Item 3. LEGAL MATTERS
On July 13, 2001, a British court found Terra Nitrogen (UK) Limited liable for damages associated with recalls of beverages containing carbon dioxide tainted with benzene, plus interest and attorney fees. In addition, there are three similar cases awaiting trial and certain other beverage manufacturers have indicated their intention to file claims for unspecified amounts. We estimate that total claims against Terra from these lawsuits may be (pound)10 million, or approximately $14 million. We have established reserves in this amount to cover estimated losses.
Terra has appealed the British court's decision. In addition, we believe we have recourse for these claims against both our insurer and the previous owner of our U.K. operations. (Our insurer had previously paid, without recourse, two recall cost settlements on our behalf, plus a court judgment rendered against us. Nonetheless, the insurer reserved its right to deny coverage in whole or in part for adverse judgments in the remaining cases.) We will vigorously pursue our rights against these parties, but there will be no income recognition for those rights until settlements are finalized.
We are involved in various other legal actions and claims, including environmental matters, arising from the normal course of business. While it is not feasible to predict with certainty the final outcome of these proceedings, we do not believe that these matters, or the U.K. benzene claims, will have a material adverse effect on our results of operations, financial position or net cash flows.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items were submitted to a vote of security holders of Terra during the fourth quarter of 2001.
EXECUTIVE OFFICERS OF TERRA
The following paragraphs set forth the name, age and offices of each present executive officer of Terra, the period during which each executive officer has served as such and each executive officer's business experience during the past five years:
There are no family relationships among the executive officers and directors of Terra or arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as such. Officers of Terra are elected annually to serve until their respective successors are elected and qualified.
PART II -------
Item 5.
Item 5. MARKET FOR TERRA'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information with respect to the market for Terra's common equity and related stockholder matters contained in Exhibit 13 hereto (primarily under the headings "Quarterly Financial and Stock Market Data (Unaudited)" and "Stockholders") is incorporated herein by reference.
Item 6.
Item 6. SELECTED FINANCIAL DATA.
Information with respect to selected financial data contained in Exhibit 13 hereto (primarily under the heading "Financial Summary") is incorporated herein by reference.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information with respect to management's discussion and analysis of financial condition and results of operations contained in Exhibit 13 hereto (primarily under the heading "Financial Review") is incorporated herein by reference.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information with respect to quantitative and qualitative disclosures about market risk contained in Exhibit 13 hereto (primarily under the subheading "Risk Management and Financial Instruments" of the "Financial Review" discussion) is incorporated herein by reference.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, together with the notes thereto and the report of independent auditors thereon, and the information set forth under the heading "Quarterly Financial and Stock Market Data (Unaudited)" contained in Exhibit 13 hereto are incorporated herein by reference.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no change in accountants, nor has there been any matter of accounting principles or practices or financial disclosure, which in either case is required to be reported pursuant to this Item 9.
PART III --------
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF TERRA.
Information with respect to directors of Terra under the caption "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 30, 2002, is incorporated herein by reference. Information with respect to executive officers of Terra appears under the caption "Executive Officers of Terra" in Part I hereof and is incorporated herein by reference.
Item 11.
Item 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation under the caption "Executive Compensation and Other Information" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 30, 2002, is incorporated herein by reference.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain beneficial owners and management under the caption "Equity Security Ownership" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 30, 2002, is incorporated herein by reference.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related transactions under the caption "Certain Relationships and Related Transactions" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on April 30, 2002, is incorporated herein by reference.
PART IV -------
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements and Financial Statement Schedules.
1. Consolidated Financial Statements of Terra and its subsidiaries (incorporated herein by reference to Exhibit 13 hereof).
Consolidated Statements of Financial Position at December 31, 2001 and 2000.
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999.
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999.
Notes to the Consolidated Financial Statements.
Responsibility for Financial Statements.
Independent Auditors' Report.
Quarterly Production Data (Unaudited).
Quarterly Financial and Stock Market Data (Unaudited).
Volumes and Prices (Unaudited).
Stockholders.
Financial Summary.
2. Index to Financial Statement Schedules.
See Index to Financial Statement Schedules of Terra and its subsidiaries at page S-1.
3. Other Financial Statements.
Individual financial statements of Terra's subsidiaries are omitted because all such subsidiaries are included in the consolidated financial statements being filed. Individual financial statements of 50% or less owned persons accounted for on the equity method have been omitted because such 50% or less owned persons considered in the aggregate, as a single subsidiary, would not constitute a significant subsidiary.
(b) Executive Compensation Plans and Arrangements.
Exhibits 10.1.1 through 10.1.22 are incorporated herein by reference.
(c) Reports on Form 8-K
Form 8-K dated October 10, 2001, announcing completion of a new $175.0 million revolving credit facility and issuance of $200.0 million of 12 7/8% Senior Secured Notes due in 2008.
(d) Exhibit
- --------------------------------------------------------------------------------
* Filed herewith.
** Confidential treatment requested.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 13, 2002 By: /s/ FRANCIS G. MEYER ------------------------------------------------- Francis G. Meyer Senior Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Date: March 13, 2002 *By: /s/ MARK A. KALAFUT ------------------- Mark A. Kalafut Attorney-in-Fact
INDEX TO FINANCIAL STATEMENT SCHEDULES, REPORTS AND CONSENTS ------------------------------------------------------------
Financial statement schedules not included in this report have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto.
S-1
INDEPENDENT AUDITORS' REPORT ON ------------------------------- FINANCIAL STATEMENT SCHEDULE ----------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF TERRA INDUSTRIES INC.:
We have audited the consolidated financial statements of Terra Industries Inc. and subsidiaries as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated January 31, 2002. Such financial statements and report are included in the 2001 Annual Report to Stockholders of Terra Industries Inc. and are incorporated herein by reference. Our audits also included the financial statement schedule of Terra Industries Inc. and subsidiaries listed in Item 14(a) of this Form 10-K. This financial statement schedule is the responsibility of the management of Terra Industries Inc. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska January 31, 2002
INDEPENDENT AUDITORS' CONSENT -----------------------------
We consent to the incorporation by reference in Registration Statements Nos. 333-32869, 33-46735, 33-46734 and 33-30058 of Terra Industries Inc. and subsidiaries on Forms S-8 and Registration Statements Nos. 2-90808, 2-84876 and 2-84669 of Terra Industries Inc. and subsidiaries on Form S-3 of our reports dated January 31, 2002, appearing in and incorporated by reference in the Annual Report on Form 10-K of Terra Industries Inc. and subsidiaries for the year ended December 31, 2001.
DELOITTE & TOUCHE LLP
Omaha, Nebraska March 13, 2002
S-2
SCHEDULE II
TERRA INDUSTRIES INC.
VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2001, 2000, and 1999 --------------------------------------------- (in thousands)
S-3