<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND
INVESTMENT PLAN
Form 11-K for the Years Ended
December 31, 1997 and 1996
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the Transition Period From to
Commission File Number 1-8520
A. Full title of the Plan and the address of the Plan, if different from
that of the issuer named below:
TERRA INDUSTRIES INC. EMPLOYEES' SAVINGS AND INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the Plan and the address
of its principal executive office:
TERRA INDUSTRIES INC.
TERRA CENTRE
600 FOURTH STREET
P.O. BOX 6000
SIOUX CITY, IOWA 51102-6000
<PAGE>
REQUIRED INFORMATION
Plan financial statements and schedules are prepared in accordance with the
financial reporting requirements of ERISA and are included therein as listed in
the table of contents below.
<TABLE>
<CAPTION>
Table of Contents
- -----------------
(a) Financial Statements Pages
------------------------ -----
<S> <C>
Independent Auditors' Report 3
Statements of Net Assets Available for Benefits at
December 31, 1997 and 1996 4-5
Statements of Changes in Net Assets Available for
Benefits for the Years Ended December 31, 1997 and 1996 6-7
Notes to Financial Statements 8-12
(b) Supplemental Schedules
--------------------------
Schedule of Assets Held for Investment Purposes 13
Schedule of Reportable Transactions 14
(c) Exhibits
------------
Exhibit E - Independent Auditors' Consent 15
</TABLE>
Schedules not filed herewith are omitted because of the absence of the
conditions under which they are required.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants and
Administrator of the
Terra Industries Inc.
Employees' Savings and Investment Plan
We have audited the accompanying statements of net assets available for benefits
of the Terra Industries Inc. Employees' Savings and Investment Plan as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Terra Industries Inc.
Employees' Savings and Investment Plan as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the years then ended in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) assets
held for investment purposes as of December 31, 1997, and (2) reportable
transactions for the year ended December 31, 1997, are presented for purposes of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor is Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental information by fund in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for the purpose of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of the individual funds. The
supplemental schedules and supplemental information by fund is the
responsibility of the Plan's management. Such supplemental schedules and
supplemental information by fund have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 24, 1998
<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Employer
Directed Terra
Terra Industries
Industries Inc.
Inc. Voluntary Putnam Putnam Putnam Putnam
Common Common Growth & Income New Money
Stock Stock Income Fund Opportunities Market
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at fair value:
Terra Industries Inc.
Common Stock $26,931,358 $5,587,962 $ - $ - $ - $ -
Putnam Fund for Growth
and Income - - 16,143,082 - -
Putnam Income Fund - - - 4,163,301 -
Putnam New Opportunities
Fund - - - - 10,044,027 -
Putnam Money Market Fund - - - - - 6,522,779
Putnam International Growth
Fund - - - - - -
Putnam Asset Allocation -
Growth Portfolio - - - - - -
Putnam Asset Allocation -
Balanced Portfolio - - - - -
Putnam Asset Allocation -
Conservative Portfolio - - - - -
Putnam Voyager Fund - - - - - -
Loans to participants - - - - -
Total investments 26,931,358 5,587,962 16,143,082 4,163,301 10,044,027 6,522,779
Employer contributions
receivable 141,209 - - - - -
Participant contributions
receivable - 27,721 20,161 17,641 70,563 15,121
Receivable - securities sold - 62,542 - - - -
Total assets 27,072,567 5,678,225 16,163,243 4,180,942 10,114,590 6,537,900
LIABILITIES:
Payable - securities - 18,956 - - - -
purchased
Net assets available for
benefits $27,072,567 $5,659,269 $16,163,243 $4,180,942 $10,114,590 $6,537,900
</TABLE>
See notes to financial statements.
<PAGE>
- -------------------------------------------------------------------------------
Supplemental Information by Fund
- -------------------------------------------------------------------------------
Participant Directed
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam
Putnam Putnam Putnam AA
International AA AA Conserv- Putnam
Growth Growth Balanced ative Voyager Participant
Fund Fund Fund Fund Fund Loans Total
<S> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ - $ - $ 32,519,320
- - - - - - 16,143,082
- - - - - - 4,163,301
- - - - - - 10,044,027
- - - - - - 6,522,779
2,675,251 - - - - - 2,675,251
-
- 2,196,170 - - - - 2,196,170
-
- - 1,425,041 - - - 1,425,041
- - - 698,683 - - 698,683
- - - - 26,896,589 - 26,896,589
- - - - - 3,863,754 3,863,754
---------- ---------- ---------- -------- ----------- ---------- ------------
2,675,251 2,196,170 1,425,041 698,683 26,896,589 3,863,754 107,147,997
- - - - - - 141,209
57,962 - - - 42,842 - 252,011
- - - - - - 62,542
---------- ---------- ---------- -------- ----------- ---------- ------------
2,733,213 2,196,170 1,425,041 698,683 26,939,431 3,863,754 107,603,759
---------- ---------- ---------- -------- ----------- ---------- ------------
- - - - - - 18,956
---------- ---------- ---------- -------- ----------- ---------- ------------
$2,733,213 $2,196,170 $1,425,041 $698,683 $26,939,431 $3,863,754 $107,584,803
========== ========== ========== ======== =========== ========== ============
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Employer
Directed
Terra
Terra Industries
Industries Inc.
Inc. Voluntary Putnam Putnam Putnam
Common Common Growth & Putnam New Money
Stock Stock Income Income Opportunities Market
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at fair value:
Terra Industries Inc.
Common Stock $27,175,208 $5,182,742 $ - $ - $ - $ -
Putnam Fund for Growth
and Income - - 11,200,356 - - -
Putnam Income Fund - - - 3,852,029 - -
Putnam New Opportunities
Fund - - - - 7,149,056 -
Putnam Money Market Fund - - - - - 5,177,084
Putnam International Growth
Fund - - - - - -
Putnam Asset Allocation -
Growth Portfolio - - - - - -
Putnam Asset Allocation -
Balanced Portfolio - - - - - -
Putnam Asset Allocation -
Conservative Portfolio - - - - - -
Putnam Voyager Fund - - - - - -
Loans to participants - - - - - -
Total investments 27,175,208 5,182,742 11,200,356 3,852,029 7,149,056 5,177,084
Employer contributions
receivable 108,026 - - - - -
Participant contributions
receivable - 24,148 17,562 15,367 61,468 13,172
Receivable - securities
sold - 726,795 - - - -
Total assets 27,283,234 5,933,685 11,217,918 3,867,396 7,210,524 5,190,256
LIABILITIES:
Accrued administrative
expenses - 651 1,234 420 786 570
Payable - securities 181,766 - - - - -
purchased
Total liabilities 181,766 651 1,234 420 786 570
Net assets available for
benefits $27,101,468 $5,933,034 $11,216,684 $3,866,976 $7,209,738 $5,189,686
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Supplemental Information by Fund
- -------------------------------------------------------------------------------------------
Participant Directed
- -------------------------------------------------------------------------------------------
Putnam Putnam Putnam Putnam
International AA AA AA Putnam
Growth Growth Balanced Conservative Voyager Participant
Fund Fund Fund Fund Fund Loans Total
<S> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ -- $ -- $32,357,950
-- -- -- -- -- -- 11,200,356
-- -- -- -- -- -- 3,852,029
-- -- -- -- -- -- 7,149,056
-- -- -- -- -- -- 5,177,084
1,545,185 -- -- -- -- -- 1,545,185
-- 1,325,313 -- -- -- -- 1,325,313
-- -- 659,142 -- -- -- 659,142
-- -- -- 281,753 -- -- 281,753
-- -- -- -- 24,544,054 -- 24,544,054
-- -- -- -- -- 3,282,504 3,282,504
---------- ---------- -------- -------- ----------- ---------- -----------
1,545,185 1,325,313 659,142 281,753 24,544,054 3,282,504 91,374,426
-- -- -- -- -- -- 108,026
50,492 -- -- -- 37,320 -- 219,529
-- -- -- -- -- -- 726,795
---------- ---------- -------- -------- ----------- ---------- -----------
1,595,677 1,325,313 659,142 281,753 24,581,374 3,282,504 92,428,776
---------- ---------- -------- -------- ----------- ---------- -----------
170 149 75 27 2,698 -- 6,780
-- -- -- -- -- -- 181,766
---------- ---------- -------- -------- ----------- ---------- -----------
170 149 75 27 2,698 -- 188,546
---------- ---------- -------- -------- ----------- ---------- -----------
$1,595,507 $1,325,164 $659,067 $281,726 $24,578,676 $3,282,504 $92,240,230
========== ========== ======== ======== =========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Employer
Directed
--------------------------------------------------------------------------------------
Terra
Terra Industries
Industries Inc.
Inc. Voluntary Putnam Putnam Putnam
Common Common Growth & Putnam New Money
Stock Stock Income Income Opportunities Market
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income (loss):
Dividend, interest, and
other income $ 349,696 $ 74,907 $ 2,114,763 $ 259,416 $ 216,733 $ 321,005
Net appreciation
(depreciation) in fair
value of investments (3,081,128) (512,418) 979,189 55,447 1,429,352 593
Total investment
income (loss) (2,731,432) (437,511) 3,093,952 314,863 1,646,085 321,598
Employer contributions 4,585,387 - - - - -
Participant contributions - 703,586 1,780,537 468,906 2,157,095 369,706
Total additions 1,853,955 266,075 4,874,489 783,769 3,803,180 691,304
Deductions from net assets
attributed to:
Benefit payments 1,687,008 309,158 1,512,050 233,118 387,421 783,109
Administrative expenses 5,709 19,489 14,623 3,187 7,453 7,151
Total deductions 1,692,717 328,647 1,526,673 236,305 394,874 790,260
Net increase (decrease) prior to
interfund transfers/net loans 161,238 (62,572) 3,347,816 547,464 3,408,306 (98,956)
Interfund transfers/net loans (190,139) (211,193) 1,598,752 (233,498) (503,454) 1,447,170
Net increase (decrease) (28,901) (273,765) 4,946,568 313,966 2,904,852 1,348,214
Assets available for benefits:
Beginning of year 27,101,468 5,933,034 11,216,684 3,866,976 7,209,738 5,189,686
End of year $27,072,567 $5,659,269 $16,163,243 $4,180,942 $10,114,590 $6,537,900
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental Information by Fund
- -------------------------------------------------------------------------------------------------------------
Participant Directed
- -------------------------------------------------------------------------------------------------------------
Putnam Putnam Putnam Putnam
International AA AA AA Putnam
Growth Growth Balanced Conservative Voyager Participant
Fund Fund Fund Fund Fund Loans Total
<S> <C> <C> <C> <C> <C> <C>
$ 157,221 $ 157,770 $ 119,964 $ 43,436 $ 1,601,778 $ 359,810 $ 5,776,499
194,314 146,067 54,533 7,562 3,972,341 - 3,245,852
351,535 303,837 174,497 50,998 5,574,119 359,810 9,022,351
- - - - - - 4,585,387
532,854 445,167 191,396 71,150 2,646,975 - 9,367,372
884,389 749,004 365,893 122,148 8,221,094 359,810 22,975,110
139,542 148,764 13,461 1,327 2,020,384 309,740 7,545,082
2,198 1,798 1,056 426 22,356 - 85,455
141,740 150,562 14,517 1,753 2,042,740 309,740 7,630,537
742,649 598,442 351,376 120,395 6,178,354 50,070 15,344,573
395,057 272,564 414,598 296,562 (3,817,599) 531,180 -
1,137,706 871,006 765,974 416,957 2,360,755 581,250 15,344,573
1,595,507 1,325,164 659,067 281,726 24,578,676 3,282,504 92,240,230
$2,733,213 $2,196,170 $1,425,041 $698,683 $26,939,431 $3,863,754 $107,584,803
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Employer
Directed
Terra
Terra Industries
Industries Inc.
Inc. Voluntary U.S.
Common Common Equity Money
Stock Stock Income Intermediate Stock Market
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income (loss):
Dividend, interest, and
other income $ 261,179 $ 66,762 $ 105,612 $ 196,025 $ 649,272 $ 132,592
Net appreciation
(depreciation) in fair
value of investments 1,402,944 184,017 1,063,070 (257,318) 109,022 -
Total investment
income (loss) 1,664,123 250,779 1,168,682 (61,293) 758,294 132,592
Employer contributions 3,665,799 - - - - -
Participant contributions - 919,711 1,071,165 606,048 2,091,030 437,905
Total additions 5,329,922 1,170,490 2,239,847 544,755 2,849,324 570,497
Deductions from net assets
attributed to:
Benefit payments 1,277,288 179,962 688,776 199,045 1,178,565 239,520
Administrative expenses - 13,447 21,599 11,824 38,674 7,988
Total deductions 1,277,288 193,409 710,375 210,869 1,217,239 247,508
Net increase (decrease)
prior to interfund
transfers/net loans 4,052,634 977,081 1,529,472 333,886 1,632,085 322,989
Interfund transfers/
net loans (43,927) (1,321,501) (10,531,893) (4,791,564) (18,380,873) (3,963,292)
Net increase (decrease) 4,008,707 (344,420) (9,002,421) (4,457,678) (16,748,788) (3,640,303)
Assets available for
benefits:
Beginning of year 23,092,761 6,277,454 9,002,421 4,457,678 16,748,788 3,640,303
End of year $27,101,468 $ 5,933,034 $ - $ - $ - $ -
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Supplemental Information
Participant Directed
Putnam Putnam Putnam Putnam
Growth & Putnam New Money International
GIC Windsor Income Income Opportunities Market Growth
Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
$ 9,212 $ 143,972 $ 762,642 $ 83,663 $ 53,560 $ 71,773 $ 20,292
124,366 1,215,899 165,318 70,991 (266,459) - (10,177)
----------- ------------ ----------- ---------- ---------- ---------- ----------
133,578 1,359,871 927,960 154,654 (212,899) 71,773 10,115
- - - - - - -
367,375 1,328,392 374,195 162,295 301,688 168,697 86,136
500,953 2,688,263 1,302,155 316,949 88,789 240,470 96,251
179,656 354,222 130,517 85,153 20,934 30,504 105
5,705 24,173 1,302 482 842 636 170
185,361 378,395 131,819 85,635 21,776 31,140 275
315,592 2,309,868 1,170,336 231,314 67,013 209,330 95,976
(3,591,669) (11,230,983) 10,046,348 3,635,662 7,142,725 4,980,356 1,499,531
(3,276,077) (8,921,115) 11,216,684 3,866,976 7,209,738 5,189,686 1,595,507
3,276,077 8,921,115 - - - - -
$ - $ - $11,216,684 $3,866,976 $7,209,738 $5,189,686 $1,595,507
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
by Fund
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Putnam Putnam Putnam
AA AA AA Putnam
Growth Balanced Conservative Voyager Participant
Fund Fund Fund Fund Loans Total
<S> <C> <C> <C> <C> <C>
$ 64,617 $ 35,771 $ 12,670 $ 1,542,405 $ 297,869 $ 4,509,888
(66,880) (35,769) (12,375) (1,887,852) - 1,798,797
---------- -------- -------- ----------- ---------- -----------
(2,263) 2 295 (345,447) 297,869 6,308,685
- - - - - 3,665,799
32,455 11,469 2,846 800,518 - 8,761,925
---------- -------- -------- ----------- ---------- -----------
30,192 11,471 3,141 455,071 297,869 18,736,409
---------- -------- -------- ----------- ---------- -----------
5 3,932 397 227,975 122,598 4,919,154
171 75 27 2,968 5 130,088
---------- -------- -------- ----------- ---------- -----------
176 4,007 424 230,943 122,603 5,049,242
---------- -------- -------- ----------- ---------- -----------
30,016 7,464 2,717 224,128 175,266 13,687,167
1,295,148 651,603 279,009 24,354,548 (29,228) -
---------- -------- -------- ----------- ---------- -----------
1,325,164 659,067 281,726 24,578,676 146,038 13,687,167
- - - - 3,136,466 78,553,063
---------- -------- -------- ----------- ---------- -----------
$1,325,164 $659,067 $281,726 $24,578,676 $3,282,504 $92,240,230
========== ======== ======== =========== ========== ===========
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
A. DESCRIPTION OF PLAN
The following brief description of the Terra Industries Inc. Employees'
Savings and Investment Plan (the Plan) is provided for general information
only. Participants should refer to the Plan Document for more complete
information.
General - The Plan, established as of January 1, 1984, is a defined
contribution plan covering eligible employees of Terra Industries Inc. and
eligible subsidiaries and affiliates (collectively, the Company). The Plan is
subject to the Employee Retirement Income Security Act of 1974 (ERISA) and is
administered by the Employee Benefit Committee (the Committee) of the
Company. The assets of the Plan are held by Putnam Investments (Chase
Manhattan Bank, N.A., through September 30, 1996), the trustee of the Plan.
Certain Plan investments are funds managed by the trustee of the Plan and,
therefore, qualify as party-in-interest.
Participation - All full-time active employees of the Company are eligible
for Plan participation on the first day of the month following the date their
employment commenced. In addition, part time or temporary employees with at
least one year of service and 1,000 hours are eligible for participation.
Participation in the Plan is voluntary.
Participants' Accounts - Each participant's account is credited with the
participant's contributions, the employer's matching contributions and an
allocation of fund earnings. A participant's benefit is limited to the amount
that can be provided from the participant's account, subject to the
applicable vesting requirements.
Contributions - Participants earning $80,000 or less annually in 1997 and
$66,000 or less annually in 1996, could elect to contribute up to 15% of
annual compensation (10% of their annual compensation through November 1996)
on a pretax basis and 10% on an after-tax basis. The maximum combined
deferral on a pretax and after-tax basis is 20%. Participants earning more
than $80,000 and $66,000 in 1997 and 1996, respectively, could contribute up
to 8% and 6%, respectively, of their annual compensation on a combined pretax
and after-tax basis.
The maximum participant pretax contribution was $10,000 and $9,500 in 1997
and 1996, respectively.
Participants may elect to invest their contributions in one or more of the
ten available participant directed investment options.
Employer - The Company contributes an amount determined by its Board of
Directors, equal to 100% of the participant's contributions up to 3% of their
annual compensation, and 50% up to an additional 3% of annual compensation in
1997 and 1996. Beginning October 1, 1997, the Company increased its
contribution on the second 3% of annual compensation from 50% to 60%. The
contributions made by the Company must be invested in the Terra Industries
Inc. Common Stock Fund. The Company may elect to make an additional
contribution, subject to certain limitations as defined in the Plan, in such
amount as its Board of Directors shall determine. No such additional
contributions were made in 1997 or 1996. Employer contributions are reduced
by the amount of any participant forfeitures during the period. Participant
forfeitures totaled $198,930 and $127,643 in 1997 and 1996, respectively.
<PAGE>
Maximum Contributions Per Participant - The sum of a participant's
contribution and employer matching contribution cannot exceed the lesser of
$30,000 or 25% of net compensation of the participant. Net compensation is
defined as total participant compensation less any pretax contributions made
by the participant. Eligible compensation was limited to $160,000 and
$150,000 in 1997 and 1996, respectively.
Vesting - Participants are immediately fully vested in their contributions
and earnings on their voluntary contributions. Employer contributions vest at
a rate of 20% per year, until fully vested after five years of service.
Participant Loans - Participants may borrow from their individual
contribution accounts subject to maximum limitations as defined in the Plan.
Loan transactions are treated as a transfer to (from) the investment fund
from (to) the Participant Loan fund. Loan terms range from one to five years
or up to thirty years for the purchase of a primary residence. The loans are
secured by the balance in the participant's account and bear interest at a
reasonable rate based on the published prime rate. Interest rates range from
5.5% to 14%. Principal and interest is paid ratably through monthly payroll
deductions.
Benefits - Participants or their beneficiaries are eligible to receive the
value of their vested account balance upon the occurrence of one of the
following: early or normal retirement; termination of employment; death or
total disability.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments - Investments, except for loans to participants, are
reported at fair value, which is determined, in the case of Terra Industries
Inc.'s Common Stock, from the latest available market quotations and, in the
case of investments in mutual funds, at quoted net asset value. Money market
funds are reported at fair value as determined by the issuer and common funds
are valued at the unit value as reported by the fund. Participant loans are
valued at cost which approximates fair value. In accordance with the policy
of stating investments at fair value, the net change in realized and
unrealized appreciation or depreciation in fair value is included in income
from investments, which is reflected in the statement of changes in net
assets available for benefits. Dividend income is recorded on the ex-dividend
date. Investment transactions are recognized on a trade date basis.
The Plan has investments in eleven funds. The net assets and net investment
income of the funds are allocated to the participants in the Plan based upon
each participant's participation relative to the total participation in each
of the eleven investment funds. At the close of business on September 30,
1996, all investment fund options were changed, except for the Terra
Industries Inc. Common Stock Fund and Terra Industries Inc. Voluntary Common
Stock Fund, and assets were transferred to Putnam Investments. A summary
description of each investment fund follows:
Terra Industries Inc. Common Stock Fund (Employer Directed) - A fund
invested primarily in Terra Industries Inc. Common Stock which is limited
to employer contributions only.
<PAGE>
Terra Industries Inc. Voluntary Common Stock Fund (Participant Directed) - A
fund invested primarily in Terra Industries Inc. Common Stock.
Putnam Growth and Income Fund (Participant Directed) - A fund invested in
shares of Putnam Fund for Growth and Income, which is comprised primarily of
common stocks that offer potential for capital growth, current income, or
both.
Putnam Income Fund (Participant Directed) - A fund invested in shares of
Putnam Income Fund, which is comprised primarily of debt securities,
including both government and corporate obligations, preferred stocks and
dividend-paying common stocks.
Putnam New Opportunities Fund (Participant Directed) - A fund invested in
shares of Putnam New Opportunities Fund, which is comprised principally of
common stocks of companies in sectors of the economy which Putnam Management
believes possess above-average long-term growth potential.
Putnam Money Market Fund (Participant Directed) - A fund invested in shares
of Putnam Money Market Fund, which is comprised principally of high-quality
money market instruments and seeks as high a rate of current income as
Putnam Management believes is consistent with preservation of capital and
maintenance of liquidity.
Putnam International Growth Fund (Participant Directed) - A fund invested in
shares of Putnam International Growth Fund, which is comprised primarily of
equity securities of companies located in a country other than the United
States.
Putnam AA Growth Fund (Participant Directed) - A fund invested in shares of
Putnam Asset Allocation: Growth Portfolio, which seeks capital appreciation
and is comprised 65% to 95% of equity securities and 5% to 35% of fixed
income securities.
Putnam AA Balanced Fund (Participant Directed) - A fund invested in shares
of Putnam Asset Allocation: Balanced Portfolio, which is comprised 50% to
75% of equity securities and 25% to 50% of fixed income securities.
Putnam AA Conservative Fund (Participant Directed) - A fund invested in
shares of Putnam Asset Allocation: Conservative Portfolio, which is
comprised 25% to 45% of equity securities and 55% to 75% of fixed income
securities.
Putnam Voyager Fund (Participant Directed) - A fund invested in shares of
Putnam Voyager Fund, which is comprised primarily of common stocks of
companies which Putnam Management believes have potential for capital
appreciation which is significantly greater than that of market averages.
Through September 30, 1996, the Plan had the following investment fund
options in addition to the Terra Industries Inc. Common Stock Fund and Terra
Industries Inc. Voluntary Common Stock Fund:
Equity Income Fund (Participant Directed) - A fund invested primarily in
shares of Vista Growth and Income Fund, which is comprised primarily of
income producing equity securities and securities convertible into such
equity securities.
Intermediate Fund (Participant Directed) - A fund invested primarily in
shares of Vista U.S. Government Income Fund, which is comprised primarily of
debt obligations backed by the full faith and credit of the U.S. Government.
<PAGE>
Stock Fund (Participant Directed) - A fund invested primarily in shares of
Fidelity Magellan Fund, which is comprised primarily of common stocks and
which seeks long-term capital appreciation.
Money Market Fund (Participant Directed) - A fund invested primarily in
shares of Vista U.S. Government Money Market Fund so as to preserve capital
and maintain a high degree of liquidity.
GIC Fund (Participant Directed) - A fund invested primarily in shares of
BancOklahoma Guaranteed Investment Contract Fund so as to provide current
income while maintaining a stable market valuation.
Windsor Fund (Participant Directed) - A fund invested primarily in shares of
Vanguard Windsor Fund, a fund invested principally in income producing equity
securities.
Benefits Payable - The Plan's policy is to record benefit payments upon
distribution of balances to participants. There were no benefits payable as
of December 31, 1997 and 1996.
Administrative Expenses - Administrative expenses are comprised of charges
relating to routine services provided by the Plan's trustee and recordkeeping
agent and fees associated with the annual audit of the Plan's financial
statements. Administrative expenses are allocated to the investment funds,
other than the Terra Industries Inc. Employer Directed Common Stock Fund,
based upon the fair value of each fund's investment relative to the total
fair value of all investment funds to which expenses are allocated.
C. INVESTMENTS
The fair value of the Plan's investments, other than loans to participants
are presented in the following tables. Investments that represent five
percent or more of the Plan's net assets are separately identified.
<TABLE>
December 31, 1997
-------------------------------------
Number of
Shares or
Principal
Amount Fair Value
----------------- -------------
<S> <C> <C>
Investments, at Fair Value as Determined by
Quoted Market Price:
Terra Industries Inc. Common Stock 2,489,019 $ 32,519,320
Putnam Growth and Income Fund 826,156 16,143,082
Putnam Income Fund 585,556 4,163,301
Putnam New Opportunities Fund 206,455 10,044,027
Putnam Money Market Fund 6,522,779 6,522,779
Putnam International Growth Fund 160,483 2,675,251
Putnam Asset Allocation - Growth Portfolio 178,116 2,196,170
Putnam Asset Allocation - Balanced Portfolio 128,036 1,425,041
Putnam Asset Allocation - Conservative Portfolio 70,079 698,683
Putnam Voyager Fund 1,411,894 26,896,589
------------
$103,284,243
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------
Number of
Shares or
Principal
Amount Fair Value
--------- -----------
<S> <C> <C>
Investments, at Fair Value as Determined by
Quoted Market Price:
Terra Industries Inc. Common Stock 2,230,710 $32,357,950
Putnam Growth and Income Fund 621,551 11,200,356
Putnam Income Fund 549,505 3,852,029
Putnam New Opportunities Fund 175,955 7,149,056
Putnam Money Market Fund 5,177,084 5,177,084
Putnam International Growth Fund 102,807 1,545,185
Putnam Asset Allocation - Growth Portfolio 118,015 1,325,313
Putnam Asset Allocation - Balanced Portfolio 62,835 659,142
Putnam Asset Allocation - Conservative Portfolio 29,411 281,753
Putnam Voyager Fund 1,522,584 24,544,054
-----------
$88,091,922
===========
</TABLE>
D. PLAN TERMINATION
Although it has expressed no intent to do so, the Company specifically
reserves the right to amend or terminate the Plan or to discontinue
contributions at any time. Upon termination, a participant's entire account
will become fully vested and the assets shall be administered in the manner
provided for in the Plan.
E. FEDERAL INCOME TAX STATUS
The Plan obtained its latest determination letter dated November 21, 1995, in
which the Internal Revenue Service stated that the Plan, as amended March 9,
1995, was in compliance with the applicable requirements of the Internal
Revenue Code. The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is currently
designed and is being operated in compliance with the applicable requirements
of the Internal Revenue Code. Therefore, they believe that the Plan was
qualified and the related trust was tax exempt as of the financial statement
date. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
Plan income, participant pretax contributions and employer contributions
represent taxable income to the participating employees at the time of
distribution in accordance with IRS regulations currently in effect.
F. RELATED PARTY TRANSACTIONS
Plan investments include 2,489,019 and 2,230,710 shares of Terra Industries
Inc. Common Stock with a fair market value of $32,519,320 and $32,357,950 at
December 31, 1997 and 1996, respectively. Terra Industries Inc. is the Plan
sponsor and therefore, these transactions qualify as related party
transactions.
Certain Plan investments are shares of mutual funds managed by Putnam
Investments. Putnam Investments is the trustee as designated by the Plan and,
therefore, these transactions qualify as related party transactions.
<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
<TABLE>
<CAPTION>
PN 333
EIN #52-1145429
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
<S> <C> <C> <C>
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------
Column B Column C Column D Column E
Description of investment
Identity of issue, including collateral, rate
borrower, lessor or of interest, maturity date, Current
similar party par or maturity value Cost Value
Common Stock:
*Terra Industries Inc. 2,489,019 shares $21,751,695 $32,519,320
Mutual Funds:
*Putnam Growth and Income
Fund 826,156 shares 15,489,571 16,143,082
*Putnam Income Fund 585,556 shares 4,079,694 4,163,301
*Putnam New Opportunities Fund 206,455 shares 8,891,107 10,044,027
*Putnam Money Market Fund 6,522,779 shares 6,522,779 6,522,779
*Putnam International Growth Fund 160,483 shares 2,551,061 2,675,251
*Putnam Asset Allocation -
Growth Portfolio 178,116 shares 2,138,504 2,196,170
*Putnam Asset Allocation -
Balanced Portfolio 128,036 shares 1,415,130 1,425,041
*Putnam Asset Allocation -
Conservative Portfolio 70,079 shares 704,598 698,683
*Putnam Voyager Fund 1,411,894 shares 24,785,376 26,896,589
Other Investments:
*Loans to Participants Principal balance of $3,863,754
bearing interest rates ranging
from 5.5% to 14% and maturing
from January 1998 to August
2027 3,863,754
------------
$107,147,997
============
* Party-In-Interest
</TABLE>
<PAGE>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
PN 333
EIN #52-1145429
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
Series of Transactions When Aggregated Involving an
Amount in Excess of 5 Percent of the Current Value of Plan Assets
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Total Dollar
Identity of Description Number of Number of Value of
Party Involved of Asset Purchases Sales Purchases
<S> <C> <C> <C> <C>
*Terra Industries Inc. Common Stock 250 451 $7,005,347
*Putnam Investments Putnam Growth and
Income Fund 276 395 7,622,156
*Putnam Investments Putnam Voyager
Fund 207 514 5,505,373
</TABLE>
<TABLE>
<CAPTION>
Column F Column G
Total Dollar
Value of Net Gain
Sales or (Loss)
<S> <C>
$ 3,751,873 $1,075,646
3,658,620 268,785
7,125,178 (117,446)
</TABLE>
*Party-In-Interest
<PAGE>
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Employer
Directed
--------------------------------------------------------------------------------
Terra
Terra Industries
Industries Inc.
Inc. Voluntary Putnam Putnam Putnam
Common Common Growth & Putnam New Money
Stock Stock Income Income Opportunities Market
ASSETS: Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Investments, at fair value:
Terra Industries Inc. Common
Stock $26,931,358 $5,587,962 $ - $ - $ - $ -
Putnam Fund for Growth
and Income - - 16,143,082 - - -
Putnam Income Fund - - - 4,163,301 - -
Putnam New opportunities
Fund - - - - 10,044,027 -
Putnam Money Market Fund - - - - - 6,522,779
Putnam International Growth
Fund - - - - - -
Putnam Asset Allocation -
Balanced Portfolio - - - - - -
Putnam Asset Allocation -
Conservative Portfolio - - - - - -
Putnam Voyager Fund - - - - - -
Loans to participants - - - - - -
Total investments 26,931,358 5,587,962 16,143,082 4,163,301 10,044,027 6,522,779
Employer contributions receivable 141,209 - - - - -
Participant contributions receivable - 27,721 20,161 17,641 70,563 15,121
Receivable - securities sold - 62,542 - - - -
Total assets 27,072,567 5,678,225 16,163,243 4,180,942 10,114,590 6,537,900
LIABILITIES:
Payable - securities purchased - 18,956 - - - -
Net assets available for benefits $27,072,567 $5,659,269 $16,163,243 $4,180,942 $10,114,590 $6,537,900
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
TERRA INDUSTRIES INC.
EMPLOYEES' SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Employer
Directed
-------------------------------------------------------------------------------------------
Terra
Terra Industries
Industries Inc.
Inc. Voluntary Putnam
Common Common Growth & Putnam Putnam
Stock Stock Income Income Voyager
ASSETS: Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Investments, at fair value:
Terra Industries Inc. Common Stock $27,175,208 $5,182,742 $ - $ - $ -
Putnam Fund for Growth and Income - - 11,200,356 - -
Putnam Income Fund - - - 3,852,029 -
Putnam Voyager Fund - - - - 24,544,054
Putnam New Opportunities Fund - - - - -
Putnam Asset Allocation - Growth
Portfolio - - - - -
Putnam Asset Allocation - Balanced
Portfolio - - - - -
Putnam Asset Allocation - Conservative
Portfolio - - - - -
Putnam International Growth Fund - - - - -
Putnam Money Market Fund - - - - -
----------- ---------- ----------- ---------- -----------
Total investments at fair value 27,175,208 5,182,742 11,200,356 3,852,029 24,544,054
Loans to participants - - - - -
----------- ---------- ----------- ---------- -----------
Total investments 27,175,208 5,182,742 11,200,356 3,852,029 24,544,054
Employer contributions receivable 108,026 - - - -
Participant contributions receivable - 24,148 17,562 15,367 37,320
Receivable - securities sold - 726,795 - - -
----------- ---------- ----------- ---------- ----------
Total assets 27,283,234 5,933,685 11,217,919 3,867,396 24,581,374
LIABILITIES:
Accrued administrative expenses - 651 1,234 420 2,698
Payable - securities purchased 181,766 - - - -
----------- ---------- ----------- ---------- -----------
Total liabilities 181,766 651 1,234 420 2,698
----------- ---------- ----------- ---------- -----------
Net assets available for benefits $27,101,468 $5,933,034 $11,216,684 $3,866,976 $24,578,676
=========== ========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Supplemental Information by Fund
-----------------------------------------------------------------------------
Participant Directed
-----------------------------------------------------------------------------
Putnam Putnam Putnam Putnam Putnam
New AA AA AA International
Opportunities Growth Balanced Conservative Growth
ASSETS: Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Investments, at fair value:
Terra Industries Inc. Common Stock $ - $ - $ - $ - $ -
Putnam Fund for Growth and Income - - - - -
Putnam Income Fund - - - - -
Putnam Voyager Fund - - - - -
Putnam New Opportunities Fund 7,149,056 - - - -
Putnam Asset Allocation - Growth
Portfolio - 1,325,313 - - -
Putnam Asset Allocation - Balanced
Portfolio - - 659,142 - -
Putnam Asset Allocation - Conservative - - - - -
Portfolio - - - 281,753 -
Putnam International Growth Fund - - - - -
Putnam Money Market Fund - - - - -
---------- ---------- -------- -------- ----------
Total investments at fair value 7,149,056 1,325,313 659,142 281,753 1,545,185
Loans to participants - - - - -
---------- ---------- -------- -------- ----------
Total investments 7,149,056 1,325,313 659,142 281,753 1,545,084
Employer contributions receivable - - - - -
Participant contributions receivable 61,468 - - - 50,492
Receivable - securities sold - - - - -
---------- ---------- -------- -------- ----------
Total assets 7,210,524 1,325,313 659,142 281,753 1,595,677
LIABILITIES:
Accrued administrative expenses 786 149 75 27 170
Payable - securities purchased - - - - -
---------- ---------- -------- -------- ----------
Total liabilities 786 149 75 27 170
---------- ---------- -------- -------- ----------
Net assets available for benefits $7,209,738 $1,325,164 $659,067 $281,726 $1,595,507
========== ========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
-------------------------------
Putnam
Money
Market Participant
ASSETS: Fund Loans
<S> <C> <C>
Investments, at fair value:
Terra Industries Inc. Common Stock $ - $ -
Putnam Fund for Growth and Income - -
Putnam Income Fund - -
Putnam Voyager Fund
Putnam New Opportunities Fund - -
Putnam Asset Allocation - Growth
Portfolio - -
Putnam Asset Allocation - Balanced
Portfolio - -
Putnam Asset Allocation - Conservative
Portfolio
Putnam International Growth Fund - -
Putnam Money Market Fund 5,177,084 -
---------- ----------
Total investments at fair value 5,177,084 -
Loans to participants - 3,282,504
---------- ----------
Total investments 5,177,084 3,282,504
Employer contributions receivable - -
Participant contributions receivable 13,172 -
Receivable - securities sold - -
---------- ----------
Total assets 5,190,256 3,282,504
LIABILITIES:
Accrued administrative expenses 570 -
Payable - securities purchased - -
---------- ----------
Total liabilities 570 -
---------- ----------
Net assets available for benefits $5,189,686 $3,282,504
========== ==========
</TABLE>
See notes to financial statements.
22
<PAGE>
EXHIBIT E
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement 33-46734
on Form S-8 of our report dated April 24, 1998 appearing in this Annual Report
on Form 11-K of the Terra Industries Inc. Employees' Savings and Investment Plan
for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 22, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the members
of the Terra Industries Inc. Employee Benefit Committee have duly caused this
report to be signed on its behalf by the undersigned hereunto duly authorized.
TERRA INDUSTRIES INC. EMPLOYEES'
SAVINGS AND INVESTMENT PLAN
Date: June 24, 1998 By: /s/ George H. Valentine
------------------------------ ------------------------------
George H. Valentine
Senior Vice President, General Counsel
and Corporate Secretary
