UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | 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)
| Maryland | 52-1145429 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| Terra Centre P.O. Box 6000 600 Fourth Street Sioux City, Iowa |
51102-6000 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s 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 x No ¨
As of March 31, 2005, the following shares of the registrant’s stock were outstanding:
| Common Shares, without par value | 92,929,124 shares |
| Part I – FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements |
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| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| Item 2. |
Management Discussion and Analysis of Financial Condition and Results of Operations |
24 | ||
| Item 3. |
28 | |||
| Part II – OTHER INFORMATION |
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| Item 4. |
30 | |||
| Item 6. |
31 | |||
2
PART I. FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| March 31, 2005 |
December 31, 2004 |
March 31, 2004 |
||||||||||
| Assets |
||||||||||||
| Cash and short-term investments |
$ | 205,001 | $ | 233,798 | $ | 160,092 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $268, $262 and $580 |
157,680 | 150,271 | 106,088 | |||||||||
| Inventories |
138,736 | 148,808 | 113,986 | |||||||||
| Other current assets |
53,250 | 58,106 | 36,656 | |||||||||
| Total current assets |
554,667 | 590,983 | 416,822 | |||||||||
| Property, plant and equipment, net |
779,402 | 797,978 | 697,741 | |||||||||
| Equity method investments |
222,453 | 215,939 | 2,326 | |||||||||
| Deferred plant turnaround costs |
36,282 | 33,897 | 22,425 | |||||||||
| Intangible assets |
18,698 | 24,884 | 3,166 | |||||||||
| Other assets |
25,943 | 21,827 | 27,104 | |||||||||
| Total assets |
$ | 1,637,445 | $ | 1,685,508 | $ | 1,169,584 | ||||||
| Liabilities |
||||||||||||
| Debt due within one year |
$ | 151 | $ | 167 | $ | 154 | ||||||
| Accounts payable |
91,875 | 119,571 | 77,545 | |||||||||
| Accrued expenses and other current liabilities |
201,689 | 220,195 | 165,473 | |||||||||
| Total current liabilities |
293,715 | 339,933 | 243,172 | |||||||||
| Long-term debt and capital lease obligations |
394,490 | 435,238 | 402,164 | |||||||||
| Deferred income taxes |
65,903 | 58,224 | 28,736 | |||||||||
| Pension liabilities |
117,217 | 119,570 | 63,453 | |||||||||
| Other liabilities |
46,389 | 47,872 | 50,444 | |||||||||
| Minority interest |
93,403 | 92,197 | 90,842 | |||||||||
| Total liabilities and minority interest |
1,011,117 | 1,093,034 | 878,811 | |||||||||
| Preferred Stock - $137,269 liquidation value at March 31, 2005 and December 31, 2004 |
133,069 | 133,069 | — | |||||||||
| Common Shareholders’ Equity |
||||||||||||
| Capital stock |
||||||||||||
| Common Shares |
144,562 | 144,531 | 129,029 | |||||||||
| Paid-in capital |
681,540 | 681,639 | 555,604 | |||||||||
| Accumulated other comprehensive loss |
(25,494 | ) | (55,994 | ) | (37,320 | ) | ||||||
| Unearned compensation |
(2,302 | ) | (2,568 | ) | — | |||||||
| Accumulated deficit |
(305,047 | ) | (308,203 | ) | (356,540 | ) | ||||||
| Total shareholders’ equity |
493,259 | 459,405 | 290,773 | |||||||||
| Total liabilities, minority interest, preferred stock and shareholders’ equity |
$ | 1,637,445 | $ | 1,685,508 | $ | 1,169,584 | ||||||
See Accompanying Notes to the Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
(unaudited)
| Three Months Ended March 31, |
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| 2005 |
2004 |
|||||||
| Revenues |
||||||||
| Net sales |
$ | 449,409 | $ | 360,461 | ||||
| Other income, net |
603 | 568 | ||||||
| Total revenues |
450,012 | 361,029 | ||||||
| Costs and Expenses |
||||||||
| Cost of sales |
413,743 | 323,718 | ||||||
| Recovery of product claim costs |
— | (15,514 | ) | |||||
| Equity in earnings of unconsolidated affiliates |
(5,007 | ) | (71 | ) | ||||
| Selling, general and administrative expense |
10,453 | 7,309 | ||||||
| 419,189 | 315,442 | |||||||
| Income from operations |
30,823 | 45,587 | ||||||
| Interest income |
1,754 | 377 | ||||||
| Interest expense |
(15,853 | ) | (13,501 | ) | ||||
| Loss on early retirement of debt |
(10,804 | ) | — | |||||
| Change in fair value of warrant liability |
4,900 | — | ||||||
| Income before income taxes and minority interest |
10,820 | 32,463 | ||||||
| Income tax provision |
(2,185 | ) | (11,300 | ) | ||||
| Minority interest |
(4,204 | ) | (2,933 | ) | ||||
| Net income |
4,431 | 18,230 | ||||||
| Preferred share dividends |
(1,275 | ) | — | |||||
| Income Available to Common Shareholders |
$ | 3,156 | $ | 18,230 | ||||
| Basic and diluted income per share: |
||||||||
| Basic |
$ | 0.03 | $ | 0.24 | ||||
| Diluted |
0.03 | 0.23 | ||||||
| Basic and diluted weighted average shares outstanding: |
||||||||
| Basic |
91,357 | 75,814 | ||||||
| Diluted |
92,217 | 77,776 | ||||||
See Accompanying Notes to the Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended March 31, |
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| 2005 |
2004 |
|||||||
| Operating Activities |
||||||||
| Net income |
$ | 4,431 | $ | 18,230 | ||||
| Adjustments to reconcile net income to net cash flows from operating activities: |
||||||||
| Loss on early retirement of debt |
9,418 | — | ||||||
| Change in fair value of warrant liability |
(4,900 | ) | — | |||||
| Recovery of product claim costs |
— | (12,874 | ) | |||||
| Depreciation and amortization |
29,176 | 25,578 | ||||||
| Deferred income tax provision |
7,077 | 11,323 | ||||||
| Minority interest in earnings |
4,204 | 2,933 | ||||||
| Equity earnings of unconsolidated affiliates |
(5,007 | ) | (71 | ) | ||||
| Amortization of unearned compensation |
339 | — | ||||||
| Term loan discount accretion |
1,209 | — | ||||||
| Changes in current assets and liabilities: |
||||||||
| Accounts receivable |
(8,163 | ) | 28,588 | |||||
| Inventories |
9,637 | (22,273 | ) | |||||
| Other current assets |
28,045 | 7,875 | ||||||
| Accounts payable |
(30,212 | ) | (3,214 | ) | ||||
| Accrued expenses and other current liabilities |
(8,259 | ) | 19,713 | |||||
| Net cash flows from operating activities |
36,995 | 75,808 | ||||||
| Investing Activities |
||||||||
| Capital expenditures |
(6,420 | ) | (1,075 | ) | ||||
| Plant turnaround expenditures |
(7,032 | ) | (150 | ) | ||||
| Other |
1,530 | (861 | ) | |||||
| Net cash flows from investing activities |
(11,922 | ) | (2,086 | ) | ||||
| Financing Activities |
||||||||
| Payments under borrowings arrangements |
(50,042 | ) | (41 | ) | ||||
| Proceeds from exercise of stock options |
102 | 136 | ||||||
| Distributions to minority interests |
(2,998 | ) | (1,153 | ) | ||||
| Net cash flows from financing activities |
(52,938 | ) | (1,058 | ) | ||||
| Effect of exchange rate changes on cash |
(932 | ) | 94 | |||||
| Increase (decrease) to cash and short-term investments |
(28,797 | ) | 72,758 | |||||
| Cash and short-term investments at beginning of period |
233,798 | 87,334 | ||||||
| Cash and short-term investments at end of period |
$ | 205,001 | $ | 160,092 | ||||
| Supplemental cash flow information: |
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| Interest paid |
$ | 2,939 | $ | 494 | ||||
| Income tax refunds received |
10,054 | — | ||||||
| Income taxes paid |
12 | 121 | ||||||
| Preferred stock dividends paid |
2,125 | — | ||||||
See Accompanying Notes to the Consolidated Financial Statements.
5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(