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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1999
TERRA INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Maryland 1-8520 52-1145429
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
Terra Centre
600 Fourth Street
P.O. Box 6000
Sioux City, Iowa 51102-6000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (712) 277-1340
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ITEM 2. Acquisition or Disposition of Assets.
------------------------------------
Terra Industries Inc. completed on June 30, 1999 the sale of its Distribution
business to Agro Distribution, LLC, an affiliate of Cenex/Land O'Lakes Agronomy
Company for $390 million. The transaction was structured as a sale of assets and
the purchase price was determined on an arms-length basis. The final purchase
price is subject to an independent audit and post-closing adjustments based on
any differences between estimated and actual working capital balances at June
30, 1999 and net cash flows for the business in the 1999 second quarter.
Terra used approximately $350 million of sale proceeds to settle outstanding
obligations for an accounts receivable securitization program, to repurchase a
preferred minority interest in one of its subsidiaries (Beaumont Methanol
Limited Partnership), and to repay seasonal short-term borrowings. The
remainder of sales proceeds was used for general corporate purposes and to repay
bank debt.
The assets of the Distribution business that were sold include about 400 farm
service centers and the associated improvements, equipment, inventory and
receivables. This business distributes and markets a comprehensive line of
fertilizers, crop protection products, seed and services to farmers and dealers
located in the midwestern and southern regions of the United States and the
eastern region of Canada.
The buyer entered into a three-year supply contract with Terra's Nitrogen
business that makes them Terra's largest customer.
ITEM 7. Financial Statements and Exhibits.
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<TABLE>
<CAPTION>
(b) Pro forma financial information: Page
----
<S> <C> <C>
Introductory paragraph to pro forma information F-1
Pro forma consolidated statement of financial position at
March 31, 1999 F-2
Pro forma consolidated statement of income (loss) from continuing
operations for the quarter ended March 31, 1999 and 1998 F-3
Pro forma consolidated statement of income (loss) from continuing
operations for the year ended December 31, 1998 F-4
</TABLE>
2
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(c) Exhibits:
10.12 Asset Sale and Purchase Agreement dated as of May 3, 1999 by and
between Terra Industries Inc. and Cenex/Land O'Lakes Agronomy
Company, filed as Exhibit 10.12 to Terra Industries Inc. Form
8-K dated May 3, 1999, is incorporated herein by reference.
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.
By: /s/ Francis G. Meyer
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Francis G. Meyer
Senior Vice President and Chief
Financial Officer
Date: July 14, 1999
3
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Pro Forma Consolidated Financial Statements
The following pro forma consolidated financial statements of Terra have been
prepared to give effect to the sale of its Distribution business segment, which
sale was completed on June 30, 1999. These pro forma consolidated financial
statements have been derived from, and should be read in conjunction with, the
historical financial statements and related notes of Terra. The Pro Forma
Consolidated Statement of Financial Position assumes that the disposition of the
Distribution business segment occurred as of March 31, 1999. The Pro Forma
Consolidated Statements of Income (Loss) From Continuing Operations assume that
the disposition of the Distribution business segment occurred on January 1,
1998.
The pro forma adjustments are based on available financial information and
certain estimates and assumptions. Therefore, it is likely that actual results
will differ from the pro forma adjustments. Management of Terra believes that
any differences between the actual results and the pro forma adjustments will
not have a material effect on the pro forma consolidated financial statements as
presented herein.
THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL DATA ARE PRESENTED FOR INFORMATIONAL
PURPOSES ONLY AND ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT ACTUALLY
WOULD HAVE OCCURRED HAD THE DISPOSITION BEEN CONSUMMATED ON THE DATES INDICATED
OR THE RESULTS THAT MAY OCCUR OR BE OBTAINED IN THE FUTURE.
F-1
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TERRA INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ProForma Discontinued Distribution Business Segment
(in thousands)
<TABLE>
<CAPTION>
At March 31, 1999
-----------------
As Reported Adjustments ProForma
----------- ----------- ----------
<S> <C> <C> <C>
Assets:
Cash and short-term investments $ 25,808 $ 15,000 (b) $ 40,808
Accounts receivable, net 234,523 (139,861)(a) 94,662
Inventories 565,420 (415,607)(a) 149,813
Other current assets 73,378 (1,431)(a) 71,947
---------- ---------- ----------
Total current assets 899,129 (541,899) 357,230
Equity and other investments 11,374 (9,449)(a) 1,925
Property, plant and equipment, net 1,156,195 (142,785)(a) 1,013,410
Excess of cost over net assets of
acquired businesses 285,163 (18,347)(a) 266,816
Deferred tax asset 6,683 - 6,683
Other assets 76,087 (1,893)(a) 74,194
---------- ---------- ----------
Total assets $2,434,631 $ (714,373) $1,720,258
========== ========== ==========
Liabilities
Debt due within one year $ 43,572 $ (34,000)(b) $ 9,572
Accounts payable 339,213 (277,360)(a) 61,853
Accrued and other liabililies 257,386 (171,891)(a) 85,495
---------- ---------- ----------
Total current liabilities 640,171 (483,251) 156,920
Long-term debt 485,204 (7,000)(b) 478,204
Deferred income taxes 204,153 (6,122)(b) 198,031
Other liabilities 62,013 17,000 (b) 79,013
Minority interest 335,886 (225,000)(b) 110,886
---------- ---------- ----------
Total liabilities 1,727,427 (704,373) 1,023,054
---------- ---------- ----------
Stockholders' equity
Capital stock 127,888 - 127,888
Paid in capital 552,899 - 552,899
Accumulated other comprehensive
income (21,851) - (21,851)
Retained earnings 48,268 (10,000)(b) 38,268
---------- ---------- ----------
Total stockholders' equity 707,204 (10,000) 697,204
---------- ---------- ----------
Total liabilities and stockholders'
equity $2,434,631 $ (714,373) $1,720,258
========== ========== ==========
</TABLE>
(a) To eliminate the assets and liabilities included in the balance sheet of
the Company's Distribution business segment.
(b) To reflect use of proceeds from sale ($285 million net of accounts
receivable securitization) and establish appropriate reserves for expected
future costs of the Distribution business segment. The reserves have not been
included in the accompanying proforma Consolidated Statements of Income (Loss)
From Continuing Operations and will be recorded in the income statements of
the Company in subsequent periods.
F-2
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TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS) FROM CONTINUING OPERATIONS
Pro Forma Discontinued Distribution Business Segment
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
--------------------------------------------
As Reported Adjustments (a) Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
- --------
Net sales $ 406,632 $ (234,568) $ 172,064
Other income 8,026 (3,300) 4,726
---------- ----------- -----------
Total revenues 414,658 (237,868) (b) 176,790
---------- ----------- -----------
Costs and Expenses
- ------------------
Cost of sales 378,453 (195,524) 182,929
Selling, general and administrative 75,627 (64,711) 10,916
Equity in earnings of affiliates 1,013 696 1,709
---------- ----------- -----------
Total costs and expenses 455,093 (259,539) (b) 195,554
---------- ----------- -----------
Income (loss) from operations (40,435) 21,671 (18,764)
Gain on sale of unconsolidated affiliates 9,804 (9,804) (b) -
Interest income 967 (939) (c) 28
Interest expense (14,818) 2,202 (c) (12,616)
Minority interest (4,155) - (4,155)
---------- ----------- -----------
Income before income taxes (48,637) 13,130 (35,507)
Income tax (expense) provision 19,450 (5,251) (d) 14,199
---------- ----------- -----------
Income (loss) from continuing operations $ (29,187) $ 7,879 $ (21,308)
========== =========== ===========
Basic weighted average shares 74,166 74,166 74,166
========== =========== ===========
Diluted weighted average shares 74,166 74,166 74,166
========== =========== ===========
Basic Earnings Per Share:
Income from continuing operations $ (0.39) $ 0.11 $ (0.28)
========== =========== ===========
Diluted Earnings Per Share:
Income from continuing operations $ (0.39) $ 0.11 $ (0.28)
========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
--------------------------------------------
As Reported Adjustments (a) Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
- --------
Net sales $ 455,621 $ (258,260) $ 197,361
Other income 10,051 (6,556) 3,495
---------- ----------- -----------
Total revenues 465,672 (264,816) (b) 200,856
---------- ----------- -----------
Costs and Expenses
- ------------------
Cost of sales 394,682 (225,236) 169,446
Selling, general and administrative 81,828 (70,608) 11,220
Equity in earnings of affiliates 695 641 1,336
---------- ----------- -----------
Total costs and expenses 477,205 (295,203) (b) 182,002
---------- ----------- -----------
Income (loss) from operations (11,533) 30,387 18,854
Gain on sale of unconsolidated affiliates - - -
Interest income 1,568 (1,543) (c) 25
Interest expense (14,982) 2,745 (c) (12,237)
Minority interest (6,301) - (6,301)
---------- ----------- -----------
Income before income taxes (31,248) 31,589 341
Income tax (expense) provision 12,982 (13,110) (d) (142)
---------- ----------- -----------
Income (loss) from continuing operations $ (18,280) $ 18,479 $ 199
========== =========== ===========
Basic weighted average shares 73,860 73,860 73,860
========== =========== ===========
Diluted weighted average shares 73,860 73,860 73,860
========== =========== ===========
Basic Earnings Per Share:
Income from continuing operations $ (0.25) $ 0.25 -
========== =========== ===========
Diluted Earnings Per Share:
Income from continuing operations $ (0.25) $ 0.25 -
========== =========== ===========
</TABLE>
(a) The final purchase price is subject to an independent audit and post-closing
adjustments based on any differences between estimated and actual working
capital balances at June 30, 1999 and net cash flows for the business in the
1999 second quarter.
(b) To eliminate the revenue, costs, and expenses of the Company's Distribution
business segment for the entire period, including allocated indirect general and
administrative expenses of less than 3%.
(c) To reflect the interest income and expense allocated to the Company's
Distribution business segment based upon capital utilized.
(d) To reflect the income taxes allocated to the Company's Distribution business
segment based upon the then current effective rate applied to income or loss.
F-3
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TERRA INDUSTRIES INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS) FROM CONTINUING OPERATIONS
ProForma Discontinued Distribution Business Segment
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------
As Reported Adjustments (a) ProForma
----------- --------------- --------
<S> <C> <C> <C>
Revenues
- --------
Net sales $2,472,961 $(1,658,075) $814,886
Other income 79,057 (76,182) 2,875
---------- ----------- --------
Total revenues 2,552,018 (1,734,257)(b) 817,761
---------- ----------- --------
Costs and Expenses
- ------------------
Cost of sales 2,152,392 (1,406,577) 745,815
Selling, general and administrative 357,441 (308,229) 49,212
Equity in earnings of affiliates (3,172) 1,936 (1,236)
---------- ----------- --------
Total costs and expenses 2,506,661 (1,712,870)(b) 793,791
---------- ----------- --------
Income (loss) from operations 45,357 (21,387) 23,970
Interest income 4,553 (4,227)(c) 326
Interest expense (63,649) 12,527 (c) (51,122)
Minority interest (27,510) - (27,510)
---------- ----------- --------
Income before income taxes (41,249) (13,087) (54,336)
Income tax (expense) provision 15,000 4,759 (d) 19,759
---------- ----------- --------
Income (loss) from continuing operations $ (26,249) $ (8,328) $(34,577)
========== =========== ========
Basic weighted average shares 73,954 73,954 73,954
========== =========== ========
Diluted weighted average shares 73,954 73,954 73,954
========== =========== ========
Basic Earnings Per Share:
Income from continuing operations $ (0.35) $ (0.11) $ (0.46)
========== =========== ========
Diluted Earnings Per Share:
Income from continuing operations $ (0.35) $ (0.11) $ (0.46)
========== =========== ========
</TABLE>
(a) The final purchase price is subject to an independent audit and post-closing
adjustments based on any differences between estimated and actual working
capital balances at June 30, 1999 and net cash flows for the business in the
1999 second quarter.
(b) To eliminate the revenue, costs, and expenses of the Company's Distribution
business segment for the entire period, including allocated indirect general and
administrative expenses of less than 3%.
(c) To reflect the interest income and expense allocated to the Company's
Distribution business segment based upon capital utilized.
(d) To reflect the income taxes allocated to the Company's Distribution business
segment based upon the then current effective rate applied to income or loss.
F-4
