Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2007
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from to
Commission file number: 1-8520
TERRA INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
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Maryland
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52-1145429 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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Terra Centre |
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P.O. Box 6000 |
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600 Fourth Street |
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Sioux City, Iowa
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51102-6000 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (712) 277-1340
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
o Yes þ No
As of October 23, 2007, the following shares of the registrants stock were outstanding:
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Common Shares, without par value
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89,507,153 shares |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TERRA INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
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September 30, |
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December 31, |
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September 30, |
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2007 |
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2006 |
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2006 |
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Assets |
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Cash and cash equivalents |
|
$ |
360,478 |
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$ |
179,017 |
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$ |
122,170 |
|
Accounts receivable, less allowance for
doubtful accounts of $326, $333 and $371 |
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159,905 |
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198,791 |
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|
193,339 |
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Inventories |
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126,154 |
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211,017 |
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|
160,191 |
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Other current assets |
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13,067 |
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|
31,680 |
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|
26,158 |
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Total current assets |
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659,604 |
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|
620,505 |
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|
501,858 |
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Property, plant and equipment, net |
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435,103 |
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720,897 |
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722,952 |
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Equity method investments |
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369,605 |
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164,099 |
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|
161,455 |
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Deferred plant turnaround costs, net |
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35,029 |
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44,558 |
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|
40,577 |
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Intangible assets, net |
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4,234 |
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|
5,645 |
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6,115 |
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Other assets |
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16,918 |
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17,009 |
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27,164 |
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Total assets |
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$ |
1,520,493 |
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$ |
1,572,713 |
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$ |
1,460,121 |
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Liabilities |
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Accounts payable |
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80,296 |
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156,493 |
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115,734 |
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Customer prepayments |
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85,313 |
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77,091 |
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|
27,949 |
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Accrued expenses and other current liabilities |
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96,351 |
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|
75,863 |
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80,974 |
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Total current liabilities |
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261,960 |
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|
309,447 |
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224,657 |
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Long-term debt and capital lease obligations |
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330,000 |
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331,300 |
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331,300 |
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Pension liabilities |
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38,041 |
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134,444 |
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112,729 |
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Other liabilities |
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139,882 |
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104,039 |
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96,541 |
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Minority interest |
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102,854 |
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94,687 |
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95,014 |
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Total liabilities and minority interest |
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872,737 |
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973,917 |
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860,241 |
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Preferred Stock - liquidation value of $120,000 |
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115,800 |
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115,800 |
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115,800 |
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Common Shareholders Equity |
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Capital stock |
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Common Shares, authorized 133,500 shares;
89,501; 92,630 and 92,639 outstanding |
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142,069 |
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144,976 |
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144,968 |
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Paid-in capital |
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617,085 |
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693,896 |
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693,944 |
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Accumulated other comprehensive loss |
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(63,480 |
) |
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(63,739 |
) |
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(52,362 |
) |
Accumulated deficit |
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(163,718 |
) |
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|
(292,137 |
) |
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(302,470 |
) |
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Total common shareholders equity |
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531,956 |
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482,996 |
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484,080 |
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Total liabilities and minority interest, preferred stock
and common shareholders equity |
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$ |
1,520,493 |
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$ |
1,572,713 |
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$ |
1,460,121 |
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See Accompanying Notes to the Consolidated Financial Statements.
3
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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Revenues |
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Product revenues |
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$ |
590,046 |
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$ |
461,533 |
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$ |
1,780,840 |
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$ |
1,381,084 |
|
Other income |
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|
3,669 |
|
|
|
3,248 |
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|
|
8,976 |
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|
|
6,135 |
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Total revenues |
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|
593,715 |
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|
464,781 |
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|
1,789,816 |
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1,387,219 |
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Costs and Expenses |
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Cost of sales |
|
|
442,879 |
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|
422,523 |
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|
1,405,098 |
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|
1,337,210 |
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Selling, general and administrative expense |
|
|
21,935 |
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|
13,679 |
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|
67,186 |
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|
38,395 |
|
Equity (earnings) of unconsolidated
affiliates (Note 8) |
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|
(5,566 |
) |
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|
(809 |
) |
|
|
(10,379 |
) |
|
|
(15,830 |
) |
Impairment of long-lived assets (Note 5) |
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|
38,964 |
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|
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|
38,964 |
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|
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Total cost and expenses |
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|
498,212 |
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|
435,393 |
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|
1,500,869 |
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|
1,359,775 |
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|
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Income (loss) from operations |
|
|
95,503 |
|
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|
29,388 |
|
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|
288,947 |
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|
27,444 |
|
Equity earnings of unconsolidated
affiliates (Note 8) |
|
|
2,202 |
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|
|
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|
2,202 |
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|
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Interest income |
|
|
4,709 |
|
|
|
2,091 |
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|
|
11,078 |
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|
|
5,499 |
|
Interest expense |
|
|
(6,905 |
) |
|
|
(11,786 |
) |
|
|
(22,685 |
) |
|
|
(35,340 |
) |
Loss on early retirement of debt |
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|
|
|
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(38,836 |
) |
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|
Income (loss) before income taxes and
minority interest |
|
|
95,509 |
|
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|
19,693 |
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|
|
240,706 |
|
|
|
(2,397 |
) |
Income tax (provision) benefit |
|
|
(29,985 |
) |
|
|
(6,000 |
) |
|
|
(74,742 |
) |
|
|
2,002 |
|
Minority interest |
|
|
(11,144 |
) |
|
|
(3,352 |
) |
|
|
(33,720 |
) |
|
|
(7,000 |
) |
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|
|
|
|
|
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|
Net income (loss) |
|
|
54,380 |
|
|
|
10,341 |
|
|
|
132,244 |
|
|
|
(7,395 |
) |
Preferred share dividends |
|
|
(1,275 |
) |
|
|
(1,275 |
) |
|
|
(3,825 |
) |
|
|
(3,825 |
) |
|
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|
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|
Income (Loss) Available to
Common Shareholders |
|
$ |
53,105 |
|
|
$ |
9,066 |
|
|
$ |
128,419 |
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|
$ |
(11,220 |
) |
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Basic and diluted income (loss) per share: |
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Basic |
|
$ |
0.59 |
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|
$ |
0.10 |
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|
$ |
1.41 |
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|
$ |
(0.12 |
) |
Diluted |
|
$ |
0.51 |
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|
$ |
0.10 |
|
|
$ |
1.24 |
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|
$ |
(0.12 |
) |
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Basic and diluted weighted average shares
outstanding: |
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Basic |
|
|
90,092 |
|
|
|
91,817 |
|
|
|
91,143 |
|
|
|
92,994 |
|
Diluted |
|
|
105,946 |
|
|
|
93,405 |
|
|
|
106,899 |
|
|
|
92,994 |
|
See Accompanying Notes to the Consolidated Financial Statements.
4
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
Operating Activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
132,244 |
|
|
$ |
(7,395 |
) |
Adjustments to reconcile net income (loss)
to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment and
amortization of deferred plant turnaround costs |
|
|
81,057 |
|
|
|
78,859 |
|
Impairment
of long-lived assets |
|
|
38,964 |
|
|
|
|
|
Deferred income taxes |
|
|
48,981 |
|
|
|
(2,002 |
) |
Minority interest in earnings |
|
|
33,720 |
|
|
|
7,000 |
|
Distributions in excess of equity earnings |
|
|
5,121 |
|
|
|
9,135 |
|
Equity earnings GrowHow UK Limited |
|
|
(2,202 |
) |
|
|
|
|
Non-cash loss on derivatives |
|
|
176 |
|
|
|
2,775 |
|
Share-based compensation |
|
|
16,838 |
|
|
|
4,285 |
|
Amortization of intangible and other assets |
|
|
6,655 |
|
|
|
8,128 |
|
Non-cash loss on early retirement of debt |
|
|
4,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(29,242 |
) |
|
|
25,785 |
|
Inventories |
|
|
49,472 |
|
|
|
36,592 |
|
Accounts payable and customer prepayments |
|
|
(25,100 |
) |
|
|
(38,859 |
) |
Other assets and liabilities, net |
|
|
20,391 |
|
|
|
(21,029 |
) |
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
381,737 |
|
|
|
103,274 |
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(23,124 |
) |
|
|
(40,785 |
) |
Plant turnaround expenditures |
|
|
(35,985 |
) |
|
|
(31,987 |
) |
Cash retained by GrowHow UK Limited |
|
|
(17,249 |
) |
|
|
|
|
Distributions received from unconsolidated affiliates |
|
|
|
|
|
|
9,660 |
|
Changes in restricted cash |
|
|
|
|
|
|
8,595 |
|
Proceeds from the sale of property, plant and equipment |
|
|
|
|
|
|
9,666 |
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(76,358 |
) |
|
|
(44,851 |
) |
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
330,000 |
|
|
|
|
|
Payments under borrowing arrangements |
|
|
(331,300 |
) |
|
|
(34 |
) |
Payments for debt issuance costs |
|
|
(6,403 |
) |
|
|
|
|
Preferred share dividends paid |
|
|
(3,825 |
) |
|
|
(3,825 |
) |
Common stock issuances and vestings |
|
|
89 |
|
|
|
363 |
|
Payments under share repurchase program |
|
|
(87,426 |
) |
|
|
(18,796 |
) |
Distributions to minority interests |
|
|
(25,554 |
) |
|
|
(4,244 |
) |
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
(124,419 |
) |
|
|
(26,536 |
) |
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
501 |
|
|
|
3,917 |
|
|
|
|
|
|
|
|
Increase to cash and cash equivalents |
|
|
181,461 |
|
|
|
35,804 |
|
Cash and cash equivalents at beginning of period |
|
|
179,017 |
|
|
|
86,366 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
360,478 |
|
|
$ |
122,170 |
|
|
|
|
|
|
|
|
See Accompanying Notes to the Consolidated Financial Statements.
5
Consolidated Statements of Cash Flows (continued)
|
|
|
|
|
|
|
|
|
|
|
Nine Months ended |
|
|
|
September 30 |
|
|
|
2007 |
|
|
2006 |
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
22,900 |
|
|
$ |
21,394 |
|
Income tax refunds received |
|
$ |
555 |
|
|
$ |
|
|
Income taxes paid |
|
$ |
8,743 |
|
|
$ |
1,569 |
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and
financing activities: |
|
|
|
|
|
|
|
|
Conversion of warrants to common stock |
|
$ |
568 |
|
|
$ |
|
|
Equity method investments contributed to GrowHow UK Limited |
|
$ |
193,784 |
|
|
$ |
|
|
|
|
|
|
|
|
|
Supplemental schedule of unconsolidated affiliates
distributions received: |
|
|
|
|
|
|
|
|
Equity earnings of unconsolidated affiliates |
|
$ |
10,379 |
|
|
$ |
15,830 |
|
Distribution in excess of (less than) equity earnings |
|
|
5,121 |
|
|
|
9,135 |
|
Distributions received from unconsolidated affiliates |
|
|
|
|
|
|
9,660 |
|
|
|
|
|
|
|
|
Total cash distributions received from
unconsolidated affiliates |
|
$ |
15,500 |
|
|
$ |
34,625 |
|
|
|
|
|
|
|
|
See Accompanying Notes to the Consolidated Financial Statements.
6
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(in thousands)
(unaudited)
|
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Accumulated |
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|
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|
|
|
|
|
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|
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Other |
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Common |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
|
|
|
|
Comprehensive |
|
|
|
Stock |
|
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Capital |
|
|
Loss |
|
|
Deficit |
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Total |
|
|
Income |
|
|
Balance at January 1, 2007 |
|
$ |
144,976 |
|
|
$ |
693,896 |
|
|
$ |
(63,739 |
) |
|
$ |
(292,137 |
) |
|
$ |
482,996 |
|
|
|
|
|
Comprehensive income (loss): |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132,244 |
|
|
|
132,244 |
|
|
$ |
132,244 |
|
Foreign currency
translation adjustment |
|
|
|
|
|
|
|
|
|
|
(42,361 |
) |
|
|
|
|
|
|
(42,361 |
) |
|
|
(42,361 |
) |
Change in fair value of
derivatives, net of taxes
of $1,381 |
|
|
|
|
|
|
|
|
|
|
(2,565 |
) |
|
|
|
|
|
|
(2,565 |
) |
|
|
(2,565 |
) |
Pension and post retirement
benefit liabilities |
|
|
|
|
|
|
|
|
|
|
1,913 |
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|
|
|
|
|
|
1,913 |
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|
1,913 |
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|
Comprehensive income |
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|
|
|
|
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|
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|
|
|
|
|
|
|
|
$ |
89,231 |
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|
|
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|
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|
Transfer of
UK pension plan to GrowHow UK Limited |
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|
43,272 |
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|
|
43,272 |
|
|
|
|
|
Preferred share dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,825 |
) |
|
|
(3,825 |
) |
|
|
|
|
Exercise of stock options |
|
|
252 |
|
|
|
320 |
|
|
|
|
|
|
|
|
|
|
|
572 |
|
|
|
|
|
Net vested stock |
|
|
273 |
|
|
|
(757 |
) |
|
|
|
|
|
|
|
|
|
|
(484 |
) |
|
|
|
|
Conversion of warrants |
|
|
568 |
|
|
|
(568 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares purchased and
retired under share
repurchase program |
|
|
(4,000 |
) |
|
|
(83,426 |
) |
|
|
|
|
|
|
|
|
|
|
(87,426 |
) |
|
|
|
|
Share-based compensation |
|
|
|
|
|
|
7,620 |
|
|
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|
|
|
|
|
|
|
|
7,620 |
|
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|
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|
|
|
|
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|
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|
|
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Balance September 30, 2007 |
|
$ |
142,069 |
|
|
$ |
617,085 |
|
|
$ |
(63,480 |
) |
|
$ |
(163,718 |
) |
|
$ |
531,956 |
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Accumulated |
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|
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Other |
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|
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|
|
Common |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Unearned |
|
|
Accumulated |
|
|
|
|
|
|
Comprehensive |
|
|
|
Stock |
|
|
Capital |
|
|
Loss |
|
|
Compensation |
|
|
Deficit |
|
|
Total |
|
|
Income |
|
|
Balance at January 1, 2006 |
|
$ |
146,994 |
|
|
$ |
712,671 |
|
|
$ |
(70,143 |
) |
|
$ |
(5,369 |
) |
|
$ |
(291,250 |
) |
|
$ |
492,903 |
|
|
|
|
|
Comprehensive income (loss): |
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|
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|
|
|
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|
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|
|
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Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,395 |
) |
|
|
(7,395 |
) |
|
$ |
(7,395 |
) |
Foreign currency
translation adjustment |
|
|
|
|
|
|
|
|
|
|
22,638 |
|
|
|
|
|
|
|
|
|
|
|
22,638 |
|
|
|
22,638 |
|
Change in fair value of
derivatives, net of taxes
of $2,589 |
|
|
|
|
|
|
|
|
|
|
(4,857 |
) |
|
|
|
|
|
|
|
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|
|
(4,857 |
) |
|
|
(4,857 |
) |
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|
Comprehensive income |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,386 |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred share dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,825 |
) |
|
|
(3,825 |
) |
|
|
|
|
Exercise of stock options |
|
|
95 |
|
|
|
268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363 |
|
|
|
|
|
Non vested stock |
|
|
554 |
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,103 |
|
|
|
|
|
Shares purchased and retired
under share repurchase
program |
|
|
(2,675 |
) |
|
|
(16,121 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,796 |
) |
|
|
|
|
Reclassification for adoption
of FAS 123 R |
|
|
|
|
|
|
(5,369 |
) |
|
|
|
|
|
|
5,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
|
|
|
|
1,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Balance at September 30, 2006 |
|
$ |
144,968 |
|
|
$ |
693,944 |
|
|
$ |
(52,362 |
) |
|
$ |
|
|
|
$ |
(302,470 |
) |
|
$ |
484,080 |
|
|
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See Accompanying Notes to the Consolidated Financial Statements.
7
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. |
|
Financial Statement Presentation |
Basis of Presentation
The accompanying unaudited consolidated financial statements and notes thereto contain all
adjustments necessary, in the opinion of management, to summarize fairly the financial
position of Terra Industries Inc. and all majority-owned subsidiaries (Terra, the
Company and it) and the results of operations for the periods presented. Because of the
seasonal nature of Terras 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 a full year. These statements should be read in conjunction with
the Companys 2006 Annual Report on Form 10-K to Shareholders.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the price is fixed or determinable, no obligations remain and collectibility is
probable.
Revenues are primarily comprised of sales of the Companys nitrogen- and methanol-based
products, including any realized hedging gains or losses related to nitrogen product
derivatives, and are reduced by estimated discounts and trade allowances. Revenues also
include profit sharing revenue under the Methanex supply contract when the estimated margin
on an annualized basis is probable. The Company classifies amounts directly or indirectly
billed to its customers for shipping and handling as revenue.
Cost of Sales
Costs of sales are primarily manufacturing costs related to the Companys nitrogen- and
methanol-based products, including any realized hedging gains or losses related to natural
gas derivatives. The Company classifies amounts directly or indirectly billed for delivery
of products to its customers or its terminals as cost of sales.
Derivatives and Financial Instruments
The Company enters 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, to manage the prices of its nitrogen products and to manage foreign
currency risk. The Company reports the fair value of the derivatives on its 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 hedge,
and to the extent such hedge is determined to be effective, changes in fair value are
either (a) offset by the change in fair value of the hedged asset or liability, or (b)
reported as a component of accumulated other comprehensive income (loss) in the period of
change, and subsequently recognized in cost of sales in the period the offsetting hedged
transaction occurs. If an instrument is settled early, any gains or losses are immediately
recognized in cost of sales.
8
Inventories
Inventories are stated at the lower of average cost or estimated net realizable value. The
Company performs a monthly analysis of its inventory balances to determine if the carrying
amount of inventories exceeds its net realizable value. The analysis of estimated
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.
Production costs include the cost of direct labor and materials, depreciation and
amortization, and overhead costs related to manufacturing activity. The cost of inventories
is determined using the first- in, first-out method.
The Company estimates a reserve for obsolescence and excess of its materials and supplies
inventory. Inventory is stated net of the reserve.
Plant Turnaround Costs
Costs related to the periodic scheduled major maintenance of continuous process production
facilities (plant turnarounds) are deferred and charged to product costs on a straight-line
basis during the period until the next scheduled turnaround, generally two years.
Impairment of Long-Lived Assets
Terra reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. If the
sum of the expected future cash flows expected to result from the use of the asset
(undiscounted and without interest charges) is less than the carrying amount of the asset,
an impairment loss is recognized based on the difference between the carrying amount and
the fair value of the asset. During the third quarter, there was an impairment at the
Beaumont, Texas facility, see Note 5.
Use of Estimates in Preparation of the Financial Statements
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
2. |
|
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 involved in the weighted average number of common shares outstanding used to compute
basic income (loss) per share.
9
The following table provides a reconciliation between basic and diluted income (loss) per
share for the three- and nine-month periods ended September 30, 2007 and 2006:
|
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|
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|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands, except per-share amounts) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Basic income (loss) per share
computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
$ |
54,380 |
|
|
$ |
10,341 |
|
|
$ |
132,244 |
|
|
$ |
(7,395 |
) |
Less: Preferred share dividends |
|
|
(1,275 |
) |
|
|
(1,275 |
) |
|
|
(3,825 |
) |
|
|
(3,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to
common shareholders |
|
$ |
53,105 |
|
|
$ |
9,066 |
|
|
$ |
128,419 |
|
|
$ |
(11,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
90,092 |
|
|
|
91,817 |
|
|
|
91,143 |
|
|
|
92,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per common share |
|
$ |
0.59 |
|
|
$ |
0.10 |
|
|
$ |
1.41 |
|
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to
common shareholders |
|
$ |
53,105 |
|
|
$ |
9,066 |
|
|
$ |
128,419 |
|
|
$ |
(11,220 |
) |
Add: Preferred share dividends |
|
|
1,275 |
|
|
|
|
|
|
|
3,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to common
shareholders and assumed conversions |
|
$ |
54,380 |
|
|
$ |
9,066 |
|
|
$ |
132,244 |
|
|
$ |
(11,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
90,092 |
|
|
|
91,817 |
|
|
|
91,143 |
|
|
|
92,994 |
|
Add incremental shares from
assumed conversions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
|
12,049 |
|
|
|
|
|
|
|
12,049 |
|
|
|
|
|
Nonvested stock |
|
|
985 |
|
|
|
596 |
|
|
|
783 |
|
|
|
|
|
Common stock warrants |
|
|
2,710 |
|
|
|
846 |
|
|
|
2,791 |
|
|
|
|
|
Common stock options |
|
|
110 |
|
|
|
146 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares |
|
|
105,946 |
|
|
|
93,405 |
|
|
|
106,899 |
|
|
|
92,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per common share |
|
$ |
0.51 |
|
|
$ |
0.10 |
|
|
$ |
1.24 |
|
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three-month period ended September 30, 2006, common stock options totaling 0.1
million shares were excluded from the computation of diluted income per share because the
exercise prices of these options exceeded the average market price of the Companys stock
for the respective periods, and the effect of their inclusion would have been antidilutive.
For the three-month period ending September 30, 2006, 120,000 preferred shares were
excluded from the computation of diluted earnings per share. These preferred shares were
antidilutive using the if-converted method.
For the nine-month period ended September 30, 2006, all preferred shares, nonvested stock
and common stock options were antidilutive because the Company was in a net loss position.
As such, these instruments were excluded from the computation of the diluted income (loss)
per share for the nine-month period ended September 30, 2006.
10
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2006 |
|
Raw materials |
|
$ |
19,558 |
|
|
$ |
26,583 |
|
|
$ |
29,679 |
|
Supplies |
|
|
36,385 |
|
|
|
54,542 |
|
|
|
53,642 |
|
Finished goods |
|
|
70,211 |
|
|
|
129,892 |
|
|
|
76,870 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
126,154 |
|
|
$ |
211,017 |
|
|
$ |
160,191 |
|
|
|
|
|
|
|
|
|
|
|
Inventory is valued at actual first-in, first-out cost. Costs include raw material, labor
and overhead.
4. |
|
Derivative Financial Instruments |
Terra manages risk using derivative financial instruments for (a) changes in natural gas
supply prices (b) interest rate fluctuations (c) changes in nitrogen prices and (d)
currency. Derivative financial instruments have credit risk and market risk.
To manage credit risk, Terra enters into derivative transactions only with counter-parties
who are currently rated as BBB or better or equivalent as recognized by a national rating
agency. Terra 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.
Terra classifies a derivative financial instrument as a hedge if all of the following
conditions are met:
|
1. |
|
The item to be hedged must expose Terra 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). |
|
|
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 Terras North American and United
Kingdom (U.K.) production facilities are purchased at market prices (See Note 8). Natural
gas market prices are volatile and Terra effectively fixes prices for a portion of its
natural gas production requirements and inventory through the use of futures contracts,
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 Terras 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. The
U.K. contracts are based on the Intercontinental Exchange (ICE) index price. Physical
delivery prices in the U.K. are based on the ICE index. The contracts are traded in months
forward and settlement dates are scheduled to coincide with gas purchases during that
future period.
11
A swap is a contract between Terra 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 futures contracts require maintenance of cash balances generally 10% to 20% of the contract value
and option contracts require initial premium payments ranging from 2% to 5% of contract
value. Basis swap contracts require payments to or from Terra for the amount, if any, that
monthly published gas prices from the source specified in the contract differ from the
prices of a NYMEX natural gas futures during a specified period. There are no initial cash
requirements related to the swap and basis swap agreements.
Terra may also use a collar structure where it will enter into a swap, sell a call at a
higher price and buy a put. The collar structure allows for greater participation in a
decrease to natural gas prices and protects against moderate price increases. However, the
collar exposes Terra to large price increases. At September 30, 2007 there were no collars
outstanding.
The following summarizes open natural gas derivative contracts at September 30, 2007 and
2006 and December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Other |
|
|
|
|
|
|
|
|
|
Current |
|
|
Current |
|
|
Deferred |
|
|
Net |
|
(in thousands) |
|
Assets |
|
|
Liabilities |
|
|
Taxes |
|
|
Asset (Liability) |
|
September 30, 2007 |
|
$ |
4,732 |
|
|
$ |
(26,167 |
) |
|
$ |
7,754 |
|
|
$ |
(13,681 |
) |
December 31, 2006 |
|
$ |
4,731 |
|
|
$ |
(22,591 |
) |
|
$ |
6,373 |
|
|
$ |
(11,487 |
) |
September 30, 2006 |
|
$ |
7,050 |
|
|
$ |
(22,129 |
) |
|
$ |
5,365 |
|
|
$ |
(9,714 |
) |
Certain derivatives outstanding at September 30, 2007 and 2006, which settled during
October 2007 and 2006, respectively, are included in the position of open natural gas
derivatives in the table above. The October 2007 derivatives settled for an approximate
$7.7 million loss. Substantially all open derivatives will settle during the next 12
months.
At September 30, 2007, the Company determined that certain derivative contracts were
ineffective hedges for accounting purposes and recorded a credit of $0.3 million to cost of
sales for the three-month period and a credit of $1.7 million for the nine-month period
ending September 30, 2007. At September 30, 2006, the Company determined that certain
derivative contracts were ineffective hedges for accounting purposes and recorded a charge
of $1.2 million and $2.8 million to cost of sales for the three- and nine-month periods
ending September 30, 2006, respectively.
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 and ICE natural gas contract prices.
12
The activity to accumulated other comprehensive income (loss), net of income taxes,
relating to current period hedging transactions for the three-month periods ended September
30, 2007 and 2006 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
(in thousands) |
|
Gross |
|
|
Net of tax |
|
|
Gross |
|
|
Net of tax |
|
Beginning accumulated gain (loss) |
|
$ |
(28,684 |
) |
|
$ |
(18,644 |
) |
|
$ |
(7,034 |
) |
|
$ |
(4,578 |
) |
Reclassification into earnings |
|
|
(31,210 |
) |
|
|
(20,286 |
) |
|
|
(34 |
) |
|
|
(14 |
) |
Net change in market value |
|
|
37,739 |
|
|
|
24,529 |
|
|
|
(8,263 |
) |
|
|
(5,374 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending accumulated gain (loss) |
|
$ |
(22,155 |
) |
|
$ |
(14,401 |
) |
|
$ |
(15,331 |
) |
|
$ |
(9,966 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The activity to accumulated other comprehensive income (loss), net of income taxes,
relating to current period hedging transactions for the nine-month periods ended September
30, 2007 and 2006 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
(in thousands) |
|
Gross |
|
|
Net of tax |
|
|
Gross |
|
|
Net of tax |
|
Beginning accumulated gain (loss) |
|
$ |
(18,210 |
) |
|
$ |
(11,836 |
) |
|
$ |
(7,886 |
) |
|
$ |
(5,109 |
) |
Reclassification into earnings |
|
|
(31,562 |
) |
|
|
(20,515 |
) |
|
|
42,556 |
|
|
|
27,597 |
|
Net change in market value |
|
|
27,617 |
|
|
|
17,950 |
|
|
|
(50,001 |
) |
|
|
(32,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending accumulated gain (loss) |
|
$ |
(22,155 |
) |
|
$ |
(14,401 |
) |
|
$ |
(15,331 |
) |
|
$ |
(9,966 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At times, the Company also uses forward derivative instruments to fix or set floor prices
for a portion of its nitrogen sales volumes. At September 30, 2007, the Company had open
contracts of nitrogen solutions. When outstanding, the nitrogen solution contracts do not
qualify for hedge treatment due to inadequate trading history to demonstrate effectiveness.
Consequently, these contracts are marked-to-market and unrealized gains or losses are
reflected in revenue in the statement of operations. For the three- and nine-month periods
ending September 30, 2007, the Company recognized a loss of $1.0 million and $2.9 million,
respectively, on nitrogen forward derivative instruments. For the three- and nine-month
periods ending September 30, 2006, there were no gains or losses on nitrogen forward
derivative instruments.
5. |
|
Impairment of Beaumont Assets |
On September 28, 2007, Eastman Chemical Company exercised its option to purchase the
Companys Beaumont, Texas assets, including the methanol and ammonia production facilities.
The Company anticipates closing the sale on or before January 1, 2009.
As a result of this agreement, the Company determined that the value of its Beaumont
property was impaired. The Company recorded a $39.0 million impairment charge for the
quarter ended September 30, 2007. The impairment charge reduces Terras investment in the
Beaumont property to approximately $51 million.
13
6. |
|
Unrecognized Tax Benefit |
The Company adopted the provision of Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty to Income Taxes (FIN 48), on January 1,
2007. Under FIN 48, tax benefits are recorded only for tax positions that are more likely
than not to be sustained upon examination by tax authorities. The amount recognized is
measured as the largest amount of benefit that is greater than 50% likely to be realized
upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the
Companys tax returns that do not meet these recognition and measurement standards.
The primary jurisdictions in which the Company or one of its subsidiaries files income tax
returns are the United States, Canada and the United Kingdom (See Note 8). In most United
States jurisdictions, the Company has significant net operating loss (NOL) carryforwards
that date back to 1999 and will remain subject to examination by tax authorities as those
NOL positions may be used to offset future taxable earnings. For jurisdictions in Canada
and the United Kingdom, income tax returns remain subject to examination by tax authorities
for calendar years beginning in 2001 and 2005, respectively.
The adoption of FIN 48 had no impact on the Companys financial statements other than the
reclassification of the unrecognized tax benefit. The Companys other liabilities include
an unrecognized tax benefit of $33.5 million at September 30, 2007, which had been
previously recognized under FASB Statement No. 5 Accounting for Contingencies or FASB
Statement No. 109 Accounting for Income Taxes. There were no changes in unrecognized tax
positions during the period, and there are no expected changes in the next twelve months.
If recognized, the $33.5 million of unrecognized tax benefit would have an impact on the
effective tax rate.
When applicable, the Company recognizes interest accrued and penalties related to
unrecognized tax benefits in income taxes on the statement of operations. Due to the
Companys NOL carryforward position, no interest or penalties were recognized at September
30, 2007.
Other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2006 |
|
Deferred income taxes |
|
$ |
49,691 |
|
|
$ |
63,851 |
|
|
$ |
58,922 |
|
Unrecognized tax benefit |
|
|
33,560 |
|
|
|
|
|
|
|
|
|
Long-term medical and
closed facility reserve |
|
|
24,026 |
|
|
|
23,206 |
|
|
|
23,560 |
|
Other |
|
|
32,605 |
|
|
|
16,982 |
|
|
|
14,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
139,882 |
|
|
$ |
104,039 |
|
|
$ |
96,542 |
|
|
|
|
|
|
|
|
|
|
|
14
Trinidad and United States
Terras investments in 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 Terras Verdigris nitrogen plant.
These investments were $156.4 million at September 30, 2007. Terra includes the net
earnings of these investments as an element of income from operations as the investees
operations provide additional capacity to Terras operations.
The combined results of operations and financial position of Terras equity method
investments are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Condensed income statement
information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
46,844 |
|
|
$ |
28,078 |
|
|
$ |
101,903 |
|
|
$ |
129,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
13,555 |
|
|
$ |
4,483 |
|
|
$ |
23,049 |
|
|
$ |
32,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terras (loss) equity in earnings
of unconsolidated affiliates |
|
$ |
5,566 |
|
|
$ |
809 |
|
|
$ |
10,379 |
|
|
$ |
15,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
Condensed balance sheet information: |
|
|
|
|
|
|
|
|
Current assets |
|
$ |
43,130 |
|
|
$ |
45,964 |
|
Long-lived assets |
|
|
194,310 |
|
|
|
194,549 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
237,440 |
|
|
$ |
240,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
24,193 |
|
|
$ |
26,473 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
Equity |
|
|
213,247 |
|
|
|
214,040 |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
237,440 |
|
|
$ |
240,513 |
|
|
|
|
|
|
|
|
The carrying value of these investments at September 30, 2007 was $49.7 million more than
Terras 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 15 years. Terras equity in earnings of unconsolidated subsidiaries is
different than its ownership interest in income reported by the unconsolidated subsidiaries
due to deferred profits on intergroup transactions and amortization of basis differences.
Terra has transactions in the normal course of business with PLNL whereby Terra is obliged
to purchase 50 percent of the ammonia produced by PLNL at current market prices. During the
nine-month period ending September 30, 2007, Terra purchased approximately $52.7 million of
ammonia from PLNL. During 2007, PLNL performed a turnaround, resulting in lower production
levels and consequently, lower purchases by the Company. During the first nine months of
2006, Terra purchased approximately $63.4 million of ammonia from PLNL.
15
During the first nine months of 2007 there were $15.5 million in cash distributions from
all of the Companys equity investments. The total distributions from all investments were
$34.6 million for the nine-month period ended September 30, 2006.
United Kingdom
On September 14, 2007, the Company completed the formation of GrowHow UK Limited (GrowHow),
a joint venture between the Company and Kemira GrowHow Oyj (Kemira). Pursuant to the joint
venture agreement, Terra contributed its United Kingdom subsidiary Terra Nitrogen (UK)
Limited to the joint venture for a 50% interest. Subsequent to September 14, 2007, the
Company has accounted for its investment in GrowHow UK Limited as an equity method
investment. The equity investment of $213.2 million was recorded at Terras net historical
cost basis.
The preliminary financial position of GrowHow UK Limited at September 30, 2007 was:
|
|
|
|
|
|
|
September 30, |
|
Condensed balance sheet information: |
|
2007 |
|
Current assets |
|
$ |
119,082 |
|
Long-lived assets |
|
|
179,767 |
|
|
|
|
|
Total Assets |
|
$ |
298,849 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
52,527 |
|
Long-term liabilities |
|
|
74,697 |
|
Equity |
|
|
171,625 |
|
|
|
|
|
Total liabilities and Equity |
|
$ |
298,849 |
|
|
|
|
|
These preliminary financial position balances are based on historical cost of the Growhow
UK Limited assets contributed into the joint venture.
Pursuant to the joint venture agreement, the Company retained all rights to sales generated
through September 30, 2007. GrowHow UK Limited was formed on September 14, 2007. The
Company estimated the equity earnings of its equity method investment of $2.2 million for
the 2007 third quarter. This estimate was based on the proportionate number of days as an
equity investment as compared to the pre-joint venture classification as a wholly-owned and
fully consolidated subsidiary.
The Companys interest in the joint venture is classified as a non operating equity
investment. Terra does 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 Terra, nor are its operations integrated with Terras supply chain in North America.
Pursuant to the Joint Venture Contribution Agreement, the Company is eligible to receive a
balancing consideration payment from GrowHow UK Limited. The payment is due to the Company
in 2011. The Company will receive a minimum of $40 million, and has
the right to receive up to
$120 million, based on operational efficiencies of GrowHow UK
Limited.
The Company has rights to receive a cash refund from GrowHow UK Limited for working capital
contributions in excess of amounts specified in the Joint Venture Contribution Agreement.
The Company anticipates receiving approximately $20 million
during the 2007 fourth quarter.
16
There were no distributions from the United Kingdom equity investment for the three- and
nine-month period ended September 30, 2007.
9. |
|
Long-term Debt and Capital Lease Obligation |
Long-term debt and capital lease obligations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2006 |
|
Unsecured
Senior Notes, 7.0% due 2017 |
|
$ |
330,000 |
|
|
$ |
|
|
|
$ |
|
|
Secured Senior Notes, 12.875%
due 2008 |
|
|
|
|
|
|
200,000 |
|
|
|
200,000 |
|
Second Priority Senior Secured
Notes, 11.5%, due 2010 |
|
|
|
|
|
|
131,300 |
|
|
|
131,300 |
|
Other |
|
|
|
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and
capital lease obligations |
|
|
330,000 |
|
|
|
331,301 |
|
|
|
331,304 |
|
Less current maturities |
|
|
|
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and
capital lease obligations |
|
$ |
330,000 |
|
|
$ |
331,300 |
|
|
$ |
331,300 |
|
|
|
|
|
|
|
|
|
|
|
In January 2007, Terra Capital, Inc., (TCAPI) a subsidiary of Terra Industries Inc.,
issued $330 million of 7.0% Senior Notes due 2017. The notes are unconditionally guaranteed
by Terra Industries Inc. and its U.S. subsidiaries. Fees and expenses of the transaction
totaled $6.4 million. 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 these notes contains covenants that limit, among other things, the
Companys ability to: incur additional debt, pay dividends on common stock of Terra
Industries Inc. or repurchase shares of such common stock, make certain investments, sell
any of the Companys principal production facilities or sell other assets outside the
ordinary course of business, enter into transactions with affiliates, limit dividends or
other payments by the Companys restricted subsidiaries, enter into sale and leaseback
transactions, engage in other businesses, sell all or substantially all of the Companys
assets or merge with or into other companies, and reduce the Companys insurance coverage.
The Company is 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 interest to the date of purchase. The Indenture
governing these notes contains events of default and remedies customary for a financing of
this type.
Offering proceeds were used to repurchase the Companys 12.875% Senior Secured Notes and
11.5% Second Priority Secured Notes pursuant to a tender offer.
As a result of the Companys debt refinancing, the Company incurred costs of approximately
$31.9 million for tender premiums, and approximately $2.2 million for make-whole payments
and administrative expenses. In addition, the Company recognized approximately $4.7 million
of expense related to deferred fees on the bonds that were repaid. In connection with the
new bond offering the Company paid approximately $6.4 million for fees and administrative
costs.
17
In the first quarter of 2007, the Company amended the $200 million revolving credit
facility to extend the expiration date to January 31, 2012. The revolving credit facility
is secured by substantially all of the assets of the Company. Borrowing availability is
generally based on 100% of eligible cash balances, 85% of eligible accounts receivable and
60% of eligible finished goods inventory less outstanding letters of credit issued under
the facility. These facilities include $50 million only available for the use of Terra
Nitrogen Company, L.P. (TNCLP), one of the Companys consolidated subsidiaries. Borrowings
under the revolving credit facility will bear interest at a floating rate plus an
applicable margin, which can be either a base rate, or, at the Companys option, a London
Interbank Offered Rate (LIBOR). At September 30, 2007, the LIBOR rate was 5.13%. 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 are 0.50% and 1.75%, respectively, at September 30,
2007. The revolving credit facility requires an initial one-half percent (0.50%) commitment
fee on the difference between committed amounts and amounts actually borrowed.
At September 30, 2007, the Company had no outstanding revolving credit borrowings and $10.8
million in outstanding letters of credit. The $10.8 million in outstanding letters of
credit reduced the Companys borrowing availability to $189.2 million at September 30,
2007. The credit facilities require that the Company 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. If the Companys borrowing availability falls below $60 million, the
Company is required to have achieved minimum operating cash flows or earnings before
interest, income taxes, depreciation, amortization and other non-cash items of $60 million
during the most recent four quarters.
Terra maintains 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. The Company also has certain non-qualified pension plans
covering executives, which are unfunded. Terra accrues pension costs based upon annual
actuarial valuations for each plan and funds these costs in accordance with statutory
requirements.
The estimated components of net periodic pension expense follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Service cost |
|
$ |
748 |
|
|
$ |
744 |
|
|
$ |
2,244 |
|
|
$ |
2,232 |
|
Interest cost |
|
|
6,231 |
|
|
|
5,888 |
|
|
|
18,693 |
|
|
|
17,664 |
|
Expected return on plan assets |
|
|
(6,056 |
) |
|
|
(5,394 |
) |
|
|
(18,168 |
) |
|
|
(16,182 |
) |
Amortization of prior service cost |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(27 |
) |
|
|
(21 |
) |
Amortization of actuarial loss |
|
|
1,409 |
|
|
|
1,408 |
|
|
|
4,227 |
|
|
|
4,224 |
|
Termination charge |
|
|
123 |
|
|
|
291 |
|
|
|
369 |
|
|
|
873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension expense |
|
$ |
2,446 |
|
|
$ |
2,930 |
|
|
$ |
7,338 |
|
|
$ |
8,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Cash contributions to the defined benefit pension plans for the three months ended
September 30, 2007 and 2006 were $14.7 million and $8.8 million, respectively. Cash
contributions to the defined benefit pension plans for the nine months ended September 30, 2007 and 2006 were $29.4 million and
$14.1 million, respectively.
During the 2007 third quarter, the Company contributed its UK assets
and operations into a joint venture, which included a reduction of
the Companys pension liabilities of approximately
$67 million (see Note 8).
Terra also sponsors 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 the Company contributions to these plans for the
three-month periods ending September 30, 2007 and 2006 totaled $1.4 million and $1.2
million, respectively. Contributions to these plans for the nine-month periods ending
September 30, 2007 and 2006 were $4.5 million and $5.3 million, respectively.
Terra provides 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.
11. |
|
Accumulated other comprehensive income (loss) |
Accumulated other comprehensive income (loss) refers to revenues, expenses, gains and
losses that under accounting principles generally accepted in the United States are
recorded as an element of shareholders equity but are excluded from net income (loss).
Terras accumulated other comprehensive income (loss) is comprised of (a) adjustments that
result from translation of Terras foreign entity financial statements from their
functional currencies to United States dollars, (b) adjustments that result from
translation of intercompany foreign currency transactions that are of a long-term
investment nature (that is, settlement is not planned or anticipated in the foreseeable
future) between entities that are consolidated in Terras financial statements, (c) the
offset to the fair value of derivative assets and liabilities (that qualify as hedged
relationships) recorded on the balance sheet, and (d) pension and post-retirement benefit
liabilities adjustments.
19
The components of accumulated other comprehensive income (loss), net of tax, for the nine
months ended September 30, 2007 and 2006 follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency |
|
|
|
|
|
|
Pension and Post- |
|
|
|
|
|
|
Translation |
|
|
Fair Value of |
|
|
Retirement Benefit |
|
|
|
|
(in thousands) |
|
Adjustment |
|
|
Derivatives |
|
|
Liabilities |
|
|
Total |
|
|
Balance January 1, 2007 |
|
$ |
24,518 |
|
|
$ |
(11,836 |
) |
|
$ |
(76,421 |
) |
|
$ |
(63,739 |
) |
Change in pension and post
retirement benefit liabilities |
|
|
|
|
|
|
|
|
|
|
1,913 |
|
|
|
1,913 |
|
Transfer of UK pension plan to
GrowHow UK Limited |
|
|
|
|
|
|
|
|
|
|
43,272 |
|
|
|
43,272 |
|
Change in foreign translation
adjustment |
|
|
(42,361 |
) |
|
|
|
|
|
|
|
|
|
|
(42,361 |
) |
Reclassification to earnings |
|
|
|
|
|
|
(20,515 |
) |
|
|
|
|
|
|
(20,515 |
) |
Change in fair value of derivatives |
|
|
|
|
|
|
17,950 |
|
|
|
|
|
|
|
17,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2007 |
|
$ |
(17,843 |
) |
|
$ |
(14,401 |
) |
|
$ |
(31,236 |
) |
|
$ |
(63,480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2006 |
|
$ |
(9,100 |
) |
|
$ |
(5,109 |
) |
|
$ |
(55,934 |
) |
|
$ |
(70,143 |
) |
Change in foreign translation
adjustment |
|
|
22,638 |
|
|
|
|
|
|
|
|
|
|
|
22,638 |
|
Reclassification to earnings |
|
|
|
|
|
|
27,597 |
|
|
|
|
|
|
|
27,597 |
|
Change in fair value of derivatives |
|
|
|
|
|
|
(32,454 |
) |
|
|
|
|
|
|
(32,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2006 |
|
$ |
13,538 |
|
|
$ |
(9,966 |
) |
|
$ |
(55,934 |
) |
|
$ |
(52,362 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
12. |
|
Industry Segment Data |
Terra classifies its operations into two business segments: nitrogen products and methanol.
The nitrogen products business produces and distributes ammonia, urea, nitrogen solutions,
ammonium nitrate and other products to farm distributors and industrial users. The methanol
business manufactures and distributes methanol which is used in the production of a variety
of chemical derivatives and in the production of methyl tertiary butyl ether (MTBE), an
oxygenate and an octane enhancer for gasoline. Terra does not allocate interest, income
taxes or corporate-related charges to business segments. Included in Other are general
corporate activities not attributable to a specific industry segment.
The following summarizes operating results by business segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Revenues - Nitrogen Products |
|
$ |
571,518 |
|
|
$ |
442,612 |
|
|
$ |
1,739,001 |
|
|
$ |
1,355,574 |
|
- Methanol |
|
|
18,528 |
|
|
|
18,921 |
|
|
|
41,839 |
|
|
|
25,510 |
|
- Other |
|
|
3,669 |
|
|
|
3,248 |
|
|
|
8,976 |
|
|
|
6,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
593,715 |
|
|
$ |
464,781 |
|
|
$ |
1,789,816 |
|
|
$ |
1,387,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Nitrogen Products |
|
$ |
123,676 |
|
|
$ |
20,409 |
|
|
$ |
315,978 |
|
|
$ |
25,098 |
|
- Methanol |
|
|
(27,208 |
) |
|
|
9,405 |
|
|
|
(25,646 |
) |
|
|
3,363 |
|
- Other |
|
|
(965 |
) |
|
|
(426 |
) |
|
|
(1,385 |
) |
|
|
(1,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
$ |
95,503 |
|
|
$ |
29,388 |
|
|
$ |
288,947 |
|
|
$ |
27,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The following summarizes geographic revenues information (See Note 8):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
United States |
|
$ |
474,270 |
|
|
$ |
337,958 |
|
|
$ |
1,416,068 |
|
|
$ |
1,048,142 |
|
Canada |
|
|
11,353 |
|
|
|
12,874 |
|
|
|
54,639 |
|
|
|
48,755 |
|
United Kingdom |
|
|
108,092 |
|
|
|
113,949 |
|
|
|
319,109 |
|
|
|
290,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
593,715 |
|
|
$ |
464,781 |
|
|
$ |
1,789,816 |
|
|
$ |
1,387,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. |
|
Commitments and Contingencies |
The Company is involved in various claims and legal actions arising in the ordinary course
of business, including employee injury claims. Based on the facts currently available,
management believes that the ultimate disposition of these matters will not have a material
adverse effect on the Companys 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.
The Company has entered into physical natural gas supply agreements through March 2009 for
approximately 25.9 million MMBtus. As of September 30, 2007, these natural gas
commitments were $1.4 million above the respective index prices.
On April 25, 2006, the Board of Directors authorized the Company to repurchase a maximum of
10 percent, or 9,516,817 shares, of its outstanding common stock. The stock buyback
program has been and will be conducted on the open market, in private transactions or
otherwise at such times prior to June 30, 2008, and at such prices, as determined
appropriate by the Company. Purchases may be commenced or suspended at any time without
notice. In 2006 there were 2.7 million shares repurchased for an aggregate cost of $18.8
million, which resulted in a balance of 6.8 million shares available for repurchase under
the program.
During 2007, the Company repurchases under the stock program were:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except |
|
Number of |
|
|
Average Price |
|
|
Total Cost of |
|
average price of shares |
|
Shares |
|
|
of Shares |
|
|
Shares |
|
repurchased) |
|
Repurchased |
|
|
Repurchased |
|
|
Repurchased |
|
January 2007 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
February 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
March 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
April 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
May 2007 |
|
|
650 |
|
|
|
18.79 |
|
|
|
12,220 |
|
June 2007 |
|
|
350 |
|
|
|
19.53 |
|
|
|
6,991 |
|
July 2007 |
|
|
200 |
|
|
|
25.53 |
|
|
|
5,067 |
|
August 2007 |
|
|
2,800 |
|
|
|
22.55 |
|
|
|
63,148 |
|
September 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,000 |
|
|
$ |
21.86 |
|
|
$ |
87,426 |
|
|
|
|
|
|
|
|
|
|
|
21
15. |
|
New Accounting Pronouncements |
In September 2006, the FASB issued SFAS 157, Fair Value Measurements, (SFAS 157). SFAS 157
is definitional and disclosure oriented and addresses how companies should approach
measuring fair value when required by generally accepted accounting principles (GAAP); it
does not create or modify any current GAAP requirements to apply fair value accounting.
SFAS 157 provides a single definition for fair value that is to be applied consistently for
all accounting applications, and also generally describes and prioritizes according to
reliability the methods and input used in valuations. SFAS 157 prescribes various
disclosures about financial statement categories and amounts which are measured at fair
value, if such disclosures are not already specified elsewhere in GAAP. The new measurement
and disclosure and requirements of SFAS 157 are effective for the Company in 2008 first
quarter and the Company expects no significant impact from adopting the Standard.
In February 2007, the FASB issued Statement of Financial Accounting Standards (SFAS 159),
The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159
permits entities to choose to measure many financial instruments and certain other items at
fair value at specified election dates. SFAS 159 is effective for the Company beginning in
the first quarter of 2008. The Company is currently assessing the impact SFAS 159 may have
on its financial statements.
On October 9, 2007, GrowHow UK Limited (GrowHow) announced the closure of its Severnside
manufacturing facilities. The closure is expected to be completed by the end of January
2008. GrowHow estimates the costs associated with severance to be approximately $26.5
million, which will impact the Companys equity earnings from GrowHow during the 2007
fourth quarter.
Pursuant to the Joint Venture Contribution Agreement, the Company is responsible for any
remediation costs required to prepare the Severnside site for disposal. The Company
anticipates remediation costs to be approximately $5.0 million to $10.0 million; however,
the Company also has an option to purchase the Severnside land for a nominal amount at any
time prior to its sale. The Company anticipates that the proceeds related to the sale of
the Severnside land would exceed the total cost of reclamation of the site.
17. |
|
Guarantor Subsidiaries |
The consolidating statement of financial position of Terra Industries Inc. (the Parent),
Terra Capital, Inc. (TCAPI), the Guarantor Subsidiaries and subsidiaries of the Parent
that are not guarantors of the Unsecured Senior Notes due 2017 for September 30, 2007;
December 31, 2006; and September 30, 2006 are presented below for purposes of complying
with the reporting requirements of the Guarantor Subsidiaries. Statements of operations and
statements of cash flows for the nine months ended September 30, 2007 and 2006 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 as well as 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.
22
Consolidating Balance Sheet as of September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
43,545 |
|
|
$ |
218,604 |
|
|
$ |
566,133 |
|
|
$ |
(467,804 |
) |
|
$ |
360,478 |
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
97,989 |
|
|
|
61,916 |
|
|
|
|
|
|
|
159,905 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
78,753 |
|
|
|
51,785 |
|
|
|
(4,384 |
) |
|
|
126,154 |
|
Other current assets |
|
|
2,075 |
|
|
|
537 |
|
|
|
7,516 |
|
|
|
4,811 |
|
|
|
(1,872 |
) |
|
|
13,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,075 |
|
|
|
44,082 |
|
|
|
402,862 |
|
|
|
684,645 |
|
|
|
(474,060 |
) |
|
|
659,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net |
|
|
|
|
|
|
|
|
|
|
311,535 |
|
|
|
123,569 |
|
|
|
(1 |
) |
|
|
435,103 |
|
Equity method investments |
|
|
|
|
|
|
|
|
|
|
10,917 |
|
|
|
358,688 |
|
|
|
|
|
|
|
369,605 |
|
Intangible assets, other assets
and deferred plant
turnaround costs |
|
|
(1,839 |
) |
|
|
8,326 |
|
|
|
23,854 |
|
|
|
30,253 |
|
|
|
(4,413 |
) |
|
|
56,181 |
|
Investments in and advanced
to (from) affiliates |
|
|
589,662 |
|
|
|
344,748 |
|
|
|
1,459,277 |
|
|
|
|
|
|
|
(2,393,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
589,898 |
|
|
$ |
397,156 |
|
|
$ |
2,208,445 |
|
|
$ |
1,197,155 |
|
|
$ |
(2,872,161 |
) |
|
$ |
1,520,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,298 |
|
|
$ |
(212 |
) |
|
$ |
89,147 |
|
|
$ |
74,376 |
|
|
$ |
|
|
|
$ |
165,609 |
|
Accrued expenses and
other current liabilities |
|
|
36,314 |
|
|
|
3,549 |
|
|
|
37,913 |
|
|
|
20,357 |
|
|
|
(1,782 |
) |
|
|
96,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
38,612 |
|
|
|
3,337 |
|
|
|
127,060 |
|
|
|
94,733 |
|
|
|
(1,782 |
) |
|
|
261,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital
lease obligations |
|
|
|
|
|
|
330,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330,000 |
|
Pension and other liabilities |
|
|
100,247 |
|
|
|
(511 |
) |
|
|
14,167 |
|
|
|
(27,333 |
) |
|
|
91,353 |
|
|
|
177,923 |
|
Minority interest |
|
|
|
|
|
|
20,077 |
|
|
|
82,777 |
|
|
|
|
|
|
|
|
|
|
|
102,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
minority interest |
|
|
138,859 |
|
|
|
352,903 |
|
|
|
224,004 |
|
|
|
67,400 |
|
|
|
89,571 |
|
|
|
872,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock - liquidation
value of 120,000 |
|
|
115,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
142,070 |
|
|
|
|
|
|
|
73 |
|
|
|
32,458 |
|
|
|
(32,532 |
) |
|
|
142,069 |
|
Paid-in capital |
|
|
617,085 |
|
|
|
150,218 |
|
|
|
1,949,997 |
|
|
|
1,173,391 |
|
|
|
(3,273,606 |
) |
|
|
617,085 |
|
Accumulated other
comprehensive income
(loss) |
|
|
(37,305 |
) |
|
|
|
|
|
|
|
|
|
|
102,236 |
|
|
|
(128,411 |
) |
|
|
(63,480 |
) |
Accumulated deficit |
|
|
(386,611 |
) |
|
|
(105,965 |
) |
|
|
34,371 |
|
|
|
(178,330 |
) |
|
|
472,817 |
|
|
|
(163,718 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity |
|
|
335,239 |
|
|
|
44,253 |
|
|
|
1,984,441 |
|
|
|
1,129,755 |
|
|
|
(2,961,732 |
) |
|
|
531,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
minority interest,
preferred stock and common
shareholders equity |
|
$ |
589,898 |
|
|
$ |
397,156 |
|
|
$ |
2,208,445 |
|
|
$ |
1,197,155 |
|
|
$ |
(2,872,161 |
) |
|
$ |
1,520,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Consolidating Statement of Operations for the three months ended September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
297,668 |
|
|
$ |
292,378 |
|
|
$ |
|
|
|
$ |
590,046 |
|
Other |
|
|
|
|
|
|
|
|
|
|
3,129 |
|
|
|
541 |
|
|
|
(1 |
) |
|
|
3,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
300,797 |
|
|
|
292,919 |
|
|
|
(1 |
) |
|
|
593,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
300 |
|
|
|
261 |
|
|
|
244,160 |
|
|
|
209,265 |
|
|
|
(11,107 |
) |
|
|
442,879 |
|
Selling, general and
administrative expenses |
|
|
564 |
|
|
|
(3,056 |
) |
|
|
8,150 |
|
|
|
5,371 |
|
|
|
10,906 |
|
|
|
21,935 |
|
Equity in the (earnings) loss
of unconsolidated affiliates |
|
|
(95,936 |
) |
|
|
(100,364 |
) |
|
|
(5,769 |
) |
|
|
(15,374 |
) |
|
|
211,877 |
|
|
|
(5,566 |
) |
Impairment |
|
|
|
|
|
|
|
|
|
|
38,964 |
|
|
|
|
|
|
|
|
|
|
|
38,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost & expenses |
|
|
(95,072 |
) |
|
|
(103,159 |
) |
|
|
285,505 |
|
|
|
199,262 |
|
|
|
211,676 |
|
|
|
498,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
95,072 |
|
|
|
103,159 |
|
|
|
15,292 |
|
|
|
93,657 |
|
|
|
(211,677 |
) |
|
|
95,503 |
|
Equity in the earnings (loss)
of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,202 |
|
|
|
|
|
|
|
2,202 |
|
Interest income |
|
|
|
|
|
|
1,251 |
|
|
|
1,520 |
|
|
|
2,075 |
|
|
|
(137 |
) |
|
|
4,709 |
|
Interest expense |
|
|
(465 |
) |
|
|
(6,323 |
) |
|
|
(2 |
) |
|
|
(115 |
) |
|
|
|
|
|
|
(6,905 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes and minority interest |
|
|
94,607 |
|
|
|
98,087 |
|
|
|
16,810 |
|
|
|
97,819 |
|
|
|
(211,814 |
) |
|
|
95,509 |
|
Income tax (provision) benefit |
|
|
(24,714 |
) |
|
|
|
|
|
|
|
|
|
|
(5,271 |
) |
|
|
|
|
|
|
(29,985 |
) |
Minority interest |
|
|
|
|
|
|
(2,151 |
) |
|
|
(8,993 |
) |
|
|
|
|
|
|
|
|
|
|
(11,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
69,893 |
|
|
$ |
95,936 |
|
|
$ |
7,817 |
|
|
$ |
92,548 |
|
|
$ |
(211,814 |
) |
|
$ |
54,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Consolidating Statement of Operations for the nine months ended September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
859,081 |
|
|
$ |
926,224 |
|
|
$ |
(4,465 |
) |
|
$ |
1,780,840 |
|
Other |
|
|
|
|
|
|
|
|
|
|
7,279 |
|
|
|
1,697 |
|
|
|
|
|
|
|
8,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
866,360 |
|
|
|
927,921 |
|
|
|
(4,465 |
) |
|
|
1,789,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
600 |
|
|
|
2,147 |
|
|
|
747,798 |
|
|
|
696,857 |
|
|
|
(42,304 |
) |
|
|
1,405,098 |
|
Selling, general and
administrative expenses |
|
|
1,516 |
|
|
|
(8,780 |
) |
|
|
16,267 |
|
|
|
23,176 |
|
|
|
35,007 |
|
|
|
67,186 |
|
Equity in the (earnings) loss
of unconsolidated affiliates |
|
|
(223,428 |
) |
|
|
(280,562 |
) |
|
|
(10,857 |
) |
|
|
(26,055 |
) |
|
|
530,523 |
|
|
|
(10,379 |
) |
Impairment |
|
|
|
|
|
|
|
|
|
|
38,964 |
|
|
|
|
|
|
|
|
|
|
|
38,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost & expenses |
|
|
(221,312 |
) |
|
|
(287,195 |
) |
|
|
792,172 |
|
|
|
693,978 |
|
|
|
523,226 |
|
|
|
1,500,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
221,312 |
|
|
|
287,195 |
|
|
|
74,188 |
|
|
|
233,943 |
|
|
|
(527,691 |
) |
|
|
288,947 |
|
Equity in the earnings (loss)
of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,202 |
|
|
|
|
|
|
|
2,202 |
|
Interest income |
|
|
|
|
|
|
2,521 |
|
|
|
5,077 |
|
|
|
3,603 |
|
|
|
(123 |
) |
|
|
11,078 |
|
Interest expense |
|
|
(1,395 |
) |
|
|
(20,944 |
) |
|
|
(5 |
) |
|
|
(341 |
) |
|
|
|
|
|
|
(22,685 |
) |
Loss on early retirement
of debt |
|
|
|
|
|
|
(38,836 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,836 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes and minority interest |
|
|
219,917 |
|
|
|
229,936 |
|
|
|
79,260 |
|
|
|
239,407 |
|
|
|
(527,814 |
) |
|
|
240,706 |
|
Income tax (provision) benefit |
|
|
(63,848 |
) |
|
|
|
|
|
|
|
|
|
|
(10,894 |
) |
|
|
|
|
|
|
(74,742 |
) |
Minority interest |
|
|
|
|
|
|
(6,508 |
) |
|
|
(27,212 |
) |
|
|
|
|
|
|
|
|
|
|
(33,720 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
156,069 |
|
|
$ |
223,428 |
|
|
$ |
52,048 |
|
|
$ |
228,513 |
|
|
$ |
(527,814 |
) |
|
$ |
132,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Consolidating Statement of Cash Flows for the nine months ended September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
156,069 |
|
|
$ |
223,428 |
|
|
$ |
52,048 |
|
|
$ |
228,513 |
|
|
$ |
(527,814 |
) |
|
$ |
132,244 |
|
Adjustments to reconcile net
income (loss) to net cash
flows from operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
|
|
|
|
|
|
|
|
47,594 |
|
|
|
33,463 |
|
|
|
|
|
|
|
81,057 |
|
Impairment of assets |
|
|
|
|
|
|
|
|
|
|
38,964 |
|
|
|
|
|
|
|
|
|
|
|
38,964 |
|
Deferred income taxes |
|
|
48,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,981 |
|
Minority interest in earnings |
|
|
|
|
|
|
1,575 |
|
|
|
32,145 |
|
|
|
|
|
|
|
|
|
|
|
33,720 |
|
Distributions in excess of
equity earnings |
|
|
168,715 |
|
|
|
2,730 |
|
|
|
5,121 |
|
|
|
427,083 |
|
|
|
(598,528 |
) |
|
|
5,121 |
|
Non-cash loss on derivatives |
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176 |
|
Share-based compensation |
|
|
16,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
16,838 |
|
Amortization of intangible
and other assets |
|
|
|
|
|
|
|
|
|
|
6,655 |
|
|
|
|
|
|
|
|
|
|
|
6,655 |
|
Non-cash loss on early
retirement of debt |
|
|
|
|
|
|
4,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,662 |
|
Change in operating assets
and liabilities |
|
|
(80,018 |
) |
|
|
(1,323 |
) |
|
|
(4,506 |
) |
|
|
110,724 |
|
|
|
(9,356 |
) |
|
|
15,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from
Operating Activities |
|
|
310,762 |
|
|
|
231,072 |
|
|
|
178,021 |
|
|
|
799,783 |
|
|
|
(1,135,699 |
) |
|
|
383,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment |
|
|
|
|
|
|
|
|
|
|
(10,917 |
) |
|
|
(12,207 |
) |
|
|
|
|
|
|
(23,124 |
) |
Cash retained by
GrowHow UK Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,249 |
) |
|
|
|
|
|
|
(17,249 |
) |
Plant turnaround expenditures |
|
|
|
|
|
|
|
|
|
|
(10,396 |
) |
|
|
(25,589 |
) |
|
|
|
|
|
|
(35,985 |
) |
Equity earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,202 |
) |
|
|
|
|
|
|
(2,202 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from
Investing Activities |
|
|
|
|
|
|
|
|
|
|
(21,313 |
) |
|
|
(57,247 |
) |
|
|
|
|
|
|
(78,560 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
|
|
|
|
330,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330,000 |
|
Payment on debt |
|
|
|
|
|
|
(331,300 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
1 |
|
|
|
(331,300 |
) |
Payments for debt issuance
costs |
|
|
|
|
|
|
(6,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,403 |
) |
Common stock issuances
and vestings |
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89 |
|
Preferred share dividends paid |
|
|
(3,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,825 |
) |
Repurchases of TRA stock |
|
|
(87,426 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,426 |
) |
Distributions to minority interest |
|
|
|
|
|
|
|
|
|
|
(25,554 |
) |
|
|
|
|
|
|
|
|
|
|
(25,554 |
) |
Change in investments and
advances from (to) affiliates |
|
|
(219,603 |
) |
|
|
(280,562 |
) |
|
|
95,027 |
|
|
|
(244,769 |
) |
|
|
649,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from
Financing Activities |
|
|
(310,762 |
) |
|
|
(288,265 |
) |
|
|
69,472 |
|
|
|
(244,769 |
) |
|
|
649,908 |
|
|
|
(124,419 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Foreign Exchange
Rate on Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
501 |
|
|
|
|
|
|
|
501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in Cash
and Cash Equivalents |
|
|
(3 |
) |
|
|
(57,193 |
) |
|
|
226,180 |
|
|
|
498,268 |
|
|
|
(485,791 |
) |
|
|
181,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
at Beginning of Year |
|
|
1 |
|
|
|
100,736 |
|
|
|
|
|
|
|
78,282 |
|
|
|
(2 |
) |
|
|
179,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
at End of Period |
|
$ |
(2 |
) |
|
$ |
43,543 |
|
|
$ |
226,180 |
|
|
$ |
576,550 |
|
|
$ |
(485,793 |
) |
|
$ |
360,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Consolidating Balance Sheet for the Year Ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1 |
|
|
$ |
100,736 |
|
|
$ |
|
|
|
$ |
78,282 |
|
|
$ |
(2 |
) |
|
$ |
179,017 |
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
75,466 |
|
|
|
123,325 |
|
|
|
|
|
|
|
198,791 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
84,924 |
|
|
|
117,958 |
|
|
|
8,135 |
|
|
|
211,017 |
|
Other current assets |
|
|
3,166 |
|
|
|
1,319 |
|
|
|
12,918 |
|
|
|
18,355 |
|
|
|
(4,078 |
) |
|
|
31,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
3,167 |
|
|
|
102,055 |
|
|
|
173,308 |
|
|
|
337,920 |
|
|
|
4,055 |
|
|
|
620,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net |
|
|
|
|
|
|
|
|
|
|
381,987 |
|
|
|
338,912 |
|
|
|
(2 |
) |
|
|
720,897 |
|
Equity method investments |
|
|
|
|
|
|
|
|
|
|
10,710 |
|
|
|
153,389 |
|
|
|
|
|
|
|
164,099 |
|
Deferred plant turnaround
costs, intangible and
other assets |
|
|
(1,839 |
) |
|
|
7,582 |
|
|
|
22,117 |
|
|
|
39,351 |
|
|
|
1 |
|
|
|
67,212 |
|
Investments in and advances
to (from) affiliates |
|
|
758,377 |
|
|
|
347,478 |
|
|
|
1,622,696 |
|
|
|
422,436 |
|
|
|
(3,150,987 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
759,705 |
|
|
$ |
457,115 |
|
|
$ |
2,210,818 |
|
|
$ |
1,292,008 |
|
|
$ |
(3,146,933 |
) |
|
$ |
1,572,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
109 |
|
|
$ |
|
|
|
$ |
63,634 |
|
|
$ |
92,750 |
|
|
$ |
|
|
|
$ |
156,493 |
|
Accrued expenses and
other current liabilities |
|
|
28,119 |
|
|
|
5,927 |
|
|
|
61,782 |
|
|
|
62,354 |
|
|
|
(5,228 |
) |
|
|
152,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
28,228 |
|
|
|
5,927 |
|
|
|
125,416 |
|
|
|
155,104 |
|
|
|
(5,228 |
) |
|
|
309,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital
lease obligations |
|
|
|
|
|
|
331,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331,300 |
|
Pension and other liabilities |
|
|
188,246 |
|
|
|
|
|
|
|
7,386 |
|
|
|
45,060 |
|
|
|
(2,209 |
) |
|
|
238,483 |
|
Minority interest |
|
|
|
|
|
|
18,501 |
|
|
|
76,186 |
|
|
|
|
|
|
|
|
|
|
|
94,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
minority interest |
|
|
216,474 |
|
|
|
355,728 |
|
|
|
208,988 |
|
|
|
200,164 |
|
|
|
(7,437 |
) |
|
|
973,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock liquidation
value of 120,000 |
|
|
115,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
144,975 |
|
|
|
|
|
|
|
73 |
|
|
|
49,709 |
|
|
|
(49,781 |
) |
|
|
144,976 |
|
Paid in capital |
|
|
693,895 |
|
|
|
150,218 |
|
|
|
2,007,811 |
|
|
|
1,246,129 |
|
|
|
(3,404,157 |
) |
|
|
693,896 |
|
Accumulated other
comprehensive
income (loss) |
|
|
(92,187 |
) |
|
|
|
|
|
|
6,373 |
|
|
|
30,828 |
|
|
|
(8,753 |
) |
|
|
(63,739 |
) |
Accumulated deficit |
|
|
(319,252 |
) |
|
|
(48,831 |
) |
|
|
(12,427 |
) |
|
|
(234,822 |
) |
|
|
323,195 |
|
|
|
(292,137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
427,431 |
|
|
|
101,387 |
|
|
|
2,001,830 |
|
|
|
1,091,844 |
|
|
|
(3,139,496 |
) |
|
|
482,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities minority interest,
preferred stock and common
shareholders equity |
|
$ |
759,705 |
|
|
$ |
457,115 |
|
|
$ |
2,210,818 |
|
|
$ |
1,292,008 |
|
|
$ |
(3,146,933 |
) |
|
$ |
1,572,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Consolidating Balance Sheet as of September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1 |
|
|
$ |
(17,081 |
) |
|
$ |
89,612 |
|
|
$ |
49,639 |
|
|
$ |
(1 |
) |
|
$ |
122,170 |
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
89,173 |
|
|
|
104,166 |
|
|
|
|
|
|
|
193,339 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
62,019 |
|
|
|
98,172 |
|
|
|
|
|
|
|
160,191 |
|
Other current assets |
|
|
(857 |
) |
|
|
10,863 |
|
|
|
7,461 |
|
|
|
5,368 |
|
|
|
3,323 |
|
|
|
26,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
(856 |
) |
|
|
(6,218 |
) |
|
|
248,265 |
|
|
|
257,345 |
|
|
|
3,322 |
|
|
|
501,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net |
|
|
|
|
|
|
|
|
|
|
389,524 |
|
|
|
333,429 |
|
|
|
(1 |
) |
|
|
722,952 |
|
Equity method investments |
|
|
|
|
|
|
|
|
|
|
7,193 |
|
|
|
154,262 |
|
|
|
|
|
|
|
161,455 |
|
Intangible assets, other assets
and deferred plant
turnaround costs |
|
|
|
|
|
|
8,314 |
|
|
|
23,898 |
|
|
|
41,644 |
|
|
|
|
|
|
|
73,856 |
|
Investments in and advanced
to (from) affiliates |
|
|
727,320 |
|
|
|
551,576 |
|
|
|
1,453,292 |
|
|
|
437,194 |
|
|
|
(3,169,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
726,464 |
|
|
$ |
553,672 |
|
|
$ |
2,122,172 |
|
|
$ |
1,223,874 |
|
|
$ |
(3,166,061 |
) |
|
$ |
1,460,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt due within one year |
|
$ |
|
|
|
$ |
|
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4 |
|
Accounts payable |
|
|
107 |
|
|
|
900 |
|
|
|
36,015 |
|
|
|
78,712 |
|
|
|
|
|
|
|
115,734 |
|
Accrued expenses and
other current liabilities |
|
|
7,904 |
|
|
|
100,512 |
|
|
|
48,556 |
|
|
|
28,237 |
|
|
|
(76,290 |
) |
|
|
108,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
8,011 |
|
|
|
101,412 |
|
|
|
84,575 |
|
|
|
106,949 |
|
|
|
(76,290 |
) |
|
|
224,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital
lease obligations |
|
|
|
|
|
|
331,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331,300 |
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
18,608 |
|
|
|
40,314 |
|
|
|
|
|
|
|
58,922 |
|
Pension and other liabilities |
|
|
140,659 |
|
|
|
(509 |
) |
|
|
9,127 |
|
|
|
1,071 |
|
|
|
|
|
|
|
150,348 |
|
Minority interest |
|
|
|
|
|
|
18,564 |
|
|
|
76,450 |
|
|
|
|
|
|
|
|
|
|
|
95,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
minority interest |
|
|
148,670 |
|
|
|
450,767 |
|
|
|
188,760 |
|
|
|
148,334 |
|
|
|
(76,290 |
) |
|
|
860,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
115,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
144,968 |
|
|
|
|
|
|
|
73 |
|
|
|
49,709 |
|
|
|
(49,782 |
) |
|
|
144,968 |
|
Paid-in capital |
|
|
693,944 |
|
|
|
150,218 |
|
|
|
2,026,502 |
|
|
|
1,265,009 |
|
|
|
(3,441,729 |
) |
|
|
693,944 |
|
Accumulated other
comprehensive income
(loss) compensation |
|
|
(63,636 |
) |
|
|
|
|
|
|
|
|
|
|
30,080 |
|
|
|
(18,806 |
) |
|
|
(52,362 |
) |
Retained earnings (deficit) |
|
|
(313,282 |
) |
|
|
(47,313 |
) |
|
|
(93,163 |
) |
|
|
(269,258 |
) |
|
|
420,546 |
|
|
|
(302,470 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity |
|
|
461,994 |
|
|
|
102,905 |
|
|
|
1,933,412 |
|
|
|
1,075,540 |
|
|
|
(3,089,771 |
) |
|
|
484,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
minority interest,
preferred stock and common
shareholders equity |
|
$ |
726,464 |
|
|
$ |
553,672 |
|
|
$ |
2,122,172 |
|
|
$ |
1,223,874 |
|
|
$ |
(3,166,061 |
) |
|
$ |
1,460,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Consolidating Statement of Operations for the three months ended September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
375,329 |
|
|
$ |
86,204 |
|
|
$ |
|
|
|
$ |
461,533 |
|
Other income |
|
|
|
|
|
|
|
|
|
|
747 |
|
|
|
2,500 |
|
|
|
1 |
|
|
|
3,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
376,076 |
|
|
|
88,704 |
|
|
|
1 |
|
|
|
464,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
370,874 |
|
|
|
65,206 |
|
|
|
(13,557 |
) |
|
|
422,523 |
|
Selling, general and
administrative expenses |
|
|
616 |
|
|
|
(2,286 |
) |
|
|
(6,206 |
) |
|
|
7,996 |
|
|
|
13,559 |
|
|
|
13,679 |
|
Equity in the (earnings) loss
of subsidiaries |
|
|
8,658 |
|
|
|
(26,829 |
) |
|
|
(16,848 |
) |
|
|
14,949 |
|
|
|
19,261 |
|
|
|
(809 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost and expenses |
|
|
9,274 |
|
|
|
(29,115 |
) |
|
|
347,820 |
|
|
|
88,151 |
|
|
|
19,263 |
|
|
|
435,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(9,274 |
) |
|
|
29,115 |
|
|
|
28,256 |
|
|
|
553 |
|
|
|
(19,262 |
) |
|
|
29,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
(1,274 |
) |
|
|
5,194 |
|
|
|
(3,576 |
) |
|
|
1,747 |
|
|
|
2,091 |
|
Interest expense |
|
|
(465 |
) |
|
|
(10,024 |
) |
|
|
(3,357 |
) |
|
|
2,809 |
|
|
|
(749 |
) |
|
|
(11,786 |
) |
Income (loss) before income
taxes and minority interest |
|
|
(9,739 |
) |
|
|
17,817 |
|
|
|
30,093 |
|
|
|
(214 |
) |
|
|
(18,264 |
) |
|
|
19,693 |
|
Income tax provision |
|
|
(5,657 |
) |
|
|
|
|
|
|
|
|
|
|
(343 |
) |
|
|
|
|
|
|
(6,000 |
) |
Minority interest |
|
|
|
|
|
|
(647 |
) |
|
|
(2,706 |
) |
|
|
|
|
|
|
1 |
|
|
|
(3,352 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(15,396 |
) |
|
$ |
17,170 |
|
|
$ |
27,387 |
|
|
$ |
(557 |
) |
|
$ |
(18,263 |
) |
|
$ |
10,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statement of Operations for the nine months ended September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
TCAPI |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
645,275 |
|
|
$ |
735,809 |
|
|
$ |
|
|
|
$ |
1,381,084 |
|
Other income |
|
|
|
|
|
|
|
|
|
|
4,328 |
|
|
|
1,807 |
|
|
|
|
|
|
|
6,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
649,603 |
|
|
|
737,616 |
|
|
|
|
|
|
|
1,387,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
675,913 |
|
|
|
701,056 |
|
|
|
(39,759 |
) |
|
|
1,337,210 |
|
Selling, general and
administrative expenses |
|
|
1,623 |
|
|
|
(6,848 |
) |
|
|
(8,317 |
) |
|
|
12,177 |
|
|
|
39,760 |
|
|
|
38,395 |
|
Equity in the (earnings) loss
of subsidiaries |
|
|
27,336 |
|
|
|
(66,108 |
) |
|
|
(16,848 |
) |
|
|
(43,459 |
) |
|
|
83,249 |
|
|
|
(15,830 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost & expenses |
|
|
28,959 |
|
|
|
(72,956 |
) |
|
|
650,748 |
|
|
|
669,774 |
|
|
|
83,250 |
|
|
|
1,359,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(28,959 |
) |
|
|
72,956 |
|
|
|
(1,145 |
) |
|
|
67,842 |
|
|
|
(83,250 |
) |
|
|
27,444 |
|
Interest income |
|
|
|
|
|
|
(224 |
) |
|
|
5,194 |
|
|
|
(1,218 |
) |
|
|
1,747 |
|
|
|
5,499 |
|
Interest expense |
|
|
(1,395 |
) |
|
|
(33,610 |
) |
|
|
(6 |
) |
|
|
(3,745 |
) |
|
|
3,416 |
|
|
|
(35,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes and minority interest |
|
|
(30,354 |
) |
|
|
39,122 |
|
|
|
4,043 |
|
|
|
62,879 |
|
|
|
(78,087 |
) |
|
|
(2,397 |
) |
Income tax benefit |
|
|
(2,835 |
) |
|
|
|
|
|
|
|
|
|
|
4,835 |
|
|
|
2 |
|
|
|
2,002 |
|
Minority interest |
|
|
|
|
|
|
(1,351 |
) |
|
|
(5,649 |
) |
|
|
|
|
|
|
|
|
|
|
(7,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(33,189 |
) |
|
$ |
37,771 |
|
|
$ |
(1,606 |
) |
|
$ |
67,714 |
|
|
$ |
(78,085 |
) |
|
$ |
(7,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Consolidating Statement of Cash Flows for the nine months ended September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
TCAPI |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(33,189 |
) |
|
$ |
37,771 |
|
|
$ |
(1,606 |
) |
|
$ |
67,714 |
|
|
$ |
(78,085 |
) |
|
$ |
(7,395 |
) |
Adjustments to reconcile net
income (loss) to net cash
flows from operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
2,196 |
|
|
|
44,488 |
|
|
|
40,302 |
|
|
|
1 |
|
|
|
86,987 |
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
18,608 |
|
|
|
(20,610 |
) |
|
|
|
|
|
|
(2,002 |
) |
Minority interest in earnings |
|
|
|
|
|
|
515 |
|
|
|
6,485 |
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
Equity in undistributed
earnings |
|
|
(27,336 |
) |
|
|
66,108 |
|
|
|
16,848 |
|
|
|
43,459 |
|
|
|
(89,944 |
) |
|
|
9,135 |
|
Non-cash loss on derivatives |
|
|
|
|
|
|
|
|
|
|
1,703 |
|
|
|
1,072 |
|
|
|
|
|
|
|
2,775 |
|
Share-based compensation |
|
|
4,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,285 |
|
Change in operating assets
and liabilities |
|
|
90 |
|
|
|
11,674 |
|
|
|
(71,167 |
) |
|
|
48,279 |
|
|
|
13,613 |
|
|
|
2,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from
Operating Activities |
|
|
(56,150 |
) |
|
|
118,264 |
|
|
|
15,359 |
|
|
|
180,216 |
|
|
|
(154,415 |
) |
|
|
103,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment |
|
|
|
|
|
|
|
|
|
|
(25,549 |
) |
|
|
(15,236 |
) |
|
|
|
|
|
|
(40,785 |
) |
Plant turnaround expenditures |
|
|
|
|
|
|
|
|
|
|
(13,458 |
) |
|
|
(18,529 |
) |
|
|
|
|
|
|
(31,987 |
) |
Distributions received from
unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,660 |
|
|
|
|
|
|
|
9,660 |
|
Changes in restricted cash |
|
|
|
|
|
|
|
|
|
|
8,595 |
|
|
|
|
|
|
|
|
|
|
|
8,595 |
|
Proceeds from the sale of
property, plant and
equipment |
|
|
|
|
|
|
|
|
|
|
7,544 |
|
|
|
2,122 |
|
|
|
|
|
|
|
9,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from
Investing Activities |
|
|
|
|
|
|
|
|
|
|
(22,868 |
) |
|
|
(21,983 |
) |
|
|
|
|
|
|
(44,851 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments under
borrowing arrangements |
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
(34 |
) |
Preferred share dividends paid |
|
|
(3,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,825 |
) |
Proceeds from exercise of
stock options |
|
|
363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363 |
|
Payments under share
repurchase program |
|
|
(18,796 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,796 |
) |
Distributions to minority interests |
|
|
|
|
|
|
|
|
|
|
(4,244 |
) |
|
|
|
|
|
|
|
|
|
|
(4,244 |
) |
Change in investments and
advances from (to) affiliates |
|
|
78,408 |
|
|
|
(146,853 |
) |
|
|
34,015 |
|
|
|
(119,985 |
) |
|
|
154,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from
Financing Activities |
|
|
56,150 |
|
|
|
(146,853 |
) |
|
|
29,749 |
|
|
|
(119,997 |
) |
|
|
154,415 |
|
|
|
(26,536 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Foreign Exchange
Rate on Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,917 |
|
|
|
|
|
|
|
3,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in Cash
and Cash Equivalents |
|
|
|
|
|
|
(28,589 |
) |
|
|
22,240 |
|
|
|
42,153 |
|
|
|
|
|
|
|
35,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
at Beginning of Year |
|
|
1 |
|
|
|
11,508 |
|
|
|
67,372 |
|
|
|
7,486 |
|
|
|
(1 |
) |
|
|
86,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
at End of Year |
|
$ |
1 |
|
|
$ |
(17,081 |
) |
|
$ |
89,612 |
|
|
$ |
49,639 |
|
|
$ |
(1 |
) |
|
$ |
122,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Terra produces and markets nitrogen products for agricultural and industrial markets with
production facilities located in North America and the United Kingdom (U.K.).
During the 2007 third quarter, the Company contributed its U.K. operations into GrowHow U.K.
Limited (GrowHow), a U.K. joint venture with Kemira GrowHow Oyj (Kemira). The Company
received a 50% interest in GrowHow U.K. Limited. The Company accounts for GrowHow U.K. Limited
as an unconsolidated equity investment.
In July, the Company entered into an option agreement with Eastman Chemical Company (Eastman)
to sell the Companys Beaumont, Texas facility. During the 2007 third quarter, Eastman
exercised its option to purchase the Beaumont facility. The sale of the Beaumont facility is
scheduled to close on or before January 1, 2009.
Nitrogen products are commodity chemicals that are sold at prices reflecting global supply and
demand conditions. The nitrogen products industry has cycles of oversupply, resulting in lower
prices and idled capacity, followed by supply shortages, resulting in high selling prices and
higher industry-wide production rates. Natural gas is the most significant raw material in the
production of nitrogen and methanol products. In order to be viable in this industry, a
producer must be among the low-cost suppliers in the markets it serves and have a financial
position that can sustain it during periods of oversupply.
Imports, most of which are produced at facilities with access to fixed-price natural gas
supplies, account for a significant portion of U.S. nitrogen product supply. The natural gas
costs of imported products have been and could continue to be substantially lower than the
delivered cost of natural gas to Terras facilities. Off-shore producers are most competitive
in regions close to the point of entry for imports, including the Gulf Coast and East Coast of
North America.
Terras sales volumes depend primarily on its plants operating rates. The Company also
purchases product from other manufacturers and importers for resale; however, historic gross
margins on these volumes have not been significant. Profitability and cash flows from Terras
nitrogen products business are affected by the Companys ability to manage its costs and
expenses (other than natural gas), most of which do not materially change for different levels
of production or sales. Other factors affecting Terras nitrogen products results include the
level of planted acres, transportation costs, weather conditions (particularly during the
planting season), grain prices and other variables described in Item 1 Business and Item 2
Properties sections of Terras 2006 Form 10-K filing with the Securities and Exchange
Commission.
31
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 2007 COMPARED WITH
QUARTER ENDED SEPTEMBER 30, 2006
Consolidated Results
Terra reported net income of $54.4 million for the 2007 third quarter compared with 2006 net
income of $10.3 million. The net income increase is primarily due to higher sales volume and
prices, offset by a $39.0 million impairment of assets charge related to the Beaumont, Texas
facility. The 2006 third quarter results include approximately $8.2 million of repairs and
additional cost for purchased ammonia due to damage from an explosion at the Billingham,
England ammonia plant.
Terra classifies its operations into two business segments: nitrogen products and methanol.
The nitrogen products segment represents operations directly related to the wholesale sales of
nitrogen products from the Companys ammonia production and upgrading facilities. The methanol
segment represents wholesale sales of methanol produced by Terras methanol manufacturing
plant.
Total revenues and income (loss) from operations by segment for the three-month periods ended
September 30, 2007 and 2006 follow:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2007 |
|
|
2006 |
|
REVENUES: |
|
|
|
|
|
|
|
|
Nitrogen Products |
|
$ |
571,518 |
|
|
$ |
442,612 |
|
Methanol |
|
|
18,528 |
|
|
|
18,921 |
|
Other |
|
|
3,669 |
|
|
|
3,248 |
|
|
|
|
|
|
|
|
|
|
$ |
593,715 |
|
|
$ |
464,781 |
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
|
|
|
|
Nitrogen Products |
|
$ |
123,676 |
|
|
$ |
20,409 |
|
Methanol |
|
|
(27,208 |
) |
|
|
9,405 |
|
Other |
|
|
(965 |
) |
|
|
(426 |
) |
|
|
|
|
|
|
|
|
|
$ |
95,503 |
|
|
$ |
29,388 |
|
|
|
|
|
|
|
|
Nitrogen Products
Volumes and prices for the three-month periods ended September 30, 2007 and 2006 were:
VOLUMES AND PRICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
|
Sales |
|
|
Average |
|
|
Sales |
|
|
Average |
|
(quantities in thousands of tons) |
|
Volumes |
|
|
Unit Price* |
|
|
Volumes |
|
|
Unit Price* |
|
Ammonia |
|
|
477 |
|
|
$ |
304 |
|
|
|
466 |
|
|
$ |
281 |
|
Nitrogen solutions |
|
|
1,113 |
|
|
$ |
208 |
|
|
|
1,031 |
|
|
$ |
129 |
|
Urea |
|
|
24 |
|
|
$ |
298 |
|
|
|
32 |
|
|
$ |
236 |
|
Ammonium nitrate |
|
|
413 |
|
|
$ |
250 |
|
|
|
323 |
|
|
$ |
226 |
|
|
|
|
* |
|
After deducting outbound freight costs |
Nitrogen products segment revenues for the quarter ended September 30, 2007 increased $128.9
million, or 29%, compared with the same 2006 quarter primarily due to higher prices for all
major products. Sales volumes also improved as compared to the quarter ended September 30,
2006, with nitrogen solutions and ammonium nitrate increasing 8% and 28%, respectively. The volume and price increases are
primarily due to increased and earlier demand for nitrogen products to support expected 2008
corn and wheat planting intentions.
32
Operating income for the 2007 third quarter was $123.7 million, which was $103.3 million
more than the $20.4 million income in the 2006 third quarter. Higher third quarter sales
volumes and prices increased operating income approximately $12.1 million and $107.9 million,
respectively. These improvements were offset by a $12.3 million increase in cost primarily
related to higher North American natural gas. Third quarter equity earnings increased from
2006 due to improved operations at the Point Lisas Trinidad nitrogen facility. Selling,
general and administrative expense for the 2007 third quarter increased $8.2 million from the
2006 third quarter, primarily due to the annual and long term compensation and incentive
plans. Included in the 2006 third quarter results was approximately $8.2 million of repairs
and additional cost for purchased ammonia due to damage from an explosion at the Billingham,
England ammonia plant.
Methanol
For the three months ended September 30, 2007 and 2006, the Methanol segment had revenues of
$18.5 million and $18.9 million, respectively. In the 2007 third quarter, approximately 6.2
million gallons of methanol were sold at the Woodward, Oklahoma facility compared to
approximately 6.8 million gallons of methanol sold in the 2006 third quarter. Third quarter
2007 and 2006 revenues included $12.0 million and $11.6 million, respectively, of profit
sharing revenue under the Methanex supply agreement, which expires at the end of 2008. The
supply agreement limits the margin to $12.0 million on an annual basis.
The methanol segment had an operating loss of $27.2 million for the 2007 third quarter
compared to operating income of $9.4 million for the 2006 third quarter. The operating loss
was due primarily to an impairment charge of $39.0 million related to the Companys Beaumont,
Texas facility.
Interest Expense
Interest expense decreased approximately $4.9 million to $6.9 million during the 2007 third quarter
as compared to $11.8 million for the 2006 third quarter. The decrease in interest expense was due
to the refinancing of debt in the first quarter of 2007.
Minority Interest
Minority interest represents third-party interests in the earnings of the publicly held common
units of Terra Nitrogen Company, L.P. (TNCLP). The 2007 and 2006 amounts are directly related
to TNCLP earnings and losses.
Income Taxes
Income taxes for the 2007 third quarter were recorded based on the estimated effective tax
rate for the individual jurisdictions in which Terra operates. The annual effective tax rates
were 36% and 37% in the quarters ended September 30, 2007 and 2006, respectively, which
approximated statutory rates.
33
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 2006
Consolidated Results
Terra reported net income of $132.2 million for the 2007 first nine months compared with a
2006 net loss of $7.4 million in 2006. The 2007 net income increase is primarily due to higher
sales volumes and prices, offset by $38.8 million of 2007 losses on early retirement of debt
and the $39.0 million impairment of assets charge related to the Beaumont, Texas facility. The
2006 net loss was primarily related to lower sales volumes as a result of high natural gas
costs during 2006 and approximately $15.6 million of plant outages and repair from the U.K.
operations resulting from an explosion during the 2006 second quarter.
Total revenues and income (loss) from operations by segment for the nine-month period ended
September 30, 2007 and 2006 follow:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2007 |
|
|
2006 |
|
REVENUES: |
|
|
|
|
|
|
|
|
Nitrogen Products |
|
$ |
1,739,001 |
|
|
$ |
1,355,574 |
|
Methanol |
|
|
41,839 |
|
|
|
25,510 |
|
Other |
|
|
8,976 |
|
|
|
6,135 |
|
|
|
|
|
|
|
|
|
|
$ |
1,789,816 |
|
|
$ |
1,387,219 |
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
|
|
|
|
Nitrogen Products |
|
$ |
315,978 |
|
|
$ |
25,098 |
|
Methanol |
|
|
(25,646 |
) |
|
|
3,363 |
|
Other |
|
|
(1,385 |
) |
|
|
(1,017 |
) |
|
|
|
|
|
|
|
|
|
$ |
288,947 |
|
|
$ |
27,444 |
|
|
|
|
|
|
|
|
Nitrogen Products
Volumes and prices for the nine-month periods ended September 30, 2007 and 2006 are:
VOLUMES AND PRICES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
|
Sales |
|
|
Average |
|
|
Sales |
|
|
Average |
|
(quantities in thousands of tons) |
|
Volumes |
|
|
Unit Price* |
|
|
Volumes |
|
|
Unit Price* |
|
Ammonia |
|
|
1,465 |
|
|
$ |
328 |
|
|
|
1,417 |
|
|
$ |
320 |
|
Nitrogen solutions |
|
|
3,497 |
|
|
$ |
191 |
|
|
|
2,799 |
|
|
$ |
143 |
|
Urea |
|
|
88 |
|
|
$ |
305 |
|
|
|
116 |
|
|
$ |
267 |
|
Ammonium nitrate |
|
|
1,164 |
|
|
$ |
244 |
|
|
|
879 |
|
|
$ |
226 |
|
|
|
|
* |
|
After deducting outbound freight costs |
Nitrogen products segment revenues for the nine months ended September 30, 2007 increased
$383.4 million, or 28%, compared with the same 2006 first nine months primarily due to higher
sales volumes for nitrogen solutions and ammonium nitrate, and higher prices for all products.
The volume and price increases are due to stronger demand for nitrogen products, primarily as
a result of increased planted corn acreage as compared to 2006.
34
The operating income for the 2007 first nine months was $316.0 million and was $290.9 million
more than the $25.1 million operating income in the 2006 first nine months. Higher 2007 sales
volumes, selling prices and cost reductions contributed to operating income increases of $63.6
million, $185.6 million and $71.0 million, respectively. Cost reductions were principally
related to lower natural gas costs and higher production rates than during 2006. In addition,
the Company incurred approximately $15.6 million of repairs and additional costs for purchased
ammonia due to damage from the explosion at the Billingham, England ammonia plant in 2006.
These improvements were offset by a $5.4 million decrease in equity earnings. First nine-month
equity earnings declined from 2006 due to an extended plant outage and turnaround at the Point
Lisas Trinidad nitrogen facility, which resumed normal operating rates during May. Selling,
general and administrative expense increased $28.8 million for the 2007 first nine months
increased from 2006, mainly due to the annual and long term compensation and incentive plans.
Methanol
For the nine months ended September 30, 2007 and 2006, the Methanol segment had revenues of
$41.8 million and $25.5 million, respectively. In the 2007 first nine months, approximately
24.8 million gallons of methanol were sold at the Woodward, Oklahoma facility compared to
approximately 11.6 million gallons of methanol sold in the 2006 first nine months. Methanol
revenues in 2007 and 2006 each included $12.0 of profit sharing revenue under the Methanex
supply agreement.
The methanol segment had an operating loss of $25.6 million for the 2007 first nine months
compared to operating income of $3.4 million for the 2006 first nine months. The decrease in
operating income is due primarily to an impairment charge of $39.0 million related to the
Beaumont, Texas facility.
Interest Expense
Interest expense decreased approximately $12.6 million to $22.7 million during the 2007 first
nine months as compared to $35.3 million for the prior year period due primarily to the
refinancing of debt in January of 2007.
Minority Interest
Minority interest represents third-party interests in the earnings of the publicly held common
units of Terra Nitrogen Company, L.P. (TNCLP). The 2007 and 2006 amounts are directly related
to TNCLP earnings and losses.
Income Taxes
Income taxes for the first nine months of 2007 were recorded based on the estimated annual
effective tax rate for the individual jurisdictions in which Terra operates. The annual
effective tax rate was 36% and 21% in the first nine months ended September 30, 2007 and 2006,
respectively. The increase in the effective rate is due primarily to the losses in 2006 in
foreign jurisdictions that had a lower effective rate than the U.S.
35
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $360.5 million at September 30, 2007. Terras primary uses
of cash are to fund its working capital requirements, make payments on its debt and other
obligations and fund plant turnarounds and capital expenditures. The principal sources of
these cash outlays will be cash flow from operations, cash on hand and borrowings under
available bank facilities.
Net cash provided by operations in the first nine months of 2007 was $381.7 million, composed
of $366.2 million of cash provided from operating activities and $15.5 million from working
capital changes. First nine-month changes to current assets and liabilities represented
seasonal fluctuations to working capital balances. The primary working capital needs were to
fund $33.3 million of accounts payable offset by $8.2 million of customer prepayments, and a
reduction of $49.5 million of inventory, for seasonal customer orders.
During the first nine months, Terra funded plant and equipment purchases of $23.1 million
primarily for replacement or stay-in-business capital needs. Plant turnaround costs represent
cash used for the periodic scheduled major maintenance of the Companys continuous process
production facilities that is performed at each plant, generally every two years. Terra funded
$36.0 million of plant turnaround costs in the first nine months of 2007. Approximately $17.2
million of cash was retained by the creation of the GrowHow U.K. Limited joint venture during
the 2007 third quarter.
In April 2006, the Board of Directors authorized the Company to repurchase a maximum of 10%,
or 9,516,817 shares, of its then outstanding common stock on the open market in private
transactions or otherwise. During 2007, the Companys repurchases under its stock buyback
programs were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Shares Purchased as |
|
|
Maximum Number of |
|
Month of |
|
Number of |
|
|
Average |
|
|
Part of Publicly |
|
|
Shares that May Yet Be |
|
Share |
|
Shares |
|
|
Price Paid |
|
|
Announced Plans or |
|
|
Purchased Under the |
|
Purchases |
|
Purchased |
|
|
per share |
|
|
Programs |
|
|
Plans or Programs |
|
January 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
February 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
March 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
April 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
May 2007 |
|
|
650,000 |
|
|
$ |
18.79 |
|
|
|
3,325,100 |
|
|
|
6,191,717 |
|
June 2007 |
|
|
350,000 |
|
|
$ |
19.53 |
|
|
|
3,675,100 |
|
|
|
5,841,717 |
|
July 2007 |
|
|
200,000 |
|
|
$ |
25.53 |
|
|
|
3,875,100 |
|
|
|
5,641,717 |
|
August 2007 |
|
|
2,800,000 |
|
|
$ |
22.55 |
|
|
|
6,675,100 |
|
|
|
2,841,717 |
|
September 2007 |
|
|
|
|
|
$ |
|
|
|
|
6,675,100 |
|
|
|
2,841,717 |
|
The Company paid dividends on the outstanding preferred stock of $1.3 million and $3.8 million
for the three- and nine-month periods, respectively, ending September 30, 2007 and 2006.
Distributions paid to the minority TNCLP common unit holders in the first nine months of 2007
and 2006 were $25.6 million and $4.2 million, respectively. TNCLP distributions are based on
Available Cash as defined in the Partnership Agreement.
36
In January 2007, Terra Capital, Inc., (TCAPI) a subsidiary of Terra Industries Inc., issued
$330 million of 7.0% Senior Notes due 2017. The notes are unconditionally guaranteed by Terra
Industries Inc. and its U.S. subsidiaries. Fees and expenses of the transaction totaled $6.4
million. These notes and guarantees are unsecured and will rank equal in right of payment with
any future senior obligations of such guarantors.
Offering proceeds were used to repurchase the Companys 12.875% Senior Secured Notes and 11.5%
Second Priority Secured Notes. On April 2, 2007, Terra Capital, Inc. exercised its right to
redeem the remaining bonds effective June 1, 2007. On April 2, 2007, sufficient funds were
deposited with the trustee of the 11.5% Secured Notes to defease the bonds and allow remaining
liens to be released.
In the first quarter of 2007, the Company amended the $200 million revolving credit facility
to extend the expiration date to January 31, 2012. Borrowing availability under the credit
facility is generally based on 100% eligible cash balances, 85% of eligible accounts
receivable and 60% of eligible inventory, less outstanding letters of credit. These facilities
include $50 million only available for the use of TNCLP, one of Terras consolidated
subsidiaries. There were no outstanding revolving credit borrowings and there were $10.8
million in outstanding letters of credit, resulting in remaining borrowing availability of
approximately $189.2 million under the facilities. The Company is required to maintain a
combined minimum unused borrowing availability of $30 million. The credit facility also
requires that the Company 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. In addition, if
the Companys borrowing availability falls below a combined $60 million, the Company is
required to have generated $60 million of operating cash flows, or earnings before interest,
income taxes, depreciation, amortization and other non-cash items (as defined in the credit
facility) for the preceding four quarters.
The Companys ability to meet credit facility covenants will depend on future operating cash
flows, working capital needs, receipt of customer prepayments and trade credit terms. Failure
to meet these covenants could result in additional costs and fees to amend the credit facility
or could result in termination of the facility. Based on current market conditions for the
Companys finished products and natural gas, the Company anticipates that it will be able to
meet its covenants through 2007. If there were to be any adverse changes in the factors
discussed above, the Company may need a waiver of its credit facility covenants, of which,
there is no assurance that the Company could receive such waivers.
The significant changes to the Companys business were the refinancing of debt during the 2007
first quarter and the contribution of the Terra Nitrogen U.K. Limited into the GrowHow UK
Limited joint venture. These transactions did not materially change the Companys contractual
obligations or off-balance sheet arrangements presented in Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations of the Annual Report on Form
10-K for the period ended December 31, 2006.
37
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to Terras operations result primarily from interest rates, foreign
exchange rates, natural gas prices and nitrogen prices. Terra manages its exposure to these
and other market risks through regular operating and financing activities and through the use
of derivative financial instruments. Terra intends to use derivative financial instruments as
risk management tools and not for speculative investment purposes. Item 7A, Quantitative and
Qualitative Disclosures about Market Risk, of Terras Annual Report on Form 10-K for the year
ended December 31, 2006 provides more information as to the types of practices and instruments
used to manage risk. There were no material changes in the Companys use of financial
instruments during the quarter ended September 30, 2007.
The volume of natural gas hedged varies from time to time based on managements judgment of
market conditions, particularly natural gas prices and prices for nitrogen products.
Management also considers the Companys position related to forward fixed price sales
contracts in determining the level of derivatives necessary. Contracts were in place at
September 30, 2007 to cover approximately 30% of its natural gas requirements for the
succeeding twelve months. The Companys ability to manage exposure to commodity price risk in
the purchase of natural gas through the use of financial derivatives may be affected by
limitations imposed by its bank agreement covenants.
ITEM 4. CONTROLS AND PROCEDURES
The Companys Chief Executive Officer and Chief Financial Officer have concluded, based on
their evaluation as of the end of the period covered by this report, that the Companys
disclosure controls and procedures are effective to ensure that information required to be
disclosed in the reports that the Company files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported, within the time periods specified in
the Securities and Exchange Commissions rules and forms.
There were no significant changes in the Companys internal control over financial reporting
that occurred during the most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial
reporting.
FORWARD-LOOKING PRECAUTIONS
Information contained in this report, other than historical information, may be considered
forward looking. Forward-looking information reflects managements current views of future
events and financial performance that involve a number of risks and uncertainties. The
factors that could cause actual results to differ materially include, but are not limited to,
the following: changes in financial markets, general economic conditions within the
agricultural industry, competitive factors and price changes (principally, sales prices of
nitrogen and methanol products and natural gas costs), changes in product mix, changes in the
seasonality of demand patterns, changes in weather conditions, changes in agricultural
regulations, and other risks detailed in the Factors that Affect Operating Results section
of Terras most recent Form 10-K.
38
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on the Companys consolidated financial position, results of
operations or liquidity and the likelihood that a loss contingency will occur in connection
with these claims is remote.
ITEM 1A. RISK FACTORS
There were no significant changes in the Companys risk factors during the third quarter of
2007 as compared to the risk factors identified in the Companys 2006 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
39
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Company Purchases of Equity Securities
The following table provides information about share repurchases by the Company during 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Shares Purchased as |
|
|
Maximum Number of |
|
Month of |
|
Number of |
|
|
Average |
|
|
Part of Publicity |
|
|
Shares that May Yet Be |
|
Share |
|
Shares |
|
|
Price Paid |
|
|
Announced Plans or |
|
|
Purchased Under the |
|
Purchases |
|
Purchased |
|
|
per share |
|
|
Programs |
|
|
Plans or Programs |
|
January 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
February 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
March 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
April 2007 |
|
|
|
|
|
$ |
|
|
|
|
2,675,100 |
|
|
|
6,841,717 |
|
May 2007 |
|
|
650,000 |
|
|
$ |
18.79 |
|
|
|
3,325,100 |
|
|
|
6,191,717 |
|
June 2007 |
|
|
350,000 |
|
|
$ |
19.53 |
|
|
|
3,675,100 |
|
|
|
5,841,717 |
|
July 2007 |
|
|
200,000 |
|
|
$ |
25.53 |
|
|
|
3,875,100 |
|
|
|
5,641,717 |
|
August 2007 |
|
|
2,800,000 |
|
|
$ |
22.55 |
|
|
|
6,675,100 |
|
|
|
2,841,717 |
|
September 2007 |
|
|
|
|
|
$ |
|
|
|
|
6,675,100 |
|
|
|
2,841,717 |
|
On April 25, 2006, the Board of Directors authorized the Company to repurchase a maximum of 10
percent, or 9,516,817 shares, of its then outstanding common stock. The stock buyback program
has been and will be conducted on the open market, in private transactions or otherwise at
such times prior to June 30, 2008, and at such prices, as determined appropriate by the
Company. During the 2007 third quarter, the Company repurchased 3,000,000 shares at an average
price of $22.70. The remaining number of shares that the Company is authorized to repurchase
is 2,841,717 at September 30, 2007.
The calculation of the average price paid per share does not include the effect for any fees,
commissions or other costs associated with the repurchase of such shares.
40
ITEM 6. EXHIBITS
(a) Exhibits
|
|
|
Exhibit
10.1
|
|
Joint Venture Contribution Agreement
among GrowHow UK Limited and Terra International (Canada), Inc. and
Kemira GrowHow Oyj and Terra Industries Inc. dated September 14, 2007.
|
|
|
|
Exhibit
10.2
|
|
Shareholders Agreement
among Kemira GrowHow Oyj and Terra International (Canada), Inc. and
Terra Industries Inc. and GrowHow UK Limited dated September 14, 2007. |
|
|
|
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
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
41
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
TERRA INDUSTRIES INC.
|
|
Date: October 25, 2007 |
/s/ Daniel D. Greenwell
|
|
|
Daniel D. Greenwell |
|
|
Senior Vice President and Chief
Financial Officer and a duly authorized
signatory |
|
42
EXHIBIT INDEX
|
|
|
Exhibit No. |
|
Description |
|
Exhibit
10.1
|
|
Joint Venture Contribution Agreement
among GrowHow UK Limited and Terra International (Canada), Inc. and
Kemira GrowHow Oyj and Terra Industries Inc. dated September 14, 2007.
|
|
|
|
Exhibit
10.2
|
|
Shareholders Agreement
among Kemira GrowHow Oyj and Terra International (Canada), Inc. and
Terra Industries Inc. and GrowHow UK Limited dated September 14, 2007. |
|
|
|
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
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
43