##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-8520
 Terra Industries Inc.
  Maryland
(State or other jurisdiction of
incorporation or organization)
    
    52-1145429
(I.R.S. Employer Identification No.)
 Terra Centre
    
    51102-6000600 Fourth Street
    
    (Zip Code)P. O. Box 6000Sioux City, Iowa
    
    (712) 277-1340(Address of principal executive offices)
    
    (Registrants telephone number)
 Securities registered pursuant to Section 12(b) of the Act:
 Name of each exchangeTitle of each class
    
    on which registeredCommon Shares, without par value
    
    New York Stock Exchange
 Securities registered pursuant to section 12(g) of the Act:
 o þ
 o þ
 þ o
 o
  o þ o
 o þ
   Documents Incorporated by Reference




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##### 



Table of Contents
 Part IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    14Item 1B. Unresolved Staff Comments
    
    
    18Item 2. Properties
    
    
    18Item 3. Legal Proceedings
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Executive Officers of Terra
    
    
    21Part IIItem 5. Market for Terras Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    22Item 6. Selected Financial Data
    
    
    23Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    23Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 8. Financial Statements and Supplementary Data
    
    
    43Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosures
    
    
    90Item 9A. Controls and Procedures
    
    
    90Item 9B. Other Information
    
    
    93Part IIIItem 10. Directors and Executive Officers of Terra
    
    
    93Item 11. Executive Compensation
    
    
    93Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    93Item 13. Certain Relationships and Related Transactions
    
    
    94Item 14. Principal Accounting Fees and Services
    
    
    94Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    95Signatures
    
    
    106Index to Financial Statement Schedules, Reports and Consents
    
    
    S-1Certificate of IncorporationBy-LawsForm of Long-Term Incenitve AwardForm of Long-Term Incentive Award2006 Officers and Key Employees Incentive PlanDescription of Compensatory ArrangementsRatio of Earnings to Financial ChargesSubsidiariesSubsidiaries302 Certification of Chief Executive Officer302 Certification of Chief Financial OfficerSection 906 CertificationFinancial Statements




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##### Table of Contents



PART I
 
 Item 1. Business
   Business Overview
    1




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##### Table of Contents



Annual Capacity1Location
    
    Ammonia2
    
    UAN3
    
    
    AN4
    
    
    Urea5
    
    
    Methanol6Beaumont, Texas7
    
    
    255,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,000,000Donaldsonville, Louisiana8
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Port Neal, Iowa
    
    
    370,000
    
    
    
    840,000
    
    
    
    
    
    
    
    60,000
    
    
    
    Verdigris, Oklahoma
    
    
    1,050,000
    
    
    
    2,200,000
    
    
    
    
    
    
    
    
    
    
    
    Woodward, Oklahoma9
    
    
    440,000
    
    
    
    340,000
    
    
    
    
    
    
    
    25,000
    
    
    
    40,000,000Yazoo City, Mississippi10
    
    
    500,000
    
    
    
    600,000
    
    
    
    775,000
    11
    
    
    7,000
    
    
    
    Courtright, Ontario
    
    
    480,000
    
    
    
    400,000
    
    
    
    
    
    
    
    175,000
    
    
    
    Severnside, U.K.
    
    
    265,000
    
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    Billingham, U.K.12
    
    
    550,000
    
    
    
    
    
    
    
    520,000
    
    
    
    
    
    
    
    Point Lisas, Trinidad and Tobago13
    
    
    360,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,770,000
    
    
    
    4,380,000
    
    
    
    1,795,000
    
    
    
    267,000
    
    
    
    265,000,000
 1.
    
    Annual capacity includes an allowance for planned maintenance shutdowns.2.
    
    Measured in gross tons of ammonia produced; net tons available for sale will
vary with upgrading requirements.3.
    
    Measured in tons of UAN containing 28% nitrogen by weight.4.
    
    Measured in tons.5.
    
    Urea is sold as urea liquor from the Port Neal, Woodward and Yazoo City
facilities and as either granular urea or urea liquor from the Courtright facility.
Production capacities shown are for urea sold in tons.6.
    
    Measured in gallons.7.
    
    The Beaumont facility was mothballed in December 2004 and remains out of
production. The Beaumont plant capacity depends on product mix (ammonia/methanol).8.
    
    The Donaldsonville facilitys manufacturing capacity consists of a single
ammonia plant. This plant was mothballed in January 2005 and remains out of
production.9.
    
    Woodwards plant capacity depends on product mix (ammonia/methanol).10.
    
    The Yazoo City facility also produces merchant nitric acid; sales for the
twelve months ended December 31, 2005 were 40,000 product tons.11.
    
    Terras full AN capacity at Yazoo City is 835,000 tons, however such production
would limit Yazoo Citys UAN production to approximately 450,000 tons and increase
urea production to 45,000 tons.12.
    
    The Billingham, England facility also produces merchant nitric acid; sales for
the twelve months ended December 31, 2005 were 267,000 product tons.13.
    
    The Point Lisas plant capacity represents Terras 50% interest.
 2




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% of Total
    
    U.S.
    
    U.K.2005 Terra
    
    Capacity
    
    CapacityProduct
    
    Revenues1
    
    Position
    
    PositionAmmonia
    
    
    30.1
    %
    
    
    2
    
    
    
    1UAN
    
    
    36.5
    %
    
    
    1
    
    
    
    *AN
    
    
    17.8
    %
    
    
    1
    
    
    
    1Urea
    
    
    3.6
    %
    
    
    4
    
    
    
    *Methanol
    
    
    1.4
    %
    
    
    1
    
    
    
    *
 1

    Revenues from sales of carbon dioxide, nitric acid and other
nitrogen products and services, as well as industrial sales in the
U.K., represented 10.5% of Terras total revenues for 2005.*

    Terra does not compete in these markets.
   Nitrogen Business Segment
  3




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Anhydrous Ammonia
   Urea Ammonium Nitrate Solutions (UAN)
    4




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Ammonium Nitrate (AN)
   Urea
   Nitric Acid
  Dinitrogen Tetroxide
 2 4
 Marketing and Distribution
  5




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Methanol Business Segment
  6




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Manufacturing Facilities
   Nitrogen Industry Overview
  7




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Demand
  Supply
    Methanol Industry Overview
  8




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Demand
  Supply
  Credit
  Seasonality and Volatility
   
    
    Weather patterns and field conditions (particularly during periods of high fertilizer
consumption);
    
    Quantities of fertilizers imported to primary markets;
    
    Current and projected grain inventories and prices, which are heavily influenced by U.S.
exports and worldwide grain markets; and
 9




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
    
    Price fluctuations in natural gas, the principal raw material used to produce nitrogen
fertilizer.
   Raw Materials
     Transportation
  10




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Research and Development
  Competition
   11




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Environmental and Other Regulatory Matters
   12




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13




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Revenues and Assets
  Employees
  
 Item 1A. Risk Factors
  Terras inability to predict future seasonal nitrogen products demand accurately could result in
low or excess inventory, potentially at costs in excess of market value.
  14




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A substantial portion of Terras operating expense is related to the cost of natural gas, and an
increase in such cost that is either unexpected or not accompanied by increases in selling prices
of products could result in reduced profit margins and lower product production.
  Declines in the prices of Terras products may reduce profit margins.
  Terras products are subject to price volatility resulting from periodic imbalances of supply and
demand, which may cause the results of operations to fluctuate.
  15




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Terras products are global commodities and Terra faces intense competition from other nitrogen
fertilizer producers.
  The Companys business is subject to risks related to weather conditions.
  Terra is substantially dependent on its manufacturing facilities, and any operational disruption
could result in a reduction of sales volumes and could cause Terra to incur substantial
expenditures.
  Terra may be adversely affected by environmental regulations.
  16




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Terra may be required to install additional pollution control equipment at certain facilities in
order to maintain compliance with applicable environmental requirements.
  Government regulation and agricultural policy may reduce the demand for Terras products.
  17




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Terra is subject to risks associated with international operations.
  Terras business may be adversely impacted by the Companys high-cost leverage, which requires the
use of a substantial portion of excess cash flow to service debt and may limit Terras access to
additional capital.
  Terra may not be able to finance a change of control offer.
  
 Item 1B.
    
    Unresolved Staff
Comments
  
 Item 2.
    
    Properties
  18




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Beaumont, Texas.
 Donaldsonville, Louisiana.
 Port Neal, Iowa.
 Verdigris, Oklahoma.
 Woodward, Oklahoma.
 Yazoo City, Mississippi.
  19




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Courtright, Ontario, Canada.
 Billingham, U.K.
 Severnside, U.K.
 Trinidad.
  
 Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  20




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Executive Officers of Terra
  Present positions and offices with the CompanyName
    
    and principal occupations during the past five yearsMichael L. Bennett
    
    President and Chief Executive Officer of Terra since April 2001; Executive Vice President and Chief
Operating Officer of Terra from February 1997 to April 2001; President and Chief Executive Officer of
Terra Nitrogen Division since June 1998. Age 52.Joe A. Ewing
    
    Vice President, Human Resources and Corporate Communications of Terra since December 2004; Vice
President, Human Resources of Mississippi Chemical Corporation from April 2003 to December 2004; Vice
President, Marketing and Distribution of Mississippi Chemical Corporation from 1999 to April 2003. Age
55.Joseph D. Giesler
    
    Senior Vice President, Commercial Operations of Terra since December 2004; Vice President of Industrial
Sales and Operations of Terra from December 2002 to December 2004; Global Director, Industrial Sales of
Terra from September 2001 to December 2002; Director of Marketing of Terra from June 2000 to August
2001; and Director of Western Division of Terra from July 1998 to May 2000. Age 47.Daniel D. Greenwell
    
    Vice President, Controller of Terra since April 2005; Corporate Controller for Belden CDT Inc. from
2002 to 2005; and Chief Financial Officer of Zoltek Companies Inc. from 1996 to 2002. Age 43.Mark A. Kalafut
    
    Vice President, General Counsel and Corporate Secretary of Terra since June 2001; Vice President and
Associate General Counsel of Terra from April 1997 through June 2001. Age 52.Francis G. Meyer
    
    Senior Vice President and Chief Financial Officer of Terra since November 1995. Age 53.W. Mark Rosenbury
    
    Senior Vice President and Chief Administrative Officer of Terra since August
1999. Age 58.Richard S. Sanders Jr.
    
    Vice President, Manufacturing of Terra since August
2003; Plant Manager, Verdigris, Oklahoma
manufacturing facility from 1995 to August, 2003.
Age 48.
 21




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Present positions and offices with the CompanyName
    
    and principal occupations during the past five yearsPaul Thompson
    
    Vice President, Sales and Marketing of Terra since
December 2004; Global Director, Ag Sales and Terra
U.K. Managing Director from August 1999 to December
2004. Age 51.
  
 PART II
 
 Item 5.
    
    Market for Terras Common Equity and Related Stockholder Matters and
Issuer Purchases of Equity Securities
  (per-share data and stock prices)
    
    March 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 312005Common Share Price:High
    
    $
    9.27
    
    
    $
    7.88
    
    
    $
    8.59
    
    
    $
    6.65Low
    
    
    7.29
    
    
    
    6.27
    
    
    
    6.10
    
    
    
    4.872004Common Share Price:High
    
    $
    6.66
    
    
    $
    6.55
    
    
    $
    8.95
    
    
    $
    9.38Low
    
    
    3.20
    
    
    
    4.15
    
    
    
    5.50
    
    
    
    7.00
  22




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Item 6.
    
    Selected Financial Data
 Financial Summary
 (in thousands, except per share data)
    
    2005(1)
    
    
    2004(2)
    
    
    2003(3)
    
    
    2002(4)
    
    
    2001Income Statement Data:Revenues
    
    $
    1,939,065
    
    
    $
    1,509,110
    
    
    $
    1,351,055
    
    
    $
    1,043,983
    
    
    $
    1,037,310Income (loss) from operations
    
    
    113,696
    
    
    
    134,746
    
    
    
    (23,560
    )
    
    
    (5,407
    )
    
    
    (61,818
    )Net income (loss) from
continuing operations
    
    
    22,087
    
    
    
    67,596
    
    
    
    (12,481
    )
    
    
    (36,174
    )
    
    
    (79,843
    )Net income (loss)
    
    
    22,087
    
    
    
    67,596
    
    
    
    (12,481
    )
    
    
    (258,325
    )
    
    
    (79,843
    )Preferred share dividends
    
    
    (5,134
    )
    
    
    (1,029
    )
    
    
    
    
    
    
    
    
    
    
    Basic income per share:Continuing operations
    
    
    0.18
    
    
    
    0.87
    
    
    
    (0.16
    )
    
    
    (3.43
    )
    
    
    (1.06
    )Discontinued operation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.22
    )
    
    
    Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.73
    )
    
    
    Basic income per share
    
    
    0.18
    
    
    
    0.87
    
    
    
    (0.16
    )
    
    
    (3.43
    )
    
    
    (1.06
    )Diluted income per share
    
    $
    0.18
    
    
    $
    0.85
    
    
    $
    (0.16
    )
    
    $
    (3.43
    )
    
    $
    (1.06
    )Balance Sheet Data:Total assets
    
    $
    1,523,625
    
    
    $
    1,685,508
    
    
    $
    1,125,062
    
    
    $
    1,128,110
    
    
    $
    1,336,043Long-term debt
and capital leases
    
    $
    331,300
    
    
    $
    435,238
    
    
    $
    402,206
    
    
    $
    400,358
    
    
    $
    436,534Preferred stock
    
    $
    115,800
    
    
    $
    133,069
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    The 2005 selected financial data includes data for Mississippi Chemical Corporation
(MCC), which was acquired on December 21, 2004.(2)
    
    The 2004 selected financial data includes the effects of the December 21, 2004
acquisition of MCC and the issuance of preferred shares during the 2004 fourth quarter.(3)
    
    The 2003 selected financial data includes a $53.1 million charge for impairment of
long-lived assets.(4)
    
    The 2002 selected financial data includes a $16.2 million loss from discontinued
operations and a $206.0 million charge relating to a cumulative effect of change in
accounting principle. 
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Introduction
   23




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24




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Overview of Consolidated Results
      Factors That Affect Operating Results
   25




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26




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Critical Accounting Policies
   Derivative and Financial Instruments
  Revenue Recognition
   Inventory Valuation
  27




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Equity Investments
  Pension Assets and Liabilities
  Post-Retirement Benefits
  Deferred Income Taxes
   28




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Impairment of Long-Lived Assets
   Results of Continuing Operations2005 Compared with 2004
 Consolidated Results
    29




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(in thousands)
    
    2005
    
    
    2004Revenues:Nitrogen products
    
    $
    1,905,505
    
    
    $
    1,320,142Methanol
    
    
    31,347
    
    
    
    186,823Other revenues
    
    
    2,213
    
    
    
    2,145$
    1,939,065
    
    
    $
    1,509,110Operating Income (Loss):Nitrogen products
    
    $
    131,474
    
    
    $
    138,745Methanol
    
    
    (14,089
    )
    
    
    1,479Other expensenet
    
    
    (3,689
    )
    
    
    (5,478
    )$
    113,696
    
    
    $
    134,746
 Nitrogen Products
  Volumes and Prices
    
    2005
    
    
    2004(quantities in
    
    Sales
    
    
    Average
    
    
    Sales
    
    
    Averagethousands of tons)
    
    Volumes
    
    
    Unit Price*
    
    
    Volumes
    
    
    Unit Price*Ammonia
    
    
    1,898
    
    
    $
    303
    
    
    
    1,391
    
    
    $
    266Nitrogen solutions
    
    
    4,368
    
    
    
    151
    
    
    
    3,869
    
    
    
    120Urea
    
    
    151
    
    
    
    262
    
    
    
    376
    
    
    
    195Ammonium nitrate
    
    
    1,581
    
    
    
    202
    
    
    
    988
    
    
    
    178
 *
    
    After deducting outbound freight costs    30




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Methanol
   Other Operating ActivitiesNet
  Interest ExpenseNet
  Minority Interest
  Income Taxes
   Results of Continuing Operations2004 Compared with 2003
 Consolidated Results
  31




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(in thousands)
    
    2004
    
    2003Revenues:Nitrogen products
    
    $
    1,320,142
    
    
    $
    1,139,379Methanol
    
    
    186,823
    
    
    
    209,870Other revenues
    
    
    2,145
    
    
    
    1,806$
    1,509,110
    
    
    $
    1,351,055Operating Income (Loss):Nitrogen products
    
    $
    138,745
    
    
    $
    33,721Impairment of long-lived assets
(nitrogen products)
    
    
    
    
    
    
    (53,091
    )Methanol
    
    
    1,479
    
    
    
    1,866Other expensenet
    
    
    (5,478
    )
    
    
    (6,056
    )$
    134,746
    
    
    $
    (23,560
    )
 Nitrogen Products
  Volumes and Prices
    
    2004
    
    2003(quantities in
    
    Sales
    
    Average
    
    Sales
    
    Averagethousands of tons)
    
    Volumes
    
    Unit Price*
    
    Volumes
    
    Unit Price*Ammonia
    
    
    1,391
    
    
    $
    266
    
    
    
    1,400
    
    
    $
    229Nitrogen solutions
    
    
    3,869
    
    
    
    120
    
    
    
    3,840
    
    
    
    99Urea
    
    
    376
    
    
    
    195
    
    
    
    545
    
    
    
    173Ammonium nitrate
    
    
    988
    
    
    
    178
    
    
    
    934
    
    
    
    142
 *
    
    After deducting outbound freight costs
 32




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Impairment of Long-Lived Assets
  Methanol
   33




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Other Operating ActivitiesNet
  Interest ExpenseNet
  Minority Interest
  Income Taxes
   Liquidity and Capital Resources
  34




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35




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Payments Due InLess than
    
    One to
    
    Three to(in millions)
    
    One Year
    
    Three Years
    
    Five Years
    
    ThereafterLong-term debt
    
    $
    
    
    
    $
    200.0
    
    
    $
    131.3
    
    
    $
    Operating leases
    
    
    21.1
    
    
    
    34.2
    
    
    
    24.8
    
    
    
    11.7Interest expense on
fixed rate debt
    
    
    40.8
    
    
    
    78.5
    
    
    
    21.4
    
    
    
    Ammonia purchase contract (1)
    
    
    112.6
    
    
    
    225.2
    
    
    
    225.2
    
    
    
    900.8Other purchase obligations
    
    
    188.3
    
    
    
    2.2
    
    
    
    2.2
    
    
    
    4.4Total
    
    $
    362.8
    
    
    $
    540.1
    
    
    $
    404.9
    
    
    $
    916.9
 (1)
    
    The Company has a contractual obligation to purchase one-half of the ammonia produced
by Point Lisas Nitrogen Limited. The purchase price is based on the average market price of
ammonia, F.O.B. Caribbean, less a discount. Obligations in the above table are based on
purchasing 360,000 short tons per year at the December 2005 average price paid. This
contract expires in October 2018.
  36




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Recently Issued Accounting Standards
 Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004
 37




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Share-Based Payment
 Exchanges of Nonmonetary Assets,
 Accounting for Conditional Asset
Retirement Obligations Accounting for Asset
Retirement Obligations.
 Accounting Changes and Error Corrections, Reporting
Accounting Changes in Interim Financial Statements  An Amendment of APB Opinion No. 28.
 Determining the Amortization Period
for Leasehold Improvements
 38




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Accounting for Conditional Asset
Retirement Obligations
  Forward-Looking Precautions
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Risk Management and Financial Instruments
  39




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Foreign Currency Fluctuations
  Natural Gas PricesNorth American Operations
  40




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Natural Gas PricesTrinidad Operation
  Natural Gas PricesUnited Kingdom Operations
  Nitrogen Prices
  Interest Rate Fluctuations
  41




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Interest Rate Sensitivity
 (in millions)
    
    Expected Maturity Date2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    Total
    
    Fair ValueLong-Term DebtSenior Secured Notes,
fixed rate of 12.88% ($US)
    
    $
    
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    204.3Senior Second Priority
Secured Notes,
fixed rate 11.50% ($US)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131.3
    
    
    
    
    
    
    
    131.3
    
    
    
    125.7Total Long-Term Debt
    
    $
    
    
    
    $
    
    
    
    $
    200.0
    
    
    $
    
    
    
    $
    131.3
    
    
    $
    
    
    
    $
    331.3
    
    
    $
    455.4Short-Term BorrowingsRevolving credit facility,
notional amount ($US)
    
    $
    150.0
    
    
    $
    150.0
    
    
    $
    150.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Variable interest rate,
LIBOR based
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TNLP revolving credit
facility, notional
amount ($US)
    
    $
    50.0
    
    
    $
    50.0
    
    
    $
    50.0
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    Variable interest rate,
LIBOR based
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    4.34
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 42




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Consolidated Statements of Financial Position
 At December 31,(in thousands)
    
    2005
    
    
    2004AssetsCash and cash equivalents
    
    $
    86,366
    
    
    $
    233,798Restricted cash
    
    
    8,595
    
    
    
    Accounts receivable, less allowance for
doubtful accounts of $234 and $262
    
    
    206,407
    
    
    
    150,271Inventories
    
    
    190,314
    
    
    
    148,808Income tax receivable
    
    
    
    
    
    
    11,500Other current assets
    
    
    54,578
    
    
    
    46,606Total current assets
    
    
    546,260
    
    
    
    590,983Property, plant and equipment, net
    
    
    733,536
    
    
    
    797,978Deferred plant turnaround costs
    
    
    27,447
    
    
    
    33,897Equity investments
    
    
    183,884
    
    
    
    215,939Intangible assets
    
    
    7,526
    
    
    
    24,884Other assets
    
    
    24,972
    
    
    
    21,827Total assets
    
    $
    1,523,625
    
    
    $
    1,685,508LiabilitiesDebt due within one year
    
    $
    38
    
    
    $
    167Accounts payable
    
    
    125,863
    
    
    
    119,571Customer prepayments
    
    
    52,913
    
    
    
    115,347Accrued and other current liabilities
    
    
    84,996
    
    
    
    104,848Total current liabilities
    
    
    263,810
    
    
    
    339,933Long-term debt and capital lease obligations
    
    
    331,300
    
    
    
    435,238Deferred income taxes
    
    
    65,998
    
    
    
    58,224Pension liabilities
    
    
    120,236
    
    
    
    119,570Other liabilities
    
    
    41,320
    
    
    
    47,872Minority interest
    
    
    92,258
    
    
    
    92,197Total liabilities and minority interest
    
    
    914,922
    
    
    
    1,093,034Commitments and contingencies (Note 11)
    
    
    
    
    
    
    Preferred Shares- liquidation value of
$120,000 and $137,269
    
    
    115,800
    
    
    
    133,069Common Stockholders EquityCapital stockCommon Shares, authorized 133,500 shares;
95,171 and 92,994 shares outstanding
    
    
    146,994
    
    
    
    144,531Paid-in capital
    
    
    712,671
    
    
    
    681,639Accumulated other comprehensive loss
    
    
    (70,143
    )
    
    
    (55,994
    )Unearned compensation
    
    
    (5,369
    )
    
    
    (2,568
    )Accumulated deficit
    
    
    (291,250
    )
    
    
    (308,203
    )Total stockholders equity
    
    
    492,903
    
    
    
    459,405Total liabilities and stockholders equity
    
    $
    1,523,625
    
    
    $
    1,685,508
 See accompanying Notes to the Consolidated Financial Statements
 43




---



##### Table of Contents



Consolidated Statements of Operations
 Year ended December 31,(in thousands, except per-share amounts)
    
    2005
    
    
    2004
    
    
    2003Revenues
    
    $
    1,930,583
    
    
    $
    1,506,965
    
    
    $
    1,349,249Other income, net
    
    
    8,482
    
    
    
    2,145
    
    
    
    1,806Total Revenue
    
    
    1,939,065
    
    
    
    1,509,110
    
    
    
    1,351,055Cost and ExpensesCost of sales
    
    
    1,800,236
    
    
    
    1,348,077
    
    
    
    1,281,663Selling, general and administrative expense
    
    
    46,548
    
    
    
    44,190
    
    
    
    39,861Equity in earnings of unconsolidated affiliates
    
    
    (21,415
    )
    
    
    
    
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    53,091Recovery of product claim costs
    
    
    
    
    
    
    (17,903
    )
    
    
    1,825,369
    
    
    
    1,374,364
    
    
    
    1,374,615Income (loss) from operations
    
    
    113,696
    
    
    
    134,746
    
    
    
    (23,560
    )Interest income
    
    
    8,086
    
    
    
    3,307
    
    
    
    534Interest expense
    
    
    (53,478
    )
    
    
    (53,134
    )
    
    
    (55,072
    )Loss on early retirement of debt
    
    
    (27,193
    )
    
    
    (11,116
    )
    
    
    Change in fair value of warrant liability
    
    
    8,860
    
    
    
    
    
    
    
    Income (loss) before income taxes and minority interest
    
    
    49,971
    
    
    
    73,803
    
    
    
    (78,098
    )Income tax benefit (provision)
    
    
    (14,217
    )
    
    
    5,000
    
    
    
    57,000Minority interest
    
    
    (13,667
    )
    
    
    (11,207
    )
    
    
    8,617Net income (loss)
    
    
    22,087
    
    
    
    67,596
    
    
    
    (12,481
    )Preferred share dividends
    
    
    (5,134
    )
    
    
    (1,029
    )
    
    
    Income (Loss) Available to Common Stockholders
    
    $
    16,953
    
    
    $
    66,567
    
    
    $
    (12,481
    )Basic and Diluted Income (Loss) Per Share:Basic
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    (0.16
    )Diluted
    
    
    0.18
    
    
    
    0.85
    
    
    
    (0.16
    )Basic and Diluted Weighted Average Shares Outstanding:Basic
    
    
    92,537
    
    
    
    76,478
    
    
    
    75,676Diluted
    
    
    94,935
    
    
    
    79,859
    
    
    
    75,676
 See accompanying Notes to the Consolidated Financial Statements
 44




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##### Table of Contents



Consolidated Statements of Cash Flows
 Year ended December 31,(in thousands)
    
    2005
    
    
    2004
    
    
    2003Operating ActivitiesNet income (loss)
    
    $
    22,087
    
    
    $
    67,596
    
    
    $
    (12,481
    )Adjustments to reconcile net income (loss) to net cash
flows from operating activities:Depreciation and amortization
    
    
    110,342
    
    
    
    102,230
    
    
    
    107,370Non-cash loss on early retirement of debt
    
    
    22,543
    
    
    
    2,985
    
    
    
    Change in fair value of warrant liability
    
    
    (8,860
    )
    
    
    
    
    
    
    Deferred income taxes
    
    
    13,538
    
    
    
    (6,058
    )
    
    
    (57,398
    )Non-cash loss on derivatives
    
    
    4,091
    
    
    
    
    
    
    
    Minority interest in earnings (loss)
    
    
    13,667
    
    
    
    11,207
    
    
    
    (8,617
    )Equity in undistributed earnings
    
    
    (6,941
    )
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    1,997
    
    
    
    1,513
    
    
    
    Term loan discount accretion
    
    
    1,773
    
    
    
    
    
    
    
    Recovery of product claim costs
    
    
    
    
    
    
    (12,874
    )
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    53,091Change in current assets and liabilities, net of acquisition:Accounts receivable
    
    
    (59,591
    )
    
    
    27,647
    
    
    
    (27,569
    )Inventories
    
    
    (45,579
    )
    
    
    (11,352
    )
    
    
    (354
    )Accounts payable and customer prepayments
    
    
    (60,136
    )
    
    
    48,394
    
    
    
    11,501Other assets and liabilities, net
    
    
    1,944
    
    
    
    (19,782
    )
    
    
    16,879Net Cash Flows from Operating Activities
    
    
    10,875
    
    
    
    211,506
    
    
    
    82,422Investing ActivitiesPurchase of property, plant and equipment
    
    
    (30,820
    )
    
    
    (18,472
    )
    
    
    (8,639
    )Plant turnaround costs
    
    
    (22,331
    )
    
    
    (28,878
    )
    
    
    (28,080
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (54,168
    )
    
    
    Distributions received from unconsolidated affiliates
    
    
    31,901
    
    
    
    
    
    
    
    Restricted cash
    
    
    (8,595
    )
    
    
    
    
    
    
    Proceeds from the sale of property, plant and equipment
    
    
    7,560
    
    
    
    
    
    
    
    1,755Other
    
    
    
    
    
    
    966
    
    
    
    (11,358
    )Net Cash Flows used in Investing Activities
    
    
    (22,285
    )
    
    
    (100,552
    )
    
    
    (46,322
    )Financing ActivitiesPayments under borrowing arrangements
    
    
    (125,167
    )
    
    
    (70,854
    )
    
    
    (200,142
    )Preferred share dividends paid
    
    
    (5,950
    )
    
    
    
    
    
    
    Distributions to minority interests
    
    
    (13,607
    )
    
    
    (8,072
    )
    
    
    (1,153
    )Proceeds from exercise of stock options
    
    
    142
    
    
    
    447
    
    
    
    68Preferred share issuance, net of $4,200 issuance costs
    
    
    
    
    
    
    115,800
    
    
    
    Deferred financing costs
    
    
    
    
    
    
    (2,598
    )
    
    
    (8,581
    )Issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    202,000Net Cash Flows used in Financing Activities
    
    
    (144,582
    )
    
    
    34,723
    
    
    
    (7,808
    )Effect of Exchange Rate Changes on Cash
    
    
    8,560
    
    
    
    787
    
    
    
    563Increase (Decrease) in Cash and Cash Equivalents
    
    
    (147,432
    )
    
    
    146,464
    
    
    
    28,855Cash and Cash Equivalents at Beginning of Year
    
    
    233,798
    
    
    
    87,334
    
    
    
    58,479Cash and Cash Equivalents at End of Year
    
    $
    86,366
    
    
    $
    233,798
    
    
    $
    87,334
 See accompanying Notes to the Consolidated Financial Statements
 45




---



##### Table of Contents



Consolidated Statements of Cash Flows (continued)
 Year ended December 31,2005
    
    
    2004
    
    
    2003Supplemental cash flow information:Interest paid
    
    $
    42,110
    
    
    $
    50,455
    
    
    $
    50,983Income tax refunds received
    
    
    11,933
    
    
    
    
    
    
    
    Income taxes paid
    
    
    1,526
    
    
    
    1,123
    
    
    
    4,297Supplemental schedule of non-cash investing and
financing activities:Conversion of Series B preferred stock
to common stock:Common Stock
    
    $
    2,066
    
    
    $
    
    
    
    $
    Paid in Capital
    
    $
    14,646
    
    
    $
    
    
    
    $
    Consideration to fund acquisitions:Common shares
    
    $
    
    
    
    $
    135,750
    
    
    $
    Series B preferred shares
    
    $
    
    
    
    $
    17,269
    
    
    $
    Assumed debt
    
    $
    
    
    
    $
    125,000
    
    
    $
    Stock Incentive Plan
    
    $
    5,020
    
    
    $
    2,908
    
    
    $
    608
 See accompanying Notes to the Consolidated Financial Statements
 46




---



##### Table of Contents



Consolidated Statements of Changes in Common Stockholders Equity
 AccumulatedOtherCommon Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Unearned
    
    
    Accumulated
    
    
    
    
    
    
    Comprehensive(in thousands)
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Compensation
    
    
    Deficit
    
    
    Total
    
    
    IncomeJanuary 1, 2003
    
    
    76,920
    
    
    $
    128,654
    
    
    $
    555,167
    
    
    $
    (63,668
    )
    
    $
    
    
    
    $
    (362,289
    )
    
    $
    257,864Comprehensive Income (Loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,481
    )
    
    
    (12,481
    )
    
    $
    (12,481
    )Foreign currency
translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,631
    
    
    
    
    
    
    
    
    
    
    
    27,631
    
    
    
    27,631Change in fair value of
derivatives, net of taxes
of $614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Minimum pension liability,
net of taxes of $1,806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,560
    )
    
    
    
    
    
    
    
    
    
    
    (8,560
    )
    
    
    (8,560
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,591Exercise of stock options, net
    
    
    48
    
    
    
    48
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Stock Incentive Plan
    
    
    595
    
    
    
    266
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    608December 31, 2003
    
    
    77,563
    
    
    
    128,968
    
    
    
    555,529
    
    
    
    (44,596
    )
    
    
    
    
    
    
    (374,770
    )
    
    
    265,131Comprehensive Income (Loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,596
    
    
    
    67,596
    
    
    $
    67,956Foreign currency
translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,216
    
    
    
    
    
    
    
    
    
    
    
    25,216
    
    
    
    25,216Change in fair value of
derivatives, net of taxes
of $690
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,286
    )
    
    
    
    
    
    
    
    
    
    
    (23,286
    )
    
    
    (23,286
    )Minimum pension liability,
net of taxes of $3,149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,328
    )
    
    
    
    
    
    
    
    
    
    
    (13,328
    )
    
    
    (13,328
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    56,198Preferred share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,029
    )
    
    
    (1,029
    )Issuance of common stock
    
    
    14,995
    
    
    
    14,995
    
    
    
    120,755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,750Exercise of stock options
    
    
    198
    
    
    
    198
    
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447Restricted stock
    
    
    238
    
    
    
    370
    
    
    
    5,106
    
    
    
    
    
    
    
    (4,081
    )
    
    
    
    
    
    
    1,395Amortization of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,513
    
    
    
    
    
    
    
    1,513December 31, 2004
    
    
    92,994
    
    
    
    144,531
    
    
    
    681,639
    
    
    
    (55,994
    )
    
    
    (2,568
    )
    
    
    (308,203
    )
    
    
    459,405Comprehensive Income (Loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,087
    
    
    
    22,087
    
    
    $
    22,087Foreign currency
translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,387
    )
    
    
    
    
    
    
    
    
    
    
    (23,387
    )
    
    
    (23,387
    )Change in fair value of
derivatives, net of taxes
of $2,861
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,198
    
    
    
    
    
    
    
    
    
    
    
    14,198
    
    
    
    14,198Minimum pension liability,
net of taxes of $5,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,960
    )
    
    
    
    
    
    
    
    
    
    
    (4,960
    )
    
    
    (4,960
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,938Preferred share dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,134
    )
    
    
    (5,134
    )Conversion of preferred shares
    
    
    2,066
    
    
    
    2,066
    
    
    
    14,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,712Reclassification of
warrant liability
    
    
    
    
    
    
    
    
    
    
    12,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,240Exercise of stock options
    
    
    39
    
    
    
    39
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142Restricted stock
    
    
    72
    
    
    
    358
    
    
    
    4,043
    
    
    
    
    
    
    
    (4,798
    )
    
    
    
    
    
    
    (397
    )Amortization of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,997
    
    
    
    
    
    
    
    1,997December 31, 2005
    
    
    95,171
    
    
    $
    146,994
    
    
    $
    712,671
    
    
    $
    (70,143
    )
    
    $
    (5,369
    )
    
    $
    (291,250
    )
    
    $
    492,903
 See accompanying Notes to the Consolidated Financial Statements
 47




---



##### Table of Contents



Notes to the Consolidated Financial Statements
 1. Summary of Significant Accounting Policies
 Basis of presentation:
 Description of business:
 Foreign exchange:
 Cash and cash equivalents:
 Restricted cash:
 Inventories:
  Property, plant and equipment:
 Plant turnaround costs:
  48




---



##### Table of Contents



Equity investments:
 Intangible assets:
  Debt issuance costs:
 Impairment of long-lived assets:
 Derivatives and financial instruments:
 Revenue recognition:
  Cost of sales and hedging transactions:
 49




---



##### Table of Contents



Share-based compensation:
 (in thousands, except per-share data)
    
    2005
    
    
    2004
    
    
    2003Income (loss) available to common
shareholders, as reported
    
    $
    16,953
    
    
    $
    66,567
    
    
    $
    (12,481
    )Add: Share based employee compensation
expense included in reported income,
net of related tax effects
    
    
    1,218
    
    
    
    1,205
    
    
    
    1,224Deduct: Share based employee
compensation expense determined under
fair-value based method for all awards,
net of related tax effects
    
    
    (1,218
    )
    
    
    (1,205
    )
    
    
    (1,224
    )Pro forma income (loss) available
to common shareholders
    
    $
    16,953
    
    
    $
    66,567
    
    
    $
    (12,481
    )Earnings (loss) per share:Basic  as reported
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    (0.16
    )Basic  pro forma
    
    
    0.18
    
    
    
    0.87
    
    
    
    (0.16
    )Diluted  as reported
    
    $
    0.18
    
    
    $
    0.85
    
    
    $
    (0.16
    )Diluted  pro forma
    
    
    0.18
    
    
    
    0.85
    
    
    
    (0.16
    )
 Per share results:
 Estimates:
 50




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##### Table of Contents



Recently issued accounting standards: Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004
 Share-Based Payment
 Exchanges of Nonmonetary Assets,
 Accounting Changes and Error Corrections, Reporting
Accounting Changes in Interim Financial Statements  An Amendment of APB Opinion No. 28. 51
    Table of Contents    Determining the Amortization Period
for Leasehold Improvements
 Accounting for Conditional Asset
Retirement Obligations
  2. Acquisition
  52




---



##### Table of Contents



Preliminary Purchase Price
    
    
    
    
    
    FinalAllocation as Reported
    
    
    
    
    
    Purchasein December 31, 2004
    
    
    
    
    
    Price(in thousands)
    
    Annual Report
    
    Adjustments
    
    AllocationCurrent assets
    
    $
    97,278
    
    
    $
    1,899
    
    
    $
    99,177Property, plant and equipment
    
    
    124,528
    
    
    
    16,427
    
    
    
    140,955Equity investments
    
    
    213,300
    
    
    
    (11,780
    )
    
    
    201,520Other assets
    
    
    
    
    
    
    3,464
    
    
    
    3,464Intangible assets
    
    
    15,550
    
    
    
    (6,142
    )
    
    
    9,408Total assets acquired
    
    
    450,656
    
    
    
    3,868
    
    
    
    454,524Current liabilities
    
    
    37,169
    
    
    
    
    
    
    
    37,169Long-term debt and warrants
    
    
    125,000
    
    
    
    
    
    
    
    125,000Pension and other long-term liabilities
    
    
    36,314
    
    
    
    
    
    
    
    36,314Deferred income taxes
    
    
    41,574
    
    
    
    953
    
    
    
    42,527Total liabilities assumed
    
    
    240,057
    
    
    
    953
    
    
    
    241,010Net Assets acquired
    
    $
    210,599
    
    
    $
    2,915
    
    
    $
    213,514
   Year ended December 31,(in thousands, except per share data)
    
    2004
    
    
    2003Revenues
    
    $
    1,886,953
    
    
    $
    1,637,873Operating income (loss)
    
    
    179,349
    
    
    
    (81,016
    )Net income (loss)
    
    
    78,204
    
    
    
    (85,886
    )Basic income (loss) per share
    
    
    0.85
    
    
    
    (1.10
    )Selected costs included above:Interest expense
    
    
    72,639
    
    
    
    74,575Depreciation and amortization
    
    
    117,994
    
    
    
    124,005Impairment losses included above
    
    
    
    
    
    
    116,003
 53
    Table of Contents    3. Earnings Per Share
   (in thousands, except per-share data)
    
    2005
    
    
    2004
    
    
    2003Basic income (loss) per share computation:Income (loss) from continuing operations
    
    $
    22,087
    
    
    $
    67,596
    
    
    $
    (12,481
    )Less: Preferred share dividends
    
    
    (5,134
    )
    
    
    (1,029
    )
    
    
    Income (loss) available to common shareholders
    
    
    16,953
    
    
    
    66,567
    
    
    
    (12,481
    )Weighted average shares outstanding
    
    
    92,537
    
    
    
    76,478
    
    
    
    75,676Basic income (loss) per common share
    
    $
    0.18
    
    
    $
    0.87
    
    
    $
    (0.16
    )Diluted income (loss) per share computation:Income (loss) available to common shareholders
    
    $
    16,953
    
    
    $
    66,567
    
    
    $
    (12,481
    )Add: Preferred share dividends
    
    
    
    
    
    
    1,029
    
    
    
    Income
(loss) available to common shareholders andassumed conversions
    
    $
    16,953
    
    
    $
    67,596
    
    
    $
    (12,481
    )Weighted average shares outstanding
    
    
    92,537
    
    
    
    76,478
    
    
    
    75,676Add incremental shares from assumed conversions:Preferred Shares
    
    
    1,048
    
    
    
    2,423
    
    
    
    Restricted stock
    
    
    577
    
    
    
    750
    
    
    
    Common stock options
    
    
    179
    
    
    
    208
    
    
    
    Common stock warrants
    
    
    594
    
    
    
    
    
    
    
    Dilutive potential common shares
    
    
    94,935
    
    
    
    79,859
    
    
    
    75,676Diluted income (loss) per potential common share
    
    $
    0.18
    
    
    $
    0.85
    
    
    $
    (0.16
    )
   54




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4. Inventories
  (in thousands)
    
    2005
    
    
    2004Raw materials
    
    $
    22,487
    
    
    $
    22,891Supplies
    
    
    55,647
    
    
    
    53,612Finished goods
    
    
    112,180
    
    
    
    72,305Total
    
    $
    190,314
    
    
    $
    148,808
  5. Property, Plant and Equipment, Net
  (in thousands)
    
    2005
    
    
    2004Land
    
    $
    16,086
    
    
    $
    29,981Buildings and improvements
    
    
    62,937
    
    
    
    52,280Plant and equipment
    
    
    1,339,799
    
    
    
    1,350,433Construction in progress
    
    
    27,510
    
    
    
    15,3461,446,332
    
    
    
    1,448,040Less accumulated depreciation and amortization
    
    
    (712,796
    )
    
    
    (650,062
    )Total
    
    $
    733,536
    
    
    $
    797,978
 6. Equity Investments
  55




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##### Table of Contents



(in thousands)
    
    2005
    
    2004Condensed income statement information:Net sales
    
    $
    181,818
    
    
    $
    6,664Net income
    
    $
    62,723
    
    
    $
    1,788Terras equity in net income of affiliates
    
    $
    31,362
    
    
    $
    893Condensed balance sheet information:Current assets
    
    $
    78,711
    
    
    $
    60,747Long-lived assets
    
    
    194,548
    
    
    
    251,488Total assets
    
    $
    273,259
    
    
    $
    312,235Current liabilities
    
    $
    37,804
    
    
    $
    15,221Long-term liabilities
    
    
    75
    
    
    
    527Equity
    
    
    235,380
    
    
    
    296,487Total liabilities and equity
    
    $
    273,259
    
    
    $
    312,235
   7. Current Maturities of Long-Term Debt and Capital Lease Obligations
  (in thousands)
    
    2005
    
    2004Current maturities of long-term debt
and capital lease obligations
    
    $
    38
    
    
    $
    167
  56




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##### Table of Contents



8. Accrued and Other Current Liabilities
  (in thousands)
    
    2005
    
    2004Derivative contracts
    
    $
    25,576
    
    
    $
    16,852Warrants issued in conjunction
with acquisition
    
    
    
    
    
    
    21,100Payroll and benefit costs
    
    
    12,381
    
    
    
    19,208Pension liabilities
    
    
    8,326
    
    
    
    9,641Deferred taxes
    
    
    
    
    
    
    5,133Accrued interest
    
    
    6,737
    
    
    
    7,044Deferred revenue
    
    
    5,224
    
    
    
    4,779Other
    
    
    26,752
    
    
    
    21,091Total
    
    $
    84,996
    
    
    $
    104,848
 9. Other Liabilities
  (in thousands)
    
    2005
    
    2004Long-term medical and
closed facilities reserve
    
    $
    24,415
    
    
    $
    25,356Post retirement benefits
    
    
    4,844
    
    
    
    7,161Deferred revenue
    
    
    10,285
    
    
    
    15,355Other
    
    
    1,776
    
    
    
    Total
    
    $
    41,320
    
    
    $
    47,872
 57




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##### Table of Contents



10. Long-Term Debt and Capital Lease Obligations
  (in thousands)
    
    2005
    
    2004Senior Secured Notes, 12.875%,
due 2008
    
    $
    200,000
    
    
    $
    200,000Term loan, due 2008, net of
$24.1 million unamortized discount
    
    
    
    
    
    
    103,900Second Priority Senior
Secured Notes, 11.5%, due 2010
    
    
    131,300
    
    
    
    131,300Other
    
    
    38
    
    
    
    205331,338
    
    
    
    435,405Less current maturities
    
    
    38
    
    
    
    167Total long-term debt
    
    $
    331,300
    
    
    $
    435,238
    58




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##### Table of Contents



Second PrioritySenior Secured
    
    Senior Secured
    
    CapitalYear Ended
    
    Notes
    
    Notes
    
    Leases
    
    Total(in thousands)2006
    
    $
    
    
    
    $
    
    
    
    $
    38
    
    
    $
    382007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    200,0002009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    131,300
    
    
    
    
    
    
    
    131,300$
    200,000
    
    
    $
    131,300
    
    
    $
    38
    
    
    $
    331,338
 11. Commitments and Contingencies
  59




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(in thousands)2006
    
    $
    21,0852007
    
    
    18,7212008
    
    
    15,4602009
    
    
    13,2602010
    
    
    11,5282011 and thereafter
    
    
    11,717Net minimum lease payments
    
    $
    91,771
       Accounting for Conditional Asset Retirement Obligations
 60




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##### Table of Contents



Accounting for
Asset Retirement Obligations
  12. Preferred Shares
  2005
    
    2004Number
    
    Carrying
    
    Number
    
    Carrying(in thousands)
    
    of shares
    
    Value
    
    of shares
    
    ValueSeries A Preferred Shares
(120,000 shares authorized,
$1,000 per share liquidation value)
    
    
    120,000
    
    
    $
    115,800
    
    
    
    120,000
    
    
    $
    115,800Series B Preferred Shares
(750,000 shares authorized,
$100 per share liquidation value)
    
    
    
    
    
    
    
    
    
    
    172,690
    
    
    
    17,269Total
    
    
    
    
    
    $
    115,800
    
    
    
    
    
    
    $
    133,069
  61




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##### Table of Contents



13. Derivative Financial Instruments
    1.
    
    The item to be hedged must expose Terra to currency, interest or price risk.2.
    
    It must be probable that the results of the hedge position substantially offset the
effects of currency, interest or price changes on the hedged item (i.e., there is a high
correlation between the hedge position and changes in market value of the hedge item).3.
    
    The derivative financial instrument must be designated as a hedge of the item at the
inception of the hedge.
   62




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2005
    
    2004Contract
    
    Unrealized
    
    Contract
    
    Unrealized(in thousands)
    
    MMBtu
    
    Gain (Loss)
    
    MMBtu
    
    Gain (loss)Swaps
    
    
    17,621
    
    
    $
    10,630
    
    
    
    27,715
    
    
    $
    (14,769
    )Basis swaps
    
    
    8,410
    
    
    
    (7,389
    )
    
    
    8,410
    
    
    
    85Put options
    
    
    7,160
    
    
    
    (1,812
    )
    
    
    12,630
    
    
    
    (5,252
    )Sold call options
    
    
    6,540
    
    
    
    (10,222
    )
    
    
    12,630
    
    
    
    3,107Purchased call options
    
    
    2,700
    
    
    
    (3,268
    )
    
    
    
    
    
    
    $
    (12,061
    )
    
    
    
    
    
    $
    (16,829
    )
    (in thousands)
    
    2005
    
    2004Unrealized losses of open positions
    
    $
    (12,061
    )
    
    $
    (16,829
    )Ineffective position charged to
cost of sales
    
    
    4,091
    
    
    
    Income tax benefit (provision)
    
    
    2,861
    
    
    
    (2,478
    )Other comprehensive loss
    
    $
    (5,109
    )
    
    $
    (19,307
    )
  63




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##### Table of Contents



(in thousands)
    
    2005
    
    2004Beginning accumulated gain (loss)
    
    $
    (19,307
    )
    
    $
    3,979Reclassification into earnings
    
    
    3,059
    
    
    
    (7,244
    )Net change associated with current period hedging transactions
    
    
    11,139
    
    
    
    (16,042
    )Ending accumulated gain (loss)
    
    $
    (5,109
    )
    
    $
    (19,307
    )
   14. Financial Instruments and Concentrations of Credit Risk
  2005
    
    2004Carrying
    
    Fair
    
    Carrying
    
    Fair(in millions)
    
    Amount
    
    Value
    
    Amount
    
    ValueFinancial AssetsCash and short-term investments
    
    $
    86.4
    
    
    $
    86.4
    
    
    $
    233.8
    
    
    $
    233.8Receivables
    
    
    206.4
    
    
    
    206.4
    
    
    
    150.3
    
    
    
    150.3Equity and other investments
    
    
    183.9
    
    
    
    183.9
    
    
    
    215.9
    
    
    
    215.9Financial liabilitiesLong-term debt
    
    
    331.3
    
    
    
    322.7
    
    
    
    435.2
    
    
    
    455.4Preferred shares
    
    
    115.8
    
    
    
    102.6
    
    
    
    133.1
    
    
    
    133.1
  
    
    Cash and receivables:The carrying amounts approximate fair value because of the short
maturity of those instruments.
    
    Equity and other investments:Investments in untraded companies are valued on the basis
of managements estimates and, when available, comparisons with similar companies whose shares are publicly traded.
    
    Short-term borrowings and long-term debt:The fair value of Terras short-term
borrowings and long-term debt is estimated by discounting expected cash flows at the rates
currently offered for debt of the same remaining maturities.
 64




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##### Table of Contents




    
    Preferred shares:Preferred shares are valued on the basis of market quotes, when
available and management estimates based on comparisons with similar instruments that are
publicly traded.
 Concentration of Credit Risk:
 Financial Instruments:
 15. Common Stockholders Equity
    16. Share-Based Compensation
   65




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(options in thousands)2005
    
    2004
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseNumber
    
    
    Price
    
    
    Number
    
    
    Price
    
    
    Number
    
    
    PriceOutstanding beginning of year
    
    
    660
    
    
    $
    5.51
    
    
    
    930
    
    
    $
    4.72
    
    
    
    1,657
    
    
    $
    5.28Expired/terminated
    
    
    29
    
    
    
    13.20
    
    
    
    72
    
    
    
    4.29
    
    
    
    679
    
    
    
    6.32Exercised
    
    
    39
    
    
    
    4.12
    
    
    
    198
    
    
    
    2.26
    
    
    
    48
    
    
    
    1.43Outstandingend of year
    
    
    592
    
    
    $
    5.24
    
    
    
    660
    
    
    $
    5.51
    
    
    
    930
    
    
    $
    4.72
 66




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##### Table of Contents



(options
in thousands)Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    AverageRange
of
    
    Number
    
    
    Remaining
    
    
    Exercise
    
    
    Number
    
    
    ExerciseExercise Prices
    
    Outstanding
    
    
    Life (years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$ 1.43-$3.88
    
    
    494
    
    
    
    3.0
    
    
    $
    3.74
    
    
    
    494
    
    
    $
    3.747.81-7.81
    
    
    6
    
    
    
    2.6
    
    
    
    7.81
    
    
    
    6
    
    
    
    7.8112.13-14.75
    
    
    92
    
    
    
    1.6
    
    
    
    13.04
    
    
    
    92
    
    
    
    13.04Total
    
    
    592
    
    
    
    2.8
    
    
    $
    5.24
    
    
    
    592
    
    
    $
    5.24
  17. Retirement Benefit Plans
   (in thousands)
    
    2005
    
    
    2004
    
    
    2003Service cost
    
    $
    2,976
    
    
    $
    2,731
    
    
    $
    5,076Interest cost
    
    
    23,550
    
    
    
    15,669
    
    
    
    13,323Expected return on plan assets
    
    
    (21,575
    )
    
    
    (12,280
    )
    
    
    (13,024
    )Amortization of prior service cost
    
    
    (28
    )
    
    
    21
    
    
    
    38Amortization of actuarial loss
    
    
    5,632
    
    
    
    4,889
    
    
    
    6,007Amortization of net assets
    
    
    
    
    
    
    49
    
    
    
    (114
    )Termination charge
    
    
    1,165
    
    
    
    
    
    
    
    1,773Pension expense
    
    $
    11,720
    
    
    $
    11,079
    
    
    $
    13,079
   67




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##### Table of Contents



(in thousands)
    
    U.S.
    
    
    Canada
    
    
    U.K.
    
    
    TotalChange in Projected Benefit Obligation Present ValueProjected benefit obligationbeginning of year
    
    $
    253,932
    
    
    $
    29,149
    
    
    $
    144,988
    
    
    $
    428,069Service cost
    
    
    2,078
    
    
    
    898
    
    
    
    
    
    
    
    2,976Interest cost
    
    
    14,196
    
    
    
    1,854
    
    
    
    7,499
    
    
    
    23,549Actuarial (gain) loss
    
    
    10,506
    
    
    
    6,008
    
    
    
    12,753
    
    
    
    29,267Termination charge
    
    
    
    
    
    
    
    
    
    
    1,165
    
    
    
    1,165Foreign currency exchange rate changes
    
    
    
    
    
    
    1,460
    
    
    
    (16,142
    )
    
    
    (14,682
    )Benefits paid
    
    
    (13,612
    )
    
    
    (732
    )
    
    
    (1,489
    )
    
    
    (15,833
    )Projected benefit obligationend of year
    
    
    267,100
    
    
    
    38,637
    
    
    
    148,774
    
    
    
    454,511Change in Plan AssetsFair value plan assetsbeginning of year
    
    
    162,415
    
    
    
    25,443
    
    
    
    101,287
    
    
    
    289,145Actual return on plan assets
    
    
    16,332
    
    
    
    3,008
    
    
    
    10,497
    
    
    
    29,837Foreign currency exchange rate changes
    
    
    
    
    
    
    1,173
    
    
    
    (11,263
    )
    
    
    (10,090
    )Employer contribution
    
    
    15,439
    
    
    
    2,150
    
    
    
    4,659
    
    
    
    22,248Benefits paid
    
    
    (13,612
    )
    
    
    (732
    )
    
    
    (1,489
    )
    
    
    (15,833
    )Fair value plan assetsend of year
    
    
    180,574
    
    
    
    31,042
    
    
    
    103,691
    
    
    
    315,307Funded Status
    
    
    (86,526
    )
    
    
    (7,595
    )
    
    
    (45,083
    )
    
    
    (139,204
    )Unrecognized net actuarial loss
    
    
    49,288
    
    
    
    8,859
    
    
    
    35,705
    
    
    
    93,852Unrecognized prior service cost
    
    
    (355
    )
    
    
    
    
    
    
    
    
    
    
    (355
    )Contributions
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170Accrued benefit cost
    
    $
    (37,423
    )
    
    $
    1,264
    
    
    $
    (9,378
    )
    
    $
    (45,537
    )
 68




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(in thousands)
    
    U.S.
    
    
    Canada
    
    
    U.K.
    
    
    TotalChange in Projected Benefit Obligation Present ValueProjected benefit obligationbeginning of year
    
    $
    118,246
    
    
    $
    25,537
    
    
    $
    116,473
    
    
    $
    260,256Service cost
    
    
    1,947
    
    
    
    784
    
    
    
    
    
    
    
    2,731Interest cost
    
    
    7,123
    
    
    
    1,610
    
    
    
    6,936
    
    
    
    15,669Actuarial (gain) loss
    
    
    6,208
    
    
    
    
    
    
    
    13,072
    
    
    
    19,280Prior service cost
    
    
    (428
    )
    
    
    
    
    
    
    
    
    
    
    (428
    )Acquisitions
    
    
    125,931
    
    
    
    
    
    
    
    
    
    
    
    125,931Foreign currency exchange rate changes
    
    
    
    
    
    
    1,862
    
    
    
    9,620
    
    
    
    11,482Benefits paid
    
    
    (5,095
    )
    
    
    (644
    )
    
    
    (1,113
    )
    
    
    (6,852
    )Projected benefit obligationend of year
    
    
    253,932
    
    
    
    29,149
    
    
    
    144,988
    
    
    
    428,069Change in Plan AssetsFair value plan assetsbeginning of year
    
    
    60,396
    
    
    
    21,667
    
    
    
    83,087
    
    
    
    165,150Actual return on plan assets
    
    
    3,448
    
    
    
    1,670
    
    
    
    8,986
    
    
    
    14,104Foreign currency exchange rate changes
    
    
    
    
    
    
    1,631
    
    
    
    6,762
    
    
    
    8,393Employer contribution
    
    
    11,857
    
    
    
    1,119
    
    
    
    3,558
    
    
    
    16,534Participants contributions
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7Acquisitions
    
    
    91,809
    
    
    
    
    
    
    
    
    
    
    
    91,809Benefits paid
    
    
    (5,095
    )
    
    
    (644
    )
    
    
    (1,113
    )
    
    
    (6,852
    )Fair value plan assetsend of year
    
    
    162,415
    
    
    
    25,443
    
    
    
    101,287
    
    
    
    289,145Funded Status
    
    
    (91,517
    )
    
    
    (3,706
    )
    
    
    (43,701
    )
    
    
    (138,924
    )Unrecognized net actuarial loss
    
    
    44,672
    
    
    
    3,869
    
    
    
    33,405
    
    
    
    81,946Unrecognized prior service cost
    
    
    (383
    )
    
    
    
    
    
    
    
    
    
    
    (383
    )Contributions
    
    
    163
    
    
    
    
    
    
    
    
    
    
    
    163Accrued benefit cost
    
    $
    (47,065
    )
    
    $
    163
    
    
    $
    (10,296
    )
    
    $
    (57,198
    )
  (in thousands)
    
    2005
    
    
    2004Accrued benefit cost
    
    $
    46,974
    
    
    $
    57,198Accumulated other comprehensive loss
    
    
    55,934
    
    
    
    50,974Deferred tax asset
    
    
    27,279
    
    
    
    22,265Funding subsequent to valuation
    
    
    (1,625
    )
    
    
    (1,226
    )Amount recognized
    
    
    128,562
    
    
    
    129,211Less: current portion
    
    
    (8,326
    )
    
    
    (9,641
    )Pension liabilities
    
    $
    120,236
    
    
    $
    119,570
  2005
    
    
    2004
    
    
    2003Weighted average discount rate
    
    
    5.4
    %
    
    
    5.7
    %
    
    
    5.8
    %Long-term per annum compensation increase
    
    
    3.3
    %
    
    
    3.5
    %
    
    
    3.5
    %Long-term return on plan assets
    
    
    7.7
    %
    
    
    7.7
    %
    
    
    7.5
    %
 69




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September 30,2005
    
    
    2004Asset AllocationEquities
    
    
    56.4
    %
    
    
    54.9
    %Bonds
    
    
    14.2
    %
    
    
    36.0
    %Cash equivalents
    
    
    29.4
    %
    
    
    9.1
    %100.0
    %
    
    
    100.0
    %
   (in thousands)
    
    PaymentsEstimated Future Benefit Payments2006
    
    $
    16,7582007
    
    
    17,2402008
    
    
    17,7392009
    
    
    18,3802010
    
    
    19,1232011-2015
    
    
    114,553
  70




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18. Post-Retirement Benefits
   (in thousands)
    
    2005
    
    
    2004Change in Benefit ObligationProjected benefit obligationbeginning of year
    
    $
    4,171
    
    
    $
    2,986Service cost
    
    
    12
    
    
    
    11Interest cost
    
    
    230
    
    
    
    172Participants contributions
    
    
    222
    
    
    
    238Amendments
    
    
    
    
    
    
    899Actuarial (gain) loss
    
    
    346
    
    
    
    316Foreign currency exchange rate changes
    
    
    28
    
    
    
    50Benefits paid
    
    
    (807
    )
    
    
    (501
    )Projected benefit obligationend of year
    
    
    4,202
    
    
    
    4,171Change in Plan AssetsFair value plan assetsbeginning of year
    
    
    
    
    
    
    Employer contribution
    
    
    585
    
    
    
    263Participants contributions
    
    
    222
    
    
    
    238Benefits paid
    
    
    (807
    )
    
    
    (501
    )Fair value plan assetsend of year
    
    
    
    
    
    
    Funded Status
    
    
    (4,202
    )
    
    
    (4,171
    )Unrecognized net actuarial gain
    
    
    (220
    )
    
    
    (536
    )Unrecognized prior service cost
    
    
    982
    
    
    
    978Employer contribution
    
    
    138
    
    
    
    60Accrued benefit cost
    
    $
    (3,302
    )
    
    $
    (3,669
    )
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Service cost
    
    $
    12
    
    
    $
    11
    
    
    $
    8Interest cost
    
    
    230
    
    
    
    172
    
    
    
    195Amortization of prior service cost
    
    
    44
    
    
    
    (43
    )
    
    
    (40
    )Amortization of actuarial gain
    
    
    (13
    )
    
    
    (45
    )
    
    
    (43
    )Post-retirement medical benefit expense
    
    $
    273
    
    
    $
    95
    
    
    $
    120
  71




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##### Table of Contents



(in thousands)
    
    PaymentsEstimated Future Benefit Payments2006
    
    $
    3342007
    
    
    3152008
    
    
    2832009
    
    
    2802010
    
    
    2522011-2015
    
    
    1,721
 19. Accumulated Other Comprehensive Income (Loss)
  72




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##### Table of Contents



ForeignCurrency
    
    
    
    
    
    MinimumTranslation
    
    Fair Value of
    
    Pension(in thousands)
    
    Adjustment
    
    Derivatives
    
    Liability
    
    TotalBalance December 31, 2003
    
    $
    (10,929
    )
    
    $
    3,979
    
    
    $
    (37,646
    )
    
    $
    (44,596
    )Change in foreign currency translation adjustment
    
    
    25,216
    
    
    
    
    
    
    
    
    
    
    
    25,216Reclassification to earnings
    
    
    
    
    
    
    (7,244
    )
    
    
    
    
    
    
    (7,244
    )Change in fair value of derivatives
    
    
    
    
    
    
    (16,042
    )
    
    
    
    
    
    
    (16,042
    )Change in minimum pension liabilities
    
    
    
    
    
    
    
    
    
    
    (13,328
    )
    
    
    (13,328
    )Balance December 31, 2004
    
    
    14,287
    
    
    
    (19,307
    )
    
    
    (50,974
    )
    
    
    (55,994
    )Change in foreign currency translation adjustment
    
    
    (23,387
    )
    
    
    
    
    
    
    
    
    
    
    (23,387
    )Reclassification to earnings
    
    
    
    
    
    
    3,059
    
    
    
    
    
    
    
    19,307Change in fair value of derivatives
    
    
    
    
    
    
    11,139
    
    
    
    
    
    
    
    (5,109
    )Change in minimum pension liabilities
    
    
    
    
    
    
    
    
    
    
    (4,960
    )
    
    
    (4,960
    )Balance December 31, 2005
    
    $
    (9,100
    )
    
    $
    (5,109
    )
    
    $
    (55,934
    )
    
    $
    (70,143
    )
 20. Income Taxes
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    679
    
    
    
    1,058
    
    
    
    398State
    
    
    
    
    
    
    
    
    
    
    679
    
    
    
    1,058
    
    
    
    398Deferred:Federal
    
    
    4,196
    
    
    
    2,570
    
    
    
    (79,400
    )Foreign
    
    
    9,102
    
    
    
    (8,628
    )
    
    
    22,002State
    
    
    240
    
    
    
    
    
    
    
    13,538
    
    
    
    (6,058
    )
    
    
    (57,398
    )Total income tax provision (benefit)
    
    $
    14,217
    
    
    $
    (5,000
    )
    
    $
    (57,000
    )
 73




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##### Table of Contents



(in thousands)
    
    2005
    
    
    2004
    
    
    2003Income (loss) from continuing
operations before taxes:Domestic
    
    $
    560
    
    
    $
    (7,516
    )
    
    $
    (100,117
    )Foreign
    
    
    35,744
    
    
    
    70,112
    
    
    
    30,63636,304
    
    
    
    62,596
    
    
    
    (69,481
    )Statutory income tax provision (benefit):Domestic
    
    
    196
    
    
    
    (2,631
    )
    
    
    (34,915
    )Foreign
    
    
    11,057
    
    
    
    21,934
    
    
    
    9,78511,253
    
    
    
    19,303
    
    
    
    (25,130
    )Reduction to foreign tax assessments
and reserves
    
    
    
    
    
    
    (27,877
    )
    
    
    (36,421
    )Foreign exchange gain (loss)
    
    
    (1,302
    )
    
    
    1,548
    
    
    
    4,883Debt repayment losses
    
    
    7,807
    
    
    
    
    
    
    
    Warrant fair value gain
    
    
    (3,278
    )
    
    
    
    
    
    
    Valuation reserve
    
    
    964
    
    
    
    2,460
    
    
    
    840Other
    
    
    (1,227
    )
    
    
    (434
    )
    
    
    (1,172
    )Income tax provision (benefit)
    
    $
    14,217
    
    
    $
    (5,000
    )
    
    $
    (57,000
    )
  (in thousands)
    
    2005
    
    
    2004Current deferred tax asset (liability)Accrued liabilities
    
    $
    1,944
    
    
    $
    (5,061
    )Inventory valuation
    
    
    (1,019
    )
    
    
    (72
    )Unsettled derivative losses
    
    
    1,341
    
    
    
    Net current deferred tax asset (liability)
    
    
    2,266
    
    
    
    (5,133
    )Non-current deferred tax liabilityDepreciation
    
    
    (188,977
    )
    
    
    (213,753
    )Investments in partnership
    
    
    (7,235
    )
    
    
    (5,127
    )Investment in affiliates
    
    
    (37,589
    )
    
    
    (39,183
    )Intangible asset
    
    
    (2,785
    )
    
    
    Unfunded employee benefits
    
    
    13,117
    
    
    
    10,465Discontinued business costs
    
    
    8,257
    
    
    
    9,863Valuation allowance
    
    
    (61,728
    )
    
    
    (56,490
    )NOL, capital loss and tax credit carryforwards
    
    
    180,548
    
    
    
    212,954Accumulated other comprehensive income
    
    
    30,141
    
    
    
    22,955Other
    
    
    254
    
    
    
    92Net noncurrent deferred tax liability
    
    
    (65,997
    )
    
    
    (58,224
    )Net deferred tax liability
    
    $
    (63,731
    )
    
    $
    (63,357
    )
  74




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21. Industry Segment Data
  75




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##### Table of Contents



Nitrogen(in thousands)
    
    Products
    
    
    Methanol
    
    
    Other
    
    
    Total2005Revenues
    
    $
    1,905,505
    
    
    $
    31,347
    
    
    $
    2,213
    
    
    $
    1,939,065Operating income (loss)
    
    
    131,474
    
    
    
    (14,089
    )
    
    
    (3,689
    )
    
    
    113,696Total assets
    
    
    1,298,289
    
    
    
    102,811
    
    
    
    122,525
    
    
    
    1,523,625Depreciation and amortization
    
    
    90,638
    
    
    
    10,993
    
    
    
    8,711
    
    
    
    110,342Capital expenditures
    
    
    29,967
    
    
    
    59
    
    
    
    794
    
    
    
    30,820Equity earnings
    
    
    21,415
    
    
    
    
    
    
    
    
    
    
    
    21,415Equity investments
    
    
    183,884
    
    
    
    
    
    
    
    
    
    
    
    183,884Minority interest in earnings
    
    
    13,667
    
    
    
    
    
    
    
    
    
    
    
    13,6672004Revenues
    
    $
    1,320,142
    
    
    $
    186,823
    
    
    $
    2,145
    
    
    $
    1,509,110Operating income (loss)
    
    
    138,745
    
    
    
    1,479
    
    
    
    (5,478
    )
    
    
    134,746Total assets
    
    
    1,440,103
    
    
    
    122,273
    
    
    
    123,132
    
    
    
    1,685,508Depreciation and amortization
    
    
    76,175
    
    
    
    13,019
    
    
    
    13,036
    
    
    
    102,230Capital expenditures
    
    
    17,038
    
    
    
    53
    
    
    
    1,381
    
    
    
    18,472Equity earnings
    
    
    442
    
    
    
    
    
    
    
    
    
    
    
    442Equity investments
    
    
    215,939
    
    
    
    
    
    
    
    
    
    
    
    215,939Minority interest in earnings
    
    
    11,207
    
    
    
    
    
    
    
    
    
    
    
    11,2072003Revenues
    
    $
    1,139,379
    
    
    $
    209,870
    
    
    $
    1,806
    
    
    $
    1,351,055Operating income (loss)
    
    
    (19,370
    )
    
    
    1,866
    
    
    
    (6,056
    )
    
    
    (23,560
    )Total assets
    
    
    898,437
    
    
    
    157,187
    
    
    
    69,438
    
    
    
    1,125,062Depreciation and amortization
    
    
    80,246
    
    
    
    13,242
    
    
    
    13,882
    
    
    
    107,370Capital expenditures
    
    
    6,708
    
    
    
    1,571
    
    
    
    360
    
    
    
    8,639Equity earnings
    
    
    803
    
    
    
    
    
    
    
    
    
    
    
    803Equity investments
    
    
    2,255
    
    
    
    
    
    
    
    
    
    
    
    2,255Minority interest in losses
    
    
    (8,617
    )
    
    
    
    
    
    
    
    
    
    
    (8,617
    )
  Revenues
    
    
    Long-lived Assets(in thousands)
    
    2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003United States
    
    $
    1,464,375
    
    
    $
    1,061,261
    
    
    $
    983,936
    
    
    $
    512,572
    
    
    $
    570,031
    
    
    $
    461,690Canada
    
    
    55,641
    
    
    
    61,395
    
    
    
    57,618
    
    
    
    55,625
    
    
    
    51,036
    
    
    
    55,010United Kingdom
    
    
    419,049
    
    
    
    386,454
    
    
    
    309,501
    
    
    
    219,045
    
    
    
    257,520
    
    
    
    251,105$
    1,939,065
    
    
    $
    1,509,110
    
    
    $
    1,351,055
    
    
    $
    787,242
    
    
    $
    878,587
    
    
    $
    767,805
 76




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##### Table of Contents



22. Guarantor Subsidiaries
    77




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##### Table of Contents



Guarantor
    
    
    Non-GuarantorParent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCash, cash equivalents and
restricted cash
    
    $
    1
    
    
    $
    11,508
    
    
    $
    75,967
    
    
    $
    7,486
    
    
    $
    (1
    )
    
    $
    94,961Accounts receivable, net
    
    
    
    
    
    
    1,563
    
    
    
    54,486
    
    
    
    150,357
    
    
    
    1
    
    
    
    206,407Inventories
    
    
    
    
    
    
    
    
    
    
    60,350
    
    
    
    119,061
    
    
    
    10,903
    
    
    
    190,314Other current assets
    
    
    9,198
    
    
    
    12,704
    
    
    
    9,720
    
    
    
    22,763
    
    
    
    193
    
    
    
    54,578Total current assets
    
    
    9,199
    
    
    
    25,775
    
    
    
    200,523
    
    
    
    299,667
    
    
    
    11,096
    
    
    
    546,260Property, plant and
equipment, net
    
    
    
    
    
    
    
    
    
    
    275,223
    
    
    
    458,313
    
    
    
    
    
    
    
    733,536Equity investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,884
    
    
    
    
    
    
    
    183,884Deferred plant turnaround
costs, intangible and
other assets
    
    
    
    
    
    
    10,861
    
    
    
    7,299
    
    
    
    42,139
    
    
    
    (354
    )
    
    
    59,945Investments in and advances
to (from) affiliates
    
    
    747,233
    
    
    
    536,937
    
    
    
    1,358,920
    
    
    
    618,155
    
    
    
    (3,261,245
    )
    
    
    Total Assets
    
    $
    756,432
    
    
    $
    573,573
    
    
    $
    1,841,965
    
    
    $
    1,602,158
    
    
    $
    (3,250,503
    )
    
    $
    1,523,625LiabilitiesDebt due within one year
    
    $
    
    
    
    $
    
    
    
    $
    26
    
    
    $
    12
    
    
    $
    
    
    
    $
    38Accounts payable
    
    
    210
    
    
    
    
    
    
    
    48,501
    
    
    
    77,152
    
    
    
    
    
    
    
    125,863Accrued and other
liabilities
    
    
    3,119
    
    
    
    92,984
    
    
    
    54,855
    
    
    
    63,670
    
    
    
    (76,719
    )
    
    
    137,909Total current liabilities
    
    
    3,329
    
    
    
    92,984
    
    
    
    103,382
    
    
    
    140,834
    
    
    
    (76,719
    )
    
    
    263,810Long-term debt and capital
Lease obligations
    
    
    
    
    
    
    331,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    331,300Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,088
    
    
    
    (4,090
    )
    
    
    65,998Pension and other liabilities
    
    
    148,793
    
    
    
    
    
    
    
    11,173
    
    
    
    1,591
    
    
    
    (1
    )
    
    
    161,556Minority interest
    
    
    
    
    
    
    18,049
    
    
    
    74,209
    
    
    
    
    
    
    
    
    
    
    
    92,258Total liabilities and
minority interest
    
    
    152,122
    
    
    
    442,333
    
    
    
    188,764
    
    
    
    212,513
    
    
    
    (80,810
    )
    
    
    914,922Preferred stock
    
    
    115,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,800Stockholders equityCommon stock
    
    
    146,994
    
    
    
    
    
    
    
    73
    
    
    
    49,709
    
    
    
    (49,782
    )
    
    
    146,994Paid in capital
    
    
    712,671
    
    
    
    150,218
    
    
    
    1,741,688
    
    
    
    1,473,065
    
    
    
    (3,364,971
    )
    
    
    712,671Accumulated other
comprehensive income
income (loss) and
unearned compensation
    
    
    (63,728
    )
    
    
    
    
    
    
    
    
    
    
    5,232
    
    
    
    (17,016
    )
    
    
    (75,512
    )Retrained earnings (deficit)
    
    
    (307,427
    )
    
    
    (18,978
    )
    
    
    (88,560
    )
    
    
    (138,361
    )
    
    
    262,076
    
    
    
    (291,250
    )Total stockholders equity
    
    
    488,510
    
    
    
    131,240
    
    
    
    1,653,201
    
    
    
    1,389,645
    
    
    
    (3,169,693
    )
    
    
    492,903Total liabilities and
stockholders equity
    
    $
    756,432
    
    
    $
    573,573
    
    
    $
    1,841,965
    
    
    $
    1,602,158
    
    
    $
    (3,250,503
    )
    
    $
    1,523,625
 78




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##### Table of Contents



Guarantor
    
    
    Non-GuarantorParent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenuesRevenues
    
    $
    
    
    
    $
    
    
    
    $
    576,993
    
    
    $
    1,353,589
    
    
    $
    1
    
    
    $
    1,930,583Other income, net
    
    
    
    
    
    
    
    
    
    
    7,189
    
    
    
    1,293
    
    
    
    
    
    
    
    8,482Total revenues
    
    
    
    
    
    
    
    
    
    
    584,182
    
    
    
    1,354,882
    
    
    
    1
    
    
    
    1,939,065Cost and ExpenseCost of sales
    
    
    
    
    
    
    3,510
    
    
    
    603,372
    
    
    
    1,242,991
    
    
    
    (49,637
    )
    
    
    1,800,236Selling, general and
administrative expenses
    
    
    2,817
    
    
    
    (8,183
    )
    
    
    (4,425
    )
    
    
    6,848
    
    
    
    49,491
    
    
    
    46,548Equity in the (earnings) loss
of subsidiaries
    
    
    40,800
    
    
    
    (209,743
    )
    
    
    (89,609
    )
    
    
    (79,915
    )
    
    
    317,052
    
    
    
    (21,415
    )Total cost and expenses
    
    
    43,617
    
    
    
    (214,416
    )
    
    
    509,338
    
    
    
    1,169,924
    
    
    
    316,906
    
    
    
    1,825,369Income (loss) from operations
    
    
    (43,617
    )
    
    
    214,416
    
    
    
    74,844
    
    
    
    184,958
    
    
    
    (316,905
    )
    
    
    113,696Interest income
    
    
    
    
    
    
    2,049
    
    
    
    5,291
    
    
    
    (612
    )
    
    
    1,358
    
    
    
    8,086Interest expense
    
    
    (1,860
    )
    
    
    (44,843
    )
    
    
    (16
    )
    
    
    (6,758
    )
    
    
    (1
    )
    
    
    (53,478
    )Loss on early retirement
of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,193
    )
    
    
    
    
    
    
    (27,193
    )Change in fair value
of warrant liability
    
    
    8,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,860Income (loss) before tax
and minority interests
    
    
    (36,617
    )
    
    
    171,622
    
    
    
    80,119
    
    
    
    150,395
    
    
    
    (315,548
    )
    
    
    49,971Income tax benefit (provision)
    
    
    (4,435
    )
    
    
    
    
    
    
    
    
    
    
    (9,782
    )
    
    
    
    
    
    
    (14,217
    )Minority interest
    
    
    
    
    
    
    (2,679
    )
    
    
    (10,989
    )
    
    
    
    
    
    
    1
    
    
    
    (13,667
    )Net Income (Loss)
    
    $
    (41,052
    )
    
    $
    168,943
    
    
    $
    69,130
    
    
    $
    140,613
    
    
    $
    (315,547
    )
    
    $
    22,087
 79




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##### Table of Contents



Guarantor
    
    
    Non-GuarantorParent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet income (loss)
    
    $
    (41,052
    )
    
    $
    168,943
    
    
    $
    69,130
    
    
    $
    140,613
    
    
    $
    (315,547
    )
    
    $
    22,087Non-cash loss on early
retirement of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,543
    
    
    
    
    
    
    
    22,543Change in fair value
of warrant liability
    
    
    (8,860
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,860
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    43,506
    
    
    
    64,838
    
    
    
    1,998
    
    
    
    110,342Non-cash loss on derivatives
    
    
    
    
    
    
    
    
    
    
    4,091
    
    
    
    
    
    
    
    
    
    
    
    4,091Deferred taxes
    
    
    13,538
    
    
    
    
    
    
    
    
    
    
    
    (5,400
    )
    
    
    5,400
    
    
    
    13,538Minority interest in earnings
(loss)
    
    
    
    
    
    
    2,679
    
    
    
    10,989
    
    
    
    
    
    
    
    (1
    )
    
    
    13,667Equity earnings in excess of
profit distributions
    
    
    40,800
    
    
    
    (209,743
    )
    
    
    
    
    
    
    (79,915
    )
    
    
    241,917
    
    
    
    (6,941
    )Amortization of unearned
compensation
    
    
    1,997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,997Term loan discount accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,773
    
    
    
    
    
    
    
    1,773Change in operating assets
and liabilities
    
    
    11,645
    
    
    
    147,075
    
    
    
    (56,723
    )
    
    
    (107,064
    )
    
    
    (158,295
    )
    
    
    (163,362
    )Net Cash Flows from
Operating Activities
    
    
    18,068
    
    
    
    108,954
    
    
    
    70,993
    
    
    
    37,388
    
    
    
    (224,528
    )
    
    
    10,875Investing ActivitiesPurchase of property,
plant and equipment
    
    
    
    
    
    
    
    
    
    
    (3,331
    )
    
    
    (27,489
    )
    
    
    
    
    
    
    (30,820
    )Plant turnaround costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,331
    )
    
    
    
    
    
    
    (22,331
    )Distributions received from
unconsolidated affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,901
    
    
    
    
    
    
    
    31,901Proceeds from the sale of
property, plant
and equipment
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    7,392
    
    
    
    
    
    
    
    7,560Restricted cash
    
    
    
    
    
    
    
    
    
    
    (8,595
    )
    
    
    
    
    
    
    
    
    
    
    (8,595
    )Net Cash Flows from
Investing Activities
    
    
    168
    
    
    
    
    
    
    
    (11,926
    )
    
    
    (10,527
    )
    
    
    
    
    
    
    (22,285
    )Financing ActivitiesPayments under
borrowing arrangements
    
    
    
    
    
    
    
    
    
    
    (104
    )
    
    
    (125,063
    )
    
    
    
    
    
    
    (125,167
    )Proceeds from exercise of
stock options
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142Stock issuance
    
    
    
    
    
    
    
    
    
    
    (9,190
    )
    
    
    
    
    
    
    9,190
    
    
    
    Change in investments and
advances from (to)
affiliates
    
    
    (12,428
    )
    
    
    (299,473
    )
    
    
    
    
    
    
    239,000
    
    
    
    72,901
    
    
    
    Preferred share dividends paid
    
    
    (5,950
    )
    
    
    
    
    
    
    
    
    
    
    (133,875
    )
    
    
    133,875
    
    
    
    (5,950
    )
 80




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##### Table of Contents



Guarantor
    
    
    Non-GuarantorParent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedDistributions to minority
interests
    
    
    
    
    
    
    (2,664
    )
    
    
    (10,944
    )
    
    
    
    
    
    
    1
    
    
    
    (13,607
    )Net Cash Flows from
Financing Activities
    
    
    (18,236
    )
    
    
    (302,137
    )
    
    
    (20,238
    )
    
    
    (19,938
    )
    
    
    215,967
    
    
    
    (144,582
    )Effect of Foreign Exchange
Rate on Cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,560
    
    
    
    8,560Increase (Decrease) in Cash
and Cash Equivalents
    
    
    
    
    
    
    (193,183
    )
    
    
    38,829
    
    
    
    6,923
    
    
    
    (1
    )
    
    
    (147,432
    )Cash and Cash Equivalents
at Beginning of Year
    
    
    1
    
    
    
    204,691
    
    
    
    28,543
    
    
    
    563
    
    
    
    
    
    
    
    233,798Cash and Cash Equivalents
at End of Year
    
    $
    1
    
    
    $
    11,508
    
    
    $
    67,372
    
    
    $
    7,486
    
    
    $
    (1
    )
    
    $
    86,366
 81




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##### Table of Contents



Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Parent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCash, cash equivalents and
restricted cash
    
    $
    1
    
    
    $
    204,691
    
    
    $
    28,543
    
    
    $
    563
    
    
    $
    
    
    
    $
    233,798Accounts receivable
    
    
    7
    
    
    
    (75
    )
    
    
    31,181
    
    
    
    119,158
    
    
    
    
    
    
    
    150,271Inventories
    
    
    60
    
    
    
    
    
    
    
    32,243
    
    
    
    116,504
    
    
    
    1
    
    
    
    148,808Other current assets
    
    
    1,520
    
    
    
    21,149
    
    
    
    9,540
    
    
    
    26,888
    
    
    
    (991
    )
    
    
    58,106Total current assets
    
    
    1,588
    
    
    
    225,765
    
    
    
    101,507
    
    
    
    263,113
    
    
    
    (990
    )
    
    
    590,983Property, plant and
equipment, net
    
    
    
    
    
    
    
    
    
    
    306,020
    
    
    
    499,170
    
    
    
    (7,212
    )
    
    
    797,978Deferred plant turnaround
costs, intangible and
other assets
    
    
    237
    
    
    
    14,177
    
    
    
    14,365
    
    
    
    42,560
    
    
    
    9,269
    
    
    
    80,608Equity investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,939
    
    
    
    
    
    
    
    215,939Investments in and advances
to (from) affiliates
    
    
    735,357
    
    
    
    237,464
    
    
    
    1,366,624
    
    
    
    192,787
    
    
    
    (2,532,232
    )
    
    
    Total Assets
    
    $
    737,182
    
    
    $
    477,406
    
    
    $
    1,788,516
    
    
    $
    1,213,569
    
    
    $
    (2,531,165
    )
    
    $
    1,685,508LiabilitiesDebt due within
one year
    
    $
    
    
    
    $
    
    
    
    $
    104
    
    
    $
    63
    
    
    $
    
    
    
    $
    167Accounts payable
    
    
    515
    
    
    
    1,600
    
    
    
    26,385
    
    
    
    94,218
    
    
    
    (3,147
    )
    
    
    119,571Accrued and other
liabilities
    
    
    50,466
    
    
    
    7,426
    
    
    
    79,233
    
    
    
    84,058
    
    
    
    (988
    )
    
    
    220,195Total current liabilities
    
    
    50,981
    
    
    
    9,026
    
    
    
    105,722
    
    
    
    178,339
    
    
    
    (4,135
    )
    
    
    339,933Long-term debt and
capital lease obligations
    
    
    
    
    
    
    331,300
    
    
    
    26
    
    
    
    103,912
    
    
    
    
    
    
    
    435,238Deferred income taxes
    
    
    (19,322
    )
    
    
    
    
    
    
    
    
    
    
    75,488
    
    
    
    2,058
    
    
    
    58,224Pension and other
liabilities
    
    
    112,020
    
    
    
    
    
    
    
    15,343
    
    
    
    36,935
    
    
    
    3,144
    
    
    
    167,442Minority interest
    
    
    
    
    
    
    18,034
    
    
    
    74,164
    
    
    
    
    
    
    
    (1
    )
    
    
    92,197Total liabilities and
minority interest
    
    
    143,679
    
    
    
    358,360
    
    
    
    195,255
    
    
    
    394,674
    
    
    
    1,066
    
    
    
    1,093,034Preferred Shares
    
    
    133,069
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,069Stockholders EquityCommon stock
    
    
    144,531
    
    
    
    
    
    
    
    72
    
    
    
    49,709
    
    
    
    (49,781
    )
    
    
    144,531Paid in capital
    
    
    681,639
    
    
    
    150,218
    
    
    
    1,750,879
    
    
    
    892,400
    
    
    
    (2,793,497
    )
    
    
    681,639Accumulated other
comprehensive
income (loss)
    
    
    (55,994
    )
    
    
    (52,994
    )
    
    
    
    
    
    
    21,885
    
    
    
    31,109
    
    
    
    (55,994
    )Unearned compensation
    
    
    (2,568
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,568
    )Retained earnings
(deficit)
    
    
    (307,174
    )
    
    
    21,822
    
    
    
    (157,690
    )
    
    
    (145,099
    )
    
    
    279,938
    
    
    
    (308,203
    )Total stockholders equity
    
    
    460,434
    
    
    
    119,046
    
    
    
    1,593,261
    
    
    
    818,895
    
    
    
    (2,532,231
    )
    
    
    459,405Total liabilities and
stockholders equity
    
    $
    737,182
    
    
    $
    477,406
    
    
    $
    1,788,516
    
    
    $
    1,213,569
    
    
    $
    (2,531,165
    )
    
    $
    1,685,508
 82




---



##### Table of Contents



Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Parent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenuesRevenues
    
    $
    
    
    
    $
    
    
    
    $
    535,977
    
    
    $
    961,472
    
    
    $
    9,516
    
    
    $
    1,506,965Other income, net
    
    
    
    
    
    
    
    
    
    
    10,972
    
    
    
    689
    
    
    
    (9,516
    )
    
    
    2,145Total revenues
    
    
    
    
    
    
    
    
    
    
    546,949
    
    
    
    962,161
    
    
    
    
    
    
    
    1,509,110Cost and ExpenseCost of sales
    
    
    
    
    
    
    
    
    
    
    504,037
    
    
    
    848,825
    
    
    
    (4,785
    )
    
    
    1,348,077Selling, general and
administrative expenses
    
    
    3,780
    
    
    
    (9,823
    )
    
    
    30,173
    
    
    
    11,294
    
    
    
    8,766
    
    
    
    44,190Product claim costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,903
    )
    
    
    
    
    
    
    (17,903
    )Equity in the (earnings)
loss of subsidiaries
    
    
    (45,792
    )
    
    
    (97,064
    )
    
    
    (74,338
    )
    
    
    (442
    )
    
    
    217,636
    
    
    
    Total cost and expenses
    
    
    (42,012
    )
    
    
    (106,887
    )
    
    
    459,872
    
    
    
    841,774
    
    
    
    221,617
    
    
    
    1,374,364Income (loss) from
operations
    
    
    42,012
    
    
    
    106,887
    
    
    
    87,077
    
    
    
    120,387
    
    
    
    (221,617
    )
    
    
    134,746Interest income
    
    
    1
    
    
    
    1,856
    
    
    
    4,261
    
    
    
    1,838
    
    
    
    (4,649
    )
    
    
    3,307Interest expense
    
    
    (3,077
    )
    
    
    (49,643
    )
    
    
    (29
    )
    
    
    (5,172
    )
    
    
    4,787
    
    
    
    (53,134
    )Loss on early retirement
of debt
    
    
    
    
    
    
    (11,116
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11.116
    )Income (loss) before
income taxes and
minority interest
    
    
    38,936
    
    
    
    47,984
    
    
    
    91,309
    
    
    
    117,053
    
    
    
    (221,479
    )
    
    
    73,803Income tax benefit (provision)
    
    
    28,660
    
    
    
    
    
    
    
    
    
    
    
    (23,660
    )
    
    
    
    
    
    
    5,000Minority interest
    
    
    
    
    
    
    (2,192
    )
    
    
    (9,015
    )
    
    
    
    
    
    
    
    
    
    
    (11,207
    )Net Income
    
    $
    67,596
    
    
    $
    45,792
    
    
    $
    82,294
    
    
    $
    93,393
    
    
    $
    (221,479
    )
    
    $
    67,596
 83




---



##### Table of Contents



Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Parent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet income (loss)
    
    $
    67,596
    
    
    $
    45,792
    
    
    $
    82,294
    
    
    $
    93,393
    
    
    $
    (221,479
    )
    
    $
    67,596Adjustments to reconcile net
loss to net cash flows from
operating activities:Loss on early retirement
of debt
    
    
    
    
    
    
    2,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,985Depreciation and
amortization
    
    
    
    
    
    
    4,086
    
    
    
    47,676
    
    
    
    50,468
    
    
    
    
    
    
    
    102,230Deferred income taxes
    
    
    (49,601
    )
    
    
    
    
    
    
    
    
    
    
    46,362
    
    
    
    (2,819
    )
    
    
    (6,058
    )Minority interest in earnings
    
    
    
    
    
    
    2,192
    
    
    
    9,015
    
    
    
    
    
    
    
    
    
    
    
    11,207Equity in earnings (loss)
of subsidiaries
    
    
    45,792
    
    
    
    97,064
    
    
    
    74,338
    
    
    
    442
    
    
    
    (217,636
    )
    
    
    Unearned compensation
    
    
    1,513
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,513Change in operating assets
and liabilities
    
    
    32,800
    
    
    
    (29,558
    )
    
    
    59,830
    
    
    
    3,139
    
    
    
    (21,304
    )
    
    
    44,907Claim cost recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,874
    )
    
    
    
    
    
    
    (12,874
    )Net Cash Flows from
Operating Activities
    
    
    98,100
    
    
    
    122,561
    
    
    
    273,153
    
    
    
    180,930
    
    
    
    (463,238
    )
    
    
    211,506Investing ActivitiesPurchase of property,
plant and equipment
    
    
    
    
    
    
    
    
    
    
    (4,250
    )
    
    
    (14,222
    )
    
    
    
    
    
    
    (18,472
    )Plant turnaround costs
    
    
    
    
    
    
    
    
    
    
    (12,103
    )
    
    
    (16,775
    )
    
    
    
    
    
    
    (28,878
    )Acquisitions, net of cash
received
    
    
    175,250
    
    
    
    
    
    
    
    
    
    
    
    (229,418
    )
    
    
    
    
    
    
    (54,168
    )Other
    
    
    22,872
    
    
    
    (4
    )
    
    
    (10,963
    )
    
    
    (13,672
    )
    
    
    2,733
    
    
    
    966Net Cash Flows from
Investing Activities
    
    
    198,122
    
    
    
    (4
    )
    
    
    (27,316
    )
    
    
    (274,087
    )
    
    
    2,733
    
    
    
    (100,552
    )Financing ActivitiesPrincipal payments on
long-term debt
    
    
    
    
    
    
    (70,700
    )
    
    
    (95
    )
    
    
    (59
    )
    
    
    
    
    
    
    (70,854
    )Stock issuance
    
    
    116,247
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,247Deferred financing costs
    
    
    
    
    
    
    (2,598
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,598
    )Distributions to minority
interests
    
    
    
    
    
    
    (1,575
    )
    
    
    (6,497
    )
    
    
    
    
    
    
    
    
    
    
    (8,072
    )Change in investments and
advances from (to)
affiliates
    
    
    (412,468
    )
    
    
    82,376
    
    
    
    (216,441
    )
    
    
    86,815
    
    
    
    459,718
    
    
    
    Net Cash Flows from
Financing Activities
    
    
    (296,221
    )
    
    
    7,503
    
    
    
    (223,033
    )
    
    
    86,756
    
    
    
    459,718
    
    
    
    34,723Effect of Foreign Exchange
Rate on Cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787
    
    
    
    787Increase (Decrease) in Cash
and Short-term Investments
    
    
    1
    
    
    
    130,060
    
    
    
    22,804
    
    
    
    (6,401
    )
    
    
    
    
    
    
    146,464Cash and Short-term Investments
at Beginning of Year
    
    
    
    
    
    
    74,631
    
    
    
    5,739
    
    
    
    6,964
    
    
    
    
    
    
    
    87,334Cash and Short-term
Investments at End of Year
    
    $
    1
    
    
    $
    204,691
    
    
    $
    28,543
    
    
    $
    563
    
    
    $
    
    
    
    $
    233,798`
 84




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##### Table of Contents



Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Parent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCash and cash equivalents
    
    $
    
    
    
    $
    74,631
    
    
    $
    5,739
    
    
    $
    6,964
    
    
    $
    
    
    
    $
    87,334Accounts receivable
    
    
    
    
    
    
    
    
    
    
    49,642
    
    
    
    83,838
    
    
    
    
    
    
    
    133,480Inventories
    
    
    
    
    
    
    
    
    
    
    26,337
    
    
    
    64,532
    
    
    
    
    
    
    
    90,869Other current assets
    
    
    7,541
    
    
    
    6,267
    
    
    
    16,836
    
    
    
    12,221
    
    
    
    454
    
    
    
    43,319Total current assets
    
    
    7,541
    
    
    
    80,898
    
    
    
    98,554
    
    
    
    167,555
    
    
    
    454
    
    
    
    355,002Property, plant and
equipment, net
    
    
    
    
    
    
    
    
    
    
    343,379
    
    
    
    366,321
    
    
    
    (2,035
    )
    
    
    707,665Investment in and
advanced to (from)
affiliates
    
    
    380,076
    
    
    
    425,301
    
    
    
    1,257,814
    
    
    
    82,676
    
    
    
    (2,145,867
    )
    
    
    Deferred plant turnaround costs,
intangible and other assets
    
    
    
    
    
    
    18,650
    
    
    
    10,037
    
    
    
    34,126
    
    
    
    (418
    )
    
    
    62,395Total Assets
    
    $
    387,617
    
    
    $
    524,849
    
    
    $
    1,709,784
    
    
    $
    650,678
    
    
    $
    (2,147,866
    )
    
    $
    1,125,062LiabilitiesDebt due within
one year
    
    $
    
    
    
    $
    
    
    
    $
    95
    
    
    $
    58
    
    
    $
    
    
    
    $
    153Accounts payable
    
    
    669
    
    
    
    
    
    
    
    29,426
    
    
    
    49,468
    
    
    
    
    
    
    
    79,563Accrued and other
liabilities
    
    
    851
    
    
    
    27,456
    
    
    
    41,213
    
    
    
    72,818
    
    
    
    
    
    
    
    142,338Total current liabilities
    
    
    1,520
    
    
    
    27,456
    
    
    
    70,734
    
    
    
    122,344
    
    
    
    
    
    
    
    222,054Long-term debt and
capital lease obligations
    
    
    
    
    
    
    402,000
    
    
    
    130
    
    
    
    76
    
    
    
    
    
    
    
    402,206Deferred income taxes
    
    
    30,279
    
    
    
    
    
    
    
    
    
    
    
    (12,448
    )
    
    
    
    
    
    
    17,831Pension and other
liabilities
    
    
    90,687
    
    
    
    (3,680
    )
    
    
    23,019
    
    
    
    18,750
    
    
    
    2
    
    
    
    128,778Minority interest
    
    
    
    
    
    
    17,421
    
    
    
    71,641
    
    
    
    
    
    
    
    
    
    
    
    89,062Total liabilities and
minority interest
    
    
    122,486
    
    
    
    443,197
    
    
    
    165,524
    
    
    
    128,722
    
    
    
    2
    
    
    
    859,931Stockholders EquityCommon stock
    
    
    128,968
    
    
    
    
    
    
    
    72
    
    
    
    49,709
    
    
    
    (49,781
    )
    
    
    128,968Paid in capital
    
    
    555,529
    
    
    
    150,218
    
    
    
    1,819,036
    
    
    
    725,546
    
    
    
    (2,694,800
    )
    
    
    555,529Accumulated other
comprehensive
income (loss)
    
    
    (44,596
    )
    
    
    (44,596
    )
    
    
    
    
    
    
    16,090
    
    
    
    28,506
    
    
    
    (44,596
    )Retained earnings
(deficit)
    
    
    (374,770
    )
    
    
    (23,970
    )
    
    
    (274,848
    )
    
    
    (269,389
    )
    
    
    568,207
    
    
    
    (374,770
    )Total stockholders equity
    
    
    265,131
    
    
    
    81,652
    
    
    
    1,544,260
    
    
    
    521,956
    
    
    
    (2,147,868
    )
    
    
    265,131Total liabilities and
stockholders equity
    
    $
    387,617
    
    
    $
    524,849
    
    
    $
    1,709,784
    
    
    $
    650,678
    
    
    $
    (2,147,866
    )
    
    $
    1,125,062
 85




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##### Table of Contents



Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Parent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenuesRevenues
    
    $
    
    
    
    $
    
    
    
    $
    518,188
    
    
    $
    828,702
    
    
    $
    2,359
    
    
    $
    1,349,249Other income, net
    
    
    
    
    
    
    
    
    
    
    3,387
    
    
    
    778
    
    
    
    (2,359
    )
    
    
    1,806Total revenues
    
    
    
    
    
    
    
    
    
    
    521,575
    
    
    
    829,480
    
    
    
    
    
    
    
    1,351,055Cost and ExpenseCost of sales
    
    
    
    
    
    
    
    
    
    
    511,940
    
    
    
    776,073
    
    
    
    (6,350
    )
    
    
    1,281,663Selling, general and
administrative expenses
    
    
    5,620
    
    
    
    (1,046
    )
    
    
    24,403
    
    
    
    11,240
    
    
    
    (356
    )
    
    
    39,861Impairment of long-lived
assets
    
    
    
    
    
    
    
    
    
    
    12,436
    
    
    
    40,655
    
    
    
    
    
    
    
    53,091Equity in the (earnings)
loss of subsidiaries
    
    
    78,197
    
    
    
    41,861
    
    
    
    57,354
    
    
    
    (804
    )
    
    
    (176,608
    )
    
    
    Total cost and expenses
    
    
    83,817
    
    
    
    40,815
    
    
    
    606,133
    
    
    
    827,164
    
    
    
    (183,314
    )
    
    
    1,374,615Income (loss) from
continuing operations
before income taxes
    
    
    (83,817
    )
    
    
    (40,815
    )
    
    
    (84,558
    )
    
    
    2,316
    
    
    
    183,314
    
    
    
    (23,560
    )Interest income
    
    
    47
    
    
    
    3,043
    
    
    
    3,989
    
    
    
    145
    
    
    
    (6,690
    )
    
    
    534Interest expense
    
    
    (12,911
    )
    
    
    (42,110
    )
    
    
    (39
    )
    
    
    (6,679
    )
    
    
    6,667
    
    
    
    (55,072
    )Loss before income taxes
and minority interest
    
    
    (96,681
    )
    
    
    (79,882
    )
    
    
    (80,608
    )
    
    
    (4,218
    )
    
    
    183,291
    
    
    
    (78,098
    )Income tax benefit (provision)
    
    
    84,200
    
    
    
    
    
    
    
    
    
    
    
    (27,200
    )
    
    
    
    
    
    
    57,000Minority interest
    
    
    
    
    
    
    1,685
    
    
    
    6,932
    
    
    
    
    
    
    
    
    
    
    
    8,617Net Loss
    
    $
    (12,481
    )
    
    $
    (78,197
    )
    
    $
    (73,676
    )
    
    $
    (31,418
    )
    
    $
    183,291
    
    
    $
    (12,481
    )
 86




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##### Table of Contents



Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Parent
    
    
    TCAPI
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating ActivitiesNet loss
    
    $
    (12,481
    )
    
    $
    (78,197
    )
    
    $
    (73,676
    )
    
    $
    (31,418
    )
    
    $
    183,291
    
    
    $
    (12,481
    )Adjustments to reconcile net
loss to net cash flows from
operating activities:Impairment of long-lived assets
    
    
    
    
    
    
    
    
    
    
    12,436
    
    
    
    40,655
    
    
    
    
    
    
    
    53,091Depreciation and
amortization
    
    
    
    
    
    
    3,816
    
    
    
    49,753
    
    
    
    53,801
    
    
    
    
    
    
    
    107,370Deferred income taxes
    
    
    (39,873
    )
    
    
    (19,422
    )
    
    
    
    
    
    
    4,379
    
    
    
    (2,482
    )
    
    
    (57,398
    )Minority interest in earnings
    
    
    
    
    
    
    (1,685
    )
    
    
    (6,932
    )
    
    
    
    
    
    
    
    
    
    
    (8,617
    )Equity in earnings (loss)
of subsidiaries
    
    
    (78,197
    )
    
    
    (41,861
    )
    
    
    (57,354
    )
    
    
    804
    
    
    
    176,608
    
    
    
    Change in operating assets
and liabilities
    
    
    (7,462
    )
    
    
    (1,893
    )
    
    
    (86,180
    )
    
    
    23,734
    
    
    
    72,258
    
    
    
    457Net Cash Flows from
Operating Activities
    
    
    (138,013
    )
    
    
    (139,242
    )
    
    
    (161,953
    )
    
    
    91,955
    
    
    
    429,675
    
    
    
    82,422Investing ActivitiesPurchase of property,
plant and equipment
    
    
    
    
    
    
    
    
    
    
    (2,831
    )
    
    
    (5,808
    )
    
    
    
    
    
    
    (8,639
    )Plant turnaround costs
    
    
    
    
    
    
    
    
    
    
    (5,981
    )
    
    
    (22,099
    )
    
    
    
    
    
    
    (28,080
    )Proceeds from the sale of
property, plant and
equipment
    
    
    
    
    
    
    
    
    
    
    1,755
    
    
    
    
    
    
    
    
    
    
    
    1,755Other
    
    
    (479
    )
    
    
    
    
    
    
    12,168
    
    
    
    (1,538
    )
    
    
    (21,509
    )
    
    
    (11,358
    )Net Cash Flows from
Investing Activities
    
    
    (479
    )
    
    
    
    
    
    
    5,111
    
    
    
    (29,445
    )
    
    
    (21,509
    )
    
    
    (46,322
    )Financing ActivitiesPrincipal payments on
long-term debt
    
    
    (200,000
    )
    
    
    
    
    
    
    (88
    )
    
    
    (54
    )
    
    
    
    
    
    
    (200,142
    )Change in investments and
advances from (to)
affiliates
    
    
    338,423
    
    
    
    5,291
    
    
    
    163,597
    
    
    
    (164,672
    )
    
    
    (342,639
    )
    
    
    Issuance of long-term debt
    
    
    
    
    
    
    202,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,000Deferred financing costs
    
    
    
    
    
    
    (8,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,581
    )Distributions to minority
interests
    
    
    
    
    
    
    (225
    )
    
    
    (928
    )
    
    
    
    
    
    
    
    
    
    
    (1,153
    )Stock issuance
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Net Cash Flows from
Financing Activities
    
    
    138,491
    
    
    
    198,485
    
    
    
    162,581
    
    
    
    (164,726
    )
    
    
    (342,639
    )
    
    
    (7,808
    )Effect of Foreign Exchange
Rate on Cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563
    
    
    
    563Increase (Decrease) in Cash
and Short-term Investments
    
    
    (1
    )
    
    
    59,243
    
    
    
    5,739
    
    
    
    (102,216
    )
    
    
    66,090
    
    
    
    28,855Cash and Short-term Investments
at Beginning of Year
    
    
    1
    
    
    
    15,388
    
    
    
    
    
    
    
    109,180
    
    
    
    (66,090
    )
    
    
    58,479Cash and Short-term
Investments at End of Year
    
    $
    
    
    
    $
    74,631
    
    
    $
    5,739
    
    
    $
    6,964
    
    
    $
    
    
    
    $
    87,334
 87




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##### Table of Contents



23 Agreements of Limited Partnerships
 Terra Nitrogen Company L.P. (TNCLP)
    24. Quarterly Financial Data (Unaudited)
 (in thousands, except per-share data)
    
    March 31
    
    
    June 30
    
    
    Sept 30
    
    
    Dec 312005Total revenues
    
    $
    450,012
    
    
    $
    489,993
    
    
    $
    485,694
    
    
    $
    513,366Operating income (loss)
    
    $
    30,823
    
    
    $
    69,761
    
    
    $
    31,977
    
    
    $
    (18,865
    )Net income (loss)
    
    $
    4,431
    
    
    $
    21,702
    
    
    $
    11,086
    
    
    $
    (15,132
    )Per Share:Diluted income (loss) per share
    
    $
    0.03
    
    
    $
    0.20
    
    
    $
    0.10
    
    
    $
    (0.17
    )2004Total revenues
    
    $
    361,029
    
    
    $
    416,768
    
    
    $
    376,667
    
    
    $
    354,646Operating income
    
    $
    45,587
    
    
    $
    39,284
    
    
    $
    25,288
    
    
    $
    24,587Net income
    
    $
    18,230
    
    
    $
    17,865
    
    
    $
    6,453
    
    
    $
    24,019Per Share:Diluted income per share
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    0.08
    
    
    $
    0.28
 88




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##### Table of Contents



Report
of Independent Registered Public Accounting Firm
     Internal Control    Integrated
Framework
 
 89




---



##### Table of Contents



Quarterly Financial Data
 
 Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
  
 Item 9A. Controls And Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
 Internal Control  Integrated Framework
  Changes in Internal Controls Over Financial Reporting
  90




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Report
of Independent Registered Public Accounting Firm
  Internal Control  Integrated Framework
    Internal Control  Integrated Framework
 91




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Internal Control  Integrated Framework
  
 92




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##### Table of Contents



Item 9B. Other Information
  
 Part III
 
 Item 10. Directors and Executive Officers of Terra
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  93




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##### Table of Contents



Equity Compensation Plan Information(a)
    
    (b)
    
    (c)Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    under equityissued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excludingoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    reflected in columnPlan category
    
    and rights
    
    and rights
    
    (a))Equity compensation
plans approved by
security holders
    
    
    592,000
    
    
    
    $5.24
    
    
    
    1,458,000Equity compensation
plans not approved
by security holders
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Total
    
    
    592,000
    
    
    
    $5.24
    
    
    
    1,458,000
 
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
 Principal Accountant Audit Fees and Services Fees
  Audit Committee Pre-Approval Policies and Procedures
  94




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Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) Documents Filed as a Part of this Report
 1.
    
    Consolidated Financial Statements of Terra and its
subsidiaries are included in Item 8
herein.
 Consolidated Statements of Financial Position at December 31, 2005 and 2004Consolidated Statements of Operations for the years ended December 31, 2005,
2004 and 2003Consolidated Statements of Cash Flows for the years ended December 31, 2005,
2004 and 2003Consolidated Statements of Changes in Stockholders Equity for the years ended
December 31, 2005, 2004 and 2003Notes to the Consolidated Financial StatementsReport of Independent Registered Accounting Firm
 2.
    
    Index to Financial Statement Schedules, Reports and Consents
 See Index to Financial Statement Schedules of Terra and its subsidiaries at page
S-1
 3.
    
    Other Financial Statements
 Individual financial statements of the Companys 50% owned joint venture in
Trinidad, Point Lisas Nitrogen Limited, accounted for on the equity method, have
been included because the equity investment constitutes a significant
subsidiary. Other 50% owned joint ventures accounted for on the equity basis
considered in the aggregate would not constitute a significant subsidiary.
Therefore, those financial statements have been omitted.
 (b) Exhibits
 2.1
    
    
    Stock Purchase Agreement dated as
of August 6, 2004 among Terra Industries Inc., MissChem
Acquisition Inc. and Mississippi Chemical Corporation, filed as Exhibit 99.2 to
Terra Industries Inc.s Form 8-K dated August 9, 2004, is incorporated herein by reference.3.1
    
    
    Articles of Restatement of Terra Industries Inc. filed with the
State Department of Assessments and Taxation of Maryland on August 3, 2005,
restating the Charter of Terra Industries Inc., filed as Exhibit 3.1 to Terra
Industries Inc.s August 4, 2005 Form 8-K, are incorporated herein by
reference.
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##### Table of Contents



3.2
    
    
    Amended and Restated By-Laws of Terra Industries Inc.,
effective as of August 3, 2005, filed as Exhibit 3.2 to Terra Industries Inc.s
August 4, 2005 Form 8-K, are incorporated herein by reference.3.3
    
    
    Certificate of Incorporation of Terra Capital, Inc. filed as
Exhibit 3.i.(a) to Terra Capital, Inc.s Registration Statement filed on Form
S-4 on November 13, 2001, is incorporated herein by reference.3.4
    
    
    Certificate of Incorporation of Beaumont Ammonia Inc. filed as
Exhibit 3.i.(b) to Terra Capital, Inc.s Registration Statement filed on Form
S-4 on November 13, 2001, is incorporated herein by reference.3.5
    
    
    Certificate of Incorporation of Beaumont Holdings Corporation
filed as Exhibit 3.i.(c) to Terra Capital, Inc.s Registration Statement filed
on Form S-4 on November 13, 2001, is incorporated herein by reference.3.6
    
    
    Certificate of Incorporation of BMC Holdings Inc. filed as
Exhibit 3.i.(d) to Terra Capital, Inc.s Registration Statement filed on Form
S-4 on November 13, 2001, is incorporated herein by reference.3.7
    
    
    Certificate of Incorporation of Port Neal Corporation filed as
Exhibit 3.i.(e) to Terra Capital, Inc.s Registration Statement filed on Form
S-4 on November 13, 2001, is incorporated herein by reference.3.8
    
    
    Certificate of Incorporation of Terra (UK) Holdings Inc. filed
as Exhibit 3.i.(f) to Terra Capital, Inc.s Registration Statement filed on
Form S-4 on November 13, 2001, is incorporated herein by reference.3.9
    
    
    Certificate of Incorporation of Terra Capital Holdings, Inc.
filed as Exhibit 3.i.(g) to Terra Capital, Inc.s Registration Statement filed
on Form S-4 on November 13, 2001, is incorporated herein by reference.3.10
    
    
    Certificate of Incorporation of Terra International (Oklahoma)
Inc. filed as Exhibit 3.i.(k) to Terra Capital, Inc.s Registration Statement
filed on Form S-4 on November 13, 2001, is incorporated herein by reference.3.11
    
    
    Certificate of Incorporation of Terra International, Inc. filed
as Exhibit 3.i.(l) to Terra Capital, Inc.s Registration Statement filed on
Form S-4 on November 13, 2001, is incorporated herein by reference.3.12
    
    
    Certificate of Incorporation of Terra Methanol Corporation
filed as Exhibit 3.i.(m) to Terra Capital, Inc.s Registration Statement filed
on Form S-4 on November 13, 2001, is incorporated herein by reference.
 96




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##### Table of Contents



3.13
    
    
    Certificate of Incorporation of Terra Nitrogen Corporation
filed as Exhibit 3.i.(n) to Terra Capital, Inc.s Registration Statement filed
on Form S-4 on November 13, 2001, is incorporated herein by reference.3.14
    
    
    Certificate of Incorporation of Terra Real Estate Corporation
filed as Exhibit 3.i.(o) to Terra Capital, Inc.s Registration Statement filed
on Form S-4 on November 13, 2001, is incorporated herein by reference.3.15
    
    
    By-Laws of Terra Capital, Inc. filed as Exhibit 3.ii.(a) to
Terra Capital, Inc.s Registration Statement filed on Form S-4 on November 13,
2001, is incorporated herein by reference.3.16
    
    
    By-Laws of Beaumont Ammonia Inc. filed as Exhibit 3.ii.(b) to
Terra Capital, Inc.s Registration Statement filed on Form S-4 on November 13,
2001, is incorporated herein by reference.3.17
    
    
    By-Laws of Beaumont Holdings Corporation filed as Exhibit
3.ii.(c) to Terra Capital, Inc.s Registration Statement filed on Form S-4 on
November 13, 2001, is incorporated herein by reference.3.18
    
    
    By-Laws of BMC Holdings, Inc. filed as Exhibit 3.ii.(d) to
Terra Capital, Inc.s Registration Statement filed on Form S-4 on November 13,
2001, is incorporated herein by reference.3.19
    
    
    By-Laws of Port Neal Corporation filed as Exhibit 3.ii.(e) to
Terra Capital, Inc.s Registration Statement filed on Form S-4 on November 13,
2001, is incorporated herein by reference.3.20
    
    
    By-Laws of Terra (UK) Holdings Inc. filed as Exhibit 3.ii.(f)
to Terra Capital, Inc.s Registration Statement filed on Form S-4 on November
13, 2001, is incorporated herein by reference.3.21
    
    
    By-Laws of Terra Capital Holdings, Inc. filed as Exhibit
3.ii.(g) to Terra Capital, Inc.s Registration Statement filed on Form S-4 on
November 13, 2001, is incorporated herein by reference.3.22
    
    
    By-Laws of Terra International (Oklahoma) Inc. filed as Exhibit
3.ii.(i) to Terra Capital, Inc.s Registration Statement filed on Form S-4 on
November 13, 2001, is incorporated herein by reference.3.23
    
    
    By-Laws of Terra International, Inc. filed as Exhibit 3.ii.(j)
to Terra Capital, Inc.s Registration Statement filed on Form S-4 on November
13, 2001, is incorporated herein by reference.
 97




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3.24
    
    
    By-Laws of Terra Methanol Corporation filed as Exhibit 3.ii.(k)
to Terra Capital, Inc.s Registration Statement filed on Form S-4 on November
13, 2001, is incorporated herein by reference.3.25
    
    
    By-Laws of Terra Nitrogen Corporation filed as Exhibit 3.ii.(l)
to Terra Capital, Inc.s Registration Statement filed on Form S-4 on November
13, 2001, is incorporated herein by reference.3.26
    
    
    By-Laws of Terra Real Estate Corporation filed as Exhibit
3.ii.(m) to Terra Capital, Inc.s Registration Statement filed on Form S-4 on
November 13, 2001, is incorporated herein by reference.3.27
    
    
    Certificate of Incorporation of Terra Nitrogen GP Inc., filed
as Exhibit 3.2 to the September 7, 2005 Terra Nitrogen
Company, L.P.s Form 8-K, is incorporated herein
by reference.3.28
    
    
    By-Laws of Terra Nitrogen GP Inc., filed as Exhibit 3.3 to the
September 7, 2005 TNCLP Form 8-K, are incorporated herein by reference.3.29*
    
    
    Certificate of Incorporation of Terra Nitrogen GP Holdings Inc.3.30*
    
    
    By-Laws of Terra Nitrogen GP Holdings Inc.4.1
    
    
    Indenture dated as of October 10, 2001 among Terra Capital,
Inc., certain guarantors and U.S. Bank National Association, as trustee,
including the form of
note, filed as Exhibit 4.1 to Terra Industries Form 8-K dated October 10,
2001, is incorporated herein by reference.4.2
    
    
    Amendment No. 1 to the Amended and Restated Credit Agreement
dated January 26, 2005, among Terra Capital, Inc., Mississippi Chemical
Corporation and Terra Nitrogen (U.K.) Limited (collectively Borrowers), Terra
Industries Inc., Terra Capital Holdings, Inc., the financial institutions from
time to time party thereto as issuing banks (Issuers) and Citicorp USA Inc.,
as administrative agent and collateral agent for Lenders and Issuers, filed as
Exhibit 4.3 to Terra Industries Form 10-Q for the fiscal quarter ended
September 30, 2005, is incorporated herein by reference.4.3
    
    
    Amendment No. 2 to the Amended and Restated Credit Agreement
dated July 29, 2005, among Terra Capital, Inc., Terra Mississippi Holdings
Corporation (f/k/a Mississippi Chemical Corporation) and Terra Nitrogen (U.K.)
Limited (collectively Borrowers), Terra Industries Inc., Terra Capital
Holdings, Inc., the Lenders party hereto and Citicorp USA Inc. as
administrative agent and collateral agent for the Lenders and Issuers, filed as
Exhibit 4.4 to Terra Industries Inc.s Form 10-Q for the fiscal quarter ended
September 30, 2005, is incorporated herein by reference.
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##### Table of Contents



4.4
    
    
    Amendment No. 1 to the Credit Agreement dated July 29, 2005
among Terra Nitrogen, Limited Partnership (Borrower), Terra Nitrogen Company,
L.P., the Lenders party hereto and Citicorp USA Inc. as administrative agent
and collateral agent for the Lenders and Issuers, filed as Exhibit 4.5 to Terra
Industries Form 10-Q for the quarter ended September 30, 2005, is incorporated
herein by reference.4.5
    
    
    Indenture dated May 21, 2003 between the Company, the
guarantors party hereto, and U.S. National Bank Association as Trustee, with
respect to the 11.5% Second Priority Senior Secured Notes due 2010 (including
the form of 11.5% Second Priority Senior Secured Notes), previously filed as
Exhibit 4.i to Amendment No. 1 to the Registrants Registration Statement of
Form S-4 filed on June 12, 2003 and incorporated by reference herein, filed as
Exhibit 4.6 to Terra Industries Form10-Q for the quarter ended June 30, 2003,
is incorporated herein by reference.4.6
    
    
    Articles Supplementary of Terra Industries Inc. relating to the
Retirement of the Companys Trust Shares, filed as Exhibit 3.1 to Terra
Industries Inc.s August 3, 2005 Form 8-K, are incorporated herein by
reference.4.7
    
    
    Articles Supplementary of Terra Industries Inc. relating to the
Reclassification of the Companys Series B Cumulative Redeemable Preferred
Shares, filed as Exhibit 3.2 to Terra Industries Inc.s August 3, 2005 Form
8-K, are incorporated herein by reference.4.8
    
    
    Registration Rights Agreement dated as of October 7, 2004,
among Terra and Citigroup Global Markets Inc., as Representative of the Initial
Purchasers, filed as Exhibit 4.6 to Terras Form S-3 dated January 4, 2005, is
incorporated herein by reference.4.9
    
    
    Registration Rights Agreement, dated as of August 6, 2004,
among Terra Industries Inc., Taurus Investments S.A. and the other shareholders
named therein, filed as Exhibit 99.1 to Terras Form 8-K dated August 16, 2004,
is incorporated herein by reference.4.10
    
    
    Registration Rights Agreement, dated as of December 16, 2004,
among Terra Industries Inc. and the initial purchasers named therein, filed as
Exhibit 4.7 to Terras Form S-3/A filed February 9, 2005, is incorporated by
reference.4.11
    
    
    Registration Rights Agreement, dated as of December 21, 2004,
among Terra Industries Inc., Värde Investment Partners, L.P., Perry Principals
Investments LLC, Citigroup Global Markets, Inc., filed as Exhibit 10.1 to
Terras Form 8-K dated December 27, 2004, is incorporated by reference.
 99




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##### Table of Contents



4.12
    
    
    Form of Indenture relating to the 4.25% Convertible
Subordinated Debentures, filed as Exhibit 4.7 to Terras Form S-3 dated January
4, 2005, is incorporated herein by reference.4.13
    
    
    Purchase Agreement, dated October 7, 2004, among Terra
Industries Inc. and the initial purchasers named therein relating to the sale
of Terras 4.25% Series A Cumulative Convertible Perpetual Preferred Shares,
filed as Exhibit 1 to Terras Form S-3 filed on January 4, 2005, is
incorporated by reference.4.14
    
    
    $150,000,000 Amended and Restated Credit Agreement dated as of
December 21, 2004, among Terra Capital, Inc., Terra Nitrogen (U.K.) Limited,
Mississippi Chemical Corporation, as Borrowers; Terra Industries Inc. and Terra
Capital Holdings, Inc., as Guarantors; and the Lenders and Issuers Party
thereto; and Citicorp USA, Inc., as Administrative Agent and Collateral Agent,
Citigroup Global Markets Inc. as Lead Arranger and Sole Book Runner, filed as
Exhibit 4.18 to the Terra Industries Form 10-K for the fiscal year ended
December 31, 2004, is incorporated herein by reference.4.15
    
    
    $50,000,000 Credit Agreement dated as of December 21, 2004
among Terra Nitrogen, Limited Partnership, as Borrower; Terra Nitrogen Company,
L.P., as a Guarantor; and the Lenders and Issuers Party thereto; and Citicorp
USA, Inc., as Administrative Agent and Collateral Agent; and Citigroup Global
Markets Inc., as Lead Arranger and Sole Book Runner, filed as Exhibit 4.19 to
the Terra Industries Form 10-K for the fiscal year ended December 31, 2004, is
incorporated herein by reference.10.1.1
    
    
    Resolution adopted by the Personnel Committee of the Board of Directors of
Terra Industries with respect to supplemental retirement benefits for certain
senior executive officers of Terra Industries, filed as Exhibit 10.4.2 to Terra
Industries Form 10-Q for the fiscal quarter ended March 31, 1991, is
incorporated herein by reference.10.1.2
    
    
    Excess Benefit Plan of Terra Industries, as amended effective as of January
1, 1992, filed as Exhibit 10.1.13 to Terra Industries Form 10-K for the year
ended December 31, 1992, is incorporated herein by reference.10.1.3
    
    
    Amendment to the Terra Industries Inc. Excess Benefit Plan, dated July 26,
2000, filed as Exhibit 10.1.6.a to Terra Industries Form 10-K for the year
ended December 31, 2000, is incorporated herein by reference.10.1.4
    
    
    Terra Industries Inc. Supplemental Deferred Compensation Plan effective as of
December 20, 1993 filed as Exhibit 10.1.9 to Terra Industries Form 10-K for
the year ended December 31, 1993, is incorporated herein by reference.
 100




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##### Table of Contents



10.1.5
    
    
    Amendment No. 1 to the Terra Industries Inc. Supplemental Deferred
Compensation Plan, filed as Exhibit 10.1.15 to Terra Industries Form 10-Q for
the quarter ended September 30, 1995, is incorporated herein by reference.10.1.5.a
    
    
    Amendment No. 2 to the Terra Industries Inc. Supplemental Deferred
Compensation Plan, dated July 26, 2000, filed as Exhibit 10.1.8.a to the Terra
Industries Form 10-K for the year ended December 31, 2000, is incorporated
herein by reference.10.1.5.b
    
    
    Amendment No. 3 to the Terra Industries Inc. Supplemental Deferred
Compensation Plan, dated March 29, 2002, filed as Exhibit 10.1.8.b. to the
Terra Industries Form 10-K for the year ended December 31, 2001, is
incorporated herein by reference.10.1.6
    
    
    1992 Stock Incentive Plan of Terra Industries Inc. filed as Exhibit 10.1.6 To
Terra Industries Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.10.1.7
    
    
    Revised Form of Incentive Stock Option Agreement of Terra Industries Inc.
under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.12 to Terra
Industries Form 10-K for the year ended December 31, 1996, is incorporated
herein by reference.10.1.8
    
    
    Revised Form of Nonqualified Stock Option Agreement of Terra Industries Inc.
under its 1992 Stock Incentive Plan, filed as Exhibit 10.1.13 to Terra
Industries Form 10-K for the year ended December 31, 1996, is incorporated
herein by reference.10.1.9
    
    
    1997 Stock Incentive Plan of Terra
Industries Inc., filed as Exhibit 10.1.14 to
Terra Industries Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference.10.1.9.a
    
    
    Amendment No. 1 dated as of February 20, 1997 to the 1997 Stock Incentive
Plan of Terra Industries Inc. filed as Exhibit 10.1.21 to Terra Industries
Form 10-K for the year ended December 31, 1999, is incorporated herein by
reference.10.1.10
    
    
    Form of Incentive Stock Option
Agreement of Terra Industries Inc. under its 1997
Stock Incentive Plan filed as Exhibit 10.1.13 to Terra Industries Form 10-K
for the year ended December 31, 1999, is incorporated herein by reference.10.1.11
    
    
    Form of Nonqualified Stock Option
Agreement of Terra Industries Inc. under its
1997 Stock Incentive Plan filed as Exhibit 10.1.14 to Terra Industries Form
10-K for the year ended December 31, 1999, is incorporated herein by reference.
 101




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##### Table of Contents



10.1.12
    
    
    Form of Performance Share Award of Terra Industries under its 1997 Stock
Incentive Plan, filed as Exhibit 10.1.15 to Terra Industries Form 10-K for the
year ended December 31, 1998, is incorporated herein by reference.10.1.13
    
    
    Form of Executive Retention Agreement for Other Executive Officers, filed as
Exhibit 10.1.19 to Terra Industries Form 10-K for the year ended December 31,
1998, is incorporated herein by reference.10.1.14
    
    
    Form of Non-Employee Director Stock Option Agreement under the 1997 Stock
Incentive Plan, filed as Exhibit 10.2.21 to Terra Industries Inc.s Form 10-Q
for the quarter ended September 30, 1999, is incorporated herein by reference.10.1.15
    
    
    Form of Performance Share Award of Terra Industries Inc. under its 1997
Stock Incentive Plan, dated February 16, 2000, filed as Exhibit 10.1.22 of the
Terra Industries Form 10-K for the year ended December 31, 2000, is
incorporated herein by reference.10.1.16
    
    
    Form of Non-Employee Director Performance Share Award of Terra Industries
Inc. under its 1997 Stock Incentive Plan, dated May 2, 2000, filed as Exhibit
10.1.23 to the Terra Industries Form 10-K for the year ended December 31,
2000, is incorporated herein by reference.10.1.17
    
    
    Terra Industries Inc. Stock Incentive Plan of 2002, filed as Exhibit 10.1.23
to the Terra Industries Form 10-K for the year ended December 31, 2001, is
incorporated herein by reference.10.1.18
    
    
    Form of Restricted Stock Award to Non-Employee Directors under the Terra
Industries Inc. Stock Incentive Plan of 2002, filed as Exhibit 10.1.23 to the
Terra Industries Form 10-K for the year ended December 31, 2002, is
incorporated herein by reference.10.1.19
    
    
    Form of Restricted Stock Award to Officers and Other Key Employees under the
Terra Industries Inc. Stock Incentive Plan of 2002, filed as Exhibit 10.1.24 to
the Terra Industries Form 10-K for the year ended December 31, 2002, is
incorporated herein by reference.10.1.20
    
    
    Revised Form of Restricted Stock Award of Terra Industries Inc. under its
Stock Incentive Plan of 2002, filed as Exhibit 10.9 to the Terra Industries
Form 10-Q for the fiscal quarter ended September 30, 2005, is incorporated
herein by reference.10.1.21
    
    
    Form of Long-Term Incentive Award for Time and Performance Based Shares of
Terra Industries Inc. under its Stock Incentive Plan of 2002, filed as Exhibit
10.10 to the Terra Industries 10-Q for the fiscal quarter ended September 30,
2005, is incorporated herein by reference.
 102




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##### Table of Contents



10.1.22
    
    
    Form of Long-Term Incentive Award for Phantom Time and Performance Based
Shares of Terra Industries Inc. under its Stock Incentive Plan of 2002, filed
as Exhibit 10.11 to the Terra Industries Form 10-Q for the fiscal quarter ended
September 30, 2005, is incorporated herein by reference.10.1.23*
    
    
    Form of Long-Term Incentive Award for Performance Shares of Terra
Industries Inc. under its Stock Incentive Plan of 2002.10.1.24*
    
    
    Form of Long-Term Incentive Award for Phantom Performance Shares of Terra
Industries Inc. under its Stock Incentive Plan of 2002.10.1.25*
    
    
    Terra Industries Inc. 2006 Officers and Key Employees Incentive Plan.10.1.26*
    
    
    Terra Industries Inc. Description of Compensatory Arrangements for 2006
Applicable to Named Executive Officers10.2
    
    
    First Amended and Restated Agreement of Limited Partnership of
Terra Nitrogen, Limited Partnership dated September 1, 2005,
filed as Exhibit
10.3 to the September 7, 2005 Terra Nitrogen Company, L.P.s Form 8-K, is
incorporated herein by reference.10.3
    
    
    First Amended and Restated Agreement of Limited Partnership of
Terra Nitrogen, Limited Partnership dated September 1, 2005, filed as Exhibit
10.3 to the September 7, 2005 Terra Nitrogen Company, L.P.s Form 8-K, is
incorporated herein by reference.10.4
    
    
    Amendment No. 1 to the General and Administrative Service
Agreement regarding Services by Terra Industries Inc. dated September 1, 2005,
filed as Exhibit 10.4 to the September 7, 2005 Terra Nitrogen Company, L.P.s
Form 8-K, is incorporated herein by reference.10.5
    
    
    Amendment No. 1 to the General and Administrative Services
Agreement regarding Services by Terra Nitrogen Corporation dated September 1,
2005, filed as Exhibit 10.5 to the September 7, 2005 Terra Nitrogen Company,
L.P.s Form 8-K, is incorporated herein by reference.10.6
    
    
    Reorganization Agreement among Terra Nitrogen Company, L.P.,
(the MLP), Terra Nitrogen, Limited Partnership (the OLP) and Terra Nitrogen
Corporation (the GP) dated September 1, 2005, filed as Exhibit 10.1 to the
September 7, 2005 Terra Nitrogen Company, L.P.s Form 8-K, is incorporated
herein by reference.10.7
    
    
    Conveyance, Assignment and Assumption Agreement by and between
Terra Nitrogen Corporation (the Company) and Terra Nitrogen GP Inc. (the New
GP) dated September 1, 2005, filed as Exhibit 10.2 to the September 7, 2005
Terra Nitrogen Company, L.P.s Form 8-K, is incorporated herein by reference.
 103




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10.8
    
    
    Sale of Business Agreement dated November 20, 1997 between ICI
Chemicals & Polymers Limited, Imperial Chemical Industries PLC, Terra Nitrogen
(U.K.) Limited (f/k/a Terra Industries Limited) and Terra Industries Inc. filed
as Exhibit 2 to Terra Industries Form 8-K/A dated December 31, 1997, is
incorporated herein by reference.10.9
    
    
    Ammonium Nitrate Agreement dated December 31, 1997 between
Terra International (Canada) Inc and ICI Chemicals & Polymers Limited filed as
Exhibit 99 to Terra Industries Form 8-K/A dated December 31, 1997, is
incorporated herein by reference.10.10
    
    
    Asset Sale and Purchase Agreement dated as of May 3, 1999 by
and between Terra Industries Inc. and Cenex/Land OLakes Agronomy Company,
filed as Exhibit 10.12 to Terra Industries Form 8-K dated May 3, 1999, is
incorporated herein by reference.10.11
    
    
    Asset Purchase and Methanol Exclusivity Agreement among Terra Industries
Inc., BMC Holdings Inc., and Methanex Methanol Company dated December 15, 2003,
filed as Exhibit 10.9 to Terra Industries From 10-K for the year ended
December 31, 2003, is incorporated herein by reference.10.11.1
    
    
    Services Agreement among Terra Industries Inc., BMC Holdings Inc., and
Methanex Methanol Company dated December 15, 2003 included as Schedule E to
Exhibit 10.9 herein, filed as Exhibit 10.91.1 to Terra Industries Form 10-K
for the year ended December 31, 2003, is incorporated herein by reference.10.12
    
    
    First Amendment to Asset Purchase and Methanol Exclusivity Agreement dated
February 20, 2004, filed as Exhibit 10.10 to Terra Industries Form 10-K for
the year ended December 31, 2003, is incorporated herein by reference.10.13
    
    
    Warrant Agreement dated December 21, 2004 among Terra
Industries Inc., Perry Principals Investments LLC, Citigroup Financial Products
Inc. and Värde Investment Partners, L.P., filed as Exhibit 10.11 to Terra
Industries Form 10-K for the year ended December 31, 2004, is incorporated
herein by reference.10.14
    
    
    Ammonium Nitrate Supply Agreement between Terra Mississippi Nitrogen, Inc.
and Orica USA Inc. dated July 21, 2005, filed as Exhibit 10.7 to Terra
Industries Inc.s Form 10-Q for the fiscal quarter ended September 30, 2005, is
incorporated herein by reference.10.15
    
    
    Conversion Agreement by and between Terra Mississippi Nitrogen, Inc. and
Orica USA Inc. dated July 21, 2005, filed as exhibit 10.8 to the Terra
Industries Inc. Form 10-Q for the fiscal quarter ended September 30, 2005, is
incorporated herein by reference.12.1*
    
    
    Ratio of Earnings to Financial Charges
 104




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21.1*
    
    
    Subsidiaries of Terra Industries Inc.23.1*
    
    
    Consent of Deloitte & Touche LLP31.1*
    
    
    Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32*
    
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.99*
    
    
    Financial statements for Point Lisas Nitrogen Limited for the
fiscal year ended December 31, 2005.
 
 *
    
    Filed herewith.
    
    Confidential treatment has been requested for portions of this document.Exhibits 10.1.1 through 10.1.26 are management contracts or compensatory plans or arrangements. 105




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##### Table of Contents



Signatures
  TERRA INDUSTRIES INC.Date: March 10, 2006
    
    By:
    
    /s/ FRANCIS G. MEYERFrancis G. MeyerSenior Vice President and Chief FinancialOfficer
  Signature
    
    
    
    Title/s/HENRY R. SLACK
    
    
    
    Chairman of the BoardHenry R. Slack/s/MICHAEL L. BENNETT
    
    
    
    Director, President and Chief Executive OfficerMichael L. Bennett
    
    
    
    (Principal Executive Officer)/s/FRANCIS G. MEYER
    
    
    
    Senior Vice President and Chief Financial OfficerFrancis G. Meyer
    
    
    
    (Principal Financial Officer and PrincipalAccounting Officer)/s/DAVID E. FISHER
    
    
    
    DirectorDavid E. Fisher/s/DOD A. FRASER
    
    
    
    DirectorDod A. Fraser/s/MARTHA O. HESSE
    
    
    
    DirectorMartha O. Hesse/s/PETER S. JANSON
    
    
    
    DirectorPeter S. JansonDate: March 10, 2006
 106




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##### Table of Contents



Index to Financial Statement Schedules
  I            Condensed Financial Information of Registrant, is included in Item 8 herein,
Footnote 22, Column 1, Parent.II           Valuation and Qualifying Accounts:
Years Ended December 31, 2005, 2004 and 2003
                                                      S-2
  S-1




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##### Table of Contents



Schedule II
 Terra Industries Inc.
Valuation and Qualifying Accounts  Years Ended December 31, 2004, 2003, and 2002  (in thousands)
 Less Write-Additions
    
    offs, andBalance at
    
    Charged to
    
    Transfers,
    
    BalanceBeginning of
    
    Costs and
    
    Net of
    
    at EndDescription
    
    Period
    
    Expenses
    
    Recoveries
    
    of PeriodYear Ended December 31, 2005:Allowance for Doubtful Accounts
    
    $
    262
    
    
    $
    824
    
    
    $
    (852
    )
    
    $
    234Year Ended December 31, 2004:Allowance for Doubtful Accounts
    
    $
    87
    
    
    $
    11
    
    
    $
    164
    
    
    $
    262Year Ended December 31, 2003:Allowance for Doubtful Accounts
    
    $
    135
    
    
    $
    1,510
    
    
    $
    (1,558
    )
    
    $
    87
 S-2