
at the inception of the hedge. |
Natural gas supplies to meet production requirements at our North American production
facilities are purchased at market prices. Natural gas market prices are volatile and we
effectively fix prices for a portion of our natural gas production requirements and
inventory through the use of swaps and options. The North American contracts reference
physical natural gas prices or appropriate NYMEX futures contract prices. Contract physical
prices for North America are frequently based on prices at the Henry Hub in Louisiana, the
most common and financially liquid location of reference for financial derivatives related
to natural gas. However, natural gas supplies for our North American production facilities
are purchased at locations other than Henry Hub, which often creates a location basis
differential between the contract price and the physical price of natural gas.
Accordingly, the use of financial derivatives may not exactly offset the change in the
price of physical gas. Natural gas derivatives are designated as cash flow hedges, provided
that the derivatives meet the conditions discussed above. The contracts are traded in
months forward and settlement dates are scheduled to coincide with gas purchases during
that future period. |
||
A swap is a contract between us and a third party to exchange cash based on a designated
price. Option contracts give the holder the right to either own or sell a futures or swap
contract. The option contracts require initial premium payments ranging from 2% to 5% of
contract value. Basis swap contracts require payments to or from us for the amount, if any,
that monthly published gas prices from the source specified in the contract differ from the
prices of NYMEX natural gas futures during a specified
period. There are no initial cash requirements related to the swap and basis swap
agreements; however, the counterparties require maintenance of cash margin balances
generally 10% to 20% of the contract value. |
13
The following summarizes open derivative contracts at March 31, 2009 and 2008: |
March 31, | March 31, | |||||||||
2009 | 2008 | |||||||||
(in thousands) | Contract | Contract | ||||||||
Transaction Type | Commodity Type | MMBtu | MMBtu | |||||||
Swaps |
Natural Gas | 16,932 | 18,520 | |||||||
Basis swaps |
Natural Gas | 16,020 | 15,495 | |||||||
Purchased put options |
Natural Gas | 5,810 | | |||||||
Purchased call options |
Natural Gas | 11,220 | |
The following summarizes the gross fair market value of all derivative instruments and their
location in our Consolidated Balance Sheet are shown by those in an asset or liability
position and are categorized as commodity derivatives. |
Asset Derivatives (a) | ||||||||||||||||
March 31, | December 31, | March 31, | ||||||||||||||
Derivative Instrument | Location | 2009 | 2008 | 2008 | ||||||||||||
Commodity Derivatives |
Other current assets | $ | 7,447 | $ | 25,773 | $ | 28,001 |
Liability Derivatives (a) | ||||||||||||||||
March 31, | December 31, | March 31, | ||||||||||||||
Derivative Instrument | Location | 2009 | 2008 | 2008 | ||||||||||||
Commodity Derivatives |
Derivative hedge liabilities | $ | (27,274 | ) | $ | (125,925 | ) | $ | (902 | ) |
(a) | Amounts are disclosed at gross fair value in accordance with SFAS 161
requirements. All of our commodity derivatives are designated as cash flow hedging
instruments under SFAS 133. See footnote 1 and 5 of our 2008 Annual Report Form
10-K for additional information on our overall risk management strategies. The
deferred taxes related to these commodity derivatives for the periods ended March
31, 2009, December 31, 2008 and March 31, 2008 were $9.6 million, $25.2 million
and $9.3 million, respectively. |
Certain derivatives outstanding at March 31, 2009 and 2008, which settled during April 2009
and April 2008, respectively, are included in the position of open natural gas derivatives
in the table above. The April 2009 derivatives settled for an approximate $14.6 million
loss compared to the April 2008 derivatives which settled for an approximate $9.4 million
gain. All open derivatives at March 31, 2009 will settle during the next twelve months. |
||
We are required to maintain certain margin deposits on account with derivative
counterparties. At March 31, 2009, we had no margin deposits with derivative
counterparties, which are reported as Margin deposits with derivative counterparties on
the Consolidated Statements of Financial Position. At December 31, 2008 and March 31, 2008,
we had margin deposits with derivative counterparties of $36.9 million and less than $0.1
million, respectively. |
||
At March 31, 2009 and 2008, we determined that a portion of certain derivative contracts
were ineffective for accounting purposes and, as a result, recorded a $1.1 million and $0.5
million charge to cost of sales, respectively. At March 31, 2009, we excluded a portion of
the loss on certain derivative
contracts from the effectiveness assessment and, as a result, recorded a $4.3 million
charge to cost of sales. |
14
The effective portion of gains and losses on derivative contracts that qualify for hedge
treatment are carried as accumulated other comprehensive income (loss) and credited or
charged to cost of sales in the month in which the hedged transaction settles. Gains and
losses on the contracts that do not qualify for hedge treatment are credited or charged to
cost of sales based on the positions fair value. The risk and reward of outstanding
natural gas positions are directly related to increases or decreases in natural gas prices
in relation to the underlying NYMEX natural gas contract prices. |
||
All of our commodity derivatives are designated as cash flow hedging instruments under SFAS
133. See footnote 1 and 5 of our 2008 Annual Report Form 10-K for additional information on
our overall risk management strategies. The following table presents the effect of our
commodity derivative instruments on the Consolidated Statement of Operations for the three
months ended March 31, 2009 and 2008. |
Amount of Gain (Loss) | ||||||||||||||||||||||||||||||||
Amount of Gain (Loss) | Location of Gain | Reclassified from AOCI | Amount of Gain (Loss) | |||||||||||||||||||||||||||||
Recognized in OCI | (Loss) Reclassified | into Income | Recognized in Income (b) | |||||||||||||||||||||||||||||
March 31, | March 31, | from AOCI into | March 31, | March 31, | Location of Gain (Loss) | March 31, | March 31, | |||||||||||||||||||||||||
2009 | 2008 | Income (a) | 2009 | 2008 | Recognized in Income (b) | 2009 | 2008 | |||||||||||||||||||||||||
$ | (32,870 | ) | $ | 42,747 | Cost of Sales | $ | (72,891 | ) | $ | 7,497 | Cost of Sales | $ | (5,351 | ) | $ | 484 |
(a) | Effective portion of gain (loss) |
|
(b) | The amount of gain or (loss) recognized in income represents ($1.1) million
and ($0.5) million related to the ineffective portion of the hedging relationships
and ($4.3) million and $ related to the amount excluded from the assessment of
hedge effectiveness. |
The activity to accumulated other comprehensive income (loss), net of income taxes and
before allocation to our noncontrolling interest, relating to current period hedging
transactions for the three-month periods ended March 31, 2009 and 2008 follows: |
Three Months Ended March 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
(in thousands) | Gross | Net of tax | Gross | Net of tax | ||||||||||||
Beginning accumulated loss |
$ | (65,279 | ) | $ | (40,099 | ) | $ | (8,635 | ) | $ | (5,612 | ) | ||||
Reclassification into earnings |
72,891 | 44,733 | (7,497 | ) | (4,873 | ) | ||||||||||
Net change in market value |
(32,870 | ) | (20,245 | ) | 42,747 | 27,786 | ||||||||||
Ending accumulated income (loss) |
$ | (25,258 | ) | $ | (15,611 | ) | $ | 26,615 | $ | 17,301 | ||||||
Approximately $25.3 million of the net accumulated loss at March 31, 2009 will be
reclassified into earnings during the next twelve months as compared to $26.6 million of
the net accumulated income at March 31, 2008. |
||
7. | Fair Value Measurements |
|
On January 1, 2008, we adopted SFAS 157, Fair Value Measurements (SFAS 157), which, among
other things, requires enhanced disclosure of assets and liabilities measured and reported
at fair value. In February 2008, the Financial Accounting Standards Board (FASB) issued
FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which delayed for
one year the applicability of SFAS 157s fair-value measurements to certain nonfinancial
assets and liabilities. Except as it applies to those nonfinancial assets and liabilities
affected by the one-year delay, we adopted SFAS 157 on
January 1, 2008. On January 1, 2009, we adopted SFAS 157 as it applies to those
nonfinancial assets and liabilities affected by the one-year delay. The adoption of SFAS
157 did not have a material impact on our financial statements. |
15
SFAS 157 establishes a three level hierarchal disclosure framework that prioritizes and
ranks the level of market price observability used in measuring assets and liabilities at
fair value. Market price observability is impacted by a number of factors, including the
type of asset or liability and its characteristics. Assets and liabilities with readily
available active quoted prices or for which fair value can be measured from actively quoted
prices generally will have a higher degree of market price observability and a lesser
degree of judgment used in measuring fair value. |
||
The three levels are defined as follows: |
| Level 1 inputs to the valuation methodology are unadjusted quoted prices for
identical assets or liabilities in active markets. |
||
| Level 2 inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the
full term of the financial instrument. |
||
| Level 3 inputs to the valuation methodology are unobservable and significant
to the fair value measurement. |
We evaluated our assets and liabilities to determine which items should be disclosed
according to SFAS 157. We currently measure our derivative contracts on a recurring basis
at fair value. The inputs included in the fair value measurement of our derivative
contracts use adjusted quoted prices from an active market, which are classified as level 2
as a significant other observable input in the disclosure hierarchy framework as defined by
SFAS 157. Our gas derivative contracts, which are classified as a level 2 input, are
comprised of swaps, basis swaps and options. The valuation techniques for these contracts
are observable market data for inputs, including prices quoted on the
NYMEX, prices quoted in spot markets and commonly referenced industry publications and
prices quoted by market makers. There have been no changes in valuation techniques during
the quarter ending March 31, 2009. |
||
The following table summarizes the valuation of our assets and liabilities in accordance
with SFAS 157 fair value hierarchy levels as of March 31, 2009: |
Quoted Market | Significant Other | Significant | ||||||||||
Prices in Active | Observable | Unobservable | ||||||||||
Markets | Inputs | Inputs | ||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | |||||||||
Assets |
||||||||||||
Derivative contracts |
$ | | $ | 7,447 | $ | | ||||||
Total |
$ | | $ | 7,447 | $ | | ||||||
Liabilities |
||||||||||||
Derivative contracts |
$ | | $ | (27,274 | ) | $ | | |||||
Total |
$ | | $ | (27,274 | ) | $ | | |||||
16
The following table summarized the valuation of our assets and liabilities in accordance
with SFAS 157 fair value hierarchy levels of December 31, 2008: |
Quoted Market | Significant Other | Significant | ||||||||||
Prices in Active | Observable | Unobservable | ||||||||||
Markets | Inputs | Inputs | ||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | |||||||||
Assets |
||||||||||||
Derivative contracts |
$ | | $ | 25,773 | $ | | ||||||
Total |
$ | | $ | 25,773 | $ | | ||||||
Liabilities |
||||||||||||
Derivative contracts |
$ | | $ | (125,925 | ) | $ | | |||||
Total |
$ | | $ | (125,925 | ) | $ | | |||||
The following table summarized the valuation of our assets and liabilities in accordance
with SFAS 157 fair value hierarchy levels of March 31, 2008: |
Quoted Market | Significant Other | Significant | ||||||||||
Prices in Active | Observable | Unobservable | ||||||||||
Markets | Inputs | Inputs | ||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | |||||||||
Assets |
||||||||||||
Derivative contracts |
$ | | $ | 28,001 | $ | | ||||||
Total |
$ | | $ | 28,001 | $ | | ||||||
Liabilities |
||||||||||||
Derivative contracts |
$ | | $ | (902 | ) | $ | | |||||
Total |
$ | | $ | (902 | ) | $ | | |||||
8. | Preferred Shares |
|
The components of preferred shares outstanding at March 31: |
2009 | 2008 | |||||||||||||||
Number | Carrying | Number | Carrying | |||||||||||||
(in thousands) | of shares | Value | of shares | Value | ||||||||||||
Series A Preferred Shares
(120,000 shares authorized,
$1,000 per share liquidation value) |
1,600 | $ | 1,544 | 120,000 | $ | 115,800 |
We had 1,600 shares of cumulative convertible perpetual Series A Preferred Shares with a
liquidation value of $1,000 per share outstanding at March 31, 2009 and 120,000 shares with
a liquidation value of $1,000 per share at March 31, 2008. Cumulative dividends of $10.625
per share are payable quarterly. The Series A Preferred Shares are not redeemable, but are
convertible into our common stock at the option of the holder for a conversion price of
$9.96 per common share. The Series A shares may automatically be converted to common shares
after December 20, 2009 if the closing price for our common shares exceeds 140% of the
conversion price for twenty days within a consecutive
thirty day period prior to such conversion. Upon the occurrence of a fundamental change to
our capital structure, including a change of control, merger, or sale of Terra, holders of
the Series A Preferred Shares may require us to purchase any or all of their shares at a
price equal to their liquidation value plus any accumulated, but unpaid, dividends. We also
have the right, under certain conditions, to require holders of the Series A Preferred
Shares to exchange their shares for convertible subordinated debentures with similar terms. |
17
In September 2008 we commenced offers (the inducement offers) to pay a cash premium to
holders of the Series A Preferred Shares who elected to convert their Series A Preferred
Shares into shares of Terra common stock. A total of 118,400 shares or 99% of the
outstanding shares of Series A Preferred Shares were surrendered and converted as part of
the inducement offers. The former holders of the Series A Preferred Shares received, in the
aggregate, the following: |
| 11,887,550 shares of Terra Industries common stock; and |
||
| A cash premium of approximately $5.3 million |
The $5.3 million represents the difference between the fair value of all securities and
other consideration transferred in the transaction to the preferred stockholders and the
fair value of securities issuable pursuant to the original conversion terms of the Series A
Preferred Shares less the costs related to the inducement offers. |
||
9. | Turnaround Costs |
|
The following represents a summary of the deferred plant turnaround costs for the three
months ended March 31, 2009 and 2008: |
Turnaround | Currency | |||||||||||||||||||
Beginning | Costs | Turnaround | Translation | Ending | ||||||||||||||||
(in thousands) | Balance | Capitalized | Amortization | Adjustments | Balance | |||||||||||||||
Period ended: |
||||||||||||||||||||
March 31, 2009 |
$ | 23,467 | $ | 9,328 | $ | (5,620 | ) | $ | (122 | ) | $ | 27,053 | ||||||||
March 31, 2008 |
42,190 | 627 | (7,571 | ) | (493 | ) | 34,753 |
10. | Accrued and Other Liabilities |
|
Accrued and other current liabilities consisted of the following: |
March 31, | December 31, | March 31, | ||||||||||
(in thousands) | 2009 | 2008 | 2008 | |||||||||
Payroll and benefit costs |
$ | 14,165 | $ | 27,104 | $ | 15,283 | ||||||
Accrued dividends payable |
10,483 | | | |||||||||
Income taxes payable |
8,224 | 63,999 | 25,942 | |||||||||
Current accrued phantom shares |
5,341 | 4,341 | 6,898 | |||||||||
Accrued interest |
3,974 | 9,748 | 3,976 | |||||||||
Deferred revenue |
3,585 | 3,346 | 1,376 | |||||||||
Accrued property taxes |
1,937 | 3,291 | 1,992 | |||||||||
Other |
17,531 | 15,941 | 12,110 | |||||||||
$ | 65,240 | $ | 127,770 | $ | 67,577 | |||||||
18
11. | Other Liabilities |
|
Other liabilities consisted of the following: |
March 31, | December 31, | March 31, | ||||||||||
(in thousands) | 2009 | 2008 | 2008 | |||||||||
Unrecognized tax benefit |
$ | 35,949 | $ | 35,949 | $ | 33,560 | ||||||
Long-term medical and
closed facility reserve |
23,885 | 23,887 | 24,316 | |||||||||
Long-term deferred revenue |
10,114 | 10,488 | 10,656 | |||||||||
Accrued phantom shares |
2,678 | 2,430 | 5,018 | |||||||||
Other |
5,826 | 5,799 | 6,622 | |||||||||
$ | 78,452 | $ | 78,553 | $ | 80,172 | |||||||
12. | Equity Investments |
|
Trinidad and United States |
||
Our investment in Trinidad and U.S. companies that are accounted for on the equity method
of accounting and included in operations consist of the following: (1) 50% ownership
interest in Point Lisas Nitrogen Limited, (PLNL) which operates an ammonia production plant
in Trinidad (2) 50% interest in an ammonia storage joint venture located in Houston, Texas
and (3) 50% interest in a joint venture in Oklahoma CO2 at our Verdigris
nitrogen plant. These investments were $126.6 million and
$145.4 million at March 31, 2009 and 2008, respectively. We include the
net earnings of these investments as an element of income from operations because the
investees operations provide additional capacity to our operations. |
||
The combined results of operations and financial position of our equity method investments
are summarized below: |
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Condensed income statement
information: |
||||||||
Net sales |
$ | 37,979 | $ | 98,535 | ||||
Net income |
$ | 8,007 | $ | 31,281 | ||||
Terras equity in earnings
of unconsolidated affiliates |
$ | 3,252 | $ | 13,290 | ||||
March 31, | March 31, | |||||||
(in thousands) | 2009 | 2008 | ||||||
Condensed balance sheet information: |
||||||||
Current assets |
$ | 47,448 | $ | 72,576 | ||||
Long-term assets |
169,549 | 186,981 | ||||||
Total assets |
$ | 216,997 | $ | 259,557 | ||||
Current liabilities |
$ | 17,464 | $ | 47,464 | ||||
Long-term liabilities |
20,226 | 11,265 | ||||||
Equity |
179,307 | 200,828 | ||||||
Total liabilities and equity |
$ | 216,997 | $ | 259,557 | ||||
19
The carrying value of these investments at March 31, 2009 was $37.0 million more than our
share of the affiliates book value. The excess is attributable primarily to the step-up
in basis for fixed asset values, which is being depreciated over a period of approximately
fifteen years. Our equity in earnings of unconsolidated subsidiaries is different than our
ownership interest in income reported by the unconsolidated subsidiaries due to deferred
profits on intergroup transactions and amortization of basis differences. |
||
We have transactions in the normal course of business with PLNL whereby we are obliged to
purchase 50% of the ammonia produced by PLNL at current market prices. During the
three-month period ending March 31, 2009, we purchased approximately $16.5 million of
ammonia from PLNL. During the three-month period ending March 31, 2008, we purchased
approximately $33.3 million of ammonia from PLNL. |
||
We received $8.2 million and $19.9 million in distributions from all of our equity
investments in the three-month periods ending March 31, 2009 and 2008, respectively. |
||
United Kingdom |
||
On September 14, 2007, we completed the formation of GrowHow UK Limited (GrowHow), a joint
venture between Terra and Kemira GrowHow Oyj (Kemira). Pursuant to the joint venture
agreement, we contributed our United Kingdom subsidiary Terra Nitrogen (UK) Limited to the
joint venture for a 50% interest. Subsequent to the formation, we have accounted for our
investment in GrowHow as a non-operating equity method investment. We do not include the net
earnings of this investment as an element of income from operations since the investees
operations do not provide additional capacity to us, nor are its operations integrated with
our supply chain in North America. The GrowHow joint venture includes the Kemira site at
Ince and our former Teeside and Severnside sites. |
||
In January 2008 GrowHow closed the Severnside manufacturing facility. Pursuant to the
agreement with Kemira, we are responsible for any remediation costs required to prepare the
Severnside site for disposal. We anticipate remediation costs to be approximately between
$5.0 million and $10.0 million. We have an option to purchase the Severnside land for a
nominal amount at any time prior to sale. If we elect not to exercise this option, we are
still entitled to receive the sales proceeds. We anticipate that the proceeds related to
the sale of the Severnside land will exceed the total cost of reclamation of the site. |
||
The Joint Venture Contribution Agreement specifies that we are entitled to receive a
minimum balancing consideration payment of up to £60 million based on GrowHows operating
results for fiscal 2008 to 2010. Pursuant to agreements with Kemira, we received minimum
balancing consideration and other payments totaling
£3.7 million ($5.2 million) during the first quarter of 2009. We also received £38.0
million ($61.3 million) of balancing consideration payments during fiscal year 2008. In
addition, we received $27.4 million from GrowHow during fiscal year 2008 for the refund of
working capital contributions in excess of amounts specified in the Joint Venture
Contribution Agreement. The carrying value of this equity method investment was $127.0
million and $185.3 million at March 31, 2009 and 2008, respectively. |
20
The three-month results of operations and financial position of our equity method
investment in GrowHow at March 31, 2009 and 2008 were: |
(in thousands) | 2009 | 2008 | ||||||
Condensed income statement information: |
||||||||
Net sales |
$ | 107,660 | $ | 266,827 | ||||
Net income (loss) |
$ | (7,855 | ) | $ | 21,366 | |||
Terras equity in earnings (loss)
of unconsolidated affiliates |
$ | (4,374 | ) | $ | 9,284 | |||
Condensed balance sheet information: |
||||||||
Current assets |
$ | 170,569 | $ | 260,910 | ||||
Long-term assets |
205,353 | 263,130 | ||||||
Total assets |
$ | 375,922 | $ | 524,040 | ||||
Current liabilities |
$ | 66,937 | $ | 143,182 | ||||
Long-term liabilities |
93,313 | 173,942 | ||||||
Equity |
215,672 | 206,916 | ||||||
Total liabilities and equity |
$ | 375,922 | $ | 524,040 | ||||
The carrying value of these investments at March 31, 2009 was $19.2 million more than our
share of GrowHows book value. The excess is attributable primarily to the step-up in basis
for fixed asset values, which is being depreciated over a period of approximately twelve
years. Our equity earnings of GrowHow are different than our ownership interest in
GrowHows net income due to the amortization of basis differences. |
||
13. | Long-term Debt |
|
Long-term debt consisted of the following: |
March 31, | December 31, | March 31, | ||||||||||
(in thousands) | 2009 | 2008 | 2008 | |||||||||
Unsecured Senior Notes, 7.0%
due 2017 |
$ | 330,000 | $ | 330,000 | $ | 330,000 | ||||||
Total long-term debt |
330,000 | 330,000 | 330,000 | |||||||||
Less current maturities |
| | | |||||||||
Total long-term debt |
$ | 330,000 | $ | 330,000 | $ | 330,000 | ||||||
In 2007, Terra Capital, Inc., (TCAPI) a subsidiary of Terra Industries Inc.,
issued $330 million of 7.0% Senior Notes due 2017 (the 7.0% Notes). The notes are unconditionally guaranteed by Terra and
certain of its U.S. subsidiaries (the Guarantor Subsidiaries); see Note 18, Guarantor
Subsidiaries, of the Notes to the Consolidated Financial Statements. These notes and
guarantees are unsecured and will rank equal in right of payment with any existing and
future senior obligations of such guarantors. |
||
The Indenture governing the 7.0% Notes contains covenants that limit, among other things,
our ability to: incur additional debt, pay dividends on common stock of Terra or repurchase
shares of such common stock, make certain investments, sell any of our principal production
facilities or sell other assets outside the ordinary course of business, enter into
transactions with affiliates, limit dividends or
other payments by our restricted subsidiaries, enter into sale and leaseback transactions,
engage in other businesses, sell all or substantially all of our assets or merge with or
into other companies, and reduce our insurance coverage. |
21
We are obligated to offer to repurchase these notes upon a Change of Control (as defined in
the Indenture) at a cash price equal to 101% of the aggregate principal amount outstanding
at that time, plus accrued and unpaid interest to the date of purchase. The Indenture
governing these notes contains events of default and remedies customary for a financing of
this type. |
||
The $200 million revolving credit
facilities (the facilities) due 2012 are secured by substantially all of our working capital.
Borrowing availability is generally based on 100% of eligible cash balances, 85% of
eligible accounts receivable, 60% of eligible finished goods inventory and is reduced by
outstanding letters of credit. These facilities include $50 million available only for the
use of Terra Nitrogen Company, L.P. (TNCLP), one of our consolidated subsidiaries.
Borrowings under the revolving credit facilities will bear interest at a floating rate plus
an applicable margin, which can be either a base rate, or, at our option, a London
Interbank Offered Rate (LIBOR). At March 31, 2009, the LIBOR rate was 0.50%. The base rate
is the highest of (1) Citibank, N.A.s base rate (2) the federal funds effective rate, plus
one-half percent (0.50%) per annum and (3) the base three month certificate of deposit
rate, plus one-half percent (0.50%) per annum, plus an applicable margin in each case.
LIBOR loans will bear interest at LIBOR plus an applicable margin. The applicable margins
for base rate loans and LIBOR loans were 0.50% and 1.75%, respectively, at March 31, 2009.
The revolving facilities require an initial one-half percent (0.50%) commitment fee on the
difference between committed amounts and amounts actually borrowed. |
||
The facilities and the Indenture governing the 7.0% Notes also require that there be no
change of control related to Terra, such that no individual or group (within the meaning of
the Securities Exchange Act of 1934, as amended) beneficially owns more than 35% of the
outstanding voting shares of Terra. Such a change of control would constitute an event of
default under the facilities and would require TCAPI to offer to repurchase the 7.0% Notes
at 101% of the principal amount thereof, including any accrued but unpaid interest. On
February 23, 2009, CF Industries Holdings, Inc. (CF) commenced an exchange offer to acquire
all of the outstanding Terra common stock. Such a business combination, if consummated,
would constitute a change of control under both the facilities and the Indenture governing
the 7.0% Notes. See Note 3, Unsolicited Exchange Offer by CF Industries Holdings, Inc., of
the Notes to the Consolidated Financial Statements for additional information with respect
to CFs unsolicited proposal. |
||
At March 31, 2009, we had no outstanding revolving credit borrowings and $6.6 million in
outstanding letters of credit. The $6.6 million in outstanding letters of credit reduced
our borrowing availability to $193.4 million at March 31, 2009. The facilities require that
we adhere to certain limitations on additional debt, capital expenditures, acquisitions,
liens, asset sales, investments, prepayments of subordinated indebtedness, changes in lines
of business and transactions with affiliates. Under the $150 million facility, if our
consolidated borrowing availability falls below $60 million, we are required to have
achieved minimum operating cash flows or earnings before interest, income taxes,
depreciation, amortization and other non-cash items (EBITDA) of $60 million during the most
recent four quarters. Under the $50 million TNCLP facility, if our borrowing availability
as computed for that facility falls below $10 million, we are required to achieve EBITDA at
TNCLP of $25 million during the most recent four quarters. A default under the $50 million
facility results in a cross default to the $150 million facility. |
22
14. | Pension Plans |
|
We maintain defined benefit and defined contribution pension plans that cover substantially
all salaried and hourly employees. Benefits are based on a pay formula. The defined benefit
plans assets consist principally of equity securities and corporate and government debt
securities. We also have certain non-qualified pension plans covering executives, which are
unfunded. We accrue pension costs based upon annual actuarial valuations for each plan and
fund these costs in accordance with statutory requirements. |
||
The estimated components of net periodic pension expense follow: |
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Service cost |
$ | 733 | $ | 778 | ||||
Interest cost |
4,648 | 4,412 | ||||||
Expected return on plan assets |
(4,701 | ) | (4,516 | ) | ||||
Amortization of prior service cost |
(9 | ) | (9 | ) | ||||
Amortization of actuarial loss |
162 | 468 | ||||||
Pension expense |
$ | 833 | $ | 1,133 | ||||
Cash contributions to the defined benefit pension plans for the three months ended March
31, 2009 and 2008 were $0.4 million and $0.4 million, respectively. |
||
We also sponsor defined contribution savings plans covering most full-time employees.
Contributions made by participating employees are matched based on a specified percentage
of employee contributions. The cost of our contributions to these plans for the three-month
periods ending March 31, 2009 and 2008 were $1.2 million and $1.0 million, respectively. |
||
We provide health care benefits for certain U.S. employees who retired on or before January
1, 2002. Participant contributions and co-payments are subject to escalation. The plan pays
a stated percentage of most medical expenses reduced for any deductible and payments made
by government programs. These costs are funded as paid. |
||
15. | Comprehensive Income |
|
Comprehensive income attributable to Terra Industries Inc. and its components, net of tax,
were as follows: |
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Net income before noncontrolling interest |
$ | 37,903 | $ | 119,583 | ||||
Changes in cumulative foreign currency translation adjustment |
(17,859 | ) | (2,886 | ) | ||||
Changes in market value of derivative financial instruments
classified as cash flow hedges, net of tax |
24,488 | 22,913 | ||||||
Comprehensive income before noncontrolling interest |
44,532 | 139,610 | ||||||
Comprehensive income attributable to noncontrolling interest |
(11,073 | ) | (22,380 | ) | ||||
Comprehensive income attributable to Terra Industries Inc. |
$ | 33,459 | $ | 117,230 | ||||
23
The adoption of SFAS 160 has resulted in the reclassification of amounts previously
attributable to minority interest (now referred to as noncontrolling interest) to a
separate component of equity on the accompanying Consolidated Balance Sheet. Additionally,
net income attributable to noncontrolling interests is shown separately from net income in
the Consolidated Statements of Operations. Refer to Note 2, New Accounting Pronouncements, of
the Notes to the Consolidated Financial Statements, on this Form 10-Q for additional
information on the adoption of SFAS 160. |
||
Prior year amounts related to noncontrolling interest (previously referred to as minority
interest) have been reclassified to conform to the current year presentation as required by
SFAS 160. The following table reconciles equity attributable to noncontrolling interest: |
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Noncontrolling interest, January 1 |
$ | 104,082 | $ | 108,581 | ||||
Net income attributable to noncontrolling interest |
7,908 | 18,126 | ||||||
Distributions to noncontrolling interests |
(13,705 | ) | (20,526 | ) | ||||
Changes in market value of derivative financial instruments
classified as cash flow hedges, net of tax, attributable
to the noncontrolling interest |
3,165 | 4,254 | ||||||
Noncontrolling interest, March 31 |
$ | 101,450 | $ | 110,435 | ||||
16. | Commitments and Contingencies |
|
We are involved in various claims and legal actions arising in the ordinary course of
business. Based on the facts currently available, management believes that the ultimate
disposition of these matters will not have a material adverse effect on our consolidated
financial position, results of operation or liquidity and that the likelihood that a loss
contingency will occur in connection with these claims is remote. |
||
We have entered into physical natural gas supply agreements through November 2009 for
approximately 31.7 million MMBtus. As of March 31, 2009, these natural gas commitments
were $9.7 million above the respective index prices. |
||
17. | Common Stockholders Equity |
|
Terra allocates $1.00 per share upon the issuance of Common Shares to the Common Share
capital account. The Common Shares have no par value. In the first quarter 2009, we
declared a $0.10 dividend per Common Share. Future dividends are necessarily dependent upon
future earnings, capital requirements, general financial condition, general business
conditions, approval from our Board of Directors, compliance with covenants in our debt
agreements and other factors. |
||
On May 6, 2008, the Board of Directors adopted a resolution for the repurchase of
12,841,717 shares representing 14 percent of our then outstanding common stock. The stock
buyback program commenced on May 7, 2008 and has been and will be conducted on the open
market, in private transactions or otherwise at such times prior to June 30, 2010, and at
such prices as we determine to be appropriate. Purchases may be commenced or suspended at
any time without notice. As of March 31, 2009 there are 7,448,662 shares available to be
repurchased under the plan. There were no share repurchase during the first quarter of
2009. |
24
18. | Guarantor Subsidiaries |
|
Terra Industries Inc., excluding all majority owned subsidiaries, (Parent) files a
consolidated United States federal income tax return. Beginning in 1995, the Parent adopted
the tax sharing agreements, under which all domestic operating subsidiaries provide for and
remit income taxes to the Parent based on their pretax accounting income, adjusted for
permanent differences between pretax accounting income and taxable income. The tax sharing
agreements allocated the benefits of operating losses and temporary differences between
financial reporting and tax basis income to the Parent. |
||
Condensed consolidating financial information regarding the Parent, Terra Capital, Inc.
(TCAPI), the Guarantor Subsidiaries and the subsidiaries of the Parent that are not
guarantors of the Senior Unsecured Notes (the Non-Guarantor Subsidiaries) (see Note 13,
Long-term Debt, of the Notes to Consolidated Financial Statements) for March 31, 2009;
December 31, 2008; and March 31, 2008 are presented below for purposes of complying with
the reporting requirements of the Guarantor Subsidiaries. The guarantees of the Guarantor
Subsidiaries are full and unconditional. The Subsidiary issuer and the Guarantor
Subsidiaries guarantees are joint and several with the Parent. |
||
Guarantor Subsidiaries include: subsidiaries that own the Woodward, Oklahoma; Port Neal,
Iowa; Yazoo City, Mississippi; and Beaumont, Texas plants; Terra Environmental
Technologies; Terra Global Holding Company Inc., Terra Investment Fund I LLC, Terra
Investment Fund II LLC, Terra (U.K.) Holdings Inc., and the corporate headquarters facility
in Sioux City, Iowa. All Guarantor Subsidiaries are wholly owned by the Parent. All other
company facilities are owned by Non-Guarantor Subsidiaries. In 2008, we declared the
Beaumont, Texas facility as a discontinued operation and classified the facility as held
for sale pursuant to SFAS 144. In December 2008, the Beaumont, Texas facility was sold; see
Note 19, Discontinued Operations, of the Notes to the Consolidated Financial Statements. |
25
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 438,429 | $ | 260,637 | $ | 320,954 | $ | | $ | 1,020,020 | ||||||||||||
Accounts receivable, net |
| | 67,601 | 51,679 | | 119,280 | ||||||||||||||||||
Inventories |
| | 93,160 | 67,179 | | 160,339 | ||||||||||||||||||
Other current assets |
22,821 | 7,015 | 2,675 | 6,739 | | 39,250 | ||||||||||||||||||
Total current assets |
22,821 | 445,444 | 424,073 | 446,551 | | 1,338,889 | ||||||||||||||||||
Property, plant and
equipment, net |
| 6,037 | 293,020 | 107,787 | | 406,844 | ||||||||||||||||||
Equity method investments |
| | 9,816 | 243,808 | | 253,624 | ||||||||||||||||||
Intangible assets, other assets
and deferred plant
turnaround costs |
2,220 | 6,862 | 29,607 | 12,962 | | 51,651 | ||||||||||||||||||
Investments in and advances
to (from) affiliates |
1,250,867 | 46,696 | 3,039,509 | 483,343 | (4,820,415 | ) | | |||||||||||||||||
Total assets |
$ | 1,275,908 | $ | 505,039 | $ | 3,796,025 | $ | 1,294,451 | $ | (4,820,415 | ) | $ | 2,051,008 | |||||||||||
Liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | 60 | $ | | $ | 75,484 | $ | 23,012 | $ | | $ | 98,556 | ||||||||||||
Customer prepayments |
| | 83,005 | 93,539 | | 176,544 | ||||||||||||||||||
Derivative hedge liabilities |
14,998 | | 767 | 11,509 | | 27,274 | ||||||||||||||||||
Accrued and other
current liabilities |
29,344 | 3,345 | 30,652 | 1,899 | | 65,240 | ||||||||||||||||||
Total current liabilities |
44,402 | 3,345 | 189,908 | 129,959 | | 367,614 | ||||||||||||||||||
Long-term debt |
| 330,000 | | | | 330,000 | ||||||||||||||||||
Deferred taxes |
66,794 | | | 7,824 | | 74,618 | ||||||||||||||||||
Pension and other liabilities |
75,160 | (174 | ) | 10,685 | 2,103 | | 87,774 | |||||||||||||||||
Total liabilities |
186,356 | 333,171 | 200,593 | 139,886 | | 860,006 | ||||||||||||||||||
Preferred Shares liquidation
value of $1,600 |
1,544 | | | | | 1,544 | ||||||||||||||||||
Common Stockholders Equity |
||||||||||||||||||||||||
Common stock |
152,481 | | 73 | 92,262 | (92,335 | ) | 152,481 | |||||||||||||||||
Paid-in capital |
580,035 | 150,218 | 2,096,972 | 869,985 | (3,117,175 | ) | 580,035 | |||||||||||||||||
Accumulated other
comprehensive income
(loss) |
(172,065 | ) | | | (145,155 | ) | 145,155 | (172,065 | ) | |||||||||||||||
Retained earnings
(accumulated deficit) |
527,557 | 2,070 | 1,416,517 | 337,473 | (1,756,060 | ) | 527,557 | |||||||||||||||||
Total stockholders equity |
1,088,008 | 152,288 | 3,513,562 | 1,154,565 | (4,820,415 | ) | 1,088,008 | |||||||||||||||||
Noncontrolling interest |
| 19,580 | 81,870 | | | 101,450 | ||||||||||||||||||
Total equity |
1,088,088 | 171,868 | 3,595,432 | 1,154,565 | (4,820,415 | ) | 1,189,458 | |||||||||||||||||
Total liabilities and equity |
$ | 1,275,908 | $ | 505,039 | $ | 3,796,025 | $ | 1,294,451 | $ | (4,820,415 | ) | $ | 2,051,008 | |||||||||||
26
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Product revenues |
$ | | $ | | $ | 209,867 | $ | 208,495 | $ | | $ | 418,362 | ||||||||||||
Other income |
| | 1,103 | 288 | | 1,391 | ||||||||||||||||||
Total revenues |
| | 210,970 | 208,783 | | 419,753 | ||||||||||||||||||
Cost and Expenses |
||||||||||||||||||||||||
Cost of sales |
| 83 | 182,145 | 160,729 | | 342,957 | ||||||||||||||||||
Selling, general and
administrative expenses |
2,239 | (2,159 | ) | 11,166 | 9,022 | | 20,268 | |||||||||||||||||
Equity earnings of
North American affiliates |
| | (699 | ) | (2,553 | ) | | (3,252 | ) | |||||||||||||||
Total cost and expenses |
2,239 | (2,076 | ) | 192,612 | 167,198 | | 359,973 | |||||||||||||||||
Income (loss) from operations |
(2,239 | ) | 2,076 | 18,358 | 41,585 | | 59,780 | |||||||||||||||||
Interest income |
| 806 | 499 | 505 | | 1,810 | ||||||||||||||||||
Interest expense |
(465 | ) | (6,182 | ) | 23,459 | (23,540 | ) | | (6,728 | ) | ||||||||||||||
Income (loss) before income
taxes and noncontrolling
interest |
(2,704 | ) | (3,300 | ) | 42,316 | 18,550 | | 54,862 | ||||||||||||||||
Income tax benefit (provision) |
535 | (6,358 | ) | (8,372 | ) | 1,610 | | (12,585 | ) | |||||||||||||||
Equity earnings (loss) of
unconsolidated affiliates |
32,164 | 43,348 | | (4,374 | ) | (75,512 | ) | (4,374 | ) | |||||||||||||||
Income from continuing
operations net of tax |
29,995 | 33,690 | 33,944 | 15,786 | (75,512 | ) | 37,903 | |||||||||||||||||
Income from discontinued
operations net of tax |
| | | | | | ||||||||||||||||||
Net income before
noncontrolling interest |
29,995 | 33,690 | 33,944 | 15,786 | (75,512 | ) | 37,903 | |||||||||||||||||
Less: Net income attributable to
the noncontrolling interest |
| (1,526 | ) | (6,382 | ) | | | (7,908 | ) | |||||||||||||||
Net income (loss) attributable
to Terra Industries Inc. |
$ | 29,995 | $ | 32,164 | $ | 27,562 | $ | 15,786 | $ | (75,512 | ) | $ | 29,995 | |||||||||||
27
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Operating Activities |
||||||||||||||||||||||||
Net income attributable to
Terra Industries Inc. |
$ | 29,995 | $ | 32,164 | $ | 27,562 | $ | 15,786 | $ | (75,512 | ) | $ | 29,995 | |||||||||||
Income from
discontinued operations |
| | | | | | ||||||||||||||||||
Income from continuing
operations |
29,995 | 32,164 | 27,562 | 15,786 | (75,512 | ) | 29,995 | |||||||||||||||||
Adjustments to reconcile
income from continuing
operations to net cash
flows from operating
activities: |
||||||||||||||||||||||||
Depreciation and amortization |
| | 12,942 | 7,203 | | 20,145 | ||||||||||||||||||
Loss on sale of property,
plant and equipment |
| | 235 | | | 235 | ||||||||||||||||||
Deferred income taxes |
(2,359 | ) | | | | | (2,359 | ) | ||||||||||||||||
Noncontrolling interest in
earnings |
| 1,526 | 6,382 | | | 7,908 | ||||||||||||||||||
Distributions in excess of
(less than) equity earnings |
(32,164 | ) | (43,348 | ) | 181 | 294 | 75,512 | 475 | ||||||||||||||||
Equity earnings
GrowHow UK Limited |
| | | 4,374 | | 4,374 | ||||||||||||||||||
Non-cash gain on derivatives |
621 | | | | | 621 | ||||||||||||||||||
Share-based compensation |
7,170 | | | | | 7,170 | ||||||||||||||||||
Amortization of intangible
and other assets |
| | 1,835 | 505 | | 2,340 | ||||||||||||||||||
Change in operating assets
and liabilities |
(32,637 | ) | 27,424 | 9,306 | 10,126 | | 14,219 | |||||||||||||||||
Net cash flows from operating
activities continuing
operations |
(29,374 | ) | 17,766 | 58,443 | 38,288 | | 85,123 | |||||||||||||||||
Net cash flows from operating
activities discontinued
operations |
| | | | | | ||||||||||||||||||
Net Cash Flows from
Operating Activities |
(29,374 | ) | 17,766 | 58,443 | 38,288 | | 85,123 | |||||||||||||||||
Investing Activities |
||||||||||||||||||||||||
Capital expenditures and plant
turnaround expenditures |
| | (24,463 | ) | (4,169 | ) | | (28,632 | ) | |||||||||||||||
Distributions received from
unconsolidated affiliate |
| | 120 | 4,353 | | 4,473 | ||||||||||||||||||
Balancing consideration and
other payments received
from GrowHow UK Limited |
| | | 5,230 | | 5,230 | ||||||||||||||||||
Net cash flows from investing
activities continuing
operations |
| | (24,343 | ) | 5,414 | | (18,929 | ) | ||||||||||||||||
Net cash flows from investing
activities discontinued
operations |
| | | | | | ||||||||||||||||||
Net Cash Flows from
Investing Activities |
| | (24,343 | ) | 5,414 | | (18,929 | ) | ||||||||||||||||
28
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Financing Activities |
||||||||||||||||||||||||
Preferred share dividends paid |
(17 | ) | | | | | (17 | ) | ||||||||||||||||
Common stock issuances and
vestings |
(5,270 | ) | | | | | (5,270 | ) | ||||||||||||||||
Change in investments and
advances from (to) affiliates |
30,740 | 91,593 | (47,060 | ) | (75,273 | ) | | | ||||||||||||||||
Excess tax benefits from equity
compensation plans |
3,921 | | | | | 3,921 | ||||||||||||||||||
Distributions to minority
interests |
| (2,644 | ) | (11,061 | ) | | | (13,705 | ) | |||||||||||||||
Net cash flows from financing
activities continuing
operations |
29,374 | 88,949 | (58,121 | ) | (75,273 | ) | | (15,071 | ) | |||||||||||||||
Net cash flows from financing
activities discontinued
operations |
| | | | | | ||||||||||||||||||
Net Cash Flows from
Financing Activities |
29,374 | 88,949 | (58,121 | ) | (75,273 | ) | | (15,071 | ) | |||||||||||||||
Effect of Exchange Rate
Changes on Cash |
| | | 2,197 | | 2,197 | ||||||||||||||||||
Increase (decrease) in Cash
and Cash Equivalents |
| 106,715 | (24,021 | ) | (29,374 | ) | | 53,320 | ||||||||||||||||
Cash and Cash Equivalents
at Beginning of Period |
| 331,714 | 284,658 | 350,328 | | 966,700 | ||||||||||||||||||
Cash and Cash Equivalents
at End of Period |
$ | | $ | 438,429 | $ | 260,637 | $ | 320,954 | $ | | $ | 1,020,020 | ||||||||||||
29
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 331,714 | $ | 284,658 | $ | 350,328 | $ | | $ | 966,700 | ||||||||||||
Accounts receivable, net |
9 | 74 | 73,358 | 56,949 | | 130,390 | ||||||||||||||||||
Inventories |
| | 111,295 | 85,796 | | 197,091 | ||||||||||||||||||
Margin deposits with
derivative counterparties |
| 36,945 | | | | 36,945 | ||||||||||||||||||
Other current assets |
23,807 | 10,440 | 13,596 | 13,495 | | 61,338 | ||||||||||||||||||
Current assets held for sale
discontinued operations |
| | | | | | ||||||||||||||||||
Total current assets |
23,816 | 379,173 | 482,907 | 506,568 | | 1,392,464 | ||||||||||||||||||
Property, plant and
equipment, net |
| 6,037 | 288,449 | 108,827 | | 403,313 | ||||||||||||||||||
Equity method investments |
| | 10,117 | 260,798 | | 270,915 | ||||||||||||||||||
Deferred plant turnaround
costs, intangible and
other assets |
2,230 | 7,156 | 21,146 | 15,793 | | 46,325 | ||||||||||||||||||
Investments in and advances
to (from) affiliates |
1,252,608 | 94,331 | 3,103,568 | 588,172 | (5,038,679 | ) | | |||||||||||||||||
Total assets |
$ | 1,278,654 | $ | 486,697 | $ | 3,906,187 | $ | 1,480,158 | $ | (5,038,679 | ) | $ | 2,113,017 | |||||||||||
Liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | 205 | $ | 62 | $ | 70,473 | $ | 29,153 | $ | | $ | 99,893 | ||||||||||||
Customer prepayments |
| | 58,922 | 52,670 | | 111,592 | ||||||||||||||||||
Derivative hedge liabilities |
35,254 | 7,476 | 39,880 | 43,315 | | 125,925 | ||||||||||||||||||
Accrued and other
current liabilities |
51,861 | 8,947 | 42,261 | 24,701 | | 127,770 | ||||||||||||||||||
Current liabilities held for
sale discontinued
operations |
| | | | | | ||||||||||||||||||
Total current liabilities |
87,320 | 16,485 | 211,536 | 149,839 | | 465,180 | ||||||||||||||||||
Long-term debt |
| 330,000 | | | | 330,000 | ||||||||||||||||||
Deferred taxes |
51,770 | | | 9,673 | | 61,443 | ||||||||||||||||||
Pension and other liabilities |
74,975 | | 10,983 | 1,765 | | 87,723 | ||||||||||||||||||
Total liabilities |
214,065 | 346,485 | 222,519 | 161,277 | | 944,346 | ||||||||||||||||||
Preferred Shares liquidation
value of $1,600 |
1,544 | | | | | 1,544 | ||||||||||||||||||
Common Stockholders Equity |
||||||||||||||||||||||||
Common stock |
152,111 | | 73 | 83,332 | (83,405 | ) | 152,111 | |||||||||||||||||
Paid-in capital |
579,164 | 150,218 | 2,201,646 | 963,435 | (3,315,299 | ) | 579,164 | |||||||||||||||||
Accumulated other
comprehensive income
(loss) |
(175,529 | ) | | | (170,574 | ) | 170,574 | (175,529 | ) | |||||||||||||||
Retained earnings
(accumulated deficit) |
507,299 | (30,094 | ) | 1,397,955 | 442,688 | (1,810,549 | ) | 507,299 | ||||||||||||||||
Total stockholders equity |
1,063,045 | 120,124 | 3,599,674 | 1,318,881 | (5,038,679 | ) | 1,063,045 | |||||||||||||||||
Noncontrolling interest |
| 20,088 | 83,994 | | | 104,082 | ||||||||||||||||||
Total equity |
1,063,045 | 140,212 | 3,683,668 | 1,318,881 | (5,038,679 | ) | 1,167,127 | |||||||||||||||||
Total liabilities and equity |
$ | 1,278,654 | $ | 486,697 | $ | 3,906,187 | $ | 1,480,158 | $ | (5,038,679 | ) | $ | 2,113,017 | |||||||||||
30
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 35,231 | $ | 310,402 | $ | 978,875 | $ | (507,311 | ) | $ | 817,197 | |||||||||||
Accounts receivable, net |
1 | | 111,676 | 47,741 | | 159,418 | ||||||||||||||||||
Inventories |
| | 140,864 | 57,856 | 11,517 | 210,237 | ||||||||||||||||||
Other current assets |
17,715 | 38 | 6,115 | 20,903 | | 44,771 | ||||||||||||||||||
Current assets held for sale
discontinued operations |
| | 45,593 | | | 45,593 | ||||||||||||||||||
Total current assets |
17,716 | 35,269 | 614,650 | 1,105,375 | (495,794 | ) | 1,277,216 | |||||||||||||||||
Property, plant and
equipment, net |
| | 259,627 | 120,119 | | 379,746 | ||||||||||||||||||
Equity method investments |
| | 10,376 | 320,302 | | 330,678 | ||||||||||||||||||
Intangible assets, other assets
and deferred plant
turnaround costs |
6,732 | 8,039 | 15,944 | 38,757 | (5,191 | ) | 64,281 | |||||||||||||||||
Investments in and advances
to (from) affiliates |
739,782 | 377,107 | 1,939,351 | 132,417 | (3,188,657 | ) | | |||||||||||||||||
Total assets |
$ | 764,230 | $ | 420,415 | $ | 2,839,948 | $ | 1,716,970 | $ | (3,689,642 | ) | $ | 2,051,921 | |||||||||||
Liabilities |
||||||||||||||||||||||||
Accounts payable |
$ | 1,992 | $ | | $ | 109,614 | $ | 49,055 | $ | | $ | 160,661 | ||||||||||||
Customer prepayments |
| | 97,678 | 184,719 | | 282,397 | ||||||||||||||||||
Derivative hedge liabilities |
240 | | 94 | 568 | | 902 | ||||||||||||||||||
Accrued and other
current liabilities |
21,702 | 3,380 | 29,282 | 13,213 | | 67,577 | ||||||||||||||||||
Current liabilities held for
sale discontinued
operations |
| | 16,764 | | | 16,764 | ||||||||||||||||||
Total current liabilities |
23,934 | 3,380 | 253,432 | 247,555 | | 528,301 | ||||||||||||||||||
Long-term debt |
| 330,000 | | | | 330,000 | ||||||||||||||||||
Deferred taxes |
120,864 | | | 13,528 | 3,445 | 137,837 | ||||||||||||||||||
Pension and other liabilities |
76,626 | (170 | ) | 11,403 | 1,410 | 497 | 89,766 | |||||||||||||||||
Total liabilities |
221,424 | 333,210 | 264,835 | 262,493 | 3,942 | 1,085,904 | ||||||||||||||||||
Preferred Shares liquidation
value of $120,000 |
115,800 | | | | | 115,800 | ||||||||||||||||||
Common Stockholders Equity |
||||||||||||||||||||||||
Common stock |
143,964 | | 73 | 32,458 | (32,531 | ) | 143,964 | |||||||||||||||||
Paid-in capital |
619,384 | 150,218 | 2,031,300 | 1,255,515 | (3,437,033 | ) | 619,384 | |||||||||||||||||
Accumulated other
comprehensive income
(loss) |
(21,346 | ) | | | 358,349 | (365,410 | ) | (28,407 | ) | |||||||||||||||
Retained earnings
(accumulated deficit) |
(314,996 | ) | (84,327 | ) | 454,619 | (191,845 | ) | 141,390 | 4,841 | |||||||||||||||
Total stockholders equity |
427,006 | 65,891 | 2,485,992 | 1,454,477 | (3,693,584 | ) | 739,782 | |||||||||||||||||
Noncontrolling interest |
| 21,314 | 89,121 | | | 110,435 | ||||||||||||||||||
Total equity |
427,006 | 87,205 | 2,575,113 | 1,454,477 | (3,693,584 | ) | 850,217 | |||||||||||||||||
Total liabilities and equity |
$ | 764,230 | $ | 420,415 | $ | 2,839,948 | $ | 1,716,970 | $ | (3,689,642 | ) | $ | 2,051,921 | |||||||||||
31
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Product revenues |
$ | | $ | | $ | 355,734 | $ | 217,468 | $ | | $ | 573,202 | ||||||||||||
Other revenues |
| | 945 | 557 | | 1,502 | ||||||||||||||||||
Total revenues |
| | 356,679 | 218,025 | | 574,704 | ||||||||||||||||||
Cost and Expenses |
||||||||||||||||||||||||
Cost of sales |
| 83 | 286,344 | 120,562 | | 406,989 | ||||||||||||||||||
Selling, general and
administrative expenses |
509 | (2,035 | ) | 6,678 | 7,552 | | 12,704 | |||||||||||||||||
Equity earnings
of North America affiliates |
| | (13,290 | ) | | | (13,290 | ) | ||||||||||||||||
Total cost and expenses |
509 | (1,952 | ) | 279,732 | 128,114 | | 406,403 | |||||||||||||||||
Income (loss) from operations |
(509 | ) | 1,952 | 76,947 | 89,911 | | 168,301 | |||||||||||||||||
Interest income |
| 3,637 | | 4,771 | | 8,408 | ||||||||||||||||||
Interest expense |
(465 | ) | (6,219 | ) | (2 | ) | (372 | ) | | (7,058 | ) | |||||||||||||
Foreign currency gain (loss) |
| | 6 | (6 | ) | | | |||||||||||||||||
Income (loss) before income
taxes and noncontrolling
interest |
(974 | ) | (630 | ) | 76,951 | 94,304 | | 169,651 | ||||||||||||||||
Income tax benefit (provision) |
376 | (23,481 | ) | (29,715 | ) | (6,684 | ) | | (59,504 | ) | ||||||||||||||
Equity earnings (loss) of
unconsolidated affiliates |
102,055 | 129,664 | | 9,284 | (231,719 | ) | 9,284 | |||||||||||||||||
Income from continuing
operations net of tax |
101,457 | 105,553 | 47,236 | 96,904 | (231,719 | ) | 119,431 | |||||||||||||||||
Income from discontinued
operations net of tax |
| | 152 | | | 152 | ||||||||||||||||||
Net income before
noncontrolling interest |
$ | 101,457 | $ | 105,553 | $ | 47,388 | $ | 96,904 | $ | (231,719 | ) | $ | 119,583 | |||||||||||
Less: Net income attributable to
the noncontrolling interest |
| (3,498 | ) | (14,628 | ) | | | (18,126 | ) | |||||||||||||||
Net income (loss) attributable
to Terra Industries Inc. |
$ | 101,457 | $ | 102,055 | $ | 32,760 | $ | 96,904 | $ | (231,719 | ) | $ | 101,457 | |||||||||||
32
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Operating Activities |
||||||||||||||||||||||||
Net income attributable to
Terra Industries Inc. |
101,457 | 102,055 | 32,760 | 96,904 | (231,719 | ) | 101,457 | |||||||||||||||||
Income from discontinued
operations |
| | 152 | | | 152 | ||||||||||||||||||
Income from continuing
operations |
$ | 101,457 | $ | 102,055 | $ | 32,608 | $ | 96,904 | $ | (231,719 | ) | $ | 101,305 | |||||||||||
Adjustments to reconcile
income from continuing
operations to net cash
flows from operating
activities: |
||||||||||||||||||||||||
Depreciation and amortization |
| | 10,518 | 9,335 | | 19,853 | ||||||||||||||||||
(Gain) loss on sale of property,
plant and equipment |
| | 765 | (288 | ) | | 477 | |||||||||||||||||
Deferred income taxes |
37,901 | | | | | 37,901 | ||||||||||||||||||
Noncontrolling interest
in earnings |
| (463 | ) | 18,589 | | | 18,126 | |||||||||||||||||
Distributions less than
equity earnings |
(117,710 | ) | (10,972 | ) | (332 | ) | (71,542 | ) | 200,224 | (332 | ) | |||||||||||||
Equity earnings
GrowHow UK Limited |
| | | (9,284 | ) | | (9,284 | ) | ||||||||||||||||
Non-cash gain on derivatives |
(661 | ) | | | | | (661 | ) | ||||||||||||||||
Share-based compensation |
1,264 | | | | | 1,264 | ||||||||||||||||||
Amortization of intangible
and other assets |
| | 1,119 | 819 | | 1,938 | ||||||||||||||||||
Change in operating assets
and liabilities |
(11,586 | ) | (5,063 | ) | (57,740 | ) | 72,766 | (70,427 | ) | (72,050 | ) | |||||||||||||
Net cash flows from operating
activities continuing
operations |
10,665 | 85,557 | 5,527 | 98,710 | (101,922 | ) | 98,537 | |||||||||||||||||
Net cash flows from operating
activities discontinued
operations |
| | 11,037 | | | 11,037 | ||||||||||||||||||
Net Cash Flows from
Operating Activities |
10,665 | 85,557 | 16,564 | 98,710 | (101,922 | ) | 109,574 | |||||||||||||||||
Investing Activities |
||||||||||||||||||||||||
Capital expenditures and
plant turnaround
expenditures |
| | (5,930 | ) | (1,169 | ) | | (7,099 | ) | |||||||||||||||
Distributions received from
unconsolidated affiliate |
| | 6,927 | | | 6,927 | ||||||||||||||||||
Contribution settlement
received from
GrowHow UK Limited |
| | | 27,890 | | 27,890 | ||||||||||||||||||
Proceeds from the sale of
property, plant and
equipment |
| | 1,224 | 390 | | 1,614 | ||||||||||||||||||
Net cash flows from investing
activities continuing
operations |
| | 2,221 | 27,111 | | 29,332 | ||||||||||||||||||
Net cash flows from investing
activities discontinued
operations |
| | | | | | ||||||||||||||||||
Net Cash Flows from
Investing Activities |
| | 2,221 | 27,111 | | 29,332 | ||||||||||||||||||
33
Guarantor | Non-Guarantor | |||||||||||||||||||||||
(in thousands) | Parent | TCAPI | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Financing Activities |
||||||||||||||||||||||||
Common stock issuances and
vestings |
(5,873 | ) | | | | | (5,873 | ) | ||||||||||||||||
Excess tax benefits from
equity compensation plans |
7,695 | | | | | 7,695 | ||||||||||||||||||
Preferred share dividends paid |
(1,275 | ) | | | | | (1,275 | ) | ||||||||||||||||
Change in investments and
advances from (to) affiliates |
(11,212 | ) | (106,183 | ) | 44,998 | (53,730 | ) | 126,127 | | |||||||||||||||
Distributions to minority
interests |
| | (20,526 | ) | | | (20,526 | ) | ||||||||||||||||
Net cash flows from financing
Activities continuing
Operations |
(10,665 | ) | (106,183 | ) | 24,472 | (53,730 | ) | 126,127 | (19,979 | ) | ||||||||||||||
Net cash flows from financing
activities discontinued
operations |
| | | | | | ||||||||||||||||||
Net Cash Flows from
Financing Activities |
(10,665 | ) | (106,183 | ) | 24,472 | (53,730 | ) | 126,127 | (19,979 | ) | ||||||||||||||
Effect of Exchange Rate
Changes on Cash |
| | | 32 | | 32 | ||||||||||||||||||
Increase (decrease) in Cash
and Cash Equivalents |
| (20,626 | ) | 43,257 | 72,123 | 24,205 | 118,959 | |||||||||||||||||
Cash and Cash Equivalents
at Beginning of Period |
| 55,857 | 267,145 | 906,752 | (531,516 | ) | 698,238 | |||||||||||||||||
Cash and Cash Equivalents
at End of Period |
$ | | $ | 35,231 | $ | 310,402 | $ | 978,875 | $ | (507,311 | ) | $ | 817,197 | |||||||||||
19. | Discontinued Operations |
|
On December 31, 2008, pursuant to a 2007 agreement, we sold our Beaumont, Texas assets,
including the methanol and ammonia production facilities, to Eastman Chemical Company
(Eastman). Consideration received, including cash and a Promissory Note from Eastman of
$5.2 million, approximated this facilitys carrying value. The Promissory Note is due on
December 31, 2009 bearing interest at a rate of 3.0% per annum. |
||
Pursuant to the requirements of FASB Statement No. 144 (SFAS 144), Accounting for the
Impairment or Disposal of Long-Lived Assts, we classified and accounted for the Beaumont
assets and liabilities as held for sale in the statements of financial position and the
results of operations on a net of tax basis in the statement of operations. SFAS 144
requires that assets held for sale are valued on an asset-by-asset basis at the lower of
carrying amount or fair value less costs to sell. In applying those provisions, we
considered cash flow analyses, and offers related to those assets. In accordance with the
provisions of SFAS 144, assets for sale are not depreciated. |
34
Three Months Ended | ||||||||
March 31, | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Operating revenue |
$ | | $ | 1,421 | ||||
Operating and other expenses |
| (1,187 | ) | |||||
Pretax income from operations of
discontinued components |
| 234 | ||||||
Income tax expense |
| (82 | ) | |||||
Income from discontinued operations |
$ | | $ | 152 | ||||
March 31, | December 31, | March 31, | ||||||||||
(in thousands) | 2009 | 2008 | 2008 | |||||||||
Trade receivables |
$ | | $ | | $ | 232 | ||||||
Inventory |
| | 2,203 | |||||||||
Other current assets |
| | 43,158 | |||||||||
Current assets |
$ | | $ | | $ | 45,593 | ||||||
Property, plant and equipment net |
$ | | $ | | $ | | ||||||
Other non-current assets |
| | | |||||||||
Non-current assets |
$ | | $ | | $ | | ||||||
Accounts payable |
$ | | $ | | $ | 302 | ||||||
Other current liabilities |
| | 16,462 | |||||||||
Current liabilities |
$ | | $ | | $ | 16,764 | ||||||
Other non-current liabilities |
$ | | $ | | $ | | ||||||
Non-current liabilities |
$ | | $ | | $ | | ||||||
35
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
| Business Strategy; |
||
| Recent Business Environment; |
||
| Results of Operations; |
||
| Liquidity and Capital Resources; and |
||
| Various Quantitative and Qualitative Disclosures. |
36
| Development of products and markets for upgraded products made from ammonia such as
UAN, our primary nitrogen fertilizer product, and TerraCair®, a liquid product for the
treatment of diesel exhaust in automotive applications; |
||
| Seeking opportunities to expand our existing asset base to take advantage of
logistical or feedstock advantages both domestically and internationally; |
||
| Management of North American and international assets to realize a rate of return
that meets or exceeds our cost of capital throughout the business cycle; |
||
| Maintenance of our facilities to be safe, reliable and environmentally compliant,
cultivation of relationships with natural customers who, due to their physical
location, can receive our product most economically, and close management of the
supply chain to keep storage, transportation and other costs at an appropriate level;
and |
||
| Continued evaluation of business opportunities in nitrogen markets and businesses
that leverage Terras core competencies in chemical manufacturing, distribution and
product application. |
37
March 31, | June 30, | September 30, | December 31, | March 31, | ||||||||||||||||
(in $per MMBtu) | 2008 | 2008 | 2008 | 2008 | 2009 | |||||||||||||||
$ | 10.50 | $ | 13.22 | $ | 7.90 | $ | 6.09 | $ | 4.69 |
38
Quarter ended March 31, | ||||||||||||||||
2009 - 2008 | ||||||||||||||||
(in millions except per share data) | 2009 | 2008 | Change | Percent | ||||||||||||
Net sales |
$ | 419.8 | $ | 574.7 | $ | (154.9 | ) | -27 | % | |||||||
Cost of goods sold |
343.0 | 407.0 | (64.0 | ) | -16 | % | ||||||||||
Gross margin |
76.8 | 167.7 | (90.9 | ) | -54 | % | ||||||||||
Gross margin percentage |
18.3 | % | 29.2 | % | -10.9 | % | -37 | % | ||||||||
Selling, general and
administrative expenses |
20.3 | 12.7 | 7.6 | 60 | % | |||||||||||
Equity in earnings of
North American affiliates |
(3.3 | ) | (13.3 | ) | 10.0 | -75 | % | |||||||||
Income from operations |
59.8 | 168.3 | (108.5 | ) | -64 | % | ||||||||||
Interest income (expense), net |
(4.9 | ) | 1.3 | (6.2 | ) | -477 | % | |||||||||
Income before income taxes,
noncontrolling interest and
equity earnings (loss) of
GrowHow UK Limited |
54.9 | 169.6 | (114.7 | ) | -68 | % | ||||||||||
Income tax provision |
(12.6 | ) | (59.5 | ) | 46.9 | -79 | % | |||||||||
Equity earnings (loss) of
GrowHow UK Limited |
(4.4 | ) | 9.3 | (13.7 | ) | NM | ||||||||||
Income from continuing operations |
37.9 | 119.4 | (81.5 | ) | -68 | % | ||||||||||
Income from discontinued
operations, net of tax |
| 0.2 | (0.2 | ) | -100 | % | ||||||||||
Net income before
noncontrolling interest |
37.9 | 119.6 | (81.7 | ) | -68 | % | ||||||||||
Net income attributable to
noncontrolling interest |
(7.9 | ) | (18.1 | ) | 10.2 | -56 | % | |||||||||
Net income attributable to Terra Industries Inc. |
30.0 | 101.5 | (71.5 | ) | -70 | % | ||||||||||
Diluted earnings per share |
$ | 0.30 | $ | 0.97 | $ | (0.67 | ) | -69 | % | |||||||
Weighted average diluted
shares outstanding |
99,760 | 104,429 | 4,669 | -4 | % |
2009 | 2008 | |||||||||||||||
Sales | Average | Sales | Average | |||||||||||||
(quantities in thousands of tons) | Volumes | Unit Price(1) | Volumes | Unit Price(1) | ||||||||||||
Ammonia |
381 | $ | 336 | 364 | $ | 462 | ||||||||||
UAN 32% basis |
625 | $ | 282 | 917 | $ | 285 | ||||||||||
Urea(2) |
77 | $ | 322 | 59 | $ | 425 | ||||||||||
Ammonium nitrate(3) |
168 | $ | 267 | 240 | $ | 274 |
(1) | After deducting $34.7 million and $33.8 million outbound freight costs for 2009
and 2008, respectively. |
|
(2) | Urea sales volumes and prices include granular urea and urea solutions data. |
|
(3) | Ammonium nitrate sales volumes and prices include agricultural grade AN,
industrial grade AN and ammonium nitrate solution (ANS). |
39
40
41
Three Months Ended | ||||||||
March 31, | ||||||||
($ in millions) | 2009 | 2008 | ||||||
Operating activities |
$ | 85.1 | $ | 109.6 | ||||
Investing activities |
(18.9 | ) | 29.3 | |||||
Financing activities |
(15.1 | ) | (20.0 | ) | ||||
Effect of exchange rate changes on cash |
2.2 | 0.1 | ||||||
Increase in cash and cash equivalents |
$ | 53.3 | $ | 119.0 | ||||
42
43
| changes in financial markets, |
||
| general economic conditions within the agricultural industry, |
||
| competitive factors and price changes (principally, sales prices of nitrogen
products and natural gas costs), |
||
| changes in product mix, |
||
| changes in the seasonality of demand patterns, |
||
| changes in weather conditions, |
||
| changes in environmental and other government regulations, |
||
| changes in agricultural regulations, and |
||
| other risks detailed in Risk Factors in our 2008 Annual Report. |
44
45
Exhibit 10.1 | Revised Form of Long-Term Incentive Award for Performance Shares
under the 2007 Terra Industries Inc. Omnibus Stock Incentive Plan |
|
Exhibit 10.2 | Revised Form of Long-Term Incentive Award for Phantom Performance
Shares under the 2007 Terra Industries Inc. Omnibus Stock Incentive Plan |
|
Exhibit 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
Exhibit 31.2 | Certification of the Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32.1 | Certification of the Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32.2 | Certification of the Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
46
TERRA INDUSTRIES INC. |
||||
Date: April 24, 2009 | /s/ Daniel D. Greenwell | |||
Daniel D. Greenwell | ||||
Senior Vice President and Chief
Financial Officer and a duly authorized signatory (Principal Financial Officer and Principal Accounting Officer) |
47
Exhibit No. | Description | |
Exhibit 10.1 | Revised Form of Long-Term Incentive Award for Performance Shares under
the 2007 Terra Industries Inc. Omnibus Stock Incentive Plan |
|
Exhibit 10.2 | Revised Form of Long-Term Incentive Award for Phantom Performance
Shares under the 2007 Terra Industries Inc. Omnibus Stock Incentive Plan |
|
Exhibit 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
Exhibit 31.2 | Certification of the Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32.1 | Certification of the Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32.2 | Certification of the Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
48