Terra Industries Inc. Reports Fourth Quarter and Full-Year Results; Declares Dividend

Terra Industries Inc. (NYSE:TRA) ("Terra”) announced adjusted income attributable to common stockholders for the 2009 fourth quarter of $74.0 million ($0.75 per diluted share), excluding special charges of $77.8 million ($0.79 per diluted share) for a quarterly loss attributable to common stockholders of $3.8 million ($0.04 per diluted share). This compares to income of $164.7 million ($1.65 per diluted share) for the same period in 2008.

Terra’s full-year 2009 adjusted income attributable to common stockholders was $239.0 million ($2.39 per diluted share), excluding special charges of $86.4 million ($0.86 per diluted share), for yearly income attributable to common stockholders of $152.6 million ($1.53 per diluted share). This compares to income of $631.9 million ($6.20 per diluted share) for full year 2008. Terra’s full-year 2009 adjusted results represent the third-best annual financial performance in the company’s history.

Terra also declared a dividend of $0.10 per common share, payable April 7, 2010, to holders of record as of March 17, 2010.

Analysis of Fourth Quarter Results

Revenues for the 2009 fourth quarter totaled $361.1 million, compared to revenues of $683.5 million for the 2008 fourth quarter. Selling price declines decreased revenues by 53 percent, and were partially offset by sales volume gains in ammonia and urea, which increased revenues by 9 percent. The lower selling prices were due to generally weaker nitrogen demand related to the overall economic climate. The stronger ammonia and urea sales volumes reflect the timing of restocking activity through the fourth quarter and healthy sales into environmental markets.

Lower natural gas prices helped to reduce fourth quarter 2009 production costs by $205 million, compared to the 2008 fourth quarter.

Selling, general and administrative expenses in the 2009 fourth quarter reflected additional costs related to long-term incentive accruals as a result of changes in the Terra stock price. Fourth quarter long-term incentive compensation expense was $5.0 million higher than the prior-year comparable amount.

During the 2009 fourth quarter, Terra’s GrowHow UK joint venture benefited from 63 percent lower gas prices and a 5 percent increase in sales volumes, which offset the 7 percent decrease in selling prices, as compared to the 2008 fourth quarter.

Special charges for the quarter included:

• $42.8 million ($0.43 per diluted share) in U.S. tax expense associated with the repatriation of funds to the U.S.
• $32.4 million, net of tax ($0.33 per diluted share) for the early retirement of debt; and
• $2.6 million, net of tax ($0.03 per diluted share) of other operating expenses related to the unsolicited proposals by CF Industries Holdings, Inc.

Analysis of Full-Year Results

Revenues for 2009 totaled $1,581.4 million, compared to $2,891.5 million for 2008. Sales price declines decreased revenues by 41 percent and sales volume reductions in all product lines but urea decreased revenues by 10 percent, due generally to reduced demand related to the economic slowdown.

Lower 2009 natural gas costs due to a favorable supply/demand balance decreased production costs by $489 million compared to 2008.

2009 cost of sales reflects the curtailment of ammonia production at the Donaldsonville and Woodward plants and maintenance turnarounds at the Yazoo City, Woodward, Verdigris and Courtright facilities in the first, second, third and fourth quarters, respectively. The cost of these activities was approximately $35.1 million on a pretax basis ($21.3 million after tax) or $0.21 per diluted share.

Special charges for 2009 included:

• $42.8 million ($0.43 per diluted share) in U.S. tax expense associated with the repatriation of funds to the U.S.;
• $32.4 million, net of tax ($0.32 per diluted share) for the early retirement of debt; and
• $11.2 million, net of tax ($0.11 per diluted share) of other operating expenses related to unsolicited proposals by CF Industries Holdings, Inc.

Terra’s income tax expense for 2009 and 2008 was $74.3 million and $239.9 million, respectively. The effective tax rate for 2009 and 2008 was 32.9 percent and 27.5 percent, respectively. Excluding the $42.8 million tax repatriation charge, the effective tax rate for 2009 was 14.0 percent.

Forward Natural Gas Position

Terra’s forward purchase contracts at Dec. 31, 2009, fixed prices for about 14 percent of its next 12 months’ natural gas needs at about $8.4 million less than published prices for Dec. 31, 2009 forward markets. These forward positions hedge production costs primarily associated with product that Terra has sold and plans to ship in the 2010 first half.

Cash Balances, Customer Prepayments and Dividends

Cash balances totaled $501.3 million and customer prepayments totaled $39.2 million at Dec. 31, 2009. Terra expects to ship products under customer prepay agreements during the 2010 first half.

In addition to its $0.10-per-share regular quarterly dividends, Terra returned an aggregate of approximately $750 million to shareholders with the payment of its $7.50-per-share special dividend on Dec. 11, 2009. Over the past three years Terra has delivered 108 percent of its net income to shareholders in the form of share repurchases and dividends.

Pending Acquisition by Yara

Terra announced on Feb. 15, 2010, that its Board of Directors had unanimously approved a definitive merger agreement under which Yara International ASA (OSLO: YAR.OL) (Yara) will acquire all of the outstanding shares of Terra common stock for US$41.10 per share in cash. The transaction has a total equity value of approximately US$4.1 billion.

CEO’s Remarks

"Terra’s fourth quarter and full-year results reflect the gradual pace of recovery from the weakened market conditions that prevailed through most of 2009,” said Terra President and CEO Michael Bennett. "Moderate natural gas prices for the quarter and year helped reduce our costs significantly, but could not fully counter the effects of much lower nitrogen products selling prices. While sales volumes for the full year lagged those of 2008, fourth quarter sales volumes increased over the previous year, signaling the start of what we believe will be a solid market rebound.

"Since quarter’s end, Terra has announced an agreement to be purchased by Yara International ASA. We believe this transaction represents a compelling opportunity for all Terra stakeholders, and look forward to refocusing our efforts on completing the transaction and then achieving a smooth integration of these two highly complementary companies.”

Conference Call Details

Terra management will conduct a conference call to discuss these fourth quarter and full-year results this afternoon at 3:00 ET. A live webcast of the conference call will be available from Terra’s Web site at www.terraindustries.com, and will be archived for playback for three months.

About Terra

Terra Industries Inc., with 2009 revenues of $1.6 billion, is a leading North American producer and marketer of nitrogen products.

Important Information

Terra Industries Inc. ("Terra”) plans to file with the Securities and Exchange Commission (the "SEC”) and mail to its stockholders a proxy statement regarding the proposed business combination with Yara International ASA ("Yara”). Investors and security holders are urged to read the proxy statement relating to such business combination and any other relevant documents filed with the SEC (when available), because they will contain important information. Investors and security holders may obtain a free copy of the proxy statement and other documents that Terra files with the SEC (when available) at the SEC’s Web site at www.sec.gov and Terra’s Web site at www.terraindustries.com. In addition, the proxy statement and other documents filed by Terra with the SEC (when available) may be obtained from Terra free of charge by directing a request to Terra Industries Inc., Attn: Investor Relations, Terra Industries Inc., 600 Fourth Street, P.O. Box 6000, Sioux City, IA 51102-6000.

Certain Information Regarding Participants

Terra, its directors, executive officers and certain employees may be deemed to be participants in the solicitation of Terra’s security holders in connection with the proposed business combination with Yara. Security holders may obtain information regarding the names, affiliations and interests of such individuals in Terra’s Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on February 27, 2009 and amended on April 28, 2009, its definitive proxy statement for the 2009 Annual Meeting, which was filed with the SEC on October 13, 2009, and its Current Report on Form 8-K filed with the SEC on December 1, 2009. To the extent holdings of Terra securities have changed since the amounts printed in the definitive proxy statement for the 2009 Annual Meeting, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Additional information regarding the interests of such individuals can also be obtained from the proxy statement relating to the proposed business combination with Yara when it is filed by Terra with the SEC. These documents (when available) may be obtained free of charge from the SEC’s Web site at www.sec.gov and Terra’s Web site at www.terraindustries.com.

Forward-Looking Statements

Certain statements in this communication may constitute "forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made and Terra undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. Words such as "expects,” "intends,” "plans,” "projects,” "believes,” "estimates,” and similar expressions are used to identify these forward-looking statements. In particular, statements about the proposed business combination with Yara and the completion of the Carseland acquisition and the benefits to Terra from such acquisition are forward-looking statements and may not necessarily occur. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks, uncertainties and assumptions include, among others:

• the possibility that various closing conditions for the proposed business combination with Yara may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction,
• the risk that Terra’s stockholders fail to approve the proposed business combination,
• the risk that Yara’s stockholders fail to approve the proposed capital increase for its rights offering,
• that risk that the proposed business combination with Yara will not close within the anticipated time period,
• the risk that disruptions from the proposed business combination with Yara will harm Terra’s relationships with its customers, employees and suppliers,
• the diversion of management time on issues related to the proposed business combination with Yara,
• the outcome of any legal proceedings challenging the proposed business combination with Yara,
• the amount of the costs, fees, expenses and charges related to the proposed business combination with Yara,
• the risk that the closing of the Carseland acquisition, which is conditioned on the completion of Agrium’s unsolicited bid for CF Industries Holdings, Inc., may not occur,
• risks related to potential acquisition transactions,
• changes in financial and capital markets,
• general economic conditions within the agricultural industry,
• competitive factors and price changes (principally, sales prices of nitrogen and methanol products and natural gas costs),
• changes in product mix,
• changes in the seasonality of demand patterns,
• changes in weather conditions,
• changes in environmental and other government regulations,
• changes in agricultural regulations and
• changes in the securities trading markets.

Additional information as to these factors can be found in Terra’s 2008 Annual Report/10-K and in Terra’s subsequent Quarterly Reports on Form 10-Q, in each case in the sections entitled "Business,” "Risk Factors,” "Legal Proceedings,” and "Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Notes to the consolidated financial statements.

Note: Terra Industries’ news announcements are also available on its Web site, www.terraindustries.com.

Because of the seasonal nature and effects of weather-related conditions in several of Terra’s marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.

1. After deducting outbound freight costs.

2. Urea sales volumes and prices include granular urea and urea solutions data. Previous financial reports did not includes urea solutions data.

3. AN sales volumes and prices include ag grade AN, industrial grade AN (IGAN) and ammonium nitrate solution (ANS). Previous financial reports did not include ANS data.

4. Per MMBtu. Includes all transportation and other logistical costs and any gains or losses on financial derivatives related to North American natural gas purchases. Net costs of derivatives for the fourth quarter and full year of 2009 were $4.6 million and $112.1 million, respectively. Excluding the impact of 2009 hedge costs, natural gas cost was $4.37 per MMBtu and $3.82 per MMBtu for the 2009 fourth quarter and full year, respectively. The net cost of derivatives for the 2008 fourth quarter was $189.5 million and $172.5 million, respectively. Excluding the impact of 2008 hedge costs, natural gas cost was $9.05 per MMBtu and $8.10 per MMBtu for the 2008 fourth quarter and full year, respectively.

Because of the seasonal nature and effects of weather-related conditions in several of Terra’s marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.