<PAGE>
================================================================================
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, 1996
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 (I.R.S. Employer
incorporation or organization) Identification No.)
TERRA CENTRE
P.O. BOX 6000
600 FOURTH STREET 51102-6000
SIOUX CITY, IOWA (Zip Code)
(Address of principal executive offices)
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 April 30, 1996, the following shares of the registrant's stock
were outstanding:
Common Shares, without par value 81,025,884 shares
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
---------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Cash and short-term investments $ 34,109 $ 138,707 $ 133,145
Accounts receivable, less allowance for
doubtful accounts of $11,795, $10,626 and $9,739 217,817 178,738 213,881
Inventories 553,434 367,272 538,094
Deferred tax asset -- current 27,175 23,768 49,641
Other current assets 89,508 55,511 53,566
- ---------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 922,043 763,996 988,327
- ---------------------------------------------------------------------------------------------
Equity and other investments 14,104 15,408 12,764
Property, plant and equipment, net 747,001 694,358 569,348
Excess of cost over net assets of acquired businesses 305,538 308,414 320,908
Partnership distribution reserve fund 18,480 18,480 18,480
Other assets 67,755 67,202 54,600
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $2,074,921 $1,867,858 $1,964,427
=============================================================================================
LIABILITIES
Debt due within one year $ 45,419 $ 30,425 $ 76,009
Accounts payable 276,123 203,400 301,039
Accrued and other liabilities 314,982 222,298 295,316
- ---------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 636,524 456,123 672,364
- ---------------------------------------------------------------------------------------------
Long-term debt 405,837 407,162 512,820
Deferred income taxes 115,377 111,871 93,656
Other liabilities 143,887 138,218 53,316
Minority interest 182,843 182,901 182,183
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,484,468 1,296,275 1,514,339
- ---------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock
Common Shares, authorized 133,500 shares;
outstanding 81,433, 81,173 and 81,018 shares 134,219 133,970 133,800
Paid-in capital 633,891 631,195 630,241
Cumulative translation adjustment (310) (271) (1,093)
Accumulated deficit (177,347) (193,311) (312,860)
- ---------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 590,453 571,583 450,088
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,074,921 $1,867,858 $1,964,427
=============================================================================================
</TABLE>
2
See accompanying Notes to the Consolidated Financial Statements
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
REVENUES
Net sales $388,312 $434,121
Other income, net 6,429 9,219
- -------------------------------------------------------------------------------
394,741 443,340
- -------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 277,517 304,281
Selling, general and administrative expense 62,080 56,045
Equity in loss of unconsolidated affiliates 1,081 1,197
Interest income (2,331) (2,666)
Interest expense 11,565 14,007
Minority interest 13,169 16,593
- -------------------------------------------------------------------------------
363,081 389,457
- -------------------------------------------------------------------------------
Income from operations before income taxes 31,660 53,883
Income tax provision 13,260 20,930
- -------------------------------------------------------------------------------
NET INCOME $ 18,400 $ 32,953
===============================================================================
NET INCOME PER SHARE $ 0.23 $ 0.41
===============================================================================
WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING 81,477 81,215
===============================================================================
CASH DIVIDENDS DECLARED PER SHARE $ 0.03 $ 0.02
===============================================================================
</TABLE>
3
See accompanying Notes to the Consolidated Financial Statements
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
Common Paid-In Translation Accumulated
Shares Capital Adjustment Deficit Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 133,770 $ 630,111 $ (1,259) $(344,193) $ 418,429
Stock Incentive Plan 30 130 --- --- 160
Translation Adjustment --- --- 166 --- 166
Dividends --- --- --- (1,620) (1,620)
Net income --- --- --- 32,953 32,953
- -----------------------------------------------------------------------------------------
Balance at March 31, 1995 $ 133,800 $ 630,241 $ (1,093) $(312,860) $ 450,088
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Cumulative
Common Paid-In Translation Accumulated
Shares Capital Adjustment Deficit Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 133,970 $ 631,195 $ (271) $(193,311) $ 571,583
Exercise of stock options 35 153 --- --- 188
Stock repurchase (3) (40) --- --- (43)
Issuance of common shares 215 2,580 --- --- 2,795
Stock Incentive Plan 2 3 --- --- 5
Translation Adjustment --- --- (39) --- (39)
Dividends --- --- --- (2,436) (2,436)
Net income --- --- --- 18,400 18,400
- -----------------------------------------------------------------------------------------
Balance at March 31, 1996 $ 134,219 $ 633,891 $ (310) $(177,347) $ 590,453
=========================================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements
4
<PAGE>
TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 18,400 $ 32,953
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 17,102 16,174
Income taxes (1,178) 3,761
Minority interest in earnings 13,169 16,593
Other non-cash items 1,333 (4,060)
Changes in current assets and liabilities,
excluding working capital purchased/sold:
Accounts receivable (37,169) (59,703)
Inventories (177,433) (201,662)
Other current assets (7,946) (4,489)
Accounts payable 70,397 119,989
Accrued and other liabilities 79,646 83,071
Unreimbursed Port Neal casualty (16,822) (3,098)
Other (3,646) 9,256
- -------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (44,147) 8,785
- -------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (4,910) (10,340)
Port Neal plant construction (38,376) (12,579)
Insurance proceeds from plant casualty --- 3,677
Purchase of property, plant and equipment (15,568) (14,007)
Discontinued operations 30 (478)
Proceeds from investments 261 246
- -------------------------------------------------------------------------------
Net cash used in investing activities (58,563) (33,481)
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings 14,996 7,199
Principal payments on long-term debt (1,327) (1,403)
Stock issuance/repurchase - net 145 155
Distributions to minority interests (13,227) (5,040)
Dividends (2,436) (1,620)
- -------------------------------------------------------------------------------
Net cash used in financing activities (1,849) (709)
- -------------------------------------------------------------------------------
Foreign exchange effect on cash and short-term
investments (39) 166
- -------------------------------------------------------------------------------
Decrease in cash and short-term investments (104,598) (25,239)
Cash and short-term investments at beginning
of period 138,707 158,384
- -------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 34,109 $ 133,145
===============================================================================
</TABLE>
See accompanying Notes to the Consolidated Financial Statements
5
<PAGE>
TERRA INDUSTRIES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The accompanying unaudited consolidated financial statements and notes
thereto contain all adjustments necessary to summarize fairly the financial
position of Terra Industries Inc. and all majority-owned subsidiaries (the
"Corporation") and the results of the Corporation's operations for the
periods presented. Because of the seasonal nature of the Corporation's
operations and effects of weather-related conditions in several of its
marketing areas, earnings of any single reporting period should not be
considered as indicative of results for a full year. Certain
reclassifications have been made to prior years' financial statements to
conform with current year presentation. These statements should be read in
conjunction with the Corporation's 1995 Annual Report to Stockholders.
2. Per-share data are based on the weighted average number of Common Shares that
would become outstanding after allowing for the exercise of outstanding stock
options.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3. Inventories consisted of the following:
March 31, December 31, March 31,
(in thousands) 1996 1995 1995
- ---------------------------------------------------------------------------------
Raw materials $ 35,673 $ 36,499 $ 44,855
Finished goods 517,761 330,773 493,239
- ---------------------------------------------------------------------------------
Total $ 553,434 $ 367,272 $ 538,094
=================================================================================
</TABLE>
4. The Corporation and certain of its subsidiaries are involved in various
legal actions and claims, including environmental matters, arising during
the normal course of business. Although it is not possible to predict with
any certainty the outcome of such matters, it is the opinion of management
that these matters will not have a material adverse effect on the results
of operations, financial position or cash flows of the Corporation.
5. The Corporation entered into a methanol hedging agreement (the "Methanol
Hedging Agreement") effective October 1994. Pursuant to the agreement, the
Corporation received $4 million in cash and agreed to make payments to the
extent that average methanol prices exceed the sum of $0.65 per gallon plus
0.113 times the average spot price index, in cents per MMBtu for natural
gas during the periods October 20, 1994 to December 31, 1995, calendar year
1996, and calendar year 1997. The amount due, if any, is dependent upon
average methanol and natural gas prices during each of the periods.
Payments are due five days after the end of each period. The quantities
subject to the agreement for each of these periods are 155.5 million, 140
million and 130 million gallons, respectively. The Corporation's methanol
production facilities have a capacity of 320 million gallons of methanol
per year.
The $4 million received pursuant to the Methanol Hedging Agreement is being
recognized as income over the term of the agreement. No amounts have been
paid or are presently accrued under the terms of the agreement. The
estimated fair value of the agreement, representing the amount that the
Corporation would expect to pay at March 31, 1996 to liquidate the
agreement for its remaining term, is less than $1 million.
6. On December 13, 1994, the Corporation's Port Neal facility in Iowa was
extensively damaged as a result of an explosion. There were four employee
fatalities plus injuries or damages to other people and property. Insurance
was in force to cover damage to the Corporation's property, business
interruption and third party liability claims. A $7 million pretax charge
was recorded in 1994 for expected uninsured costs associated with the
incident, including deductibles. As of March 31, 1996, the Corporation had
6
<PAGE>
received interim payments of $175.3 million on its claim. The Corporation
is in discussions with its insurers concerning additional insurance
proceeds to which the Corporation believes it should be entitled. Estimated
lost profits recoverable under the business interruption policy are being
included in income. Insurance proceeds received under the Corporation's
property damage claim are being deferred pending final settlement of the
claim. The Corporation has invested additional funds for enhancements and
improvements at the Port Neal facility.
The Corporation expects to record a substantial non-recurring gain,
representing the difference between the property insurance settlement on
the Port Neal facility with the Corporation's insurers and the carrying
value of the facility at the time of the explosion. The amount of the gain
will be dependent on final construction, clean-up expenditures and the
settlement reached with the Corporation's insurance carriers. As of March
31, 1996, $85 million has been recorded as a deferred gain and is included
in other liabilities.
In September 1995, the Corporation transferred the Port Neal facility to
Port Neal Holdings Corp. ("PNH"). PNH was structured to finance and
complete the reconstruction of the Port Neal facility through its wholly
owned subsidiary, Port Neal Corporation ("PNC"). PNH issued to unrelated
third parties $25 million of non-convertible preferred stock. The preferred
stock represents 25% of the voting rights of PNH and accrues dividends
commensurate with market interest rates.
7. The Corporation's natural gas procurement policy is to effectively fix or
cap the price of between 40 and 80% of its natural gas requirements for a
one-year period and up to 50% of its natural gas requirements for the
subsequent two-year period through various supply contracts, financial
derivatives and other forward pricing techniques. The Corporation has
entered into forward pricing positions for the purchase of natural gas
amounting to approximately 79% of natural gas volumes for the remainder of
1996, 49% for 1997 and 24% for 1998. As a result of its policies, the
Corporation has limited the potential adverse financial impact of natural
gas price increases during the forward pricing period, but conversely, if
natural gas prices were to fall, the Corporation will incur higher costs.
Unrealized gains from forward pricing positions totaled $45.6 million as of
March 31, 1996.
8. In June 1995, the Corporation issued $200 million unsecured 10.5% Senior
Notes due in full June 15, 2005. The 10.5% Senior Notes are redeemable at
the option of the Corporation, in whole or part, at any time on or after
June 15, 2000, initially at 105.250% of their principal amount, plus
accrued interest, declining to 102.625% on or after June 15, 2001, and
declining to 100% on or after June 15, 2002. The 10.5% Senior Notes
Indenture contains certain restrictions, including the issuance of
additional debt, payment of dividends, issuance of capital stock, certain
transactions with affiliates, incurrence of liens, sale of assets, and
sale-leaseback transactions. Net proceeds of $28.8 million were used to
acquire 974,900 of the outstanding Senior Preference Units ("SPUs") of
Terra Nitrogen Company, L.P. ("TNCLP"). The remaining net proceeds were
used to repay bank term loans.
During December 1995, the Corporation amended its credit agreement to
provide revolving credit facilities of up to $375 million for domestic
working capital needs and other corporate purposes. Bank term loans
outstanding were converted into advances under the amended credit
agreement. There was $41.0 million outstanding at March 31, 1996. Interest
on borrowings under this line is charged at current market rates.
9. In October 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock Based Compensation." Beginning in 1996, SFAS 123
requires expanded disclosures of stock-based compensation arrangements with
employees and encourages, but does not require, the recognition of employee
compensation expense related to stock compensation based on the fair value
of the equity instrument granted. Companies that do not adopt the fair
value recognition provisions of SFAS 123 and
7
<PAGE>
continue to follow the existing APB Opinion 25 rules to recognize and
measure compensation, will be required to disclose the pro forma amounts of
net income and earnings per share that would have been reported had the
Corporation elected to follow the fair value recognition of SFAS 123. The
impact on the Corporation's financial position and results of operations is
not material. The Corporation will continue to apply APB Opinion 25 to its
stock-based compensation awards to employees and will disclose annually the
required pro forma effect on net income and earnings per share.
10. On April 30, 1996, the Board of Directors of the Corporation authorized the
repurchase of up to 8.5 million Common Shares on the open market and
through privately negotiated transactions over the next fifteen months.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
---------------------
QUARTER ENDED MARCH 31, 1996, COMPARED WITH
QUARTER ENDED MARCH 31, 1995
CONSOLIDATED RESULTS
The Corporation reported net income of $18.4 million, or $0.23 per share, on
revenues of $394.7 million for the first quarter of 1996 compared with net
income of $33.0 million or $0.41 per share on revenues of $443.3 million in
1995. Revenues decreased $48.6 million, or 11.0%, over the comparable 1995
period and operating income declined $27.8 million, primarily the result of
significantly lower methanol prices in the first quarter of 1996 compared with
1995.
The Corporation classifies its operations into three business segments:
Distribution, Nitrogen Products and Methanol. The Distribution segment includes
sales of products purchased from manufacturers, including the Corporation, and
resold by the Corporation. Distribution revenues are derived primarily from
grower and dealer customers through sales of crop protection products,
fertilizers, seed and services. The Nitrogen Products segment represents those
operations directly related to wholesale sales of nitrogen products from the
Corporation's ammonia manufacturing and upgrading facilities. The Methanol
segment represents wholesale sales of methanol from the Corporation's two
methanol manufacturing facilities.
Total revenues and operating income (loss) for the three-month periods ended
March 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Distribution $ 222,913 $ 238,454
Nitrogen Products 153,067 147,188
Methanol 28,896 65,874
Other - net of intercompany eliminations (10,135) (8,176)
- --------------------------------------------------------------------------------
$ 394,741 $ 443,340
================================================================================
OPERATING INCOME (LOSS):
Distribution $ (23,409) $ (14,635)
Nitrogen Products 74,334 57,384
Methanol 4,029 39,608
Other expense - net (891) (540)
- --------------------------------------------------------------------------------
54,063 81,817
Interest expense - net (9,234) (11,341)
Minority interest (13,169) (16,593)
- --------------------------------------------------------------------------------
Total from operations $ 31,660 $ 53,883
================================================================================
</TABLE>
DISTRIBUTION
Distribution revenues of $222.9 million during the 1996 first quarter, decreased
$15.5 million, or 6.5%, compared with 1995 results. A slow start to the spring
planting season due to unfavorable weather conditions
9
<PAGE>
caused both crop protection products and fertilizer revenues to decline from the
prior year period. Crop protection products revenues declined $14.4 million, or
10.2%, and fertilizer revenues declined $5.8 million, or 8.9%. Seed and other
sales and services were up $4.7 million over 1995 as early season seed revenues
attributable to growers' intentions to increase planted acres more than offset a
lower level of custom application revenues.
The operating loss for the Distribution business was $23.4 million in 1996
compared with $14.6 million in 1995. An increase of $8.2 million in selling
expenses contributed to the decrease in operating income. The expansion of the
distribution network to 389 locations in 1996 from 371 locations in 1995
increased selling expenses by $2.1 million. New employees and equipment at
existing locations in anticipation of increased demand for products and services
for the 1996 planting season also contributed to higher selling expenses.
NITROGEN PRODUCTS
Nitrogen Products revenues increased 4.0% to $153.1 million in 1996 from $147.2
million in 1995. Prices for nitrogen solutions and urea increased 11.7% and
8.2%, respectively, while prices for ammonia declined 10.9%. The effect of these
price changes was a favorable price variance of $3.4 million. The Port Neal
nitrogen manufacturing plant began producing ammonia in December 1995.
Production at the plant for the first quarter of 1996 was 69,000 tons of
ammonia. The remaining work required to rebuild the urea and solution upgrading
facilities at the Port Neal site will be completed in the second quarter of
1996. When fully operational, the plant is expected to have annual gross
production capacity of 350,000 tons of ammonia, 45,000 tons of urea and 500,000
tons of nitrogen solution.
Operating income for the Nitrogen Products business was $74.3 million in the
first quarter of 1996 compared with $57.4 million in the 1995 first quarter.
The increase in operating income for first quarter 1996 was due to higher prices
for upgraded products and lower cost of natural gas. The average natural gas
cost declined 34.4% from the first quarter of 1995 due to the Corporation's use
of financial derivatives which more than offset the increase in the price of
physical gas.
METHANOL
Methanol revenues were $28.9 million in the first quarter of 1996, compared with
$65.9 million in 1995. The lower revenues reflected significantly lower prices.
Average prices were $0.38 in 1996 first quarter and $0.98 in 1995 (including the
effect of the Methanol Hedging Agreement) resulting in an unfavorable price
variance of $45.2 million. Sales volumes in 1996 increased 8.0 million gallons
or 11.9% over the first quarter of 1995.
Operating income for the 1996 first quarter was $4.0 million, while 1995
operating income was $39.6 million. Lower prices reduced operating income by
$45.2 million as compared with the 1995 first quarter. Higher sales volumes and
lower natural gas cost offset a portion of the pricing shortfall. The decline
in cost of gas was due to the use of financial derivatives to forward price a
majority of the gas requirements for 1996.
OTHER OPERATING EXPENSE - NET
Other operating expense was $0.9 million in the 1996 first quarter compared with
$0.5 million in the comparable 1995 period. Other operating expense includes
expenses not directly related to individual business segments, including certain
insurance coverages, corporate finance fees and other costs. The increase in
1996 is primarily the result of an increase in fixed manufacturing costs at the
Blytheville formulation facility.
10
<PAGE>
INTEREST EXPENSE - NET
Interest expense, net of interest income, totaled $9.2 million in 1996 compared
with $11.3 million in 1995. The decrease is principally the result of lower
interest expense due to the repayment of bank term loans in 1995.
INCOME TAXES
First quarter 1996 income tax expense was recorded at an effective rate of
41.9%, compared with 38.8% in the first quarter of 1995. The increased rate is
the result of goodwill amortization which is not deductible for income tax
purposes. Goodwill amortization as a percent of income before taxes increased
to 12.7% in 1996 from 8.3% for 1995, resulting in the increase in the effective
tax rate for first quarter 1996.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Corporation's primary uses of funds will be to fund its working capital
requirements, make payments on its indebtedness and other obligations, make
quarterly distributions to minority interests, disburse quarterly stock
dividends, make capital expenditures and acquisitions and fund repurchases of
its common stock. The principal sources of funds will be cash flow from
operations and borrowings under available bank facilities. The Corporation
believes that cash from operations and available financing sources will be
sufficient to meet anticipated cash requirements.
Cash used for operations in the 1996 first quarter was $44.1 million due to a
seasonal increase in working capital balances of $72.5 million. The Corporation
has available a $375 million revolving credit facility for domestic working
capital needs. As of March 31, 1996, $41.0 million was outstanding under this
facility.
Cash used for investing activities was $58.6 million in the first quarter of
1996, $38.4 million was used to rebuild the Port Neal manufacturing plant while
$15.6 million funded other investments in plant and equipment. Cash used for
acquisitions represents amounts paid to acquire new locations for the
Corporation's distribution network.
The Corporation expects 1996 capital expenditures, exclusive of expenditures
related to the Port Neal casualty and the acquisition of retail distribution
locations, to approximate $50 million consisting of the expansion of existing
service centers; routine replacement of equipment; and efficiency improvements
at manufacturing facilities.
During 1996, the Corporation expects to make expenditures estimated at $60
million related to the Port Neal facility. The Corporation is in discussions
with its insurers and expects that additional proceeds will be received in
connection with the insurance claim.
In May 1995, the Board of Directors of the Corporation approved an open market
purchase program pursuant to which the Corporation may purchase up to five
million SPUs from time to time at prices and in quantities determined by the
Corporation's management. There were no repurchases in the first quarter of
1996.
On April 30, 1996, the Board of Directors of the Corporation authorized the
repurchase of up to 8.5 million Common Shares on the open market and through
privately negotiated transactions over the next fifteen months.
During the quarter, the Corporation distributed $1.91 per unit, or $12.7
million, to minority Senior Preference unitholders, paid a dividend rate of
7.99%, or $0.5 million, to minority preferred stock shareholders, and paid the
Corporation's quarterly dividend of $0.03 per share which totaled $2.4 million.
11
<PAGE>
The Farm Bill was signed into law on April 4, 1996. The law ends governmental
guaranteed prices for corn, other feed grains, cotton, rice and wheat. Farmers
will receive guaranteed payments that decline over seven years and an immediate
end to most planting controls. The Corporation has not determined, at this
time, the impact this legislation will have on its customers or results of
operations.
Cash balances at March 31, 1996 were $34.1 million of which $8.7 million is used
to collateralize letters of credit supporting recorded liabilities.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1996 Annual Meeting of stockholders was held on April 30,
1996, in Sioux City, Iowa. At the meeting, a total of 75,549,662 votes were
cast by stockholders. There were no broker nonvotes.
The following directors were elected to hold office until the
next Annual Meeting or until their successors are duly elected and qualified,
and received the votes set forth opposite their respective name:
<TABLE>
<CAPTION>
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
Edward G. Beimfohr 75,157,078 392,584
Carol L. Brookins 75,115,901 433,761
Edward M. Carson 75,158,231 391,431
David E. Fisher 74,535,540 1,014,122
Basil T. A. Hone 75,160,131 389,531
Burton M. Joyce 74,543,299 1,006,363
Anthony W. Lea 74,510,700 1,038,962
William R. Loomis, Jr. 74,499,568 1,050,094
John R. Norton III 75,160,651 389,011
Henry R. Slack 73,678,166 1,871,496
</TABLE>
In addition, the stockholders ratified the selection by the
Corporation's Board of Directors of Deloitte & Touche LLP as independent
accountants for the Corporation for 1996. The number of votes cast for such
proposal was 75,139,994, the number against was 290,635 and the number of
abstentions was 119,033.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
None.
(B) REPORTS ON FORM 8-K
Current Report on Form 8-K dated May 2, 1996 reporting
authorization to repurchase common shares.
13
<PAGE>
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: May 13, 1996 /s/ Francis G. Meyer
--------------------
Francis G. Meyer
Senior Vice President and Chief Financial Officer
and a duly authorized signatory
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This Schedule contains summary financial information extracted from
the consolidated statement of financial position of Terra Industries Inc. as of
March 31, 1996 and the related consolidated statement of income for the three
months then ended and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,751
<SECURITIES> 13,358
<RECEIVABLES> 229,612
<ALLOWANCES> (11,795)
<INVENTORY> 553,434
<CURRENT-ASSETS> 922,043
<PP&E> 910,832
<DEPRECIATION> (163,831)
<TOTAL-ASSETS> 2,074,921
<CURRENT-LIABILITIES> 636,524
<BONDS> 405,837
<COMMON> 134,219
0
0
<OTHER-SE> 456,234
<TOTAL-LIABILITY-AND-EQUITY> 2,074,921
<SALES> 388,312
<TOTAL-REVENUES> 394,741
<CGS> 277,517
<TOTAL-COSTS> 51,278
<OTHER-EXPENSES> 24,497
<LOSS-PROVISION> 555
<INTEREST-EXPENSE> 11,565
<INCOME-PRETAX> 31,660
<INCOME-TAX> 13,260
<INCOME-CONTINUING> 18,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,400
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0
</TABLE>
