UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-‑K

(Mark One)

[x]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, ~~2003~~2004
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 001-12217
Commission File Number 001‑12217
MISSISSIPPI CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
MISSISSIPPI (State or other jurisdiction of incorporation or organization)		64-‑0292638 (IRS Employer Identification Number)
3622 Highway 49 East, P.O. Box 388, Yazoo City, MS (Address of principal executive offices)		39194 (Zip Code)
Registrant's telephone number, including area code:		(662) 746-‑4131

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01
Preferred Stock Purchase Rights

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.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-‑K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-‑K or any amendment to this Form 10-‑K. [ X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-‑2 of the Act). Yes [ ] No [X]

On ~~October 1~~September 15, ~~2003~~2004, the registrant had 25 24,~~356~~250,~~852~~109 shares of common stock, par value $.01, outstanding. On December 31, ~~2002~~2003 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the registrant's common stock held by approximately 12,~~365~~255 ~~non-affiliates~~nonaffiliates was $83,~~314~~606,~~718~~848 (based upon the December 31, ~~2002~~2003, closing price of $0.3215 of the common stock on the ~~New York~~OTC ~~Stock~~Bulletin ~~Exchange~~Board). Shares of the registrant's common stock held by each officer, director, and holder of 10% or more of the registrant's outstanding common stock have been excluded because such persons may be deemed affiliates of the registrant, which deemed affiliation status is not necessarily a conclusive determination for other purposes.

DOCUMENTS INCORPORATED BY REFERENCE

~~Proxy Statement for Annual Meeting of Shareholders to be held on December 2, 2003(Items 10(a), (e) and (f), 11, 12, 13 and 14 in Part III)~~None. ~~INDEX TO EXHIBITS BEGINS ON PAGE 96~~

~~Page~~INDEX 1TO EXHIBITS BEGINS ON PAGE 114

TABLE OF CONTENTS
	Page
PART I	3
Item 1. Business	3
General	3
Operating Segments	3
Nitrogen	3
Phosphate	8
Potash	10
Certain Business Factors	12
Factors Affecting Fertilizer Demand and Prices	12
Dependence on Natural Gas	13
Seasonality	13
Competition	13
Compliance With Environmental Regulations	14
Financial Information About Foreign and Domestic Sales and Operations	15
Executive Officers and Employees	15
Item 2. Properties	16
Item 3. Legal Proceedings	16
Item 4. Submission of Matters to a Vote of Security Holders	16
PART II	16
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters	16
Item 6. Selected Financial Data	17
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
General	17
Results of Operations - Fiscal 2003 Compared to Fiscal 2002	23
Results of Operations - Fiscal 2002 Compared to Fiscal 2001	28
Liquidity and Capital Resources	33
Outlook	38
Forward-Looking Statements	38
Item 7A. Market Risk	39
Item 8. Financial Statements and Supplementary Data	40
Quarterly Results	88
New Accounting Pronouncements	89
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	90
Item 9A. Controls and Procedures	90
PART III	90
Item 10. Directors and Executive Officers of the Registrant	90
Item 11. Executive Compensation	91
Item 12. Security Ownership of Certain Beneficial Owners and Management	91
Item 13. Certain Relationships and Related Transactions	92
Item 14. Principal Accounting Fees and Services	92
PART IV	93
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K	93
Signatures	94
Exhibit Index	96

TABLE OF CONTENTS
	Page
PART I	4
Item 1. Business	4
General	4
Operations	4
Products	4
Production and Properties	6
Marketing and Distribution	7
Raw Materials	8
Employees	9
Discontinued Segments	9
Certain Business Factors	10
Factors Affecting Fertilizer Demand and Prices	10
Dependence on Natural Gas	10
Seasonality	10
Competition	11
Compliance With Environmental Regulations	11
Financial Information About Foreign and Domestic Sales and Operations	12
Reorganization	12
Item 2. Properties	12
Item 3. Legal Proceedings	12
Item 4. Submission of Matters to a Vote of Security Holders	12
PART II	13
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6. Selected Financial Data	13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	14
General	14
Petition for Relief Under Chapter 11 of the United States Bankruptcy Code	14
Critical Accounting Policies	17
Recent Accounting Pronouncements	21
Results of Operations ‑ Fiscal 2004 Compared to Fiscal 2003	22
Results of Operations ‑ Fiscal 2003 Compared to Fiscal 2002	28
Liquidity and Capital Resources	33
Outlook	38
Forward‑Looking Statements	39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	39
Item 8. Financial Statements and Supplementary Data	41
Quarterly Results	92
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	93
Item 9A. Controls and Procedures	93
Evaluation of Disclosure Controls and Procedures	93
Changes in Internal Controls	93
PART III	94
Item 10. Directors and Executive Officers of the Registrant	94
Directors	94
Executive Officers	95
Certain Relationships	96
Code of Ethics for Senior Financial Officers	96

~~Page~~Item 211. Executive Compensation 97 Summary Compensation Table 97 Stock Options 98 Option Exercises and Holdings 98 Pension Benefits 98 Retention and Severance 99 Compensation Committee Report 100 Directors' Compensation 104 Item 12. Security Ownership of Certain Beneficial Owners and Management 105 Equity Compensation Plan Information 105 Security Ownership of Certain Beneficial Owners 106 Security Ownership of Management 106 Section 16(a) Beneficial Ownership Reporting Compliance 109 Item 13. Certain Relationships and Related Transactions 109 Item 14. Principal Accountant Fees and Services 109 Overview 109 Independent Auditors 110 Audit Fees 110 PART IV 111 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8‑K 111 Documents Filed as Part of this Annual Report on Form 10-K 111 Reports on Form 8-K 111 Signatures 112 Exhibit Index 114

PART I

ITEM 1. BUSINESS

GENERAL

Mississippi Chemical Corporation (the "Company") was incorporated in Mississippi on May 23, 1994, and is the successor by merger, effective July 1, 1994, to a business which was incorporated in Mississippi in September 1948 as the first fertilizer cooperative in the United States (the "Cooperative"). The address of the Company's principal executive office is Owen Cooper Administration Building, 3622 Highway 49 East, Yazoo City, Mississippi 39194, and its telephone number is (662) 746-‑4131. The Company maintains a site on the World Wide Web at www.misschem.com. Information appearing on the Company's website should not be considered a part of this Annual Report on Form 10-‑K. The term "Company" includes Mississippi Chemical Corporation and its subsidiaries: Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Eddy Potash, Inc.; Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; Triad Nitrogen, L.L.C.; Mississippi Chemical Management Company; Mississippi Chemical Company, L.P.; Melamine Chemicals, Inc.; Mississippi Chemical Holdings, Inc.; MissChem (Barbados) SRL; and MissChem Trinidad Limited; and Mississippi Chemical Corporation's affiliates: Point Lisas Nitrogen Limited ~~(formerly known as "Farmland MissChem Limited")~~, our 50/50 ammonia production joint venture with Koch Nitrogen Company; FMCL Limited Liability Company, our 50/50 ammonia shipping joint venture with Koch Nitrogen Company; and Houston Ammonia Terminal, L.P., our 50/50 ammonia storage joint venture with Potash Corporation of Saskatchewan. ~~References to the Company's operations prior to July 1, 1994, refer to the Cooperative's operations.~~ Any reference to an industrial customer or user herein includes, but is not limited to, producers who convert products purchased from the Company to other fertilizer products.

On May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its direct and indirect subsidiaries (collectively, the "Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"), the cases being administered jointly in Joint Case Number 03-‑02984 WEE ("Case"). As debtors-‑in-‑possession, the Debtors are authorized to operate their business but may not engage in transactions outside the ordinary course of business without the approval of the Court. The OnCase ~~May 16,~~and ~~2003,~~ the Debtors' ~~Court~~debtor‑in‑possession ~~rendered~~financing anare ~~Interim~~more ~~Order~~particularly described ~~approving~~below ~~the~~in ~~Debtors'~~Item 7 ~~request~~of ~~for~~this ~~interim~~Annual ~~financing,~~Report ~~and~~ on ~~October 2~~Form 10‑K. On August 9, ~~2003~~2004, the ~~Court~~Company announced that it has entered into a ~~Final~~definitive agreement ~~Order~~with ~~approving~~Terra ~~debtor-in-possession~~Industries ~~financing~~Inc. ~~with~~("Terra"), ~~Harris~~pursuant ~~Trust~~to ~~and~~which ~~Savings~~Terra ~~Bank~~will acquire ~~and~~the aCompany, ~~syndicate~~subject to approval of ~~six~~the Court and other ~~lenders~~regulatory approvals, as more particularly described below in Item 7 of this Annual Report on Form 10-K. Consistent with the Terra transaction, we filed our first amended joint plan of reorganization with the Court on September 2, 2004.

~~OPERATING SEGMENTS~~OPERATIONS

The Company's ~~has~~nitrogen ~~three~~business is its only reportable operating ~~segments:~~segment. The ~~nitrogen,~~Company's phosphate, potash, and melamine ~~potash~~segments have been classified as discontinued operations. The amounts of revenue, operating profit or loss and identifiable assets attributable to the nitrogen segment and each of our discontinued segments are set forth in Item 7 and Item 8 of this Annual Report on Form 10-‑K. Additional information about ~~each~~our nitrogen operating segment is set forth below.

~~Nitrogen~~Products

The Company produces nitrogen products at its production facilities in Yazoo City, Mississippi, Donaldsonville, Louisiana, and through its 50/50 joint venture with Koch Nitrogen Company, known as Point Lisas Nitrogen Limited ("Point Lisas Nitrogen"), in Point Lisas, The Republic of Trinidad and Tobago. The Company's principal nitrogen products include anhydrous ammonia; fertilizer‑grade ammonium nitrate, which is sold under the Company's trade name Amtrate® UAN solution, which is sold under the Company's trade name N‑Sol 32® nitric acid, and dinitrogen tetroxide. Each of the Company's nitrogen products has its own distinct characteristics that produce agronomic preferences among end‑users.

~~Page~~ In 3fiscal 2004, the Company sold approximately 1.7 million tons of nitrogen products to fertilizer dealers and distributors and industrial users located primarily in the southern United States compared to 1.9 million tons in fiscal 2003. Net sales of nitrogen products by the Company in fiscal 2004 were approximately $299.0 million, which represented approximately 99.5% of consolidated net sales.

Anhydrous Ammonia. ~~fertilizer-grade~~ In ~~ammonium~~fiscal ~~nitrate~~2004, ~~which~~the Company produced approximately 793,000 tons of anhydrous ammonia at its Yazoo City and Donaldsonville facilities. The Company is ~~sold~~obligated ~~under~~by contract to purchase one‑half of the ~~Company's~~anhydrous ~~trade~~ammonia ~~name~~(approximately ~~AmtrateÒ~~358,000 ;tons ~~UAN~~per ~~solution~~year) produced by Point Lisas Nitrogen at a discount to market, ~~which~~subject isto ~~sold~~a ~~under~~minimum price. In fiscal 2004, the Company's ~~trade~~purchased ~~name~~approximately ~~N-Sol 32Ò~~375,000 ;tons ~~urea;~~pursuant to its contract with Point Lisas Nitrogen and ~~nitric~~approximately ~~acid~~148,000 tons from nonaffiliates for resale or upgrade to other fertilizer products. In ~~Each~~fiscal of2004, the Company's sold ~~nitrogen~~approximately ~~products~~685,000 ~~has~~tons ~~its~~of ~~own~~anhydrous ~~distinct~~ammonia, ~~characteristics~~approximately ~~that~~645,000 ~~produce~~tons of ~~agronomic~~which ~~preferences~~were ~~among~~sold ~~end-~~as a raw material for industrial users. The Company consumed approximately 633,000 tons of anhydrous ammonia as a raw material to manufacture its other nitrogen products, melamine, and diammonium phosphate.

In fiscal 2003, the Company sold approximately 2.1 million tons of nitrogen products to fertilizer dealers and distributors and industrial users located primarily in the southern United States compared to 2.5 million tons in fiscal 2002. Net sales of nitrogen products by the Company in fiscal 2003 were approximately $271.0 million, which represented approximately 61% of consolidated net sales.

Anhydrous Ammonia. In fiscal 2003, the Company produced approximately 1,012,000 tons of anhydrous ammonia at its Yazoo City and Donaldsonville facilities. The Company is obligated by contract to purchase one-half of the anhydrous ammonia (approximately 350,000 tons per year) produced by Point Lisas Nitrogen at a discount to market, subject to a minimum price. In fiscal 2003, the Company purchased approximately 312,000 tons pursuant to its contract with Point Lisas Nitrogen and approximately 139,000 tons from non-affiliates for resale or upgrade to other fertilizer products. In fiscal 2003, the Company sold approximately 689,000 tons of anhydrous ammonia, approximately 654,000 tons of which were sold as a raw material for industrial users. The Company consumed approximately 814,000 tons of anhydrous ammonia as a raw material to manufacture its other nitrogen products, melamine, and diammonium phosphate.

The basic nitrogen product is anhydrous ammonia, which is a necessary raw material for the production of the Company's other nitrogen products. Anhydrous ammonia, which is 82% nitrogen, is the most concentrated nitrogen product available. It is synthesized as a gas under high temperature and pressure. The Company uses natural gas, atmospheric nitrogen, and steam to produce anhydrous ammonia.

Ammonium Nitrate. The Company produced approximately 610,000 tons of solid ammonium nitrate fertilizer at its Yazoo City facility in fiscal 2004. During this period, the Company sold approximately 633,000 tons of solid ammonium nitrate fertilizer to fertilizer dealers and distributors and approximately 16,000 tons of ammonium nitrate synthesis to industrial users.

~~UAN~~ The ~~Solution~~Company is the largest manufacturer and marketer of agricultural‑grade ammonium nitrate fertilizer in the United States, which is sold under the registered trade name Amtrate®. Ammonium nitrate, which is 34% nitrogen, is produced by reacting anhydrous ammonia and nitric acid. Ammonium nitrate is less subject to volatilization (evaporation) losses than other nitrogen products. Due to its stable nature, ammonium nitrate is the product of choice for such uses as pastures and no‑till row crops where fertilizer is spread upon the surface and is subject to volatilization losses. The use of conservation tillage, which reduces soil erosion, is increasing in the United States and should have a positive impact on ammonium nitrate demand.

~~The~~ UAN ~~N-Sol 32Ò product is a 32% nitrogen product that is made by mixing urea liquor and ammonium nitrate liquor~~Solution. The ~~N-Sol 32Ò~~Company ~~product~~produced approximately ~~is used as a direct application product for cotton~~323,000 ~~corn,~~tons ~~grains,~~of ~~and~~UAN ~~pastures,~~solution asat ~~well~~its asYazoo City ~~for~~facility ~~use~~ in ~~liquid fertilizer blends~~fiscal 2004. The ~~Over~~Company ~~the~~sold ~~past~~approximately ~~20 years~~323,000 ~~there~~tons ~~has been a substantial increase in the use~~ of UAN solution ~~due~~ to fertilizer ~~the~~dealers ~~overall~~and ~~growth~~distributors in fiscal 2004 under the ~~agricultural~~N‑Sol 32® ~~consumption~~trade name.

~~Page~~ The 4N‑Sol 32® product is a 32% nitrogen product that is made by mixing urea liquor and ammonium nitrate liquor. The N‑Sol 32® product is used as a direct application product for cotton, corn, grains, and pastures, as well as for use in liquid fertilizer blends. The growth in agricultural use of UAN solution is attributable to its effectiveness as a replacement product for ammonia, which evaporates more quickly and costs more to apply.

of Nitric ~~nitrogen~~Acid. In ~~products~~fiscal in2004, the Company ~~United~~produced ~~States~~approximately ~~and~~660,000 ~~because~~tons ~~UAN~~of ~~solution~~nitric isacid ~~being~~at ~~used~~its Yazoo City facility. The Company uses substantially all of its nitric acid as a ~~replacement~~raw ~~product~~material for ~~ammonia~~the ~~used~~production of ~~for~~ammonium ~~direct~~nitrate ~~application~~and UAN solutions. In fiscal 2004, the Company sold approximately 41,000 tons of nitric acid to ~~crops~~industrial users.

Urea. In fiscal 2003, the Company produced approximately 272,000 tons of prilled urea and urea melt at its Donaldsonville facility. During this period, the Company sold approximately 241,000 tons of prilled urea and approximately 29,000 tons of urea synthesis. In addition, the Company purchased and resold approximately 5,000 tons of granular urea in fiscal 2003. Approximately 48% of our urea tons were sold to industrial users and approximately 19% to manufacturers of animal feeds.

Urea is synthesized by the reaction of ammonia and carbon dioxide. At 46% nitrogen by weight, urea is the most concentrated form of dry nitrogen. Because urea undergoes a complex series of changes within the soil before the nitrogen it contains is ultimately converted into a form that can be used by plants, it is considered a long-lasting form of nitrogen. As a fertilizer product, urea is acceptable as both a direct-application material and as an ingredient in fertilizer blends.

Nitric Acid.

Nitric acid is made by oxidizing ammonia with air. Nitric acid is used by industrial customers to produce end products such as nylon fibers, polyurethane foams, rubber chemicals and specialty fibers. The Yazoo City facility has the largest single site capacity for nitric acid in the United States.

Dinitrogen Tetroxide. In fiscal 2004, the Company received a $3.5 million facility fee to produce dinotrogen tetroxide ("N₂O₄") for the United States Defense Energy Support Center ("DESC"). The Company manufactured approximately 834,000 pounds of N₂O₄.

N₂O₄ is the propellant oxidizer used in various satellite, rocket, and missile propulsion systems. It is also used by industrial customers in the manufacture of pharmaceuticals and in the manufacture of pulp and paper. N₂O₄ is produced by cooling and condensing a slipstream of process gas from a nitric acid plant containing various oxides of nitrogen. The recovered product is filtered and its composition adjusted to meet the final product specifications.

Production and Properties

Yazoo City, Mississippi. The Yazoo City facility is a closely integrated, multiplant production complex located on approximately 2,240 acres, with approximately 60 acres of such land subject to a long‑term lease with Yazoo County, Mississippi. The complex includes two anhydrous ammonia plants, five nitric acid plants, an ammonium nitrate plant, two urea plants, a UAN solution plant and an N2O4 production and storage facility. The Company's corporate headquarters is located adjacent to the Yazoo City plant.

The Company's annual anhydrous ammonia production capacity at the Yazoo City facility is approximately 669,000 tons, and its annual solid ammonium nitrate production capacity is approximately ~~773~~835,000 tons. Ammonium nitrate production capacity is lower than the prior year due to an increase in the prill Size Guide Number ("SNG") to 220 SGN from 200 SGN, which is a component used in the calculation of production capacities. During fiscal ~~2003~~2004, the operating rates for ammonia and ammonium nitrate at the Yazoo City facility were approximately 6858% and 8873%, respectively. The Yazoo City facility also has annual nitric acid production capacity of approximately 1,055,000 tons, annual UAN solution production capacity of approximately 588,000 tons, and annual urea synthesis production capacity of approximately 197,000 tons. During fiscal ~~2003~~2004, the operating rate for UAN solution at the Yazoo City facility was approximately 7455%. The ~~plant~~Yazoo City ~~has~~facility ~~storage~~is ~~facilities~~under contract ~~for~~through ~~anhydrous~~August ~~ammonia~~2007 ~~(36,000~~as ~~tons),~~the ~~ammonium~~sole ~~nitrate~~provider ~~(51,700~~of ~~tons),~~N2O4 for ~~nitric~~the ~~acid~~DESC. The ~~(4,300~~N2O4 ~~tons),~~plant ~~and~~is ~~UAN~~fully ~~solution~~capable ~~(48,000~~of ~~tons)~~meeting the annual contract requirements of the DESC.

The Yazoo City facility ~~includes~~has astorage ~~20.5~~facilities ~~megawatt cogeneration~~for ~~facility that produces savings by the simultaneous generation of~~anhydrous ~~electricity~~ammonia ~~and~~(36,000 ~~steam.~~tons), ~~Adequate~~ammonium ~~backup~~nitrate ~~electricity~~(51,700 ~~and~~tons), ~~water~~nitric ~~supply~~acid ~~are~~(4,300 ~~available.~~tons), ~~The Yazoo City plant~~ and ~~the~~UAN ~~port~~solution ~~facility have direct access to barge~~(48,000 ~~rail, and~~tons).

~~Page~~ The Yazoo City facility includes a 20.5 megawatt cogeneration facility that produces savings by the simultaneous efficient generation of electricity and steam. Adequate backup electricity, water supply, and steam generation capacity are available. The Yazoo City plant and port facility have direct access to barge, rail, and truck transportation and the plant is strategically located for the purchase of competitively priced natural gas.

~~truck~~ Donaldsonville, Louisiana. ~~transportation~~The ~~and~~Donaldsonville facility is a closely integrated, multi-plant production complex located on approximately 766 acres fronting the ~~Yazoo~~Mississippi ~~City~~River at Donaldsonville, Louisiana. The facility includes two anhydrous ammonia plants with a combined annual production capacity of approximately 1,004,000 tons, a urea plant iswith an annual urea synthesis production capacity of ~~strategically~~approximately ~~located~~587,000 tons, ~~for~~an annual prilled urea capacity of approximately 396,000 tons, and two melamine crystal production plants with a combined annual production capacity of approximately 115 million pounds. Only one of the ~~purchase~~melamine plants, which has a capacity of ~~competitively~~80 million ~~priced~~tons, was ~~natural~~run ~~gas~~in fiscal year 2004.

~~Donaldsonville~~ In April 2004, ~~Louisiana~~the ammonia No. 1 plant, urea plant, and melamine M‑I plant were indefinitely idled due to market conditions. The ammonia No. 2 plant, which has a capacity of 534,000 tons, operates on a swing basis as market conditions dictate. During fiscal 2004, the operating rates for ammonia, prilled urea, and melamine were 40%, 11% and 46% (M‑I only), respectively. The plant has storage facilities for anhydrous ammonia (60,000 tons), bulk urea (40,000 tons), and melamine (6,000,000 pounds).

In The ~~April~~Donaldsonville ~~2003,~~facility wehas ready ~~purchased~~access ofto ~~all~~rail, oftruck, ~~the~~and ~~common~~ammonia ~~stock~~pipeline ~~of Melamine Chemicals, Inc~~transportation. The ~~("MCI"),~~plant ~~that~~is also ~~owns~~equipped with a ~~melamine~~deep‑water ~~crystal~~port ~~production~~ facility ~~located~~on ~~within~~the ~~our~~Mississippi ~~Donaldsonville~~River, ~~Louisiana,~~allowing ~~complex.~~access ~~The terms of the transaction were not material~~ to economical ~~either~~oceangoing ~~party.~~vessel ~~Melamine~~and ~~crystal~~barge istransportation ~~a raw material~~ for ~~manufacturers~~its inurea ~~the construction/remodeling~~ and ~~automotive industries~~ammonia products. The ~~MCI~~facility ~~owns~~has ~~two~~adequate ~~production~~supplies ~~units with the combined capacity to produce approximately 115 million pounds~~ of ~~melamine~~electricity aand ~~year.~~water ~~Initially,~~and weis well‑positioned ~~intend~~for tothe ~~operate~~purchase ~~only one facility that will produce approximately 80 million pounds~~ of ~~melamine~~competitively apriced ~~year~~natural gas.

Point Lisas, Trinidad. The ~~Donaldsonville~~Point Lisas Nitrogen facility has ~~ready~~an ~~access~~annual production capacity attributable to ~~rail,~~the Company's ~~truck,~~50% ~~and~~interest ~~ammonia~~of ~~pipeline~~approximately ~~transportation~~358,000 tons. In ~~The~~fiscal ~~plant~~2004, isthe Company ~~also~~purchased ~~equipped~~approximately ~~with~~375,000 atons ~~deep-water~~of ~~port~~ammonia ~~facility~~from on the ~~Mississippi~~Point ~~River,~~Lisas Nitrogen ~~allowing~~facility. This ~~access~~ammonia towas ~~economical~~used ~~oceangoing~~as ~~vessel~~a ~~and~~raw ~~barge~~material ~~transportation~~ for ~~its~~upgrading ~~urea~~into finished ~~and~~fertilizer ~~ammonia~~ products. ~~The~~at ~~facility~~the ~~has~~Company's ~~adequate~~existing ~~supplies~~facilities ~~of electricity~~ and ~~water~~to ~~and is well-positioned for~~ meet the ~~purchase~~Company's ofcontractual ~~competitively~~commitments ~~priced~~to ~~natural~~certain ~~gas~~industrial customers.

Point Lisas, Trinidad

Marketing and Distribution

The Company sells its nitrogen products to fertilizer dealers and distributors as well as industrial users located primarily in the southern region of the United States where its facilities are located. In fiscal ~~2003~~2004, approximately 3942% of the Company's nitrogen tons sold were to industrial users, which represents approximately 5053% of nitrogen net sales. Although the Company has traditionally sold the majority of its nitrogen products through the agricultural fertilizer distribution chain, the Company continues to focus its efforts on increasing the percentage of nitrogen product sold to industrial users in order to reduce the Company's exposure to the seasonal and cyclical nature of the agricultural fertilizer markets. However, during fiscal ~~2003~~2004, industrial sales tons were ~~down~~unchanged ~~11%~~ compared to fiscal ~~2002~~2003, primarily due to ~~the~~our ~~idling~~lack orof ~~closure~~liquidity ofneeded ~~plants~~to inimprove our industrial ~~primary~~ammonia ~~trade~~sales ~~area~~and asterminal aactivities, ~~result~~as ofwell ~~the~~as ~~general~~our ~~downturn in the U~~bankruptcy status.~~S. economy.~~

In the agricultural fertilizer distribution chain, distributors operate as wholesalers supplying dealers who, in turn, sell directly to farmers. Larger customers (distributors and large multi-‑location dealers) arrange for distribution, storage, and financing of nitrogen products. The majority of the Company's agricultural sales are made to distributors and large dealers in the Company's primary trade area, while almost all industrial sales are made directly to the end user. The ten states that make up the Company's primary trade area are Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, Tennessee, and Texas.

~~Page~~ The 5Company transports its nitrogen products by barge, rail, pipeline, truck and oceangoing vessels. To serve our customers, place our nitrogen products in strategically located, high‑consumption areas, and enhance our distribution capabilities, we enter into a variety of contractual relationships with customers in the fertilizer distribution chain. The Company owns a 50% interest in an ammonia storage terminal in Pasadena, Texas, and a 50% interest in FMCL Limited Liability Company, a joint venture with Koch Nitrogen Company that provides transportation of ammonia from the Point Lisas Nitrogen facility in Trinidad to the United States and other world markets. FMCL Limited Liability Company has executed one long‑term time charter agreement for oceangoing vessels with a European ship owner. The agreement establishes a fixed charter rate for the vessel during the entire time that the agreement is in effect. The Company believes that the time charter agreement provides a hedge against unfavorable fluctuations in shipping rates and is a cost‑effective method of transporting its Trinidad product.

trade area, while almost all industrial sales are made directly to the end user. The ten states that make up the Company's primary trade area are Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, Tennessee, and Texas.

The Company transports its nitrogen products by barge, rail, pipeline, truck and oceangoing vessels. To serve our customers, place our nitrogen products in strategically located, high-consumption areas, and enhance our distribution capabilities, we enter into a variety of contractual relationships with customers in the fertilizer distribution chain. The Company owns a 50% interest in an ammonia storage terminal in Pasadena, Texas, and a 50% interest in FMCL Limited Liability Company, a joint venture with Koch Nitrogen Company that provides transportation of ammonia from the Point Lisas Nitrogen facility in Trinidad to the United States and other world markets. FMCL has executed one long-term time charter agreement for oceangoing vessels with a European ship owner. The agreement establishes a fixed charter rate for the vessel during the entire time that the agreement is in effect. The Company believes that the time charter agreement provides a hedge against unfavorable fluctuations in shipping rates and will be a cost-effective method of transporting its Trinidad product.

Raw Materials

Natural Gas. Natural gas is the primary raw material used by the Company in the manufacture of nitrogen products. Natural gas is used both as a chemical feedstock and as a fuel to produce anhydrous ammonia, which is upgraded into other nitrogen products. During fiscal 2004, natural gas prices increased significantly relative to fiscal 2003 with NYMEX monthly settlements averaging approximately $5.31 per MMBtu in fiscal 2004 versus approximately $4.79 per MMBtu in fiscal 2003. This resulted in natural gas representing approximately 88% of the Company's cost of producing ammonia. Because there are no commercially feasible alternatives for natural gas in the production of ammonia, the economic success of the Company's nitrogen business depends upon the availability of reasonably priced natural gas relative to the prevailing market price for nitrogen products.

The Company's total delivered natural gas cost generally consists of two components -- the market price of the natural gas in the producing area at the point of delivery into a pipeline and the fee charged by the pipeline for transporting the natural gas to the Company's plants. The cost of the transportation component can vary substantially depending on whether or not the pipeline has to compete for business. Therefore, it is extremely important to the Company's competitiveness that it have access to multiple natural gas sources and transportation services.

~~Natural~~ During normal operations, natural gas requirements for the Yazoo City facility are approximately 54,~~000~~500 MMBtu's per day. ~~During normal operation~~ Routinely, the Company purchases natural gas for the Yazoo City facility via market-‑sensitive pricing from ~~two~~three natural gas marketers, Interconn Resources, Inc. ("Interconn") Bridgeline ~~and~~Gas ~~Cinergy~~ Marketing ~~and~~LLC ~~Trading~~("Bridgeline"), LPand Crosstex Gulf Coast Marketing, Ltd. ("~~Cinergy~~Crosstex"). ~~and~~Natural gas is also purchased directly from a producer with reserves located in Rankin County, Mississippi, Pursue Energy Corporation ("Pursue"). Delivery of gas purchased from Interconn and ~~Cinergy~~Bridgeline is effected through the Yazoo City facility's direct connections to the interstate pipeline systems operated by Southern Natural Gas Company and Texas Eastern Transmission Corporation, respectively. Purchases from ~~Pursue's~~Crosstex ~~reserves~~and ~~located~~Pursue ~~in Rankin County, Mississippi,~~ are delivered via a natural gas pipeline owned by CenterPoint Energy Entex ("Entex"). The Entex pipeline facilities connect Crosstex's intrastate pipeline affiliate, Crosstex Energy, L.P. (from which ~~connects~~Crosstex sources on‑system gas) and Pursue's processing plant with the Company's Yazoo City plant. The Entex pipeline also provides direct access to the Gulf South interstate pipeline system asproviding ~~well as an intrastate pipeline system owned by Crosstex Energy, L.P. Connection to these two pipeline systems provide~~ additional flexibility of supply to the Yazoo City plant.

Natural gas requirements for the Donaldsonville facility, when operating, are approximately 5349,000 MMBtu's per day under its current configuration. The Donaldsonville facility is located in one of the primary natural gas producing regions of the United States. The facility is currently connected to five intrastate pipeline systems. The ~~and~~Donaldsonville facility's ~~benefits~~current natural gas requirements are being served via purchases from two ~~competition~~marketers, ~~among~~Bridgeline and Cypress Gas Marketing, LLC via market‑sensitive pricing with delivery effected through the ~~many~~pipeline ~~suppliers~~systems ~~that~~of ~~have~~Bridgeline Holdings, ~~transport~~ L.P., Cypress Gas Pipeline, LLC, and Acadian Gas Pipeline System.

Page 7

capabilities on the intrastate lines. The Donaldsonville facility's current natural gas requirements are being served via purchases from two marketers, Bridgeline Gas Marketing LLC and Cypress Gas Marketing, LLC via market-sensitive pricing with delivery effected through the pipeline systems of Bridgeline Holdings, L.P., and Cypress Gas Pipeline, LLC, respectively.

The Company's natural gas supply agreements normally have terms of one to two years. As a result of favorable access to natural gas supplies at the Yazoo City and Donaldsonville facilities, the Company believes that it will have adequate access to meet its natural gas requirements. There have been no significant supply interruptions at either location.

Gas prices can be influenced significantly by short-‑term factors such as weather, storage levels, gas transportation interruptions, and competing fuel prices. In the past, the Company has used derivative transactions such as natural gas futures contracts, swaps, options, or similar derivative instruments related to the price of natural gas to manage its natural gas price risk.

Ammonia. Ammonia is a necessary raw material for production of the Company's other nitrogen products. The Company supplied the majority of its ammonia requirements in fiscal 2004. Third‑party ammonia purchases by the Company from outside suppliers in fiscal 2004 for resale and production of its other nitrogen products totaled approximately 129,000 tons, compared to approximately 117,000 tons purchased from third‑parties in fiscal 2003. This increase is attributable to the fact that our facilities were idled during a substantial part of the first fiscal quarter of 2004. The Company anticipates that it will be able to supply substantially all of its ammonia requirements in fiscal 2005 from the Company's ammonia plants at the Yazoo City facility, the Donaldsonville facility, and the Trinidad facility, or from third‑party purchases. Natural gas prices will continue to play a major role in determining how we operate our plants as we seek to match production to market conditions.

~~Phosphate~~Employees

~~Products~~ As of September 15, 2004, the Company employed approximately 517 persons throughout all of its locations, none of whom are represented by unions.

~~The~~Discontinued Company produces diammonium phosphate fertilizer ("DAP") at its facility in Pascagoula, Mississippi. In fiscal 2003, the Company produced approximately 697,000 tons of DAP and sold approximately 712,000 tons. Net sales of DAP by the Company in fiscal 2003 were approximately $102.3 million, which represented approximately 23% of consolidated net sales.Segments

~~DAP~~ Phosphates. In June 2004, is the ~~most~~Company's ~~common~~Board ~~form~~ of ~~phosphate~~Directors ~~fertilizer.~~authorized ~~DAP~~management isto pursue ~~produced~~the bydivestiture ~~reacting~~of ~~phosphate~~its ~~rock~~wholly ~~with~~owned ~~sulfuric~~subsidiary ~~acid~~Mississippi toPhosphates Corporation ~~produce~~as ~~phosphoric~~part ~~acid,~~of ~~which~~its isplan ~~then~~to ~~combined~~emerge ~~with~~from ~~ammonia~~bankruptcy. The ~~DAP~~Pascagoula ~~contains~~facility ~~18%~~is ~~nitrogen~~still ~~and~~in operation ~~46%~~as ~~phosphate~~market ~~(P205)~~conditions bydictate, ~~weight.~~but ~~DAP~~such isassets anare ~~important~~classified ~~fertilizer~~as discontinued ~~product~~assets ~~both~~on ~~for~~the ~~direct~~Company's ~~application~~2004 ~~and~~consolidated ~~for~~balance ~~use~~sheet. In fiscal in2004, ~~blended~~the ~~fertilizers~~Pascagoula ~~applied~~facility tosold all ~~major~~of the ~~types~~approximately 657,000 tons of ~~row~~diammonium ~~crops~~phosphate it produced. Net sales by Mississippi Phosphates in fiscal 2004 were approximately $116.4 million.

~~Page~~ Potash. On March 1, 2004, the Company sold substantially all of its Carlsbad, New Mexico, potash assets to affiliates of Intrepid Mining LLC. In fiscal 2004, the Carlsbad facility sold approximately 518,000 tons and produced approximately 428,000 tons of potash. Net sales of potash in fiscal 2004 were approximately $46.8 million.

~~Production~~ Melamine/Urea. On March 25, 2004, the Company permanently shut down its melamine and ~~Properties~~urea operations at Donaldsonville, Louisiana. In fiscal 2004, the Donaldsonville melamine crystal facility sold approximately 43.4 million pounds and produced approximately 37.2 million pounds of melamine crystal. Net sales of melamine crystal by the Company in fiscal 2004 were approximately $18.0 million. In fiscal year 2004, approximately 78,700 tons of urea synthesis were sold, resulting in net sales of $15.0 million

The Company's phosphate production complex in Pascagoula, Mississippi, is located on approximately 2,100 acres. The Pascagoula facility is a closely integrated, multiplant phosphatic fertilizer complex where the primary facilities are two phosphoric acid plants, two sulfuric acid plants, and a DAP granulation plant. The phosphoric acid plants have an annual production capacity of approximately 415,000 tons, the two sulfuric acid plants have a combined annual production capacity of approximately 1,031,000 tons, and the DAP granulation plant has an annual production capacity of approximately 868,000 tons. During fiscal 2003, the operating rate for DAP at the Pascagoula facility was approximately 80%. The plant has storage facilities for finished product (80,000 tons), as well as for the primary raw materials: phosphate rock (100,000 tons), sulfur (10,000 tons), and ammonia (25,000 tons). For information regarding the Company's phosphogypsum disposal facilities, see "Certain Business Factors - Compliance With Environmental Regulations" below in this Item 1.

The plant site fronts a deep-water channel that provides direct access to the Gulf of Mexico. The complex contains docks and off-loading facilities for receiving shipload quantities of phosphate rock, sulfur, and ammonia and for out-loading DAP and monoammonium phosphate (MAP).

Marketing and Distribution

Almost all of our DAP sales are for agricultural use. Since October 1, 1997, all of the Company's export sales of DAP have been made through Phosphate Chemicals Export Association, Inc., a Webb-Pomerene corporation known as PhosChem, and all domestic sales of DAP have been made through the Company's internal sales staff. In fiscal 2003, DAP sales to PhosChem represented approximately 12% of our consolidated net sales and approximately 52% of total DAP sales by the Company, which exports went primarily to China. China received approximately 51% of the total DAP tonnage sold by the Company in fiscal 2003. Most domestic sales are made in barge-lot quantities to major fertilizer distributors and dealers located on the Mississippi River system. The vast majority of the Company's DAP is transported by ship and barge, although truck and rail access is also available.

Raw Materials

Phosphate Rock

Sulfur

Page 9

plant at Pascagoula, Mississippi, near major oil and gas fields that supply substantial amounts of sulfur, provides the Company with a strategic advantage in the purchase of sulfur over its Florida competitors.

Ammonia

Potash

Products

The Company produces potash at two mines and related facilities near Carlsbad, New Mexico, which are referred to by the Company as the "East Facility" and the "West Facility." The Company also operates a granular compaction plant near the East and West Facilities which is referred to as the "North Facility." In fiscal 2003, the Company produced approximately 872,000 tons of potash and sold approximately 810,000 tons, primarily in granular form. Net sales of potash products by the Company in fiscal 2003 were approximately $69.5 million, which represented approximately 16% of consolidated net sales.

The Company's potash is mined from subterranean salt deposits containing a mixture of potassium chloride and sodium chloride. The Carlsbad, New Mexico, potash deposits are located from 800 to 1,200 feet below the surface. Potash is produced in a refining process by which the potassium chloride is separated from the sodium chloride.

Potash is an important fertilizer product for both direct application and for use in blended fertilizers applied to all types of crops. In addition, certain forms of potash can be used as a raw material in the production of industrial products such as potassium hydroxide and potassium nitrate.

Production and Properties

The West Facility, which consists of a potash mine and refinery, has an annual production capacity of approximately 538,000 tons of red potash. The West Facility is located on approximately 1,046 acres that are subject to long-term federal leases. All of the refined product produced at the West Facility is transported to the North Facility compaction plant where the vast majority is converted to granular form and is sold to agricultural fertilizer dealers and distributors. A small portion of the production from the West Facility is sold directly as a standard grade product. The North Facility has an annual granulation capacity of approximately 550,000 tons and is located on approximately 1,387 acres, with approximately 1,027 acres of such land subject to long-term federal potassium leases. Located contiguous to the North Facility are storage (160,000-ton capacity) and shipping facilities from which the finished product is transported by rail and truck to agricultural customers in both the domestic and export markets. During fiscal 2003, the combined operating rate for the West Facility and the North facility was approximately 88%.

The East Facility, which has an annual production capacity of approximately 560,000 tons of white potash (currently 409,000 tons due to reduced operations on a 10/4 schedule), consists of a potash mine, refinery, and compaction plant. During fiscal 2003, the operating rate for the East Facility was approximately 97% based on a 10/4 schedule. All of the refined product produced at the East Facility is a higher-purity white potash in standard form. Approximately 44% of the East Facility production can be converted to a granular form at the on-site compaction plant and sold as an agricultural

Page 10

fertilizer. The remaining product is sold to agricultural and industrial users in its original standard form. The East Facility is located on approximately 1,609 acres, with approximately 1,289 acres of such land subject to long-term federal and state potassium leases. The East Facility also has storage (160,000-ton capacity) and shipping facilities suitable for the distribution of product by rail and truck to the Company's agricultural and industrial customers. During fiscal 2001, the East Facility began mining toward the West Facility, and we anticipate connecting these two facilities by the end of fiscal 2004, which we expect to provide improved ore grades, operational flexibility, and economies of scale.

On December 3, 1997, the Company suspended plant operations at its Eddy Potash, Inc., mine and refinery because the depletion of the higher-grade ore zone rendered the continued operation of conventional mining methods at Eddy Potash uneconomical. The Company continues to evaluate alternative mining methods for the Eddy Potash reserves.

The Company's potash reserves are controlled under long-term federal and state potassium leases on approximately 100,000 surface acres, which consist of approximately 220,000 subsurface acres due to the naturally occurring overlap of ore zones in the Carlsbad potash basin. The estimates of potash ore reserves provided below were calculated using the latest bore-hole data and sophisticated modeling programs, which were completed in September 2000 and adjusted for the actual mined tons through June 2003.

The Company's proven and probable reserves at the West Facility are estimated to be 344 million tons (the "West Facility Reserves") with an average grade of 15.6% K2O. The Company estimates that it can mine 314 million tons of the West Facility Reserves at an average grade of 14.8% K2O using current mining technology. The Company's proven and probable reserves at the North Facility are estimated to be 95 million tons (the "North Facility Reserves") with an average grade of 14.5% K2O. The Company estimates that it can mine 79 million tons of the North Facility Reserves at an average grade of 14.5% K2O using current mining technology. The Company's proven and probable reserves at the East Facility are estimated to be 128 million tons (the "East Facility Reserves") with an average grade of 14.9% K2O. The Company estimates that it can mine 108 million tons of the East Facility Reserves at an average grade of 14.4% K2O using current mining technology.

The Company's total proven and probable reserves (the "Total Reserves") are estimated to be 567 million tons with an average grade of 15.2% K2O. The Company estimates that it can mine 501 million tons of the Total Reserves at an average grade of 14.7% K2O (the "Mineable Reserves") using current mining technology and that the Mineable Reserves will yield 98 million tons of muriate of potash ("KCL") available for sale to customers. Eddy Potash's reserves are excluded since these estimates include only the reserves which can be economically recovered by conventional mining techniques. At current production rates and with current mining technology, the Company's Mineable Reserves have a remaining life of several decades.

In 1995, the Company and all other potash facilities operating in the Carlsbad area signed a memorandum of understanding ("MOU") with the U.S. Department of the Interior, Bureau of Land Management ("BLM"). In this MOU, the Company agreed to develop plans for closing those surface lands disturbed by potash mining operations at its facilities when those facilities reached the end of their useful lives. The MOU also required provision of financial assurance for executing these plans. Closure plans for the Company's facilities have been prepared and approved by the BLM. As of the date of this filing, the Company was still negotiating the terms of a financial assurance arrangement with the BLM. For more information regarding our estimates of closure costs and related accruals, see "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Closure Costs" in this Annual Report on Form 10-K.

Marketing and Distribution

The majority of the Company's agricultural potash sales are in domestic markets in the states west of the Mississippi River where it enjoys freight cost advantages over Canadian and overseas potash producers in certain areas of its market territory. In order to increase profit margins, domestic sales are targeted for locations along the freight route of the Burlington Northern Santa Fe Railroad. Domestic potash marketing is coordinated from a sales office located in Arlington, Texas. The Company enters into a variety of contractual relationships with customers engaged in the distribution of potash to fertilizer, industrial, and animal feed markets throughout the western half of the United States and Mexico. These contracts place the Company's potash products in strategically located, high-consumption areas, and enhance our distribution capabilities.

Fiscal 2003 industrial potash sales represented approximately 12% of potash tons sold and approximately 15% of potash net sales. Approximately 17% of the Company's fiscal 2003 potash tons sold were to international markets, which represented approximately 16% of potash net sales. The Company's potash export sales are made through Potash Corporation of Saskatchewan Sales Limited. The fiscal 2003 export sales were to Barbados, Belize, Brazil, Colombia, Dominican Republic, Japan, Martinique, and Mexico. Potash for export is transported by rail to Mexico and to terminal facilities on the Texas Gulf Coast, where it is loaded onto oceangoing vessels for shipment.

CERTAIN BUSINESS FACTORS

Factors Affecting Fertilizer Demand and Prices

With virtually all of our ~~nitrogen~~ net sales from ~~and~~continuing ~~approximately~~operations ~~86% of our consolidated net sales~~ in fiscal ~~2003~~2004 derived from domestic markets, the Company's operating results are highly dependent upon conditions in the U.S. agricultural industry. A variety of factors beyond the Company's control can materially affect domestic fertilizer demand and pricing. These factors include, but are not limited to, futures prices for crops that require significant fertilizer application, U.S. planted acreage, government agricultural policies, fertilizer application rates and product selection, projected grain stocks, crop failure, weather, changing or unpredictable crop choices by farmers and changes in agricultural production methods. Since fertilizers, particularly anhydrous ammonia ~~and urea~~, are also used for industrial applications, industrial markets and the general economy can also affect product demand and prices~~, as reflected by the decrease in industrial tons sold in fiscal 2003~~.

International market conditions also significantly influence the Company's operating results. The market for fertilizers is influenced by such factors as the availability of inexpensive natural gas in foreign countries, the relative value of the U.S. dollar and its impact upon the cost of importing or exporting fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries, and other regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and investment. The Company is also subject to general risks of doing business abroad, including risks associated with economic or political instability.

Fertilizer prices can be extremely volatile, with significant price changes from one growing season to the next. Fertilizers are global commodities and can be subject to intense price competition from domestic and foreign sources. No assurance can be given that average realized prices paid for the Company's fertilizer products will be at any given level.

Page 12

Dependence on Natural Gas

Natural gas is the primary raw material used in the manufacture of nitrogen products. Natural gas is used as both a chemical feedstock and a fuel to produce anhydrous ammonia, which is then used in the production of all other nitrogen products. Anhydrous ammonia is also a raw material in the production of DAP. Accordingly, the Company's profitability is dependent upon the price and availability of natural gas. A significant increase in the price of natural gas without a corresponding increase in the price of the Company's nitrogen products, or an extended interruption in the supply of natural gas to our production facilities, will have a material adverse effect on our results of operations and financial condition.

Seasonality

Sales of the Company's fertilizer products to agricultural customers are typically seasonal in nature and usually result in the Company's generating a greater amount of net sales and operating income in the Spring (the Company's third and fourth fiscal quarters). However, quarterly results can vary significantly from one year to the next due primarily to weather-‑related shifts in planting schedules and purchase patterns, as well as the relationship between natural gas and nitrogen product prices. In addition, the seasonal nature of our business requires us to incur appreciable expenditures for fixed costs throughout the year and for inventory in advance of the spring planting season. The Company plans to increase the percentage of its net sales to industrial customers whose purchases are more evenly spread over the Company's fiscal year. Approximately 26% of the Company's tons sold for fiscal year 2003 were attributable to industrial sales, which represents approximately 33% of consolidated net sales. The Company anticipates that the percentage of net sales to industrial customers will increase over the next several fiscal years.

Competition

Since fertilizers are global commodities available from numerous sources, fertilizer suppliers compete primarily on the basis of delivered price. Other competitive factors include product quality, customer service, plant efficiency, and availability of product. As a result, markets for our products are highly competitive. The Company competes with a broad range of domestic and international producers, including farmer cooperatives, subsidiaries of larger companies, ~~integrated energy companies,~~ and independent fertilizer companies. Many of the Company's competitors have larger financial resources and sales than the Company. Foreign competitors often have access to cheaper raw materials or are owned or subsidized by their governments and, as a result, may have cost advantages over domestic companies. Additionally, foreign competitors are frequently motivated by nonmarket ~~non-market~~ factors such as the need for hard currency.

~~Nitrogen~~ Maintaining low production costs is critical to competitiveness. Natural gas comprises a significant portion of the raw materials cost of the Company's nitrogen products. Thus, competitive natural gas purchasing is essential to maintaining the Company's cost competitiveness. This is especially true considering that certain of the Company's foreign competitors can purchase natural gas at a lower price than the price typically paid by the Company. Also important to maintaining competitiveness is efficient use of natural gas because of the energy‑intensive nature of the nitrogen business. Therefore, cost‑competitive production facilities that allow flexible upgrading of ammonia to other finished products are critical to a low‑cost competitive position. In the highly fragmented nitrogen market, product quality and customer service also can be sources of product differentiation.

Competition is based largely on the delivered price of nitrogen products, therefore, maintaining low production costs is critical to competitiveness. Natural gas comprises a significant portion of the raw materials cost of the Company's nitrogen products. Thus, competitive natural gas purchasing is essential to maintaining the Company's cost competitiveness. This is especially true considering that certain of the Company's foreign competitors can purchase natural gas at a lower price than the price typically paid by the Company. Our results of operations in fiscal 2003, continued to be adversely affected by imported product made with low-cost natural gas. Also important to maintaining competitiveness is efficient use of natural gas because of the energy-intensive nature of the nitrogen business. Therefore, cost-competitive production facilities that allow flexible upgrading of ammonia to other finished

Page 13

products are critical to a low-cost competitive position. In the highly fragmented nitrogen market, product quality and customer service also can be sources of product differentiation.

Phosphate

The Company customarily sells a majority of its DAP through PhosChem to international markets. The U.S. phosphate industry is concentrated, and the Company is smaller than most of its competitors in terms of resources and sales. Most of the Company's principal competitors have captive sources of some or all of the raw materials needed to manufacture DAP, which may provide them with cost advantages. The Company's long-term phosphate rock contract with OCP has a flexible pricing mechanism that is a key element to the Company's ability to compete.

Potash

Most potash consumed in the United States is provided by large Canadian producers who have economies of scale and lower variable costs than their U.S. counterparts. The dominant competitors in this industry are Potash Corporation of Saskatchewan and IMC Global, Inc. Our subsidiary, Mississippi Potash, Inc., and IMC Global, Inc., own approximately 81% of U.S. potash production capacity, substantially all of which is located in the Carlsbad, New Mexico, area. While the Carlsbad producers have higher mining costs and lower average ore grades than the Canadian producers, this disadvantage may be offset by logistical and freight advantages in certain markets in the southwestern United States and the lower United States Corn Belt.

Compliance With Environmental Regulations

The Company's operations are subject to federal, state, and local laws and regulations pertaining to the environment, among which are the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, and various other federal and state statutes. The Company's facilities require operating permits that are subject to review by governmental agencies.

Capital expenditures related to environmental obligations for the past three fiscal years were approximately as follows: 2004 - $1.86 million; 2003 - $725,000; and 2002 - $3.6 million~~; and 2001 - $270,000~~. Fiscal ~~2003~~2004 environmental capital expenditures were primarily attributable to costs at our Pascagoula facility ~~for~~and the ~~completion of a water treatment facility, the~~ ongoing closure of the West phosphogypsum disposal facility (the "West Disposal Facility") ~~and the installation of an acid spill neutralization unit~~. Projected environmental capital expenditures are approximately $2.64 million for fiscal year 2004 and approximately $1.04 million for fiscal year 2005, including $2.18 million and $190,000, respectively, for the West Disposal Facility closure. Also, in fiscal year 2005, we project $350,000 in capital expenditures at our Donaldsonville, Louisiana, facility to comply with new federal emissions control rules for the Baton Rouge Ozone Nonattainment Area. As of June 30, 2003, the Company has accrued approximately $8.7 million in costs for the multiyear closure of the West Disposal Facility. We do not anticipate accruing additional costs relating to the closure of the West Disposal Facility. Regulatory officials have approved the Company's engineering plan for closure of the West Disposal Facility and have issued a compliance order with respect to our plan. On March 29, 2002, our Pascagoula facility opened a new phosphogypsum disposal facility, and we expect to accrue closure costs over a 22-year period. For more information regarding our estimates of closure costs and related accruals, see "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Closure Costs" in this Annual Report on Form 10-K.

~~Page~~ Projected environmental 14capital expenditures are approximately $1.19 million for fiscal year 2005 and approximately $750,000 for fiscal year 2006. Fiscal 2005 projected expenses include $305,000 for the West Disposal Facility closure, $350,000 in capital expenditures at our Donaldsonville, Louisiana, facility to comply with new federal emissions control rules for the Baton Rouge Ozone Nonattainment Area, and $237,500 to remediate Laguna Toston in Carlsbad, New Mexico. Fiscal 2006 projected expenses include $388,000 to complete the West Disposal Facility closure.

As of June 30, 2004, the Company has accrued approximately $2.4 million in costs for the multiyear closure of the West Disposal Facility. We do not anticipate accruing additional costs relating to the closure of the West Disposal Facility. Regulatory officials have approved the Company's engineering plan for closure of the West Disposal Facility and have issued a compliance order with respect to our plan. Two of the three closure phases are complete. On March 29, 2002, our Pascagoula facility opened a new phosphogypsum disposal facility (the "East Disposal Facility"), and we expect to accrue closure costs over a 22‑year period, which is the estimated useful life. At June 30, 2004, the Company had accrued approximately $4.5 million related to closure of the East Disposal Facility. For more information regarding our estimates of closure costs and related accruals, see "Item 7 ‑ Management's Discussion and Analysis of Financial Condition and Results of Operations ‑ Critical Accounting Policies ‑ Closure Costs" in this Annual Report on Form 10‑K.

The Company believes that its policies and procedures now in effect are in compliance with applicable environmental laws and with the permits relating to the facilities in all material respects. However, in the normal course of its business, the Company is exposed to risks relating to possible releases of hazardous substances into the environment. Such releases could cause substantial damage or injuries. Although environmental expenditures have not been material during the last three fiscal years, it is impossible to predict or quantify the impact of future environmental laws, regulations and costs.

Financial Information About Foreign and Domestic Sales and Operations

The amount of revenue attributable to the Company's sales to foreign and domestic markets over the last three fiscal years and the carrying value of the Company's foreign and domestic assets over the last three fiscal years is set forth in Item 8 of this Annual Report on Form 10-‑K under the caption "Note 1115 -‑ Segment Information" contained in the "Notes to Consolidated Financial Statements."

~~EXECUTIVE OFFICERS AND EMPLOYEES~~Reorganization

~~Executive~~ Our ability ~~Officers~~to continue as a going concern is dependent upon, but not limited to, the confirmation of a plan of reorganization, continued access to adequate sources of capital, continued compliance with debt covenants under the Replacement ~~Registrant~~DIP, the ability to sustain positive cash flows sufficient to fund operations and repay debt, and retention of key suppliers, customers and employees. No assurance can be given that we will be successful in reorganizing our affairs through the Case.

Executive officers are elected for a one-year term by the Board of Directors. The Company's executive officers are as follows:

Name of Officer	Age	Office and Employment During the Last Five Fiscal Years
Timothy A. Dawson	49	Senior Vice President and Chief Financial Officer since April 22, 1999; Vice President-Finance (1996-1999)
Charles O. Dunn	55	President and Chief Executive Officer since April 1, 1993
Gary C. Elliott	56	Vice President-Marketing and Distribution since February 18, 2003; Director of Nitrogen and Phosphates (1998-2003); Director of Ammonia and Phosphates (1996-1998)
Joe A. Ewing	52	Vice President-Human Resources since April 1, 2003; Vice President-Marketing and Distribution (1999-2003); Director of Marketing and Distribution (1998-1999); Director of Converted Nitrogen Sales (1997-1998)
Larry W. Holley	55	Vice President-Nitrogen Production since November 1, 2000; President of Farmland MissChem Limited in Trinidad (1998-2000); Vice President-Nitrogen Production (1997-1998)
Robert E. Jones	56	Senior Vice President-Corporate Development since October 1, 1997
C. E. McCraw	55	Senior Vice President-Operations since July 12, 1994
William L. Smith	53	Vice President and General Counsel since November 11, 1998; General Counsel (1997-1998)
Ethel Truly	53	Vice President-Administration since January 18, 1996
Carl R. Wallace	50	Vice President-Technical Group since January 1, 2002; Director of Technical Group (2001); Production Manager (1998-2001); Ammonia Oxidation Plant/Urea Superintendent (1992-1998)

Page 15

Employees

As of October 1, 2003, the Company employed approximately 1,124 persons throughout all of its locations, none of whom are represented by unions.

ITEM 2. PROPERTIES

Information regarding the location and general character of the Company's ~~plants~~material ~~and~~properties ~~mines~~ is included in this Annual Report on Form 10-‑K in Part I, Item 1 "Business," under the ~~headings~~heading "~~Production and Properties~~OPERATIONS" ~~and "Marketing and Distribution" for each operating segment~~.

ITEM 3. LEGAL PROCEEDINGS

Information required by this Item regarding the Company's bankruptcy filing is included in this Annual Report on Form 10-‑K in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Petition for Relief Under Chapter 11 of the United States Bankruptcy Code."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, ~~AND~~ RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded "over-‑the-‑counter" on the OTC Bulletin Board under the symbol "MSPIQ". The high and low sales prices as reported by the ~~New York Stock Exchange and the~~ OTC Bulletin Board for each quarter of fiscal ~~2003~~ 2004 and ~~2002~~2003 required by this Item 5 appear in the quarterly results tables under the heading "Quarterly Results" inat the end of Item 8 of this Annual Report on Form 10-‑K.

Holders

As of ~~October 1~~September 15, ~~2003~~2004, the record number of holders of our common stock was 12,~~250~~140.

Dividends

~~Historically, we paid a quarterly cash dividend as shown in the quarterly results tables under the heading "Quarterly Results" in Item 8 of this Annual Report on Form 10-K.~~ Due to our performance, the Board discontinued the payment of cash dividends with the first quarter of fiscal 2001. The ~~DIP~~Company's ~~Credit~~secured ~~Facility~~financing does not permit the payment of a cash dividend.

Page 16

ITEM 6. SELECTED FINANCIAL DATA

Income Statement Data:	Fiscal Years Ended June 30
(In thousands, except per share data)	2003	2002	2001	2000	1999
Net sales	$ 444,346	$ 451,294	$ 540,401	$ 485,199	$ 467,899
Operating (loss) income	$(110,085)	$(133,242)	$(105,153)	$ (19,624)	$ 8,455
Net loss	$(105,853)	$(121,196)	$ (95,249)	$ (23,664)	$ (3,608)
Loss per share - basic and diluted	$ (4.04)	$ (4.64)	$ (3.64)	$ (0.91)	$ (0.14)
Weighted average common shares outstanding - basic	26,190	26,141	26,132	26,132	26,392
Weighted average common shares outstanding - diluted	26,190	26,141	26,132	26,132	26,392
Balance Sheet Data:	June 30
(In thousands, except per share data)	2003	2002	2001	2000	1999
Working capital (deficit)	$ (41,878)	$ (21,981)	$ 113,785	$ 90,706	$ 84,364
Total assets	$ 548,090	$ 630,285	$ 779,607	$ 870,689	$ 898,888
Long-term debt, excluding long-term debt due within one year	$ -	$ 214,215	$ 386,285	$ 330,307	$ 305,857
Liabilities subject to compromise	$ 249,132	$ -	$ -	$ -	$ -
Shareholders' equity	$ 56,776	$ 179,476	$ 289,757	$ 391,598	$ 420,228
Cash dividends declared per common share	$ -	$ -	$ 0.03	$ 0.19	$ 0.40

During fiscal 2004, we recorded discontinued operations related to our potash, phosphates and melamine/urea operations. All prior years data has been restated to reflect these changes (see Note 21).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Income Statement Data:	Fiscal Years Ended June 30
(In thousands, except per share data)	2004	2003	2002	2001	2000
Net sales	$ 300,450	$ 237,919	$ 207,855	$ 370,012	$ 291,268
Operating income (loss)	$ 28,030	$ (77,615)	$(135,242)	$ (93,472)	$ (28,389)
Loss from continuing operations	$ (68,331)	$ (80,248)	$(115,621)	$ (84,356)	$ (22,524)
Loss from discontinued operations	$ (68,663)	$ (25,605)	$ (5,575)	$ (10,893)	$ (1,140)
Net loss	$(136,994)	$(105,853)	$(121,196)	$ (95,249)	$ (23,664)
Loss per share from continuing operations ‑ basic and diluted	$ (2.77)	$ (3.06)	$ (4.42)	$ (3.23)	$ (0.86)
Loss per share from discontinued operations ‑ basic and diluted	$ (2.79)	$ (0.98)	$ (0.22)	$ (0.41)	$ (0.05)
Net loss per share	$ (5.56)	$ (4.04)	$ (4.64)	$ (3.64)	$ (0.91)
Weighted average common shares outstanding - basic and diluted	24,627	26,190	26,141	26,132	26,132

Balance Sheet Data:	June 30
(In thousands, except per share data)	2004	2003	2002	2001	2000
Working capital (deficit)	$ (63,509)	$ (41,878)	$ (21,981)	$ 113,785	$ 90,706
Total assets	$ 387,636	$ 548,090	$ 630,285	$ 779,607	$ 870,689
Long‑term debt, excluding long‑term debt due within one year	$ -	$ -	$ 104,043	$ 386,285	$ 330,307
Other long‑term liabilities and deferred credits	$ 26,368	$ 36,872	$ 12,540	$ 10,922	$ 9,995
Liabilities subject to compromise	$ 231,899	$ 249,132	$ -	$ -	$ -
Shareholders' (deficit) equity	$ (78,983)	$ 56,776	$ 179,476	$ 289,757	$ 391,598
Cash dividends declared per common share	$ -	$ -	$ -	$ 0.03	$ 0.19

~~GENERAL~~ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our operations are organized into three strategic business units: nitrogen, phosphate and potash. Our nitrogen business unit produces nitrogen products for distribution to fertilizer dealers and distributors and industrial users located primarily in the southern region of the United States. Our phosphate business unit produces diammonium phosphate fertilizer (commonly referred to as "DAP") and exports approximately half of its production through Phosphate Chemicals Export Association, Inc., a Webb-Pomerene corporation known as "PhosChem." Our potash business unit mines and produces agricultural and industrial potash products for sale to farmers, fertilizer dealers and distributors, and industrial users for use primarily in the southern and western regions of the United States. Our products and primary raw materials (particularly natural gas) are commodities, prices for which can be very volatile. These commodities' prices and the global supply/demand balance for our products do not necessarily change in relation to one another and may impact our performance in different ways. GENERAL

~~The~~Our nitrogen ~~trading~~business ofunit ~~our~~produces ~~common~~nitrogen ~~stock~~products ~~commenced~~for ondistribution ~~the~~to fertilizer ~~Over~~dealers and distributors and industrial users located primarily in the ~~Counter~~southern ~~Bulletin~~region ~~Board~~of onthe ~~February~~United States. 10 Our products and primary raw materials (particularly natural gas) are commodities, ~~2003.~~prices ~~Our~~for ~~current~~which ~~trading~~can ~~symbol~~be isvery ~~MSPIQ~~volatile. These Ascommodities' ofprices and ~~October 1,~~the ~~2003,~~global supply/demand balance for our ~~shareholders~~products ofdo ~~record~~not ~~numbered~~necessarily ~~12,250~~change in relation to one another and may impact our performance in different ways.

During ~~Page~~fiscal 172004, we reduced the size and scope of our operations. On March 2, 2004, our potash assets in Carlsbad, New Mexico, were sold for approximately $28.4 million and the proceeds were used to reduce debt. Our melamine and related urea operations in Donaldsonville, Louisiana, were permanently shut down on March 24, 2004. In June 2004, our board of directors authorized management to pursue a divestiture of our wholly owned subsidiary, Mississippi Phosphates Corporation ("Mississippi Phosphates"), as part of our plan to emerge from bankruptcy. As a result of these changes, the financial results of these operations are classified as discontinued operations.

~~Petition~~ Our continuing ~~for~~operations ~~Relief~~consist ~~Under~~of ~~Chapter~~nitrogen 11facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana, our 50% interest in Point Lisas Nitrogen Limited in The Republic of ~~the~~Trinidad and ~~United~~Tobago, ~~States~~and ~~Bankruptcy~~our ~~Code~~50% interest in an ammonia terminal located near Houston, Texas.

OnThe trading ~~May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine~~ of ~~its~~our ~~direct~~common ~~and~~stock ~~indirect~~commenced ~~subsidiaries~~on ~~(collectively,~~ the ~~"Debtors")~~Over ~~filed voluntary petitions to reorganize under Chapter 11 of~~ the ~~United~~Counter ~~States~~Bulletin ~~Bankruptcy~~Board ~~Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District~~ of ~~Mississippi~~ February 10, ~~Jackson, Mississippi (the "Court")~~2003. Our ~~The~~current ~~cases~~trading ~~are~~symbol ~~being administered jointly in Joint Case Number 03-02984 WEE, collectively ("Case")~~is MSPIQ. As ~~debtors-in-possession, the Debtors are authorized to operate their business but may not engage in transactions outside the ordinary course~~ of ~~business~~September ~~without the approval of the Court. On May 16~~15, ~~2003~~2004, ~~the~~our ~~Court~~shareholders rendered an Interim Order approving the Debtors' request for interim financing, and on October 2, 2003, the Court entered a Final Order approving debtor-in-possession financing with Harris Trust and Savings Bank and a syndicate of record ~~six~~numbered ~~other lenders~~12,140.

~~The~~Petition for ~~Debtors~~Relief ~~sought~~Under ~~relief under~~ Chapter 11 of the United States Bankruptcy Code because of a lack of liquidity. The combination of the depression in the agricultural sector, several waves of low priced imports, and the extreme increase in price level and price volatility of domestic natural gas, the Company's primary raw material, had resulted in substantial financial losses for the Company for the last five years.

On May ~~June 6~~15, 2003, (the ~~Court~~"Petition ~~appointed~~Date"), ~~the~~Mississippi ~~Official~~Chemical ~~Committee~~Corporation and nine of ~~Unsecured~~its ~~Creditors~~direct toand ~~represent~~indirect subsidiaries (collectively, the "Debtors"), ~~interests~~filed voluntary petitions to reorganize under Chapter 11 of the ~~unsecured~~United ~~creditors.~~States ~~This~~Bankruptcy ~~committee~~Code ~~will~~(the ~~monitor~~"Bankruptcy Code") ~~our~~in ~~financial~~the ~~condition~~United ~~and~~States ~~restructuring~~Bankruptcy ~~activities~~Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"). The Wecases are ~~required~~being administered tojointly ~~reimburse~~in ~~certain~~Joint ~~fees~~Case ~~and~~Number ~~expenses~~03-02984 WEE, collectively (the "Case"). The Debtors sought relief under Chapter 11 of the Bankruptcy ~~committee~~Code because of a lack of liquidity. The combination of the depression in the agricultural sector, ~~including~~several ~~fees~~waves ~~for~~of ~~attorneys~~low priced imports, and the ~~other~~extreme ~~professionals~~increase toin price level and price volatility of domestic natural gas, the ~~extent~~Company's ~~allowed~~primary byraw material, had resulted in substantial financial losses for the ~~Court~~Company for the last five years.

As debtors-in-possession, the Debtors, subject to any required Court approval, may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts, and other unexpired executory pre-petition contracts. We do not believe that rejection damages will be material; however, we cannot currently determine with certainty the aggregate liability that will result from the filing and settlement of claims related to any rejected contracts.

~~Pursuant to the provisions of the Bankruptcy Code~~As debtors-in-possession, the Debtors are ~~currently~~authorized ~~developing a plan of reorganization. The principal objective of the plan of reorganization will be~~ to ~~restructure~~operate ~~the~~their ~~Debtors'~~business ~~obligations~~but may tonot ~~creditors~~engage in atransactions ~~manner~~outside ~~which~~the ~~will~~ordinary ~~permit~~course usof ~~to continue as a viable~~ business ~~organization. The Bankruptcy Code allows~~ without the ~~Debtors~~approval ~~the exclusive right to file a plan~~ of ~~reorganization during~~ the ~~first~~Court. On ~~120~~May ~~days~~16, ~~from the Petition Date~~2003, ~~or such time as~~ the Court ~~orders.~~rendered Inan ~~October 2003,~~Interim Order ~~the~~approving ~~Court extended~~ the Debtors' ~~exclusivity~~request ~~period~~for tointerim ~~file~~financing, aand ~~plan of reorganization until December~~on October 112, 2003, ~~or until such time~~ the Court ~~issues~~entered ~~its~~a ~~final~~Final ~~ruling.~~Order ~~Although~~approving debtor-in-possession werevolving ~~expect~~credit tofinancing ~~file a plan~~ of ~~reorganization~~$32.5 million, ~~there~~which ~~can~~was automatically bereduced noto ~~assurance~~$22.5 atmillion ~~this~~on ~~time~~March as2, to2004, ~~whether~~immediately orfollowing the ~~when~~sale ~~a plan~~ of ~~reorganization~~our ~~will~~Potash beAssets ~~proposed~~(see byNote ~~the~~21 ~~Debtors,~~to ~~how~~our ~~liabilities~~consolidated ~~and~~financial statements ~~equity~~in ~~interests~~Item ~~will~~8 bebelow). On ~~treated~~December in19, ~~the plan~~2003, ~~whether~~ the ~~plan~~Court ~~will~~entered bea ~~approved~~Final byOrder (the ~~various~~"Supplemental DIP ~~classes~~Order") ofapproving ~~creditors~~supplemental ~~and~~debtor-in-possession ~~equity~~term ~~holders,~~loan financing orof ~~whether it will be approved or confirmed by the Court~~$96.7 Ifmillion (the ~~exclusivity~~"Supplemental ~~period~~DIP"). On ~~were to be terminated without confirmation of a plan of reorganization~~July 15, ~~other interested parties~~2004, ~~such~~the asCourt ~~creditors,~~entered ~~would~~a ~~have~~Final ~~the~~Order ~~right~~approving toa ~~propose~~new ~~alternative plans of reorganization~~$182.5 million ~~Our~~credit ~~plan~~facility of(the ~~reorganization~~"Replacement ~~could~~DIP") ~~substantially~~to ~~change~~refinance ~~the~~all ~~amounts~~our pre-petition and ~~characterization~~post-petition ofsecured ~~liabilities~~debt ~~disclosed~~(as inmore ~~the~~particularly ~~accompanying consolidated financial statements~~described below).

On June ~~October 8~~6, 2003, wethe ~~signed~~Court anappointed ~~agreement~~the ~~with~~Official ~~Koch~~Committee ~~Nitrogen~~of ~~Company~~Unsecured Creditors (the "~~Koch~~Creditors' Committee") to ~~sell~~represent ~~our~~the ~~interest~~interests ~~in Point Lisas Nitrogen for an estimated cash amount~~ of ~~$92.0 million (~~ the ~~"Stalking~~unsecured ~~Horse Agreement")~~creditors. The OnCreditors' ~~October 10,~~Committee ~~2003,~~monitors weour ~~filed~~financial condition ~~motions~~and ~~with~~restructuring ~~the~~activities. We ~~Court~~are ~~seeking~~required to ~~approve~~reimburse ~~the~~certain fees ~~Stalking~~and ~~Horse~~expenses ~~Agreement~~of ~~and~~ the ~~auction~~Creditors' ~~and~~Committee, ~~bid~~including ~~procedures~~fees for anattorneys ~~auction~~and other ofprofessionals ~~our~~to ~~Point~~the ~~Lisas~~extent ~~Nitrogen~~allowed ~~interests~~by tothe beCourt. As ~~sold~~of inJune ~~December 2003.~~30, If2004, ~~Koch~~we ishave ~~not~~paid ~~the~~fees ~~successful~~and ~~bidder~~expenses atof the ~~auction,~~Creditor's Committee ~~Koch~~during ~~will~~the beCase ~~entitled~~in tothe anamount ~~estimated break-up fee~~ of ~~approximately~~ $3.85 million.

~~Page~~ On October 188, 2003, we signed an agreement with Koch Nitrogen Company ("Koch") to sell our interests in Point Lisas Nitrogen Limited ("Point Lisas Nitrogen") for an estimated cash amount of $92.0 million, plus certain assumed liabilities (the "Koch Stalking Horse Agreement"). Subsequently, and in conjunction with the Supplemental DIP Order, we withdrew our motion to sell pursuant to the Koch Stalking Horse Agreement, resulting in the payment of a break-up fee to Koch of approximately $3.8 million (the "Koch Break-Up Fee").

~~Our~~On November ~~ability~~26, to2003, ~~continue~~our assubsidiaries, aMississippi ~~going~~Potash, ~~concern~~Inc. isand ~~dependent upon~~Eddy Potash, ~~but not limited to~~Inc., ~~the~~entered ~~development~~into ~~and confirmation of~~ a ~~plan~~stalking ofhorse ~~reorganization,~~agreement ~~continued access~~ to ~~adequate~~sell ~~sources~~substantially all of ~~capital,~~their ~~continued~~assets ~~compliance~~to ~~with~~subsidiaries ~~debt~~of ~~covenants~~Intrepid ~~under~~Mining ~~the~~LLC ~~debtor-in-possession credit facility,~~ (the ~~ability~~"Intrepid Stalking toHorse ~~sustain~~Agreement"). On ~~positive~~March ~~cash~~2, ~~flows~~2004, ~~sufficient~~these toassets ~~fund~~were ~~operations~~sold. As ~~and~~of ~~repay~~June ~~debt~~30, ~~and retention of key suppliers~~2004, ~~customers and employees. No assurance can be given that~~ we ~~will~~had bereceived ~~successful~~approximately in$27.9 ~~reorganizing~~million ~~our~~related ~~affairs through~~ to the ~~Chapter~~sale 11and ~~bankruptcy~~had ~~proceedings.~~a ~~Because~~receivable of ~~the~~approximately ~~ongoing~~$500,000 ~~nature~~recorded ofon ~~the~~our ~~reorganization~~books for ~~process,~~ the ~~outcome~~remainder of ~~which~~the ispurchase ~~not~~price ~~determinable~~attributable ~~until~~to a ~~plan~~purchase ofprice holdback ~~reorganization~~held isin ~~confirmed~~escrow ~~and~~for ~~implemented,~~contingent ~~the~~indemnification ~~accompanying consolidated financial statements do not include any adjustments that might result from the resolution of these uncertainties~~obligations.

~~Critical~~ On April ~~Accounting~~16, ~~Policies~~2004, the Debtors filed with the Court a joint plan of reorganization and disclosure statement (the "Original Plan"). The principal objective of the Original Plan was to restructure the Debtors' obligations to creditors in a manner that would permit us to continue as a viable business organization. There were objections to the Original Plan. Based on these objections, other alternatives were analyzed.

~~Overview.~~On June ~~Management's~~25, ~~discussion~~2004, ~~and~~the ~~analysis~~Court ofentered ~~our~~an ~~financial~~Interim ~~condition~~Order ~~and~~permitting ~~results~~the $182.5 ofmillion ~~operations~~Replacement ~~should~~DIP beprovided ~~read~~by inthe ~~conjunction~~New ~~with~~York-based ~~our~~lenders ~~consolidated~~Citigroup Global ~~financial~~Markets, ~~statements~~Inc., ~~and~~an ~~related~~affiliate ~~notes appearing in Item 8~~ of ~~this~~Citigroup, ~~Annual~~Perry ~~Report~~Principals onInvestments, LLC, ~~Form~~an ~~10-K.~~affiliate ~~The preparation~~ of ~~these~~Perry ~~financial~~Capital ~~statements requires management to make estimates~~ and ~~assumptions~~Varde ~~that~~Investment ~~affect~~Partners, ~~the~~L.P., ~~reported~~an affiliate ~~amounts~~ of ~~assets~~Varde ~~and~~Partners, ~~liabilities~~Inc. The ~~and~~parties ~~disclosure~~entered ofinto ~~contingent assets and liabilities at~~ the ~~date~~Replacement ofDIP on ~~the~~July ~~financial~~1, ~~statements~~2004, and the ~~reported~~Court ~~amounts~~entered ofa Final ~~revenues~~Order ~~and~~approving ~~expenses during~~ the ~~reporting~~Replacement ~~period.~~DIP ~~The~~on ~~accompanying~~July ~~consolidated~~15, ~~financial~~2004. The ~~statements~~Replacement ~~have~~DIP, ~~been~~which ~~prepared~~includes on a ~~going concern basis~~$22.5 ~~The~~million revolving ~~suitability~~credit offacility ~~using~~provided asolely ~~going~~by ~~concern~~an ~~basis~~affiliate isof ~~dependent upon~~Citigroup, replaced ~~but~~all ~~not~~of ~~limited to,~~ the ~~development~~Company's pre-petition and ~~confirmation~~post-petition ofsecured debt, a portion ~~plan~~ of ~~reorganization,~~which ~~continued~~matured ~~access~~on toJune ~~adequate~~30, ~~sources~~2004. The maturity of ~~capital,~~the ~~continued~~Replacement ~~compliance~~DIP is ~~with~~the ~~debt~~earlier ~~covenants~~of ~~under~~ the ~~debtor-in-possession~~Company's ~~credit~~exit ~~facility,~~from ~~the~~bankruptcy ~~ability~~or toDecember ~~sustain~~31, ~~cash~~2004, ~~flows~~and ~~sufficient~~the toCompany ~~fund~~has ~~operations~~the ~~and~~option ~~repay~~to ~~debt,~~extend ~~and~~the ~~retention~~maturity through ofJune ~~key~~30, ~~suppliers~~2005, ~~customers~~under ~~and~~certain ~~employees~~conditions.

WeOn August ~~have~~9, ~~identified~~2004, ~~below~~Terra ~~the~~Industries ~~accounting~~Inc. ~~policies~~(NYSE: ~~that~~TRA) ~~involve~~and ~~those~~the ~~estimates~~Company announced ~~and~~a ~~assumptions~~definitive ~~that~~agreement weunder ~~believe~~which ~~are~~Terra ~~critical~~will toacquire the Company for an ~~understanding~~estimated total value as of ~~our~~that ~~financial~~date ~~statements.~~of ~~Our~~approximately ~~management~~$268 ~~has~~million. As ~~discussed~~of the announcement date, the ~~development~~transaction consideration included estimated cash and ~~selection~~assumed debt of ~~each~~$161 ~~critical~~million ~~accounting~~and ~~estimate~~stock ~~with~~of $107 million, and the ~~Audit~~final ~~Committee~~value will depend on Terra's share price at closing and closing adjustments. Prior to the close of ~~our~~the ~~Board~~transaction, Mississippi Phosphates will either be sold to a third party or transferred to its unsecured creditors pursuant to the amended plan. Both companies' Boards of Directors, ~~and~~have unanimously approved the transaction. The ~~Audit~~Creditors' Committee, ~~has~~our ~~reviewed~~largest unsecured creditors, and the ~~related~~Replacement ~~disclosures~~DIP inlenders ~~this~~also ~~Item 7~~support the transaction. The ~~Since~~Terra transaction ~~application~~is ofexpected ~~these~~to ~~accounting~~close ~~policies~~no ~~involves~~later than the ~~exercise~~first quarter of ~~judgment~~calendar 2005. More ~~and~~information ~~use~~related ofto ~~estimates~~the transaction can be found in the Stock Purchase Agreement filed on Form 8-K by Terra on August 9, ~~actual~~2004, and ~~results~~in ~~could~~our ~~differ~~Current ~~from~~Reports ~~those~~on ~~estimates~~Form 8-K filed with the SEC on August 9, 2004 and September 8, 2004.

~~Adoption~~On September of2, ~~AICPA~~2004, ~~Statement~~the ofDebtors ~~Position~~filed ~~90-7.~~an Asamended ajoint ~~result~~plan of reorganization ~~filing~~with ~~petitions~~the ~~under~~Court ~~Chapter~~that 11replaced of the ~~Bankruptcy~~Original ~~Code,~~Plan ~~our~~(the "Amended ~~consolidated~~Plan"). The ~~financial~~primary ~~statements~~purpose ~~have~~of ~~been~~the ~~prepared~~Amended inPlan ~~accordance~~is ~~with~~to ~~AICPA~~facilitate ~~Statement~~the acquisition of ~~Position~~the ~~("SOP")~~Company ~~90-7, "Financial Reporting~~ by ~~Entities~~Terra. If ~~in Reorganization under~~ the ~~Bankruptcy~~Terra ~~Code."~~transaction ~~SOP-90-7~~is ~~does~~ not consummated, ~~change~~ the ~~application~~Amended ofPlan ~~accounting~~provides ~~principles~~that ~~generally~~the ~~accepted~~Company inwill ~~the~~emerge ~~United~~from bankruptcy ~~States~~on ofa ~~America~~stand-alone inbasis. In ~~the~~either ~~preparation~~instance, ofthe ~~financial~~Amended ~~statements.~~Plan obligates ~~However,~~the itCompany ~~does~~to ~~require~~dispose ~~that~~of ~~the~~Mississippi ~~financial~~Phosphates ~~statements~~either ~~for~~through ~~the~~a sale ~~periods~~of ~~included~~stock ~~and~~or ~~subsequent~~assets, toor ~~filing~~if asuch ~~Chapter~~sale 11is ~~petition~~not ~~distinguish~~consummated, ~~transactions~~by ~~and~~a ~~events~~distribution of ~~that~~the ~~are~~stock ~~directly~~or ~~associated~~assets ~~with~~of ~~the~~such ~~reorganization~~business ~~from~~to the ~~ongoing~~unsecured ~~operations~~creditors of Mississippi ~~the business~~Phosphates.

~~SOP~~ Under the ~~90-7~~Amended ~~requires~~Plan, (Terra will acquire the Company. Perry Principals Investments LLC, an affiliate of Perry Capital Management Inc., and Citigroup Global Markets, Inc., an affiliate of Citigroup, have entered into a) commitment to extend the term of the term loan portion of the Replacement DIP beyond Mississippi Chemical's emergence from bankruptcy until four years from the closing of the Terra transaction. Terra and the Company will use existing cash on hand to reduce the principal amount of this term loan to $125 million from $160 million and satisfy all other cash payments to creditors required by the Amended Plan. ~~that~~ In ~~pre-petition~~addition, ~~liabilities~~Terra ~~that~~would ~~are~~issue to certain of the Company's unsecured creditors 14.75 million shares of Terra common stock and an amount of preferred stock, subject to ~~compromise~~certain bepost-closing ~~segregated~~adjustments as specified in the ~~consolidated~~definitive agreement. Assuming ~~balance~~the ~~sheets~~Closing Share Price (as ~~liabilities~~defined ~~subject~~in the definitive agreement) is equal to ~~compromise~~$6.14, ~~and~~ (~~b) that~~Terra's ~~revenues~~closing share price on Friday, ~~expenses~~August 6, ~~realized~~2004, ~~gains~~the last trading day prior to the announcement of the agreement), the Company's unsecured creditors would receive Terra common stock with a value of $90.6 million plus the preferred stock. The preferred stock to be issued to unsecured creditors will initially be set with a liquidation preference of $32.2 million. The projected working capital and ~~losses~~other closing adjustments are currently anticipated to total a negative $17.4 million. Under this projected scenario, Terra will issue preferred stock with a liquidation preference of $14.8 million and, ~~provisions~~within ten months of closing, Terra will have the option, but not the obligation, to redeem the preferred stock for ~~losses~~2.4 ~~resulting~~million ~~from~~to 3.4 million shares of Terra common stock to be determined based upon Terra's stock price at closing. Based upon a Closing Share Price of $6.14 per share, Terra would have the ~~reorganization~~right to redeem the preferred stock for 2.4 million Terra common shares. The final amount of the ~~Company~~working becapital ~~reported~~and ~~separately~~other aspost-closing ~~reorganization~~adjustments ~~expense~~will independ on various factors including, but not limited to: business performance, commodity prices and the ~~consolidated~~terms ~~statement~~of final separation of ~~operations~~Mississippi Phosphates. The agreement also provides that Terra will issue 250,000 additional shares of Terra common stock for distribution to the Company's shareholders.

~~Hedging~~Under the ~~Activities.~~Amended ~~Management~~Plan, ~~estimates its natural gas requirements based on~~ the ~~relationship~~Company ~~between~~expects ~~nitrogen~~that ~~product~~substantially ~~prices~~all ~~and~~unsecured creditors ~~the~~with ~~cost~~allowed claims of ~~natural~~$5,000 ~~gas.~~or Weless ~~enter~~from ~~into~~the ~~derivative~~nitrogen ~~transactions~~business towill be ~~protect~~paid ~~future~~in ~~production~~cash, ~~costs~~in ~~against~~full. Substantially ~~price~~all ~~fluctuations~~other ofunsecured ~~natural~~creditors ~~gas,~~with allowed ~~which~~claims isfrom the ~~primary~~nitrogen ~~raw~~business ~~material~~will inbe ~~the~~paid ~~production~~either ofcash ~~our~~equal ~~nitrogen~~to ~~products.~~a specified ~~These~~percentage ~~derivative transactions may consist~~ of ~~futures~~their ~~contracts,~~allowed ~~options,~~claim ~~swaps~~ or ~~similar~~a ~~derivative~~pro-rata ~~instruments~~share ~~related~~of to the ~~price~~pool of Terra ~~natural~~common ~~gas~~and preferred stock. The ~~Gains~~Terra transaction and ~~losses~~Amended onPlan ~~the~~are subject ~~derivative~~to ~~transactions~~Court ~~that~~approval, ~~are~~successful ~~designated~~completion ~~and~~of ~~effective~~the asrestructuring ~~cash~~of ~~flow~~the Company's ~~hedges~~nitrogen ~~are~~and ~~deferred~~phosphate ~~and~~business, atas ~~the~~well ~~time~~as ~~the~~customary ~~related~~regulatory approvals. The ~~finished~~Terra ~~product~~transaction ~~inventory~~ is ~~sold~~also ~~are~~subject ~~recognized~~to asTerra's anability ~~increase~~to orobtain the ~~decrease~~consent inof ~~the~~Terra's ~~purchase~~current ~~cost~~working ofcapital lenders.

~~Page~~ Although the 19Terra transaction is the primary basis of the Amended Plan, the Amended Plan will also provide that if the Terra transaction is not consummated, then the Company would emerge from bankruptcy on a stand-alone basis. The Company's emergence financing will be provided by an existing commitment from Citigroup and Perry Capital. The existence of this alternate plan facilitates the Company's exit from bankruptcy as expeditiously as possible. Under the stand-alone alternative, the Replacement DIP would be repaid, the same cash distributions would be made to holders of allowed unsecured claims as in the Terra transaction, the Company's other unsecured creditors would receive substantially all of the common shares of the reorganized company, and the Company's current shareholders would receive warrants to acquire common shares in the reorganized company.

~~the~~ Our ability ~~related~~to ~~natural~~continue ~~gas.~~as Wea ~~account~~going ~~for~~concern ~~these~~is ~~transactions~~dependent asupon, ~~cash~~but ~~flow~~not ~~hedges~~limited into, the ~~accordance~~confirmation ~~with Statement~~ of ~~Financial~~a ~~Accounting~~plan ~~Standards~~of ~~("SFAS") No. 133~~reorganization, ~~"Accounting~~continued ~~for~~access ~~Derivative~~to ~~and~~adequate sources ~~Hedging~~of ~~Activities~~capital," ~~and~~continued ~~SFAS~~compliance ~~No.~~with ~~138,~~debt ~~"Accounting~~covenants ~~for~~under ~~Certain~~the Replacement ~~Derivative Instruments and Certain Hedging Activities." Accordingly~~DIP, ~~we record~~ the ~~fair~~ability ~~value~~to ofsustain ~~these~~positive ~~instruments~~cash onflows ~~our~~sufficient ~~consolidated~~to ~~balance~~fund operations ~~sheet~~and asrepay adebt, ~~component~~and retention of ~~shareholders'~~key ~~equity~~suppliers, ~~under~~customers ~~the heading "Accumulated Other Comprehensive Income (Loss)"~~and employees. No Atassurance ~~certain~~can ~~times,~~be wegiven ~~determine~~ that itwe iswill ~~not~~be ~~economical~~successful toin reorganizing ~~operate~~ our ~~nitrogen~~affairs ~~production~~through ~~facilities~~the ~~because~~Case. Because of anthe ~~unfavorable~~ongoing ~~relationship~~nature ~~between nitrogen product prices and~~ of the ~~cost~~reorganization ~~of natural gas. When this occurs~~process, the ~~quantity~~outcome of ~~natural~~which ~~gas~~is wenot ~~purchase~~determinable ~~may~~until bea plan ~~less~~of ~~than~~reorganization ~~the~~is ~~quantity~~confirmed ~~we have hedged,~~ and ~~therefore~~implemented, wethe ~~"undesignate"~~accompanying consolidated ~~the~~financial ~~difference~~statements ~~and~~do ~~recognize~~not ~~the~~include ~~ineffective~~any ~~portion~~adjustments ~~immediately~~that inmight result ~~our~~from ~~consolidated~~the ~~statement~~resolution of ~~operations.~~these uncertainties.

~~Material~~Critical ~~changes~~Accounting to our results of operations could occur if our hedging instruments are not highly effective in offsetting cash flows attributable to the hedged risks. We calculate the fair value of our derivative instruments using quoted market prices on the New York Mercantile Exchange ("NYMEX") or valuations determined by our counterparties. Because of delays relating to the Case, we were unable to hedge natural gas from May 16, 2003 through September 28, 2003. Under the Interim Order approving hedging activities, we may only hedge natural gas for the months of November and December 2003, and are subject to certain volume restrictions. We intend to seek further Court approval to conduct hedging activities.Policies

~~During~~Overview. Management's ~~fiscal~~discussion ~~2003,~~and ~~natural~~analysis ~~gas~~of ~~hedging~~our ~~activities~~financial ~~resulted~~condition and results of operations should be read in anconjunction ~~average~~with ~~cost~~our ~~decrease~~consolidated offinancial statements ~~approximately~~and ~~$0.52~~related ~~per~~notes ~~MMBtu~~appearing onin ~~volumes~~Item ~~hedged~~8 of ~~33.5~~this ~~million~~Annual ~~MMBtu's~~Report on Form 10-K. The ~~During~~preparation ~~fiscal~~of ~~2002,~~these ~~natural~~financial ~~gas~~statements ~~hedging~~requires ~~activities~~management ~~resulted~~to make inestimates anand ~~average~~assumptions ~~cost~~that ~~increase~~affect ofthe ~~approximately~~reported ~~$0.39~~amounts ~~per~~of ~~MMBtu~~assets onand liabilities ~~volumes~~and ~~hedged~~disclosure of ~~39.4~~contingent ~~million.~~assets ~~During~~and ~~fiscal~~liabilities ~~2001,~~at ~~natural~~the ~~gas~~date ~~hedging~~of the ~~activities~~financial ~~resulted~~statements, inand anthe ~~average~~reported ~~cost~~amounts ~~decrease~~ of ~~approximately~~revenues $0and expenses during the reporting period.73 The ~~per~~accompanying ~~MMBtu~~consolidated financial statements have been prepared on ~~volumes~~a ~~hedged~~going ofconcern 35basis.2 The ~~million.~~suitability Atof using ~~June 30,~~a ~~2003,~~going weconcern ~~had~~basis nois ~~open~~dependent ~~natural~~upon, ~~gas~~but ~~derivative~~not ~~contracts.~~limited Asto, the confirmation of ~~the~~a ~~same~~plan ~~date~~of reorganization, wecontinued ~~had~~access ~~unrecognized~~to ~~gains~~adequate sources of ~~$210~~capital,~~000~~ oncontinued ~~closed~~compliance ~~natural~~with ~~gas~~debt ~~derivative~~covenants ~~contracts~~under ~~related~~the toReplacement ~~our~~DIP, the ~~hedging~~ability ~~activities~~to ~~that~~sustain ~~were~~positive ~~recorded~~cash asflows asufficient ~~component~~to offund ~~other~~operations ~~comprehensive~~and repay ~~(loss)~~debt, ~~income~~and inretention ~~our~~of ~~consolidated~~key ~~balance~~suppliers, ~~sheet~~customers and employees.

~~Asset Retirement Obligations.~~ We have ~~estimate~~identified ~~closure~~the ~~costs~~accounting ~~for~~policies ~~our~~that ~~Pascagoula,~~involve ~~Mississippi,~~those ~~facilities~~estimates and assumptions ~~our~~that ~~potash~~we ~~mining~~believe ~~facilities~~are ~~located~~critical into ~~Carlsbad,~~an ~~New~~understanding ~~Mexico.~~of ~~These~~our ~~closure~~financial statements. Our ~~costs~~management ~~are~~has ~~recognized~~discussed ~~over~~ the ~~estimated~~development ~~life~~and selection of ~~the~~each critical ~~related~~accounting ~~facilities~~estimate ~~and~~with ~~have~~the ~~been~~Audit ~~recorded~~Committee asof aour ~~component~~Board of Directors, ~~cost~~and ofthe ~~products~~Audit ~~sold~~Committee inhas ~~our~~reviewed ~~consolidated~~the ~~statements~~related ofdisclosures ~~income~~in this Item 7. Since ~~Total~~application ~~accrued~~of ~~closure~~these ~~costs~~accounting atpolicies ~~June 30,~~involves ~~2003~~the exercise of judgment and ~~2002~~use ~~were~~of ~~$11.3~~estimates, ~~million~~actual ~~and~~results ~~$11.1~~could ~~million,~~differ ~~respectively~~from those estimates.

As Adoption of ~~June 30,~~AICPA ~~2003,~~Statement ~~estimated~~of ~~closure~~Position ~~costs~~90-7. As a result of ~~approximately~~filing ~~$2.0~~petitions under ~~million~~Chapter ~~for~~11 ~~our~~of ~~West~~the ~~phosphogypsum~~Bankruptcy ~~disposal~~Code, ~~facility~~our inconsolidated ~~Pascagoula~~financial statements have been ~~recorded~~prepared asin aaccordance ~~component~~with AICPA Statement of ~~other~~Position ("SOP") ~~long~~90-~~term liabilities~~7, ~~and~~"Financial ~~$2.8~~Reporting ~~million~~by ~~have~~Entities ~~been~~in ~~recorded~~Reorganization under asthe ~~accrued~~Bankruptcy ~~liabilities~~Code." SOP We90-7 ~~are~~does ~~currently~~not inchange the ~~process~~application of ~~closing~~U. S. ~~this~~generally ~~facility~~accepted ~~after~~accounting ~~discontinuing~~principles ~~its~~in ~~use during~~ the preparation ~~second quarter~~ of ~~fiscal~~financial ~~2003~~statements. ~~Currently~~ However, ~~the~~it ~~East~~does ~~phosphogypsum~~require ~~disposal~~that ~~facility,~~the financial ~~completed~~statements infor ~~1998~~the ~~and~~periods ~~placed~~included ~~into~~and ~~operation~~subsequent ~~during~~to ~~the~~filing ~~fourth~~a Chapter ~~quarter~~11 ofpetition ~~fiscal~~distinguish ~~2002,~~transactions isand inevents ~~full~~that ~~operation.~~are Atdirectly associated ~~June 30,~~with ~~2003,~~the wereorganization ~~had~~from ~~recorded~~the ~~closure~~ongoing ~~costs~~operations of ~~$4.0~~the ~~million related to this facility~~business.

AsSOP 90-7 ofrequires ~~June 30,~~(a) ~~2003,~~that ~~estimated~~pre-petition ~~closure~~liabilities ~~costs~~that ofare ~~approximately~~subject ~~$2.4 million have been accrued~~ to ~~close~~compromise be ~~our~~segregated ~~potash~~in ~~mining facilities. Of this amount, approximately $2.3 million, which we believe is~~ the ~~full~~consolidated ~~closure~~balance ~~cost,~~sheets ~~has~~as ~~been~~liabilities ~~accrued~~subject ~~for~~to ~~the Eddy Potash~~compromise, and ~~Inc.~~ (~~"Eddy Potash"~~b) ~~facility.~~that ~~Our~~revenues, ~~potash~~expenses, ~~facilities~~realized ingains ~~current~~and ~~operation~~losses, ~~have~~and ~~estimated~~provisions ~~useful~~for losses ~~lives~~resulting ~~spanning~~from ~~several~~the ~~decades.~~reorganization ~~Our current estimates~~ of ~~closure~~the ~~costs~~Company ~~for~~be ~~these~~reported ~~facilities~~separately as ~~are~~reorganization ~~not~~expense ~~currently~~in ~~material~~the toconsolidated ~~our~~statement of operations. ~~We will continue to evaluate such estimates and make adjustments accordingly.~~

~~Effective~~Hedging Activities. Management ~~July~~estimates its natural gas requirements based on the relationship between nitrogen product prices and the cost of natural gas. 1 We enter into derivative transactions to protect future production costs against price fluctuations of natural gas, ~~2002~~which is the primary raw material in the production of our nitrogen products. These derivative transactions may consist of futures contracts, weoptions, ~~adopted~~swaps or similar derivative instruments related to the price of natural gas. Gains and losses on the derivative transactions that are designated and effective as cash flow hedges are deferred and, at the time the related finished product inventory is sold, are recognized as an increase or decrease in the purchase cost of the related natural gas. We account for these transactions as cash flow hedges in accordance with Statement of Financial Accounting Standards ("SFAS") No. ~~143~~133, "Accounting for ~~Asset~~Derivative ~~Retirement~~and ~~Obligations~~Hedging Activities," ~~which~~as ~~addresses~~amended ~~financial~~by ~~accounting~~SFAS No. 149, "Amendment of FASB Statement No. 133 on Derivative and ~~reporting~~Hedging Activities," and SFAS No. 138, "Accounting for ~~obligations~~Certain ~~associated~~Derivative Instruments ~~with~~and Certain Hedging Activities." Accordingly, we record the fair ~~retirement~~value of ~~tangible~~these instruments on our consolidated balance sheets as a component of shareholders' equity under the heading "Accumulated Other Comprehensive Income (Loss)". At certain times, we determine that it is not economical to operate our nitrogen production facilities because of an unfavorable relationship between nitrogen product prices and the cost of natural gas. When this occurs, the quantity of natural gas we purchase may be less than the quantity we have hedged, and therefore, we "undesignate" the difference and recognize the ineffective portion immediately in our consolidated statements of operations.

~~Page~~ Material changes to our results of operations could occur if our hedging instruments are not highly effective in offsetting cash flows attributable to the hedged risks. We calculate the fair value of our derivative instruments using quoted market prices on the New York Mercantile Exchange ("NYMEX") or valuations determined by our counterparties. Because of delays relating to the Case, we were unable to hedge natural gas from May 16, 2003 through September 28, 2003. Under a Final Order entered on October 20, 2003, we obtained authority to hedge 150 natural gas contracts per month on a rolling two-month basis. Under a Final Order entered on January 22, 2004, we were permitted to hedge 450 natural gas contracts per month on a rolling two-month basis. Under a Final Order dated August 19, 2004, approving hedging activities, the Company is permitted to hedge up to 325 natural gas contracts per month for the first and second months of a four-month revolving period and up to an additional 150 natural gas contracts per month for the third and fourth months of said period.

~~long-lived~~ During fiscal ~~assets~~2004, ~~and~~natural ~~the~~gas ~~associated~~hedging ~~asset~~activities ~~retirement~~resulted ~~costs.~~in ~~The~~an ~~assets~~average ~~recorded~~cost increase ~~will~~of beapproximately ~~depreciated~~$0.32 ~~over~~per ~~the~~MMBtu ~~useful~~on ~~lives~~volumes hedged of ~~the~~18.1 ~~assets~~million MMBtu's. During tofiscal be2003, ~~retired.~~natural ~~The~~gas ~~liabilities~~hedging ~~will~~activities beresulted ~~accreted~~in ~~based~~an average oncost ~~the~~decrease ~~effective~~of ~~interest~~approximately ~~method~~$0.52 ~~and~~per ~~the~~MMBtu ~~useful~~on ~~lives~~volumes hedged of 33.5 ~~the~~million. During ~~related~~fiscal ~~facilities~~2002, natural gas hedging activities resulted in an average cost increase of approximately $0.39 Asper ~~required~~MMBtu byon ~~SFAS~~volumes Nohedged of 39.4 ~~143~~million. At June 30, 2004, we ~~will~~had ~~make~~open ~~periodic~~natural ~~assessments~~gas derivative ofcontracts ~~the~~covering ~~reasonableness~~a total volume of ~~closure~~640,000 ~~cost~~MMBtu's ~~estimates~~with ~~for~~contracts extending ~~each~~through ofAugust ~~our~~2004. The ~~facilities~~net unrealized loss on these contracts at June 30, 2004, was $277,000 and ~~make~~was ~~adjustments~~recorded as ~~needed.~~a ~~The~~component ~~resulting~~of ~~adjustments~~other comprehensive loss in our consolidated balance sheet. As ~~will~~of ~~increase~~the orsame ~~decrease~~date, ~~the~~we had ~~amounts~~unrecognized ~~expensed~~losses of $942,000 on closed natural gas derivative contracts related to our hedging activities that were recorded as a component of other comprehensive loss in ~~future~~our ~~periods~~2004 consolidated balance sheet.

~~Significant~~Asset Retirement ~~management~~Obligations. We ~~judgments~~estimate closure costs for our Pascagoula, Mississippi, facilities, and ~~estimates~~at ~~are~~June ~~made~~30, ~~when~~2004, ~~estimating~~had ~~these~~$6.9 ~~costs~~million accrued as a component of liabilities of discontinued operations. These Ifclosure ~~our~~costs are ~~judgments~~recognized ~~and~~over ~~estimates~~the ~~prove~~estimated tolife beof ~~inadequate,~~the ~~our~~related ~~financial~~facilities ~~results~~and ~~could~~have bebeen recorded ~~materially~~as ~~adversely~~a ~~impacted~~component of discontinued operations in ~~future~~our ~~periods~~consolidated statements of operations.

~~Deferred~~As of ~~Taxes~~June 30, 2004, estimated closure costs of approximately $2.4 ~~Deferred~~million ~~income~~for ~~taxes~~our ~~are~~West ~~estimated~~phosphogypsum ~~based~~disposal ~~upon~~facility ~~temporary~~in ~~differences~~Pascagoula have ~~between~~been ~~the~~recorded ~~income~~as ~~and~~a ~~losses~~component ~~that~~of weliabilities ~~report~~of discontinued operations. We are currently in ~~our~~the ~~financial~~process ~~statements~~of ~~and~~closing ~~our~~this ~~taxable~~facility ~~income~~after ~~and~~discontinuing its ~~losses~~use asduring ~~determined~~the ~~under~~second ~~applicable~~quarter ~~tax~~of ~~laws~~fiscal 2003. The InEast ~~making~~phosphogypsum disposal ~~such~~facility ~~estimates~~(the "East Facility"), wecompleted ~~use~~in ~~existing~~1998, ~~tax~~is ~~rates~~in full ~~and~~operation. At ~~laws~~June ~~and~~30, ~~our~~2004, ~~expectations~~we ofhad ~~future~~recorded ~~earnings~~closure costs of $4.5 ~~Our~~million ~~composite~~related ~~statutory~~to ~~tax~~this ~~rate~~facility, and it is ~~estimated~~included toin liabilities beof ~~approximately~~discontinued ~~38%~~operations.

WeIn addition ~~are required~~ to ~~evaluate~~accruing for the ~~likelihood~~closure of ~~our~~the ~~ability~~East toFacility, ~~generate~~Mississippi Phosphates ~~sufficient~~has ~~future~~developed ~~taxable~~a ~~income~~financial ~~that~~assurance ~~will~~mechanism ~~enable~~with usthe toMississippi Department ~~realize~~of ~~the~~Environmental ~~value~~Quality. Quarterly ofpayments ~~our~~will ~~deferred~~be ~~tax~~made ~~assets.~~into Ifa trust ~~we,~~fund inmanaged ~~our~~by ~~judgment,~~Morgan ~~are~~Keegan ~~not~~Trust ~~more~~Company, ~~likely~~FSB. This ~~than~~fund ~~not~~will tobe ~~realize~~used for ~~any~~closure ~~deferred~~and ~~tax~~post-closure ~~assets,~~care ~~then~~of wethe ~~record~~East ~~valuation~~Facility. The ~~allowances~~first ~~against~~payment ~~the~~was made ~~deferred~~April ~~tax~~1, ~~assets.~~2004, Asand as of June 30, ~~2003~~2004, we had ~~recorded~~deposited ~~deferred~~$201,000 ~~tax~~into ~~assets~~this ~~arising~~trust ~~from~~fund. Quarterly ~~federal~~payment ~~and~~amounts ~~state~~will ~~net~~be ~~operating~~reviewed ~~loss~~annually ~~carryovers amounting to approximately $33.7 million~~ and ~~approximately~~adjusted ~~$14~~for inflation.6 These ~~million,~~payments ~~respectively.~~will Wecontinue ~~estimate~~until ~~that~~funds ~~certain~~in ~~deferred~~the ~~tax~~trust ~~assets,~~are ~~principally~~adequate to ~~those~~cover ~~arising~~estimated ~~from~~costs ~~certain~~related ~~state~~to ~~net~~the ~~operating~~closure ~~loss~~of ~~carryforwards,~~the ~~will~~East ~~not be realized~~Facility. The ~~Therefore,~~East Facility wehas ~~have~~an ~~recorded~~estimated ~~valuation~~remaining ~~allowances~~useful ~~against~~life ~~these assets totaling $9.2 million as~~ of ~~June 30,~~22 ~~2003~~years.

AsEffective July ~~part~~1, ~~of the Pre-Petition Facility (as defined below under the heading Liquidity and Capital Resources - Financing Activities - The Pre-Petition Harris Facility)~~2002, awe ~~guarantee~~adopted ofSFAS ~~the~~No. ~~debt was provided by our wholly owned subsidiary~~143, ~~Mississippi~~"Accounting ~~Chemical~~for ~~Holdings,~~Asset ~~Inc. ("MCHI")~~Retirement Obligations," which ~~indirectly~~addresses ~~owns~~financial ~~our~~accounting ~~50%~~and ~~joint~~reporting ~~venture~~for obligations ~~interest~~associated inwith ~~Point~~the ~~Lisas~~retirement ~~Nitrogen~~of ~~Limited,~~tangible ~~formerly~~long-lived ~~known~~assets asand the ~~Farmland~~associated ~~MissChem~~asset ~~Limited,~~retirement ~~("Point~~costs. The ~~Lisas~~assets ~~Nitrogen")~~recorded ~~the~~will ~~operator~~be ofdepreciated over anthe ~~anhydrous~~useful ~~ammonia~~lives ~~facility~~of inthe ~~Point~~assets ~~Lisas,~~to ~~Trinidad.~~be ~~Under U~~retired.S. The ~~tax~~liabilities ~~laws,~~will ~~this~~be accreted ~~guarantee~~based ~~resulted~~on inthe aeffective ~~deemed~~interest ~~non-cash~~method ~~distribution to us of earnings from MCHI (~~and ~~effectively~~the ~~our~~useful ~~portion~~lives of the related ~~earnings~~facilities. As ~~from~~required ~~Point~~by ~~Lisas~~SFAS ~~Nitrogen)~~No. ~~As of June 30~~143, ~~2003,~~we ~~these~~will ~~cumulative~~make ~~earnings~~periodic assessments ~~approximated~~of ~~$38.6~~the ~~million.~~reasonableness Noof ~~U.S.~~closure ~~taxes~~cost ~~are~~estimates ~~currently~~for ~~payable~~each onof ~~these~~our facilities ~~earnings due to significant book~~ and ~~tax~~make ~~accounting~~adjustments ~~differences,~~as ~~primarily~~needed. The ~~with~~resulting ~~respect~~adjustments toin ~~depreciation.~~our consolidated Webalance ~~have~~sheet ~~recorded~~will ~~non-current~~increase ~~deferred~~or ~~tax~~decrease ~~liabilities~~the onamounts ~~these~~expensed ~~earnings~~in future ofperiods. The ~~approximately~~related ~~$14.5~~assets ~~million.~~and ~~While~~liabilities ~~the~~are ~~guarantee~~included ~~remains~~as inpart ~~place,~~of assets weand ~~anticipate~~liabilities ~~recording~~of ~~U.S.~~discontinued ~~taxes~~operations on ~~future~~our ~~earnings~~2004 ~~from~~consolidated balance ~~MCHI and Point Lisas Nitrogen~~sheet.

~~We use significant~~ Significant management judgments and estimates are made when estimating ~~deferred~~these ~~taxes~~costs. If our judgments and estimates prove to be inadequate, ~~or if certain tax rates and laws should change,~~ our financial results could be materially adversely impacted in future periods.

~~Impairment~~Deferred Taxes. Deferred ofincome ~~Long-Lived~~taxes ~~Assets.~~are Weestimated ~~evaluate~~based ~~the~~upon ~~recoverability~~temporary differences ofbetween ~~certain~~the ~~long-lived~~income ~~assets~~and ~~whenever~~losses ~~events~~that orwe ~~changes~~report in ~~circumstances~~our ~~indicate~~financial statements ~~that~~and anour ~~asset's~~taxable ~~carrying~~income ~~amount~~and ~~may~~losses ~~not be recoverable,~~ as ~~required~~determined byunder ~~SFAS~~applicable Notax laws. In ~~144,~~making ~~"Accounting~~such ~~for the Impairment or Disposal of Long-Lived Assets." These evaluations utilize various~~ estimates ~~and judgments. The recoverability of these assets is highly dependent upon the accuracy of various underlying assumptions~~, ~~such~~we asuse ~~future~~existing ~~product~~tax ~~prices~~rates and ~~natural~~laws ~~gas~~and ~~costs.~~our expectations ~~The impairment~~ of anfuture ~~asset is measured by the amount the carrying value of the asset exceeds its fair value~~earnings. Our ~~The~~composite ~~resulting~~statutory ~~amount~~tax ofrate ~~impairment~~ is ~~recorded~~estimated to asbe aapproximately ~~component of results of operations~~38%.

~~Page~~ We are 21required to evaluate the likelihood of our ability to generate sufficient future taxable income that will enable us to realize the value of our deferred tax assets. If we, in our judgment, are not more likely than not to realize any deferred tax assets, then we record valuation allowances against the deferred tax assets. As of June 30, 2004, we had recorded deferred tax assets arising from federal and state net operating loss carryovers amounting to approximately $62.0 million and approximately $16.0 million, respectively. We estimate that certain deferred tax assets, principally those arising from federal net operating loss carryforwards and certain state net operating loss carryforwards, may not be realized. Therefore, we have recorded federal and state valuation allowances against these assets amounting to $41.6 million and $12.8 million as of June 30, 2004, respectively.

At In connection ~~June 30~~with the Supplemental DIP that was repaid on July 1, ~~2003~~2004, weour ~~evaluated~~wholly ~~the~~owned ~~recoverability~~subsidiary, ofMississippi Chemical Holdings, Inc. ("MCHI"), had provided a guarantee on such secured debt. MCHI indirectly owns our ~~long-lived~~50% ~~assets~~joint ~~and~~venture ~~determined~~interest ~~that~~in ~~certain~~Point Lisas Nitrogen, the operator of ~~those~~an ~~assets~~ammonia ~~were~~facility ~~impaired~~in Point Lisas, Trinidad. Under WeU.S. tax ~~recognized~~laws, anthis ~~impairment~~guarantee ~~charge~~resulted ~~totaling~~in ~~$4.2~~a ~~million~~deemed ~~relating~~non-cash distribution to us of earnings from MCHI (and effectively our ~~remaining~~portion ~~ammonia~~of ~~production~~the ~~assets~~earnings ~~located~~from inPoint Lisas ~~Donaldsonville~~Nitrogen). As of June 30, ~~Louisiana~~2004, these cumulative earnings approximated $53.0 million. We ~~had~~recorded ~~previously~~non-current ~~recognized~~deferred ~~impairment~~tax ~~charges~~liabilities on ~~totaling~~these earnings of approximately $7020.93 million. Pursuant ~~during~~to ~~fiscal~~a ~~2003~~Final ~~relating~~Order entered toon ~~our~~July ~~Donaldsonville~~15, ~~Louisiana~~2004, ~~nitrogen~~(as ~~production~~defined ~~facility,~~in ~~which~~more ~~included~~detail ~~our~~under ~~second~~the ~~ammonia~~heading "Liquidity ~~plant~~ and Capital Resources - Financing Activities - Replacement Debtor-in-Possession Credit Facility"), the ~~urea~~debt ~~prilling~~guarantee ~~section~~was released. Effective July 1, 2004, we no longer consider Point Lisas Nitrogen's earnings to be reinvested indefinitely. Accordingly, we expect to record U.S. taxes on those earnings.

~~During~~We use ~~fiscal~~significant ~~2002~~management ~~and~~judgments ~~2001, we assessed the recoverability of the tangible~~ and ~~intangible~~estimates ~~long-lived~~when ~~assets~~recording ~~related~~deferred taxes. If to our ~~nitrogen~~judgments ~~operations pursuant to SFAS No. 121, "Accounting for the Impairment of Long-lived Assets~~ and ~~for~~estimates ~~Long-lived~~prove ~~Assets~~ to be ~~Disposed~~inadequate, ~~of."~~or Weif ~~projected~~certain tax ~~the~~rates ~~undiscounted future cash flows for these operations to test recoverability~~ and ~~determined~~laws ~~that,~~should ~~in certain cases~~change, ~~such cash flows were less than the value of such assets on the consolidated balance sheet, indicating that impairment was likely. Our cash flow projections were based on a third party appraisal of~~ our ~~long-lived~~financial ~~assets~~results ~~and~~could ~~included~~be ~~additional~~materially adversely ~~third~~impacted ~~party and internally developed forecasts of future nitrogen prices and natural gas costs. We determined that we had a permanent impairment~~ in the value of goodwill related to our Donaldsonville, Louisiana, nitrogen production assets acquired in December 1996. Accordingly, a non-cash charge for goodwill impairment of $101.3 million was recorded in the fourth quarter of fiscal 2002. We had made a similar non-cash charge of $58.4 million in the fourth quarter of fiscal 2001. Estimates of such future ~~cash flows are subject to significant uncertainties and assumptions~~periods. ~~Accordingly, actual results could vary significantly from such estimates.~~

~~The~~Impairment or ~~impairment~~Disposal ~~analysis~~of ~~has~~Long-Lived ~~been~~Assets. We ~~prepared~~evaluate onthe arecoverability ~~going~~of certain ~~concern~~long-lived ~~basis,~~assets ~~and~~whenever ~~the~~events ~~Company~~or changes in circumstances indicate that an asset's carrying ~~value~~amount may not be recoverable, as required by SFAS No. 144, "Accounting for ~~its~~the ~~long~~Impairment or Disposal of Long-~~lived~~Lived Assets." These evaluations utilize various estimates and judgments. The recoverability of these assets is ~~presumed~~highly todependent beupon ~~recoverable~~the ~~through~~accuracy of various underlying assumptions, such as future ~~cash~~product ~~flows~~prices and natural gas costs. The Ifimpairment of an asset is measured by the ~~Company~~amount ~~does~~the ~~not~~carrying ~~continue~~value asof athe asset ~~going~~exceeds ~~concern~~its fair value. Impairment charges occurring after May 15, ~~further~~2003 ~~impairment~~are reflected in reorganization expense, except for those charges ~~may~~relating beto ~~necessary~~assets of discontinued operations.

~~Exit~~During fiscal ~~Costs and Disposal Activities. SFAS No. 146~~2004, ~~"Accounting~~we ~~for~~evaluated ~~Costs Associated with Exit and Disposal Activities," issued in July 2002, revised~~ the ~~accounting~~recoverability ~~for~~of ~~activities~~our ~~relating~~long-lived toassets ~~exiting~~and determined orthat ~~disposing~~certain of ~~businesses~~those or assets ~~under~~were ~~EITF~~impaired. We ~~Issue~~recognized ~~No.~~a 94pre-3,tax impairment ~~"Liability~~charge ~~Recognition~~totaling ~~for~~$21.2 ~~Certain~~million ~~Employee~~relating ~~Termination~~to ~~Benefits~~our ~~and~~remaining ~~Other~~ammonia production ~~Costs~~assets tolocated ~~Exit~~in anDonaldsonville, ~~Activity~~Louisiana." This ~~For~~charge ~~most~~was ~~exit~~reflected ~~and~~as ~~disposal~~a ~~activities~~component ~~initiated~~of ~~after~~reorganization ~~December 31,~~expense ~~2002,~~in ~~costs~~the ~~may~~2004 consolidated nostatement ~~longer~~of beoperations. We ~~recorded~~recognized asadditional ~~a one~~pre-~~time~~tax impairment ~~charge~~charges ~~when~~to aour ~~formal~~discontinued ~~commitment~~operations isrelated ~~made~~ to apotash ~~plan to exit an activity or dispose~~ of ~~long-lived assets~~$34. ~~Instead~~0 million, ~~companies~~melamine/urea ~~will~~of ~~record~~$9.3 ~~exit~~million and ~~disposal~~phosphate ~~costs~~of ~~when~~$39.0 ~~they~~million. These charges are ~~incurred~~included ~~and~~in ~~can~~discontinued beoperations ~~measured~~on ~~at fair value, and will subsequently adjust~~ the ~~recorded~~2004 ~~liability~~consolidated statement ~~for~~of ~~changes in estimated cash flows~~operations.

AsDuring fiscal ~~encouraged by the FASB~~2003, we ~~elected~~evaluated tothe ~~adopt~~recoverability ~~SFAS~~of ~~No.~~our ~~146~~long-lived ~~early.~~assets Onand determined ~~December 19,~~that ~~2002,~~certain ~~approximately~~of 40those ~~employees~~assets were ~~provided~~impaired. We arecognized ~~60-day~~an impairment ~~notice~~charge ~~that~~totaling ~~operations would cease at our urea facility located in Donaldsonville, Louisiana~~$62.9 Onmillion ~~February 26,~~relating ~~2003,~~to ~~approximately 24 employees were terminated in light of the change in~~ our ~~anhydrous~~remaining ammonia production atassets ~~our~~located in Donaldsonville, Louisiana~~, facility~~. ~~At June~~ ~~30,~~ We ~~2003,~~recognized wean ~~had~~additional ~~accrued~~pre-tax ~~severance~~impairment ~~costs~~charge ~~of $468,000 related~~ to ~~this~~our ~~change in operations of the prilled~~ urea assets ~~and the No~~of $12. 2 ~~anhydrous~~million, ~~ammonia~~which ~~plant.~~is ~~These~~included ~~amounts~~in ~~are~~discontinued ~~reflected~~operations ~~as a component of liabilities subject to compromise~~ on ~~our~~the 2003 consolidated ~~balance~~statement ~~sheet~~of ~~and were accrued in accordance with SFAS No~~operations. ~~146.~~

~~Inventory~~During fiscal ~~Valuation.~~2002, ~~The~~we ~~value~~assessed the recoverability of the tangible and intangible long-lived assets related to our ~~finished~~nitrogen ~~product~~operations ~~inventories~~pursuant isto ~~stated~~SFAS atNo. 121, "Accounting for the ~~lower~~Impairment of ~~cost~~Long-lived orAssets ~~market~~and for Long-lived Assets to Be Disposed Of." We ~~Cost~~projected ~~has~~the ~~been~~undiscounted ~~determined~~future ~~under~~cash flows afor ~~moving~~these ~~average~~operations ~~cost~~to ~~method.~~test ~~Under~~recoverability ~~certain~~and ~~market~~determined ~~conditions~~that, wein certain ~~make~~cases, ~~certain~~such ~~estimates~~cash ~~and~~flows ~~judgments~~were ~~regarding~~less than the ~~valuation~~value of ~~our~~such ~~inventory~~assets on the consolidated balance sheet, indicating that impairment was likely. Our cash flow projections were based on ~~management's~~a ~~evaluation~~third party appraisal of ~~the~~our ~~price~~long-lived atassets ~~which~~and included weadditional ~~can~~third ~~sell~~party ~~our~~and ~~products.~~internally ~~The~~developed ~~price~~forecasts of future nitrogen prices and ~~demand~~natural ~~for~~gas costs. We determined that we had an impairment in the value of goodwill related to our ~~products~~Donaldsonville, isLouisiana, nitrogen ~~very~~production ~~volatile~~assets acquired in December 1996. Accordingly, Aa ~~decline~~non-cash charge infor ~~price~~goodwill ~~could~~impairment ~~result~~of $101.3 million was recorded in aour ~~lower~~fourth quarter of ~~cost~~fiscal or2002. Estimates ~~market~~of ~~adjustment~~such future cash flows are subject to significant uncertainties and assumptions. Accordingly, actual results could vary significantly from such estimates.

~~Investment in Affiliates.~~ The impairment ~~Company's~~analysis ~~investment~~has inbeen ~~affiliates~~prepared ~~primarily~~on ~~consists~~a ofgoing anconcern ~~investment~~basis inand ~~Point~~the Company's ~~Lisas~~carrying ~~Nitrogen,~~value ~~FMCL~~for ~~Limited~~its ~~Liability~~long-lived ~~Company,~~assets ~~and~~is apresumed ~~50%~~to ~~interest~~be recoverable inthrough anfuture ~~ammonia~~cash ~~storage~~flows. If ~~terminal~~the inCompany ~~Pasadena,~~does ~~Texas.~~not ~~The~~continue ~~Company~~as ~~accounts~~a going ~~for~~concern, ~~its~~further ~~investments~~impairment incharges ~~affiliates~~may ~~under~~be ~~the~~ necessary.

~~Page~~ Exit Costs 22and Disposal Activities. SFAS No. 146, "Accounting for Costs Associated with Exit and Disposal Activities," issued in July 2002, revised the accounting for activities relating to exiting or disposing of businesses or assets under EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." For most exit and disposal activities initiated after December 31, 2002, costs can no longer be recorded as a one-time charge when a formal commitment is made to a plan to exit an activity or dispose of long-lived assets. Instead, we will record exit and disposal costs when they are incurred and can be measured at fair value, and will subsequently adjust the recorded liability for changes in estimated cash flows according to SFAS No. 146.

~~equity~~ Inventory Valuation. The ~~method~~value of ~~accounting.~~our ~~Accordingly,~~finished ~~the~~product ~~Company~~inventories ~~records~~is ~~its~~stated ~~proportionate~~at the ~~share~~lower of ~~the~~cost ~~joint~~or ~~venture's~~market. Cost ~~earnings~~has inbeen ~~Point~~determined ~~Lisas~~under ~~Nitrogen as~~ a ~~component~~moving of average cost ~~of sales~~method. Under ~~Our~~certain ~~proportionate~~market ~~share~~conditions, ofwe ~~earnings~~make ~~for~~certain ~~all~~estimates ~~other~~and judgments ~~investments~~regarding ~~are~~the ~~recorded~~valuation ~~as a component~~ of ~~other~~our ~~income.~~inventory ~~Periodically,~~based ~~the~~on ~~Company~~management's evaluation ~~assesses~~of the ~~carrying~~price ~~value~~at ofwhich ~~its~~we ~~investment~~can insell ~~affiliates.~~our products. The ~~Company~~price ~~will~~and demand ~~record~~for aour ~~loss~~products onis ~~its~~very ~~investment~~volatile. A decline in ~~affiliates~~price atcould ~~that~~result ~~point~~ in ~~time management concludes that~~ a lower ~~decline in the fair value~~ of ~~the~~cost ~~investment~~or ismarket ~~other than temporary~~adjustment. ~~During 2003 and 2002, no such losses have been recorded on its investment in affiliates.~~

Investment ~~RESULTS~~in OFAffiliates. The ~~OPERATIONS~~Company's -investment ~~FISCAL~~in affiliates primarily consists of an investment in Point Lisas Nitrogen, FMCL Limited Liability Company, and a 50% interest in an ammonia storage terminal in Pasadena, Texas. The Company accounts for its investments in affiliates under the equity method of accounting. Accordingly, the Company records its proportionate share of the joint venture's earnings in Point Lisas Nitrogen as a component of cost of products sold. Our proportionate share of earnings for all other investments is recorded as a component of other income. Periodically, the Company assesses the carrying value of its investment in affiliates. The Company will record a loss on its investment in affiliates at that point in time management concludes that a decline in the fair value of the investment is other than temporary. During 2004 and 2003, ~~COMPARED~~no TOsuch ~~FISCAL~~losses ~~2002~~have been recorded on its investment in affiliates.

~~Overview~~Recent Accounting Pronouncements

~~For~~In January 2003, the ~~fiscal~~FASB ~~year~~issued ~~ended~~FASB ~~June 30,~~Interpretation ~~2003~~No. 46, we"Consolidation of ~~incurred~~Variable aInterest ~~net~~Entities." This ~~loss~~interpretation of ~~$105.9~~Accounting Research ~~million~~Bulletin ~~(or $4~~No.04 ~~per~~51, ~~diluted~~"Consolidated ~~share)~~Financial ~~compared~~Statements," addresses toconsolidation aby ~~net~~business ~~loss~~enterprises of ~~$121.2~~variable ~~million~~interest ~~(or~~entities in ~~$4.64~~which ~~per~~the ~~diluted~~equity ~~share)~~investors ~~for~~do ~~the~~not ~~year~~have ~~ended~~a ~~June 30,~~majority ~~2002.~~voting ~~The~~interest ~~non-cash~~and/or ~~impairment~~do not ~~charges~~have ofsufficient ~~$75.1~~equity ~~million~~at risk for the ~~fiscal~~entity ~~year ended June 30, 2003, related~~ to afinance ~~write-down~~its ofoperations without ~~long-lived~~additional ~~assets~~subordinated ~~associated~~financial ~~with~~support ~~our~~from ~~ammonia~~other ~~plants~~parties. We adopted and applied the ~~prilling~~provisions ~~section~~ of ~~our~~this ~~urea~~interpretation ~~plant~~during infiscal ~~Donaldsonville~~2004, without ~~Louisiana.~~a ~~These~~material ~~plants~~effect ~~were~~on ~~determined~~our toconsolidated befinancial ~~impaired~~statements. The ~~and~~FASB revised ~~will~~the ~~not~~Interpretation ~~contribute substantially~~ to ~~our~~address ~~future~~certain ~~ongoing~~technical ~~operations.~~corrections ~~The~~and ~~non-cash~~to clarify ~~impairment~~many ~~charge~~ of ~~$101.3 million for~~ the ~~fiscal~~implementation ~~year~~issues. We ~~ended~~have ~~June 30,~~evaluated ~~2002,~~the ~~resulted~~provisions ~~from a write-down~~ of the ~~all~~revised ~~remaining~~Interpretation ~~goodwill~~and ~~recorded~~concluded inthat ~~connection~~its ~~with~~adoption ~~the~~did ~~December~~not ~~1996~~have ~~acquisition~~a material ofeffect ~~our~~on ~~Donaldsonville,~~the ~~Louisiana,~~consolidated ~~nitrogen~~financial ~~production assets~~statements.

~~Net~~In April ~~sales~~2003, ~~decreased~~the toFASB ~~$444~~issued SFAS No.3 ~~million~~149, in"Amendment ~~fiscal~~of ~~2003~~Statement ~~from~~133 ~~$451~~on Derivative Instruments and Hedging Activities.3" This ~~million~~statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in ~~fiscal~~other ~~2002~~contracts and for hedging activities under FASB Statement No. We133, ~~incurred~~"Accounting for Derivative Instruments and Hedging." This amendment clarifies under what circumstances a contract with an ~~operating~~initial ~~loss~~net investment meets the characteristic of ~~$35.0~~a ~~million~~derivative, inclarifies ~~fiscal~~when ~~2003~~a ~~before~~derivative contains a ~~non-cash~~financial component, ~~impairment~~and ~~charge~~amends the definition of ~~$75.1~~an ~~million,~~underlying ~~compared~~to conform it to anlanguage used ~~operating~~in ~~loss~~FASB ofInterpretation ~~$32~~No.0 ~~million~~45. These changes will result in ~~fiscal~~more consistent ~~2002~~reporting ~~before~~of acontracts ~~non-cash~~as ~~impairment~~either ~~charge~~derivatives ofor ~~$101~~hybrid instruments.3 We ~~million~~adopted this statement on July 1, 2003, with no material effect on our consolidated financial statements.

~~Our~~In May ~~results~~2003, ofthe ~~operations~~FASB ~~have~~issued ~~historically~~SFAS ~~been~~No. ~~influenced~~150, by"Accounting afor ~~number~~Certain Financial Instruments with Characteristics of ~~factors~~both ~~beyond~~Liabilities ~~our~~and ~~control,~~Equity." This statement ~~which~~establishes ~~have~~standards atfor ~~times~~how ~~had~~an aissuer ~~significant~~classifies ~~impact~~and onmeasures certain ~~our~~financial ~~operating~~instruments ~~results.~~with ~~Fertilizer~~characteristics ~~demand~~of ~~and~~both ~~prices~~liabilities ~~are~~and equity. It ~~highly~~requires ~~dependent~~that ~~upon~~any afinancial ~~variety~~instrument ofthat ~~conditions~~is ~~stated~~within inthe scope of this ~~Annual~~statement ~~Report~~be onclassified ~~Form~~as ~~10-K~~a ~~under~~liability. We ~~the~~adopted ~~headings~~this ~~"Certain~~statement ~~Business~~on ~~Factors"~~July ~~in Item~~ 1, ~~and~~2003, ~~"Outlook"~~with ~~and~~no ~~"Forward-Looking~~material effect ~~Statements"~~on inour ~~this~~consolidated ~~Item 7~~financial statements.

~~Net~~ RESULTS ~~Sales~~OF OPERATIONS - FISCAL 2004 COMPARED TO FISCAL 2003

Overview

~~Page~~ For the 23fiscal year ended June 30, 2004, we incurred a net loss of $137.0 million (or $5.56 per diluted share), compared to a net loss of $105.9 million or ($4.04 per diluted share) for the year ended June 30, 2003. Included in the losses for these fiscal years were after-tax losses from discontinued operations related to our potash, phosphate and melamine/urea segments of $57.3 million and $25.6 million, respectively, and an after-tax loss from the sale of our Potash Assets of $11.4 million in fiscal 2004. Also included in these net losses were impairment charges related to our ammonia plants located in Donaldsonville, Louisiana.

~~Summaries~~Our continuing operations now consist of our ~~net~~nitrogen ~~sales~~facilities ~~results~~in byYazoo City, ~~business~~Mississippi, ~~unit~~and ~~are~~Donaldsonville, ~~set~~Louisiana, our ~~forth~~50% ~~below:~~interest in Point Lisas Nitrogen in The Republic of Trinidad and Tobago, and our 50% interest in an ammonia terminal located near Houston, Texas.

	Fiscal Years Ended June 30
(Dollars in thousands)			%
	2003	2002	Inc. (Dec.)
Net Sales:
Nitrogen	$271,022	$262,575	3%
DAP	102,261	110,047	(7)%
Potash	69,499	77,477	(10)%
Other	1,564	1,195	31%
Net Sales	$444,346	$451,294	(2)%

Net sales increased to $300.5 million in fiscal 2004 from $237.9 million in fiscal 2003. We had operating income from continuing operations of $28.0 million in fiscal 2004, compared to an operating loss from continuing operations of $77.6 million in fiscal 2003, which included a non-cash impairment charge of $62.9 million.

	Fiscal Years Ended June 30
(Tons in thousands)			%
	2003	2002	Inc. (Dec.)
Tons Sold:
Nitrogen:
Ammonia	689	742	(7)%
Ammonium Nitrate	675	779	(13)%
Urea	275	461	(40)%
Nitrogen solutions	475	474	0%
Nitric acid	28	33	(15)%
Total Nitrogen	2,142	2,489	(14)%
DAP	712	865	(18)%
Potash	810	912	(11)%

Our results of operations have historically been influenced by a number of factors beyond our control, which have at times had a significant impact on our operating results. Fertilizer demand and sales prices are highly dependent upon a variety of conditions stated in this Annual Report on Form 10‑K under the headings "Certain Business Factors" in Item 1, and "Outlook" and "Forward-Looking Statements" in this Item 7.

	Fiscal Years ended June 30
			%
	2003	2002	Inc. (Dec.)
Average Sales Price Per Ton:
Nitrogen	$ 127	$ 105	21%
DAP	$ 144	$ 127	13%
Potash	$ 86	$ 85	1%

Net Sales

	Fiscal Years Ended June 30
(Dollars in thousands)	2003	2002
Operating (Loss) Income:
Nitrogen (1)	$ (93,100)	$(128,992)
Phosphate	$ (11,752)	$ 2,854
Potash	$ (4,667)	$ (7,902)
Other	$ (566)	$ 798
Total	$(110,085)	$(133,242)

For fiscal 2004, our net sales increased 26% to $300.5 million, from $237.9 million for fiscal 2003. This increase was the result of higher sales prices for all of our nitrogen products, which offset the effect of lower sales volumes of ammonia, ammonium nitrate and nitrogen solutions. Demand for the spring season of fiscal 2004 was not as strong as initial indicators had implied. During the first six months of fiscal 2004, grain prices were increasing rapidly and fertilizer demand was expected to be quite strong. As we entered into the fiscal 2004 spring season, grain prices retreated some and weather became a strong factor. In our core marketing area, we were first affected by drought conditions during March and April, followed by heavy rainfall for May, but we were able to finish the season with strong product movement and ended the year with low inventories.

~~(1) Nitrogen operating losses for fiscal 2003 and 2002 totaled $18.0 million and $27.7 million, respectively, excluding non-cash impairment charges~~ Summaries of ~~$75.1 million and $101.3 million, respectively, related to the write-down of long-lived assets associated with~~ our ~~ammonia~~sales ~~plants~~results ~~and~~by ~~prilling~~business ~~section~~unit ofare ~~the~~set ~~urea~~forth ~~plant at our Donaldsonville, Louisiana, nitrogen facility, and goodwill associated with our Donaldsonville, Louisiana, nitrogen production assets.~~below:

Page 24

	Fiscal Years Ended June 30
			%
	2004	2003	Inc. (Dec.)
	(Dollars in thousands)
Net Sales:
Nitrogen	$298,953	$236,850	26%
Other	1,497	1,069	40%

Net Sales	$300,450	$237,919	26%

Nitrogen

	Fiscal Years Ended June 30
			%
	2004	2003	Inc. (Dec.)
	(Tons in thousands)
Tons Sold:
Nitrogen:
Ammonia	685	689	(1%)
Ammonium Nitrate	649	675	(4%)
Nitrogen solutions	323	475	(32%)
Nitric acid	41	28	46%

Total Nitrogen	1,698	1,867	(9%)

Substantially all of our ammonia sales are to industrial customers. Our ammonia sales volumes decreased 7% because of lower demand from industrial customers affected by a slowdown in economies worldwide, resulting in industrial customer production curtailments and, in some instances, plant closures. Our average ammonia sales price increased 40% as downtime at production points in certain foreign countries, related to political disruptions and natural gas shortages, caused the world supply/demand balance to tighten. In addition, U.S. producers curtailed production at various points during fiscal 2003 in response to high natural gas prices.

	Fiscal Years Ended June 30
			%
	2004	2003	Inc. (Dec.)
Average Sales Price Per Ton:
Nitrogen	$ 176	$ 127	39%

~~Ammonium~~ Our nitrogen ~~nitrate~~ sales ~~prices~~ increased 1026%, ~~while~~as ~~sales~~a ~~volumes~~result ~~decreased~~of ~~13%.~~higher sales prices. The ~~decrease~~average selling inprice ~~sales~~for ~~volume~~ammonia, ~~was~~ammonium ~~due~~nitrate, ~~primarily~~and tonitrogen ~~poor~~solutions ~~weather~~increased 34%, ~~during~~35%, ~~the~~and ~~fourth~~43%, ~~quarter~~respectively. A ofdecrease ~~fiscal~~in ~~2003~~U.S. nitrogen ~~During~~production, ~~the~~along ~~first~~with ~~three~~a ~~quarters~~tightening of ~~the~~world ~~fiscal~~supply/demand ~~year~~balances, led ~~sales~~to ~~volumes~~these ~~were~~nitrogen ~~running~~price ~~ahead~~increases. During offiscal ~~the~~2004, ~~previous~~nitrogen ~~year~~products in ~~due~~the U.S. continued to ~~good~~be ~~demand~~impacted ~~for~~by ~~fall/winter~~high natural ~~wheat~~gas ~~plantings~~prices, ~~and~~resulting ~~strong~~in ~~pasture~~industry-wide ~~applications.~~production ~~Unfavorable~~curtailments ~~weather~~at various points during the ~~fourth~~fiscal ~~quarter~~year. During ~~significantly~~most ~~reduced~~of ~~demand,~~the ~~resulting~~first inquarter ~~approximately~~of fiscal ~~155~~2004,~~000~~ ~~fewer~~we ~~tons~~shut ~~sold~~down insignificant ~~the~~portions ~~fourth~~of ~~quarter~~our ~~compared~~Yazoo toCity facility ~~the~~in ~~same~~an ~~prior-year~~effort ~~period.~~to ~~Prices~~manage ~~were~~inventory ~~higher~~levels ~~due~~in response to ahigh ~~reduction~~natural gas incosts ~~supply~~and atas ~~the~~a ~~beginning~~result of ~~the~~a poor spring ~~planting~~demand. This ~~season~~allowed asthe aCompany ~~result~~to conserve ofcash ~~production~~flow ~~curtailments~~during in the ~~U.S.~~negotiation ~~during~~of ~~February~~its ~~and~~debtor-in-possession ~~March~~credit facility ~~2003.~~with ~~Those~~a ~~curtailments~~group ~~were~~of ~~caused~~lenders. The byYazoo aCity facility ~~substantial~~returned ~~natural~~to ~~gas~~production ~~price~~in ~~increase~~late September 2003.

~~Urea~~Substantially all of our ammonia sales ~~prices~~are to industrial customers. Our ammonia sales prices increased 334%, ~~and~~while ~~sales~~our volumes decreased 401%. This ~~The~~decrease ~~price~~in ~~increase~~volume ~~resulted~~is ~~from~~due to ~~the~~decreased ~~tightened~~purchases ~~supply/demand~~by ~~balance~~some of our contract customers, ~~while~~largely ~~the~~offset by new business. Ammonia sales ~~volume~~prices ~~decrease~~increased ~~was~~as ~~caused~~downtime byat ~~the~~production ~~closure~~points ofin ~~the~~Indonesia, ~~prilling~~Malaysia and ~~section~~Venezuela ofrelated ~~our~~to ~~urea~~political disruptions ~~plant~~and atnatural ~~Donaldsonville~~gas shortages, ~~Louisiana~~caused the world supply/demand balance to tighten. In addition, U.S. producers curtailed production at various points during fiscal 2004 in ~~January~~response ~~2003~~to high natural gas prices and concerns about volatile U.S. natural gas prices.

~~Nitrogen~~Ammonium nitrate ~~solutions~~ sales prices increased 1735%, while sales volumes ~~remained~~decreased ~~steady as the result of market concerns over the anti-dumping petition filed by the Nitrogen Solutions Fair Trade Committee (of which we are a member) against Russia, the Ukraine, and Belarus~~4%. The decrease ~~Even~~in ~~though~~sales ~~the~~volumes ~~petition~~ was ~~not~~due ~~initially~~primarily ~~approved~~to ~~and~~the isreduced onproduction ~~appeal,~~at ~~this~~Yazoo ~~action~~City during ~~reduced~~ the ~~volume~~first ofquarter ~~unfairly~~as ~~traded~~noted ~~imports~~above. Prices were ~~positively~~higher ~~affected~~due byto ~~production~~a ~~curtailments~~reduction in asmarket ~~U.S.~~supply ~~producers reduced production during February~~ and ~~March~~concerns ~~2003~~about involatile ~~response to a~~ U.S. natural gas ~~price spike~~prices.

~~Phosphate. Our~~Nitrogen solutions ~~DAP~~ sales ~~decreased~~prices 7%increased ~~as the result of an 18~~43%, ~~decrease~~while in sales ~~volume,~~volumes ~~partially~~decreased ~~offset by a 13~~32% ~~increase in sales prices~~. This decrease ~~The rise~~ in sales ~~prices~~volumes ~~resulted~~was ~~from~~primarily adue ~~tightened~~to ~~supply/demand~~the ~~balance~~shutdown ~~because~~ of ~~lower global~~ production ~~rates~~of nitrogen ~~and~~solutions ~~increased~~at ~~demand~~Yazoo byCity during ~~China.~~the ~~Our~~first ~~sales~~quarter ~~volume~~of ~~decreased compared to~~ fiscal ~~2002~~2004. Prices ~~because~~were ofhigher ~~reduced production in fiscal 2003~~ due to ~~mechanical~~a ~~problems~~reduction in ~~and~~market ~~limited~~supply ~~availability~~and ofconcerns ~~raw~~about ~~materials,~~volatile ~~primarily~~U.S. natural ~~sulfur~~gas ~~and sulfuric acid~~prices.

~~Potash~~Other Revenues

~~Page~~ Our other 25revenues for fiscal 2004 and 2003 were $4.6 million and $2.0 million, respectively, and consisted primarily of facility fees earned by our Yazoo City facility that supplies dinitrogen tetroxide (N204) to the United States Department of Defense. This facility was placed in service at our Yazoo City facility during the third quarter of fiscal 2003.

~~Other~~Cost ~~Revenues~~of Products Sold

InOur cost ~~fiscal~~of ~~2003,~~products ~~other~~sold ~~revenues~~increased ~~totaled~~in ~~$2.0~~fiscal ~~million~~2004 ~~related~~ to ~~our DiNitrogen Tetroxide (N204) contract with the U~~$249.S.2 ~~Government ("Government"). In February 2003~~million, wefrom ~~completed the construction of our N204 production plant at our Yazoo City, Mississippi facility. We received approximately~~ $3215.0 5 million ~~from~~in ~~the Government during our third~~ fiscal ~~quarter~~2003. As as a ~~reimbursement~~percentage ~~for~~of ~~constructing~~net ~~the N204 plant. This payment represents deferred revenue and will be recognized systematically over five years~~sales, ~~the~~cost ~~term~~ of ~~the~~products ~~contract.~~sold decreased ~~In addition~~ to ~~the~~83% ~~deferred~~for ~~revenue,~~fiscal we2004 ~~are~~from ~~reimbursed~~91% ~~by the Government~~ for ~~other~~fiscal ~~out-of-pocket~~2003. This ~~costs~~decrease ~~associated~~was primarily ~~with~~ the ~~production~~result of ~~N204.~~higher ~~These~~sales ~~amounts~~prices ~~have~~partially ~~been~~offset ~~included~~by ~~and~~higher ~~classified~~costs per ~~as other revenues for fiscal year ended June 30, 2003~~ton.

~~Cost~~ Our nitrogen costs per ton increased 26%, primarily as a result of ~~Products~~higher ~~Sold~~natural gas costs at our domestic production facilities. The average price of natural gas, net of futures gains and losses, at our domestic nitrogen production facilities increased approximately 41% to $5.70 per MMBtu. During fiscal 2004, we experienced higher costs related to the purchase of ammonia from third parties and Point Lisas Nitrogen as the global supply/demand balance tightened and pushed nitrogen prices higher. Equity in earnings of approximately $21.8 million at Point Lisas Nitrogen reduced the effect of higher domestic natural gas prices and purchased ammonia prices. These equity in earnings are reflected in our consolidated statements of operations as a reduction in cost of products sold.

~~Overview.~~ Our portion ~~cost~~ of ~~products~~the ~~sold~~earnings ~~decreased~~from inPoint ~~fiscal~~Lisas ~~2003~~Nitrogen towas $~~432~~21.38 million for fiscal 2004, ~~from~~compared to $~~437.~~5.6 million infor fiscal ~~2002~~2003. During Asfiscal a2004, ~~percentage~~Point Lisas Nitrogen incurred higher natural gas costs because its gas contract ties the price of ~~net~~natural ~~sales,~~gas ~~cost~~to the market price of ~~products~~ammonia, ~~sold~~which ~~was~~increased ~~97%~~during fiscal 2004. Results for ~~both~~fiscal 2004 were improved from fiscal 2003 ~~and~~because the ~~2002.~~ammonia ~~Higher~~prices ~~costs~~received ~~per~~by ~~ton~~Point ~~for~~Lisas ~~all~~Nitrogen ~~product~~more ~~groups~~closely ~~were~~reflected ~~offset~~the market byprice. Sales ~~higher~~prices ~~sales~~during fiscal 2003 were below prevailing market prices ~~for~~because ~~all~~of product ~~groups~~offtake agreements with us and our joint venture partner, Koch Nitrogen Company. The ~~Our~~agreements ~~company-wide~~required ~~average~~Point ~~natural~~Lisas ~~gas~~Nitrogen to make sales to us at prices below the prevailing market price ~~increased~~to ~~34%~~recover amounts ~~during~~paid ~~fiscal~~in ~~2003~~previous years that were in excess of prevailing market prices.

~~Nitrogen~~Selling, General and Administrative

Our selling, ~~portion~~general ofand ~~the~~administrative ~~earnings~~expenses ~~from~~decreased ~~Point~~to ~~Lisas Nitrogen was~~ $521.61 million ~~for~~ in fiscal ~~2003~~2004, ~~compared~~from to $1226.05 million ~~for~~in fiscal ~~2002~~2003. This ~~During~~decrease ~~fiscal~~was ~~2003, Point Lisas Nitrogen incurred higher natural gas costs because its gas contract ties~~ primarily the ~~price~~result of ~~natural~~lower ~~gas~~spending tofor ~~the~~insurance ~~market~~and ~~price~~professional ofconsultants ~~ammonia,~~related to ~~which~~operating ~~increased during fiscal 2003~~activities. In Aaddition, ~~scheduled maintenance turnaround at Point Lisas Nitrogen during September 2002 added more costs during~~ the ~~fiscal~~prior year. ~~Sales~~amount ~~prices~~included approximately ~~during~~$1.9 ~~fiscal~~million ~~2003~~of ~~were~~severance ~~below~~related ~~prevailing~~charges ~~market~~at ~~prices~~Donaldsonville. As a ~~because~~percentage of ~~product~~net ~~offtake~~sales, ~~agreements with us and our joint venturer~~selling, ~~Koch~~general ~~Nitrogen Company~~ and ~~its~~administrative ~~predecessor,~~expenses decreased ~~Farmland Industries, Inc. The agreements required Point Lisas Nitrogen~~ to ~~make~~7% ~~sales to us at prices below the prevailing market price to recover amounts paid~~ in ~~previous~~fiscal ~~years~~2004 ~~that~~from ~~were~~11% in ~~excess~~fiscal ~~of prevailing market prices~~2003.

~~Phosphate~~Impairment of Long-Lived Assets

~~Potash~~Ammonia Assets. In February 2003, we announced closure plans for one of our ammonia plants located in Donaldsonville, Louisiana. This closure was the result of unfavorable natural gas prices and market conditions. We decided to idle this ammonia plant indefinitely because we did not expect it to contribute to future operations. The long-lived assets associated with this ammonia plant had a book value of approximately $70.3 million. We tested this asset for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and recorded a pre-tax impairment charge totaling $62.9 million during fiscal 2003. This amount has been reflected in the 2003 consolidated statements of operations as impairment of long-lived assets.

~~Selling~~ Due to customer demand and improved market conditions in December 2003, ~~General~~we restarted an ammonia plant previously idled and ~~Administrative~~produced through the first week in April 2004. On March 25, 2004, we announced the permanent closure for one ammonia plant and our intent to indefinitely idle a second ammonia plant. Both ammonia plants are located at our facility in Donaldsonville, Louisiana. Negative operating performance caused by persistently high natural gas prices was the major contributing factor for our decision. We tested these assets for impairment as required by SFAS No. 144, and recorded a pre-tax impairment charge of approximately $21.2 million during fiscal 2004. This impairment charge is reflected as a component of reorganization expense in the 2004 consolidated statements of operations.

~~Our~~Melamine/Urea Assets. In ~~selling~~December 2002, ~~general~~we ~~and~~announced ~~administrative~~plans ~~expenses~~to ~~increased~~close toour ~~$31.9~~urea facility ~~million~~located in ~~fiscal 2003~~Donaldsonville, ~~from $28~~Louisiana.5 This ~~million~~closure inwas ~~fiscal~~also ~~2002.~~the ~~This~~result ~~increase~~of ~~was~~unfavorable ~~primarily~~natural gas prices and market conditions. We evaluated the ~~result~~utility of ~~increases~~these inlong-lived ~~severance~~assets and ~~early~~initially concluded ~~retirement~~that ~~expenses,~~the ~~property~~prilling ~~insurance~~section ~~costs,~~of ~~start-up~~the ~~costs~~urea ~~for~~plan ~~our~~was ~~melamine~~not ~~production~~expected ~~facility~~to contribute ~~and~~to ~~professional~~ongoing ~~financial~~operations ~~consulting~~and ~~expenses.~~production ~~These~~would ~~increases~~cease. We ~~were~~tested ~~partially~~the assets ~~offset~~associated bywith the ~~absence~~urea ofprilling ~~goodwill~~section ~~amortization~~for ~~costs~~impairment in ~~fiscal~~accordance with ~~2003~~SFAS No. As144, and recorded a ~~percentage~~pre-tax ofimpairment ~~net~~charge ~~sales,~~totaling ~~selling,~~$12.2 million ~~general~~at ~~and~~December ~~administrative~~31, ~~expenses~~2002. This ~~increased~~amount tohas 7%been included in ~~fiscal~~loss ~~2003~~ from discontinued 6%operations in ~~fiscal~~the ~~2002~~2003 consolidated statement of operations.

~~Page~~ In March 262004, we announced the permanent closure of our melamine and urea operations at our Donaldsonville, Louisiana, facility because we decided to exit this business operation completely. Acting on authority granted by our board of directors, we have committed to a plan of disposal and have initiated efforts to locate a buyer for these assets. In accordance with SFAS No. 144, these assets have been reflected as discontinued operations at June 30, 2004, and prior reporting periods have also been reclassified. We have recorded a pre-tax impairment charge for the melamine/urea assets totaling $9.3 million for fiscal 2004. We ceased production at this facility during the first week in April 2004.

~~Impairment~~ Potash Assets. During our first quarter of ~~Long~~fiscal 2004, our board of directors authorized management to actively market for sale the long-~~Lived~~lived assets of Mississippi Potash, Inc. and its subsidiary (the "Potash Assets"). Accordingly, as required by SFAS No. 144, we tested the Potash Assets for impairment at September 30, 2003. This test resulted in a pre-tax impairment charge of approximately $34.0 million, which is reflected as a component of discontinued operations in the 2004 consolidated statement of operations. On March 2, 2004, these assets were sold for approximately $28.4 million.

~~During~~Phosphate Assets. In ~~fiscal~~June ~~2003~~2004, ~~we recognized impairment charges relating to~~ our ~~long-lived~~board ~~assets~~of ~~located~~directors inauthorized ~~Donaldsonville,~~management's commitment ~~Louisiana,~~to ~~totaling~~a ~~$75.1~~plan ~~million.~~to Indispose ~~December~~of ~~2002,~~Mississippi wePhosphates ~~announced~~as ~~the~~part ~~closure~~ of our ~~prilled~~plan to ~~urea~~emerge ~~facility,~~from ~~and~~bankruptcy. This insubsidiary ~~February~~will ~~2003,~~be weeither ~~announced~~sold ~~the~~to ~~closure~~a ofthird party ~~one~~or oftransferred ~~our~~to ~~two~~the ~~anhydrous~~unsecured ~~ammonia~~creditors ~~plants.~~of ~~Both~~Mississippi ~~closures~~Phosphates pursuant ~~were~~to the ~~result~~Amended ofPlan. The ~~continued~~long-lived ~~negative~~assets ~~operating~~associated ~~performance~~with ~~caused~~this byplant had ~~unfavorable~~a ~~natural~~book ~~gas~~value ~~prices~~of ~~and~~approximately ~~market conditions. The impairment charges relating to these assets totaled~~ $7051.90 million. As Atrequired ~~June 30,~~by ~~2003,~~SFAS ~~because~~No. ~~of continued volatility of natural gas prices~~144, we ~~assessed~~evaluated the ~~recoverability~~carrying ofamount ~~all~~ of ~~our~~the ~~long-lived~~Phosphate ~~assets~~Assets for ~~impairment~~recoverability. This ~~assessment~~evaluation resulted in ana ~~additional~~pre-tax impairment charge totaling $439.20 million at ~~related~~June to30, ~~our~~2004, ~~long-lived~~and ~~assets~~is ~~located~~reflected as a component of discontinued operations in ~~Donaldsonville,~~the ~~Louisiana~~2004 consolidated statement of operations.

WeImpairment of ~~incurred~~long-lived ~~similar~~assets ~~impairment charges totaling $101.3 million for fiscal 2002 relating to goodwill for our Donaldsonville, Louisiana, nitrogen production facility.~~summary:

Other Operating Expenses

	Years Ended June 30
	2004	2003	2002
	(Dollars in thousands)
Consolidated Statements of Operations
Classification

Impairment of long-lived assets
Ammonia assets	$ -	$ 62,912	$ -

Reorganization expense
Ammonia assets	21,191	-	-

Loss from discontinued operations
Melamine/Urea assets	9,255	12,206	-
Potash assets	34,022	-	-
Phosphate assets	39,000	-	-
	82,277	12,206	-

Total impairment charges	$103,468	$ 75,118	$ -

~~Our~~Significant ~~other~~judgments ~~operating~~and ~~expenses~~estimates ~~were~~are ~~$17.1~~required ~~million~~ in performing ~~fiscal~~impairment ~~2003,~~tests ~~and $17.2 million~~ in ~~fiscal~~accordance ~~2002.~~with ~~Portions~~SFAS of our ammonia, ammonium nitrate, urea and nitric acid production capacities were idled for various periods during fiscal 2003 and 2002, primarily due to the unfavorable relationship between product prices and natural gas pricesNo. ~~In addition, our potash mining operation was idled on June 20, 2003, to conserve cash and reduce inventory levels~~144.

~~Interest,~~Other ~~Net~~Operating Expenses

Our other ~~net~~operating ~~interest~~expenses ~~expense~~decreased ~~increased~~ to $296.17 million in fiscal ~~2003~~2004, from $2712.9 7 million in fiscal ~~2002~~2003. This ~~increase~~decrease ~~was~~resulted ~~primarily~~from ~~the~~a ~~result~~reduction in idle plant costs. Portions of ~~higher~~our ~~average~~ammonia, ~~interest~~ammonium ~~rates~~nitrate and ~~increased~~nitric ~~costs~~acid ~~associated~~production capacities ~~with~~were ~~our~~idled ~~Pre-Petition~~for ~~Harris~~various ~~Facility,~~periods ~~partially~~during ~~offset~~fiscal by2004 ~~lower~~and ~~average~~2003, primarily ~~debt~~due ~~balances.~~to ~~After~~ the ~~Petition~~unfavorable ~~Date,~~relationship webetween ~~ceased~~product ~~accruing~~prices ~~interest~~and natural ongas prices. During the ~~unsecured~~first ~~debt~~three ~~balances~~months of ~~the~~fiscal ~~Senior~~2004, ~~Notes~~our ~~and~~Yazoo ~~the~~City nitrogen ~~Industrial~~operation ~~Revenue~~was ~~Bonds~~idled ~~(each~~in asorder ~~more~~to ~~particularly~~reduce ~~described~~inventory ~~below~~levels ~~under~~and ~~the~~conserve cash ~~heading~~as ~~"Liquidity~~we ~~and~~negotiated ~~Capital~~a ~~Resources~~ debtor-in-possession ~~Financing~~credit ~~Activities")~~facility.

~~Settlement~~Interest, ~~of Litigation~~Net

~~During~~Our net interest expense increased to $20.1 million in fiscal 2004, from $19.5 million in fiscal 2003. During fiscal 2004, we ~~concluded~~did ~~litigation~~not ~~related~~record toany ainterest expense ~~breach~~on ofour ~~contract~~Senior ~~claim~~Notes ~~involving~~and ~~performance~~1998 ~~guarantees~~IRBs ~~for~~(each ~~work~~as ~~done~~defined atbelow ~~one~~in ofthis Item 7 under the ~~anhydrous~~heading ~~ammonia~~"Liquidity ~~plants~~and inCapital ~~Donaldsonville,~~Resources") ~~Louisiana.~~as Wethey ~~received~~are $3a part of our pre-petition liabilities subject to compromise.6 We ~~million~~did inrecord interest ~~net~~during ~~proceeds~~fiscal ~~from~~2004 on our Pre-Petition Harris Facility (as defined below in this ~~settlement~~Item 7 under the heading "Liquidity and Capital Resources") because it was adequately secured and on our DIP and Supplemental DIP loans which were post-petition loans. The interest rates on our secured debt during fiscal 2004 were higher than the rates on such debt in fiscal 2003.

~~During~~The Company ~~fiscal~~has ~~2002,~~allocated wea ~~settled~~portion of its consolidated interest expense to discontinued operations in accordance with the ~~defamation~~provisions ~~action~~of weEmerging ~~filed~~Issues Task ~~against~~Force ~~Terra~~(EITF) ~~International,~~Issue ~~Inc~~No. (87-24, "~~Terra")~~Allocation inof ~~August~~Interest ~~1995~~to Discontinued Operations." For Wethe ~~received~~fiscal year ended June 30, 2003, such allocation, in the amount of $119.07 million, ~~from~~was based ~~Terra~~on actual interest calculations on intercompany notes payable between the relevant subsidiaries and Mississippi Chemical Corporation. As a result of the Company's ~~liability~~bankruptcy ~~insurance~~filing, ~~carrier.~~these ~~Also~~intercompany notes have been classified as liabilities subject to compromise, which resulted in no interest expense being calculated on these intercompany notes payable in 2004. In fiscal ~~2002~~2004, interest weallocated ~~received~~to discontinued operations was $4.41 million inand ~~net~~was determined based on the proceeds received from the ~~conclusion~~sale of ~~litigation~~the ~~related~~Company's toPotash Assets ~~defective~~and ~~equipment~~an ~~purchased~~estimated atfair ~~our~~market ~~Yazoo~~value ~~City,~~of ~~Mississippi~~its Phosphate Assets, ~~nitrogen~~as calculated ~~production~~in ~~facility~~accordance with SFAS No. ~~The~~144. All ~~problems~~proceeds ~~with~~received ~~this~~from ~~equipment~~the sale ~~occurred~~of ~~during~~the ~~periods~~Company's ~~prior~~assets are required to ~~fiscal~~be ~~2002~~used to repay the Company's secured borrowings.

~~Other~~Settlement ~~Income~~of Litigation

~~Other~~During fiscal ~~income~~2003, ~~decreased~~we concluded litigation related to ~~$1.5~~a ~~million~~breach inof ~~fiscal~~contract ~~2003,~~claim involving ~~from~~performance ~~$6.7~~guarantees ~~million~~for inwork ~~fiscal~~done ~~2002.~~at ~~During~~one ~~fiscal~~of ~~2002,~~the weammonia ~~had~~plants ~~gains~~in ofDonaldsonville, ~~approximately~~Louisiana. We received $53.16 million ~~related~~in tonet ~~the~~proceeds ~~sale~~from ofthis ~~non-core assets~~settlement.

~~Page~~Other 27Income

~~Reorganization~~ Other income ~~Expense~~increased to $3.4 million in fiscal 2004, from $1.6 million in fiscal 2003. This increase was primarily related to better performance by one of our equity investments and a $1.2 million gain on the sale of a non-core asset.

~~Costs directly related to our reorganization under Chapter 11 of the Bankruptcy Code are reflected as reorganization expense in the consolidated statements of operations.~~ Reorganization ~~expense for the year ended June 30, 2003, was approximately $3.5 million and consisted of legal and professional fees.~~Expense

~~Income~~ Costs directly ~~Tax~~related ~~Benefit~~to our reorganization under Chapter 11 of the Bankruptcy Code are reflected as reorganization expense in our consolidated statements of operations. Reorganization expense for the fiscal year ended June 30, 2004, was approximately $45.2 million and consisted primarily of an impairment loss of approximately $21.2 million related to our ammonia plants located in Donaldsonville, Louisiana, professional fees, severance and employee retention expenses and a $3.8 million break-up fee paid to Koch for terminating the sale of our interest in Point Lisas Nitrogen. Reorganization expense for the fiscal year ended June 30, 2003, was approximately $3.5 million and consisted of legal and other professional fees.

~~Our~~Income ~~income~~Tax tax benefit increased to $31.8 million in fiscal 2003 from $17.9 million in fiscal 2002. These income tax benefits are primarily the result of our net losses, partially offset by U.S. tax expense on cumulative foreign earnings in fiscal 2003 Expense (~~as more particularly described above under the heading "Critical Accounting Policies - Deferred Taxes"~~Benefit)~~. Our estimated annual effective rate increased to 23.0% in fiscal 2003 from 12.9% in fiscal 2002.~~

For ~~RESULTS~~fiscal OF2004, ~~OPERATIONS~~our -income ~~FISCAL~~tax ~~2002~~expense ~~COMPARED~~from TOcontinuing ~~FISCAL~~operations ~~2001~~was $34.5 million, as compared to a $15.1 million benefit in fiscal 2003. The income tax expense for fiscal 2004 was primarily the result of the establishment of a valuation allowance for the deferred tax assets related to federal operating loss carryforwards that may expire unutilized. The income tax benefit for the prior fiscal year was primarily the result of our net losses from continuing operations, partially offset by U.S. tax expense on cumulative foreign earnings triggered by the guarantee of our secured debt by MCHI (as described above in this Item 7 under the heading "Critical Accounting Policies - Deferred Taxes").

~~Overview~~ Our estimated annual effective rate attributable to the loss from continuing operations increased to 101.8% in fiscal 2004, from 15.9% in fiscal 2003.

~~For~~Our income ~~the~~tax ~~fiscal~~benefit ~~year~~from ~~ended~~discontinued ~~June 30,~~operations ~~2002,~~for wefiscal ~~incurred~~2004 awas ~~net loss of~~ $1945.9 4 million ~~(or $0.76 per diluted share) before a non-cash impairment charge of $101.3 million~~, ~~and~~as ~~incurred~~compared ~~a net loss of $121.2 million (or $4.64 per diluted share) after the non-cash impairment charge. This compares~~ to a ~~net loss of~~ $3616.96 million ~~(or~~tax ~~$1.41~~benefit ~~per diluted share) before a non-cash impairment charge of $58.4 million, and a net loss of $95.2 million (or $3.64 per diluted share) after the non-cash impairment charge~~ for ~~the~~ fiscal ~~year ended June 30, 2001~~2003. The income ~~non-cash~~tax ~~impairment~~benefits ~~charges~~were ~~for~~primarily the ~~fiscal~~result ~~years ended June 30, 2002 and 2001, related to a write-down~~ of ~~goodwill associated with the December 1996 acquisition of~~ our ~~Donaldsonville,~~net ~~Louisiana,~~losses ~~nitrogen~~from discontinued ~~production assets~~operations.

~~Net~~Discontinued sales decreased to $451.3 million in fiscal 2002 from $540.4 million in fiscal 2001. We incurred an operating loss of $32.0 million in fiscal 2002 before a non-cash impairment charge of $101.3 million, compared to an operating loss of $46.8 million in fiscal 2001 before a non-cash impairment charge of $58.4 million.Operations

~~Our~~Melamine and ~~results~~Urea Assets. In March 2004, we announced the permanent closure of our ~~operations~~melamine ~~have~~and ~~historically~~urea ~~been~~operations ~~influenced~~at byour aDonaldsonville, ~~number~~Louisiana facility. Acting ofon ~~factors~~authority ~~beyond~~granted by our ~~control~~board of directors, ~~which~~we have committed atto ~~times~~a ~~had~~plan of disposal of these assets. As a ~~significant~~result ~~impact~~of this announcement and meeting the requirements for classification as discontinued operations in accordance with SFAS No. ~~Fertilizer~~144, ~~demand~~at June 30, 2004, our melamine and ~~prices~~urea ~~are~~operations ~~highly~~have ~~dependent~~been ~~upon~~reflected aas ~~variety~~discontinued operations. Melamine ofand ~~conditions~~urea ~~stated~~operations in ~~this~~previous ~~Annual~~periods ~~Report~~presented onhave also ~~Form~~been 10reclassified in accordance with SFAS No. 144. We have recorded an after-Ktax ~~under~~loss ~~the~~from ~~headings~~discontinued ~~"Certain~~operations ~~Business~~of ~~Factors"~~$9.3 inmillion, ~~Item~~ which includes a pre-tax impairment charge of $9.3 million for fiscal 2004. We have recorded an after-tax loss from discontinued operations of $14.1 ~~and~~million, ~~"Outlook"~~which ~~and~~includes ~~"Forward~~a pre-~~Looking~~tax ~~Statements"~~impairment incharge ~~this~~of ~~Item 7~~$12.2 million for fiscal 2003. Corporate allocations have been excluded from discontinued operations.

~~Net~~ Potash Assets. During ~~Sales~~our first quarter of fiscal 2004, our board of directors authorized management to actively market for sale the Potash Assets. On March 2, 2004, these assets were sold for approximately $28.4 million. As a result, at June 30, 2004, our potash operations have been reflected as discontinued operations. Potash operations in previous periods have also been reclassified in accordance with SFAS No. 144. We have recorded an after-tax loss on the disposal of our potash assets of $11.4 million in fiscal 2004. In addition, we recorded in fiscal 2004 an after-tax loss from discontinued operations of $20.5 million, which includes the pre-tax impairment charge of $34.0 million. In fiscal 2003, we recorded an after-tax loss of $4.0 million in discontinued operations. Corporate allocations have been excluded from discontinued operations.

~~Overview~~Phosphate Assets. In June 2004, our board of directors authorized a plan to dispose of Mississippi Phosphates as part of our plan to emerge from bankruptcy pursuant to the amended plan. This subsidiary will either be sold to a third party or transferred to the unsecured creditors of Mississippi Phosphates. Based on that decision and in accordance with SFAS No. 144, at June 30, 2004, our phosphate operations have been reflected as discontinued operations. Corporate allocations have been excluded from discontinued operations. We recorded an after-tax loss from discontinued operations of $27.5 million, which includes a pre-tax impairment charge of $39.0 million for fiscal 2004, and a loss of $7.5 million for fiscal 2003.

~~Page~~ RESULTS 28OF OPERATIONS - FISCAL 2003 COMPARED TO FISCAL 2002

~~Summaries of our net sales results by business unit are set forth below:~~Overview

	Fiscal Years Ended June 30
(Dollars in thousands)			%
	2002	2001	Inc. (Dec.)
Net Sales:
Nitrogen	$262,575	$369,450	(29)%
DAP	110,047	95,252	16%
Potash	77,477	74,305	4%
Other	1,195	1,394	(14)%
Net Sales	$451,294	$540,401	(16)%

For the fiscal year ended June 30, 2003, we incurred a net loss of $105.9 million (or $4.04 per diluted share), compared to a net loss of $121.2 million (or $4.64 per diluted share) for the year ended June 30, 2002. The fiscal year ended June 30, 2003, included non-cash impairment charges of $62.9 million related to a write-down of long-lived assets associated with our ammonia plants in Donaldsonville, Louisiana. These plants were determined to be impaired and would not contribute substantially to our future ongoing operations. The fiscal year ended June 30, 2002 net loss included a non-cash impairment charge of $101.3 million resulting from a write-down of all remaining goodwill recorded in connection with the December 1996 acquisition of our Donaldsonville, Louisiana, nitrogen production assets.

	Fiscal Years Ended June 30
(Tons in thousands)			%
	2002	2001	Inc. (Dec.)
Tons Sold:
Nitrogen:
Ammonia	742	891	(17)%
Ammonium Nitrate	779	598	30%
Urea	461	494	(7)%
Nitrogen solutions	474	452	5%
Nitric acid	33	63	(48)%
Total Nitrogen	2,489	2,498	0%
DAP	865	716	21%
Potash	912	811	12%

Net sales increased to $237.9 million in fiscal 2003 from $207.9 million in fiscal 2002. We incurred an operating loss of $14.7 million in fiscal 2003 before a non-cash impairment charge of $62.9 million, compared to an operating loss of $34.0 million in fiscal 2002 before a non-cash impairment charge of $101.3 million.

	Fiscal Years ended June 30
			%
	2002	2001	Inc. (Dec.)
Average Sales Price Per Ton:
Nitrogen	$ 105	$ 148	(29)%
DAP	$ 127	$ 133	(5)%
Potash	$ 85	$ 92	(8)%

These results reflect our continuing operations which consist of nitrogen facilities in Yazoo City, Mississippi and Donaldsonville, Louisiana, our 50% interest in Point Lisas Nitrogen Limited in the Republic of Trinidad and Tobago, and our 50% interest in an ammonia terminal located near Houston, Texas. Based on the changes that occurred in fiscal 2004, our potash, phosphate and melamine segments have been reclassed to discontinued operations for fiscal 2003 and 2002.

	Fiscal Years Ended June 30
(Dollars in thousands)	2002	2001
Operating (Loss) Income:
Nitrogen (1)	$(128,992)	$ (86,416)
Phosphate	$ 2,854	$ (17,436)
Potash	$ (7,902)	$ (2,876)
Other	$ 798	$ 1,575
Total	$(133,242)	$(105,153)

Our results of operations have historically been influenced by a number of factors beyond our control, which have at times had a significant impact on our operating results. Fertilizer demand and prices are highly dependent upon a variety of conditions stated in this Annual Report on Form 10-K under the headings "Certain Business Factors" in Item 1 and "Outlook" and "Forward-Looking Statements" in this Item 7.

~~(1) Nitrogen~~Net operating losses for fiscal 2002 and 2001 include non-cash impairment charges of $101.3 million and $58.4 million, respectively, related to the write-down of goodwill associated with our Donaldsonville, Louisiana, nitrogen production assets.Sales

~~Page~~ For fiscal 292003, our net sales increased 14% to $237.9 million, from $207.9 million for fiscal 2002. This increase was primarily the result of higher sales prices for all of our nitrogen products, partially offset by lower nitrogen sales volumes.

~~Nitrogen~~Summaries of our sales results by business unit are set forth below:

Substantially all of our ammonia sales are to industrial customers. Our ammonia sales volumes decreased 17% because of lower demand from industrial customers due to a slowdown in economies worldwide, which caused industrial customer production curtailments and, in some instances, plant closures. In addition, sales prices were negatively affected by anticipation of new offshore production coming on-line in Trinidad.

	Fiscal Years Ended June 30
			%
	2003	2002	Inc. (Dec.)
	(Dollars in thousands)
Net Sales:
Nitrogen	$236,850	$206,871	14%
Other	1,069	984	9%

Net Sales	$237,919	$207,855	14%

Ammonium nitrate sales prices decreased 19% as discussed above, while sales volumes increased 30%. The increase in sales volumes was primarily due to recaptured market share from imports and favorable crop conditions. Sales volumes during fiscal 2001 were low due to lost market share, significant volumes of imported ammonium nitrate, including substantial quantities of what the U.S. Government determined were unfairly traded imports, and weak fertilizer demand during the spring planting season caused by wet weather.


	Fiscal Years Ended June 30
			%
	2003	2002	Inc. (Dec.)
	(Tons in thousands)
Tons Sold:
Nitrogen:
Ammonia	689	742	(7%)
Ammonium Nitrate	675	779	(13%)
Nitrogen solutions	475	474	0%
Nitric acid	28	33	(15%)

Total Nitrogen	1,867	2,028	(8%)

Urea sales prices decreased 26%, and sales volumes decreased 7%. Sales prices decreased as a result of excess industry inventories carried over from spring 2001 and increased production. Sales volumes decreased as a result of decreased granular urea sales due to the transfer of our granular urea facility back to its prior owner during fiscal 2002, as well as decreased urea melt sales caused by Melamine Chemicals, Inc.'s closure of its plant in Donaldsonville, Louisiana. The decrease in sales volumes was partially offset by increased production and sales of prilled urea.

	Fiscal Years Ended June 30
			%
	2003	2002	Inc. (Dec.)
Average Sales Price Per Ton:
Nitrogen	$ 127	$ 102	25%

~~Nitrogen~~Our nitrogen ~~solutions~~sales increased 14% as a result of higher sales prices. The ~~decreased~~average selling ~~29%~~price for ammonia, ~~while~~ammonium ~~sales~~nitrate ~~volumes~~and nitrogen solutions increased 40%, 510% and 17%, respectively. A ~~Sales~~decrease ~~prices~~in ~~decreased~~U.S. nitrogen ~~primarily~~production, asalong with a ~~result~~tightening of aworld ~~continuation~~supply/demand ofbalances, led ~~large~~to ~~volumes~~these ofnitrogen ~~unfairly~~price ~~traded~~increases. During ~~imported~~fiscal ~~product~~2003, ~~during~~nitrogen products in the ~~first~~U.S. ~~nine~~continued ~~months~~to ofbe impacted by high natural gas prices, resulting in production curtailments at various points during the fiscal ~~2002~~year. In late June 2003, ~~and~~we ~~industry-wide~~shut down significant portions of our Yazoo City facility in an effort to manage inventory ~~overhang~~levels ~~from~~in response to high natural gas cost and as a result of poor spring demand. This allowed the ~~previous~~Company ~~year~~to conserve cash flow during the negotiation of its debtor-in-possession credit facility with a group of lenders. The Yazoo City facility returned to production in late September 2003.

~~Phosphate. Our~~Substantially all ~~DAP~~of our ammonia sales ~~increased~~are ~~16%~~to asindustrial acustomers. Our ~~result~~ammonia ofsales volumes adecreased 217% ~~increase~~because inof ~~sales~~lower ~~volume~~demand ~~partially~~from ~~offset~~industrial customers affected by a 5%slowdown ~~decrease~~ in ~~sales~~economies ~~prices.~~worldwide, ~~While~~resulting ~~average~~in ~~sales~~industrial ~~prices~~customer production ~~were~~curtailments ~~down~~and, ~~during~~in ~~fiscal~~some ~~2002 as compared to fiscal 2001~~instances, ~~world~~plant ~~market~~closures. Our ~~conditions~~average ammonia ~~improved~~sales inprice ~~the~~increased ~~last~~40% ~~part~~as ofdowntime ~~fiscal~~at ~~2002.~~production ~~Increased~~points ~~demand~~in ~~from~~certain foreign ~~China~~countries, ~~during~~related ~~the~~to ~~first~~political ~~half~~disruptions ofand ~~calendar~~natural ~~2002~~gas ~~tightened~~shortages, caused the world supply/demand balance to tighten. In addition, ~~and~~U.S. producers ~~increased~~curtailed ~~sales~~production ~~prices~~at various points during ~~the~~fiscal ~~latter~~2003 ~~part~~in ofresponse to ~~fiscal~~high ~~2002~~natural gas prices.

~~Potash~~Ammonium nitrate sales prices increased 10% while sales volumes decreased 13%. The decrease in sales volumes was due primarily to poor weather during the fourth quarter of fiscal 2003. During the first three quarters of the fiscal year, sales volumes were running ahead of the previous year due to good demand for fall/winter wheat plantings and strong pasture applications. Unfavorable weather during the fourth quarter significantly reduced demand, resulting in approximately 155,000 fewer tons sold in the fourth quarter compared to the same prior-year period. Prices were higher due to a reduction in supply at the beginning of the spring planting season as a result of production curtailments in the U.S. during February and March 2003. Those curtailments were caused by a substantial natural gas price increase.

~~Cost~~ Nitrogen solutions sales prices increased 17%, while sales volumes remained steady as the result of ~~Products~~market ~~Sold~~concerns over the anti-dumping petition filed by the Nitrogen Solutions Fair Trade Committee (of which we are a member) against Russia, the Ukraine, and Belarus. Even though the petition was not initially approved and is on appeal, this action reduced the volume of unfairly traded imports. Prices were positively affected by production curtailments as U.S. producers reduced production during February and March 2003 in response to a natural gas price spike.

~~Overview. Our~~Other cost of products sold decreased to $437.5 million from $534.2 million. As a percentage of net sales, cost of products sold decreased to 97% from 99%, primarily as a result of lower costs per ton for all product groups partially offset by lower sales prices for all product groups. Our company-wide average natural gas price increased 33% during fiscal 2002.Revenues

~~Page~~ In fiscal 2003, other revenues totaled $2.0 million related to our dinitrogen tetroxide (N204) contract with the U.S. Government ("Government"). In February 2003, we completed the construction of our N204 production plant at our Yazoo City, Mississippi facility. We received approximately $3.0 million from the Government during our third fiscal quarter as a reimbursement for constructing the N204 plant. This payment represents deferred revenue and will be recognized systematically over five years, the term of the contract. In addition to the deferred revenue, we are reimbursed by the Government for other out-of-pocket costs associated with the production of N204. These amounts have been included and classified as other revenues for fiscal year ended June 30, 2003.

~~Nitrogen~~Cost of Products Sold

Our cost ~~portion~~ of ~~the~~products ~~earnings~~sold ~~from~~increased ~~Point~~in ~~Lisas~~fiscal ~~Nitrogen~~2003 ~~was~~to $12215.05 million ~~for fiscal 2002~~, ~~compared~~from to $7205.2 0 million ~~for~~in fiscal ~~2001~~2002. As ~~During~~a ~~fiscal~~percentage ~~2002, Point Lisas Nitrogen incurred lower natural gas costs because its gas contract ties the price~~ of ~~natural~~net ~~gas~~sales, tocost ~~the market price~~ of ~~ammonia,~~products ~~which~~ sold decreased ~~during~~to ~~fiscal~~91% ~~2002.~~in ~~Additionally, Point Lisas Nitrogen sales prices during~~ fiscal ~~2002~~2003 ~~were~~from ~~above~~99% ~~prevailing~~in ~~market prices as a result of its product offtake agreements with us and our then joint venturer, Farmland Industries, Inc~~2002. This ~~The~~decrease ~~agreements~~resulted ~~required~~from higher ~~Point Lisas Nitrogen to make~~ sales ~~to us at~~ prices atpartially aoffset ~~discount~~by tohigher ~~the~~costs ~~prevailing~~per ~~market, subject to a minimum price~~ton. ~~During fiscal 2002, all Point Lisas Nitrogen sales to us were at the minimum price.~~

~~Phosphate.~~ Our nitrogen ~~DAP~~ costs per ton ~~decreased~~increased 1914%, inprimarily ~~fiscal~~as ~~2002.~~a ~~This~~result ~~decrease~~of ~~was~~higher ~~primarily~~natural gas ~~the~~costs ~~result~~at our domestic production facilities. The average price of ~~lower~~natural gas, ~~raw~~net ~~material~~of futures gains and losses, at our domestic nitrogen production facilities increased approximately 33% to $4.04 per MMBtu. In addition, we had higher costs ~~for~~related to third-party purchases of ammonia and ~~sulfur~~lower equity in earnings at Point Lisas Nitrogen. These equity in earnings are reflected in our consolidated statements of operations as a reduction in cost of products sold.

~~Potash~~Our portion of the earnings from Point Lisas Nitrogen was $5.6 million for fiscal 2003, compared to $12.0 million for fiscal 2002. During fiscal 2003, Point Lisas Nitrogen incurred higher natural gas costs because its gas contract ties the price of natural gas to the market price of ammonia, which increased during fiscal 2003. A scheduled maintenance turnaround at Point Lisas Nitrogen during September 2002 added more costs during the fiscal year. Sales prices during fiscal 2003 were below prevailing market prices because of product offtake agreements with us and our joint venturer, Koch Nitrogen Company and its predecessor, Farmland Industries, Inc. The agreements required Point Lisas Nitrogen to make sales to us at prices below the prevailing market price to recover amounts paid in previous years that were in excess of prevailing market prices.

Selling, General and Administrative

Our selling, general and administrative expenses ~~decreased~~increased to $2826.5 million in fiscal ~~2002~~2003, from $3124.45 million in fiscal ~~2001~~2002. This ~~decrease~~increase was primarily the result of ~~reduced~~increases ~~goodwill~~in ~~amortization~~severance ~~during~~and ~~fiscal~~early ~~2002.~~retirement ~~In addition~~expenses, ~~fiscal~~property insurance ~~2001 included approximately $1.0 million in~~ costs ~~related~~and toprofessional ~~benefits~~financial ~~paid~~consulting ~~under~~expenses. These increases anwere ~~early~~partially ~~retirement~~offset ~~program~~by ~~and~~the ~~severance~~absence ~~costs~~of ~~related~~goodwill toamortization ~~a reduction~~ costs in ~~force.~~fiscal 2003. As a percentage of net sales, selling, general and administrative expenses ~~were~~decreased 6to 11% ~~for~~in fiscal ~~2002~~2003 ~~and~~from 12% in fiscal ~~2001~~2002.

~~Loss~~Impairment onof ~~Goodwill Impairment~~Long-Lived Assets

~~Due~~During fiscal ~~to continued operating losses~~2003, ~~primarily caused by low product prices and increased natural gas costs,~~ we ~~assessed~~recognized ~~the~~impairment ~~recoverability~~charges ofrelating ~~our tangible and intangible long-lived assets related~~ to ~~our~~one ~~nitrogen operations pursuant to SFAS No. 121, "Accounting for the Impairment~~ of ~~Long-Lived~~our ~~Assets~~ammonia plants ~~and~~located ~~for Long-Lived Assets to Be Disposed Of," prior to its amendment discussed above. We projected the undiscounted future cash flows for these operations to test recoverability and determined that,~~ in ~~certain cases~~Donaldsonville, ~~they were less than the value of such assets on the consolidated balance sheet~~Louisiana, totaling ~~indicating~~$62.9 ~~that~~million. This impairment was ~~likely.~~the ~~The~~result ~~impairment~~ of ancontinued ~~asset~~negative operating isperformance ~~measured~~caused by ~~the~~unfavorable ~~amount~~natural ~~the~~gas carrying value of the asset exceeds its fair value. Our cash flow projections were based on a third party appraisal of our long-lived assets and included additional third party and internally developed forecasts of future nitrogen prices and ~~natural gas costs~~market conditions. We ~~determined~~incurred ~~that~~similar ~~we had a permanent~~ impairment incharges ~~the~~totaling ~~value of goodwill related to our Donaldsonville, Louisiana, nitrogen production assets acquired in December 1996. Accordingly, a non-cash provision for goodwill impairment of~~ $101.3 million ~~was recorded in our fourth quarter of~~ for fiscal 2002. Werelating ~~made a similar non-cash charge of $58.4 million in our fourth quarter of fiscal 2001. Estimates of such future cash flows are subject~~ to ~~significant uncertainties and assumptions. Accordingly, actual results could vary significantly from such estimates. We had no~~ goodwill ~~recorded~~for on our ~~books~~Donaldsonville, asLouisiana nitrogen ofproduction ~~June 30, 2002~~facility.

~~Page~~Other 31Operating Expenses

~~The~~Our other ~~impairment~~operating ~~analysis~~expenses ~~was~~increased ~~prepared~~to on$12.7 amillion ~~going~~in ~~concern~~fiscal ~~basis~~2003, ~~and~~from ~~the~~$12.4 million ~~Company's~~in ~~carrying~~fiscal ~~value~~2002. This ~~for~~increase ~~its~~resulted ~~long-lived~~from ~~assets~~an ~~was~~increase ~~presumed~~in toidle beplant costs. Portions ~~recoverable~~of ~~through~~our ~~future~~ammonia, ~~cash~~ammonium ~~flows.~~nitrate Ifand ~~the~~nitric ~~Company~~acid ~~does~~production capacities ~~not~~were ~~continue~~idled asfor avarious ~~going~~periods ~~concern~~during fiscal 2003 and 2002, primarily ~~further~~due ~~impairment~~to ~~charges~~the ~~may~~unfavorable berelationship ~~necessary~~between product prices and natural gas prices.

~~Other~~Interest, ~~Operating Expenses~~Net

Our net ~~other~~interest ~~operating~~expense ~~expenses~~increased ~~decreased~~ to $1719.25 million in fiscal ~~2002~~2003, from $2118.5 2 million in fiscal ~~2001~~2002. This ~~decrease~~increase was primarily ~~due~~the toresult ~~reduced~~of ~~idle~~higher average ~~plant~~interest ~~costs~~rates atand ~~our~~increased ~~nitrogen~~costs ~~facilities~~associated aswith aour ~~result~~Pre-Petition Harris ofFacility, ~~our~~partially ~~nitrogen~~offset ~~plants~~by ~~operating~~lower ataverage ~~higher~~debt ~~rates~~balances. After ~~Portions~~the Petition ofDate, ~~our~~we ~~ammonia,~~ceased ~~urea~~accruing ~~and~~interest ~~nitric~~on ~~acid~~the ~~production~~unsecured ~~capacities~~debt ~~were~~balances ~~idled~~of the ~~for~~Senior ~~various~~Notes ~~periods~~and ~~during~~the ~~2002~~Industrial ~~and~~Revenue ~~2001,~~Bonds ~~primarily~~(each ~~due~~as tomore ~~the~~particularly described ~~unfavorable~~below ~~relationship~~under ~~between~~the ~~product~~heading ~~prices~~"Liquidity and ~~natural~~Capital ~~gas~~Resources ~~costs~~- Financing Activities").

~~Interest,~~Settlement ~~Net~~of Litigation

~~Our net interest expense decreased to $27.9 million in~~ During fiscal ~~2002~~2003, ~~from~~we ~~$28.7~~concluded ~~million~~litigation inrelated ~~fiscal~~to ~~2001.~~a ~~This~~breach ~~decrease was primarily the result~~ of ~~lower~~contract ~~average~~claim involving ~~interest~~performance ~~rates~~guarantees ~~under~~for ~~our~~work ~~Pre-Petition~~done ~~Harris~~at ~~Facility~~one ~~(as~~of ~~defined below under~~ the ~~heading~~anhydrous ~~Liquidity~~ammonia plants ~~and~~in ~~Capital Resources - Financing Activities - The Pre-Petition Harris Facility)~~Donaldsonville, ~~partially~~Louisiana. We ~~offset~~received by$3.6 ~~higher~~million ~~average~~in ~~debt~~net ~~balances~~proceeds ~~and~~from ~~costs~~this ~~and lender fees associated with amending our Pre-Petition Harris Facility~~settlement.

~~Settlement~~ During fiscal 2002, we settled the defamation action we filed against Terra International, Inc. ("Terra International") in August 1995. We received $11.0 million from Terra International's liability insurance carrier. Also in fiscal 2002, we received $4.4 million in net proceeds from the conclusion of ~~Litigation~~litigation related to defective equipment purchased at our Yazoo City, Mississippi, nitrogen production facility. The problems with this equipment occurred during periods prior to fiscal 2002.

~~During~~Other fiscal 2002, we settled the defamation action we filed against Terra in August 1995. We received $11.0 million from Terra's liability insurance carrier. Also in fiscal 2002, we received $4.4 million in net proceeds from the conclusion of litigation related to defective equipment purchased at our Yazoo City, Mississippi, nitrogen production facility. The problems with this equipment occurred during periods prior to fiscal 2002.Income

Other income ~~Income~~decreased to $1.6 million in fiscal 2003, from $6.0 million in fiscal 2002. During fiscal 2002, we had gains of approximately $5.1 million related to the sale of non-core assets.

~~Other~~Reorganization income decreased to $6.7 million in fiscal 2002 from $9.0 million in fiscal 2001. During both fiscal 2002 and 2001, other income included gains on the sale of non-core assets of $5.1 million and $6.7 million, respectively.Expense

~~Income~~ Costs directly ~~Tax~~related ~~Benefit~~to our reorganization under Chapter 11 of the Bankruptcy Code are reflected as reorganization expense in the consolidated statements of operations. Reorganization expense for the year ended June 30, 2003, was approximately $3.5 million and consisted of legal and professional fees.

~~Our~~Income ~~income~~Tax tax benefit decreased to $17.9 million in fiscal 2002 from $29.6 million in fiscal 2001. These income tax benefits were primarily the result of our net losses. For fiscal 2002 and prior, we did not provide for taxes on our permanently reinvested foreign earnings from our investment in Point Lisas Nitrogen. In addition, we did not provide for tax benefits on our non-deductible goodwill amortization or losses on non-deductible goodwill impairment. Our estimated annual effective tax rate decreased to 12.9% in fiscal 2002 from 23.7% in fiscal 2001.Benefit

~~Page~~ Our income 32tax benefit from continuing operations decreased to $15.1 million in fiscal 2003, from $16.4 million in fiscal 2002. These income tax benefits are primarily the result of our net losses from continuing operations. The income tax benefit in fiscal 2003 was partially offset by U.S. tax expense on cumulative foreign earnings in fiscal 2003 (as more particularly described above under the heading "Critical Accounting Policies - Deferred Taxes"). For fiscal 2002 and prior, we did not provide for taxes on our permanently reinvested foreign earnings from our investment in Point Lisas Nitrogen.

~~LIQUIDITY~~ Our estimated ~~AND~~annual ~~CAPITAL~~effective ~~RESOURCES~~rate attributable to the loss from continuing operations increased to 15.9% in fiscal 2003, from 12.4% in fiscal 2002.

OnOur income ~~October 2,~~tax ~~2003,~~benefit ~~the~~from ~~Court~~discontinued ~~entered~~operations ~~the~~for ~~Final~~fiscal ~~Order~~2003 ~~authorizing~~was us$16.6 million, toas ~~borrow~~compared up to $321.5 million ~~under~~for ~~the~~fiscal ~~debtor-in-possession~~2002. These ~~financing~~tax ~~facility~~benefits ~~generally~~were primarily ~~described below in this section under~~ the ~~heading~~result ~~"Financing~~of ~~Activities - Debtor-in-Possession Financing Facility," and more particularly described in the Post-Petition Credit Agreement filed as an exhibit to~~ our ~~Form~~net ~~10-Q~~losses ~~for~~from ~~the~~discontinued ~~quarter ended March 31, 2003~~operations.

AtDiscontinued June 30, 2003, we had cash and cash equivalents of $6.1 million, compared to $2.0 million at June 30, 2002, an increase of approximately $4.1 million. At June 30, 2002, our cash and cash equivalents had decreased to $2.0 million from $11.8 million at June 30, 2001, a decrease of $9.8 million.Operations

~~Operating~~ Melamine and ~~Activities~~Urea Assets. In March 2004, we announced that permanent closure of our melamine and urea operations at our Donaldsonville, Louisiana facility. Acting on authority granted by our board of directors, we have committed to a plan of disposal and have initiated efforts to locate a buyer for these assets. As a result of this announcement and meeting the requirements for classification as discontinued operations in accordance with SFAS No. 144, our melamine and urea operations have been reflected as discontinued operations. We have recorded an after-tax loss from discontinued operations of $14.1 million, which includes a pre-tax impairment charge of $12.2 million for fiscal 2003. During fiscal 2002, we had a loss from discontinued operations of $541,000. Corporate allocations have been excluded from discontinued operations.

~~Our~~Potash Assets. During ~~net~~our ~~cash~~first ~~used~~quarter inof ~~operating activities was $34.9 million in~~ fiscal ~~2003.~~2004, ~~Such~~our ~~cash~~board ~~included a $14.9 million refund~~ of directors ~~federal~~authorized ~~taxes~~management ~~pursuant~~ to ~~the~~actively ~~Job~~market ~~Creation~~for ~~and~~sale ~~Workforce~~the ~~Assistance~~Potash ~~Act of 2002~~Assets. On ~~Our~~March ~~net~~2, ~~cash~~2004, ~~provided~~these byassets ~~operating~~were ~~activities~~sold for ~~was~~approximately $5328.~~7 million in fiscal 2002 and included a $26.~~4 million. As ~~refund~~a ofresult, ~~federal~~our ~~taxes~~potash ~~pursuant~~operations tohave ~~the~~been reflected ~~Job~~as ~~Creation~~discontinued ~~and~~operations. We ~~Workforce~~have ~~Assistance~~recorded ~~Act~~an ofafter-tax ~~2002,~~loss ~~and~~from discontinued anoperations of $114.0 million ~~settlement~~for ~~related~~fiscal to2003 ~~the~~and ~~defamation action we filed against Terra International, Inc~~$6.5 inmillion ~~August~~for fiscal ~~1995~~2002. Corporate Weallocations ~~had~~have ~~net~~been ~~cash~~excluded ~~used~~from ~~in operating activities of $48~~discontinued operations.~~2 million in fiscal 2001.~~

~~Investing~~ Phosphate Assets. In ~~Activities~~June 2004, our board of directors authorized management's commitment to a plan to dispose of Mississippi Phosphates Corporation, a wholly owned subsidiary, as part of its plan to emerge from bankruptcy. This subsidiary will either be sold to a third party or transferred to the unsecured creditors of Mississippi Phosphates pursuant to the Amended Plan. Based on that decision and in accordance with SFAS No. 144, our phosphate operations have been reflected as discontinued operations. Corporate allocations have been excluded from discontinued operations. We recorded an after-tax loss from discontinued operations of $7.5 million for fiscal 2003 and income of $1.5 million for fiscal 2002.

~~Our~~ LIQUIDITY ~~net~~AND ~~cash~~CAPITAL used in investing activities was $9.2 million in fiscal 2003 and included $14.9 million in capital expenditures for normal improvements and modifications to our facilities necessary for safe and efficient operations. These expenditures were partially offset by $3.4 million in proceeds from the sale of non-core assets and $2.2 million in dividends from two of our 50% joint ventures. Net cash used by investing activities was $1.6 million in fiscal 2002 and included $12.4 million in capital expenditures that were for normal improvements and modifications to our facilities that were necessary for safe and efficient operations. These expenditures were partially offset by $8.0 million in proceeds from the sale of non-core assets and $2.8 million primarily from the collection of a note for the sale of non-core real estate and dividends from one of our 50% joint venturers. Our net cash provided by investing activities was $2.7 million for fiscal 2001 and included $16.8 million in proceeds from the sale of non-core assets and $1.3 million in dividends from one of our 50% joint venturers. These proceeds were partially offset by $15.4 million in capital expenditures that were for normal improvements and modifications to our facilities.RESOURCES

~~Financing~~ At June ~~Activities~~30, 2004, we had cash and cash equivalents of $22.4 million, compared to $6.1 million at June 30, 2003, an increase of approximately $16.3 million. At June 30, 2003, our cash and cash equivalents had increased to $6.1 million from $2.0 million at June 30, 2002, an increase of $4.1 million.

~~Net cash provided by financing activities was $48.3 million~~ Debtor-in-Possession Financing fiscal 2003, which reflected the excess of borrowings over debt payments. Our borrowings were slightly reduced by the receipt of $14.9 million from a refund of previously paid federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002. Our net cash used in financing activities was $62.0 million in fiscal 2002, indicating that we repaid more money than we borrowed. Contributing to our debt reduction was an $11.0 million cash settlement from the Terra lawsuit, plus the receipt of $26.4 million from a refund of previously paid federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002. During fiscal 2001, amounts provided by financing activities included $55.9 million in net proceeds from borrowings, partially offset by $784,000 paid in cash dividends.Overview

On May 16, 2003, the Court entered an Interim Order approving our request, on an interim basis, for a debtor-in-possession financing facility with Harris Trust and Savings Bank and a syndicate of six other lenders (the "Original DIP Lenders") to provide up to $37.5 million in financing (the "Interim Credit Facility"). On October 2, 2003, the Court entered a Final Order that approved certain amendments to the Interim Credit Facility to permit borrowings of up to $32.5 million on a revolving credit basis (the "DIP Credit Facility") through June 30, 2004. The DIP Credit Facility was reduced to $22.5 million as a result of the sale of our Potash Assets in March 2004. Pursuant to a Final Order entered on December 19, 2003, the Investors (as defined below in this Item 7 under the heading "Supplemental Debtor-in-Possession ~~Financing~~Term ~~Facility~~Loan") provided the Supplemental DIP to us in the amount of $96.7 million, and subsequently concluded a tender offer to the Original DIP Lenders on January 23, 2004 for the remainder of our pre-petition secured debt. On July 15, 2004, the Court entered a Final Order authorizing the Replacement DIP entered into on July 1, 2004, which paid off all of our prior secured debt.

~~Page~~ Replacement Debtor-in-Possession 33Credit Facility

~~Court~~ On June ~~denied~~25, ~~our~~2004, ~~request~~the Court ~~for~~entered aan ~~Final~~Interim Order ~~with~~approving ~~regard~~our torequest, ~~the~~on ~~Interim~~an ~~Credit~~interim ~~Facility~~basis, ~~but~~for the ~~granted~~Replacement usDIP ~~authority~~with toCitigroup ~~use~~Global ~~our~~Markets, ~~cash collateral (i~~Inc.e., ~~cash~~Perry ~~and~~Principals Investments, ~~receivables)~~LLC, ~~for~~Varde ~~ordinary~~Partners, ~~course~~Inc. ~~operations~~and ~~through~~Citicorp ~~October 3~~North America, ~~2003~~Inc. ~~However,~~(the "Replacement onDIP ~~October 2,~~Lenders") ~~2003,~~to ~~the~~provide ~~Court~~up ~~entered~~to a$182.5 ~~Final~~million ~~Order~~in financing. The ~~that~~Replacement ~~approved~~DIP ~~certain~~consists ~~amendments~~of toa $160 million term loan (the "Term ~~Interim~~Loan") ~~Credit~~provided ~~Facility~~by ~~and~~Citigroup ~~permits~~(34.375%), ~~borrowings~~Perry of(50%), and Varde (15.625%) and up to $3222.5 million in revolving credit loans provided solely by Citigroup (the "~~DIP~~Revolving ~~Credit~~Loans" ~~Facility~~and collectively with the Term Loan, the "Replacement Loans"). The ~~DIP~~Replacement ~~Credit~~loans ~~Facility~~were isfunded aon ~~revolving~~July ~~credit~~1, ~~facility~~2004. On July 15, 2004, the Court entered a Final Order that ~~terminates~~approved the Replacement DIP. The Replacement DIP terminates upon the earlier to occur of (a) ~~June 30~~ December 31, 2004, (b) the date that a plan of reorganization confirmed by the Court becomes effective, or (c) ~~the~~ the date on which the Replacement DIP Lenders terminate the Replacement DIP ~~Credit Facility~~ in connection with an event of default thereunder. We have the option to extend the maturity through June 30, 2005, under certain conditions. Mississippi Chemical Corporation is the borrower under the Replacement DIP ~~Credit Facility~~ and its subsidiaries who are Debtors are guarantors. MCHI is not a guarantor, but is obligated to provide a guaranty of the Replacement DIP in the event that the contractual restrictions prohibiting such grant are waived or released.

Maximum Borrowings. The Revolving Loans provide for maximum borrowings (the "Revolver Commitment"), at any time, up to the lesser of (a) $22.5 million, or (b) a borrowing base equal to the sum of (i) 85% of eligible accounts receivable plus (ii) 65% of eligible inventory, minus (iii) an amount equal to twice the amount of all the then accrued and unpaid charges owed to warehousemen and other third parties having inventory in their possession that have not executed and delivered to the lenders a warehouseman's waiver, minus (iv) an amount equal to six months' rent for all leased facilities where inventory is kept for which the landlord has not executed and delivered to the lenders a landlord's waiver. No further borrowings are permitted on the Term Loan.

Rates and Fees. The Replacement Loans bear cash interest, payable monthly, at rates equal to the Citibank Base Rate from time to time in effect plus 3.75% and accrue additional payment-in-kind interest monthly at the rate of 5.15% per annum. On July 1, 2004, we paid the Replacement DIP Lenders a closing fee of $3,650,000 (2%) and a semi-annual agency fee of $75,000. The Replacement DIP also has an unused commitment fee equal to 0.5% per annum of the average daily unused amount of the Revolving Loans.

Collateral Security and Guarantees. Pursuant to the Final Order for the Replacement DIP, the Replacement DIP Lenders have been granted superpriority claim status in the Case with a first lien on substantially all of the Debtors' assets (including all cash collateral and proceeds of inventory and accounts receivable). Our use of cash collateral and proceeds of inventory and accounts receivable generated in the ordinary course of business is limited to the payment of certain expenses and application to the ~~DIP~~Replacement ~~Credit Facility prior to its termination and, following such termination, to the Pre-Petition Harris Facility~~DIP. All of our subsidiaries which are Debtors have guaranteed the Replacement DIP ~~Credit Facility~~ (the "Replacement DIP Guarantors"). As adequate protection for the use of pre-petition cash collateral, the Pre-Petition Lenders have been granted a replacement lien on substantially all of our assets and the assets of the DIP Guarantors, subject only to the lien of the DIP Lenders and certain liens permitted under the DIP Credit Facility.

Covenants. The Replacement DIP (a) restricts our ability to incur debt, (b) requires us to generate certain monthly minimum levels of earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined in the agreement, (c) limits our expenditures to the types set forth in a budget, subject to permitted deviations, (d) limits the amount of capital expenditures, (e) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events (such as asset dispositions outside the ordinary course of business) as detailed below in this paragraph, (f) permits the voluntary prepayment of the Replacement DIP without penalty, and (g) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for debtor-in-possession revolving credit facilities. As of the date of this filing, we were in compliance with all covenants under the Replacement DIP. The minimum cumulative EBITDA requirements are as follows:

~~Page~~Dollars 34in Millions

Period Ending	If No Sale of Interests in Point Lisas Nitrogen	If Sale of Interests in Point Lisas Nitrogen
	Through end of:
October 31, 2003	($750,000)	($1,250,000)
	Jul-04	Aug-04	Sep-04	Oct-04	Nov-04	Dec-04	Jan-05	Feb-05	Mar-05	Apr-05	May-05	Jun-05
November 30, 2003	$20,000	($480,000)
Minimum EBITDA
December 31, 2003	$1,040,000	$540,000
	$ (3.5)	$ (3.5)	$ (3.0)	$ (2.5)	$ (2.0)	$ (2.0)	$ -	$ 1.0	$ 2.0	$ 4.0	$ 5.5	$ 6.5
January 31, 2004	$2,960,000	$2,440,000
February 29, 2004	$3,610,000	$2,980,000
March 31, 2004	$2,730,000	$2,260,000
April 30, 2004	$3,800,000	$3,140,000
May 31, 2004	$3,840,000	$3,170,000
June 30, 2004	$3,660,000	$3,020,000

~~Our~~At the ~~cumulative~~time ~~capital~~of ~~expenditures~~a ~~are~~disposition ~~limited~~of Mississippi Phosphates, the minimum EBITDA covenant changes as ~~follows~~shown below:

Period Ending	Cumulative Maximum Permitted
October 31, 2003	$2,800,000
November 30, 2003	$5,300,000
December 31, 2003	$6,400,000
January 31, 2004	$7,100,000
February 29, 2004	$7,700,000
March 31, 2004	$9,000,000
April 30, 2004	$9,600,000
May 31, 2004	$10,300,000
June 30, 2004	$10,800,000

Dollars in Millions

We must maintain an excess collateral availability amount under our borrowing base according to the following schedule:

	Through end of:
		Sep-04	Oct-04	Nov-04	Dec-04	Jan-05	Feb-05	Mar-05	Apr-05	May-05	Jun-05
Month of Transaction Consummation
Month of Transaction Consummation
Sep-04		$ (3.7)	$ (4.3)	$ (3.4)	$ (3.8)	$ (3.0)	$ (2.3)	$ (1.9)	$ 1.1	$ 2.2	$ 3.0
Oct-04			$ (3.6)	$ (2.6)	$ (3.1)	$ (2.3)	$ (1.5)	$ (1.2)	$ 1.9	$ 2.9	$ 3.7
Nov-04				$ (1.5)	$ (2.0)	$ (1.2)	$ (0.4)	$ (0.1)	$ 3.0	$ 4.0	$ 4.8
Dec-04					$ (2.5)	$ (1.7)	$ (0.9)	$ (0.5)	$ 2.5	$ 3.5	$ 4.3
Jan-05						$ (1.2)	$ (0.4)	$ (0.1)	$ 3.0	$ 4.0	$ 4.8
Feb-05							$ 0.7	$ 1.1	$ 4.1	$ 5.2	$ 6.0
Mar-05								$ 1.4	$ 4.4	$ 5.4	$ 6.2
Apr-05									$ 5.0	$ 6.1	$ 6.9
May-05										$ 5.0	$ 5.8
Jun-05											$ 6.3

Period Ending	Required Excess Collateral Availability
October 31, 2003	$35,120,000
November 30, 2003	$32,980,000
December 31, 2003	$32,660,000
January 31, 2004	$31,990,000
February 29, 2004	$31,270,000
March 31, 2004	$30,900,000
April 30, 2004	$32,900,000
May 31, 2004	$35,510,000
June 30, 2004	$36,930,000

Our cumulative capital expenditures are limited as follows:

Dollars ~~Other than any disposition of our interest~~ in Point Lisas Nitrogen, all net cash proceeds of asset dispositions outside the ordinary course in excess of $1.0 million shall be applied to the Pre-Petition Facility and the DIP Credit Facility on an equal basis, provided that if the obligations under the DIP Credit Facility are otherwise satisfied as described in the DIP Credit Facility, the balance of any such proceeds shall be applied to the Pre-Petition Credit Facility. As a result of any such sale, the DIP Commitment shall be automatically and permanently reduced by the amount of each such payment with a corresponding reduction in the DIP Commitment of each DIP Lender. In the event of a disposition of our interest in Point Lisas Nitrogen, all net cash proceeds must be applied to the Pre-Petition Facility.Millions

Page 35

	Through end of:
	Jul-04	Aug-04	Sep-04	Oct-04	Nov-04	Dec-04	Jan-05	Feb-05	Mar-05	Apr-05	May-05	Jun-05
Minimum Capital Expenditures
Minimum Capital Expenditures	$ 1.50	$ 3.00	$ 4.25	$ 5.25	$ 6.25	$ 7.00	$ 7.50	$ 8.00	$ 8.50	$ 9.00	$ 9.50	$ 10.25

~~Standstill Agreement. In connection with entering into~~ At the ~~DIP~~time Credit Facility, we entered into an agreement with the Pre-Petition Lenders pursuant to which such lenders agreed not to take any action to enforce their rights under the MCHI guaranty, given in connection with the Pre-Petition Facility. Upon the termination of ~~the~~a ~~DIP~~disposition ~~Credit Facility or in the case~~ of ~~certain~~Mississippi ~~defaults~~Phosphates, the ~~Pre-Petition~~capital ~~Lenders~~expenditure covenant ~~may~~changes ~~enforce~~as ~~the~~shown MCHI guaranty. In the event that MCHI receives proceeds from a refinancing or disposition event with respect to Point Lisas Nitrogen, MCHI has agreed to apply such proceeds to the Pre-Petition Facility.below:

~~The~~Dollars in ~~Pre-Petition Harris Facility~~Millions

As of the Petition Date, we had a secured revolving credit facility with Harris Trust and Savings Bank and a syndicate of twelve other lenders totaling $158.4 million (the "Pre-Petition Facility"). The Pre-Petition Facility bears interest at rates related to the Prime Rate, the London Interbank Offered Rate or Federal Funds Rate. As of June 30, 2003, our weighted average interest rate was 9.65% and we had borrowings outstanding in the amount of $158.4 million and letters of credit outstanding in the amount of $790,000. The bankruptcy filing was an event of default under the Pre-Petition Facility and, as a result, we can no longer borrow under the Pre-Petition Facility. Since the Pre-Petition Facility is a secured facility, it has not been classified as a liability subject to compromise on our consolidated balance sheet.

	Through end of:
		Sep-04	Oct-04	Nov-04	Dec-04	Jan-05	Feb-05	Mar-05	Apr-05	May-05	Jun-05
Month of Transaction Consummation
Month of Transaction Consummation
Sep-04		$ 3.87	$ 4.44	$ 4.78	$ 5.34	$ 5.68	$ 5.97	$ 6.30	$ 6.60	$ 6.81	$ 7.37
Oct-04			$ 4.81	$ 5.16	$ 5.72	$ 6.06	$ 6.35	$ 6.67	$ 6.97	$ 7.19	$ 7.75
Nov-04				$ 5.59	$ 6.15	$ 6.49	$ 6.78	$ 7.11	$ 7.41	$ 7.62	$ 8.19
Dec-04					$ 6.81	$ 7.15	$ 7.44	$ 7.77	$ 8.06	$ 8.28	$ 8.84
Jan-05						$ 7.34	$ 7.63	$ 7.96	$ 8.25	$ 8.47	$ 9.03
Feb-05							$ 7.79	$ 8.12	$ 8.42	$ 8.63	$ 9.19
Mar-05								$ 8.33	$ 8.62	$ 8.84	$ 9.40
Apr-05									$ 8.80	$ 9.01	$ 9.57
May-05										$ 9.22	$ 9.78
Jun-05											$10.06

~~The~~Supplemental Debtor-in-Possession ~~Industrial~~Term ~~Revenue Bonds~~Loan

InOn December ~~August~~19, ~~1997~~2003, wethe ~~issued~~Court ~~$14.5~~entered ~~million~~a inFinal ~~industrial~~Order ~~revenue~~approving ~~bonds,~~the aSupplemental DIP ~~portion~~and ofour ~~which~~entering ~~were~~into ~~tax-exempt,~~the toSupplemental ~~finance~~Post-Petition ~~the~~Credit ~~development~~Agreement, dated as of ~~our~~December ~~new~~15, ~~phosphogypsum~~2003, ~~disposal~~with ~~facility~~certain atfunds ~~our~~or ~~Pascagoula,~~affiliates ~~Mississippi,~~managed ~~DAP~~or advised ~~manufacturing~~by ~~plant.~~Delaware OnStreet ~~April 1~~Capital, ~~1998,~~L.P. weand ~~issued~~DDJ ~~$14.5~~Capital ~~million~~Management inLLC (together ~~tax-exempt~~with ~~industrial~~their ~~revenue~~participants ~~bonds~~and (assigns, the "~~1998 IRBs~~Investors"), pursuant ~~the~~to ~~proceeds of~~ which ~~were~~the ~~used~~Investors tomade ~~redeem~~a ~~the~~$96.7 ~~initial~~million ~~industrial~~term ~~revenue~~loan ~~bonds~~to ~~issued~~us inon December ~~August~~30, ~~1997~~2003. The ~~1998~~proceeds ~~IRBs~~of ~~mature~~the onSupplemental ~~March 1,~~DIP ~~2022,~~were ~~and~~used ~~carry~~to areduce the ~~5.8%~~principal ~~fixed~~amount ~~rate~~ of ~~interest.~~the ~~The~~Pre-Petition ~~1998~~Harris ~~IRBs~~Facility ~~may~~(as bedefined ~~redeemed~~below atin this ~~our~~Item ~~option~~7) atby a$90.0 ~~premium~~million ~~from~~and ~~March 1,~~to ~~2008,~~pay tocertain ~~February 28,~~transaction-related ~~2010,~~fees and expenses ~~may~~of be$6.7 ~~redeemed~~million. The atSupplemental ~~face~~DIP ~~value~~was atto ~~any~~mature ~~time~~on ~~after~~the ~~February 28~~earlier of (a) October 31, ~~2010~~2004, ~~through~~(b) the ~~maturity~~effective date. ~~The~~of a ~~bonds~~plan ~~are~~of ~~the~~reorganization ~~obligation~~in of our ~~subsidiary~~Case, ~~Mississippi~~(c) ~~Phosphates~~the ~~Corporation,~~conversion ~~but~~of ~~are~~our ~~guaranteed~~Case byto ~~Mississippi~~a Chapter ~~Chemical~~7 ~~Corporation.~~case, ~~The~~or ~~bankruptcy~~(d) ~~filing~~the ~~was~~dismissal anor ~~event~~appointment of ~~default~~a ~~under~~trustee ~~the~~in ~~industrial~~any ~~revenue~~of ~~bonds.~~our Chapter 11 cases. At June 30, ~~2003~~2004, we had borrowings outstanding under the ~~industrial~~Supplemental ~~revenue~~DIP ~~bonds~~in ~~are~~the ~~reflected~~amount asof a$100.7 ~~component~~million, which included $4.0 million of ~~liabilities~~accrued ~~subject~~payment-in-kind tointerest. Amounts ~~compromise~~due under the Supplemental DIP were repaid on ~~our~~July ~~consolidated~~1, ~~balance~~2004, ~~sheet~~with funding provided by the Replacement DIP.

In addition, the Investors agreed to tender for the approximately $68.4 million remaining secured debt under the Pre-Petition Harris Facility and the obligations under the DIP Credit Facility, at par plus accrued interest (excluding default interest). The ~~Senior~~tender ~~Notes~~was conditioned upon acceptance by at least 51 percent in number of the lenders representing not less than 66-2/3 percent of the outstanding principal amount under these facilities. More than 51 percent in number of the Pre-Petition Lenders and the Original DIP Lenders tendered, respectively, 93 percent and 85 percent of the Pre-Petition Harris Facility and the DIP Credit Facility. The tender closed on January 23, 2004. As a result, the Investors held substantially all of our secured debt at such time.

On July ~~November 25~~1, ~~1997~~2004, we ~~issued~~entered ~~$200.0~~into ~~million of 7.25% Senior Notes (~~the ~~"Senior~~Replacement ~~Notes")~~DIP ~~due November 15, 2017, pursuant~~ to arefinance ~~shelf~~all registration statement filed with the Securities and Exchange Commission. The holders may elect to have the Senior Notes repaid on November 15, 2007. The Senior Notes do not contain any financial covenants, but do contain certain cross-default provisions with the Pre-Petition Harris Facility. As a result of our ~~bankruptcy filing, we did not make the semi~~pre-~~annual~~ ~~interest payment due on May 15, 2003,~~ and ~~were~~post-petition insecured ~~default under the Senior Notes~~debt. ~~At June 30, 2003, the Senior Notes, net of unamortized discounts of $239,000, are reflected as a component of liabilities subject to compromise on our consolidated balance sheet.~~

OnThe Pre-Petition ~~January 9,~~Harris 2003, Trustmark National Bank, the Trustee under the Indenture governing the Senior Notes, delivered a notice of resignation to us. On March 21, 2003, BancorpSouth Bank, a national banking association, became the Trustee under the Indenture. As of June 24, 2003, BancorpSouth Bank resigned as Trustee under the Indenture; and as of the same date, HSBC Bank USA, a banking corporation and trust company duly organized and existing under the laws of the State of New York, became the Trustee under the Indenture.Facility

~~Page~~ As of 36the Petition Date, we had a secured revolving credit facility with Harris Trust and Savings Bank and a syndicate of twelve other lenders totaling $158.4 million. The Pre-Petition Harris Facility bore interest at rates related to the Prime Rate. In December 2003, we paid down $90.0 million on the Pre-Petition Harris Facility with proceeds from the Supplemental DIP. In March 2004, we paid down $16.1 million on the Pre-Petition Harris Facility with proceeds from the sale of our Potash Assets. As of June 30, 2004, our weighted average interest rate was 9.2% (which includes the default rate) and we had borrowings outstanding in the amount of $50.8 million. The bankruptcy filing was an event of default under the Pre-Petition Harris Facility and, as a result, we were no longer permitted to borrow under this facility. As adequate protection for the use of the Pre-Petition Lenders' cash collateral, we were required to pay interest on the Pre-Petition Harris Facility. Interest was paid monthly in arrears at the non-default rate (Prime Rate + 5% on the first $105 million until this debt was reduced to $52.5 million, at which point such rate was Prime Rate + 3%). An additional 2% of default rate interest accrued until payoff of the Pre-Petition Harris Facility. Since the Pre-Petition Harris Facility was a secured facility, it was not classified as a liability subject to compromise on our consolidated balance sheets. On July 1, 2004, this facility was paid in its entirety.

~~Investment~~The Industrial inRevenue ~~Point Lisas Nitrogen~~Bonds

AsIn August ~~a result of our filing bankruptcy~~1997, we ~~are~~issued ~~in default under our ammonia offtake agreement with Point Lisas Nitrogen~~$14.5 ~~The~~million ~~bankruptcy~~in ~~filing~~industrial ~~also~~revenue ~~resulted~~bonds, in a ~~default~~portion ~~on Point Lisas Nitrogen's loan with Ex-Im Bank. Because~~ of which ~~this~~were ~~default~~tax-exempt, ~~the total loan obligation~~ to ~~Ex-Im~~finance ~~Bank~~the ~~continues~~development toof beour ~~classified~~new asphosphogypsum disposal afacility ~~current~~at ~~liability~~our onPascagoula, ~~Point~~Mississippi, ~~Lisas~~DAP ~~Nitrogen's~~manufacturing ~~balance sheet~~plant. On AtApril ~~June 30~~1, ~~2003~~1998, we ~~were~~issued in$14.5 ~~arrears~~million toin tax-exempt ~~Point~~industrial ~~Lisas~~revenue ~~Nitrogen~~bonds ~~under~~ (the ~~ammonia~~"1998 ~~offtake~~IRBs"), ~~agreement in~~ the ~~amount~~ proceeds of ~~approximately~~which ~~$2.6~~were ~~million.~~used Asto aredeem ~~consequence,~~the weinitial ~~have~~industrial ~~been~~revenue ~~paying~~bonds ~~market~~issued ~~prices~~in August ~~for~~1997. The ~~ammonia~~1998 ~~since~~IRBs, ~~the~~issued ~~Petition~~on ~~Date~~April ~~through September 30~~1, ~~2003~~1998, ~~and~~mature ~~have~~on ~~not~~March ~~been~~1, ~~able~~2022, toand ~~recover~~carry ~~amounts~~a ~~paid~~5.8% infixed ~~previous~~rate ~~years~~of interest. The ~~that~~1998 ~~were~~IRBs inmay ~~excess~~be ofredeemed ~~prevailing~~at ~~market~~our ~~prices.~~option Asat a ~~result~~premium offrom ~~entering~~March ~~into~~1, ~~the~~2008, ~~Stalking~~to ~~Horse~~February ~~Agreement~~28, ~~(as defined below)~~2010, and ~~upon~~may ~~satisfaction~~be ofredeemed ~~other~~at ~~conditions,~~face ~~Koch~~value ~~and~~at ~~Ex-Im~~any ~~Bank~~time after ~~have~~February ~~agreed~~28, to2010, ~~permit~~through usthe maturity todate. The ~~recover~~1998 ~~amounts~~IRBs ~~paid~~are inthe ~~previous~~obligation ~~years~~of ~~that~~Mississippi ~~were~~Phosphates, inbut are ~~excess~~guaranteed ofby ~~prevailing~~Mississippi ~~market~~Chemical ~~prices~~Corporation. The onbankruptcy ~~purchases~~filing ~~after~~was an ~~October 1,~~event ~~2003.~~of Asdefault ofunder the ~~date~~1998 ofIRBs. At ~~this~~June ~~filing~~30, ~~Ex-Im~~2004 ~~Bank~~and ~~has~~2003, ~~not~~the ~~demanded~~1998 ~~payment~~IRBs ofare reflected ~~the~~as ~~debt.~~a ~~Point~~component ~~Lisas~~of ~~Nitrogen~~liabilities issubject ~~continuing~~ to ~~repay~~compromise ~~the loan obligation with Ex-Im Bank based~~ on ~~the~~our consolidated ~~original~~balance ~~repayment schedule~~sheets.

OnThe Senior October 8, 2003, we signed an agreement with Koch to sell our interest in Point Lisas Nitrogen for an estimated cash amount of $92.0 million (the "Stalking Horse Agreement"). On October 10, 2003, we filed motions with the Court seeking to approve the Stalking Horse Agreement and the auction and bid procedures for an auction of our Point Lisas Nitrogen interests to be sold in December 2003. If Koch is not the successful bidder at the auction, Koch will be entitled to an estimated break-up fee of approximately $3.8 million.Notes

~~Liquidity~~On November 25, 1997, we issued $200.0 million of 7.25% Senior Notes (the "Senior Notes") due November 15, 2017, pursuant to a $300.0 million shelf registration statement filed with the Securities and Exchange Commission. The holders may elect to have the Senior Notes repaid on November 15, 2007. The Senior Notes do not contain any financial covenants, but do contain certain cross-default provisions with our other debt instruments. As a result of our bankruptcy filing, we did not make the semi-annual interest payment due on May 15, 2003, and were in default under the Senior Notes. At June 30, 2004 and 2003, the Senior Notes, net of unamortized discounts of $239,000, are reflected as a component of liabilities subject to compromise on our consolidated balance sheets.

~~Based on natural gas and product~~Investment market prices as of the date of this filing, and our current gas hedge positions, we believe that our existing cash, cash generated from operations, and cash available under the DIP Credit Facility should be sufficient to satisfy our financing requirements for operations and capital projects through fiscal 2004. Natural gas prices remain volatile, and if they increase without corresponding increases in ~~the~~Point ~~market~~Lisas ~~prices~~Nitrogen for our products, our natural gas costs will have a material adverse impact on our liquidity and results of operations. We estimate our capital expenditure requirements for fiscal 2004 to be approximately $12.0 million, which includes normal improvements and modifications to our facilities necessary for safe and efficient operations. Our ability to continue as a going concern is dependent upon, Limited

~~Page~~ Our 50-50 37joint venture, Point Lisas Nitrogen Limited, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant near Point Lisas, The Republic of Trinidad and Tobago. Point Lisas Nitrogen's loan with Export Import Bank of the United States ("Ex-Im Bank") is a non-recourse loan and is not guaranteed by the joint venture partners. In the event of default, Ex-Im Bank could demand immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen.

~~but~~ As a ~~not~~result ~~limited~~of toour filing bankruptcy, ~~the~~at ~~development~~June ~~and~~30, ~~confirmation~~2003, we had a payment default of approximately $2.6 million under our ammonia offtake agreement with Point Lisas Nitrogen. The bankruptcy filing also resulted in a default on Point Lisas Nitrogen's loan with Ex-Im ~~plan~~Bank. Because of ~~reorganization~~this default, ~~continued~~the ~~access~~total loan obligation to ~~adequate~~Ex-Im ~~sources~~Bank continues ofto ~~capital,~~be classified as a current liability on Point Lisas Nitrogen's ~~compliance~~balance ~~with~~sheet. The ~~the~~payment ~~covenants~~default amount under the ~~DIP~~ammonia ~~Credit~~offtake ~~Facility,~~agreement caused us to pay market prices for ammonia from the ~~ability~~Petition toDate through ~~sustain~~September ~~cash~~30, ~~flows~~2003, ~~sufficient~~and toprevented ~~fund~~us ~~operations~~from ~~and~~recovering ~~repay~~accumulated ~~debt~~amounts paid in previous years that were in excess of prevailing market prices. As a result of payment of the cure amount under the offtake agreement, and ~~retention~~upon satisfaction of ~~key~~other ~~suppliers~~conditions, ~~customers~~Koch and ~~employees~~Ex-Im Bank agreed to permit us to recover amounts paid in previous years, approximately $6.4 Nomillion, ~~assurance~~that ~~can~~were in beexcess ~~given~~of prevailing market prices on purchases after October 1, 2003, which amounts have been recovered. As of the date of this filing, Ex-Im Bank has not demanded that wePoint Lisas Nitrogen make payment of the outstanding debt. Point ~~will~~Lisas beNitrogen ~~successful~~is incontinuing ~~reorganizing~~to ~~our~~repay ~~affairs~~the loan obligation, and ~~successfully~~made ~~emerging~~a ~~from~~$64.1 million prepayment on August 31, 2004. As a result of this payment and cash currently on hand, Point Lisas Nitrogen expects the ~~bankruptcy~~Ex-Im obligation ~~proceedings~~to be paid off by August 31, 2005.

On ~~OUTLOOK~~October 8, 2003, we signed the Koch Stalking Horse Agreement with Koch to sell our interests in Point Lisas Nitrogen. Subsequently, and in conjunction with the Supplemental DIP Order, we withdrew our motion to sell pursuant to the Koch Stalking Horse Agreement, resulting in the payment of the Koch Break-Up Fee.

~~The~~Sale ~~spring season~~ of Potash fiscal 2003 was disappointing. Fiscal 2003 began with several positive factors, including the anticipation of U.S. farmers planting increased acreage over the spring of 2002. Nitrogen product inventories at the producer level were minimal and grain prices had shown improvement. This outlook held through the first nine months of the 2003 fiscal year. During the last quarter of the fiscal year, however, unfavorable weather greatly reduced fertilizer application and planted acreage. As we move into the fall and winter of fiscal 2004, volatility in U.S. natural gas prices has resulted in lower U.S. production rates during the summer months. This has resulted in a tighter supply/demand balance going into the fall causing nitrogen prices to remain at high levels compared to historical averages. Notwithstanding these negative developments, the fiscal 2003 decrease in actual planted acres, compared to planned acres, should cause the ratio of ending grain stocks to use, both inside and outside the United States, to remain favorable. Weather, oil prices and the U.S. economic recovery are among the most important fundamental factors in determining demand for natural gas. To maximize results in the current environment, we continue to determine operating levels for our plants based on our commitments to customers and the relationship between nitrogen product prices and natural gas prices.Assets

~~Approximately~~On ~~half~~March 2, of2004, our ~~DAP~~potash issubsidiaries, ~~sold~~Mississippi ~~into~~Potash, ~~export~~Inc. ~~markets~~and Eddy byPotash, ~~PhosChem~~Inc., Wesold ~~anticipate~~substantially ~~2004~~all ~~DAP~~of ~~fundamentals~~their assets to ~~remain~~wholly ~~similar~~owned subsidiaries toof ~~those~~Intrepid inMining ~~the~~LLC, ~~2003~~a ~~fiscal~~privately ~~year.~~held ~~China's~~Denver-based ~~imports~~natural ~~may~~gas resource becompany. As ~~slightly~~of ~~higher~~June in30, 2004, ~~compared~~we had received approximately $27.9 million related to ~~2003;~~the ~~however,~~sale ifand had a ~~recent~~receivable ~~proposal~~of approximately to$500,000 ~~limit~~recorded ~~cadmium~~on ~~levels~~our isbooks ~~enacted,~~for ~~fertilizer~~the ~~imports~~remainder ~~into~~of ~~China~~the ~~could~~purchase price beattributable ~~reduced~~to ~~since~~a ~~DAP~~purchase ~~contains~~price ~~high~~holdback ~~levels~~held ofin ~~cadmium~~escrow for contingent indemnification obligations.

~~The success of our potash segment will depend on the continued improvement of ore grades mined, improvement in production costs and increases of low potash sales prices.~~Liquidity

~~Other~~Based on ~~variables~~natural ~~can~~gas ~~affect~~and product market prices for nitrogen and DAP, as of the date of this filing, and our current gas hedge positions, we believe that our existing cash, cash generated from operations, and cash available under the Replacement DIP should be sufficient to satisfy our financing requirements for operations and capital projects through the emergence from bankruptcy. Natural gas prices remain volatile, and if they increase without corresponding increases in the market prices for our products, our natural gas costs will have a material adverse impact on our liquidity and results of operations. We estimate asour ~~stated~~capital ~~elsewhere~~expenditure inrequirements for fiscal 2005 to be approximately $9.5 million, which includes normal improvements and modifications to our ~~discussions~~facilities ~~under~~necessary for safe and efficient operations. Our ability to continue as a going concern is dependent upon, but not limited to, the ~~headings~~confirmation ~~titled~~of ~~"Results~~a plan of ~~Operations"~~reorganization, ~~and~~continued ~~"Forward-Looking~~access ~~Statements~~to adequate sources of capital," ascompliance ~~well~~with asthe covenants under the ~~heading~~Replacement ~~"Certain~~DIP, the ~~Business~~ability ~~Factors"~~to sustain positive cash flows sufficient to fund operations and repay ~~elsewhere~~debt, and retention of key suppliers, customers and employees. No assurance can be given that we will be successful in ~~this~~reorganizing ~~Annual~~our businesses ~~Report~~and onsuccessfully ~~Form~~emerging ~~10-K~~from the bankruptcy proceedings.

~~FORWARD-LOOKING~~Contractual ~~STATEMENTS~~Obligations

~~Except~~Known contractual ~~for~~obligations ~~the historical statements and discussion contained herein, statements set forth in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning~~ of ~~Section 21E of~~ the ~~Securities~~Company ~~Exchange~~existing ~~Act of 1934,~~ as ~~amended. In some cases, forward-looking statements can be identified by the use~~ of ~~terms~~June ~~such as "may~~30," ~~"will~~2004," "expects," "believes," "plans," "anticipates," "estimates," "potential," or "continue," the negatives of such words, or other comparable language. Since these forward-looking statements rely on a number of assumptions concerning future events, risks and uncertainties that are beyond our ability to control or predict, readers are cautioned that actual results may differ materially from such forward-looking statements. Future events, risks and uncertainties that could cause a material difference in such results include, but are not limited to, (i) our ~~ability to operate pursuant to the terms of the DIP Credit Facility, (ii) operating constraints, costs~~ and ~~uncertainties~~their ~~associated~~respective ~~with~~estimated ~~the~~due ~~Case, (iii) our~~dates ~~ability to develop, prosecute, confirm and consummate a plan of reorganization, (iv) our ability to receive trade credit, (v) our ability to maintain contracts that~~ are ~~critical~~as tofollows ~~its operation,~~ (~~vi) changes~~ in ~~matters which affect the global supply and demand of fertilizer products, (vii~~thousands) ~~high natural~~ :

Page 38

	Total	2005	2006-2008	2009-2011	After 2011
Supplemental DIP	$100,723	$100,723	$ -	$ -	$ -
Pre-petition Harris Facility	$ 50,810	$ 50,810	$ -	$ -	$ -
Operating leases	$ 3,443	$ 2,034	$ 1,409	$ -	$ -
Ammonia purchase obligation (1)	$422,699	$ 66,742	$200,226	$155,731	$ -

~~gas~~(1) The ~~prices~~Company ~~and~~has ~~the~~a ~~volatility~~contractual ofobligation ~~the~~to ~~natural gas market,~~purchase ~~(viii) a~~one-half ~~variety~~ of ~~conditions in~~ the ~~agricultural industry such as grain prices~~ammonia, ~~planted~~approximately ~~acreage~~358,000 ~~projected~~short-tons ~~grain~~per ~~stock~~year, ~~U.S.~~produced ~~government policies,~~by ~~weather,~~Point ~~and~~Lisas ~~changes~~Nitrogen, inour ~~agricultural~~50-50 ~~production~~joint ~~methods,~~venture ~~(ix) possible unscheduled~~ammonia plant ~~outages~~located ~~and~~in ~~other operating difficulties, (x) price~~Trinidad ~~competition and capacity expansions and reductions from both domestic and international competitors,~~ (~~xi)~~see Note ~~foreign~~4). The ~~government~~purchase ~~agricultural~~price ~~policies,~~is ~~in particular,~~based ~~the~~on ~~policies of~~ the ~~governments~~average ofmarket ~~India~~price ~~and China regarding fertilizer imports, (xii) the relative unpredictability~~ of ~~international and~~ ~~local economic conditions~~ammonia, ~~(xiii) the relative value of the U~~F.SO.B. ~~dollar~~Caribbean, ~~(xiv) regulations~~ ~~regarding~~less ~~the~~a ~~environment~~discount. Obligations ~~and the sale and transportation of fertilizer products, (xv) oil costs and the impact of war~~ in the ~~Middle~~above ~~East~~table orare ~~elsewhere,~~based ~~(xvi) the~~on ~~continuing~~purchasing ~~efficacy of unfair trade remedies and the outcome of pending unfair trade (antidumping) cases~~358,000 ~~and~~short ~~(xvii) other~~tons ~~important factors~~per ~~affecting~~year usat ~~and~~ the ~~fertilizer~~June ~~industry~~2004 ~~generally~~average ~~as detailed in Item 1~~price ~~under~~paid. This ~~the~~contract ~~heading~~expires ~~"Certain Business Factors" and elsewhere~~ in ~~this~~October, ~~Annual Report on Form 10-K~~2010.

~~ITEM~~ At June 7A30, 2004, our pension liability was $24.3 ~~MARKET~~million. This liability ~~RISK~~could increase or decrease depending on actual returns on pension plan assets and changes in the discount rate related to the benefit obligation. The plan is funded annually by the Company, subject to the Internal Revenue Code funding limitation. The Company does not anticipate making any contributions to the plan in fiscal 2005.

Overview. We are exposed to changes in natural gas prices and interest rates. For more information about how we manage specific risk exposures, see Critical Accounting Policies - Hedging Activities in Item 7 of this Annual Report on Form 10-K, and Note 8 - Credit Agreements and Long-Term Debt and Note 17 - Hedging Activities, in our Notes to Consolidated Financial Statements appearing in Item 8 of this Annual Report on Form 10-K. OUTLOOK

~~Natural~~As we ~~Gas.~~move Tointo ~~manage~~the ~~our~~fall, ~~natural~~the ~~gas~~supply/demand ~~price~~balance ~~risks,~~remains wetight ~~enter~~causing ~~into~~nitrogen prices ~~derivative~~to ~~transactions~~be asat ~~the~~high ~~opportunity~~levels ~~arises.~~compared ~~These~~to ~~derivative~~historical ~~transactions~~averages. Low ~~may~~global inventory ~~consist~~levels offor ~~futures~~nitrogen ~~contracts~~products, ~~options,~~downtime ~~swaps,~~at orplants ~~similar~~in ~~derivative~~various countries, ~~instruments~~and ~~that~~continued ~~mature~~volatility atin ~~various dates~~U.S. Wenatural dogas ~~not~~prices ~~hold~~are orsome ~~issue~~of ~~derivative~~the ~~financial~~factors affecting ~~instruments~~the ~~for~~global ~~trading~~supply/demand ~~purposes.~~balance Wethat ~~maintain~~will ~~formal~~determine ~~policies~~price ~~with~~levels over ~~respect~~the tocoming ~~entering into and monitoring derivative transactions~~months. The ~~Our~~ratio ~~derivative~~of ~~transactions~~ending ~~are~~grain ~~intended~~stock to ~~hedge~~use, ~~our~~both ~~future~~inside and ~~natural~~outside ~~gas~~the ~~costs~~U.S., ~~The~~remains ~~volume~~at oflow ~~natural~~levels, which ~~gas~~is ~~hedged~~a ~~varies~~positive ~~from~~indicator ~~time~~for tothe ~~time~~farm ~~based~~economy onand ~~management's~~spring ~~judgment~~planting oflevels. Weather ~~market~~ conditions, ~~particularly~~oil ~~natural gas~~ prices, and ~~nitrogen~~the ~~product prices~~U.S. Ateconomic ~~June 30,~~recovery ~~2003,~~are weamong ~~had~~the nomost ~~open~~important fundamental ~~natural~~factors ~~gas~~in ~~derivative~~determining ~~instruments.~~demand ~~Because~~for ofnatural ~~delays~~gas. This ~~relating~~will, toin ~~the Case~~turn, determine wethe ~~were~~natural ~~unable~~gas toprice ~~hedge~~level ~~natural~~and ~~gas~~volatility ~~from~~that ~~May 16,~~we ~~2003~~will ~~through~~face ~~September 28,~~during fiscal ~~2003~~2005. To ~~Under~~maximize ~~the~~results ~~Interim~~in ~~Order~~the ~~approving~~current ~~hedging activities~~environment, we ~~may~~continue ~~only~~to determine ~~hedge~~operating ~~natural~~levels ~~gas~~ for ~~the~~our ~~months~~plants ofbased ~~November~~on ~~and~~our ~~December~~commitments ~~2003,~~to customers and ~~are~~the ~~subject~~relationship tobetween ~~certain~~nitrogen ~~volume~~product ~~restrictions.~~prices Weand ~~intend~~natural togas ~~seek further Court approval to conduct hedging activities~~prices.

~~Interest~~ FORWARD‑LOOKING ~~Rates. The table below provides information, as of June 30, about our financial instruments sensitive to changes in interest rates.~~STATEMENTS

(Dollars in thousands)
	Maturity Date (1)				Fair Value
		2004	Thereafter	Total		2003	2002
Variable Rate Debt
Principal amount (2)		$158,423	-	$158,423		$158,423	$110,172
Average interest rate (3)		9.65%	-	9.65%

Except for the historical statements and discussion contained herein, statements set forth in this Annual Report on Form 10‑K constitute "forward‑looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, forward‑looking statements can be identified by the use of terms such as "may," "will," "expects," "believes," "plans," "anticipates," "estimates," "potential," or "continue," the negatives of such words, or other comparable language. Since these forward‑looking statements rely on a number of assumptions concerning future events, risks and uncertainties that are beyond our ability to control or predict, readers are cautioned that actual results may differ materially from such forward‑looking statements. Future events, risks and uncertainties that could cause a material difference in such results include, but are not limited to, (i) our ability to operate pursuant to the terms of the Replacement DIP, (ii) operating constraints, costs and uncertainties associated with the Case, (iii) our ability to prosecute, confirm and consummate the amended plan of reorganization and the satisfaction of closing conditions to the related proposed transactions with Terra or our alternate standalone transaction, (iv) our ability to receive trade credit, (v) our ability to maintain contracts that are critical to its operation, (vi) changes in matters which affect the global supply and demand of fertilizer products and industrial chemicals, (vii) high natural gas prices and the volatility of the natural gas market, (viii) a variety of conditions in the agricultural industry such as grain prices, planted acreage, projected grain stock, U.S. government policies, weather, and changes in agricultural production methods, (ix) possible unscheduled plant outages and other operating difficulties, (x) price competition and capacity expansions and reductions from both domestic and international competitors, (xi) foreign government agricultural policies, in particular, the policies of the governments of India and China regarding fertilizer imports, (xii) the relative unpredictability of international and local economic conditions, (xiii) the relative value of the U.S. dollar, (xiv) regulations regarding the environment and the sale and transportation of fertilizer products, (xv) oil costs and the impact of war in the Middle East, (xvi) the occurrence of any national calamity or crisis, including an act of terrorism, (xvii) the continuing efficacy of unfair trade remedies and the outcome of pending unfair trade (antidumping) cases, and (xviii) the ability of the Company to retain key employees, and (xix) other important factors affecting us and the fertilizer industry generally as detailed in Item 1 under the heading "Certain Business Factors" and elsewhere in this Annual Report on Form 10‑K.

~~Assuming~~ITEM ~~a plus or minus 1% interest rate charge, our statement of operations would increase or decrease approximately $1~~7.~~6 million~~A. ~~(1) The~~ ~~Pre-Petition~~QUANTITATIVE ~~Harris~~AND ~~Facility~~QUALITATIVE ~~matures~~DISCLOSURES ~~November 25, 2002.~~ABOUT ~~(2) The~~MARKET Pre-Petition Harris Facility has variable interest rates and, therefore, the balances are representative of fair value. (3) The average interest rate was based on June 30, 2003 variable rates. Actual rates could differ.RISK

~~Page~~ Overview. We 39are exposed to changes in natural gas prices and interest rates. For more information about how we manage specific risk exposures, see Critical Accounting Policies - Hedging Activities in Item 7 of this Annual Report on Form 10-K, and Note 7 - Credit Agreements and Long-Term Debt and Note 16 - Hedging Activities, in our Notes to Consolidated Financial Statements appearing in Item 8 of this Annual Report on Form 10‑K.

Natural ~~ITEM~~Gas. To 8manage our natural gas price risks, we enter into derivative transactions as the opportunity arises. ~~FINANCIAL~~ These ~~STATEMENTS~~derivative ~~AND~~transactions ~~SUPPLEMENTARY~~may consist ~~DATA~~of futures contracts, options, swaps, or similar derivative instruments that mature at various dates. We do not hold or issue derivative financial instruments for trading purposes. We maintain formal policies with respect to entering into and monitoring derivative transactions. Our derivative transactions are intended to hedge our future natural gas costs. The volume of natural gas hedged varies from time to time based on management's judgment of market conditions, particularly natural gas prices and nitrogen product prices. Because of delays relating to the Case, we were unable to hedge natural gas from May 16, 2003 through September 28, 2003. Under a Final Order on October 20, 2003, we obtained authority to hedge 150 natural gas contracts per month on a rolling two-month basis. Under a Final Order entered on January 22, 2004, we were permitted to hedge 450 natural gas contracts per month on a rolling two-month basis. Under a Final Order dated August 19, 2004, approving hedging activities, the Company is permitted to hedge up to 325 natural gas contracts per month for the first and second months of a four-month revolving period and up to an additional 150 natural gas contracts per month for the third and fourth months of said period.

~~Independent~~ We prepared ~~Auditors'~~a ~~Report~~sensitivity analysis to estimate our market risk exposure arising from our open natural gas derivative instruments. At June 30, 2004, the fair value of open positions was calculated by valuing each position using June 30, 2004, quoted market prices on the New York Mercantile Exchange ("NYMEX") or valuations determined by our counterparties. We define market risk as the potential loss in fair value as a result of a 10% adverse change in market prices of our open natural gas derivative instruments. We estimate that this adverse change in prices would have reduced the fair value of our open positions by approximately $394,000 at June 30, 2004. Changes in the fair value of such derivative instruments have a high correlation to changes in the spot price of natural gas purchased, which prices are affected by a variety of factors including weather conditions, oil prices, industrial production levels, and the state of the U.S. economy.

To Interest Rates. The ~~the~~table ~~Board~~below ofprovides ~~Directors~~information, ~~and Shareholders~~as of June 30, ~~Mississippi~~about ~~Chemical~~our ~~Corporation:~~financial instruments which are sensitive to changes in interest rates.

We have audited the accompanying consolidated balance sheets of Mississippi Chemical Corporation and subsidiaries as of June 30, 2003 and 2002, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of Mississippi Chemical Corporation and subsidiaries for the year ended June 30, 2001, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated August 28, 2001. We did not audit the financial statements of Point Lisas Nitrogen, an investment which is reflected in the accompanying consolidated financial statements using the equity method of accounting. The investment in Point Lisas Nitrogen represents 17.8 percent and 15.7 percent of total assets as of June 30, 2003 and 2002, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Point Lisas Nitrogen, is based solely on the report of the other auditors.

(Dollars in thousands)
	Maturity Date				Fair Value
		2005	Thereafter	Total	2004	2003

Variable Rate Debt
Pre-Petition Harris Facility
Principal Amount (1)		$ 50,810	-	$ 50,810	$ 50,810	$158,423
Average interest rate (2)		9.20%	-	9.20%
Supplemental DIP
Principal Amount (1)		$100,723	-	$100,723	$100,723	$ -
Average interest rate (2)		16.10%	-	16.10%

WeAssuming conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a ~~test~~plus ~~basis,~~or ~~evidence~~minus ~~supporting~~1% ~~the~~interest ~~amounts~~rate ~~and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management~~charge, asour consolidated ~~well as evaluating the overall financial~~ statement ~~presentation. We believe that our audits and the report~~ of ~~other~~operations ~~auditors~~would ~~provide~~increase aor ~~reasonable~~decrease ~~basis~~approximately $1.5 ~~for our opinion~~million.

In(1) The ~~our~~Pre-Petition ~~opinion,~~Harris ~~based~~Facility ~~on our audits~~ and the ~~report~~Supplemental ofDIP were ~~other~~paid ~~auditors,~~in ~~the~~their ~~consolidated~~entirety ~~financial~~on ~~statements~~July ~~referred to above present fairly~~1, in2004. Both had ~~all~~variable ~~material~~interest ~~respects,~~rates ~~the financial position of Mississippi Chemical Corporation~~ and ~~subsidiaries as of June 30~~, ~~2003 and 2002~~therefore, ~~and~~ the ~~results~~balances ofare ~~their~~representative ~~operations and their cash flows for the years ended in conformity with accounting principles generally accepted in the United States~~ of fair ~~America~~value.

The accompanying consolidated financial statements, as of June 30, 2003 and 2002, have been prepared assuming that Mississippi Chemical Corporation and subsidiaries will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses and because of insufficient liquidity, Mississippi Chemical Corporation and nine of its subsidiaries (~~"Debtors"~~2), The average ~~filed~~interest ~~voluntary~~rate ~~petitions~~was tobased ~~reorganize under Chapter 11 of the United States Bankruptcy Code ("Code")~~ on ~~May 15,~~June ~~2003. The Debtors are currently operating as debtors in possession under the Code. Currently~~30, ~~the Company has not filed a plan of reorganization and there can be no assurance that a plan of reorganization will be proposed or~~2004, ifvariable ~~proposed, that it will be approved or confirmed by the bankruptcy court and other interested parties~~rates. Actual Onrates ~~October 2,~~could ~~2003, the Company obtained debtor-in-possession financing; however, there can be no assurance that such financing facility will be sufficient to meet the Company's cash flow requirements~~differ. These matters raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

~~The Company changed its method for accounting for stock based compensation expense and adopted the provisions of Statement of Financial Accounting Standard No~~ITEM 8. FINANCIAL ~~143,~~STATEMENTS ~~"Accounting~~AND ~~for~~SUPPLEMENTARY ~~Asset Retirement Obligations" in 2003.~~DATA

~~/s/~~ REPORT ~~KPMG~~OF INDEPENDENT ~~LLP~~REGISTERED PUBLIC ACCOUNTING FIRM

~~October 2,~~ To ~~2003,~~the ~~except~~Board ~~for Note 28,~~of ~~which~~Directors isand Shareholders as of ~~October 8,~~ Mississippi ~~2003~~Chemical Corporation:

We have audited the accompanying consolidated balance sheets of Mississippi Chemical Corporation and ~~Subsidiaries~~subsidiaries as of June 30, 2004 and 2003, and the related consolidated statements of operations, shareholders' (~~Debtors-In-Possession~~deficit) equity, ~~Consolidated~~and ~~Balance~~cash ~~Sheets~~flows for each of the years in the three-year period ended June 30, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Point Lisas Nitrogen Limited, an investment which is reflected in the accompanying consolidated financial statements using the equity method of accounting. The investment in Point Lisas Nitrogen Limited represents 32.4 percent and 17.8 percent of total assets as of June 30, 2004 and 2003, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Point Lisas Nitrogen Limited, is based solely on the report of the other auditors.

	June 30
ASSETS	2003	2002
	(Dollars in thousands, except per share amount)
Current assets:
Cash and cash equivalents	$ 6,102	$ 1,989
Accounts receivable (less allowances of $1,839 in 2003 and $2,160 in 2002)	56,340	46,384
Inventories	66,286	66,746
Income tax receivable	35	14,971
Prepaid expenses and other current assets	5,039	3,784
Deferred income taxes	3,112	1,394
Total current assets	136,914	135,268
Investments in affiliates	111,509	106,972
Other assets	10,305	7,071
Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization	289,362	380,974
	$548,090	$630,285
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year	$158,423	$110,172
Accounts payable	15,736	35,948
Accrued liabilities	4,633	11,129
Total current liabilities	178,792	157,249
Long-term debt	-	214,215
Other long-term liabilities and deferred credits	36,872	12,540
Deferred income taxes	26,518	66,805
Liabilities subject to compromise (Note 10)	249,132	-
Commitments and contingencies
(see Notes 1,4, 8, 10, 13, 17, 22, 23, 24 and 25)
Shareholders' equity:
Common stock ($.01 par; authorized 100,000,000 shares; issued 27,980,973 and 27,975,936)	280	280
Additional paid-in capital	306,063	305,901
Accumulated deficit	(209,047)	(102,577)
Accumulated other comprehensive (loss) income	(12,046)	4,983
Treasury stock, at cost (1,769,340 shares and 1,809,026 shares)	(28,474)	(29,111)
Total shareholders' equity	56,776	179,476
	$548,090	$630,285

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

~~The~~In ~~accompanying~~our ~~notes~~opinion, tobased on our audits and the report of other auditors, the consolidated financial statements referred to ~~are~~above anpresent ~~integral~~fairly, ~~part~~in ofall ~~these~~material respects, the financial ~~statements~~position of Mississippi Chemical Corporation and subsidiaries as of June 30, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2004, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements, as of June 30, 2004 and 2003, have been prepared assuming that Mississippi Chemical Corporation and subsidiaries ~~Subsidiaries~~will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses and because of insufficient liquidity, Mississippi Chemical Corporation and nine of its subsidiaries ("Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code ("Code") on May 15, 2003. The Debtors are currently operating as debtors in possession under the Code. On April 16, 2004, the Debtors filed a plan of reorganization with the U.S. Bankruptcy Court, and on September 2, 2004, the Debtors filed an amended plan of reorganization for the purpose of incorporating a proposed transaction for the sale of the Company's nitrogen operations and other matters related to that proposed transaction (see Note 1 -In Bankruptcy Proceedings). However, there can be no assurance that this plan of reorganization will be approved or confirmed by the bankruptcy court or other interested parties. On July 1, 2004, the Debtors obtained replacement debtor-~~Possession~~in-possession financing (see Note 7 - Credit Agreements); however, there can be no assurance that such financing ~~Consolidated~~facility ~~Statements~~will ofbe ~~Operations~~sufficient to meet the Company's cash flow requirements. These matters raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

	Years Ended June 30
	2003	2002	2001
	(Dollars in thousands, except per share data)
Revenues:
Net sales	$ 444,346	$ 451,294	$ 540,401
Other	2,022	-	-
	446,368	451,294	540,401
Operating expenses:
Cost of products sold	432,336	437,530	534,223
Selling, general and administrative	31,906	28,509	31,390
Impairment of long-lived assets (Note 7)	75,118	-	-
Loss on goodwill impairment (Note 18)	-	101,263	58,398
Other	17,093	17,234	21,543
	556,453	584,536	645,554
Operating loss	(110,085)	(133,242)	(105,153)
Other (expense) income:
Interest, net	(29,134)	(27,886)	(28,699)
Settlement of litigation	3,581	15,363	-
Other	1,483	6,651	8,978
Loss before income taxes and reorganization expense	(134,155)	(139,114)	(124,874)
Reorganization expense (Note 14)	3,455	-	-
Loss before income taxes	(137,610)	(139,114)	(124,874)
Income tax benefit	(31,757)	(17,918)	(29,625)
Net loss	$(105,853)	$(121,196)	$ (95,249)
Loss per share - basic and diluted	$ (4.04)	$ (4.64)	$ (3.64)

/s/ KPMG LLP

~~The~~Jackson, ~~accompanying notes to consolidated financial statements~~Mississippi ~~are~~September an3, ~~integral part of these financial statements.~~2004

~~Mississippi Chemical Corporation and Subsidiaries~~ ~~(Debtors-In-Possession)~~ ~~Consolidated~~ INDEPENDENT ~~Statements of Shareholders~~AUDITORS' ~~Equity~~REPORT

	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Loss	Treasury Stock	Total
	(Dollars in thousands, except per share data)
Balances, June 30, 2000	$ 280	$305,901	$114,996	$ -	$(29,579)	$391,598
Comprehensive loss:
Cumulative net unrealized gain on hedges, net of tax of $2,482	-	-	-	4,149	-	4,149
Net loss	-	-	(95,249)	-	-	(95,249)
Net change in unrealized gain on hedges net of tax benefit of $5,966	-	-	-	(9,957)	-	(9,957)
Comprehensive loss	-	-	(95,249)	(5,808)	-	(101,057)
Cash dividends paid ($0.03 per share)	-	-	(784)	-	-	(784)
Balances, June 30, 2001	280	305,901	18,963	(5,808)	(29,579)	289,757
Comprehensive loss:
Net loss	-	-	(121,196)	-	-	(121,196)
Net change in unrealized loss on hedges, net of tax expense of $6,474	-	-	-	10,791	-	10,791
Comprehensive loss	-	-	(121,196)	10,791	-	(110,405)
Treasury stock, net	-	-	(344)	-	468	124
Balances, June 30, 2002	280	305,901	(102,577)	4,983	(29,111)	179,476
Comprehensive loss:
Net loss	-	-	(105,853)	-	-	(105,853)
Net change in unrealized gain on hedges, net of tax benefit of $2,910	-	-	-	(4,853)	-	(4,853)
Deferred pension liability, net of tax benefit of $6,557	-	-	-	(12,176)	-	(12,176)
Comprehensive loss	-	-	(105,853)	(17,029)	-	(122,882)
Stock-based compensation	-	162	-	-	-	162
Treasury stock, net	-	-	(617)	-	637	20
Balances, June 30, 2003	$ 280	$306,063	$(209,047)	$ (12,046)	$(28,474)	$ 56,776

TO THE MEMBERS OF POINT LISAS NITROGEN LIMITED

~~The~~We have ~~accompanying~~audited ~~notes~~the tobalance ~~consolidated~~sheets of Point Lisas Nitrogen Limited as of June 30, 2004 and 2003 and the related statements of income, changes in shareholders' equity and cash flows for each of the three years ended June 30, 2004 (not presented separately herein). These financial statements are ~~an integral~~the ~~part~~responsibility of ~~these~~the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~Mississippi~~We conducted ~~Chemical~~our ~~Corporation~~audits ~~and~~in ~~Subsidiaries~~accordance with the standards of the Public Company Accounting Oversight Board (~~Debtors-In-Possession~~United States). ~~Consolidated~~Those ~~Statements~~standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of ~~Cash~~material misstatement. An ~~Flows~~audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

	Years Ended June 30
	2003	2002	2001
	(Dollars in thousands)
Cash flows from operating activities:
Net loss	$(105,853)	$(121,196)	$ (95,249)
Reconciliation of net loss to net cash (used in)
provided by operating activities:
Net change in operating assets and liabilities	(9,684)	16,956	(14,096)
Impairment of long-lived assets	75,118	-	-
Loss on goodwill impairment	-	101,263	58,398
Depreciation, depletion and amortization	39,232	44,743	46,656
Change in deferred loss on hedging activities,
net of tax	(2,747)	4,780	(1,902)
Equity earnings in unconsolidated affiliates	(7,141)	(12,769)	(8,167)
Deferred income taxes	(34,186)	(1,040)	(31,089)
Refund of federal taxes pursuant to the Job Creation
and Workforce Assistance Act of 2002	14,878	26,446	-
Other	(4,515)	(5,483)	(2,755)
Net cash (used in) provided by operating activities	(34,898)	53,700	(48,204)
Cash flows from investing activities:
Purchases of property, plant and equipment	(14,866)	(12,401)	(15,369)
Proceeds from sale of assets	3,383	8,043	16,788
Other	2,243	2,800	1,250
Net cash (used in) provided by investing activities	(9,240)	(1,558)	2,669
Cash flows from financing activities:
Debt proceeds	285,685	224,395	433,316
Debt payments	(237,434)	(286,345)	(377,390)
Cash dividends paid	-	-	(784)
Net cash provided by (used in) financing activities	48,251	(61,950)	55,142
Net increase (decrease) in cash and cash equivalents	4,113	(9,808)	9,607
Cash and cash equivalents - beginning of year	1,989	11,797	2,190
Cash and cash equivalents - end of year	$ 6,102	$ 1,989	$ 11,797

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Point Lisas Nitrogen Limited as of June 30, 2004 and 2003 and the results of its operations and cash flows for each of the three years ended June 30, 2004 in conformity with U.S. generally accepted accounting principles.

~~The accompanying notes to consolidated financial statements~~/s/ ~~are~~ERNST an& ~~integral part of these financial statements.~~YOUNG

~~Page~~Port of 44Spain, TRINIDAD: July 16, 2004

Mississippi Chemical Corporation and Subsidiaries (Debtors-In-Possession) ~~Notes to~~ Consolidated ~~Financial~~Balance ~~Statements~~Sheets ~~June 30, 2003, 2002 and 2001~~

NOTE 1 - BANKRUPTCY PROCEEDINGS:

	June 30
	2004	2003
	(Dollars in thousands, except per share data)
ASSETS	(Dollars in thousands, except per share data)
Current assets:
Cash and cash equivalents	$ 22,407	$ 6,102
Accounts receivable (less allowances of $1,258 in 2004 and $1,839 in 2003)	27,925	56,375
Inventories	31,497	66,286
Prepaid expenses and other current assets	10,389	5,039
Deferred income taxes	2,492	3,112
Assets of discontinued operations	34,344	-
Total current assets	129,054	136,914

Investments in affiliates	133,119	111,509

Other assets	6,437	10,305

Property, plant and equipment, at cost, less accumulated depreciation, depletion and amortization	119,026	289,362

	$ 387,636	$548,090
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Long-term debt due within one year	$ 151,533	$158,423
Accounts payable	16,402	15,736
Accrued liabilities	10,281	4,633
Liabilities of discontinued operations	14,347	-
Total current liabilities	192,563	178,792

Other long-term liabilities and deferred credits	26,368	36,872

Deferred income taxes	15,789	26,518

Liabilities subject to compromise	231,899	249,132

Commitments and contingencies (see Notes 1,4, 7, 8, 9, 12, 16, 22, 23, 24 and 25)

Shareholders' (deficit) equity:
Common stock ($.01 par; authorized 100,000,000 shares; issued 27,980,973)	280	280
	280	280
Additional paid-in capital	306,063	306,063
Accumulated deficit	(346,041)	(209,047)
Accumulated other comprehensive loss, net	(10,811)	(12,046)
Treasury stock, at cost (3,730,864 shares and 1,769,340 shares)	(28,474)	(28,474)
Total shareholders' (deficit) equity	(78,983)	56,776

	$387,636	$548,090

The ~~Company~~accompanying ~~sought~~notes ~~relief~~to ~~under~~consolidated ~~Chapter~~financial 11statements are an ofintegral ~~the~~part ~~Bankruptcy Code because~~ of athese lack of liquidity. The combination of the depression in the agricultural sector, several waves of low priced imports, and the extreme increase in price level and price volatility of domestic natural gas, the Company's primary raw material, has resulted in substantial financial ~~losses for the Company for the last five years~~statements.

OnMississippi Chemical ~~June 6,~~Corporation ~~2003, the Court appointed the Official Committee of Unsecured Creditors to represent the interests of the unsecured creditors. This committee will monitor the Company's financial condition~~ and ~~restructuring~~Subsidiaries (Debtors-In-Possession) Consolidated ~~activities.~~Statements ~~The Company is required to reimburse certain fees and expenses~~ of ~~the committee, including fees for attorneys and other professionals to the extent allowed by the Court.~~Operations

The Company, subject to any required Court approval, may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts, and other unexpired executory pre-petition contracts. The Company cannot currently determine with certainty the ultimate aggregate liability that will result from the filing and settlement of claims related to any rejected contracts.

	Years Ended June 30
	2004	2003	2002
	(Dollars in thousands, except per share data)
Revenues:
Net sales	$ 300,450	$ 237,919	$ 207,855
Other	4,570	2,022	-
	305,020	239,941	207,855
Operating expenses:
Cost of products sold	249,175	215,470	204,958
Selling, general and administrative	21,108	26,483	24,467
Impairment of long-lived assets	-	62,912	-
Loss on goodwill impairment	-	-	101,263
Other	6,707	12,691	12,409
	276,990	317,556	343,097

Operating income (loss)	28,030	(77,615)	(135,242)

Other (expense) income:
Interest, net	(20,131)	(19,479)	(18,168)
Settlement of litigation	-	3,581	15,363
Other	3,442	1,581	6,014

Income (loss) from continuing operations before reorganization expense and income taxes	11,341	(91,932)	(132,033)

Reorganization expense	45,195	3,456	-

Loss from continuing operations before income taxes	(33,854)	(95,388)	(132,033)

Income tax expense (benefit)	34,477	(15,140)	(16,412)

Loss from continuing operations	(68,331)	(80,248)	(115,621)

Discontinued operations:
Loss from operations, net of income tax benefits of $37,188, $16,617 and $1,507, respectively	(57,258)	(25,605)	(5,575)

Loss on disposal, net of income tax benefits of $8,250	(11,405)	-	-

Loss from discontinued operations	(68,663)	(25,605)	(5,575)

Net loss	$(136,994)	$(105,853)	$(121,196)

Loss per share from continuing operations - basic and diluted	$ (2.77)	$ (3.06)	$ (4.42)
Loss per share from discontinued operations - basic and diluted	(2.79)	(0.98)	(0.22)

Net loss per share	$ (5.56)	$ (4.04)	$ (4.64)

~~Pursuant to the provisions of the Bankruptcy Code, the Company is currently developing a plan of reorganization.~~ The ~~principal~~accompanying ~~objective~~notes ~~of the plan of reorganization will be~~ to ~~restructure~~consolidated ~~the~~financial ~~Company's~~statements are an ~~obligations~~integral topart ~~creditors in a manner that will permit the Company to continue as a viable business organization. The Bankruptcy Code allows the Company the exclusive right to file a plan~~ of ~~reorganization~~these during the first 120 days from the Petition Date, or such other time as the Court orders. In October 2003, the Court extended the Company's exclusivity period to file a plan of reorganization until December 11, 2003, or until such time the Court issues its final ruling. Although the Company expects to file a plan of reorganization, there can be no assurance at this time as to whether or when a plan of reorganization will be proposed, how liabilities and equity interests will be treated in the plan, whether the plan will be approved by the various classes of creditors and equity holders, or whether it will be approved or confirmed by the Court. If the exclusivity period were to be terminated, other interested parties, such as creditors, would have the right to propose alternative plans of reorganization. The Company's plan of reorganization could substantially change the amounts and characterization of liabilities disclosed in the accompanying consolidated financial statements.

~~Page~~Mississippi Chemical 45Corporation and Subsidiaries (Debtors-In-Possession) Consolidated Statements of Shareholders' (Deficit) Equity Years Ended June 30, 2004, 2003 and 2002

NOTE 1 - BANKRUPTCY PROCEEDINGS (Continued):

			Retained	Accumulated
		Additional	Earnings	Other
	Common	Paid-In	(Accumulated	Comprehensive	Treasury
	Stock	Capital	Deficit)	Income (Loss)	Stock (1)	Total
	(Dollars in thousands, except per share data)

Balances, June 30, 2001	$ 280	$305,901	$ 18,963	$ (5,808)	$(29,579)	$ 289,757
Comprehensive loss:
Net loss	-	-	(121,196)	-	-	(121,196)
Net change in unrealized loss
on hedges, net of tax
expense of $6,474	-	-	-	10,791	-	10,791

Comprehensive loss	-	-	(121,196)	10,791	-	(110,405)

Treasury stock, net	-	-	(344)	-	468	124

Balances, June 30, 2002	280	305,901	(102,577)	4,983	(29,111)	179,476
Comprehensive loss:
Net loss	-	-	(105,853)	-	-	(105,853)
Net change in unrealized
gain on hedges, net of tax
benefit of $2,910	-	-	-	(4,853)	-	(4,853)
Deferred pension liability,
net of tax benefit of $6,557	-	-	-	(12,176)	-	(12,176)

Comprehensive loss	-	-	(105,853)	(17,029)	-	(122,882)

Stock-based compensation	-	162	-	-	-	162

Treasury stock, net	-	-	(617)	-	637	20

Balances, June 30, 2003	280	306,063	(209,047)	(12,046)	(28,474)	56,776
Comprehensive loss:
Net loss	-	-	(136,994)	-	-	(136,994)
Net change in unrealized
loss on hedges, net of tax
benefit of $506	-	-	-	(923)	-	(923)
Deferred pension liability,
net of tax expense of $1,163	-	-	-	2,158	-	2,158

Comprehensive loss	-	-	(136,994)	1,235	-	(135,759)

Balances, June 30, 2004	$ 280	$ 306,063	$ (346,041)	$ (10,811)	$(28,474)	$ (78,983)

~~The~~(1) During ~~ability~~fiscal ~~of the Company to continue as a going concern is dependent upon~~2004, ~~but~~approximately ~~not limited to~~1, ~~the development and confirmation of a plan of reorganization~~962,000 ~~continued~~shares ~~access to adequate sources~~ of ~~capital, continued compliance with debt covenants under~~ the Company's ~~debtor-in-possession~~common ~~credit~~stock ~~facility,~~were ~~the~~returned ~~ability~~at tono ~~sustain~~cost ~~cash flows sufficient~~ to ~~fund operations and repay debt, and retention of key suppliers, customers and employees. No assurance can be given that~~ the Company ~~will~~by ~~be successful in reorganizing its affairs through the Case or will successfully emerge from the bankruptcy proceedings~~former shareholders. Such ~~Because~~shares ofare ~~the~~included ~~ongoing~~in ~~nature of~~ the ~~reorganization~~number ~~process, the outcome~~ of ~~which~~treasury isshares ~~not~~held at ~~determinable~~June ~~until a plan of reorganization is confirmed and implemented~~30, ~~the accompanying consolidated financial statements do not include any adjustments that might result from the resolution of these uncertainties~~2004.

~~NOTE~~ The 2accompanying -notes ~~SUMMARY~~to OFconsolidated ~~SIGNIFICANT~~financial ~~ACCOUNTING~~statements ~~POLICIES:~~are an integral part of these financial statements.

~~Basis~~Mississippi Chemical ofCorporation ~~Financial~~and Subsidiaries (Debtors-In-Possession) Consolidated Statements of Cash Flows

As a result of the May 15, 2003 filing of petitions under Chapter 11 of the Bankruptcy Code, the Company's consolidated financial statements have been prepared in accordance with AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" and accounting principles generally accepted in the United States of America applicable to a going concern which, unless otherwise noted, assumes the realization of assets and the payment of liabilities in the ordinary course of business. See Note 2, "Summary of Significant Accounting Policies - Bankruptcy Proceedings" for additional information regarding SOP 90-7.

	Years Ended June 30
	2004	2003	2002
	(Dollars in thousands)
Cash flows from operating activities:
Net loss	$(136,994)	$(105,853)	$(121,196)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Net change in operating assets and liabilities - continuing operations	4,331	(44,688)	6,025
Net change in operating assets and liabilities - discontinued operations	15,655	35,004	10,931
Refund of federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002	-	14,878	26,446
Depreciation, depletion and amortization	27,267	39,232	44,743
Loss on asset impairments and sale of discontinued operations	122,583	75,118	-
Loss on goodwill impairment	-	-	101,263
Change in deferred gain on hedging activities, net of tax	(744)	(2,747)	4,780
Deferred income taxes	(11,174)	(34,186)	(1,040)
Equity in earnings in unconsolidated affiliates	(23,870)	(7,141)	(12,769)
Other	5,152	(4,515)	(5,483)

Net cash provided by (used in) operating activities	2,206	(34,898)	53,700

Cash flows from investing activities:
Purchases of property, plant and equipment - continuing operations	(1,172)	(6,996)	(4,959)
Purchases of property, plant and equipment - discontinued operations	(5,389)	(7,870)	(7,442)
Proceeds from sale of potash operations	27,883	-	-
Proceeds from sale of other assets	1,444	3,383	8,043
Other	1,900	2,243	2,800

Net cash provided by (used in) investing activities	24,666	(9,240)	(1,558)

Cash flows from financing activities:
Debt proceeds	233,610	285,685	224,395
Debt payments	(240,500)	(237,434)	(286,345)
Financing fees	(3,677)	-	-

Net cash (used in) provided by financing activities	(10,567)	48,251	(61,950)

Net increase (decrease) in cash and cash equivalents	16,305	4,113	(9,808)

Cash and cash equivalents - beginning of year	6,102	1,989	11,797

Cash and cash equivalents - end of year	$ 22,407	$ 6,102	$ 1,989

~~Given~~ The ~~the~~accompanying ~~uncertainties~~notes ~~inherent in Chapter 11 bankruptcy proceedings, language expressing substantial doubt about the ability of the Company~~ to ~~continue as a going concern appears in the independent auditors' report covering these~~ consolidated financial statements. are an ~~The~~integral ~~consolidated~~part ~~financial statements do not include any adjustments relating to recoverability and classification~~ of ~~recorded~~these ~~asset~~financial ~~amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern~~statements. ~~All material intercompany transactions and balances have been eliminated (see Note 1).~~

~~The~~Mississippi Chemical ~~Company~~Corporation ~~produces~~ and supplies a full product line of chemicals, including nitrogen, phosphate and potash, which are used primarily as fertilizers and for a broad range of industrial applications. The Company's principal nitrogen products include ammonia, fertilizer-grade ammonium nitrate, urea/ammonium nitrate Subsidiaries (~~"UAN"~~Debtors-In-Possession) Notes solutions and nitric acid. The Company currently produces nitrogen products at its production facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana, and produces ammonia at its 50-50 joint venture in The Republic of Trinidad and Tobago. The Company distributes its nitrogen products to ~~agricultural~~Consolidated ~~and~~Financial ~~industrial~~Statements June ~~users primarily in the southern region of the United States. The Company produces diammonium phosphate ("DAP") at its facility in Pascagoula~~30, ~~Mississippi~~2004, ~~and~~2003 ~~exports approximately half of its production through the Phosphate Chemicals Export Association, Inc. ("PhosChem"). The Company's mines~~ and related facilities near Carlsbad, New Mexico, produce the Company's potash products. The majority of the Company's agricultural potash sales are in domestic markets in the southern and western regions of the United States. In addition, the Company produces several grades of potash that are purchased as a raw material by industrial users.2002

~~During~~NOTE 1 ~~fiscal~~- ~~2003,~~BANKRUPTCY the Company purchased a melamine crystal production facility. The production of melamine did not begin until late June and, therefore, did not contribute to the Company's operations during fiscal 2003. This will become a new operating segment for the Company in fiscal 2004.PROCEEDINGS

~~Page~~ On May 4615, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its direct and indirect subsidiaries, Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; Mississippi Chemical Company, L.P.; Mississippi Chemical Management Company; Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Eddy Potash, Inc.; Triad Nitrogen, L.L.C.; and Melamine Chemicals, Inc. (collectively, the "Company" or the "Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"). The cases are being administered jointly in Joint Case Number 03-02984 WEE, (collectively the "Case"). The Debtors sought relief under Chapter 11 of the Bankruptcy Code because of a lack of liquidity. The combination of a depression in the agricultural sector, several waves of low priced imports, and the extreme increase in price level and price volatility of domestic natural gas, the Company's primary raw material, had resulted in substantial financial losses for the Company for the last five years.

~~NOTE~~ As debtors-in-possession, 2the Debtors, subject to any required Court approval, may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts, and other unexpired executory pre-petition contracts. The ~~SUMMARY~~Company OFdoes ~~SIGNIFICANT~~not ~~ACCOUNTING~~believe ~~POLICIES~~that ~~(Continued):~~rejection damages will be material; however, the Company cannot currently determine with certainty the aggregate liability that will result from the filing and settlement of claims related to any rejected contracts.

~~Cash~~ As debtors-in-possession, the Debtors are authorized to operate their business but may not engage in transactions outside the ordinary course of business without the approval of the Court. On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request for interim financing, and ~~Cash~~on ~~Equivalents~~October 2, 2003, the Court entered a Final Order approving debtor-in-possession revolving credit financing of $32,500,000, which was automatically reduced to $22,500,000 on March 2, 2004, immediately following the sale of the Company's Potash Assets (see Note 21). On December 19, 2003, the Court entered a Final Order approving supplemental debtor-in-possession term loan financing of $96,700,000 (the "Supplemental DIP"). On July 15, 2004, the Court entered a Final Order approving a new $182,500,000 credit facility (the "Replacement DIP") to refinance the Company's pre-petition and post-petition secured debt.

On June 6, 2003, the Court appointed the Official Committee of Unsecured Creditors (the "Creditors' Committee") to represent the interests of the unsecured creditors. The Creditors' Committee monitors the Company's financial ~~considers~~condition ~~all~~and ~~highly~~restructuring ~~liquid~~activities. The ~~investments~~Company ~~purchased~~is ~~with~~required anto reimburse ~~original~~certain ~~maturity~~fees and expenses of ~~three~~the ~~months~~Creditors' orCommittee, ~~less~~including fees for attorneys and other professionals to bethe ~~cash~~extent ~~equivalents~~allowed by the Court. These costs are reflected in reorganization expense in the 2004 and 2003 consolidated statements of operations.

~~Inventories~~ On October 8, 2003, the Company signed an agreement with Koch Nitrogen Company ("Koch") to sell the Company's interests in Point Lisas Nitrogen Limited ("Point Lisas Nitrogen") for an estimated cash amount of $92,000,000, plus certain assumed liabilities (the "Koch Stalking Horse Agreement"). Subsequently, and in conjunction with the Supplemental DIP Order, the Company withdrew its motion to sell pursuant to the Koch Stalking Horse Agreement, resulting in the payment of a break-up fee to Koch of approximately $3,800,000 (the "Koch Break-Up Fee"). This fee is reflected in reorganization expense in the 2004 consolidated statement of operations.

~~Inventories~~On November ~~are~~26, ~~stated~~2003, at the ~~lower~~Company's subsidiaries, Mississippi Potash, Inc. and Eddy Potash, Inc., entered into a stalking horse agreement to sell substantially all of ~~cost~~their orassets ~~market~~to subsidiaries of Intrepid Mining LLC (the "Intrepid Stalking Horse Agreement"). On ~~Cost~~March ~~has~~2, ~~been~~2004, these ~~determined~~assets ~~under~~were sold. As of June 30, 2004, the Company had received approximately $27,900,000 related to the sale and had a ~~moving~~receivable ~~average~~of ~~cost~~approximately ~~method~~$500,000 recorded on its books for the remainder of the purchase price attributable to a purchase price holdback held in escrow for contingent indemnification obligations.

~~Investments~~ On April 16, 2004, the Debtors filed with the Court a joint plan of reorganization and disclosure statement (the "Original Plan"). The principal objective of the Original Plan was to restructure the Debtors' obligations to creditors in ~~Affiliates~~a manner that would permit the Company to continue as a viable business organization. There were objections to the Original Plan. Based on these objections, other alternatives were analyzed.

~~The~~NOTE 1 ~~Company's investments in affiliates primarily consist of an investment in a 50~~-50 ~~ammonia~~BANKRUPTCY ~~production~~PROCEEDINGS ~~joint venture, Point Lisas Nitrogen Limited~~ (~~"Point Lisas Nitrogen"~~Continued), formerly Farmland MissChem Limited, with Koch Nitrogen Company (Note 4). The Company has a separate 50-50 joint venture with Koch Nitrogen Company that is responsible for the transportation of the ammonia produced at Point Lisas Nitrogen. In addition, the Company also has a 50% interest in an ammonia storage terminal in Pasadena, Texas.

~~Property~~ On June 25, ~~Plant~~2004, the Court entered an Interim Order permitting the new $182,500,000 credit facility provided by the New York-based lenders Citigroup Global Markets, Inc., an affiliate of Citigroup, Perry Principals Investments, LLC, an affiliate of Perry Capital and ~~Equipment~~Varde Investment Partners, L.P., an affiliate of Varde Partners, Inc. (the "Replacement DIP"). The parties entered into the Replacement DIP on July 1, 2004, and the Court entered a Final Order approving the Replacement DIP on July 15, 2004. The Replacement DIP, which includes a $22,500,000 revolving credit facility provided solely by an affiliate of Citigroup, replaced all of the Company's pre-petition and post-petition secured debt, a portion of which matured on June 30, 2004. The maturity of the Replacement DIP is the earlier of the Company's exit from bankruptcy or December 31, 2004, and the Company has the option to extend the maturity through June 30, 2005, under certain conditions.

~~Property,~~On August ~~plant and equipment are stated at cost~~9, ~~less accumulated depreciation~~2004, ~~depletion~~the ~~and~~Company ~~amortization. Expenditures for major improvements are capitalized; expenditures for normal maintenance~~ and ~~repairs~~Terra ~~are~~Industries ~~charged to expense as incurred~~Inc. ("Terra") ~~Upon~~announced ~~the~~a ~~sale~~definitive oragreement ~~retirement~~under ofwhich ~~properties,~~Terra will acquire the ~~cost~~Company ~~and~~for ~~accumulated~~an ~~depreciation~~estimated ~~and~~total ~~amortization~~value ~~are~~of ~~removed~~approximately ~~from the accounts~~$268,000,000 as ~~and any resulting gain or loss is recognized in income. Depreciation~~ of the ~~Company's~~announcement ~~land improvements is based on the units-of-production method~~date. The ~~Company~~transaction ~~uses~~consideration ~~primarily~~included ~~the~~cash ~~declining-balance~~and assumed ~~method~~debt of ~~depreciation~~$161,000,000 ~~for~~and ~~assets~~stock ~~purchased~~of ~~through June 30~~$107, ~~1995. Effective July 1~~000, ~~1995~~000, and the ~~Company~~final ~~changed~~value will ~~its~~depend ~~method~~on ofTerra's ~~depreciating~~share ~~newly~~price ~~acquired~~at ~~long-lived~~closing ~~assets~~and ~~from~~closing ~~the declining-balance method to the straight-line method~~adjustments. Both companies' ~~Depletion~~boards of ~~mineral~~directors ~~properties~~have isunanimously ~~provided~~approved ~~using~~ the ~~units-of-production~~transaction. The Creditors' ~~method~~Committee, ~~over~~ the ~~estimated~~Company's ~~life~~largest ofunsecured ~~the~~creditors ~~reserves. Depreciation of property, plant~~ and ~~equipment is provided over~~ the Replacement ~~estimated~~DIP ~~useful~~Lenders ~~lives~~also ofsupport the ~~related assets as follows:~~transaction.

~~Buildings 1-45~~ On September ~~years~~2, 2004, the Company filed an amended joint plan of ~~Machinery~~reorganization ~~and~~with ~~equipment 1~~the Court that replaced the Original Plan (the "Amended Plan"). The primary purpose of the Amended Plan is to facilitate the acquisition of the Company by Terra. If the Terra transaction is not consummated, the Amended Plan provides that the Company will emerge from bankruptcy on a stand-39alone ~~years~~basis. In either instance, the Amended Plan obligates the Company to dispose of Mississippi Phosphates either through a sale of stock or assets, or if such sale is not consummated, by a distribution of the stock or assets of such business to the unsecured creditors of Mississippi Phosphates.

~~Interest~~Under the ~~costs~~Amended ~~attributable~~Plan, Terra will acquire the Company. Perry Principals Investments LLC, an affiliate of Perry Capital Management Inc., and Citigroup Global Markets, Inc., an affiliate of Citigroup, have entered into a commitment to ~~major~~extend ~~construction~~the term ~~projects~~of ~~under~~the ~~development~~term ~~are~~loan ~~capitalized~~portion of the Replacement DIP beyond Mississippi Chemical's emergence from bankruptcy until four years from the closing of the Terra transaction. Terra and the Company will use existing cash on hand to reduce the principal amount of this term loan to $125 million from $160 million and satisfy all other cash payments to creditors required by the Amended Plan. In addition, Terra would issue to certain of the Company's unsecured creditors 14.75 million shares of Terra common stock and an amount of preferred stock, subject to certain post-closing adjustments as specified in the ~~appropriate~~definitive agreement. Assuming ~~property~~the ~~account~~Closing Share Price (as defined in the definitive agreement) is equal to $6.14 (Terra's closing share price on Friday, August 6, 2004, the last trading day prior to the announcement of the agreement), the Company's unsecured creditors would receive Terra common stock with a value of $90.6 million plus the preferred stock. The preferred stock to be issued to unsecured creditors will initially be set with a liquidation preference of $32.2 million. The projected working capital and ~~amortized~~other ~~over~~closing adjustments are currently anticipated to total a negative $17.4 million. Under this projected scenario, Terra will issue preferred stock with a liquidation preference of $14.8 million and, within ten months of closing, Terra will have the ~~life~~option, but not the obligation, to redeem the preferred stock for 2.4 million to 3.4 million shares of Terra common stock to be determined based upon Terra's stock price at closing. Based upon a Closing Share Price of $6.14 per share, Terra would have the ~~related~~right ~~asset~~to redeem the preferred stock for 2.4 million Terra common shares. The final amount of the working capital and other post-closing adjustments will depend on various factors including, but not limited to: business performance, commodity prices and the terms of final separation of Mississippi Phosphates. The agreement also provides that Terra will issue 250,000 additional shares of Terra common stock for distribution to the Company's shareholders.

~~The~~Under the Amended Plan, the Company ~~maintains~~expects ~~replacement~~that ~~parts~~substantially atall ~~its~~unsecured creditors ~~production~~with ~~facilities~~allowed inclaims ~~order~~of to$5,000 ~~minimize~~or ~~downtime~~less infrom the ~~event~~nitrogen ofbusiness awill be ~~part~~paid ~~failure.~~in cash, in full. Substantially all ~~parts~~other ~~that~~unsecured ~~exceed~~creditors awith allowed ~~minimum~~claims ~~value~~from ~~and~~the ~~are~~nitrogen ~~repairable~~business ~~are~~will ~~capitalized~~be aspaid ~~property,~~either ~~plant~~cash ~~and~~equal ~~equipment~~to ~~and~~a specified ~~are~~percentage ~~depreciated~~of ~~over~~ their ~~estimated~~allowed ~~useful~~claim ~~lives.~~or ~~Parts~~a ~~that~~pro-rata doshare ~~not~~of ~~exceed~~ the ~~minimum~~pool ~~value~~of Terra orcommon ~~are~~and ~~not~~preferred ~~repairable~~stock. The ~~are~~Terra ~~maintained~~transaction asand ~~replacement~~Amended ~~parts~~Plan ~~and~~ are subject ~~included~~to asCourt ~~inventory~~approval, insuccessful completion of the restructuring of the Company's ~~current~~nitrogen ~~assets~~and phosphate businesses, as well as customary regulatory approvals. The ~~These~~Terra ~~replacement~~transaction ~~parts~~is ~~are~~also ~~charged~~subject to ~~cost~~Terra's ofability ~~products~~to ~~sold~~obtain the asconsent ~~they~~of ~~are~~Terra's ~~installed~~current inworking ~~the~~capital ~~facility~~lenders.

NOTE 1 - BANKRUPTCY PROCEEDINGS (Continued)

~~Page~~ Although the 47Terra transaction is the primary basis of the Amended Plan, the Amended Plan will also provide that if the Terra transaction is not consummated, then the Company would emerge from bankruptcy on a stand-alone basis. The Company's emergence financing will be provided by an existing commitment from Citigroup and Perry Capital. The existence of this alternate plan facilitates the Company's exit from bankruptcy as expeditiously as possible. Under the stand-alone alternative, the Replacement DIP would be fully retired, the same cash distributions would be made to holders of allowed unsecured claims as in the Terra transaction, the Company's other unsecured creditors would receive substantially all of the common shares of the reorganized company, and the Company's current shareholders would receive warrants to acquire common shares in the reorganized company.

~~NOTE~~ The ability 2of ~~-SUMMARY~~the OFCompany ~~SIGNIFICANT~~to ~~ACCOUNTING~~continue ~~POLICIES~~as ~~(Continued):~~a going concern is dependent upon, but not limited to, the confirmation of a plan of reorganization, continued access to adequate sources of capital, continued compliance with debt covenants under the Replacement DIP, the ability to sustain cash flows sufficient to fund operations and repay debt, and retention of key suppliers, customers and employees. No assurance can be given that the Company will be successful in reorganizing its affairs through the Case. Because of the ongoing nature of the reorganization process, the outcome of which is not determinable until a plan of reorganization is confirmed and implemented, the accompanying consolidated financial statements do not include any adjustments that might result from the resolution of these uncertainties.

~~Impairment~~NOTE 2 ~~of Long~~-~~Lived~~ ~~Assets~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~In 2003, as prescribed in Statement~~ Basis of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company uses the undiscounted cash flow approach to assess the recoverability of long-lived assets related to its nitrogen, phosphate and potash operations. This evaluation is made whenever events or changes in circumstances indicate the carrying amount of long-lived assets may not be recoverable. Estimated cash flows are determined by disaggregating the Company's business segments to the lowest organizational level for which meaningful and identifiable cash flows can be determined. An asset is considered impaired if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. The impairment of an asset is measured by the amount the carrying value of the asset exceeds its fair value. In those instances, the amount impaired is recorded as a component of the Company's results of operations (see Note 7).Statements

In As a ~~2002~~result ~~and 2001, as prescribed in Statement~~ of ~~Financial~~the ~~Accounting~~May ~~Standards ("SFAS") No. 121~~15, ~~"Accounting~~2003 ~~for~~filing ~~the Impairment~~ of ~~Long-Lived~~petitions ~~assets~~under ~~and~~Chapter ~~for~~11 ~~Long-Lived~~of ~~Assets~~the Bankruptcy ~~to be Disposed of~~Code," the Company's ~~used~~consolidated ~~the~~financial ~~undiscounted~~statements ~~cash~~have ~~flow~~been prepared ~~approach~~in toaccordance ~~assess~~with ~~the~~AICPA ~~recoverability~~Statement of ~~long-lived~~Position ~~assets~~("SOP") ~~related to its nitrogen~~90-7, "Financial ~~phosphate~~Reporting ~~and~~by ~~potash~~Entities ~~operations. This evaluation was made whenever events or changes~~ in ~~circumstances~~Reorganization ~~indicated~~under the ~~carrying~~Bankruptcy Code" ~~amount~~and ofU. ~~long-lived assets may not be recoverable~~S. ~~Estimated~~generally ~~cash~~accepted ~~flows~~accounting ~~were~~principles ~~determined~~applicable ~~by disaggregating the Company's business segments~~ to ~~the~~a going ~~lowest~~concern ~~organizational level for~~ which, ~~meaningful~~unless ~~identifiable~~otherwise ~~cash~~noted, ~~flows~~assumes ~~could be determined. An asset was considered impaired if~~ the ~~sum~~realization of ~~the~~assets and ~~expected undiscounted future cash flows was less than~~ the ~~carrying~~payment ~~amount~~ of ~~the~~liabilities ~~asset.~~in ~~The impairment of an asset was measured by~~ the ~~amount~~ordinary ~~the~~course ~~carrying value~~ of ~~the asset exceeded its fair value~~business. ~~In those instances, the amount impaired was recorded as a component of the Company's results of operations.~~

~~Asset~~ Given the ~~Retirement~~uncertainties ~~Obligations~~inherent in Chapter 11 bankruptcy proceedings, language expressing substantial doubt about the ability of the Company to continue as a going concern appears in the report of independent registered public accounting firm covering these consolidated financial statements. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company ~~recognizes~~currently ~~its~~produces ~~obligations~~and tosupplies ~~retire~~a ~~certain~~nitrogen ~~tangible~~product ~~long-lived~~line ~~assets~~of ~~over~~chemicals, which ~~the~~are ~~estimated~~used ~~useful~~primarily ~~lives~~as offertilizers ~~those~~and ~~related~~for ~~assets~~a inbroad ~~accordance~~range ~~with~~of ~~SFAS No~~industrial applications. The ~~143~~Company's principal nitrogen products include ammonia, fertilizer-grade ~~"Accounting~~ammonium ~~for~~nitrate, ~~Asset~~urea/ammonium ~~Retirement~~nitrate ~~Obligations.~~("UAN") solutions and nitric acid. The ~~amounts~~Company ~~recorded~~currently ~~are~~produces anitrogen ~~component~~products ofat its ~~operating~~production ~~expenses~~facilities in ~~the~~Yazoo ~~Company's~~City, ~~consolidated~~Mississippi, and ~~statements~~Donaldsonville, Louisiana, and produces ammonia at its 50-50 joint venture in The Republic of ~~operations~~Trinidad ~~(see~~and Tobago. The ~~Note 9)~~Company distributes its nitrogen products to agricultural and industrial users primarily in the southern region of the United States.

~~Revenue~~Cash and ~~Recognition~~Cash Equivalents

~~Revenue is recognized by the~~ The Company ~~upon~~considers ~~the~~all ~~transfer~~highly ofliquid ~~title~~investments topurchased ~~the~~with ~~customer,~~an ~~which~~original maturity isof ~~generally~~three atmonths ~~the~~or ~~time~~less ~~product~~to isbe ~~shipped~~cash equivalents.

~~Page 48~~Inventories

~~NOTE~~ Inventories are 2stated ~~-SUMMARY~~at OFthe ~~SIGNIFICANT~~lower ~~ACCOUNTING~~of ~~POLICIES~~cost ~~(Continued):~~or market. Cost has been determined under a moving average cost method.

~~Hedging~~Investments in ~~Activities~~Affiliates

The Company's ~~enters~~investments ~~into derivative transactions to protect future production costs against price fluctuations of natural gas, which is the primary raw material~~ in ~~nitrogen~~affiliates ~~production.~~primarily ~~These derivative transactions may~~ consist of ~~futures~~an ~~contracts,~~investment ~~options,~~in ~~swaps,~~a 50-50 orammonia ~~similar~~production ~~derivative~~joint ~~financial instruments related to the price of natural gas. Gains and losses on the derivative transactions that are designated and effective as hedges are deferred and~~venture, atPoint ~~the~~Lisas ~~time the related inventory is sold~~Nitrogen, ~~are~~with ~~recognized~~Koch Nitrogen ~~as an increase or decrease in the purchase cost of the related natural gas. The~~ Company ~~accounts for its hedges in accordance with Statement of Financial Accounting Standards~~ (~~"SFAS")~~Note No4). ~~133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities."~~ The ~~fair~~Company ~~value~~has ofa ~~these~~separate ~~instruments~~50-50 isjoint ~~recorded~~venture ~~on the consolidated balance sheets as an asset or liability as applicable,~~ with Koch aNitrogen ~~corresponding amount, tax effected, reflected as a component of shareholders' equity under the heading "Accumulated Other Comprehensive Income (Loss)." At certain times, the~~ Company ~~determines~~ that ~~its~~is ~~nitrogen~~responsible ~~production~~for ~~facilities~~the ~~are~~transportation ~~not economical because~~ of the ~~unfavorable~~ammonia produced ~~relationship~~at ~~between~~Point ~~nitrogen~~Lisas ~~product prices and the price of natural gas~~Nitrogen. In ~~When this occurs~~addition, the ~~quantity of natural gas the~~ Company ~~purchases~~also ~~may~~has bea ~~less~~50% interest ~~than~~in ~~the~~an ~~quantity~~ammonia ~~hedged,~~storage ~~and~~terminal ~~therefore, the Company undesignates the difference and recognizes the ineffective portion immediately~~ in ~~its consolidated statements of operations. Due to certain matters relating to the Case~~Pasadena, ~~the Company was unable to hedge natural gas from May 16, 2003 through September 28, 2003~~Texas. Under the Interim Order approving hedging activities, the Company may only hedge natural gas for the months of November and December 2003, and is subject to certain volume restrictions. The Company intends to seek further Court approval to conduct hedging activities.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

~~Fair~~Property, Plant ~~Value~~and ~~of Financial Instruments~~Equipment

~~SFAS No. 107~~Property, plant ~~"Disclosure~~and ~~About~~equipment ~~Fair~~are ~~Value~~stated ofat ~~Financial Instruments~~cost," ~~requires~~less ~~all~~accumulated ~~entities to disclose the fair value of financial instruments~~depreciation, depletion ~~both assets~~ and ~~liabilities~~amortization. Expenditures ~~recognized~~for ~~and~~major ~~not~~improvements ~~recognized~~are capitalized; inexpenditures ~~the~~for ~~statements~~normal ofmaintenance ~~financial~~and ~~position,~~repairs ~~for~~are ~~which~~charged ~~it is practicable~~ to expense ~~estimate~~as ~~fair value~~incurred. Upon ~~SFAS~~the ~~No.~~sale ~~107~~or ~~defines~~retirement ~~fair value~~ of aproperties, ~~financial instrument as~~ the ~~amount~~cost atand accumulated ~~which~~depreciation ~~the~~and ~~instrument~~amortization ~~could~~are beremoved ~~exchanged~~from inthe aaccounts, ~~current~~and any ~~transaction~~resulting ~~between~~gain ~~willing~~or ~~parties.~~loss ~~If estimating fair value~~ is ~~not~~recognized ~~practicable,~~in ~~SFAS No~~income. Depreciation ~~107 requires disclosure~~ of ~~descriptive~~the Company's ~~information~~land ~~pertinent~~improvements tois ~~estimating~~based on the ~~value~~ units-of-production amethod. The Company ~~financial~~used ~~instrument.~~primarily ~~The~~the ~~carrying~~declining-balance ~~amount~~method of ~~the~~depreciation ~~Company's~~for ~~cash~~assets purchased ~~and~~through ~~cash~~June ~~equivalents~~30, ~~accounts~~1995. Effective ~~receivable~~July 1, ~~accounts~~1995, ~~payable~~the ~~and~~Company ~~accrued~~changed ~~liabilities~~its ~~approximates~~method ~~fair value~~ of ~~these~~depreciating ~~financial~~newly acquired ~~instruments~~long-lived atassets ~~June 30,~~from ~~2003~~the ~~and~~declining-balance ~~2002~~method ~~due~~ to ~~their short~~the straight-~~term~~line ~~nature~~method. Depletion ~~The carrying amount~~ of ~~the~~mineral ~~Company's~~properties ~~revolving~~was ~~credit~~provided ~~facilities~~using ~~carried~~the units-of-production ~~variable~~method ~~interest~~over ~~rates~~the ~~and,~~estimated ~~therefore,~~life of the ~~carrying~~reserves. The Company's ~~amounts~~mineral ~~approximate~~properties ~~fair~~were ~~value.~~sold ~~The~~in ~~estimated~~connection ~~fair~~with ~~value~~the sale of ~~the~~its Potash ~~Company's~~Assets ~~long-term~~in ~~debt~~March is2004 ~~determined~~(see ~~using~~Note ~~applicable~~21). Depreciation ~~trading~~of ~~price~~property, ~~information~~plant and equipment ~~effective~~is ~~yield~~provided ~~information~~over onthe ~~similar~~estimated ~~debt~~useful ~~instruments~~lives asof ~~quoted~~the byrelated ~~independent~~assets ~~sources (see Note 8).~~as follows:

~~Page~~ Buildings 7-45 years Machinery 49and equipment 1-39 years

~~NOTE~~ Interest costs 2attributable ~~-SUMMARY~~to OFmajor ~~SIGNIFICANT~~construction ~~ACCOUNTING~~projects ~~POLICIES~~under ~~(Continued):~~development are capitalized in the appropriate property account and amortized over the life of the related asset.

~~Income~~ The Company ~~Taxes~~maintains replacement parts at its production facilities in order to minimize downtime in the event of a part failure. Substantially all parts that exceed a minimum value and are repairable are capitalized as property, plant and equipment and are depreciated over their estimated useful lives. Parts that do not exceed the minimum value or are not repairable are maintained as replacement parts and are included as inventory in the Company's current assets. These replacement parts are charged to cost of products sold as they are installed in the facility.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts Impairment of ~~existing~~Long-Lived assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.Assets

~~Bankruptcy~~ In 2004 ~~Proceedings~~and 2003, as prescribed in Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company used the undiscounted cash flow approach to assess the recoverability of long-lived assets related to its operations. This evaluation is made whenever events or changes in circumstances indicate the carrying amount of long-lived assets may not be recoverable. Estimated cash flows are determined by disaggregating the Company's business segments to the lowest organizational level for which meaningful and identifiable cash flows can be determined. An asset is considered impaired if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. The impairment of an asset is measured by the amount the carrying value of the asset exceeds its fair value. In those instances, the amount impaired is recorded as a component of the Company's results of operations (Note 6). Impairment charges occurring after May 15, 2003, are reflected in reorganization expense, except for those charges relating to assets of discontinued operations.

AsIn 2002, aas ~~result~~prescribed in Statement of ~~filing~~Financial ~~petitions~~Accounting ~~under~~Standards ("SFAS") ~~Chapter~~No. 11121, of"Accounting for the ~~Bankruptcy~~Impairment ~~Code~~of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company's ~~consolidated~~used ~~financial~~the undiscounted ~~statements~~cash ~~have~~flow ~~been~~approach ~~prepared~~to inassess ~~accordance~~the ~~with~~recoverability ~~AICPA~~of ~~Statement~~long-lived assets ofrelated ~~Position~~to ~~("SOP")~~its ~~90-7,~~operations. This ~~"Financial~~evaluation ~~Reporting~~was bymade ~~Entities~~whenever events or changes in ~~Reorganization~~circumstances ~~under~~indicated the ~~Bankruptcy~~carrying ~~Code."~~amount ~~SOP~~of 90long-7lived ~~does~~assets may not ~~change~~be ~~the~~recoverable. Estimated ~~application~~cash offlows ~~accounting~~were ~~principles~~determined ~~generally~~by ~~accepted~~disaggregating inthe Company's business segments to the ~~United~~lowest ~~States~~organizational oflevel ~~America~~for inwhich meaningful identifiable cash flows could be determined. An asset was considered impaired if the ~~preparation~~sum of ~~financial~~the ~~statements.~~expected ~~However,~~undiscounted itfuture ~~does~~cash ~~require~~flows was ~~that~~less than the ~~financial~~carrying ~~statements~~amount ~~for~~of the ~~periods~~asset. The ~~including~~impairment ~~and~~of ~~subsequent~~an toasset ~~filing~~was measured by the ~~Chapter~~amount 11the ~~petition~~carrying ~~distinguish~~value ~~transactions~~of ~~and~~the ~~events~~asset ~~that~~exceeded ~~are~~its ~~directly~~fair value. In ~~associated~~those ~~with~~instances, the ~~reorganization~~amount ~~from~~impaired ~~the~~was ~~ongoing~~recorded ~~operations~~as ofa component of the ~~business~~Company's results of operations.

~~SOP~~Asset Retirement 90-7 requires (a) that pre-petition liabilities that are subject to compromise be segregated in the consolidated balance sheets as liabilities subject to compromise, and (b) that revenues, expenses, realized gains and losses, and provisions for losses resulting from the reorganization of the Company be reported separately as reorganization expense in the consolidated statement of operationsObligations. As a result of the reorganization proceedings under Chapter 11, the Company may be required to take actions which may cause assets to be realized or liabilities to be liquidated, for amounts other than those reflected in the consolidated financial statements.

~~Use~~ The Company recognizes its obligations to retire certain tangible long-lived assets in accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations." The amounts recorded are a component of ~~Estimates~~operating expenses in the Company's consolidated statements of operations (Note 8).

The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Revenue Recognition

~~Page~~ Revenue is 50recognized by the Company upon the transfer of title to the customer, which is at the time product is shipped.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

~~Recent Accounting Pronouncements~~Hedging Activities

InThe Company ~~November~~enters ~~2002~~into derivative transactions to protect future production costs against price fluctuations of natural gas, which is the primary raw material in nitrogen production. These derivative transactions may consist of futures contracts, options, swaps, or similar derivative financial instruments related to the price of natural gas. Gains and losses on the derivative transactions that are designated and effective as hedges are deferred and, at the time the related inventory is sold, are recognized as an increase or decrease in the purchase cost of the related natural gas. The Company accounts for its hedges in accordance with Statement of Financial Accounting Standards ~~Board~~ ("~~FASB~~SFAS") ~~issued~~No. ~~FASB~~133, ~~Interpretation~~"Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 45149, "~~Guarantor's~~Amendment ~~Accounting~~of FASB Statement No. 133 on Derivative and ~~Disclosure~~Hedging ~~Requirements~~Activities," ~~for~~and ~~Guarantors~~SFAS No. 138, "Accounting ~~Including~~for ~~Indirect~~Certain ~~Guarantors~~Derivative ofInstruments ~~Indebtedness~~and ofCertain ~~Others~~Hedging Activities." The ~~This~~fair ~~interpretation~~value ~~elaborates~~of these instruments is recorded on the consolidated ~~disclosures~~balance tosheets beas ~~made~~an byasset or liability as applicable, with a corresponding ~~guarantor~~amount, innet ~~its~~of ~~interim~~tax, ~~and~~reflected ~~annual~~as ~~financial~~a ~~statements~~component ~~about~~of ~~its~~shareholders' (deficit) ~~obligations~~equity under ~~certain~~the ~~guarantees~~heading ~~that~~"Accumulated itOther ~~has issued~~Comprehensive Loss." At Itcertain ~~also~~times, ~~clarifies~~the Company determines that aoperating ~~guarantor~~its nitrogen isproduction ~~required~~facilities tois ~~recognize,~~not ateconomically ~~the~~beneficial ~~inception~~because of athe unfavorable ~~guarantee,~~relationship abetween ~~liability~~nitrogen ~~for~~product prices and the ~~fair~~price ~~value~~of natural gas. When this occurs, the quantity of natural gas the ~~obligation~~Company purchases ~~undertaken~~may inbe ~~issuing~~less than the ~~guarantee.~~quantity ~~The~~hedged, and therefore, the Company undesignates ~~adopted~~the difference and ~~applied~~recognizes the ~~provisions~~ineffective portion immediately in its consolidated statement of ~~this~~operations. Due ~~interpretation,~~to ~~resulting~~certain inmatters norelating to ~~material~~the ~~effect~~Case, inthe ~~its~~Company ~~consolidated~~was ~~financial~~unable ~~statements~~to athedge ~~June~~natural gas from May 16, 2003 through September 28, 2003. 30 Under a Final Order entered on October 20, 2003, the Company obtained authority to hedge 150 natural gas contracts per month on a rolling two-month basis. Under a Final Order entered on January 22, 2004, we were permitted to hedge 450 natural gas contracts per month on a rolling two-month basis. Under a Final Order dated August 19, 2004, approving hedging activities, the Company is permitted to hedge up to 325 natural gas contracts per month for the first and second months of a four-month revolving period and up to an additional 150 natural gas contracts per month for the third and fourth months of said period.

InFair Value ~~January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation~~ of ~~Variable Interest Entities." This interpretation of Accounting Research Bulletin No. 51, "Consolidated~~ Financial Statements," addresses consolidation by business enterprises of variable interest entities in which the equity investors do not have a majority voting interest and/or do not have sufficient equity at risk for the entity to finance its operations without additional subordinated financial support from other parties. The Company is required to adopt and apply the provisions of this interpretation during its first quarter of fiscal 2004. The Company does not anticipate the adoption to have a material effect on its consolidated financial statements.Instruments

~~In April 2003, the FASB issued~~ SFAS No. ~~149~~107, "~~Amendment~~Disclosure ofAbout ~~Statement~~Fair ~~133~~Value onof ~~Derivative~~Financial Instruments," requires ~~and~~all ~~Hedging~~entities ~~Activities."~~to ~~This~~disclose ~~statement~~the ~~amends~~fair ~~and~~value ~~clarifies~~of financial ~~accounting~~instruments, both assets and ~~reporting~~liabilities ~~for~~recognized ~~derivative~~and ~~instruments,~~not ~~including~~recognized ~~certain~~in ~~derivative~~the ~~instruments~~consolidated statements ~~embedded~~of infinancial ~~other~~position, ~~contracts~~for ~~and~~which ~~for~~it ~~hedging~~is ~~activities~~practicable ~~under~~to ~~FASB~~estimate ~~Statement~~fair value. SFAS No. ~~133,~~107 ~~"Accounting~~defines ~~for~~fair ~~Derivative~~value ~~Instruments~~of ~~and~~a ~~Hedging."~~financial ~~This~~instrument ~~amendment~~as ~~clarifies~~the ~~under~~amount at ~~what~~which ~~circumstances~~the ainstrument ~~contract~~could ~~with~~be anexchanged ~~initial~~in ~~net~~a ~~investment~~current ~~meets~~transaction ~~the~~between willing ~~characteristic~~parties. If ofestimating afair ~~derivative~~value is not practicable, ~~clarifies~~SFAS ~~when~~No. a107 requires ~~derivative~~disclosure ~~contains~~of adescriptive ~~financial~~information ~~component,~~pertinent ~~and~~to ~~amends~~estimating the value ~~definition~~of a financial instrument. The carrying amount of anthe ~~underlying~~Company's tocash ~~conform~~and cash itequivalents, toaccounts ~~language~~receivable, ~~used~~accounts inpayable ~~FASB~~and ~~Interpretation~~accrued ~~No.~~liabilities approximates ~~45.~~fair ~~These~~value ~~changes~~of ~~will~~these ~~result~~financial ininstruments ~~more~~at ~~consistent~~June ~~reporting~~30, of2004 ~~contracts~~and as2003 ~~either~~due ~~derivatives~~to ortheir ~~hybrid~~short-term ~~instruments~~nature. The carrying amount of the Company's isrevolving ~~required~~credit tofacilities ~~adopt~~carried variable interest rates and, ~~apply~~therefore, the ~~provisions~~carrying ofamounts ~~this~~approximate ~~statement~~fair onvalue. The estimated ~~July 1,~~fair ~~2003.~~value ~~The~~of the Company's ~~does~~Senior ~~not~~Notes ~~expect~~and ~~the~~Industrial ~~adoption~~Revenue ofBonds is ~~SFAS~~determined ~~No.~~using ~~149~~applicable totrading ~~have~~price ainformation ~~material~~and ~~effect~~effective yield information on ~~its~~similar ~~consolidated~~debt ~~financial~~instruments ~~statements~~as quoted by independent sources (see Note 7).

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that any financial instrument that is within the scope of this statement be classified as a liability. The Company is required to adopt and apply the provisions of this statement to financial instruments entered into or modified after May 31, 2003, and otherwise this statement is effective on July 1, 2003. The Company does not expect the adoption of SFAS No. 150 to have a material effect on its consolidated financial statements.Income Taxes

~~Page~~ Income taxes 51are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for those deferred tax assets for which the Company has determined it is more likely than not that these assets may not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

~~NOTE 3 - INVENTORIES:~~Bankruptcy Proceedings

~~Inventories~~As a ~~consisted~~result of filing petitions under Chapter 11 of the ~~following:~~Bankruptcy Code, the Company's consolidated financial statements have been prepared in accordance with AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP 90-7 does not change the application of U. S. generally accepted accounting principles in the preparation of financial statements. However, it does require that the financial statements for the periods including and subsequent to filing the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

	June 30
	2003	2002
	(Dollars in thousands)
Finished products	$29,121	$25,865
Raw materials and supplies	6,415	6,120
Replacement parts	30,750	34,761
	$66,286	$66,746

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

~~NOTE~~ SOP 90-7 4requires (a) that pre-petition ~~INVESTMENT~~liabilities INthat ~~POINT~~are ~~LISAS~~subject ~~NITROGEN~~to ~~LIMITED:~~compromise be segregated in the consolidated balance sheets, and (b) that revenues, expenses, realized gains and losses, and provisions for losses resulting from the reorganization of the Company be reported separately as reorganization expense in the consolidated statements of operations. As a result of the reorganization proceedings under Chapter 11, the Company may be required to take actions which may cause assets to be realized or liabilities to be liquidated, for amounts other than those reflected in the consolidated financial statements.

~~The~~Use Company's 50-50 joint venture, Point Lisas Nitrogen, formerly known as Farmland MissChem Limited, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant located near Point Lisas, The Republic of Trinidad and Tobago. The plant was placed in service in late July 1998. The Company has a contractual obligation to purchase one-half of the ammonia, approximately 350,000 short tons per year, produced by Point Lisas Nitrogen. The Company uses its portion of the production from the joint venture as a raw material for upgrading into finished fertilizer products at its existing facilities and for sales into domestic markets. The Company is accounting for its investment in Point Lisas Nitrogen using the equity method. These equity earnings are reflected in the Company's consolidated statements of operations as a reduction in cost of products sold. At June 30, 2003, the Company's investment in Point Lisas Nitrogen was $104,355,000 and included $5,441,000 of capitalized interest. At June 30, 2002, the Company's investment in Point Lisas Nitrogen was $99,114,000 and included $5,802,000 of capitalized interest. Capitalized interest is being amortized over a 20-year period and represents a basis difference in the Company's investment reflected in its consolidated financial statements and its 50% equity reflected in Point Lisas Nitrogen's financial statements.Estimates

~~Point~~The preparation ~~Lisas Nitrogen's loan with Export-Import Bank~~ of the United States ("Ex-Im Bank") is a non-recourse loan and is not guaranteed by the joint venture partners. In the event of default, Ex-Im Bank may demand immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen. On May 31, 2002, the Company's ~~former~~financial ~~joint~~statements ~~venturer~~in atconformity ~~Point~~with ~~Lisas Nitrogen, Farmland Industries, Inc~~U. S. ~~"(FII"),~~generally ~~filed~~accepted aaccounting ~~voluntary~~principles ~~petition~~requires management ~~for~~to ~~protection~~make ~~under~~estimates ~~Chapter~~and 11assumptions ofthat ~~the~~affect ~~United States Bankruptcy Code in~~ the ~~United~~reported ~~States Bankruptcy Court, Western District~~ amounts of ~~Missouri.~~assets ~~This~~and ~~filing~~liabilities and ~~FII's~~disclosure ~~default under its offtake agreement with Point Lisas Nitrogen were events~~ of ~~default~~contingent ~~under~~assets ~~Point~~and ~~Lisas~~liabilities at ~~Nitrogen's~~the ~~loan~~date ~~agreement with Ex-Im Bank. Accordingly, Ex-Im Bank could have demanded immediate payment~~ of ~~all or any portion of~~ the ~~principal~~financial ~~amount of its loan with Point Lisas Nitrogen. Because of this default~~statements, atand ~~June 30, 2002,~~ the ~~total~~reported ~~loan~~amounts ~~obligation~~of ~~to Ex-Im Bank was reclassified as a current liability on Point Lisas Nitrogen's balance sheet. FII continued to purchase~~ revenues and ~~pay~~expenses ~~for~~during ~~ammonia shipped under~~ the ~~offtake~~reporting ~~agreement after its bankruptcy filing~~period. Actual Inresults ~~May~~could ~~2003,~~differ ~~FII~~from those ~~cured its default under its offtake agreement with Point Lisas Nitrogen in the amount of approximately $5,000,000 and sold its interest in Point Lisas Nitrogen to Koch Nitrogen Company ("Koch")~~estimates.

AsRecent Accounting a result of the Company's filing bankruptcy, it is in default under its ammonia offtake agreement with Point Lisas Nitrogen. The bankruptcy filing also resulted in a default on Point Lisas Nitrogen's loan with Ex-Im Bank. Because of this default, the total loan obligation to Ex-Im Bank continues to be classified as a current liability on Point Lisas Nitrogen's balance sheet. At June 30, 2003, the Company was in arrears to Point Lisas Nitrogen under the ammonia offtake agreement in the amount of $2,622,000. As a consequence, the Company has been paying market prices for ammonia since the Pronouncements

~~Page~~ In January 522003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," addresses consolidation by business enterprises of variable interest entities in which the equity investors do not have a majority voting interest and/or do not have sufficient equity at risk for the entity to finance its operations without additional subordinated financial support from other parties. The Company adopted and applied the provisions of this Interpretation during fiscal 2004 without a material effect on its consolidated financial statements. The FASB revised the Interpretation to address certain technical corrections and to clarify many of the implementation issues. The Company has evaluated the provisions of the revised Interpretation and concluded that its adoption did not have a material effect on the consolidated financial statements.

In ~~NOTE~~April 42003, -the ~~INVESTMENT~~FASB INissued ~~POINT~~SFAS ~~LISAS~~No. ~~NITROGEN~~149, ~~LIMITED~~"Amendment ~~Continued):~~of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging." This amendment clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financial component, and amends the definition of an underlying to conform it to language used in FASB Interpretation No. 45. These changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. The Company adopted this statement on July 1, 2003, with no material impact to its consolidated financial statements.

~~Petition~~ In May ~~Date through September 30,~~ 2003, ~~and~~the ~~has~~FASB ~~not~~issued ~~been~~SFAS ~~able~~No. to150, ~~recover~~"Accounting ~~amounts~~for ~~paid~~Certain inFinancial Instruments ~~previous~~with ~~years~~Characteristics ~~that were in excess~~ of ~~prevailing~~both ~~market~~Liabilities ~~prices~~and Equity." This statement Asestablishes astandards ~~result~~for ofhow ~~entering~~an ~~into~~issuer ~~the~~classifies ~~Stalking~~and ~~Horse~~measures certain ~~Agreement~~financial ~~(as~~instruments ~~defined~~with ~~below),~~characteristics ~~and upon satisfaction~~ of ~~other~~both ~~conditions,~~liabilities ~~Koch~~ and equity. It ~~Ex-Im~~requires ~~Bank~~that ~~have~~any ~~agreed~~financial toinstrument ~~permit~~that ~~the~~is ~~Company~~within tothe ~~recover~~scope ~~amounts~~of this ~~paid~~statement inbe ~~previous~~classified ~~years~~as ~~that~~a ~~were~~liability. The inCompany ~~excess~~adopted the provisions of ~~prevailing~~this ~~market~~statement ~~prices~~ on ~~purchases~~July ~~after October~~ 1, 2003~~. As of the date of this filing~~, with ~~Ex-Im~~no ~~Bank~~material ~~has~~impact ~~not demanded immediate payment of the debt. Point Lisas Nitrogen is continuing~~ to ~~repay~~its ~~the~~consolidated ~~loan~~financial ~~obligation with Ex-Im Bank based on the original repayment schedule~~statements.

~~Point~~NOTE 3 ~~Lisas~~- ~~Nitrogen's financial position as of June 30, 2003 and 2002, and its results of operations for the fiscal years ended June 30, 2003, 2002 and 2001, are summarized below:~~INVENTORIES

~~Summarized~~Inventories consisted ~~Balance~~of ~~Sheet~~the ~~Information~~following:

	June 30
	2003	2002
	2004	2003
	(Dollars in thousands)
Current assets	$ 68,639	$ 67,620
Finished products	$10,664	$29,121
Non-current assets	259,118	268,778
Raw materials and supplies	115	6,415
Current liabilities	129,930	149,773
Replacement parts	20,718	30,750
Non-current liabilities	-	-
	$31,497	$66,286
Stockholders' equity	197,827	186,625

~~Summarized~~NOTE ~~Statement~~4 of- ~~Operations~~INVESTMENT ~~Information:~~IN POINT LISAS NITROGEN LIMITED

	Years Ended June 30
	2003	2002	2001
	(Dollars in thousands)
Revenues	$ 74,451	$ 77,941	$ 76,027
Operating income	15,740	29,964	20,360
Income from continuing operations before cumulative effect of change in accounting principle	11,202	23,972	13,248
Net income	11,202	23,972	14,462

The Company's 50-50 joint venture, Point Lisas Nitrogen, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant located near Point Lisas, The Republic of Trinidad and Tobago. The plant was placed in service in late July 1998. The Company has a contractual obligation to purchase one-half of the ammonia, approximately 358,000 short tons per year, produced by Point Lisas Nitrogen. The Company uses its portion of the production from the joint venture as a raw material for upgrading into finished fertilizer products at its facilities and for sales into domestic markets. The Company is accounting for its investment in Point Lisas Nitrogen using the equity method. These equity in earnings are reflected in the Company's consolidated statements of operations as a reduction in cost of products sold. At June 30, 2004, the Company's investment in Point Lisas Nitrogen was $125,781,000 and included $5,080,000 of capitalized interest. At June 30, 2003, the Company's investment in Point Lisas Nitrogen was $104,355,000 and included $5,441,000 of capitalized interest. Capitalized interest is being amortized over a 20-year period and represents a basis difference in the Company's investment reflected in its consolidated financial statements and its 50% equity reflected in Point Lisas Nitrogen's financial statements.

~~During~~Point Lisas ~~fiscal~~Nitrogen's ~~2001~~loan with Export-Import Bank of the United States ("Ex-Im Bank") is a non-recourse loan and is not guaranteed by the joint venture partners. In the event of default, Ex-Im Bank may demand immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen. On ~~changed~~May 31, 2002, the Company's former joint venturer at Point Lisas Nitrogen, Farmland Industries, Inc. ("FII"), filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court, Western District of Missouri. This filing and FII's default under its ~~accounting~~offtake ~~policy~~agreement ~~relating~~with Point Lisas Nitrogen were events of default under Point Lisas Nitrogen's loan agreement with Ex-Im Bank. Accordingly, Ex-Im Bank could have demanded immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen. Because of this default, at June 30, 2002, the total loan obligation to ~~future~~Ex-Im ~~major~~Bank ~~maintenance~~was ~~expenditures~~reclassified as a current liability on ~~its~~Point ~~plant~~Lisas Nitrogen's balance sheet. FII Incontinued to purchase and pay for ammonia shipped under the ~~past~~offtake agreement after its bankruptcy filing. In May 2003, ~~these~~FII ~~expenditures~~cured ~~were~~its ~~accrued~~default under its offtake agreement with Point Lisas Nitrogen in the amount of approximately $5,000,000 ~~but~~and ~~will~~sold ~~now~~its beinterest ~~expensed~~in Point asLisas ~~incurred~~Nitrogen to Koch.

~~Page~~ As a 53result of the Company's filing bankruptcy, it was in default under its ammonia offtake agreement with Point Lisas Nitrogen. The bankruptcy filing also resulted in a default on Point Lisas Nitrogen's loan with Ex-Im Bank, and as a result, the total loan obligation to Ex-Im Bank continues to be classified as a current liability on Point Lisas Nitrogen's balance sheet. At June 30, 2003, the Company was in arrears to Point Lisas Nitrogen under the ammonia offtake agreement in the amount of $2,622,000. As a consequence, the Company paid market prices for ammonia from the Petition Date through September 30, 2003. As a result of the subsequent payment of the cure amount under the offtake agreement, and satisfaction of other conditions, Koch and Ex-Im Bank agreed to permit the Company to recover amounts paid in previous years, approximately $6,400,000, that were in excess of prevailing market prices on purchases after October 1, 2003, which amounts have been recovered, and are reflected in the Company's consolidated statements of operations as a reduction in cost of products sold. As of the date of this filing, Ex-Im Bank has not demanded immediate payment of the debt. Point Lisas Nitrogen is continuing to repay the loan obligation with Ex-Im Bank and made a $64,100,000 prepayment on August 31, 2004. As a result of this payment, and cash currently on hand, Point Lisas Nitrogen expects the Ex-Im obligation to be paid off by August 31, 2005.

~~NOTE~~ On October 58, 2003, the Company signed the Koch Stalking Horse Agreement (see Note 1) with Koch to sell its interests in Point Lisas Nitrogen. Subsequently, and in conjunction with the Supplemental DIP Order, the Company withdrew its motion to sell pursuant to the Koch Stalking Horse Agreement, resulting in the payment of the Koch Break-Up ~~PROPERTY~~Fee of approximately $3,800,000. This ~~PLANT~~payment ~~AND~~is ~~EQUIPMENT:~~reflected in reorganization expense in the 2004 statement of operations.

~~Property,~~NOTE 4 ~~plant~~- ~~and~~INVESTMENT ~~equipment~~IN ~~consisted~~POINT ofLISAS ~~the~~NITROGEN ~~following:~~LIMITED (Continued)

	June 30
	2003	2002
	(Dollars in thousands)
Mineral properties	$ 42,712	$ 42,712
Land and land improvements	27,226	23,542
Buildings	47,549	50,929
Machinery and equipment	574,850	719,793
Construction in progress	3,582	3,821
	695,919	840,797
Less accumulated depreciation, depletion and amortization	(406,557)	(459,823)
	$ 289,362	$ 380,974

Point Lisas Nitrogen's financial position as of June 30, 2004 and 2003, and its results of operations for the fiscal years ended June 30, 2004, 2003 and 2002, are summarized below:

~~NOTE~~ Summarized Balance 6Sheet ~~- PURCHASE OF MELAMINE CHEMICALS, INC.~~Information:

During fiscal 2003, the Company purchased all of the common stock of Melamine Chemicals, Inc. ("MCI"), that owns a melamine crystal production facility located within the Company's Donaldsonville, Louisiana, complex. The terms of the transaction were not material. Melamine crystal is a raw material for manufacturers in the construction/remodeling and automotive industries. MCI owns two production units with the combined capacity to produce approximately 115 million pounds of melamine a year. The Company intends to initially operate only one facility that will produce approximately 80 million pounds of melamine a year. Prior to the acquisition, MCI's facility had been idled since January 2002 when MCI's former owner announced its intention to sell MCI. The production of melamine did not begin until late June and, therefore, did not contribute to the Company's operations during fiscal 2003. This will become a new operating segment for the Company in fiscal 2004.

	June 30
	2004	2003
	(Dollars in thousands)
Assets
Restricted cash	$ 82,844	$ 50,398
Other current assets	22,027	18,241
Non-current assets	243,026	259,118

Total assets	$347,897	$327,757

Liabilities and Stockholders' Equity
Long-term debt due within one year	$ 93,473	$120,078
Other current liabilities	13,022	9,852
Stockholders' equity	241,402	197,827

Total liabilities and stockholders' equity	$347,897	$327,757

~~NOTE~~ Summarized Statement 7of -Operations ~~IMPAIRMENT OF LONG-LIVED ASSETS~~Information:

On December 19, 2002, the Company announced plans to close its prilled urea facility located in Donaldsonville, Louisiana, and on February 26, 2003, announced plans to close its No. 2 anhydrous ammonia plant, also located in Donaldsonville, Louisiana (the "No. 2 AA Plant"). Both closures were due to continued negative operating results from unfavorable natural gas prices and market conditions. While the Company continued to evaluate alternative uses for these assets, it concluded, at that time, that the long-lived assets associated with the prilling section of the urea plant and the assets associated with the No. 2 AA Plant would be idled indefinitely. These assets were determined to be impaired assets that would not contribute substantially to its ongoing operations. The book value of the impaired prilled urea assets was approximately $12,206,000 as of December 31, 2002. This amount has been written off and recorded as a component of operating expenses. Approximately 40 employees were terminated as a result of this shutdown. The long-lived assets associated with the No. 2 AA Plant had a book value of approximately $68,000,000 as of February 28, 2003. This amount has been written down to an estimated salvage value and the impairment of $58,683,000 has been recorded as a component of operating expenses. Production from the No. 2 AA Plant has been down since early January 2003. Approximately 24 employees were terminated as a result of this change in production. At June 30, 2003, the Company had accrued severance costs of $468,000 resulting from the termination of employees related to the shutdown of the prilled urea assets and the No. 2 AA plant. These amounts are reflected as a component of liabilities subject to compromise on the Company's consolidated balance sheet and were accrued in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."

	Years Ended June 30
	2004	2003	2002
	(Dollars in thousands)

Revenues	$127,312	$ 74,451	$ 77,941
Operating income	48,527	15,740	29,964
Net income	43,575	11,202	23,972

~~Page~~ NOTE 545 - PROPERTY, PLANT AND EQUIPMENT

~~NOTE~~ Property, plant 7and -equipment ~~IMPAIRMENT~~consisted OFof ~~LONG-LIVED~~the ~~ASSETS (Continued)~~following:

At June 30, 2003, the Company evaluated its long-lived assets for impairment. Based upon this evaluation, an additional impairment charge totaling $4,229,000 was made related to our remaining ammonia assets located in Donaldsonville, Louisiana.

	June 30
	2004	2003
	(Dollars in thousands)

Mineral properties	$ -	$ 42,712
Land and land improvements	3,576	27,226
Buildings	22,975	47,549
Machinery and equipment	352,699	574,850
Construction in progress	526	3,582
	379,776	695,919
Less accumulated depreciation, depletion and amortization	(260,750)	(406,557)

	$ 119,026	$ 289,362

NOTE 86 - ~~CREDIT~~IMPAIRMENT ~~AGREEMENTS AND~~ OF LONG-~~TERM~~LIVED ~~DEBT:~~ASSETS

Ammonia Assets. In February 2003, the Company announced closure plans for one of its ammonia plants located in Donaldsonville, Louisiana. This closure was the result of unfavorable natural gas prices and market conditions. The ~~DIP~~Company ~~Credit~~decided ~~Facility~~to idle this ammonia plant indefinitely because it was not expected to contribute to future operations. The long-lived assets associated with this ammonia plant had a book value of approximately $70,300,000. The Company tested this asset for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and recorded a pre-tax impairment charge totaling $62,912,000 during fiscal 2003. This amount has been reflected in the 2003 consolidated statement of operations as impairment of long-lived assets.

OnDue to ~~May 16,~~customer ~~2003,~~demand ~~the~~and ~~Court~~improved ~~entered~~market anconditions ~~Interim~~in ~~Order~~December ~~approving~~2003, the Company's restarted ~~request, on~~ an ~~interim~~ammonia ~~basis,~~plant ~~for~~previously aidled ~~debtor-in-possession financing facility with Harris Trust~~ and ~~Savings~~produced ~~Bank~~through ~~and a syndicate of six other lenders (~~the ~~"DIP~~first ~~Lenders")~~week in toApril ~~provide~~2004. On upMarch to25, ~~$37~~2004,~~500,000~~ ~~in financing (~~the ~~"Interim~~Company ~~Credit~~announced ~~Facility").~~the permanent ~~The~~closure ~~DIP~~of ~~Lenders~~one ~~are~~ammonia ~~also~~plant ~~lenders~~and ~~under~~its ~~the~~intent ~~Pre-Petition~~to ~~Harris~~indefinitely ~~Facility~~idle ~~(the~~a second ~~"Pre-Petition~~ammonia ~~Lenders")~~plant. Both Onammonia ~~August 13,~~plants ~~2003,~~are ~~the~~located ~~Court~~at ~~denied~~ the Company's facility ~~request~~in ~~for~~Donaldsonville, aLouisiana. Negative ~~Final~~operating ~~Order~~performance ~~with~~caused ~~regard~~by topersistently ~~the~~high ~~Interim~~natural ~~Credit~~gas ~~Facility,~~prices was ~~but~~the ~~granted~~major itcontributing ~~authority~~factor tofor ~~use~~the ~~its cash collateral (i~~decision.~~e.,~~ The ~~cash~~Company ~~and~~tested ~~receivables)~~these assets for ~~ordinary~~impairment ~~course~~as ~~operations~~required ~~through~~by ~~October 3,~~SFAS ~~2003~~No. On144 ~~October 2,~~and ~~2003,~~recorded ~~the~~a ~~Court~~pre-tax ~~approved~~impairment charge ~~certain~~of ~~amendments~~approximately ~~to the Interim Credit Facility to permit borrowings up to~~ $3221,~~500~~191,000 ~~(the~~during ~~"DIP~~fiscal ~~Credit Facility")~~2004. ~~The~~This ~~DIP~~impairment ~~Credit Facility~~ charge is areflected ~~revolving~~as ~~credit that terminates upon the earlier to occur of (~~a~~) June 30,~~ ~~2004,~~component ~~(b) the date that a plan~~ of reorganization ~~confirmed~~expense byin the ~~Court~~2004 ~~becomes~~consolidated statement ~~effective, or (c) the date on which the DIP Lenders terminate the DIP Credit Facility in connection with an event~~ of ~~default thereunder~~operations. ~~Mississippi Chemical Corporation is the borrower under the DIP Credit Facility and its subsidiaries who are Debtors are guarantors.~~

~~Maximum Borrowings~~Melamine/Urea Assets. In ~~The~~December ~~DIP~~2002, ~~Credit Facility provides for maximum borrowings (~~the ~~"DIP~~Company ~~Commitment"),~~announced atplans ~~any~~to ~~time,~~close upits tourea facility ~~the~~located ~~lesser~~in ~~of (a) $32~~Donaldsonville,~~500,000,~~ ~~or (b)~~Louisiana. a This ~~borrowing~~closure ~~base~~was ~~equal~~also to the ~~sum~~result of ~~(i) 85%~~unfavorable ofnatural ~~the~~gas ~~eligible~~prices ~~accounts~~and ~~receivable~~market conditions. The ~~plus~~Company ~~(ii) 65%~~evaluated ofthe ~~eligible~~utility ~~inventory,~~of ~~minus~~these ~~(iii) a~~long-lived ~~scheduled~~assets ~~excess~~and initially ~~collateral~~concluded ~~availability~~that ~~requirement, minus (iv) an amount equal to twice~~ the ~~amount~~prilling section of ~~all~~ the ~~then~~urea ~~accrued~~plant ~~and~~was ~~unpaid~~not expected ~~charges~~to ~~owed~~contribute to ~~warehousemen~~ongoing operations and ~~other~~production ~~third~~would ~~parties~~cease. The Company ~~having~~tested ~~inventory~~the inassets ~~their~~associated ~~possession~~with ~~that have not executed and delivered to~~ the ~~lenders~~urea aprilling ~~warehouseman's~~section ~~waiver,~~for impairment ~~minus~~in ~~(v) an~~accordance ~~amount~~with ~~equal~~SFAS toNo. ~~six~~144 ~~months'~~and ~~rent~~recorded ~~for~~a ~~all~~pre-tax ~~leased~~impairment charge ~~facilities~~totaling ~~where~~$12,206,000 ~~inventory~~at isDecember ~~kept~~31, ~~for~~2002. This ~~which~~amount ~~the~~has ~~landlord~~been included ~~has~~in ~~not~~loss ~~executed~~from ~~and~~discontinued ~~delivered~~operations toin the ~~lenders~~2003 aconsolidated statement ~~landlord's~~of ~~waiver~~operations. ~~The DIP Commitments are subject to certain mandatory reductions described below.~~

~~Rates~~On March ~~and~~25, ~~Fees.~~2004, ~~The~~the ~~loans~~Company ~~under~~announced the ~~DIP~~permanent ~~Credit~~closure ~~Facility~~of ~~bear~~its melamine ~~interest~~and aturea ~~rates~~operations ~~equal~~at toits ~~the~~Donaldsonville, ~~prime~~Louisiana, facility ~~commercial~~because ~~rate~~the ~~from~~Company ~~time~~decided to ~~time~~exit inthis ~~effect~~business ~~plus 4%~~operation completely. Acting ~~Upon~~on ~~entry~~authority ofgranted ~~the~~by ~~Interim Order,~~ the Company's ~~paid~~board ~~a facility fee~~ of ~~$375~~directors,~~000 to~~ the ~~DIP~~Company ~~Lenders~~has ~~and~~committed anto ~~administrative~~a ~~fee~~plan of ~~$75,000~~disposal ~~(of~~and ~~this~~has ~~amount,~~formally ~~$60,000~~initiated efforts ~~was refunded~~ to ~~the~~locate ~~Company~~a ~~subsequent~~buyer tofor ~~June 30,~~these ~~2003)~~assets. In toaccordance ~~Harris~~with ~~Trust~~SFAS ~~and~~No. ~~Savings Bank~~144, these asassets ~~"DIP~~have ~~Agent."~~been ~~Upon~~reflected ~~entry~~as ofdiscontinued ~~the~~operations ~~Final~~at ~~Order~~June 30, ~~the~~2004, ~~Company~~and ~~paid~~prior anreporting ~~additional~~periods ~~facility~~have ~~fee~~also ofbeen ~~$375,000~~reclassified. The toCompany ~~the~~recorded ~~DIP~~a ~~Lenders~~pre-tax ~~and~~impairment ancharge ~~additional~~for ~~administrative~~the ~~fee~~melamine/urea ofassets totaling $759,255,000 tofor the ~~DIP~~year ~~Agent.~~ended ~~The~~June ~~DIP~~30, ~~Credit~~2004. The ~~Facility~~Company ~~also~~ceased ~~has~~production aat ~~commitment~~this ~~fee~~facility ~~equal to 0.5% per annum of~~ during the ~~average~~first ~~daily~~week ~~unused~~in ~~amount~~April ~~of the DIP Commitment~~2004.

~~Page~~ Potash Assets. During 55the Company's first quarter of fiscal 2004, the board of directors authorized the Company's management to actively market for sale the long-lived assets of Mississippi Potash, Inc. and its subsidiary (the "Potash Assets"). Accordingly, at September 30, 2003, the Potash Assets were classified as assets held for sale, and all related depreciation expense ceased. As required by SFAS No. 144, the Company tested the Potash Assets for impairment at September 30, 2003. This test resulted in a pre-tax impairment charge of approximately $34,022,000, which is reflected as a component of discontinued operations in the 2004 consolidated statement of operations. On March 2, 2004, these assets were sold for approximately $28.4 million.

~~NOTE~~ Phosphate Assets. On 8June 24, 2004, the Company's board of directors authorized management's commitment to a plan to dispose of the Company's wholly-owned ~~CREDIT~~subsidiary, ~~AGREEMENTS~~Mississippi ~~AND~~Phosphates ~~LONG~~Corporation, as part of its plan to emerge from bankruptcy. This subsidiary will either be sold to a third party or transferred to the unsecured creditors of Mississippi Phosphates Corporation pursuant to the Amended Plan. The long-~~TERM~~lived ~~DEBT~~assets associated ~~(Continued):~~with this plant had a book value of approximately $51,000,000. Accordingly, as required by SFAS No. 144, the Company evaluated the carrying amount of the Phosphate Assets for recoverability. This evaluation resulted in a pre-tax impairment charge of $39,000,000, which is reflected as a component of discontinued operations in the 2004 consolidated statement of operations.

~~Collateral~~NOTE ~~Security~~6 ~~and~~- ~~Guarantees.~~IMPAIRMENT Pursuant to the Final Order, the DIP Lenders have been granted superpriority claim status in the Case that is collateralized by first liens on substantially all of our assets and the assets of the other subsidiaries included in the Case (including all of the proceeds of inventory and accounts receivable and cash collateral). Our use of proceeds of inventory and accounts receivable and all cash collateral generated in the ordinary course of business is limited to the payment of certain expenses and application to the DIP Credit Facility prior to its termination and, following such termination, to the PreOF LONG-~~Petition~~LIVED ~~Harris~~ASSETS ~~Facility. All of our subsidiaries that are included in the Case have guaranteed the DIP Credit Facility~~ (~~the "DIP Guarantors"~~Continued). As adequate protection for the use of pre-petition cash collateral, the Pre-Petition Lenders have been granted a replacement lien on substantially all of our assets and the assets of the DIP Guarantors, subject only to the lien of the DIP Lenders and certain liens permitted under the DIP Credit Facility.

~~Covenants. The DIP Credit Facility (a) restricts the Company's ability to incur debt, (b) requires us to generate certain minimum levels~~ Impairment of ~~EBITDA for so~~ long ~~as the amount of obligations under the Pre~~-~~Petition~~lived ~~Harris~~assets Facility exceed $67,500,000, (c) limits our expenditures to the types set forth in a budget, subject to permitted deviations, (d) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions outside the ordinary course of business, (e) permits the voluntary prepayment of loans under the DIP Credit Facility without penalty, (f) requires that the obligations under the Pre-Petition Harris Facility be reduced according to a schedule, and (g) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for debtor-in-possession revolving credit facilities.summary:

Asset Dispositions. Other than any disposition of our interest in Point Lisas Nitrogen, all net cash proceeds of asset dispositions outside the ordinary course in excess of $1,000,000 shall be applied to the Pre-Petition Facility and the DIP Credit Facility on an equal basis, provided that if the obligations under the DIP Credit Facility are otherwise satisfied as described in the DIP Credit Facility, the balance of any such proceeds shall be applied to the Pre-Petition Credit Facility. In the event of a disposition of the Company's interest in Point Lisas Nitrogen, all net cash proceeds must be applied to the Pre-Petition Facility.

	Years Ended June 30
	2004	2003	2002
Consolidated Statements of Operations Classification	(Dollars in thousands)

Impairment of long-lived assets
Ammonia assets	$ -	$ 62,912	$ -

Reorganization expense
Ammonia assets	21,191	-	-

Loss from discontinued operations
Melamine/Urea assets	9,255	12,206	-
Potash assets	34,022	-	-
Phosphate assets	39,000	-	-
	82,277	12,206	-

Total impairment charges	$103,468	$ 75,118	$ -

~~Standstill~~Significant ~~Agreement. As~~judgments ~~of the Petition Date, the Company had a secured revolving credit facility with Harris Trust~~ and ~~Savings~~estimates ~~Bank~~are ~~and~~required a syndicate of twelve other commercial banks totaling $158,352,000 (the "Pre-Petition Harris Facility"). The Pre-Petition Harris Facility bears interest at rates related to the Prime Rate, the London Interbank Offered Rate or Federal Funds Rate. Our weighted average interest rate was 9.65% at June 30, 2003. The Company had borrowings outstanding in performing ~~the~~impairment ~~amount~~tests ~~of $158,423,000 and letters of credit outstanding at June 30, 2003,~~ in ~~the~~accordance ~~amount of $790,000. The bankruptcy filing was an event of default under the Pre-Petition Harris Facility and, as a result, the Company can no longer borrow under the Facility. In connection~~ with ~~entering~~SFAS into the DIP Credit Facility, we entered into an agreement with the Pre-Petition Lenders pursuant to which such lenders agreed not to take any action to enforce their rights under the MCHI guaranty (see Note 21) of our obligations under the Pre-Petition Harris FacilityNo. ~~Upon the termination of the DIP Credit Facility or under certain defaults, the Pre-Petition Lenders may enforce the MCHI guaranty~~144. ~~In the event that MCHI receives proceeds from a refinancing or a disposition event with respect to Point Lisas Nitrogen, MCHI has agreed to apply such proceeds to the Pre-Petition Harris Facility.~~

~~Page~~NOTE 7 56- CREDIT AGREEMENTS AND LONG-TERM DEBT

~~NOTE~~ The DIP 8Credit ~~- CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued):~~Facility

On May ~~November 25~~16, ~~1997~~2003, the ~~Company~~Court ~~issued~~entered ~~$200,000,000~~an ofInterim ~~7.25%~~Order ~~Senior~~approving ~~Notes~~the ~~due November 15~~Company's request, ~~2017,~~on ~~pursuant~~an tointerim abasis, ~~shelf~~for ~~registration~~a ~~statement~~debtor-in-possession ~~filed~~financing facility with ~~the~~Harris ~~Securities~~Trust and ~~Exchange~~Savings ~~Commission.~~Bank ~~Semi-annual~~and ~~interest~~a ~~payments~~syndicate of ~~approximately~~six other lenders (the "Original DIP Lenders") to provide up to $737,~~250~~500,000 ~~are~~in ~~due~~financing (the on"Interim ~~each~~Credit ~~May 15~~Facility"). On ~~and~~August ~~November 15.~~13, ~~The~~2003, the ~~holders~~Court ~~may~~denied ~~elect~~the toCompany's ~~have~~request ~~the~~for ~~Senior~~a ~~Notes~~Final ~~repaid~~Order onwith ~~November 15~~regard to the Interim Credit Facility, ~~2007~~but granted it authority to use its cash collateral (i.e., ~~The~~cash ~~Senior~~and ~~Notes~~proceeds doof ~~not~~inventories ~~contain~~and ~~any~~receivables) ~~financial~~for ~~covenants~~ordinary course operations through October 3, ~~but~~2003. On doOctober ~~contain~~2, 2003, the Court entered a Final Order that approved certain amendments ~~cross-default~~to ~~provisions~~the ~~with~~Interim Credit Facility to permit borrowings up to $32,500,000 (the ~~Pre-Petition~~"DIP ~~Harris~~Credit Facility"). This AsFacility was reduced to $22,500,000 as a result of the sale of the Company's ~~filing~~Potash ~~bankruptcy,~~Assets ~~the~~in ~~Company~~March 2004. The ~~did~~DIP ~~not~~Credit ~~make~~Facility ~~the~~was ~~semi-annual~~a ~~interest~~revolving ~~payment~~credit ~~due~~facility that expired on ~~May 15,~~June ~~2003~~30, ~~and~~2004. Mississippi Chemical Corporation was inthe ~~default~~borrower under the ~~Senior~~DIP ~~Notes.~~Credit AtFacility ~~June 30,~~and ~~2003~~its subsidiaries who are Debtors, ~~the~~and ~~Senior~~Mississippi Chemical ~~Notes~~Holdings, ~~net~~Inc. of("MCHI"), ~~unamortized~~were ~~discounts~~guarantors. Pursuant ofto ~~$239~~a Final Order entered on December 19,~~000~~ 2003, ~~are~~the ~~reflected~~Investors (as adefined below ~~component~~in ofthe ~~liabilities~~notes ~~subject~~under the heading "Supplemental Debtor-in-Possession Term Loan") concluded a tender offer to ~~compromise~~the Original DIP Lenders on January 23, 2004. The terms of the ~~Company's~~Pre-Petition ~~consolidated~~Harris ~~balance~~Facility ~~sheet~~and ~~(Note 10)~~the Supplemental DIP were essentially unchanged by the tender offer.

InMaximum Borrowings. The ~~August~~DIP ~~1997,~~Credit ~~the~~Facility ~~Company~~provided ~~issued~~for ~~$14,500,000~~maximum inborrowings (the ~~industrial~~"DIP ~~revenue bonds~~Commitment"), aat ~~portion~~any ~~of which was tax-exempt~~time, up to ~~finance~~ the ~~development~~lesser of (a) $22,500,000, ~~new~~or ~~phosphogypsum~~(b) ~~disposal~~a ~~facility~~borrowing atbase ~~its~~equal ~~Pascagoula,~~to ~~Mississippi,~~the ~~DAP~~sum ~~manufacturing~~of ~~plant.~~(i) On85% ~~April 1,~~of ~~1998,~~ the eligible ~~Company~~accounts ~~issued~~receivable ~~$14,500,000~~plus in(ii) ~~tax-exempt~~65% ~~industrial~~of ~~revenue~~eligible ~~bonds~~inventory, minus (~~the~~iii) ~~"1998~~a scheduled ~~IRBs"),~~excess ~~the~~collateral ~~proceeds~~availability ofrequirement, ~~which~~minus ~~were~~(iv) ~~used~~an amount equal to ~~redeem~~twice the ~~initial~~amount ~~industrial~~of ~~revenue~~all ~~bonds~~the ~~issued~~then inaccrued ~~August~~and ~~1997.~~unpaid ~~The~~charges ~~1998~~owed ~~IRBs~~to warehousemen ~~mature on March 1, 2022,~~ and ~~carry~~other athird ~~5.80%~~parties ~~fixed~~having ~~rate~~inventories ofin ~~interest.~~their ~~The~~possession that ~~1998~~have ~~IRBs~~not ~~may~~executed beand ~~redeemed~~delivered atto the ~~Company's~~lenders ~~option at~~ a ~~premium~~warehouseman's ~~from March 1~~waiver, minus ~~2008~~(v) toan ~~February 28,~~amount ~~2010,~~equal ~~and~~to ~~may~~six bemonths' ~~redeemed~~rent atfor ~~face~~all ~~value~~leased atfacilities ~~any~~where inventories ~~time~~are ~~after~~kept ~~February 28,~~for ~~2010,~~which ~~through~~ the ~~maturity~~landlord ~~date.~~has ~~The~~not ~~bonds~~executed ~~are~~and delivered to the ~~obligation~~lenders ofa ~~our~~landlord's ~~subsidiary, Mississippi Phosphates Corporation, but are guaranteed by the Company~~waiver. The ~~bankruptcy~~DIP ~~filing~~Commitment was ansubject ~~event~~to ofcertain mandatory ~~default~~reductions ~~under~~described ~~the industrial revenue bonds~~below. At June 30, ~~2003~~2004, the ~~industrial revenue bonds are reflected as a component of liabilities subject to compromise on the~~ Company's ~~consolidated~~had ~~balance~~no ~~sheet~~borrowings ~~(Note 10)~~outstanding.

~~Long-term~~Rates and ~~debt~~Fees. The ~~consisted~~loans under the DIP Credit Facility bore interest at rates equal to the prime commercial rate from time to time in effect plus 4%. Upon entry of the ~~following:~~Interim Order, the Company paid a facility fee of $375,000 to the Original DIP Lenders and an administrative fee of $75,000 (of this amount, $60,000 was refunded to the Company subsequent to June 30, 2003) to Harris Trust and Savings Bank, as "DIP Agent." Upon entry of the Final Order, the Company paid an additional facility fee of $375,000 to the DIP Lenders and an additional administrative fee of $75,000 to the DIP Agent. The DIP Credit Facility also had a commitment fee equal to 0.5% per annum of the average daily unused amount of the DIP Commitment.

	June 30,
	2003	2002
(Dollars in thousands)
Revolving credit facility (9.65% in 2003 and 5.34% in 2002)	$ 158,423	$ 110,172
Senior Notes, net of unamortized discount of $239 and $285 (7.25%)	199,761	199,715
Industrial revenue bonds (5.80%)	14,500	14,500
	372,684	324,387
Long-term debt due within one year	(158,423)	(110,172)
Liabilities subject to compromise (Senior Notes and 1998 IRBs)	(214,261)	-
	$ -	$ 214,215

NOTE 7 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued)

~~The~~Collateral Security ~~estimated~~and ~~fair~~Guarantees. Pursuant ~~value~~to ofthe Final Order for the DIP Credit Facility, the DIP Credit Lenders were granted superpriority claim status in the Case that is collateralized by first liens on substantially all of the Company's ~~Senior~~assets ~~Notes~~ and ~~1998~~the ~~IRBs~~assets atof ~~June 30,~~the ~~2003,~~other ~~was~~subsidiaries ~~$34,345,000.~~included ~~The~~in ~~estimated~~the ~~fair~~Case (including ~~value~~all of the ~~Company's~~proceeds ~~long-term~~of ~~debt~~inventories atand ~~June 30,~~accounts ~~2002~~receivable ~~was~~and ~~$95,878,000~~cash collateral). Our ~~The~~use ~~estimated~~of ~~fair~~proceeds ~~value~~of ~~for~~inventories and accounts receivable and all cash collateral generated in the ~~Company's~~ordinary ~~Senior~~course ~~Notes~~of business was ~~computed~~limited ~~using~~to the ~~estimated~~payment ~~trading~~of ~~price~~certain ~~information~~expenses ~~from~~and anapplication ~~independent~~to ~~market-maker~~the ~~for~~DIP ~~our~~Credit ~~Senior~~Facility prior ~~Notes~~to its termination and, following such termination, to the Pre-Petition Harris Facility. All ~~The~~of ~~estimated~~the ~~fair~~Company's ~~value~~subsidiaries ~~for~~that are included in the Case ~~1998~~guaranteed ~~IRBs~~the ~~was~~DIP ~~computed~~Credit ~~using~~Facility (the ~~effective~~"DIP ~~yield~~Guarantors"). As adequate onprotection ~~state~~for ~~and~~the ~~local~~use ~~bonds~~of aspre-petition ~~quoted~~cash bycollateral, the ~~Federal~~lenders under ~~Reserve.~~the ~~The~~Pre-Petition Harris Facility were granted a replacement lien on substantially all of the Company's ~~revolving~~assets ~~credit~~and ~~facilities~~the ~~carried~~assets ~~variable~~of ~~interest~~the ~~rates~~DIP ~~and~~Guarantors, subject ~~therefore,~~only to the ~~carrying~~lien ~~amounts~~of ~~approximated~~the ~~fair~~Original ~~value~~DIP Lenders and certain liens permitted under the DIP Credit Facility.

~~Page~~ Covenants. The 57DIP Credit Facility (a) restricted the Company's ability to incur debt, (b) prior to the sale of the Company's Potash Assets, required the Company to generate certain minimum levels of EBITDA as defined in the agreement, (c) limited our expenditures to the types set forth in a budget, subject to permitted deviations, (d) provided for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions outside the ordinary course of business, (e) permitted the voluntary prepayment of loans under the DIP Credit Facility without penalty, (f) required that the obligations under the Pre-Petition Harris Facility be reduced according to a schedule, and (g) contained representations, warranties, other affirmative and negative covenants, and events of default that were customary for debtor-in-possession revolving credit facilities. As of June 30, 2004, the Company was in compliance with all covenants under the DIP Credit Facility.

~~NOTE~~ Asset Dispositions. The 9DIP Credit Facility required the Company to market and dispose of specified assets. The financing order entered by the Court on December 19, 2003, found that the transactions contemplated by the Supplemental DIP (as defined below under the heading "Supplemental Debtor-In-Possession ~~ACCRUED~~Term ~~AND~~Loan") ~~OTHER~~satisfied ~~LONG~~our disposition requirement with respect to our interests in Point Lisas Nitrogen. The financing order entered by the Court on February 12, 2004, found that the Intrepid Stalking Horse Agreement satisfied our disposition requirement with respect to our potash assets. Other than any disposition of our interest in Point Lisas Nitrogen, all net cash proceeds of asset dispositions outside the ordinary course in excess of $1,000,000 were applied to the Pre-~~TERM~~Petition ~~LIABILITIES~~Harris ~~AND~~Facility and ~~DEFERRED~~the ~~CREDITS:~~DIP Credit Facility on an equal basis, provided that if the obligations under the DIP Credit Facility were otherwise satisfied as described in the DIP Credit Facility, the balance of any such proceeds would be applied to the Pre-Petition Harris Facility. In the event of a disposition of the Company's interest in Point Lisas Nitrogen, all net cash proceeds were to be applied first to the Pre-Petition Harris Facility and then to the DIP Credit Facility.

~~Accrued~~Supplemental Debtor-In-Possession ~~liabilities~~Term ~~consisted of the following:~~Loan

	June 30
	2003	2002
	(Dollars in thousands)
Accrued vacation	$ -	$ 4,708
Accrued interest	-	2,449
Accrued taxes	907	2,560
Accrual for asset retirement costs	2,800	-
Other	926	1,412
	$ 4,633	$11,129

On December 19, 2003, the Court entered a Final Order approving the Company entering into the Supplemental Post-Petition Credit Agreement, dated as of December 15, 2003, with certain funds or affiliates managed or advised by Delaware Street Capital, L.P. and DDJ Capital Management LLC (together with their participants and assigns, the "Investors"), pursuant to which the Investors made a $96,700,000 term loan to the Company on December 30, 2003 (the "Supplemental DIP"). The proceeds of the Supplemental DIP were used to reduce the principal amount of the Pre-Petition Harris Facility by $90,000,000 and to pay certain transaction-related fees and expenses of $6,700,000. The Supplemental DIP was to mature on the earlier of (a) October 31, 2004, (b) the effective date of a plan of reorganization in the Company's Case, (c) the conversion of the Company's Case to a Chapter 7 case, or (d) the dismissal or appointment of a trustee in any of the Company's Chapter 11 cases. At June 30, 2004, the Company had borrowings outstanding under the Supplemental DIP in the amount of $100,723,000, which included $4,023,000 of accrued payment-in-kind interest. Amounts due under the Supplemental DIP were repaid on July 1, 2004, with funding provided by the Replacement DIP discussed below.

~~At June 30~~In addition, ~~2003,~~the ~~liabilities~~Investors ~~subject~~agreed to ~~compromise~~tender ~~included~~for the approximately $468,~~114~~400,000 remaining insecured ~~accrued~~debt ~~vacation~~under the Pre-Petition Harris Facility and $8the obligations under the DIP Credit Facility,~~068,000~~ inat par plus accrued interest (excluding default interest). The tender was conditioned upon acceptance by at least 51 percent in number of the lenders representing not less than 66-2/3 percent of the outstanding principal amount under these facilities. More than 51 percent in number of the Pre-Petition Lenders and the Original DIP Lenders tendered, respectively, 93 percent and 85 percent of the Pre-Petition Harris Facility and the Harris DIP. The tender closed on January 23, 2004. As a result, the Investors held substantially all of our secured debt at such time.

~~Other~~As a ~~long-term~~result ~~liabilities~~of the Supplemental DIP Loan, the Company withdrew its motion to sell under the Koch Stalking Horse Agreement, and ~~deferred~~the ~~credits~~Court ~~consisted~~entered a Final Order terminating such sale process. Accordingly, the Company paid the Koch Break-Up Fee (see Note 1) from the proceeds of the ~~following:~~Supplemental DIP Loan.

	June 30
	2003	2002
	(Dollars in thousands)
Accrual for asset retirement costs	$ 8,492	$11,139
Deferred pension liability	26,766	-
Other	1,614	1,401
	$36,872	$12,540

NOTE 7 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued)

AtOn July ~~June 30~~1, ~~2003~~2004, ~~other~~the ~~long-term~~Company ~~liabilities~~entered ~~and~~into ~~deferred~~the ~~credits~~Replacement ofDIP ~~$12,530,000~~to refinance ~~have~~all ~~been~~of ~~included~~the inCompany's ~~liabilities~~pre-petition ~~subject~~and topost-petition ~~compromise~~credit facilities.

~~Effective~~Rates and ~~July 1,~~Fees. The ~~2002,~~Supplemental ~~the~~DIP ~~Company~~loan ~~adopted~~bore ~~SFAS~~cash ~~No.~~interest, ~~143~~payable monthly, ~~"Accounting~~at ~~for~~rates ~~Asset~~equal ~~Retirement~~to ~~Obligations,"~~the ~~which~~prime ~~addresses~~commercial ~~financial~~rate ~~accounting~~from ~~and~~time ~~reporting~~to ~~for~~time ~~obligations~~in effect ~~associated~~plus ~~with~~4% ~~the~~and ~~retirement~~accrues ofadditional ~~tangible, long~~payment-~~lived~~in-kind ~~assets~~interest ~~and~~monthly at the ~~associated~~rate of ~~asset~~8% ~~retirement~~per ~~costs.~~annum Asfor ofthe ~~June 30,~~first ~~2003,~~six ~~estimated~~months ~~asset~~and ~~retirement~~9% ~~costs~~per ofannum ~~approximately~~thereafter. In connection ~~$2,043,000~~with ~~have~~the ~~been~~signing ~~recorded~~and asclosing ~~a component~~ of ~~other~~the ~~long-term~~Supplemental ~~liabilities~~DIP ~~and $2~~loan,~~800,000~~ ~~have been recorded as accrued liabilities to close~~ the Company's ~~West~~paid ~~phosphogypsum~~aggregate ~~disposal~~commitment ~~facility~~fees atof ~~its~~approximately ~~Pascagoula~~$3, ~~Mississippi~~677,000 ~~phosphate~~to ~~plant~~the Investors. The ~~Company~~Investors ~~discontinued~~were ~~the~~also ~~use~~entitled ofto ~~the~~a ~~West~~Cash ~~facility~~Out ~~during~~Commitment ~~the~~Fee ~~second quarter~~ of approximately ~~fiscal~~$1,400,000 ~~2003~~upon ~~and~~the istermination ~~currently~~of in the ~~process~~Supplemental ofDIP ~~closing it~~loan. In addition, ~~The~~the ~~East~~Investors ~~Facility~~were ~~was~~entitled ~~completed~~to ina ~~1998~~Lost ~~and~~Opportunity ~~was~~Commitment ~~placed~~Fee ~~into~~of approximately ~~operation~~$2,900,000 ~~during~~payable ~~the~~on ~~fourth~~termination ~~quarter~~ of ~~fiscal 2002. During fiscal 2003,~~ the ~~Company~~Supplemental ~~recorded~~DIP anloan ~~asset and~~ if a ~~liability~~plan asof ~~the~~reorganization ~~estimated~~was ~~asset~~not ~~retirement~~approved ~~obligation~~by ~~for~~ the ~~East Facility~~Investors. Both ~~The asset recorded will be depreciated over its estimated useful life. The liability will be accreted based on~~ the ~~effective~~Cash ~~interest~~Out Commitment ~~method~~Fee and the ~~useful~~Lost ~~life~~Opportunity ofCommitment ~~the~~Fee ~~facility.~~were Asaccrued ofat June 30, ~~2003~~2004, ~~the Company had recorded approximately $4,009,000 related to this obligation~~ and ~~included~~were itpaid ~~in other long-term liabilities~~ on ~~the~~July ~~Company's~~1, ~~consolidated balance sheet~~2004.

~~Page~~ Guarantees and 58Collateral Security. The Supplemental DIP loan was guaranteed by (a) all of the Company's direct and indirect wholly owned domestic subsidiaries (the "Domestic Subsidiaries," and together with the Company, the "Supplemental Loan Parties") and (b) MCHI. MCHI is the indirect holder of the Company's fifty percent equity interest in Point Lisas Nitrogen.

~~NOTE~~ The Supplemental 9DIP -Loan ~~ACCRUED~~was ~~AND~~secured ~~OTHER~~by ~~LONG-TERM~~(a) ~~LIABILITIES~~liens ~~AND~~and ~~DEFERRED~~security interests in ~~CREDITS~~substantially all of the assets of the Supplemental Loan Parties and (~~Continued~~b): a pledge of all stock and other equity interests owned by each of the Supplemental Loan Parties (provided that such pledge does not include the stock of MCHI, the membership interests in FMCL Limited Liability Company, a 50%-owned Delaware limited liability company that ships product from Point Lisas Nitrogen, or the partnership interests in Houston Ammonia Terminal, L.P., a 50%-owned Delaware limited partnership). The Investors' security interests in the assets of the Supplemental Loan Parties are subordinate to the DIP Credit Facility and the Pre-Petition Harris Facility.

As Covenants. The ofSupplemental ~~June 30,~~DIP ~~2003,~~Loan ~~estimated~~has ~~asset~~covenants ~~retirement~~substantially ~~costs~~the ofsame ~~approximately~~as ~~$2,440,000~~the ~~have~~DIP Credit ~~been~~Facility ~~accrued~~including to(a) ~~close~~restrictions on the Company's ~~potash~~ability ~~mining facilities. Of this amount, approximately $2,290,000 is attributable~~ to ~~its~~incur ~~Eddy Potash~~debt, ~~Inc.~~ (~~"Eddy"~~b) ~~facility~~required ~~that~~the ~~was~~Company ~~idled~~to ingenerate ~~1997.~~the ~~The~~same ~~Company~~minimum ~~estimates~~levels ~~that~~of ~~Eddy~~EBITDA ~~asset~~required by ~~retirement~~the ~~costs~~DIP ~~have~~Credit ~~been~~Facility, ~~fully~~(c) ~~accrued.~~limits ~~The~~on the Company's ~~remaining~~expenditures ~~potash~~to ~~facilities~~the types ~~have~~set ~~estimated~~forth ~~useful~~in ~~lives~~a ~~spanning~~budget, ~~several~~subject ~~decades.~~to ~~Current~~permitted ~~estimates~~deviations, of(d) ~~asset~~limits ~~retirement~~on ~~costs~~the amount ~~for~~of ~~these~~capital ~~facilities~~expenditures ~~are~~to ~~not~~the ~~material~~same toamounts permitted by the ~~Company's~~DIP ~~current~~Credit Facility, ~~operations.~~(e) ~~The~~mandatory ~~Company~~prepayments ~~will~~from ~~continue~~all toor ~~evaluate~~part ~~its~~of ~~estimates~~the ~~and~~net ~~make~~proceeds ~~adjustments~~of certain ~~accordingly.~~liquidity ~~The~~events ~~Company's~~(such ~~closure~~as ~~plans~~asset ~~for~~dispositions ~~its~~outside ~~potash~~the ~~facilities~~ordinary course ~~have~~of ~~been~~business), ~~approved~~and by(f) ~~the~~other ~~U.S.~~affirmative ~~Department~~and ofnegative ~~the~~covenants ~~Interior-Bureau~~typical for ofthis ~~Land~~type ~~Management~~of ~~("BLM")~~loan. As ~~However~~of June 30, 2004, the Company iswas ~~still~~in ~~negotiating~~compliance awith ~~financial~~all ~~assurance~~covenants ~~mechanism~~under ~~with~~ the ~~BLM~~Supplemental DIP Loan.

AsPre-Petition Harris required by SFAS No. 143, the Company will make periodic assessments as to the reasonableness of its asset retirement cost estimates and revise those estimates accordingly. The respective asset and liability balance will be adjusted on the Company's consolidated balance sheet, which will correspondingly increase or decrease the amounts expensed in future periods.Facility

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