Annual Report (Form 10-K), fiscal year 1994





ITEM 3. LEGAL PROCEEDINGS.
Various legal proceedings are pending against the Company and its subsidiaries. Management of the Company considers that the aggregate liability resulting from these proceedings will not be material to the Company.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items were submitted to a vote of security holders of the Company during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE COMPANY
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 THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information with respect to the market for the Company's common equity and related stockholder matters contained in Terra's 1994 Annual Report to Stockholders under the captions "Quarterly Financial and Stock Market Data (Unaudited)" and "Stockholders and Dividends" is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
Information with respect to selected financial data contained in Terra's 1994 Annual Report to Stockholders under the caption "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 Terra's 1994 Annual Report to Stockholders under the caption "Financial Review" 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 caption "Quarterly Financial and Stock Market Data (Unaudited)" contained in Terra's 1994 Annual Report to Stockholders are incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III --------
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information with respect to directors of the Company under the caption "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders of Terra to be held on May 2, 1995, is incorporated herein by reference. Information with respect to executive officers who are not also directors of the Company appears under the caption "Executive Officers of the Company" 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 May 2, 1995, 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 May 2, 1995, 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 May 2, 1995, 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 Terra's 1994 Annual Report to Stockholders).
Consolidated Statements of Financial Position at December 31, 1994 and 1993.
Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992.
Notes to the Consolidated Financial Statements.
Independent Auditors' Report.
Quarterly Production Data (Unaudited).
Quarterly Financial and Stock Market Data (Unaudited).
Revenues.
Stockholders and Dividends.
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
1. Amended and Restated Deferred Compensation Agreement made as of May 1, 1991, by and between Terra Industries and R. F. Richards filed as Exhibit 10 to Terra Industries' Form 8-K dated September 30, 1991.
2. Resolution adopted by the Personnel Committee of the Board of Directors of Terra Industries with respect to supplemental retirement benefits for certain senior executive officers of Terra Industries, filed as Exhibit 10.4.2 to Terra Industries' Form 10-Q for the fiscal quarter ended March 31, 1991.
3. 1992 Stock Incentive Plan of Terra Industries filed as Exhibit 10.1.6 to Terra Industries' Form 10-K for the year ended December 31, 1992.
4. Form of Restricted Stock Agreement of Terra Industries under its 1992 Stock Incentive Plan filed as Exhibit 10.1.7 to Terra Industries' Form 10-K for the year ended December 31, 1992.
5. Form of Incentive Stock Option Agreement of Terra Industries under its 1992 Stock Incentive Plan filed as Exhibit 10.1.8 to Terra Industries' Form 10-K for the year ended December 31, 1992.
6. Form of Nonqualified Stock Incentive Agreement of Terra Industries under its 1992 Stock Incentive Plan filed as Exhibit 10.1.9 to Terra Industries' Form 10-K for the year ended December 31, 1992.
7. 1993 Incentive Award Program for Officers and Key Executives of Terra Industries filed as Exhibit 10.1.10 to Terra Industries' Form 10-K for the year ended December 31, 1992.
8. Excess Benefit Plan of Terra Industries as amended effective as of January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1992.
9. Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991, filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended December 31, 1992.
10. Terra Industries Inc. Supplemental Deferred Compensation Plan effective as of December 20, 1993, filed as Exhibit 10.1.9 to Terra Industries' Form 10-K for the year ended December 31, 1993.
11. Retirement/Consulting Agreement, dated as of May 13, 1993 by and between Paul D. Foster and Terra International, filed as Exhibit 10.1.2 to Terra Industries' Form 10-K for the year ended December 31, 1993.
12. Consulting Agreement dated as of December 30, 1993, by and between Paul D. Foster and Terra International, filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1993.
13. 1994 Incentive Award Program for Officers and Key Executives of Terra Industries filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended December 31, 1993.
14. 1995 Incentive Award Program for Officers and Key Executives of Terra Industries filed as Exhibit 10.1.14 to Terra Industries' Formal 10-K for the year ended December 31, 1994.
(C) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the fourth quarter of 1994:
Form 8-K/A dated November 3, 1994, Items 2 and 7 including financial information incorporated therein. Form 8-K dated December 19, 1994, Items 2 and 5.
(D) EXHIBITS
3.1.1 Articles of Restatement of Terra Industries filed with the State of Maryland on September 11, 1990, filed as Exhibit 3.1 to Terra Industries' Form 10-K for the year ended December 31, 1990, is incorporated herein by reference.
3.1.2 Articles of Amendment of Terra Industries filed with the State of Maryland on May 6, 1992, filed as Exhibit 3.1.2 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
3.1.3 Articles Supplementary of Terra Industries filed with the State of Maryland on October 13, 1994, filed as Exhibit 4.1.3 to Terra Industries' Form 8-K/A dated November 3, 1994, is incorporated herein by reference.
3.2 By-Laws of Terra Industries, as amended through August 7, 1991, filed as Exhibit 3 to Terra Industries' Form 8-K dated September 30, 1991, is incorporated herein by reference.
4.1 Indenture dated as of May 31, 1987, from Terra Industries to Mellon Bank, N.A., as Trustee, including form of Debenture, filed as Exhibit 4 to Amendment No. 2 to the Registration Statement on Form S-3 (Registration No. 33-14171) filed by Terra Industries on June 11, 1987, is incorporated herein by reference.
4.2 Revolving Credit Agreement dated as of November 24, 1992, among Terra International, Inc., CitiCorp USA, Inc., Mellon Bank, N.A., Continental Bank N.A., First Bank National Association, NationsBank of Texas, N.A. and Rabobank Nederland, filed as Exhibit 4.1.2 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
4.3 First Amendment Agreement, dated as of March 26, 1993, by and between Terra International, Inc., the Lenders listed on the signature page thereto, and CitiCorp USA, Inc., as agent to Lenders, filed as Exhibit 4.1.3 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
4.4 Second Amendment Agreement, dated as of December 30, 1993, by and between Terra International, Inc., the Lenders listed on the signature page thereto, and CitiCorp USA, Inc., as agent for the Lenders, filed as Exhibit 4.1.4 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
4.5 Indenture dated as of October 15, 1993 among Terra Industries (as successor by merger to Agricultural Minerals and Chemicals Inc.) and Society National Bank, including form of Senior Note (the "Senior Notes Indenture"), filed as Exhibit 99.2 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33-52493), is incorporated herein by reference.
4.6 Credit Agreement among Terra Industries Inc., Terra Capital, Inc., Agricultural Minerals, L.P., Certain Guarantors, Certain Lenders, Certain Issuing Banks and Citibank, N.A. without exhibits or schedules (the "October 1994 Credit Agreement"), form of which previously filed as Exhibit 99.5 to Terra Industries' Registration Statement on Form S-3, as amended (File No. 33-52493).
4.7 Amendment No. 1 to the October 1994 Credit Agreement dated as of December 28, 1994.
4.8 Amendment No. 2 to the October 1994 Credit Agreement dated as of December 28, 1994, without exhibits.
4.9 Amendment No. 3 to the October 1994 Credit Agreement dated as of February 1, 1995.
Other instruments defining the rights of holders of long-term debt of Terra Industries and its subsidiaries are not being filed because the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of Terra Industries and its subsidiaries on a consolidated basis. Terra Industries agrees to furnish a copy of any instrument to the Securities and Exchange Commission upon request.
10.1.1 Amended and Restated Deferred Compensation Agreement made as of May 1, 1991, by and between Terra Industries and R. F. Richards filed as Exhibit 10 to Terra Industries' Form 8-K dated September 30, 1991, is incorporated herein by reference.
10.1.2 Resolution adopted by the Personnel Committee of the Board of Directors of Terra Industries with respect to supplemental retirement benefits for certain senior executive officers of Terra Industries, filed as Exhibit 10.4.2 to Terra Industries' Form 10-Q for the fiscal quarter ended March 31, 1991, is incorporated herein by reference.
10.1.3 1992 Stock Incentive Plan of Terra Industries filed as Exhibit 10.1.6 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.4 Form of Restricted Stock Agreement of Terra Industries under its 1992 Stock Incentive Plan filed as Exhibit 10.1.7 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.5 Form of Incentive Stock Option Agreement of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.8 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.6 Form of Nonqualified Stock Incentive Agreement of Terra Industries under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.9 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.7 1993 Incentive Award Program for Officers and Key Executives of Terra Industries, filed as Exhibit 10.1.10 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.8 Terra Industries Inc. Supplemental Deferred Compensation Plan effective as of December 20, 1993 filed as Exhibit 10.1.9 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
10.1.9 Excess Benefit Plan of Terra Industries as amended effective as of January 1, 1992, filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.10 Restricted Stock Agreement of Burton M. Joyce dated May 1, 1991, filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended December 31, 1992, is incorporated herein by reference.
10.1.11 Retirement/Consultant Agreement, dated as of May 13, 1993, by and between Paul D. Foster and Terra International, filed as Exhibit 10.1.12 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
10.1.12 Consulting Agreement, dated as of December 30, 1993, by and between Paul D. Foster and Terra International, filed as Exhibit 10.1.13 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
10.1.13 1994 Incentive Award Program for Officers and Key Executives of Terra Industries filed as Exhibit 10.1.14 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
10.1.14 1995 Incentive Award Program for Officers and Key Executives of Terra Industries.
10.2 Asset Sale and Purchase Agreement among Inspiration Consolidated Copper Company and Cyprus Miami Mining Corporation and Cyprus Christmas Mine Corporation dated as of June 30, 1988, filed as Exhibit 10.19 to Terra Industries' Form 10-K for the year ended December 31, 1988, is incorporated herein by reference.
10.3.1 Stock Purchase Agreement, dated as of June 14, 1991, among Minorco, Kirkdale Investments Limited, Terra Industries and Hudson Holdings Corporation, filed as Exhibit 2 to Terra Industries' Form 8-K dated June 14, 1991, is incorporated herein by reference.
10.3.2 Amended and Restated Stock Purchase Agreement, dated as of July 31, 1991, among Minorco, Kirkdale Investments Limited, Terra Industries and Hudson Holdings Corporation, filed as Exhibit 1 to Terra Industries Form 8-K dated July 31, 1991, is incorporated herein by reference.
10.3.3 Option Agreement, dated as of June 14, 1991, among Kirkdale Investments Limited and Terra Industries, filed as Exhibit 3 to Terra Industries' Form 8-K dated June 14, 1991, is incorporated herein by reference.
10.3.4 Amendment to Stock Option Agreement, dated July 31, 1991, among Minorco, Kirkdale Investments Limited and Terra Industries, filed as Exhibit 2 to Terra Industries' Form 8-K dated July 31, 1991, is incorporated herein by reference.
10.4 Asset and Sale Purchase Agreement, dated as of April 8, 1993, by and between Terra International, Inc., Terra International (Canada) Inc. and ICI Canada Inc., filed as Exhibit A to Terra Industries' Form 8-K dated April 8, 1993, is incorporated herein by reference.
10.5 Asset Purchase Agreement, dated as of December 30, 1993, by and between Terra International, Inc., The Upjohn Company and Asgrow Florida Company, filed as Exhibit A to Terra Industries' Form 8-K dated December 31, 1993, is incorporated herein by reference.
10.6 Lease, dated as of April 8, 1993, between W. Patrick Moroney and Terra International (Canada) Inc., filed as Exhibit 10.6 to Terra Industries' Form 10-K for the year ended December 31, 1993, is incorporated herein by reference.
10.7 Merger Agreement dated as of August 8, 1994 among Terra Industries Inc., AMCI Acquisition Corp. and Agricultural Minerals and Chemicals Inc. without exhibits or schedules, filed as Exhibit 2 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33-52493), is incorporated herein by reference.
10.8 Methanol Hedging Agreement among BMLP (as successor by merger to Beaumont Methanol Corporation) and The Morgan Stanley Leveraged Equity Fund II, L.P. as Counterparty, form of which filed as Exhibit 99.1 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33- 52493), is incorporated herein by reference.
10.9 Agreement of Limited Partnership of TNCLP (formerly known as Agricultural Minerals Company, L.P.) dated as of December 4, 1991, filed as Exhibit 99.3 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33-52493), is incorporated herein by reference.
10.10 Agreement of Limited Partnership of TNLP (formerly known as Agricultural Minerals, Limited Partnership) dated as of December 4, 1991, filed as Exhibit 99.4 to Terra Industries' Registration Statement on Form S-3, as amended, (File No. 33-52493), is incorporated herein by reference.
13 Financial Review and Consolidated Financial Statements as contained in the Annual Report to Stockholders of Terra Industries for the fiscal year ended December 31, 1994.
18 Deloitte & Touche LLP letter regarding changes in accounting principles dated February 1, 1995.
21 Subsidiaries of Terra Industries.
24 Powers of Attorney.
27 Financial Data Schedule. [EDGAR filing only]
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.
By: /S/George H. Valentine ------------------------------------- George H. Valentine Vice President, General Counsel and Corporate Secretary
Date: March 15, 1995
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:
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 SCHEDULES -----------------------------
To the Board of Directors and Stockholders of Terra Industries Inc.:
We have audited the consolidated financial statements of Terra Industries Inc. as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994, and have issued our report thereon dated February 1, 1995; such financial statements and report are included in the 1994 Annual Report to Stockholders of Terra Industries Inc. and are incorporated herein by reference. Our audits also included the Financial Statement Schedules of Terra Industries Inc. listed in Item 14(a) of this Form 10-K. These Financial Statement Schedules are 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 Schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska February 1, 1995
INDEPENDENT AUDITORS' CONSENT -----------------------------
We consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (Registration Nos. 33-46735, 33-46734, 33-30058 and 33-4939) and Registration Statements on Form S-3 (Registration Nos. 2-90808, 2-84876 and 2-84669) of Terra Industries Inc. of our report dated February 1, 1995, included in the 1994 Annual Report to Stockholders of Terra Industries Inc. which is incorporated by reference in this Form 10-K. We also consent to the incorporation by reference in such Prospectuses of our report on the Financial Statement Schedules, appearing above.
DELOITTE & TOUCHE LLP
Omaha, Nebraska February 1, 1995
S-2
SCHEDULE I TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT ---------------------------------------------
See accompanying Notes to the Condensed Financial Statements.
S-3
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT ---------------------------------------------
See accompanying Notes to the Condensed Financial Statements.
S-4
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT ---------------------------------------------
See accompanying Notes to the Condensed Financial Statements.
S-5
TERRA INDUSTRIES INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT ---------------------------------------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The Condensed Financial Statements include the Registrant only and reflect the equity method of accounting for its beneficially owned subsidiaries, Terra Capital, Inc., Terra International, Inc. (TII), Terra Nitrogen Corporation (TNC) and Beaumont Methanol Limited Partnership (BMLP). Equity in TII's, 1994 earnings includes a net credit of $3.4 million for the cumulative effect of accounting changes to recognize costs of major maintenance turnarounds on a deferral rather than accrual method and to recognize a liability for the estimated cost of benefits provided to TII's disabled employees. Equity in TII's 1992 earnings includes the deduction of $5.7 million for the cumulative effect of accounting changes to recognize the prior service cost of providing post-retirement medical benefits to TII's employees.
Equity in the financial results of the base metals, coal, leasing and other discontinued businesses have been included in discontinued operations.
2. LONG-TERM DEBT
Long-term debt at December 31, 1994 consists of $158.8 million of unsecured 10.75% Senior Notes due in full September 30, 2003 which were assumed in conjunction with the October 1994 acquisition of American Minerals and Chemicals Inc. (AMCI). Following the Registrant's acquisition of AMCI, $16.2 million of Senior Notes were redeemed. The 10.75% Senior Notes are redeemable at the option of the Registrant, in whole or part, at any time on or after September 30, 1998, as more fully detailed in Note 10 to the Consolidated Financial Statements.
Long-term debt at December 31, 1993 consisted of 8.5% Convertible Subordinated Debentures (Debentures) of $72,057,000 that was due 2012. The Debentures were convertible into Common Shares any time prior to maturity, unless previously redeemed, at a conversion price of $8.083 per share. The Debentures were subject to redemption, upon not less than 20 days notice by mail, at any time, as a whole or in part, at the election of the Registrant. During March 1994, the Registrant gave notice to holders of its intent to redeem the Debentures at the redemption price of 103.4% of par value. During the 20-day notice period, holders of $5.9 million chose to convert their debentures into Common Stock of the Registrant. The Registrant issued 730,768 Common Shares and paid cash for fractional shares.
3. COMMITMENTS AND CONTINGENCIES
The Registrant is committed to a non-cancelable office lease expiring in 1998. Total minimum rental payments are: 1995, $3.1 million; 1996, $3.2 million; 1997, $3.3 million and 1998, $1.7 million. These amounts are not reduced by sublease rentals, which in 1994 were $2.0 million.
The Registrant is contingently liable for retiree medical benefits of employees of coal mining operations sold on January 12, 1993. Under the purchase agreement, the purchaser agreed to indemnify the Registrant against its obligations under certain employee benefit plans. Due to the Coal Industry Retiree Health Benefit Act of 1992, certain retiree medical benefits of union coal miners have become statutorily mandated, and all companies owning 50 percent or more of any company liable for such benefits as of certain specified dates becomes liable for such benefits if the company directly liable is unable to pay them. As a result, if the purchaser becomes unable to pay its retiree medical obligations assumed pursuant to the sale, the Registrant may have to pay such amount. The Registrant has estimated that the present value of liabilities for which it retains contingent responsibility approximates $12 million at December 31, 1994. In the event the Registrant would be required to assume this liability, mineral reserves associated with the sold coal subsidiary would revert to the Registrant.
The Registrant had letters of credit outstanding totaling $9.7 million at December 31, 1994 and $13.0 million at December 31, 1993, guaranteeing various insurance and financing activities. Short-term investments of $9.6 million at December 31, 1994 and $13.0 million at December 31, 1993 are restricted to collateralize certain of the letters of credit.
S-6
4. INCOME TAXES
The Registrant files a consolidated U.S. federal tax return. Certain operating subsidiaries provide for federal income taxes according to tax sharing agreements which allocate the benefits of operating losses and differences between financial reporting and income tax basis results to the Registrant. The subsidiaries acquired in connection with the October 1994 acquisition of AMCI provide for federal taxes according to a separate return basis with any additional benefits of the Registrant's operating loss utilization allocated to the Registrant.
S-7
SCHEDULE II TERRA INDUSTRIES INC.
VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1994, 1993, and 1992 --------------------------------------------- (in thousands)
(a) Includes $100 as a result of AMCI acquisition.
(b) Write-offs, net of recoveries.
S-8
EXHIBIT INDEX
4.6 Credit Agreement among Terra Industries Inc., Terra Capital, Inc., Agricultural Minerals, L.P., Certain Guarantors, Certain Lenders, Certain Issuing Banks and Citibank, N.A. without exhibits or schedules (the "October 1994 Credit Agreement"), form of which previously filed as Exhibit 99.5 to Terra Industries' Registration Statement on Form S-3, as amended (File No. 33-52493).
4.7 Amendment No. 1 to the October 1994 Credit Agreement dated as of December 28, 1994.
4.8 Amendment No. 2 to the October 1994 Credit Agreement dated as of December 28, 1994, without exhibits.
4.9 Amendment No. 3 to the October 1994 Credit Agreement dated as of February 1, 1995.
10.1.14 1995 Incentive Award Program for Officers and Key Executives of Terra Industries.
13 Financial Review and Consolidated Financial Statements as contained in the Annual Report to Stockholders of Terra Industries for the fiscal year ended December 31, 1994.
18 Deloitte & Touche LLP letter regarding changes in accounting principles dated February 1, 1995.
21 Subsidiaries of Terra Industries.
24 Powers of Attorney.
27 Financial Data Schedule. [EDGAR filing only]