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Terra's Quarter a Footnote to Yara Deal

Terra issues an opaque fourth-quarter earnings report vastly overshadowed by its deal to sell itself to Yara Industries.
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SIOUX CITY, Iowa (TheStreet) -- Terra Industries (TRA) said it swung to a loss in its fourth quarter, but the company's impending $4.1 billion sale to Norwegian fertilizer giant Yara Industries, announced earlier this week, rendered the lackluster results nearly irrelevant.

For the record, Terra reported a loss of $3.8 million, or 4 cents a share, in the just-ended period, down from earnings a year ago of $165 million, or $1.65 a share.

Analysts were looking for a profit of 54 cents a share in the quarter, but a slew of "special charges" (amounting to $78 million) made the quarter look worse than it really was, Terra in effect said in its press release announcing the results.

Indeed, the company's quarterly report, issued Thursday, was anything but transparent. The charges included $43 million in "U.S. tax expense associated with the repatriation of funds in the U.S.," $32 million to pay for the early retirement of debt, and $2.6 million that went toward "other operating expenses related to the unsolicited proposals by CF Industries."

(

CF Industries

(CF) - Get Report

, of course, had pursued Terra in a hostile takeover effort for more than a year before

capitulating last month

.)

If one chose to exclude all that -- and Terra did -- the company said it would have earned 75 cents a share in the fourth quarter, thus surpassing the 54-cent per-share Wall Street target.

Revenue, however, was a clearer matter: Terra posted a top line of $361 million, down 47% from the 2008 fourth quarter and well below the $421 million that analysts were expecting, according to a Thomson Reuters survey.

The company blamed the declines on the precipitous drop in prices of nitrogen fertilizers -- Terra's bread-and-butter -- compared with last year. "The lower selling prices were due to generally weaker nitrogen demand related to the overall economic climate," Terra said.

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The company provide no outlook; future results will be Yara's to deal with. The companies expect the deal to close by the end of the second quarter.

CF, meanwhile, which missed profit expectations on Tuesday but nonetheless predicted a rebound in fertilizer buying this planting season, is possibly mulling over its lost chance to acquire Terra. Yara's offer price was $41 per Terra share -- in cash. CF's bid, accounting for the $7.50 special dividend Terra declared last year, amounted to around $39 a share (most of it cash, but a little more than $10 of it in CF stock).

Meanwhile, CF must deal with its own predator, the Canadian diversified agricultural concern

Agrium

(AGU)

. Some analyst have speculated that the Yara deal makes an Agrium acquisition of CF more likely.

But the spread between CF's stock price ($102.13 as of Thursday's close) and Agrium's bid (worth about $111 as of the close) hasn't narrowed much, which likely means that market players are still incredulous about a CF-Agrium hook-up.

Terra shares, meanwhile, finished trading Thursday at $41.30, up 43 cents.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.