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Terra Industries Inc. Reports Fourth Quarter and Full-Year Results
Thursday February 7, 7:30 am ET

http://biz.yahoo.com/bw/080207/20080207005401.html?.v=1&printer=1


SIOUX CITY, Iowa--(BUSINESS WIRE)--Terra Industries Inc. (NYSE:TRA - News):
S U M M A R Y

Q4/07 vs. Q4/06:


Operating income up $93 million.
Revenues up $121 million, or 27%.
Ammonia, UAN and AN selling prices up 16%, 69% and 20%.
FY07 vs. FY06:


Operating income up $354 million.
Revenues up $523 million, or 28%.
Ammonia, UAN and AN selling prices up 6%, 41% and 10%.
Outlook:


Projected grain inventories should encourage another year of strong planted acres of corn and wheat, which should lead to continued good nitrogen demand.
Nitrogen prices should remain strong through the 2008 planting season.
Natural gas prices will significantly affect Terra’s product costs.
Terra Industries Inc. (NYSE:TRA - News) announced today net income for the 2007 fourth quarter of $69.7 million ($.66 per share), up from net income of $11.6 million ($.11 per share) for the same period in 2006.

Terra reported 2007 fourth quarter operating income of $131.4 million, compared to operating income of $38.8 million for the 2006 fourth quarter. The 2007 earnings improvement was mostly due to higher selling prices.

For 2007, Terra posted net income available to common shareholders of $196.8 million ($1.90 per share) on revenues of $2.4 billion. For 2006, Terra recorded a net loss to common shareholders of $.9 million ($.01 per share) on revenues of $1.8 billion. The 2007 net income was reduced by $77.8 million ($49.8 million, net of tax), or $.47 per share, for debt retirement and asset impairment charges.

Analysis of fourth quarter results

Revenues for the 2007 fourth quarter totaled $570 million compared to $450 million for the 2006 fourth quarter. The $121 million revenue increase from the prior year was due primarily to higher nitrogen selling prices. Ammonia, nitrogen solutions (UAN) and ammonium nitrate (AN) selling prices improved 16, 69 and 20 percent, respectively, over those of the same period last year. Sales volumes of ammonia and UAN also increased by 9 and 5 percent, respectively, while AN sales volumes decreased by 22 percent, compared to last year. The improved selling prices and sales volumes reflect strong demand resulting from improved commodity grain prices and Terra customers’ efforts to secure supplies for the 2008 spring planting season. The 2006 fourth quarter revenues included Terra’s UK operation, which in September 2007 was contributed for a 50% interest in a joint venture that is reported as non-operating equity earnings.

Fourth quarter equity earnings were $5 million higher than last year due to improved operating rates at the Point Lisas Trinidad nitrogen facility.

Selling, general and administrative expense for the 2007 fourth quarter increased by $7.9 million over the 2006 fourth quarter. This is composed of an increase of $11.4 million in incentive and share-based compensation, partially offset by $3.1 million of reduced legal fees incurred in 2006 in association with planning of the UK joint venture. There was no incentive compensation earned during 2006. Share-based compensation, which vests over three years, included effects of 2007 fourth quarter increases to the price of Terra’s common shares.

Analysis of full-year results

The $523 million revenue improvement from 2006 to 2007 was mainly due to higher sales volumes and selling prices, driven by strong nitrogen products demand. UAN and AN sales volumes increased by 19 and 21 percent, respectively, over those of 2006. UAN and AN selling prices increased by 41 and 10 percent, respectively, in 2007 over 2006.

The $354 million operating income improvement from 2006 to 2007 was due to higher sales volumes and selling prices, and lower natural gas costs, partly offset by an impairment loss on Terra’s Beaumont facility and increased expenses for incentive and share-based compensation.

Terra refinanced its long-term debt in February 2007 and recorded a $39 million charge associated with the refinancing. The new debt agreement has a due date in 2017 and a fixed interest rate of 7.0%.

Forward natural gas position

Terra’s forward purchase contracts at Dec. 31, 2007, fixed prices for about 28 percent of its next 12 months’ natural gas needs at about $9.9 million above the published forward market prices at that date. These forward positions hedge production costs associated with sales commitments that Terra plans to ship in the first and second quarters of 2008.

Cash balances, customer prepayments and share buybacks

Cash balances, including almost $300 million in customer prepayments, totaled $698 million at Dec. 31, 2007. Terra expects to ship products under the prepay agreements during the 2008 first half.

During the 2007 fourth quarter, Terra did not repurchase any of its common shares under its share repurchase program. Since announcing its authorization to repurchase up to 9.5 million of its outstanding common shares by June 30, 2008, Terra has repurchased 6.7 million shares.

Donaldsonville ammonia plant restart

Terra plans to restart its Donaldsonville, Louisiana ammonia plant during the third quarter of 2008. The output of this facility will replace 400,000 tons per year of purchased imported ammonia at more favorable gross margins. The facility will undergo turnaround and startup activities during the first half of 2008. The facility ceased production in December 2004; however, Terra has maintained the facility for a potential restart and retained the skilled workforce needed to operate it.

CEO’s remarks

“The nitrogen market environment remained very positive in the fourth quarter,” said Terra President and CEO Michael Bennett. “Nitrogen products selling prices remained strong as high commodity grain prices continued to support very healthy nitrogen demand.

“Our plants operated well, with high on-stream factors and efficient utilization during the fourth quarter.

“As we look to the first half of 2008, we anticipate continued strong demand for our products as supported by the record level of customer prepayments we have accepted for delivery. Grain prices continue to be robust, providing ample incentive for growers to optimize yields.”

Bennett continued, “In response to increasing demand and improved margin realization for upgraded nitrogen products, we are evaluating projects to increase upgrading capacity at several of our facilities. We believe additional investment in our upgrading capacity will enhance the strong market position of our operations and improve Terra’s long-term earnings capability.”

Conference call details

Terra management will conduct a conference call to discuss these fourth quarter results this afternoon at 3:00 ET. A live webcast of the conference call will be available from Terra’s website at www.terraindustries.com, and will be archived for playback for three months.

About Terra

Terra Industries Inc., with 2007 revenues of $2.4 billion, is a leading international producer of nitrogen products.

Forward-looking statements

This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.’s most recent report on Form 10-K and Terra Industries Inc.’s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.