##### Table of Contents



Washington, D.C. 20549
 FORM 10-K
    (Mark One)x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    toCommission file number 1-8520   Terra Industries Inc.
 (Exact name of registrant as
    specified in its charter)
  Maryland(State or other jurisdiction of
    incorporation or organization)

52-1145429(I.R.S. Employer Identification No.)Terra Centre
    600 Fourth Street
    P. O. Box 6000

51102-6000(Zip Code)Sioux City, Iowa(Address of principal executive offices)

(712) 277-1340(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: None
   o x
  o x
  x o
  Regulation S-K Form 10-K Form 10-K. o




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Rule 12b-2 x o o o
  Rule 12b-2 o x
      Documents
    Incorporated by Reference




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Forward-Looking
    Information is Subject to Risk and Uncertainty
      
    changes in financial markets,
    general economic conditions within the agricultural industry,
    competitive factors and price changes (principally, sales prices
    of nitrogen and methanol products and natural gas costs),
    changes in product mix,
    changes in the seasonality of demand patterns,
    changes in weather conditions,
    changes in environmental and other government regulation,
    changes in agricultural regulations, and
    other risks detailed in the section entitled Risk
    Factors.




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##### 



Table of
    Contents
  Part IItem 1.


Business


1Item 1A.


Risk Factors


15Item 1B.


Unresolved Staff Comments


20Item 2.


Properties


20Item 3.


Legal Proceedings


22Item 4.


Submission of Matters to a Vote of Security
    Holders


22Executive Officers of Terra


23Part IIItem 5.


Market for Terras Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities


24Item 6.


Selected Financial Data


27Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


28Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.


Financial Statements and Supplementary Data


46Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosures


99Item 9A.


Controls and Procedures


101Item 9B.


Other Information


102Part IIIItem 10.


Directors and Executive Officers of Terra


103Item 11.


Executive Compensation


103Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


103Item 13.


Certain Relationships and Related Transactions


104Item 14.


Principal Accountant Fees and Services


104Part IVItem 15.


Exhibits and Financial Statement Schedules


105Signatures


115Index to Financial Statement Schedules


S-1Amendment No. 4 to the Amended and Restated Credit AgreementAmendment No. 5 to the Amended and Restated Credit AgreementAmendment No. 6 to the Amended and Restated Credit AgreementAmendment Number One to Employment Severance AgreementAmendment to Restricted Share AgreementAmendment to Performance Share Award AgreementAmendment to Terra Long Term Incentive AwardRatio of Earnings to Financial ChargesSubsidiariesConsent of Deloitte & Touche LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to Section 906




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##### Table of Contents



Part I  Item 1.
    Business         2007
    Overview
      GrowHow Joint
    Venture
   1




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Managements Discussion and Analysis of Financial
    Condition and Results of Operations Financial Statements and Supplementary Data Form 10-K.
  Sale of Beaumont
    Facilities
  Managements Discussion and
    Analysis of Financial Condition and Results of Operations Financial Statements and
    Supplementary Data Form 10-K.
  Business
    Strategy and Segments
           2




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Managements Discussion and
    Analysis of Financial Condition and Results of Operations Industry Segment Data Financial Statements and Supplementary Data Form 10-K.
  Nitrogen Business
    Segment
  Overview
            Anhydrous
    Ammonia
  per-pound-of-contained-nitrogen
 3




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Urea Ammonium
    Nitrate Solutions (UAN)
        Ammonium Nitrate
    (AN)
      Urea
   4




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Nitric
    Acid
    Dinitrogen
    Tetroxide
  2 4
  Marketing
        Distribution
   5




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##### Table of Contents



Transportation
        Nitrogen Industry
    Overview
   6




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year-by-year, per-acre-planted
    Demand
    Supply
        Outlook
   7




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2006-2007, 2007-2008 2008-2009,
    Methanol Business
    Segment
   8




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2007 Overview, Managements Discussion and Analysis of Financial
    Condition and Results of Operations, Financial Statements and Supplementary Data Form 10-K.
    Manufacturing
    Facilities
    Methanol Industry
    Overview
     9




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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, worldwide grain
    markets, and domestic demand (food, feed, biofuel); and
    Price fluctuations in natural gas, the principal raw material
    used to produce nitrogen fertilizer.      Raw
    Materials
       10




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Competition
    and/or
      Credit
  15-30 days,
  Environmental and
    Other Regulatory Matters
   11




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and/or
  and/or
       12




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clean-up clean-up and/or clean-up
          Employees
   13




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Available
    Information
       20549-0102
  (202) 551-8090
 (202) 777-1027
 E-mail:
   http://www.sec.gov.
  Form 10-K, Form 10-Q, Form 8-K
          51102-6000
 (712) 277-1340
  14




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##### Table of Contents



Item 1A.
    Risk
    Factors   Form 10-K,
  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.
  and/or
  Declines in the prices of our products may reduce profit
    margins.
    Our 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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Our products are global commodities and we face intense
    competition from other producers.
    Our business is subject to risks related to weather
    conditions.
    and/or
  Our risk measurement and hedging activities might not prevent
    losses.
     16




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We are substantially dependent on our manufacturing
    facilities, and any operational disruption could result in a
    reduction of sales volumes and could cause us to incur
    substantial expenditures.
    We may be adversely affected by environmental laws or
    regulations to which it is subject.
  and/or and/or
  and/or
 17




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We 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 our products.
  and/or
  We are subject to risks associated with international
    operations.
    Our business may be adversely impacted by our leverage, which
    may require the use of a substantial portion of excess cash flow
    to service debt and may limit our access to additional
    capital.
   18




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We may not be able to finance a change of control offer.
   19




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Item 1B.
    Unresolved
    Staff Comments     Item 2.
    Properties         North
    America
  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


775,00011


20,000


Courtright, Ontario


480,000


400,000





175,000


Total


3,595,000


4,380,000


775,000


280,000


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 is under contract to be sold in
    2009. 8.
    The Donaldsonville
    facilitys manufacturing capacity consists of a single
    ammonia plant. This plant was mothballed in January 2005 and is
    currently out of production. In February 2008, we announced that
    we intend to restart the facility in the third quarter 2008.9.
    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, 2007 were 53,000 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. The
    plant has the ability to produce both agricultural grade AN and
    industrial grade AN (IGAN). 20




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Beaumont, Texas.
  Donaldsonville, Louisiana.
  Port Neal, Iowa.
  Verdigris, Oklahoma.
  Woodward, Oklahoma.
  Yazoo City, Mississippi.
  Courtright, Ontario, Canada.
 21




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Joint
    Ventures
  Annual
    Capacity1Location

Ammonia2

AN3

Fertilizer3CompoundsInce,
    U.K.4


201,000


343,000


340,000Billingham,
    U.K.4


225,000


260,000Point Lisas, Trinidad and
    Tobago5


360,000





Total


786,000


603,000


340,000   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.4.
    Represents
    Terras 50% interest in capacity of facilities owned by
    GrowHow UK, a
    50/50 joint
    venture between Terra and Kemira GrowHow Oyj established in
    September 2007.5.
    Represents
    Terras 50% interest in the Point Lisas plant capacity.  Billingham, U.K. 99-year 50/50
  Ince, U.K.
  Trinidad. 50/50
  Item 3.
    Legal
    Proceedings     Item 4.
    Submission
    of Matters to a Vote of Security Holders    22




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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.
    Age 54.Joe A. Ewing

Vice President, Investor Relations and Human Resources 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 57.Brian K. Frantum

Vice President and Controller of Terra since July 2007;
    Assistant Controller from 2005 to July 2007; Senior Accountant
    of Stillwater Mining Company from August 2003 to July 2005 and
    Senior Accountant of KPMG from August 1999 to August 2003.
    Age 38.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.
    Age 49.Daniel D. Greenwell

Senior Vice President and Chief Financial Officer of Terra since
    July 2007; Vice President, Controller from April 2005 to July
    2007; Corporate Controller for Belden CDT Inc. from 2002 to
    2005; and Chief Financial Officer of Zoltek Companies Inc. from
    1996 to 2002. Age 45.John W. Huey

Vice President, General Counsel and Corporate Secretary of Terra
    since October 2006; Counsel with Shughart Thomson &
    Kilroy, P.C. from 2005-2006; Attorney with Butler
    Manufacturing Company from 1978 to 2004, Vice President of
    Administration from 1993 to 1998, Vice President, General
    Counsel and Corporate Secretary from 1998 to 2004. Age 60.Francis G. Meyer

Executive Vice President of Terra since July 2007; Senior Vice
    President and Chief Financial Officer of Terra from November
    1995 to July 2007. Age 55.Richard S. Sanders Jr.

Vice President, Manufacturing of Terra since August 2003; Plant
    Manager, Verdigris, Oklahoma manufacturing facility from 1995 to
    August 2003. Age 50. 23




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##### Table of Contents



Present positions
    and offices with the CompanyName

and
    principal occupations during the past five yearsDouglas M. Stone

Senior Vice President, Sales and Marketing since September 2007;
    Vice President, Corporate Development and Strategic Planning
    from 2006 to September 2007; Director, Industrial Sales from
    2003 to 2006; Manager, Methanol and Industrial Nitrogen from
    2000 to 2003. Age 42.    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. 312007Common Share Price:High

$
18.93


$
25.90


$
32.25


$
51.15Low


11.08



17.01



17.69



27.132006Common Share Price:High

$
7.40


$
9.19


$
7.99


$
12.40Low


5.45



5.93



6.07



7.80      24




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Performance
    Graph
    
    Indexed
    Annual Returns on Hypothetical $100 InvestmentYear Ending
    December 31,Company
    Name/Index


2003



2004



2005



2006



2007Terra Industries Inc.


$
216.34



$
580.39



$
366.01



$
783.01



$
3,121.57S&P 500 Stock Index


$
128.68



$
142.69



$
149.70



$
173.34



$
182.86Industry Peer Group


$
140.27



$
231.46



$
222.24



$
321.19



$
858.19  25




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Company
    Purchases of Equity Securities
        Total Number ofTotal





Shares Purchased as


Maximum Number ofMonth of

Number of


Average


Part of Publicly


Shares that May Yet BeShare

Shares


Price Paid


Announced Plans or


Purchased Under thePurchases

Purchased


per Share


Programs


Plans or ProgramsMay 2007


650,000


$
18.79



3,325,100



6,191,717June 2007


350,000



19.97



3,675,100



5,841,717July 2007


200,000



25.33



3,875,100



5,641,717August 2007


2,800,000



22.55



6,675,100



2,841,717    26




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##### Table of Contents



Item 6.
    Selected
    Financial Data   Financial
    Summary
  (in thousands, except per share
    data)

2007(1)


2006


2005


2004(2)


2003(3)Income Statement Data:Revenues

$
2,360,066


$
1,836,722


$
1,939,065


$
1,509,110


$
1,351,055Income (loss) from operations


420,364



66,280



113,696



134,746



(23,560
)Net income (loss)


201,896



4,213



22,087



67,596



(12,481
)Preferred share dividends


(5,100
)


(5,100
)


(5,134
)


(1,029
)


Basic income per share


2.17



(0.01
)


0.18



0.87



(0.16
)Diluted income per share

$
1.90


$
(0.01
)

$
0.18


$
0.85


$
(0.16
)Balance Sheet Data:Total assets

$
1,888,327


$
1,572,713


$
1,523,625


$
1,685,508


$
1,125,062Long-term debt
    and capital leases

$
330,000


$
331,300


$
331,300


$
435,238


$
402,206Preferred stock

$
115,800


$
115,800


$
115,800


$
133,069


$
    (1)
    The 2007 selected financial data includes (i) the effects
    of contributing our Terra Nitrogen U.K. operations into the
    GrowHow UK Limited joint venture on September 14, 2007
    (ii) a $39.0 million impairment charge for our
    Beaumont, Texas assets and (iii) a $38.8 million loss
    on the early retirement of debt associated with the debt
    refinancing that we completed during 2007.(2)
    The 2004 selected financial data includes the effects of the
    December 21, 2004 acquisition of Mississippi Chemical
    Corporation 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. 27




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations   Overview
  Financial Statements and
    Supplementary Data
  Introduction
    
    factors which affect our business,
    our earnings and costs in the periods presented,
    changes in earnings and costs between periods,
    sources of earnings,
    impact of these factors on our overall financial condition,
    expected future expenditures for capital projects, and
    expected sources of cash for future capital expenditures.    
    First, we discuss our strategy.
    We then describe the business environment in which we operate
    including factors that affect our operating results.
    We highlight significant events that are important to
    understanding our results of operations and financial condition.
    We then review our results of operations beginning with an
    overview of our total company results, followed by a more
    detailed review of those results by operating segment.
    We review our financial condition addressing our sources and
    uses of cash, security ratings, capital resources, capital
    requirements, commitments, and off-balance sheet arrangements.
    Finally, we discuss our critical accounting policies and
    recently issued accounting standards. The critical accounting
    policies are those that are most important to both the portrayal
    of our financial condition and results of operations and require
    managements most difficult, subjective or complex judgment.  Business
    Strategies
     28




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
    Manage our North American and U.K. assets to reap the highest
    returns through the cycle. We accomplish this by maintaining our
    facilities to be safe and reliable, cultivating relationships
    with natural customers who due to their physical location can
    receive our product most economically, and closely managing the
    supply chain to keep storage, transportation and other costs
    down.
    Continuously look for opportunities to expand outside our
    current geography with gas-advantaged projects. While North
    American gas markets are at less of a disadvantage than they
    were a few years ago, we still believe it is prudent to
    diversify our natural gas sourcing so that a greater share of
    our total needs is sourced outside of North America.
    Develop higher-return North American product markets, such as
    that for UAN, our primary nitrogen fertilizer product and
    TerraCair, our diesel exhaust treatment product.
    Commit resources to building our industrial and environmental
    businesses.    Recent
    Business Environment
    Demand
    Supply
   29




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##### Table of Contents



Natural Gas
    Costs
      Strategy
    Effectiveness
    
    Achieve record production, earnings, cash flows and returns for
    Terra and our stockholders.
    Refinance long-term debt of $330 million for 10 years
    with a fixed interest rate of 7.0%, saving us approximately
    $18 million per year
    Finalize plans to sell our Beaumont facility, consisting
    primarily of methanol production assets, focusing us more
    completely on our core business of nitrogen production.
    Contribute our U.K. assets to a joint venture that we believe
    will result in higher returns in that mature market.
    Fully fund our pension plans.
    Repurchase 6.7 million common shares as part of our share
    repurchase program.
    End the year with cash balances of $698 million, which
    included customer prepayments of $299 million   30




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##### Table of Contents



Results
    of Operations
  Consolidated
    Results
      Consolidated
    Performance Summary
  (in thousands)

2007

2006

2005Revenues:Nitrogen products

$
2,293,139


$
1,793,759


$
1,899,236Methanol


55,342



34,955



31,347Other revenues


11,585



8,008



8,482Total revenues

$
2,360,066


$
1,836,722


$
1,939,065Operating Income (loss):Nitrogen products

$
447,420


$
63,275


$
131,474Methanol


(23,374
)


4,952



(14,089
)Other expensenet


(3,682
)


(1,947
)


(3,689
)Total operating income

$
420,364


$
66,280


$
113,696   Nitrogen Volumes and
    Prices

2007

2006

2005(quantities in

Sales

Average

Sales

Average

Sales

Averagethousands of tons)

Volumes

Unit Price*

Volumes

Unit Price*

Volumes

Unit Price*Ammonia


1,985


$
333



1,897


$
315



1,898


$
303UAN


4,652


$
198



3,894


$
140



4,368


$
151Urea


106


$
313



147


$
262



151


$
262Ammonium nitrate


1,348


$
246



1,116


$
224



1,581


$
202    31




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##### Table of Contents



Results
    of Operations2007 Compared with 2006
  Nitrogen
        Methanol
      Other Operating
    ActivitiesNet
    Selling, General
    and Administrative Costs
    Equity Earnings
    of Unconsolidated AffiliatesGrowHow
     32




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Interest
    Income
    Interest Expense
    and Loss on Early Retirement of Debt
    Income
    Taxes
   33




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##### Table of Contents



Results
    of Operations2006 Compared with 2005
    Nitrogen
    Products
        Methanol
      Other Operating
    ActivitiesNet
   34




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Interest
    ExpenseNet
    Income
    Taxes
   35




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##### Table of Contents



Liquidity
    and Capital Resources
  Summary
    Cash
    Flows
    Total cash provided by (used in):

2007


2006


2005Operating activities

$
747.9


$
159.3


$
10.9Investing activities


(94.5
)


(48.8
)


(22.3
)Financing activities


(133.6
)


(19.7
)


(144.6
)Effect of exchange rate changes on cash


(0.6
)


1.9



8.6Increase (decrease) in cash and cash equivalents

$
519.2


$
92.7


$
(147.4
)   Operating
    Activities
    Investing
    Activities
    Financing
    Activities
    7 8 1 2
 36




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Long-term Debt
    and Revolving Credit Facilities
        Item 7A. Quantitative and
    Qualitative Disclosures about Market Risk.
    Preferred
    Shares
   37




---



##### Table of Contents



Share
    Repurchases
        Capital
    Expenditures
        Off-Balance
    Sheet Transactions
       38




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##### Table of Contents



Contractual
    Obligations
    (in millions)







Payments Due InTotal


2008


2009-2010


2011-2012


ThereafterLong-term debt

$
330.0


$



$



$



$
330.0Interest expense on long-term debt


209.8



23.1



46.2



46.2



94.3Operating leases


144.0



34.7



60.8



42.8



5.7Ammonia purchase
    obligations(1)


955.6



86.8



173.8



173.8



521.2Natural gas and other purchase obligations


261.9



198.0



33.0



28.5



2.4Total(2)

$
1,901.3


$
342.6


$
313.8


$
291.3


$
953.6   (1)
    We have a contractual obligation to purchase one-half of the
    ammonia produced by Point Lisas. 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 2007 average price
    paid. This contract expires in October 2018.(2)
    The total contractual obligations and commitments do not include
    a FIN 48 liability of $33.5 million. (See Note 20)    and/or Financial Statements and
    Supplementary Data,
  Environmental,
    Health and Safety
     39




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##### Table of Contents



Minority
    Interest
    Form 10-K Form 10-Q.
    Application
    of Critical Accounting Policies and Estimates
  Form 10-K
  Derivative and
    Financial Instruments
   40




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Revenue
    Recognition
    Inventory
    Valuation
  first-in,
  Pension Assets
    and Liabilities
   41




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##### Table of Contents



Deferred Income
    Taxes
    Impairment of
    Long-Lived Assets
      Recently Issued
    Accounting Standards
  Fair Value Measurements,
  The Fair
    Value Option for Financial Assets and Financial Liabilities
  Business Combinations,
 42




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##### Table of Contents



Noncontrolling Interests in Consolidated Financial
    Statements,
 43




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##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   Risk
    Management and Financial Instruments
  Financial Statements and Supplementary Data,
      Foreign Currency
    Fluctuations
    Natural Gas
    PricesNorth American Operations
   44




---



##### Table of Contents



Natural Gas
    PricesTrinidad Operation
    Nitrogen
    Prices
    Interest Rate
    Fluctuations
    Interest
    Rate Sensitivity
  (in millions)

Expected Maturity Date2008

2009

2010

2011

2012


Thereafter

Total


Fair ValueLong-Term DebtSenior Unsecured Notes
    fixed rate of 7% ($US)

$


$


$


$


$



$
330.0

$
330.0


$
325.1Short-Term BorrowingsRevolving credit facility notional amount ($US)

$


$


$


$


$



$


$



$
150.0Variable interest rate, LIBOR based














6.35
%





6.35
%


TNLP revolving credit facility, notional amount ($US)

$


$





$


$



$


$



$
50.0Variable interest rate, LIBOR based














6.35
%





6.35
%


  45




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data   Report
    of Independent Registered Public Accounting Firm
          Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans
  Internal ControlIntegrated Framework
  
     46




---



##### Table of Contents



Consolidated
    Statements of Financial Position
  At December 31,(in thousands)

2007


2006AssetsCash and cash equivalents

$
698,238


$
179,017Accounts receivable, less allowance for
    doubtful accounts of $264 and $332


171,228



198,791Inventories


131,525



211,017Other current assets


28,919



31,680Total current assets


1,029,910



620,505Property, plant and equipment, net


431,940



720,897Deferred plant turnaround costs


42,190



44,558Equity investments


351,986



164,099Intangible assets


3,763



5,645Other assets


28,538



17,009Total assets

$
1,888,327


$
1,572,713LiabilitiesAccounts payable

$
110,705


$
156,493Customer prepayments


299,351



77,091Accrued and other current liabilities


107,630



75,863Total current liabilities


517,686



309,447Long-term debt and capital lease obligations


330,000



331,300Deferred taxes


99,854



63,851Pension liabilities


9,268



134,444Other liabilities


85,615



40,188Minority interest


109,729



94,687Total liabilities and minority interest


1,152,152



973,917Commitments and contingencies(Note 10)






Preferred Sharesliquidation value of
    $120,000


115,800



115,800Common Stockholders EquityCapital stockCommon Shares, authorized 133,500 shares;
    89,587 and 92,630 shares outstanding


142,170



144,976Paid-in capital


618,874



693,896Accumulated other comprehensive loss


(45,328
)


(63,739
)Accumulated deficit


(95,341
)


(292,137
)Total stockholders equity


620,375



482,996Total liabilities and stockholders equity

$
1,888,327


$
1,572,713  See accompanying Notes to the
    Consolidated Financial Statements
 47




---



##### Table of Contents



Consolidated
    Statements of Operations
  Year Ended December 31,(in thousands, except per-share
    amounts)

2007


2006


2005Revenues

$
2,348,481


$
1,828,714


$
1,930,583Other income, net


11,585



8,008



8,482Total Revenue


2,360,066



1,836,722



1,939,065Cost and ExpensesCost of sales


1,824,976



1,732,222



1,800,236Selling, general and administrative expense


91,971



55,233



46,548Equity in earnings of unconsolidated affiliates


(16,209
)


(17,013
)


(21,415
)Impairment of long-lived assets


38,964







1,939,702



1,770,442



1,825,369Income from operations


420,364



66,280



113,696Interest income


17,262



6,457



8,086Interest expense


(29,100
)


(47,991
)


(53,478
)Loss on early retirement of debt


(38,836
)






(27,193
)Change in fair value of warrant liability










8,860Income before income taxes and minority interest


369,690



24,746



49,971Income tax expense


(114,795
)


(9,247
)


(14,217
)Minority interest


(50,281
)


(11,286
)


(13,667
)Equity earnings of unconsolidated affiliates


(2,718
)






Net income


201,896



4,213



22,087Preferred share dividends


(5,100
)


(5,100
)


(5,134
)Income (Loss) Available to Common Stockholders

$
196,796


$
(887
)

$
16,953Basic and Diluted Income (Loss) Per Share:Basic

$
2.17


$
(0.01
)

$
0.18Diluted


1.90



(0.01
)


0.18Basic and Diluted Weighted Average Shares Outstanding:Basic


90,575



92,676



92,537Diluted


106,454



92,676



94,935   See accompanying Notes to the
    Consolidated Financial Statements
 48




---



##### Table of Contents



Consolidated
    Statements of Cash Flows
  Year Ended December 31,(in thousands)

2007


2006


2005Operating ActivitiesNet income

$
201,896


$
4,213


$
22,087Adjustments to reconcile net income to net cash flows from
    operating activities:Depreciation of property, plant and equipment and amortization
    of deferred plant turnaround costs


100,816



108,069



110,342Impairment of assets


38,964







Deferred income taxes


90,879



3,777



13,538Non-cash loss on derivatives


1,300



933



4,091Minority interest in earnings


50,281



11,286



13,667Distributions in excess of (less than) equity earnings


8,536



9,202



(6,941
)Equity earnings of GrowHow UK Limited (Note 7)


2,718







Share-based compensation


28,102



7,010



2,431Amortization of intangible and other assets


6,954



6,878



5,243Non-cash loss on early retirement of debt


4,662







22,543Change in fair value of warrant liability










(8,860
)Term loan discount accretion










1,773Change in operating assets and liabilities, net of acquisition:Accounts receivable


(38,085
)


16,135



(59,591
)Inventories


45,771



(14,003
)


(45,579
)Accounts payable and customer prepayments


218,019



37,960



(60,136
)Other assets and liabilities, net


(12,948
)


(32,200
)


(3,733
)Net Cash Flows from Operating Activities


747,865



159,260



10,875Investing ActivitiesPurchase of property, plant and equipment


(31,721
)


(50,856
)


(30,820
)Plant turnaround expenditures


(50,655
)


(35,281
)


(22,331
)Cash retained by GrowHow UK Limited


(16,788
)






Distributions received from unconsolidated affiliates


4,705



9,660



31,901Changes in restricted cash






8,595



(8,595
)Proceeds from the sale of property, plant and equipment


24



19,100



7,560Net Cash Flows used in Investing Activities


(94,435
)


(48,782
)


(22,285
)Financing ActivitiesIssuance of debt


330,000







Payments under borrowing arrangements


(331,300
)


(37
)


(125,167
)Payments for debt issuance costs


(6,444
)






Preferred share dividends paid


(5,100
)


(5,100
)


(5,950
)Common stock issuances and vestings


(1,424
)


363



142Payments under share repurchase program


(87,426
)


(18,796
)


Distributions to minority interests


(35,239
)


(8,861
)


(13,607
)Changes in overdraft protection arrangements






11,443



Excess tax benefits from equity compensation plans


3,317



1,255



Net Cash Flows used in Financing Activities


(133,616
)


(19,733
)


(144,582
)Effect of Exchange Rate Changes on Cash


(593
)


1,906



8,560Increase (Decrease) in Cash and Cash Equivalents


519,221



92,651



(147,432
)Cash and Cash Equivalents at Beginning of Year


179,017



86,366



233,798Cash and Cash Equivalents at End of Year

$
698,238


$
179,017


$
86,366 49




---



##### Table of Contents



Consolidated
    Statements of Cash Flows (continued)
  Year Ended December 31,(in thousands)

2007


2006


2005Supplemental cash flow information:Interest paid

$
23,200


$
42,150


$
42,110Income tax refunds received


558







11,933Income taxes paid


22,697



1,930



1,526Supplemental schedule of non-cash investing and
    financing activities:Conversion of Series B preferred stock to common
    stock:Common Stock

$



$



$
2,066Paid in Capital

$



$



$
14,646Conversion of warrants to common stock

$
568


$



$
Terra Nitrogen U.K. contributed for equity investment

$
213,235


$



$
Stock Incentive Plan

$



$
4,218


$
5,020Supplemental schedule of unconsolidated affiliates
    distributions received:Equity in earnings of unconsolidated affiliates

$
16,209


$
17,013


$
21,415Distribution in excess of (less than) equity earnings

$
8,536



9,202



(6,941
)Distributions received from unconsolidated affiliates

$
4,705



9,660



31,901Total cash distributions received from unconsolidated affiliates

$
29,450


$
35,875


$
46,375   See accompanying Notes to the
    Consolidated Financial Statements
 50




---



##### 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, 2005


92,994



144,531



681,639



(55,994
)


(2,568
)


(308,203
)


459,405Comprehensive Income (Loss):Net income






















22,807



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















142Nonvested stock


72



358



4,043







(4,798
)






(397
)Share-based compensation


















1,997







1,997December 31, 2005


95,171



146,994



712,671



(70,143
)


(5,369
)


(291,250
)


492,903Comprehensive Income (Loss):Net income






















4,213



4,213


$
4,213Foreign currency translation adjustments














33,618











33,618



33,618Change in fair value of derivatives, net of taxes of $3,513














(6,727
)










(6,727
)


(6,727
)Pension and post-retirement benefit liabilities, net of taxes of
    $4,289














(11,850
)










(11,850
)


(11,850
)Comprehensive income





























$
19,254Adoption of SFAS 158, net of taxes of $4,650














(8,637
)










(8,637
)Preferred share dividends






















(5,100
)


(5,100
)Exercise of stock options


95



95



268















363Nonvested stock


39



562



(714
)














(152
)Shares purchased and retired under share repurchase program


(2,675
)


(2,675
)


(16,121
)














(18,796
)Reclassification for adoption of SFAS 123 R










(5,369
)






5,369







Share-based compensation










3,161















3,161December 31, 2006


92,630



144,976



693,896



(63,739
)






(292,137
)


482,996   51




---



##### Table of Contents



Consolidated
    Statements of Changes in Common Stockholders Equity
    (continued)
  AccumulatedOtherCommon Stock


Paid-In


Comprehensive


Accumulated





Comprehensive(in thousands)

Shares


Amount


Capital


Loss


Deficit


Total


IncomeComprehensive Income (Loss):Net income


















201,896



201,896


$
201,896Foreign currency translation adjustments














(46,882
)






(46,882
)


(46,882
)Change in fair value of derivatives, net of taxes of $3,351














6,224







6,224



6,224Pension and post-retirement benefit liabilities, net of taxes of
    $8,599














15,797







15,797



15,797Transfer of U.K. pension plan to GrowHow UK Limited














43,272







43,272Comprehensive income

























$
177,035Preferred share dividends


















(5,100
)


(5,100
)Exercise of stock options


336



336



786











1,122Net vested stock


53



290



(2,836
)










(2,546
)Net conversion of warrants


568



568



(568
)










Shares purchased and retired under share repurchase program


(4,000
)


(4,000
)


(83,426
)










(87,426
)Share-based compensation










11,022











11,022December 31, 2007


89,587


$
142,170


$
618,874


$
(45,328
)

$
(95,341
)

$
620,375   See accompanying Notes to the
    Consolidated Financial Statements
 52




---



##### 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:
  Inventories: first-in,
      Property, plant and equipment:
  Plant turnaround costs:
  Equity investments:
   53




---



##### Table of Contents



Intangible assetscustomer relationships:
    Debt issuance costs:
  Impairment of long-lived assets:
    Derivatives and financial instruments:
  Revenue recognition:
   54




---



##### Table of Contents



Cost of sales and hedging transactions:
  Share-based compensation: Share-Based Payment, Accounting for Stock Issued to Employees
  Per share results:
  Estimates:
  Recently issued accounting standards: Fair Value
    Measurements,
  The Fair
    Value Option for Financial Assets and Financial Liabilities
  Business Combinations,
 55




---



##### Table of Contents



Noncontrolling Interests in Consolidated Financial
    Statements,
  2. Earnings Per
    Share
   56




---



##### Table of Contents



(in thousands, except per-share
    data)

2007


2006


2005Basic income per share computation:Net income

$
201,896


$
4,213


$
22,087Less: Preferred share dividends


(5,100
)


(5,100
)


(5,134
)Income (loss) available to common shareholders


196,796



(887
)


16,953Weighted average shares outstanding


90,575



92,676



92,537Basic income (loss) per common share

$
2.17


$
(0.01
)

$
0.18Diluted income (loss) per share computation:Income (loss) available to common shareholders

$
196,796


$
(887
)

$
16,953Add: Preferred share dividends


5,100







Income (loss) available to common shareholders and
    assumed conversions

$
201,896


$
(887
)

$
16,953Weighted average shares outstanding


90,575



92,676



92,537Add incremental shares from assumed conversions:Preferred Shares


12,048







1,048Nonvested stock


823







577Common stock options


111







179Common stock warrants


2,897







594Dilutive potential common shares


106,454



92,676



94,935Diluted income (loss) per potential common share

$
1.90


$
(0.01
)

$
0.18       3. Derivative
    Financial Instruments
        1.
    The item to be hedged must expose us to currency, interest or
    price risk. 57




---



##### Table of Contents



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.          Other


OtherCurrent


Current


Deferred


Net Asset(in thousands)

Assets


Liabilities


Taxes


(Liability)December 31, 2007

$
4,798


$
(14,733
)

$
3,022


$
(6,913
)December 31, 2006


4,731



(22,591
)


6,373



(11,487
)      58




---



##### Table of Contents



Twelve Months EndedDecember 31,2007


2006(in thousands)

Gross


Net of tax


Gross


Net of taxBeginning accumulated loss

$
(18,210
)

$
(11,836
)

$
(7,886
)

$
(5,109
)Reclassification into earnings


53,665



34,882



48,857



31,693Net increase (decrease) in market value


(44,090
)


(28,658
)


(59,181
)


(38,420
)Ending accumulated loss

$
(8,635
)

$
(5,612
)

$
(18,210
)

$
(11,836
)       4.
    Inventories
    (in thousands)

2007


2006Raw materials

$
17,765


$
26,583Supplies


35,909



54,542Finished goods


77,851



129,892Total

$
131,525


$
211,017    59




---



##### Table of Contents



5. Property,
    Plant and Equipment, Net
    (in thousands)

2007


2006Land

$
8,561


$
17,096Buildings and improvements


58,909



65,573Plant and equipment


1,081,088



1,423,302Construction in progress


7,734



24,3721,156,292



1,530,343Less accumulated depreciation and amortization


(724,352
)


(809,446
)Total

$
431,940


$
720,897     6. Impairment of
    Beaumont Assets
    7. Equity
    Investments
  Trinidad and
    United States
  2
 60




---



##### Table of Contents



(in thousands)

2007


2006


2005Condensed income statement information:Net sales

$
151,723


$
171,906


$
181,818Net income

$
38,411


$
44,751


$
62,723Terras equity in earnings
    of unconsolidated affiliates

$
16,209


$
17,013


$
31,362   (in thousands)

2007


2006Condensed balance sheet information:Current assets

$
45,110


$
59,553Long-lived assets


191,394



185,621Total assets

$
236,504


$
245,174Current liabilities

$
25,905


$
22,311Long-term liabilities


9,511



Equity


201,088



222,863Total liabilities and equity

$
236,504


$
245,174   step-up
      United
    Kingdom
     61




---



##### Table of Contents



(in thousands)

2007Condensed income statement information:Net sales

$
233,103Net income

$
4,253Terras equity in earnings
    of unconsolidated affiliates

$
(2,718
)Condensed balance sheet information:Current assets

$
281,021Long-lived assets


269,116Total assets

$
550,137Current liabilities

$
190,371Long-term liabilities


174,405Equity


185,361Total liabilities and equity

$
550,137          62




---



##### Table of Contents



8. Revolving
    Credit Facility, Long-Term Debt and Capital Lease
    Obligations
    (in thousands)

2007


2006Unsecured Senior Notes, 7.0%due 2017

$
330,000


$
Senior Secured Notes, 12.875%,due 2008






200,000Second Priority Senior Secured Notes, 11.5%,due 2010






131,300Other






1Total long-term debtand capital lease obligations


330,000



331,301Less current maturities






1Total long-term debtand capital lease obligations

$
330,000


$
331,300          63




---



##### Table of Contents



9. Accrued and
    Other Current Liabilities
    (in thousands)

2007


2006Payroll and benefit costs

$
24,471


$
10,519Income taxes payable


15,620



4,378Derivative contracts


14,732



23,222Current accrued phantom shares


10,074



Accrued interest


9,755



6,740Deferred revenue


5,990



5,057Other


26,988



25,947Total

$
107,630


$
75,863   10. Other
    Liabilities
    (in thousands)

2007


2006Unrecognized tax benefit (See note 20)

$
33,560


$
Long-term medical and closed facilities reserve


24,368



23,206Accrued phantom shares


9,231



3,379Long-term deferred revenue


11,624



5,231Other


6,832



8,372Total

$
85,615


$
40,188  64




---



##### Table of Contents



11. Commitments
    and Contingencies
      (in thousands)2008

$
34,6922009


31,8022010


29,0202011


25,1132012


17,6772013 and thereafter


5,659Net minimum lease payments

$
143,963       (in thousands)2008

$
284,7982009


103,9432010


102,9422011


103,5402012


98,8072013 and thereafter


523,574Total obligations

$
1,217,604        65




---



##### Table of Contents



Accounting for
    Conditional Asset Retirement Obligations
   66




---



##### Table of Contents



12. Preferred
    Shares
    2007


2006Number


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


$
115,800     13. Common
    Stockholders Equity
        (in thousands)

2007


2006January 1 warrants outstanding

$
4,000


$
4,000Exercised


712



December 31 warrants outstanding

$
3,288


$
4,000    67




---



##### Table of Contents



Number of

Average Price

Total Cost(in thousands, except average

Shares

of Shares

of Sharesprice of shares repurchased)

Repurchased

Repurchased

RepurchasedMay 2007


650

$
18.79

$
12,220June 2007


350


19.97


6,991July 2007


200


25.33


5,067August 2007


2,800


22.55


63,1484,000

$
21.86

$
87,426   14. Share-Based
    Compensation
           68




---



##### Table of Contents



Year Ended December 31,(in thousands, except per-share
    amounts)

2005Net income available to common shareholders

$
16,953Add: Share based employee compensation expense included in
    reported net income, net of related tax effects


1,218Deduct: Share based employee compensation expense determined
    under fair value based method for all awards,
    net of related tax effects


(1,218
)Pro forma net income available to common shareholders

$
16,953Income per share:Basicas reported

$
0.18Basicpro forma

$
0.18Dilutedas reported

$
0.18Dilutedpro forma

$
0.18     Year Ended December 31,(in thousands)

2007

2006

2005Compensation cost charged to SG&A expense

$
31,452

$
7,010

$
2,431Total compensation cost charged to income

$
31,452

$
7,010

$
2,431Income tax benefit

$
11,008

$
2,454

$
851  69




---



##### Table of Contents



Stock
    Options
      WeightedAverageExercise(options in thousands)

Number


PriceOutstandingbeginning of period


458


$
4.78Exercised


(447
)


4.82Outstandingend of period


11


$
3.17       (options in thousands)Options Outstanding


Options ExercisableWeighted


Weighted





WeightedAverage


Average





AverageExercise


Number


Remaining


Exercise


Number


ExercisePrices


Outstanding


Life (years)


Price


Exercisable


Price$
1.43



8



0.6


$
1.43



8


$
1.437.81



3



1.4



7.81



3



7.81Total






11



1.2


$
3.17



11


$
3.17     Nonvested Stock
    Shares and Phantom Share Awards
     70




---



##### Table of Contents



WeightedAverageGrant-Date(in thousands, except fair values)

Shares


Fair ValueOutstanding at January 1, 2007


1,376


$
7.23Granted


307



21.10Vested


(391
)


9.51Outstanding at December 31, 2007


1,292


$
11.57       15. Financial
    Instruments and Concentrations of Credit Risk
    2007


2006Carrying


Fair


Carrying


Fair(in millions)

Amount


Value


Amount


ValueFinancial AssetsCash and cash equivalents

$
698.2


$
698.2


$
179.0


$
179.0Receivables


171.2



171.2



198.8



198.8Equity investments


352.0



352.0



164.1



164.1Financial liabilitiesLong-term debt


330.0



325.1



331.3



321.8Preferred shares


115.8



580.9



115.8



161.7     
    Cash and receivables: The carrying amounts
    approximate fair value because of the short maturity of those
    instruments. 71




---



##### Table of Contents




    Equity 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.
    Long-term debt: The fair value of our long-term debt is
    estimated by discounting expected cash flows at the rates
    currently offered for debt of the same remaining maturities.
    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:
 72




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##### Table of Contents



16. Retirement
    Benefit Plans
  Employers Accounting for Defined
    Benefit Pension and Other Postretirement Plans
    (SFAS 158)
    (in thousands)

2007


2006


2005Service cost

$
3,113


$
2,991


$
2,976Interest cost


17,648



24,926



23,550Expected return on plan assets


(18,063
)


(24,224
)


(21,575
)Amortization of prior service cost


(36
)


(36
)


(28
)Amortization of actuarial loss


1,871



5,636



5,632Termination charge






492



1,165Pension expense

$
4,533


$
9,785


$
11,720    73




---



##### Table of Contents



(in thousands)

U.S.


Canada


TotalChange in Projected Benefit Obligation Present ValueProjected benefit obligationbeginning of year

$
260,597


$
44,040


$
304,637Service cost


1,809



1,304



3,113Interest cost


15,159



2,489



17,648Actuarial (gain) loss


(9,169
)


(2,644
)


(11,813
)Foreign currency exchange rate changes






8,171



8,171Benefits paid


(14,950
)


(1,189
)


(16,139
)Projected benefit obligationend of year


253,446



52,171



305,617Change in Plan AssetsFair value plan assetsbeginning of year


191,463



35,940



227,403Actual return on plan assets


25,347



2,614



27,961Foreign currency exchange rate changes






7,824



7,824Employer contribution


48,459



10,811



59,270Benefits paid


(14,950
)


(1,189
)


(16,139
)Fair value plan assetsend of year


250,319



56,000



306,319Funded Status


(3,127
)


3,829



702Unrecognized net actuarial loss


14,933



9,265



24,198Unrecognized prior service cost


(282
)






(282
)Prepaid benefit cost

$
11,524


$
13,094


$
24,618  74




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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

$
267,100


$
38,637


$
148,774


$
454,511Service cost


1,976



1,105







2,991Interest cost


14,972



2,058



7,896



24,926Actuarial (gain) loss


(8,247
)


3,109



23,575



18,437Termination charge










492



492Foreign currency exchange rate changes






36



22,563



22,599Benefits paid


(15,204
)


(905
)


(3,686
)


(19,795
)Projected benefit obligationend of year


260,597



44,040



199,614



504,161Change in Plan AssetsFair value plan assetsbeginning of year


180,574



31,042



103,691



315,307Actual return on plan assets


18,239



2,415



8,565



29,219Foreign currency exchange rate changes






15



15,047



15,062Employer contribution


7,683



3,373



4,030



15,086Participants contributions


171











171Benefits paid


(15,204
)


(905
)


(3,686
)


(19,795
)Fair value plan assetsend of year


191,463



35,940



127,647



355,050Funded Status


(69,134
)


(8,010
)


(71,967
)


(149,111
)Unrecognized net actuarial loss


35,058



11,006



61,817



107,881Unrecognized prior service cost


(319
)










(319
)Prepaid (accrued) benefit cost

$
(34,395
)

$
2,996


$
(10,150
)

$
(41,549
)     (in thousands)

2007


2006Accrued (prepaid) benefit cost

$
(24,617
)

$
41,549Accumulated other comprehensive loss


15,638



73,123Deferred tax asset


8,278



34,439Funding subsequent to valuation






(1,709
)Amount recognized


(701
)


147,402Pension assets


10,652



Less: current portion


(683
)


(12,958
)Pension liabilities

$
(9,268
)

$
134,444    75




---



##### Table of Contents



2007

2006

2005Weighted average discount rate


6.3%


5.5%


5.4%Long-term per annum compensation increase


3.6%


3.3%


3.3%Long-term return on plan assets


5.4%


7.6%


7.7%         2007


2006Asset AllocationEquities


58.2%



58.3%Bonds


41.1%



18.4%Cash equivalents


0.7%



23.3%100.0%



100.0%    76




---



##### Table of Contents



(in thousands)

PaymentsEstimated Future Benefit Payments2008


$16,8402009


17,7312010


18,4632011


19,1612012


20,0852013-2017


110,751       (in thousands)Net actuarial loss

$
24,198Net prior service cost (credit)


(282)Net transition obligation (asset)


$
23,916     (in thousands)Amortization of net transition obligation

$
Amortization of prior service cost


(37)Amortization of net losses


684$
647     17.
    Post-Retirement Benefits
   77




---



##### Table of Contents



(in thousands)

2007


2006Change in Benefit ObligationProjected benefit obligationbeginning of year

$
5,464


$
4,202Service cost


12



11Interest cost


311



228Participants contributions


181



202Actuarial (gain) loss


5



1,737Foreign currency exchange rate changes


159



Benefits paid


(897
)


(916
)Projected benefit obligationend of year


5,235



5,464Change in Plan AssetsFair value plan assetsbeginning of year






Employer contribution


716



715Participants contributions


181



202Benefits paid


(897
)


(917
)Fair value plan assetsend of year






Funded Status


(5,235
)


(5,464
)Unrecognized net actuarial gain


1,583



1,655Unrecognized prior service cost


692



761Employer contribution


179



179Accrued benefit cost

$
(2,781
)

$
(2,869
)     (in thousands)

2007

2006

2005Service cost

$
12

$
11

$
12Interest cost


311


228


230Amortization of prior service cost


69


77


44Amortization of actuarial gain


89





(13
)Post-retirement medical benefit expense

$
481

$
316

$
273        78




---



##### Table of Contents



(in thousands)

Payments2008

$
5092009


5012010


5232011


5642012


5572013-2016


2,941       (in thousands)Net actuarial loss

$
1,590Net prior service cost (credit)


692Net transition obligation (asset)


$
2,282     (in thousands)Amortization of net transition obligation

$
Amortization of prior service cost


(69
)Amortization of net losses


(90
)$
(159
)   18. Accumulated
    Other Comprehensive Income (Loss)
   79




---



##### Table of Contents



Foreign





Pension andCurrency





Post-retirementTranslation


Fair Value of


Benefit(in thousands)

Adjustment


Derivatives


Liabilities


TotalBalance 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







3,059Change in fair value of derivatives






11,139







11,139Change in pension and post-retirement benefit liabilities










(4,960
)


(4,960
)Balance December 31, 2005


(9,100
)


(5,109
)


(55,934
)


(70,143
)Change in foreign currency translation adjustment


33,618











33,618Reclassification to earnings






31,693







31,693Change in fair value of derivatives






(38,420
)






(38,420
)Change in pension and post-retirement benefit liabilities










(11,850
)


(11,850
)Adoption of SFAS 158










(8,637
)


(8,637
)Balance December 31, 2006


24,518



(11,836
)


(76,421
)


(63,739
)Change in foreign currency translation adjustment


(46,882
)










(46,882
)Reclassification to earnings






34,882







34,882Change in fair value of derivatives






(28,658
)






(28,658
)Change in pension and post-retirement benefit liabilities










15,797



15,797Transfer of U.K. pension plan to GrowHow UK Limited










43,272



43,272Balance December 31, 2007

$
(22,364
)

$
(5,612
)

$
(17,352
)

$
(45,328
)  80




---



##### Table of Contents



19. Income
    Taxes
    (in thousands)

2007


2006


2005Current:Federal

$
5,154


$
719


$
Foreign


6,056



4,351



679State


12,706



400



23,916



5,470



679Deferred:Federal


76,226



6,417



4,196Foreign


14,653



(2,710
)


9,102State






70



24090,879



3,777



13,538Total income tax provision

$
114,795


$
9,247


$
14,217     (in thousands)

2007


2006


2005Income before income taxes
    and minority interest:Domestic

$
239,474


$
6,570


$
560Foreign


77,216



6,890



35,744316,690



13,460



36,304Statutory income tax expense:Domestic


95,550



2,432



196Foreign


24,699



2,841



11,057120,249



5,273



11,253Reduction to foreign tax rates


(4,043
)






Foreign exchange gain (loss)






3,553



(1,302
)Debt repayment losses










7,807Warrant fair value gain










(3,278
)Valuation allowance


4,178



(367
)


964Foreign tax credit


(6,765
)






Other


1,176



788



(1,227
)Income tax expense

$
114,795


$
9,247


$
14,217  81




---



##### Table of Contents



(in thousands)

2007


2006Current deferred tax assetAccrued liabilities

$
2,736


$
8,323Inventory valuation


354



(685
)Unsettled derivative losses


3,223



(3,521
)Net current deferred tax asset


6,313



4,117Non-current deferred tax liabilityDepreciation


(125,183
)


(185,044
)Investments in partnership


(7,301
)


(7,352
)Investment in affiliates


(43,596
)


(34,537
)Intangible asset


(1,480
)


(2,089
)Unfunded employee benefits


13,992



9,111Discontinued business costs


8,920



8,202Valuation allowance


(31,740
)


(61,361
)NOL, capital loss and tax credit carryforwards


74,283



166,386Accumulated other comprehensive income


12,097



42,592Other


153



241Net noncurrent deferred tax liability


(99,854
)


(63,851
)Net deferred tax liability

$
(93,541
)

$
(59,734
)     20. Unrecognized
    Tax Benefit
  Accounting for Uncertainty to Income Taxes
    (in thousands)

TotalBalance at January 1, 2007

$
33,560Increases related to current year tax positions


Expiration of the statute of limitations for the assessment of
    taxes


Balance at December 31, 2007

$
33,560    82




---



##### Table of Contents



Accounting for Contingencies Accounting for Income Taxes
    21. Industry
    Segment Data
   83




---



##### Table of Contents



Nitrogen(in thousands)

Products


Methanol


Other


Total2007Revenues

$
2,293,139


$
55,342


$
11,585


$
2,360,066Operating income (loss)


447,420



(23,374
)


(3,682
)


420,364Total assets


1,379,584



61,614



447,129



1,888,327Depreciation and amortization


94,047



5,609



1,160



100,816Capital expenditures


31,510







211



31,721Equity earnings


13,491











13,491Equity investments


351,986











351,986Minority interest in losses


50,281











50,2812006Revenues

$
1,793,759


$
34,955


$
8,008


$
1,836,722Operating income (loss)


63,275



4,952



(1,947
)


66,280Total assets


1,377,471



98,916



96,326



1,572,713Depreciation and amortization


74,031



13,386



20,652



108,069Capital expenditures


50,626



2



228



50,856Equity earnings


17,013











17,013Equity investments


164,099











164,099Minority interest in losses


11,286











11,2862005Revenues

$
1,899,236


$
31,347


$
8,482


$
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











13,667  84




---



##### Table of Contents



Revenues


Long-lived AssetsYear Ended December 31,


December 31,(in thousands)

2007


2006


2005


2007


2006


2005United States

$
1,971,197


$
1,397,994


$
1,464,375


$
524,333


$
663,994


$
512,572Canada


69,760



63,902



55,641



334,084



49,637



55,625United Kingdom


319,109



374,826



419,049







238,577



219,045$
2,360,066


$
1,836,722


$
1,939,065


$
858,417


$
952,208


$
787,242   22. Minority
    interest
        23. Guarantor
    Subsidiaries
     85




---



##### Table of Contents



86




---



##### Table of Contents



Condensed
    Consolidating Statement of Financial Position for the Year Ended
    December 31, 2007:
  Guarantor

Non-GuarantorParent


TCAPI


Subsidiaries

Subsidiaries


Eliminations


ConsolidatedAssetsCash, cash equivalents and restricted cash

$



$
55,857


$
267,145

$
906,752


$
(531,516
)

$
698,238Accounts receivable, net


1



2



98,514


72,711







171,228Inventories










97,985


32,104



1,436



131,525Other current assets


10,614



638



11,213


6,454







28,919Total current assets


10,615



56,497



474,857


1,018,021



(530,080
)


1,029,910Property, plant and equipment, net










306,410


125,530







431,940Equity investments










10,488


341,498







351,986Deferred plant turnaround costs, intangible and other assets


6,732



8,333



19,801


45,174



(5,549
)


74,491Investments in and advances to (from) affiliates


620,375



365,762



1,848,352


57,752



(2,892,241
)


Total Assets

$
637,722


$
430,592


$
2,659,908

$
1,587,975


$
(3,427,870
)

$
1,888,327LiabilitiesCustomer prepayments

$



$



$
125,036

$
174,315


$



$
299,351Accounts payable


128







66,963


43,614







110,705Accrued and other liabilities


25,715



9,169



50,483


22,263







107,630Total current liabilities


25,843



9,169



242,482


240,192







517,686Long-term debt and capital lease obligations






330,000














330,000Deferred income taxes


86,157










10,113



3,584



99,854Pension and other liabilities


79,650







12,367


2,866







94,883Minority interest






21,404



88,325










109,729Total liabilities and minority interest


191,650



360,573



343,174


253,171



3,584



1,152,152Preferred stock


115,800


















115,800Stockholders equityCommon stock


142,170







73


32,458



(32,531
)


142,170Paid in capital


618,873



150,218



1,910,748


1,133,745



(3,194,710
)


618,874Accumulated other comprehensive income income (loss) and
    unearned compensation


(22,002
)









281,850



(305,176
)


(45,328
)Retained earnings (deficit)


(408,769
)


(80,199
)


405,913


(113,249
)


100,963



(95,341
)Total stockholders equity


330,272



70,019



2,316,734


1,334,804



(3,431,454
)


620,375Total liabilities and stockholders equity

$
637,722


$
430,592


$
2,659,908

$
1,587,975


$
(3,427,870
)

$
1,888,327  87




---



##### Table of Contents



Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2007:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenuesRevenues

$



$



$
1,194,343


$
1,154,138


$



$
2,348,481Other income, net










9,634



1,951







11,585Total revenues










1,203,977



1,156,089







2,360,066Cost and ExpenseCost of sales


900



345



992,182



831,548



1



1,824,976Selling, general and administrative expenses


2,179



(10,611
)


32,439



67,962



2



91,971Equity in the (earnings) loss of subsidiaries










(16,209
)










(16,209
)Impairment










38,964











38,964Total cost and expenses


3,079



(10,266
)


1,047,376



899,510



3



1,939,702Income (loss) from operations


(3,079
)


10,266



156,601



256,579



(3
)


420,364Interest income






6,093



5,077



6,092







17,262Interest expense


(1,860
)


(26,909
)


(6
)


(325
)






(29,100
)Loss on debt






(38,836
)














(38,836
)Foreign currency gain (loss)






(1,886
)


8



1,878







Income (loss) before tax and minority interests


(4,939
)


(51,272
)


161,680



264,224



(3
)


369,690Income tax benefit (provision)


1,790



(37,582
)


(58,294
)


(20,709
)






(114,795
)Minority interest






(9,704
)


(40,577
)










(50,281
)Equity in subs (earnings) loss


205,045



303,602







(2,718
)


(508,647
)


(2,718
)Net Income (Loss)

$
201,896


$
205,044


$
62,809


$
240,797


$
(508,650
)

$
201,896  88




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2007:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedOperating ActivitiesNet income (loss)

$
201,896


$
205,044


$
62,809


$
240,796


$
(508,649
)

$
201,896Depreciation of property, plant and equipment and amortization
    of deferred plant turnaround costs










46,439



54,377







100,816Impairment of assets










38,964











38,964Deferred income taxes


90,879



















90,879Non-cash loss on derivatives


1,300



















1,300Minority interest in earnings






2,903



47,378











50,281Distributions in excess of (less than) equity earnings


144,211



(18,284
)


8,536



379,935



(505,862
)


8,536Equity earnings in GrowHow UK Limited














2,718







2,718Share-based compensation


28,103















(1
)


28,102Amortization of intangible and other assets










3,713



3,240



1



6,954Non-cash loss on early retirement of debt






4,662















4,662Change in operating assets and liabilities


(83,235
)


4,952



78,212



460,091



(247,263
)


212,757Net Cash Flows from Operating Activities


383,154



199,277



286,051



1,141,157



(1,261,774
)


747,865Investing ActivitiesPurchase of property, plant and equipment










(8,721
)


(23,000
)






(31,721
)Plant turnaround expenditures










(9,955
)


(40,699
)


(1
)


(50,655
)Cash retained by GrowHow UK Limited














(16,788
)






(16,788
)Distributions received from unconsolidated affiliates










4,705











4,705Proceeds from the sale of property, plant and equipment










24











24Net Cash Flows from Investing Activities










(13,947
)


(80,487
)


(1
)


(94,435
)Financing ActivitiesIssuance of debt






330,000















330,000Payments under borrowing arrangements






(331,300
)


(1
)






1



(331,300
)Common stock issuances and vestings


(1,424
)


















(1,424
) 89




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2007 (continued):
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedPayments for debt issuance costs






(6,444
)














(6,444
)Change in investments and advances from (to) affiliates


(292,522
)


(236,412
)


30,281



(231,607
)


730,260



Preferred share dividends paid


(5,100
)


















(5,100
)Payments under share repurchase program


(87,426
)


















(87,426
)Excess tax benefits from equity compensation plans


3,317



















3,317Distributions to minority interests










(35,239
)










(35,239
)Net Cash Flows from Financing Activities


(383,155
)


(244,156
)


(4,959
)


(231,607
)


730,261



(133,616
)Effect of Foreign Exchange Rate on Cash














(593
)






(593
)Increase (Decrease) in Cash and Cash Equivalents


(1
)


(44,879
)


267,145



828,470



(531,514
)


519,221Cash and Cash Equivalents at Beginning of Year


1



100,736







78,282



(2
)


179,017Cash and Cash Equivalents at End of Year

$



$
55,857


$
267,145


$
906,752


$
(531,516
)

$
698,238  90




---



##### Table of Contents



Condensed
    Consolidating Statement of Financial Position for the Year Ended
    December 31, 2006:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedAssetsCash, cash equivalents and restricted cash

$
1


$
100,736


$



$
78,282


$
(2
)

$
179,017Accounts receivable, net










75,466



123,325







198,791Inventories










84,924



117,958



8,135



211,017Other current assets


3,166



1,319



12,918



18,355



(4,078
)


31,680Total current assets


3,167



102,055



173,308



337,920



4,055



620,505Property, plant and equipment, net










381,987



338,912



(2
)


720,897Equity investments










10,710



153,389







164,099Deferred plant turnaround costs, intangible and other assets


(1,839
)


7,582



22,117



39,351



1



67,212Investments in and advances to (from) affiliates


758,377



347,478



1,622,696



422,436



(3,150,987
)


Total Assets

$
759,705


$
457,115


$
2,210,818


$
1,292,008


$
(3,146,933
)

$
1,572,713LiabilitiesDebt due within one year

$



$



$
1


$



$
(1
)

$
Accounts payable


109







63,634



92,750







156,493Accrued and other liabilities


28,119



5,927



61,781



62,354



(5,227
)


152,954Total current liabilities


28,228



5,927



125,416



155,104



(5,228
)


309,447Long-term debt and capitalLease obligations






331,300















331,300Deferred income taxes


22,214











43,848



(2,211
)


63,851Pension and other liabilities


166,032







7,386



1,212



2



174,632Minority interest






18,501



76,186











94,687Total liabilities and minority interest


216,474



355,728



208,988



200,164



(7,437
)


973,917Preferred stock


115,800



















115,800Stockholders equityCommon stock


144,975







73



49,709



(49,781
)


144,976Paid in capital


693,895



150,218



2,007,811



1,246,129



(3,404,157
)


693,896Accumulated other comprehensive income income (loss) and
    unearned compensation


(92,187
)






6,373



30,828



(8,753
)


(63,739
)Retained earnings (deficit)


(319,252
)


(48,831
)


(12,427
)


(234,822
)


323,195



(292,137
)Total stockholders equity


427,431



101,387



2,001,830



1,091,844



(3,139,496
)


482,996Total liabilities and stockholders equity

$
759,705


$
457,115


$
2,210,818


$
1,292,008


$
(3,146,933
)

$
1,572,713  91




---



##### Table of Contents



Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2006:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenuesRevenues

$



$



$
859,454


$
969,261


$
(1
)

$
1,828,714Other income, net










5,795



2,213







8,008Total revenues










865,249



971,474



(1
)


1,836,722Cost and ExpenseCost of sales










882,352



901,940



(52,070
)


1,732,222Selling, general and administrative expenses


2,358



(8,142
)


(7,601
)


16,549



52,069



55,233Equity in the (earnings) loss of subsidiaries


29,853



(184,740
)


(91,993
)


(46,002
)


275,869



(17,013
)Total cost and expenses


32,211



(192,882
)


782,758



872,487



275,868



1,770,442Income (loss) from operations


(32,211
)


192,882



82,491



98,987



(275,869
)


66,280Interest income






(167
)


7,004



(1,267
)


887



6,457Interest expense


(1,860
)


(42,320
)


(8
)


1,610



(5,413
)


(47,991
)Income (loss) before tax and minority interests


(34,071
)


150,395



89,487



99,330



(280,395
)


24,746Income tax benefit (provision)


(7,607
)










(1,642
)


2



(9,247
)Minority interest






(2,178
)


(9,108
)










(11,286
)Net Income (Loss)

$
(41,678
)

$
148,217


$
80,379


$
97,688


$
(280,393
)

$
4,213  92




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2006:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedOperating ActivitiesNet income (loss)

$
(41,678
)

$
148,217


$
80,379


$
97,688


$
(280,393
)

$
4,213Depreciation and amortization






2,928



45,789



35,154



31,076



114,947Non-cash loss on derivatives










589



344







933Deferred taxes














3,777







3,777Minority interest in earnings (loss)






452



10,838







(4
)


11,286Equity earnings in excess of profit distributions


(29,853
)


184,740



91,993



46,002



(283,680
)


9,202Amortization of unearned compensation


7,010



















7,010Change in operating assets and liabilities


33,137



(73,758
)


(33,997
)


31,657



50,853



7,892Net Cash Flows from Operating Activities


(31,384
)


262,579



195,591



214,622



(482,148
)


159,260Investing ActivitiesPurchase of property, plant and equipment










(29,115
)


(21,741
)






(50,856
)Plant turnaround costs










(13,755
)


(21,526
)






(35,281
)Distributions received from unconsolidated affiliates














9,660







9,660Proceeds from the sale of property, plant and equipment










16,400



2,700







19,100Restricted cash










8,595











8,595Net Cash Flows from Investing Activities










(17,875
)


(30,907
)






(48,782
)Financing ActivitiesPayments under borrowing arrangements










(25
)


(12
)






(37
)Proceeds from exercise of stock options


363



















363Tax benefit of unvested stock


1,255



















1,255Change in investments and advances from (to) affiliates


53,652



(173,351
)


(236,202
)


(126,256
)


482,157



Preferred share dividends paid


(5,100
)


















(5,100
)Repurchases of TRA stock


(18,786
)














(10
)


(18,796
)Changes in overdraft protection arrangements














11,443







11,443Distributions to minority interests










(8,861
)










(8,861
)Net Cash Flows from Financing Activities


31,384



(173,351
)


(245,088
)


(114,825
)


482,147



(19,733
) 93




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2006 (continued):
  Guarantor


Non-GuarantorParent

TCAPI

Subsidiaries


Subsidiaries

Eliminations


ConsolidatedEffect of Foreign Exchange Rate on Cash












1,906






1,906Increase (Decrease) in Cash and Cash Equivalents





89,228


(67,372
)


70,796


(1
)


92,651Cash and Cash Equivalents at Beginning of Year


1


11,508


67,372



7,486


(1
)


86,366Cash and Cash Equivalents at End of Year

$
1

$
100,736

$



$
78,282

$
(2
)

$
179,017  94




---



##### Table of Contents



Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2005:
  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  95




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2005:
  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



7,241



115,585Non-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


2,431



















2,431Term loan discount accretion














1,773







1,773Change in operating assets and liabilities


11,211



147,075



(56,723
)


(107,064
)


(163,538
)


(169,039
)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
)Distributions to minority interests






(2,664
)


(10,944
)






1



(13,607
) 96




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2005 (continued):
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet 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  97




---



##### Table of Contents



24. Quarterly
    Financial Data (Unaudited)
  (in thousands, except per-share
    data)

March 31


June 30


Sept 30


Dec 312007Total revenues

$
502,286


$
693,815


$
593,715


$
570,249Operating income

$
64,670


$
128,774


$
95,303


$
131,417Net income

$
7,210


$
70,655


$
54,380


$
69,651Per Share:Basic income per share

$
0.06


$
0.76


$
0.59


$
0.77Diluted income per share

$
0.06


$
0.66


$
0.51


$
0.662006Total revenues

$
398,920


$
523,520


$
464,781


$
449,501Operating income (loss)

$
(28,166
)

$
26,224


$
29,388


$
38,834Net income (loss)

$
(23,991
)

$
6,257


$
10,341


$
11,606Per Share:Basic income (loss) per share

$
(0.27
)

$
0.05


$
0.10


$
0.11Diluted income (loss) per share

$
(0.27
)

$
0.05


$
0.10


$
0.11  98




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure     Item 9A.
    Controls
    and Procedures   (a)
    Disclosure Controls and Procedures
    (b)
    Changes in Internal Controls
    (c)
    Internal Control over Financial Reporting
  Form 10-K Form 10-K.
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Internal Control-Integrated Framework
 99




---



##### Table of Contents



Report
    of Independent Registered Public Accounting Firm
    Internal ControlIntegrated Framework Managements Annual Report on Internal Control Over
    Financial Reporting.
        Internal ControlIntegrated Framework
 100




---



##### Table of Contents



101




---



##### Table of Contents



Item 9B.
    Other
    Information    102




---



##### Table of Contents



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     Equity
    Compensation Plan Information(a)

(b)

(c)Number of securities
    to be

Weighted-average

Number of securities
    remaining available forissued upon exercise
    of

exercise price of

future issuance
    under equity compensationoutstanding options,
    warrants

outstanding
    options,

plans (excluding
    securities reflected in columnPlan
    category

and
    rights

warrants
    and rights

(a))Equity compensation plans approved by security holders

11,000

$3.17

3,753,626Equity compensation plans not approved by
    security holders

-0-

-0-

-0-Total

11,000

$3.17

3,753,626
  103




---



##### Table of Contents



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
   104




---



##### Table of Contents



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.              2.
    Index to Financial Statement Schedules, Reports and Consents  page S-1
      (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.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

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. 105




---



##### Table of Contents



3
.5

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
.6

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.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 Corp. (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.4
.4

Amendment No. 3 to the Amended and Restated Credit
    Agreement dated October 30, 2006, among Terra Capital,
    Inc., Terra Mississippi Holdings Corp. (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 4.1 to Terra
    Industries Inc.s
    Form 10-Q
    for the fiscal quarter ended September 30, 2006, is
    incorporated herein by reference.4
.5*

Amendment No. 4 to the Amended and Restated Credit
    Agreement dated February 2, 2007, among Terra Capital,
    Inc., Terra Mississippi Holdings Corp. (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.4
.6*

Amendment No. 5 to the Amended and Restated Credit
    Agreement dated July 11, 2007, among Terra Capital, Inc.,
    Terra Mississippi Holdings Corp. (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. 106




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4
.7*

Amendment No. 6 to the Amended and Restated Credit
    Agreement dated August 28, 2007, among Terra Capital Inc.,
    Terra Mississippi Holdings Corp. (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.4
.8

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
.9

Amendment No. 2 to the Credit Agreement dated
    February 2, 2007, 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 4.8 to Terra Nitrogen Company, L.P.s Form
    10-K for the year ended December 31, 2007.4
.10

Indenture dated May 21, 2003 between the Company, the
    guarantors party hereto, and U.S. National Bank Association as
    Trustee, with respect to the
    111/2%
    Second Priority Senior Secured Notes due 2010 (including the
    form of
    111/2%
    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
    Form 10-Q
    for the quarter ended June 30, 2003, is incorporated herein
    by reference.4
.11

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
.12

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
.13

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
.14

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
.15

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. 107




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4
.16

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.4
.17

Registration Agreement, dated as of February 2, 2007, by
    and among Terra Capital, Inc., the guarantors named therein and
    Citigroup Global Markets Inc., relating to the 7% Senior Notes
    due 2017, filed as Exhibit 10.1 to Terra Industries
    Inc.s
    Form 8-K
    dated February 5, 2007, is incorporated herein by reference.4
.18

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
.19

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
.20

Purchase Agreement, dated as of January 25, 2007, by and
    among Terra Capital, Inc., the guarantors named therein and
    Citigroup Global Markets Inc., relating to the 7% Senior Notes
    due 2017, filed as Exhibit 10.1 to Terra Industries
    Inc.s
    Form 8-K
    dated January 30, 2007, is incorporated herein by reference.4
.21

$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
.22

$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.4
.23

Third Supplement to Indenture, dated as of January 29, 2007, by
    and among Terra Capital, Inc., the guarantors named therein and
    U.S. Bank National Association, as trustee, with respect to the
    127/8%
    Senior Secured Notes due 2008, filed as Exhibit 4.1 to Terra
    Industries Inc.s Form 8-K dated January 30, 2007, is
    incorporated herein by reference.4
.24

Third Supplement to Indenture, dated as of January 29,
    2007, by and among Terra Capital, Inc., the guarantors named
    therein and U.S. Bank National Association, as trustee, with
    respect to the
    111/2%
    Second Priority Senior Secured Notes due 2010, files as
    Exhibit 4.2 to Terra Industries Inc.s
    Form 8-K
    dated January 30, 2007, is incorporated herein by
    reference. 108




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4
.25

Indenture, dated February 2, 2007, by and among Terra
    Capital, Inc., Terra Industries Inc., the guarantors named
    therein and U.S. Bank National Association, as trustee, relating
    to the 7% Senior Notes due 2017, filed as Exhibit 4.1 to
    Terra Industries Inc.s
    Form 8-K
    dated February 5, 2007, 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.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, filed as
    Exhibit 10.1.14 to Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 1996, is incorporated
    herein by reference. 109




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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 Inc.s
    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 Inc.s
    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 Inc.s
    Form 10-K
    for the year ended December 31, 1999, is incorporated
    herein by reference.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 10.1.18 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. 110




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##### Table of Contents



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.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
    filed as Exhibit 10.1.23 to the Terra Industries
    Inc.s
    Form 10-K
    for the year ended 2005, is incorporated by reference.10
.1.24

Form of Long-Term Incentive Award for Phantom Performance Shares
    of Terra Industries Inc. under its Stock Incentive Plan of 2002
    filed as Exhibit 10.1.24 to the Terra Industries
    Inc.s
    Form 10-K
    for the year ended 2005, is incorporated by reference.10
.1.25

Form of Indemnity Agreement of Terra Industries Inc., filed as
    Exhibit 10.1.27 to Terra Industries Inc.s
    Form 8-K
    dated July 1, 2006, is incorporated by reference.10
.1.26

Form of Unrestricted Annual Share Award to Non-Employee
    Directors under the Terra Industries Inc. Stock Incentive Plan
    of 2002, filed as Exhibit 99.1 to Terra Industries
    Inc.s
    Form 8-K
    dated August 10, 2006, is incorporated herein by reference.10
.1.27

Employment Severance Agreement between Terra Industries Inc. and
    Michael L. Bennett dated October 5, 2006, filed as
    Exhibit 10.1 to Terra Industries Inc.s
    Form 8-K
    dated October 5, 2006, is incorporated herein by reference.10
.1.28

Form of Employment Severance Agreement for Section 16(b)
    Executive Officers, filed as Exhibit 10.2 to Terra
    Industries Inc.s
    Form 8-K
    dated October 5, 2006, is incorporated herein by reference.10
.1.29

Amendment to Employment Severance Agreement between Terra
    Industries Inc. and Mark A. Kalafut dated October 6, 2006,
    filed as Exhibit 10.1 to Terra Industries Inc.s
    Form 8-K
    dated October 6, 2006 is incorporated herein by reference.10
.1.30

2007 Omnibus Incentive Compensation Plan, adopted by the board
    of directors of Terra Industries Inc. (Terra) and
    subsequently approved by its stockholders at the annual meeting
    of Terra on May 8, 2007, reported on Terras
    Form 8-K filed May 10, 2007 and attached as
    Appendix A to Terras Proxy Statement on
    Schedule 14A filed with the Securities and Exchange
    Commission on March 15, 2007, is incorporated herein by
    reference.10
.1.31*

Amendment Number One to Employment Severance Agreement.10
.1.32*

Amendment to Restricted Share Agreement.10
.1.33*

Amendment to Performance Share Award Agreement.10
.1.34*

Amendment to Terra Long Term Incentive Award dated
    October 23, 2007, for former Terra, now GrowHow UK Limited
    joint venture employees. 111




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10
.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

General and Administrative Services Agreement regarding Services
    by Terra Industries Inc. filed as Exhibit 10.11 to Terra
    Industries Inc. Form 10-Q for the quarter ended
    March 31, 1995, 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

Amended and Restated General and Administrative Services
    Agreement between Terra Industries Inc., Terra Nitrogen
    Corporation, and Terra Nitrogen GP Inc., dated October 23,
    2007, filed as Exhibit 10.1 to TNCLPs Form 10-Q
    filed on October 29, 2007, is incorporated herein by
    reference.10
.7

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
.8

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.10
.9

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
.10

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
.11

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. 112




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##### Table of Contents



10
.12

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
.12.1

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
.13

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
.14

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
.15

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
.16

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.10
.17

Option Agreement, dated as of July 18, 2007, by and between
    Terra Industries Inc. and Eastman Chemical Company, filed as
    Exhibit 10.1 to Terra Industries Inc.s Form 8-K
    dated July 23, 2007, is incorporated herein by reference.10
.18

Joint Venture Contribution Agreement, dated September 14,
    2007, by and among GrowHow UK Limited, Terra International
    (Canada), Inc., Kemira GrowHow Oyj and Terra Industries Inc.,
    filed as Exhibit 10.1 to Terra Industries Inc.s
    Form 10-Q dated October 29, 2007, is incorporated
    herein for reference. 113




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##### Table of Contents



10
.19

Shareholders Agreement, dated September 14, 2007, by
    and among Kemira GrowHow Oyj, Terra International (Canada),
    Inc., Terra Industries Inc and GrowHow UK Limited filed as
    Exhibit 10.2 to Terra Industries Inc.s
    Form 10-Q
    dated October 29, 2007, is incorporated herein for
    reference.12
.1*

Ratio of Earnings to Financial Charges21
.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.    *
    
    Filed herewith.
    
    Confidential treatment has been requested for portions of this
    document.   114




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##### Table of Contents



Signatures    TERRA INDUSTRIES INC.
 Date: February 28, 2008

By:

/s/  DANIEL
    D. GREENWELLDaniel
    D. Greenwell
    Senior Vice President and Chief Financial
    Officer     Signature

Title/s/  HENRY
    R. SLACKHenry
    R. Slack

Chairman of the Board/s/  MICHAEL
    L. BENNETTMichael
    L. Bennett

Director, President and Chief Executive Officer
    (Principal Executive Officer)/s/  DANIEL
    D. GREENWELLDaniel
    D. Greenwell

Senior Vice President and Chief Financial Officer
    (Principal Financial Officer and Principal
    Accounting Officer)/s/  DAVID
    E. FISHERDavid
    E. Fisher

Director/s/  DOD
    A. FRASERDod
    A. Fraser

Director/s/  MARTHA
    O. HESSEMartha
    O. Hesse

Director/s/  PETER
    S. JANSONPeter
    S. Janson

Director/s/  JAMES
    R. KRONERJames
    R. Kroner

Director/s/  DENNIS
    MCGLONEDennis
    McGlone

Director    115




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##### Table of Contents



Index to
    Financial Statement Schedules  Schedule No.I  Condensed Financial Information of Registrant, is
    included in Item 8 herein, Footnote 23, Column 1,
    Parent.II  Valuation and Qualifying Accounts:
    
    Years Ended December 31, 2007, 2006 and 2005

S-2    S-1




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##### Table of Contents



Schedule II  Terra Industries
    Inc.
 Valuation
    and Qualifying Accounts
 Years
    Ended December 31, 2007, 2006, and 2005
 (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, 2007:Allowance for doubtful accounts

$
332


$
15


$
(83
)

$
264Allowance for deferred tax assets

$
61,361


$
3,939


$
(33,560
)

$
31,740Year Ended December 31, 2006:Allowance for doubtful accounts

$
234


$
486


$
(388
)

$
332Allowance for deferred tax assets

$
61,728


$



$
(367
)

$
61,361Year Ended December 31, 2005:Allowance for doubtful accounts

$
262


$
824


$
(852
)

$
234Allowance for deferred tax assets

$
56,490


$
5,238


$



$
61,728  S-2