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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended September 30, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-10877
TERRA NITROGEN COMPANY, L.P.
(Exact name of registrant as specified in its charter)
Delaware 73-1389684
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Terra Centre
PO Box 6000, 600 Fourth Street
Sioux City, Iowa 51102-6000
(Address of principal executive office) (Zip Code)
Registrant's telephone number:
(712) 277-1340
At the close of business on October 31, 2002, there were 18,501,576 Common
Units outstanding.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes ___ No
- ---
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PART I. FINANCIAL INFORMATION
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31, September 30,
2002 2001 2001
------------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,462 $ 10 $ 10
Accounts receivable 27,090 32,311 25,170
Inventory - finished products 8,739 18,292 27,632
Inventory - materials and supplies 9,777 10,128 9,636
Prepaid expenses and other current assets 9,491 3,939 7,902
- -------------------------------------------------------------------------------------------------------
Total current assets 69,559 64,680 70,350
- -------------------------------------------------------------------------------------------------------
Net property, plant and equipment 127,800 136,335 139,336
Other assets 7,696 9,402 6,846
- -------------------------------------------------------------------------------------------------------
Total assets $ 205,055 $ 210,417 $ 216,532
=======================================================================================================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Note payable to affiliates $ --- $ 14,293 $ 20,709
Accounts payable and accrued liabilities 12,721 12,720 17,906
Customer prepayments 3,946 2,388 ---
Current portion of long-term debt and
capital lease obligations 53 --- 1,000
- -------------------------------------------------------------------------------------------------------
Total current liabilities 16,720 29,401 39,615
- -------------------------------------------------------------------------------------------------------
Long-term debt 8,347 8,200 6,985
Long-term payable to affiliates 5,316 5,316 5,316
Partners' capital 174,672 167,500 164,616
- -------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $ 205,055 $ 210,417 $ 216,532
========================================================================================================
See Accompanying Notes to the Consolidated Financial Statements.
2
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenues $ 76,001 $ 55,488 $ 237,639 $ 222,587
Other income 163 264 818 547
- -----------------------------------------------------------------------------------------------------
Total revenues 76,164 55,752 238,457 223,134
Cost of goods sold 71,595 64,610 223,859 226,365
- -----------------------------------------------------------------------------------------------------
Gross profit 4,569 (8,858) 14,598 (3,231)
Operating expenses 2,598 2,135 7,242 6,876
- -----------------------------------------------------------------------------------------------------
Operating income (loss) 1,971 (10,993) 7,356 (10,107)
Interest expense (8) (405) (135) (817)
Interest income 48 --- 51 203
- -----------------------------------------------------------------------------------------------------
Net income (loss) $ 2,011 $ (11,398) $ 7,272 $ (10,721)
=====================================================================================================
Net income (loss) allocable to
limited partners' interest $ 1,971 $ (11,170) $ 7,127 $ (10,507)
=====================================================================================================
Net income (loss) per limited
partnership unit $ 0.11 $ (0.60) $ 0.39 $ (0.57)
=====================================================================================================
See Accompanying Notes to the Consolidated Financial Statements.
3
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2002 2001
----------- -----------
Operating activities:
Net income (loss) from operations $ 7,272 $ (10,721)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Depreciation and amortization 9,824 9,609
Changes in operating assets and liabilities:
Receivables 5,221 (431)
Inventories 9,904 (17,887)
Prepaid expenses and other current assets (1,876) (4,785)
Accounts payable, accrued liabilities and
customer prepayments 1,559 (4,850)
Other 1,706 4,413
- ----------------------------------------------------------------------------------------------------
Net cash flows from operating activities 33,610 (24,652)
Investing activities:
Capital expenditures (1,289) (1,348)
- ----------------------------------------------------------------------------------------------------
Net cash flows from investing activities (1,289) (1,348)
Financing activities:
Net changes in short-term borrowings (14,293) 20,709
Issuance (repayment) of long-term debt
and capital lease obligations 200 (1,265)
Partnership distributions paid (3,776) (8,306)
Other --- (3,069)
- ----------------------------------------------------------------------------------------------------
Net cash flows from financing activities (17,869) 8,069
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 14,452 (17,931)
Cash and cash equivalents at beginning of period 10 17,941
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,462 $ 10
====================================================================================================
See Accompanying Notes to the Consolidated Financial Statements.
4
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF PARTNER'S CAPITAL
Limited General Accumulated Total
Partners' Partners' Other Partners'
Interests Interests Comprehensive Capital
(in thousands, except for Units) Income (Loss)
- -----------------------------------------------------------------------------------------------------------
Partners' capital at January 1, 2002 $ 178,808 $ (10,221) $ (1,087) $167,500
Net Income 7,127 145 --- 7,272
Change in fair value of derivatives --- --- 3,676 3,676
-------
Comprehensive income --- --- --- 10,948
Distributions (3,738) (38) (3,776)
- -----------------------------------------------------------------------------------------------------------
Partners' capital at September 30, 2002 $ 182,197 $ (10,114) $ 2,589 $174,672
===========================================================================================================
Limited partner units issued and
Outstanding at September 30, 2002 18,501,576
===========
Limited General Accumulated Total
Partners' Partners' Other Partners'
Interests Interest Comprehensive Capital
(in thousands, except for Units) Income (Loss)
- -----------------------------------------------------------------------------------------------------------
Partners' capital at January 1, 2001 $ 196,571 $ (9,859) $ --- $186,712
Net loss (10,507) (214) --- (10,721)
Cumulative effect of change in
accounting principle for
derivative financial instruments --- --- 14,200 14,200
Change in fair value of derivatives --- --- (17,269) (17,269)
--------
Comprehensive loss --- --- --- (13,790)
Distributions (8,140) (166) --- (8,306)
- -----------------------------------------------------------------------------------------------------------
Partners' capital at September 30, 2001 $ 177,924 $ (10,239) $ (3,069) $164,616
===========================================================================================================
Limited partner units issued and
Outstanding at September 30, 2001 18,501,576
===========
See Accompanying Notes to the Consolidated Financial Statements.
5
TERRA NITROGEN COMPANY, L.P.
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The consolidated financial statements contained herein should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Terra Nitrogen Company, L.P. ("TNCLP") Annual Report on
Form 10-K for the year ended December 31, 2001. TNCLP and its operating
partnership subsidiary, Terra Nitrogen, Limited Partnership (the "Operating
Partnership"), are referred to herein, collectively, as the "Partnership".
The accompanying unaudited consolidated financial statements reflect all
adjustments, which are, in the opinion of management, necessary for the
fair statement of the results for the periods presented. All of these
adjustments are of a normal and recurring nature. Results for the quarter
are not necessarily indicative of future financial results of the
Partnership.
Realized gains and losses from hedging activities and premiums paid for
option contracts are deferred and recognized in the month in which the
hedged transactions closed. Swaps, options and other derivative instruments
that do not qualify for hedge accounting treatment are marked to market
each accounting period. Costs associated with settlement of natural gas
purchase contracts and costs for shipping and handling are included in cost
of sales.
Net income per limited partnership unit is computed by dividing net income,
less a 2% share allocable to the General Partner for the nine months ended
September 30, 2002 and 2001, respectively, by 18,501,576 limited partner
units. According to the Agreement of Limited Partnership of TNCLP, net
income is allocated to the General Partner and the Limited Partners in each
taxable year in the same proportion as Available Cash for such taxable year
was distributed to the General Partner and the Limited Partners. If there
is no cash distribution, net income is allocated to the Limited Partners
and the General Partner generally based on their respective ownership
percentages. Distributions of Available Cash are made 98% to the Limited
Partners and 2% to the General Partner, except that the General Partner is
entitled, as an incentive, to larger percentage interests (up to 50%) to
the extent that distributions of Available Cash exceed specified amounts.
2. Distributions to Unitholders
The Partnership makes quarterly cash distributions to Unitholders and the
General Partner in an amount equal to 100% of its "Available Cash" (as
defined in the Partnership Agreement). The Partnership paid a $3.8 million
cash distribution ($0.20 per common unit) on August 26, 2002. On October
24, 2002, the Partnership declared a $3.8 distribution ($0.20 per common
unit) payable November 22, 2002 to record holders as of November 1, 2002.
The Partnership paid cash distributions totaling $8.3 million ($0.44 per
common unit) in the first nine months of 2001.
6
3. Financing Arrangements
The Partnership has an arrangement for demand deposits and notes with an
affiliate to allow for excess Partnership cash to be deposited with or
funds to be borrowed from Terra Capital, Inc., the parent of the General
Partner. At September 30, 2002, $14.5 million was deposited with Terra
Capital, Inc. The amount of the demand note was $20.7 million at September
30, 2001 and bore interest at the rate earned by Terra Capital on its
short-term investments.
4. Natural gas costs
Natural gas is the principal raw material used in the Partnership's
production of nitrogen products. Natural gas prices are volatile and we
manage this volatility through the use of derivative commodity instruments.
The Partnership's normal policy is to hedge 20-80% of its natural gas
requirements for the upcoming 12 months and up to 50% of the requirements
for the following 24-month period, provided that such arrangements would
not result in costs greater than expected selling prices for our finished
products. The financial derivatives are traded in months forward and
settlement dates are scheduled to coincide with gas purchases during those
future periods. These contracts reference physical natural gas prices or
approximate NYMEX futures contract prices. Contract prices are frequently
based on prices at the most common and financially liquid location of
reference for financial derivatives related to natural gas. However,
natural gas supplies for our facilities are purchased for each plant at
locations other than reference points, which often creates a location basis
differential between the contract price and the physical price of natural
gas. Accordingly, use of financial derivatives may not exactly offset the
change in the price of physical gas.
The Partnership has entered into forward pricing positions for a portion of
its natural gas requirements for the remainder of 2002 and part of 2003,
consistent with its policy. As a result of its policies, the Partnership
has reduced the potential adverse financial impact of natural gas increases
during the forward pricing period, but conversely, if natural gas prices
were to fall, the Partnership will incur higher costs. Contracts were in
place at September 30, 2002 to cover 10% of natural gas requirements for
the succeeding twelve months.
Unrealized gains from forward pricing positions totaled $1.6 million as of
September 30, 2002. The amount ultimately recognized by the Partnership
will be dependent on published prices in effect at the time of settlement.
The Partnership also had $1.0 million of realized gains on closed North
America contracts relating to future periods that have been deferred to the
respective period.
On September 30, 2002, the fair value of the derivatives resulted in a $1.5
million increase to current assets and a $1.0 million reduction to current
liabilities. The increase to current assets was to recognize the value of
open natural gas contracts; the reduction to current liabilities was to
reclassify deferred gains on closed contracts relating to future periods.
7
5. Idled facilities
On June 7, 2001, the Partnership reported it would suspend production of
ammonia and urea at its Blytheville, Arkansas plant due to its inability to
generate positive cash flow under existing price and cost conditions. The
restart of production at that facility began on October 1, 2001.
6. Recently Issued Accounting Standards
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting
for Asset Retirement Obligations". This standard requires the Partnership
to record the fair value of a liability for an asset retirement obligation
in the period in which it is incurred and is effective for our fiscal year
2003. The adoption of this standard is not expected to have a material
effect on the Partnerships' financial position or results of operations.
In June, 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This standard requires the
Partnership to recognize a liability for a cost associated with an exit or
disposal activity when the liability is incurred rather than recognition of
the liability at the date of a commitment to an exit plan and is effective
for exit or disposal activities that are initiated after December 31, 2002.
8
Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim reporting purposes. The preparation of these financial
statements requires us to make estimates and judgments that affect the amount of
assets, liabilities, revenues and expenses at the date of our financial
statements. Actual results may differ from these estimates under different
assumptions or conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. Our critical
accounting policies are described below.
Impairments of long-lived assets - We record impairment losses on long-lived
assets used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount of these items. Our cash flow
estimates are based on historical results adjusted to reflect our best estimate
of future market and operating conditions. The net carrying value of assets not
recoverable is reduced to fair value. Our estimates of fair value represent our
best estimate based on industry trends and reference to market rates and
transactions.
Revenue recognition - Revenue is recognized when title to finished product
passes to the customer. Revenue is recognized as the net amount to be received
after deducting estimated amounts for discounts and trade allowances. Revenue
includes amounts paid by customers for shipping and handling.
Inventory valuation - Inventories are stated at the lower of cost or estimated
net realizable value. The average cost of inventories is determined using the
first-in, first-out method. The nitrogen and methanol industries are
characterized by rapid change in both demand and pricing. Rapid declines in
demand could result in temporary or permanent curtailment of production, while
rapid declines in price could result in a lower of cost or market adjustment.
9
Three months ended September 30, 2002 compared with
three months ended September 30, 2001
Volumes and prices for the three-month periods ended September 30, 2002 and 2001
follow:
2002 2001
Volumes Unit price volumes unit price
(000 tons) ($/ton) (000 tons) ($/ton)
---------- ----------- ----------- ----------
Ammonia 83 $ 138 36 $ 175
UAN 594 70 510 75
Urea 100 122 28 110
Revenues for the quarter ended September 30, 2002 increased $20.5 million, or
37%, compared with the same quarter in 2001 as the result of higher volumes for
all Partnership products, partly offset by lower sales prices. Selling prices
declined from last year as the result of increased global nitrogen supplies.
Third quarter gross profits increased $13.4 million from 2001. Higher 2002 sales
volumes contributed about $750,000 to gross profits. The remainder of the gross
profit improvement represented lower product costs partly offset by reduced
selling prices. Third quarter 2002 product costs were lower due to lower natural
gas costs during the 2002 second and third quarters. Third quarter natural gas
costs declined from $3.55/MMBtu in 2001 to $2.96/MMBtu in 2002 (net of forward
pricing gains or losses.) In addition, a considerable amount of 2001 third
quarter product costs represented products manufactured during the 2001 second
quarter when gas costs average $5.25/MMBtu; in contrast, during 2002 there was
substantially less second quarter carryover inventory and most sales were
sourced from current production. As a result of forward price contracts, third
quarter 2002 natural gas costs for the Partnership were $2.3 million lower than
spot prices.
Operating expenses increased $463,000 in 2002 from 2001 due to higher
administrative and overhead expense allocations from the General Partner. Net
interest income was $445,000 higher in 2002 than the 2001 third quarter due to
lower borrowing levels.
10
Nine months ended September 30, 2002 compared with
Nine months ended September 30, 2001
Volumes and prices for the nine-month periods ended September 30, 2002 and 2001
follow:
2002 2001
Volumes Unit Price Volumes Unit Price
(000 tons) ($/ton) (000 tons) ($/ton)
---------- ------------- ----------- -----------
Ammonia 287 $ 147 145 $ 256
UAN 1,839 69 1,323 104
Urea 342 113 171 152
Revenues for the nine months ended September 30, 2002 increased $15.1 million,
or 7%, compared with the same period in 2001. Sales prices were lower as the
result of increased supplies of nitrogen fertilizer in contrast to 2001 when
high natural gas costs resulted in industry-wide production curtailments. A
substantial portion of the revenue shortfall from lower sales prices was offset
by higher 2002 volumes as compared to the first nine months of last year. Sales
volumes in 2001 were depressed due to lower production rates, reduced demand in
response to high prices and increased competition from imports.
Gross profits during the 2002 first nine months increased $17.8 million from
2001. The increase in gross profits was primarily related to lower natural gas
costs and higher sales volumes, offset in part by reduced sales prices. Natural
gas unit costs, net of forward pricing gains and losses decreased to $2.89/MMBtu
during the 2002 first nine months compared to $5.19/MMBtu during the same 2001
period. Lower natural gas costs also reduced the need to curtail production
rates until nitrogen prices rose to levels covering the higher gas costs as was
the case in 2001. Natural gas costs in the 2002 first nine months were $3.7
million lower than spot prices as the result of forward price contracts.
Operating expenses increased $366,000 in 2002 from 2001 due to higher
administrative and overhead expense allocations from the General Partner. Net
interest income was $530,000 higher than the 2001 nine months due to lower
borrowing levels and higher cash balances.
Capital resources and liquidity
Net cash generated from operating activities for the first nine months of 2002
was $33.6 million composed of $17.1 million of cash provided from operating
activities and $16.5 million of declines to working capital balances. The
decline in working capital consisted of a seasonal decrease in inventory
accounts receivable and an increase in customer prepayments.
Capital expenditures of $1.3 million during the first nine months of 2002 were
primarily to fund replacement and stay-in-business additions to plant and
equipment. The Partnership expects 2002 capital expenditures to approximate $3
million to fund replacement and stay-in-business additions to plant and
equipment.
11
The Partnership paid a $3.8 million cash distribution ($0.20 per common unit) on
August 26, 2002. On October 24, 2002, the Partnership declared a $3.8
distribution ($0.20 per common unit) payable November 22, 2002 to record holders
as of November 1, 2002. The Partnership paid cash distributions totaling $8.3
million ($0.44 per common unit) in the first nine months of 2001.
The Partnership, along with Terra Industries Inc. ("Terra"), Terra Capital, Inc.
and other affiliates, has an asset-based financing agreement that expires in
June 2005. The financing agreement provides for the Partnership to borrow
amounts generally up to 85% of eligible receivables plus 60% of eligible
inventory. At September 30, 2002, the Partnership had unused borrowing
availability of approximately $24 million. The financing agreement, which
expires June 2005, bears interest at floating rates and is secured by
substantially all of the Partnerships' working capital. The agreement also
requires the Partnership and its affiliates to adhere to certain limitations on
additional debt, capital expenditures, acquisitions, liens, asset sales,
investments, prepayments of subordinated indebtedness, changes in lines of
business and transactions with affiliates. In June, 2002 the credit facility was
amended to remove Terra's required minimum level of earnings before interest,
income taxes, depreciation, amortization and other non-cash items ("EBITDA") as
long as borrowing availability is $60 million or more. If Terra's borrowing
availability falls below $60 million after December 31, 2002, Terra will be
required to have achieved minimum EBITDA of $60 million during the most recent
four quarters. Prior to December 31, 2002, a reduced EBITDA requirement is in
effect, which is $50 million for the four quarters ending September 30, 2002. If
necessary, the Partnership believes that it could replace its existing credit
lines on terms and conditions not materially different than its current
arrangement through Terra.
The Partnership's principal needs for funds are for support of its working
capital and capital expenditures. The Partnership intends to fund its needs
primarily from net cash provided by operating activities, and, to the extent
required, from funds borrowed from others, including borrowings from Terra
Capital, Inc., the parent of the General Partner. The Partnership believes that
such sources of funds will be adequate to meet the Partnership's working capital
needs and fund the Partnership's capital expenditures for at least the next 12
months.
Limited Call Right
At December 31, 2001, the General Partner and its affiliates owned 75.1% of the
Partnership's outstanding units. When less than 25% of the issued and
outstanding units are held by non-affiliates of the General Partner, the
Partnership, at the General Partner's sole discretion, may call, or assign to
the General Partner or its affiliates, its right to acquire all such outstanding
units held by non-affiliated persons. If the General Partner elects to acquire
all outstanding units, the Partnership is required to give at least 30 but not
more than 60 days' notice of its decision to purchase the outstanding units. The
purchase price per unit will be the greater of 1) the average of the previous 20
trading days' closing prices as of the date five days before the purchase is
announced and 2) the highest price paid by the General Partner of any of its
affiliates for any unit within the 90 days preceding the date the purchase is
announced. Additional purchases of common units by the General Partner are
restricted under the terms of Terra's bank credit agreement as described
therein.
12
FORWARD LOOKING PRECAUTIONS
Information contained in this report, other than historical information, may be
considered forward looking. Forward looking information reflects Management's
current views of future events and financial performance that involve a number
of risks and uncertainties. The factors that could cause actual results to
differ materially include, but are not limited to the following: Changes in the
financial markets, general economic conditions within the agricultural industry,
competitive factors and price changes (principally, sales prices of nitrogen
products and natural gas costs), changes in product mix, changes in the
seasonality of demand patterns, changes in weather conditions, changes in
agricultural regulations, and other risks detailed in the Partnership's
Securities and Exchange Commission filings, in particular the "Factors that
Affect Operating Results" section of its most recent Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded, based on
their evaluation within 90 days of the filing date of this report, that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commission's
rules and forms. There have been no significant changes in our internal controls
or in other factors that could significantly affect these controls subsequent to
the date of the previously mentioned evaluation.
13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 99.1 Certification pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
None
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 NITROGEN COMPANY, L.P.
By: TERRA NITROGEN CORPORATION
as General Partner
By: /s/ Francis G. Meyer
------------------------------
Francis G. Meyer
Vice President
(Principal Accounting Officer)
Date: November 1, 2002
14
CERTIFICATIONS
I, Michael L. Bennett, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Terra Nitrogen
Company, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
15
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 1, 2002
/s/ MICHAEL L. BENNETT
-------------------------------------
Michael L. Bennett
President and Chief Executive Officer
I, Francis G. Meyer, Senior Vice President and Chief Financial Officer,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Terra Nitrogen
Company, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
16
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 1, 2002
/s/ FRANCIS G. MEYER
-------------------------------------------------
Francis G. Meyer
Senior Vice President and Chief Financial Officer
17