##### Table of Contents



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, 2009ORo

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.
   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
    Sioux City, Iowa(Address of principal executive offices)

51102-6000(Zip Code)(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:
   o x
   o x
   x o




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Regulation S-T
 o x
  Regulation S-K Form 10-K Form 10-K.
 o
  Rule 12b-2
  Large accelerated
    filer x

Accelerated
    filer o

Non-accelerated
    filer o(Do not check if a smaller
    reporting company)

Smaller reporting
    company o   Rule 12b-2
 o x
     Documents
    Incorporated by Reference
  120-day Form 10-K 120-day




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Forward-Looking
    Information is Subject to Risk and Uncertainty
  Form 10-K
    §
    the possibility that various closing conditions for the proposed
    business combination with Yara may not be satisfied or waived,
    including that a governmental entity may prohibit, delay, or
    refuse to grant approval for the consummation of the transaction,§
    the risk that Terras stockholders fail to approve the
    proposed business combination,§
    the risk that Yaras stockholders fail to approve the
    proposed capital increase for its rights offering,§
    the risk that the proposed business combination with Yara will
    not close within the anticipated time period,§
    the risk that disruptions from the proposed business combination
    with Yara will harm Terras relationships with its
    customers, employees and suppliers,§
    the diversion of management time on issues related to the
    proposed business combination with Yara,§
    the outcome of any legal proceedings challenging the proposed
    business combination with Yara,§
    the amount of the costs, fees, expenses and charges related to
    the proposed business combination with Yara,§
    changes in financial and capital 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 regulations,§
    changes in agricultural regulations and§
    changes in the securities trading markets.  Form 10-K.




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##### 



Table
    of Contents
  PART IItem 1.

Business


1Item 1A.

Risk Factors


16Item 1B.

Unresolved Staff Comments


22Item 2.

Properties


22Item 3.

Legal Proceedings


24Item 4.

Submission of Matters to a Vote of Security
    Holders


24Executive Officers of Terra


26PART IIItem 5.

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


28Item 6.

Selected Financial Data


31Item 7.

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


33Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


55Item 8.

Financial Statements and Supplementary Data


57Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosures


116Item 9A.

Controls and Procedures


116Item 9B.

Other Information


119PART IIIItem 10.

Directors and Executive Officers of Terra


120Item 11.

Executive Compensation


120Item 12.

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


120Item 13.

Certain Relationships and Related Transactions


121Item 14.

Principal Accountant Fees and Services


121PART IVItem 15.

Exhibits and Financial Statement Schedules


122Signatures


132Index to Financial Statement Schedules


S-1EX-12.1EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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Glossary
    of Terms
  AN

Ammonium Nitrate, a solid nitrogen product that Terra sells in
    agricultural and industrial grades. AN contains 34 percent
    nitrogen by weight.API

American Petroleum Institute, the primary U.S trade association
    for the oil and natural gas industry.ASC

Accounting Standards Codification  also referred to
    as Codification.DEF

Diesel Exhaust Fluid. Urea solution that reduces NOx emissions
    from the exhaust stream of diesel engines. Terras branded
    DEF product is TerraCair
    Ultrapure®

    DEF.DHS

Department of Homeland Security, A Cabinet department of the
    U.S. federal government responsible for protecting the U.S. from
    terrorist attacks and responding to natural disasters.EPA

Environmental Protection Agency, a U.S. federal government
    agency charged with protecting human health and the environment.FASB

Financial Accounting Standards BoardGAAP

General Accepted Accounting PrinciplesGrowHow

GrowHow UK Ltd., the U.K. joint venture in which Terra owns a
    50 percent interest.HAT

Houston Ammonia Terminal, a facility in which Terra owns a
    50 percent interest. HAT was part of Terras 2004
    acquisition of Mississippi Chemical Corporation.IGAN

Industrial Grade Ammonium Nitrate, a prilled, low-density
    product containing 34 percent nitrogen by weight that is
    used as feedstock for blasting agents used in the mining
    industry and in other industrial applications.NOx

Nitrogen Oxides, the EPA-regulated compounds that are reduced
    through the use of SCR technology and nitrogen-based reagents.NYMEX

New York Mercantile ExchangeOSHA

Occupational Safety & Health Administration, a U.S.
    federal agency that regulates workplace safety and health.PLNL

Point Lisas Nitrogen Limited, the ammonia manufacturing joint
    venture in the Republic of Trinidad and Tobago in which Terra
    owns a 50 percent interest. Also referred to as Point
    Lisas.SCR

Selective Catalytic Reduction, the process that allows
    nitrogen-based reagents to reduce the nitrogen oxides that form
    when fossil fuels are combusted to atmospheric nitrogen and pure
    water.TerraCair

TerraCair
    Ultrapure®

    DEF, Terras branded diesel exhaust fluid product.
    TerraCairs quality is certified by the API.TET

Terra Environmental Technologies Inc., Terras
    environmental business. TET was formed in 2003 and incorporated
    in 2007. It is a wholly-owned subsidiary of Terra Industries Inc.TFI

The Fertilizer Institute, a trade organization of which Terra is
    a member. TFI represents the fertilizer industry on issues of
    public policy, communication and statistical needs of producers,
    manufacturers, retailers and transporters.




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TNCLP

Terra Nitrogen Company, L.P., the Master Limited Partnership of
    which Terra Industries Inc. owns 75.3 percent of the
    outstanding units. TNCLPs operations consist of the
    Verdigris, Oklahoma nitrogen manufacturing facility and terminal
    assets in Blair, Nebraska and Pekin, Illinois. TNCLP is traded
    under the ticker symbol TNH.UAN

Urea Ammonium Nitrate solutions, Terras premiere product.
    UAN is a clear, odorless non-hazardous liquid that contains 28
    to 32 percent nitrogen by weight. UAN is safer to store,
    transport and apply than ammonia.U.K.

United KingdomUSDA

United States Department of Agriculture, the U.S. federal
    executive department responsible for developing and executing
    U.S. federal government policy on farming, agriculture and food.




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Item 1.
    Business  TERRA: A HISTORY
    OF GROWTH THROUGH ACQUISITION
      §
    In 1976, Terra doubled its nitrogen production capacity by
    forming a partnership to operate a new plant in Woodward,
    Oklahoma. Terra later bought out its partners interest in
    this facility, and expanded its ammonia plant. In 2010, Terra
    expects to complete a project to add 500,000 tons per year of
    urea ammonium nitrate solutions (UAN) capacity at this facility,
    consistent with the companys strategic focus on
    higher-value, upgraded products.§
    In 1993, Terra made its first investment outside the
    U.S. with the purchase of a nitrogen fertilizer
    manufacturing complex in Courtright, Ontario, Canada. Shortly
    thereafter, Terra combined the two existing urea plants in
    Courtright into an improved single unit that manufactures
    product that can be granulated or used as a feedstock in UAN
    production.§
    Just a year after the Courtright acquisition, Terra purchased
    Agricultural Minerals and Chemicals Inc., with manufacturing
    facilities in Verdigris, Oklahoma and Blytheville, Arkansas,
    again doubling its nitrogen production capacity. The acquisition
    also included terminal assets. Terra eventually closed the
    Blytheville manufacturing facility permanently when high
    North American gas prices and stiff competition from Gulf
    importers rendered the facility unprofitable. We sold the
    Blytheville terminal assets in 2005, but retained access to the
    ammonia and UAN storage capacity through a leasing agreement. We
    continue to operate terminal assets in Blair, Nebraska and
    Pekin, Illinois that we gained through this acquisition.§
    Terra expanded beyond North America in 1997 with the acquisition
    of two nitrogen fertilizer plants in the U.K., at Billingham and
    Severnside. Ten years later, Terra contributed its U.K. assets
    to a joint venture with Kemira GrowHow Oyj to form GrowHow
    UK Ltd. (GrowHow). Recognizing that the U.K. market could be
    better served with two manufacturing facilities rather than the
    three it was then operating, GrowHow soon closed the Severnside
    facility. Terra continues to own a 50 percent interest in
    GrowHow, and the steps undertaken to realize synergies and
    right-size production to U.K. demand has allowed the joint
    venture to contribute meaningfully to Terras financial
    performance.§
    In 1997, Terra also completed an expansion project at its Port
    Neal, Iowa facility, increasing its UAN capacity by more than
    60 percent and furthering Terras leading position in
    UAN.§
    In 2004, Terra acquired Mississippi Chemical Corporation,
    including a manufacturing facility in Yazoo City, Mississippi;
    an ammonia plant and deepwater terminal in Donaldsonville,
    Louisiana; a 50 percent interest in Point Lisas Nitrogen
    Limited (Point Lisas) in the Republic of Trinidad and Tobago, an
    ammonia production joint venture with a long-term, beneficial
    natural gas contract; and a 50 percent interest in an
    ammonia terminal near Houston, Texas. Terra has since restarted
    the previously idle Donaldsonville ammonia facility and modified
    one of the Yazoo City ammonium nitrate (AN) towers to allow it
    to produce industrial grade AN in addition to agricultural grade
    AN. The modifications allowed Terra to more fully utilize Yazoo
    Citys AN capacity, and fulfill commitments to a
    significant new industrial customer. 1




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TERRA
    TODAY
          Managements Discussion and Analysis of Financial
    Condition and Results of Operations Industry Segment Data Financial
    Statements and Supplementary Data Form 10-K.
  The Pending Yara
    Merger
       2




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2009 OVERVIEW
    Executing Our Business Strategy
        Expanding
    Upgrading Capacity
        Positioning Terra
    Environmental Technologies for Market Leadership
   3




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Stationary
    Business: Established and Growing
    Mobile
    Customers: A Source of New Revenues
  ®
    TETs
    2009 Accomplishments Were Significant
    §
    Working with the American Petroleum Institute (API) to certify
    the quality of TerraCair. Through this exhaustive process, we
    ultimately received certification that recognizes that our
    product meets the stringent quality standards that engine
    manufacturer service warranties require.§
    Executing an agreement with Excelda Manufacturing Company for
    the packaging and distribution of TerraCair in package sizes of
    50 gallons or less. This agreement complements one that TET
    signed with Brenntag North America in December 2008. Together,
    the Excelda and Brenntag agreements provide avenues for TET to
    distribute TerraCair in package sizes ranging from one-gallon
    containers to bulk truckloads.§
    Signing DEF supply agreements with Daimler Trucks North America
    LLC; Volvo Group North America, Inc; Mack Trucks, Inc. and Ford
    Motor Company.§
    Launching a new Web site at www.tet-terra.com in support of
    TETs position as a North American leader in emissions
    reduction. 4




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Recalibrating Our
    Balance Sheet
    Returning Value
    to Shareholders
    Living Our
    Values
    Operate
    Safely
    §
    Our Verdigris facility was awarded Occupational
    Safety & Health Administration (OSHA) VPP Star status,
    representing the highest level of voluntary safety program
    recognition that can be achieved in industry.§
    Our Courtright staff achieved three million
    man-hours
    worked without a lost-time injury.§
    Our Yazoo City staff achieved one million
    man-hours
    worked without a lost-time injury.  Focus on
    Security
    Sustain Our
    Business through Green Initiatives
    §
    Terra reduced its total direct greenhouse gas emissions by six
    percent in 2009 with the installation of projects on nitric acid
    units at Verdigris and Yazoo City. The projects resulted in a
    decrease in greenhouse gas emissions of more than 600,000 metric
    tons of carbon dioxide over the course of the year.§
    TET-supplied reagents reduced more than 800,000 tons of NOx
    produced at fossil-fuel-based power plants and from large and
    small industrial boiler applications. 5




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§
    We completed our second full year of partnering with Envirofresh
    Produce Inc. on an innovative project that reduces our
    Courtright manufacturing facilitys environmental
    footprint. Envirofresh built greenhouses on 170 acres of
    Terra land in 2008. Today, excess energy from the manufacturing
    process heats the greenhouses, and carbon dioxide that would
    formerly have been released into the air is now captured and
    used in food production. The project ties in perfectly with
    Terras primary business of providing crop nutrients and
    also aligns with our desire and ongoing efforts to be
    environmentally responsible.  Listen and
    Respond to Customer Needs
    §
    We instituted a web-based customer portal that gives our
    customers greater visibility and access to their account
    information. The portal environment has been well used and
    highly appreciated by our customers.§
    Consistent with our past practices, we conducted a customer
    survey to broaden our understanding of customer wants and needs
    and develop appropriate responses to meet those needs. This
    project is part of an ongoing process to continuously improve
    our relations with agricultural, industrial and environmental
    customers.  Support Our
    Communities
    THE NITROGEN
    INDUSTRY: CONDUCTING BUSINESS IN A GLOBAL MARKETPLACE
    Strategic
    Production Locations
  
   6




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Product
    Mix
      Anhydrous
    Ammonia
  
  
  Urea Ammonium
    Nitrate Solutions (UAN)
  
      Ammonium Nitrate
    (AN)
   7




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ANS (Ammonium
    Nitrate Solution)
    §
    produce an emulsion that is used as a blasting agent in the
    mining industry;§
    act as an oxidant in the production of catalyst for oil
    refineries; and§
    produce nitrous oxide, or laughing gas, which is used primarily
    in dentistry.  tm
  Amtratetm
  
  tm   IGAN
  Urea
  
  Non-Core Products and/or
  Nitric
    Acid
    Dinitrogen
    Tetroxide
   8




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Carbon
    Dioxide
  2
  Customer
    Base
  Agricultural
    Industrial
    Environmental
    Distribution
          Transportation
    §
    Railcars are the major mode of transportation at our North
    American manufacturing facilities. At December 31, 2009,
    our rail distribution system had approximately 3,000 railcars,
    including those dedicated to hauling TET product. We believe our
    fleet of UAN railcars is the largest in North America. 9




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§
    We also deliver significant quantities of our product by truck.
    We own and operate a common carrier, Terra Express, Inc., that
    specializes in transporting all forms of nitrogen.§
    We use barges to move product up the river system and into the
    Corn Belt. We hold twelve UAN and six ammonia barges under
    long-term charter. We know of no recognized public source for
    industry barge data, but believe that our long-term charters
    comprise about 20 and 17 percent of the total available UAN
    and ammonia fleets, respectively.§
    We use two separate pipeline transportation agreements to move
    ammonia to the Corn Belt from our facilities. The Magellan
    ammonia pipeline is directly connected to our Verdigris, Blair
    and Port Neal facilities and the NuStar ammonia pipeline is
    directly connected to our Donaldsonville and Blair facilities.
    Our Woodward facility injects product into the Magellan system
    as warranted via truck transfers. The location of our
    manufacturing facilities and our network of distribution and
    transportation resources allow Terra to efficiently provide
    nitrogen products to agricultural and industrial customers.  NITROGEN INDUSTRY
    OVERVIEW
    Building Blocks for Growth
    year-to-year, per-acre-planted
    Demand: Stable
    Growth
     10




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Supply:
    Influenced by Gas Costs and Capital/Construction Costs
  
  
  
  Outlook: Broadly
    Positive
    
  
 11




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2007-2008, 2009-2010,
    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 and biofuel); and§
    Price fluctuations in natural gas, the principal raw material
    used to produce nitrogen fertilizer.    Raw
    Materials
     12




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How Natural Gas Gets to
    Terras Facilities2009 Average BasisFacility

Mode of
    Transportation

Difference From Henry
    HubCourtright, Ontario

Purchased from local utility distribution company, through open
    access


0.29Donaldsonville, Louisiana

Four intrastate pipelines


.04Port Neal, Iowa

Interstate, open-access pipelines


(0.44
)Verdigris, Oklahoma*

Intrastate pipelines


(0.79
)Woodward, Oklahoma*

Interstate and intrastate pipelines


(0.79
)Yazoo City, Mississippi

Three interstate pipelines and one intrastate pipeline


.04* The intrastate pipelines serving Woodward and Verdigris
    are not open-access carriers, but are nonetheless part of a
    regional system which allows receipt from other major Oklahoma
    sources. We also have limited access to
    out-of-state
    natural gas supplies for these facilities.   
    Competition
    and/or
    Credit
  15-30 days,
 13




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Environmental and
    Other Regulatory Matters
  and/or
      and/or
  Employees
   14




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Available
    Information
  http://www.sec.gov, (800) SEC-0330.
  Form 10-K, Form 10-Q, Form 8-K,
      51102-6000
 15




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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 our
    results of operations to fluctuate.
    Our products are global commodities and we face intense
    competition from other producers.
   16




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Our business is subject to risks related to weather
    conditions.
    and/or
  Our risk measurement and hedging activities might not prevent
    losses.
    over-the-counter
    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.
   17




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We may incur costs or liabilities under environmental laws or
    regulations to which we are subject.
  and/or
  and/or
    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
 18




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We are subject to risks associated with possible climate
    change legislation, regulation and international accords.
        cap-and-trade cap-and-trade cap-and-trade cap-and-trade
  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.
    We may be unable to refinance our debt upon a change of
    control.
   19




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If the global economic downturn continues or worsens, our
    business could be adversely impacted.
    We are exposed to risks associated with our joint venture
    investments.
    §
    have economic or business interests or goals that are or become
    inconsistent with our business interests or goals;§
    are in a position to take action contrary to our instructions,
    requests, policies or objectives;§
    subject the property to liabilities exceeding those contemplated;§
    take actions that reduce our return on investment; or§
    take actions that harm our reputation or restrict our ability to
    run our business.    Disruption in or increased costs of transportation services
    could have an adverse effect on our profitability.
    We and Yara may not satisfy certain closing conditions
    necessary to consummate the Yara Merger.
   20




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If the Yara Merger is not consummated, we will have incurred
    substantial costs that may adversely affect our business,
    financial condition and results of operations and the market
    price of our common stock.
    The pending Yara Merger may create uncertainty for our
    customers and employees.
   21




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ITEM 1B. UNRESOLVED
    STAFF COMMENTS   ITEM 2.   PROPERTIES        Annual
    Capacity1FertilizerLocation

Ammonia2


UAN3


AN4


Urea5


Compounds4Donaldsonville,
    Louisiana6


500,000















Port Neal, Iowa


370,000



735,000







60,000



Verdigris, Oklahoma


1,050,000



1,925,000











Woodward,
    Oklahoma7


440,000



298,0008







25,000



Yazoo City,
    Mississippi9,

    10


500,000



525,000



775,00010



20,000



Courtright, Ontario


480,000



350,000







175,000



Ince,
    U.K.11


201,000







343,000







340,000Billingham, U.K.
    11


287,000







319,000







Point Lisas, Trinidad and
    Tobago12


360,000















Total


4,188,000



3,833,000



1,437,000



280,000



340,000   1.
    
    Annual capacity includes an
    allowance for planned maintenance shutdowns. Unless otherwise
    indicated, annual capacity is not limited by the production of
    other products at the same facility.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
    32 percent 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.
    
    The Donaldsonville facilitys
    manufacturing capacity consists of a single ammonia plant. This
    plant was mothballed in January 2005, and was restarted
    September 2008.7.
    
    Woodwards plant capacity
    depends on product mix (ammonia/methanol). Sales of methanol for
    the years ended December 31, 2009 and 2008 were
    23.3 million and 28.0 million gallons, respectively.8.
    
    Woodward facility UAN capacity
    does not include the effects of the upgrade project scheduled
    for completion in 2010.9.
    
    The Yazoo City facility also
    produces merchant nitric acid; sales for the years ended
    December 31, 2009 and 2008 were 19,200 and 20,700 product
    tons, respectively.10.
    
    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).11.
    
    Represents Terras
    50 percent interest in the capacity of facilities owned by
    GrowHow.12.
    
    Represents Terras
    50 percent interest in the Point Lisas plant capacity. 22




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Donaldsonville, Louisiana.
  Port Neal, Iowa.
  Verdigris, Oklahoma.
  Woodward, Oklahoma.
  Yazoo City, Mississippi.
  Courtright, Ontario, Canada.
  Billingham, U.K. 99-year
  Ince, U.K.
  Point Lisas, Trinidad. 50 50
 23




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ITEM 3.   LEGAL
    PROCEEDINGS        ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   24




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NAME

FOR


WITHHELDMartha O. Hesse


35,497,627



2,497,232Dennis McGlone


35,501,074



2,493,785Henry R. Slack


35,492,207



2,502,652John N. Lilly


45,389,922



947,764David A. Wilson


45,081,217



1,256,469Irving B. Yoskowitz


45,510,241



827,445      25




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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;
    President of Terra Nitrogen GP Inc. (TNGP) (or its predecessor),
    the General Partner of TNCLP, since June 1998; Chairman of the
    Board of TNGP (or its predecessor) since 2002. Age 56.Daniel D. Greenwell

Senior Vice President and Chief Financial Officer of Terra since
    July 2007; Vice President, Controller of Terra from April 2005
    to July 2007; Director of TNGP, the General Partner of TNCLP,
    since March 2008; Vice President and Chief Financial Officer of
    TNGP since February 2008; Vice President and Chief Accounting
    Officer of TNGP from April 2006 to February 2008; Corporate
    Controller for Belden CDT Inc. from 2002 to 2005; and Chief
    Financial Officer of Zoltek Companies Inc. from 1996 to 2002.
    Age 47.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;
    Vice President of TNGP, the General Partner of TNCLP, since
    April 2006. Age 51.Douglas 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; Vice President of TNGP, the General Partner of
    TNCLP, since April 2009. Age 44.Edward J. Dillon

Vice President and Controller of Terra since November 2008; Vice
    President of TNGP, the General Partner of TNCLP, since April
    2009. In 1998, he joined the General Electric Company and served
    in numerous roles including Finance Manager for the National
    Broadcasting Company in New York City, progressing to Global
    Controller for the Consumer & Industrial segment in
    Louisville, Kentucky. He joined INVISTA, a subsidiary of Koch
    Industries, Inc. (KII) in 2005 in Wichita as Director of
    Corporate Finance and in 2007, moved to KII Corporation as
    Finance Director. Age 42.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 59.John W. Huey

Vice President, General Counsel and Corporate Secretary of Terra
    since October 2006; Vice President, General Counsel and
    Corporate Secretary of TNGP, the General Partner of TNCLP, 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 62.Geoffrey J. Obeney

Vice President, Information Technology of Terra since February
    of 2008, a Director and member of the Compensation Committee of
    Wireless Ronin (RNIN) from April 2008 to present, Interim CEO of
    Spirit Computing Ltd from November 2005 to January 2008; CIO of
    SEI LLC, a start-up company from October 2004 to October 2005.
    Age 52. 26




---



##### Table of Contents



Richard S. Sanders Jr.

Vice President, Manufacturing of Terra since August 2003; Vice
    President, Manufacturing of TNGP (or its predecessor), the
    General Partner of TNCLP, since October 2003; Plant Manager,
    Verdigris, Oklahoma manufacturing facility from 1995 to August
    2003. Age 52.Earl B. Smith

Vice President, Business Development of Terra since March 2008;
    Registered Financial Advisor with UBS from 2006 to 2008. Various
    positions with Vulcan Materials Company from 1982 to 2005,
    serving last a Global Business Manager from 2003 to 2005. Age
    49.    27




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##### Table of Contents



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. 312009Common Share Price:High

$
30.09


$
30.81


$
37.25


$
43.13Low


14.45



23.60



23.90



31.032008Common Share Price:High

$
53.48


$
56.25


$
57.64


$
30.00Low


33.80



33.85



25.85



11.21       Declared and PaidDate of Declaration

Date of Record

Date of Payment


Per Common ShareFebruary 10, 2009

March 18, 2009

April 7, 2009


$
0.10April 21, 2009

May 20, 2009

June 9, 2009



0.10July 23, 2009

August 20, 2009

September 10, 2009



0.10October 22, 2009

November 23, 2009

December 11, 2009



0.10October 29, 2009

November 23, 2009

December 11, 2009



7.50$
7.90     Declared and PaidDate of Declaration

Date of Record

Date of Payment


Per Common ShareMay 8, 2008

May 28, 2008

June 13, 2008


$
0.10July 24, 2008

August 25, 2008

September 12, 2008



0.10October 23, 2008

November 24, 2008

December 12, 2008



0.10$
0.30    28




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##### Table of Contents



Performance
    Graph
  
      Annual Return
    PercentageYear Ending December 31,Company Name/Index


2005


2006


2007


2008


2009Terra Industries Inc.


(36.94)%


113.93%


298.66%


(64.71)%


141.18%S&P 500 Stock Index


4.91%


15.79%


5.49%


(37.00)%


26.46%New Industry Peer Group


(1.19)%


49.63%


174.63%


(56.30)%


72.12%Former Industry Peer Group


(3.98)%


44.53%


167.38%


(56.87)%


72.14%     29




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##### Table of Contents



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


2005


2006


2007


2008


2009Terra Industries Inc.


$63.06


$134.91


$537.84


$189.81


$457.78S&P 500 Stock Index


$104.91


$121.48


$128.16


$80.74


$102.11New Industry Peer Group


$98.81


$147.84


$406.02


$177.42


$305.37Former Industry Peer Group


$96.02


$138.71


$370.87


$159.95


$275.32       Company Purchases
    of Equity Securities
     30




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##### Table of Contents



ITEM 6.   SELECTED
    FINANCIAL DATA  Managements Discussion and Analysis of Financial
    Condition and Results of Operations Financial Statements and Supplementary Data Form 10-K. Summary of
    Significant Accounting Policies Financial Statements and Supplementary Data Form 10-K
  (In thousands, except per share data)

2009(1)


2008(2)


2007(3)


2006


2005(4)Income Statement Data:Revenues

$
1,581,432


$
2,891,479


$
2,342,929


$
1,819,696


$
1,930,796Gross profit


386,256



863,227



527,508



118,517



154,687Income from continuing operations, net of
    tax(5)


177,499



700,456



271,038



16,015



45,825Amounts attributable to 
    Terra Industries Inc.:Income from continuing operations

$
151,515


$
632,772


$
220,757


$
4,729


$
31,618Income (loss) from discontinued operations


1,118



8,269



(18,861
)


(516
)


(9,531
)Net income attributable to 
    Terra Industries Inc.

$
152,633


$
641,041


$
201,896


$
4,213


$
22,087Net income

$
178,617


$
708,725


$
252,177


$
15,499


$
35,754Less: Net income attributable to noncontrolling interest


25,984



67,684



50,281



11,286



13,667Net income attributable to 
    Terra Industries Inc.

$
152,633


$
641,041


$
201,896


$
4,213


$
22,087Preferred share dividends

$
(56
)

$
(3,876
)

$
(5,100
)

$
(5,100
)

$
(5,134
)Cash dividends declared 
    per common share

$
7.90


$
0.30


$



$



$
Per Share Data:Basic income (loss) per common share attributable to Terra
    Industries Inc.:Continuing operations

$
1.53


$
6.65


$
2.38


$



$
0.28Discontinued operations


0.01



0.09



(0.21
)


(0.01
)


(0.10
)Basic income (loss) per common share

$
1.54


$
6.74


$
2.17


$
(0.01
)

$
0.18Diluted income (loss) per common share attributable toTerra Industries Inc.:Continuing operations

$
1.52


$
6.12


$
2.07


$



$
0.28Discontinued operations


0.01



0.08



(0.17
)


(0.01
)


(0.10
)Diluted income (loss) per common share

$
1.53


$
6.20


$
1.90


$
(0.01
)

$
0.18 31




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##### Table of Contents



Balance Sheet Data:Total assets

$
1,599,743


$
2,113,017


$
1,888,327


$
1,572,713


$
1,523,625Long-term debt and capital leases

$
602,434


$
330,000


$
330,000


$
331,300


$
331,300Preferred stock

$
483


$
1,544


$
115,800


$
115,800


$
115,800   1.
    
    The 2009 selected financial data
    includes (i) the effects of a special cash dividend of
    $7.50 per share (or $748.7 million) declared on
    October 29, 2010 and paid on December 11, 2010;
    (ii) $42.8 million, net of tax ($0.43 per diluted
    share) in U.S. tax expense associated with the repatriation of
    funds to the U.S.; (iii) $32.4 million, net of tax
    ($0.32 per diluted share) for the early retirement of debt; and
    (iv) $11.2 million, net of tax ($0.11 per diluted
    share) of other operating expenses related to the CF Industries
    Holdings, Inc. unsolicited acquisition offers.2.
    
    The 2008 selected financial data
    includes (i) the effects of the Series A Preferred
    Shares inducement pursuant to which a total of 118,400
    Series A Preferred Shares were converted to
    11,887,550 shares of Terra common stock; (ii) the
    effects of instituting a cash dividend per common share of $0.10
    per quarter starting in May 2008; (iii) the full year
    equity earnings effect of the GrowHow joint venture of
    $95.6 million, and (iv) we declared our Beaumont
    methanol plant as discontinued operations in 2008 with all
    fiscal years presented reflecting the classification of
    Beaumonts financial results as discontinued operations.3.
    
    The 2007 selected financial data
    includes (i) the effects of contributing our Terra Nitrogen
    U.K. operations to the GrowHow 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 2007.4.
    
    The 2005 selected financial data
    includes the full year income statement effects of the
    December 21, 2004 acquisition of Mississippi Chemical
    Corporation.5.
    
    These figures are before the
    allocation of noncontrolling interest expense. 32




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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 Form 10-K.
  Introduction
    §
    Company Overview§
    2009 Executive Summary§
    Business Strategy§
    Recent Business Environment§
    Results of Operations§
    Liquidity and Capital Resources§
    Off Balance Sheet Transactions§
    Applications of Critical Accounting Policies and Estimates§
    Quantitative and Qualitative Disclosures about Market Risk 33




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##### Table of Contents



Company
    Overview
  Pending Yara
    Merger
  Subsequent Events,
  Pure Play
    Nitrogen Company
  
  Upgraded Products
  Terras
    Production Locations
  
  
 34




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##### Table of Contents



Supplying
    Industry, Cleaning the Air, Feeding the World
  
  
  
  2009 Executive
    Summary
  Significant
    Results
  §
    During 2009, Terras shareholders achieved a
    141 percent return, including the $7.50 per share special
    cash dividend paid in December 2009. Terras performance
    was industry leading. 35




---



##### Table of Contents



§
    In 2009 we achieved net income attributable to Terra of
    $152.6 million on revenues of $1.6 billion. Net income
    was down $488.4 million year over year, gross margin as a
    percentage of sales decreased from 29.9 percent to
    24.4 percent. Throughout the volatile year, we effectively
    managed the business in order to maximize our gross margin
    potential.§
    Results for 2009 were reduced by special charges totaling
    $86.4 million, net of tax ($0.86 per diluted share),
    related to tax expenses for repatriation of funds to the U.S.
    ($42.8 million), loss on early debt retirement
    ($32.4 million, net of tax) and operating expenses related
    to CFs unsolicited acquisition proposals for Terra
    ($11.2 million, net of tax).§
    We executed our strategy to return value to our shareholders by
    returning $788.6 million of cash to shareholders through
    dividends paid in 2009.§
    In the fourth quarter we refinanced our $330 million
    7.0 percent Unsecured Senior Notes due 2017, with
    $600 million 7.75 percent Unsecured Senior Notes due
    2019 to allow flexibility to execute our strategic growth
    opportunities.§
    Through ongoing tax planning our effective rate, excluding the
    $42.8 million tax repatriation charge, was
    14.0 percent. Including this charge, our effective tax rate
    for 2009 was 32.9 percent.  Significant
    Developments
  §
    On February 12, 2010, Terra entered into an Agreement and
    Plan of Merger with Yara International ASA and an indirect,
    wholly owned subsidiary of Yara. Upon consummation of the Yara
    Merger, each outstanding share of Terra common stock will be
    converted into the right to receive $41.10 in cash, without
    interest and less any taxes required to be withheld.§
    On January 14, 2010, CF withdrew its offer to acquire
    Terra, announced that it was no longer pursuing the proposed
    acquisition and has sold all of its shares of Terra common stock.§
    TET entered into exclusive initial fill agreements with Daimler
    Trucks North America LLC; Volvo Group North America, Inc; Mack
    Trucks, Inc. and Ford Motor Company to supply
    TerraCair®.

    TET has also established a nationwide distribution network
    complete with national providers such as Brenntag North America
    and Excelda Manufacturing Company and a second tier last
    mile distribution network.§
    Our $180 million Woodward UAN expansion is 50 percent
    complete and on budget and we expect it to be completed in the
    third quarter of 2010.  Significant
    Drivers
  §
    Weather conditions added significant variability to the 2009
    planting season; fertilizer application was affected by a wet
    spring, which resulted in delayed planting, followed by a wet
    fall and early snow fall which delayed harvest and prevented
    fall fill.§
    Unprecedented sales volumes and prices in 2008 led to inventory
    channel imbalances in 2009. As a result of carrying higher
    priced inventory in a time of declining fertilizer prices,
    retailers were reluctant to make purchases until their inventory
    levels were drawn down and they had firm commitments from
    growers. However, due to the early inclement weather during
    planting season, growers were equally hesitant to further their
    capital investment in the planting season that was not starting
    off under optimal conditions. 36




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##### Table of Contents



§
    Due to the decrease in fertilizer prices in 2009, there were
    fewer imports attracted to North America.§
    The decline in the global economy continued to impact our
    business. Industrial customers entered curtailments which
    reduced demand. The agriculture industry continued to be
    impacted by the credit crisis at the end of 2008.§
    Overall, the TET business saw growth of 14 percent in total
    revenues during 2009. The advancing enactments of the 2010
    emission standards of the 1990 Amendments of the Clean Air Act
    saw OEMs start to prepare for the new requirements.  Business
    Strategy
    §
    Developing products and markets for upgraded products made from
    ammonia such as UAN, our primary nitrogen fertilizer product,
    and
    TerraCair®,

    a liquid product for the treatment of diesel exhaust in
    automotive applications;§
    Seeking opportunities to expand our existing asset base to take
    advantage of logistical or feedstock advantages both
    domestically and internationally;§
    Managing our North American and international assets to realize
    a rate of return that meets or exceeds our cost of capital
    throughout the business cycle;§
    Maintaining our facilities to be safe, reliable and
    environmentally compliant, cultivation of relationships with
    customers who, due to their physical location, can receive our
    product most economically, and close management of the supply
    chain to keep storage, transportation and other costs at an
    appropriate level; and§
    Continuing to evaluate business opportunities in nitrogen
    categories and businesses that leverage Terras core
    competencies in chemical manufacturing, distribution and product
    application.  Recent Business
    Environment
    Demand
       37




---



##### Table of Contents



Supply
            Natural Gas
    Costs
   38




---



##### Table of Contents



(in $per MMBtu)

March 31,

June 30,

September 30,

December 31,2009

$
4.69


$
5.09


$
5.72


$
5.792008

$
10.50


$
13.22


$
7.90


$
6.09      39




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##### Table of Contents



Results of
    Operations
  Consolidated
    Results
      Year Ended December 31,


2009-2008


2008-2007(In millions, except per share data)

2009


2008


2007


Change


Percent


Change


PercentNet sales

$
1,581.4


$
2,891.5


$
2,342.9


$
(1,310.1
)


-45
%

$
548.6



23
%Cost of sales


1,195.2



2,028.3



1,815.4



(833.1
)


-41
%


212.9



12
%Gross profit


386.2



863.2



527.5



(477.0
)


-55
%


335.7



64
%Gross profit percentage


24.4
%


29.9
%


22.5
%


-5.4
%


-18
%


7.3
%


33
%Selling, general and administrative expenses


67.1



70.7



92.0



(3.6
)


-5
%


(21.3
)


-23
%Other operating expenses


18.0











18.0



NM







0
%Equity in earnings of North American affiliates


(17.7
)


(56.2
)


(16.2
)


38.5



-69
%


(40.0
)


247
%Income from operations


318.8



848.7



451.7



(529.9
)


-62
%


397.0



88
%Interest income (expense), net


(27.7
)


(4.0
)


(11.8
)


(23.8
)


595
%


7.8



-66
%Loss on early retirement of debt


(53.5
)






(38.8
)


(53.5
)


NM



38.8



-100
%Income before income taxes, noncontrolling interest and equity
    earnings (loss) of GrowHow UK Limited


237.6



844.7



401.1



(607.2
)


-72
%


443.6



111
%Income tax provision


(74.3
)


(239.9
)


(127.3
)


165.6



-69
%


(112.6
)


88
%Equity earnings (loss) of GrowHow UK Limited


14.2



95.6



(2.7
)


(81.4
)


-85
%


98.3



NMIncome from continuing operations, net of tax


177.5



700.4



271.1



(523.0
)


-75
%


429.3



158
%Income (loss) from discontinued operations, net of tax


1.1



8.3



(18.9
)


(7.2
)


-87
%


27.2



-144
%Net income


178.6



708.7



252.2



(530.2
)


-75
%


456.5



181
%Less: Net income attributable to noncontrolling interest


26.0



67.7



50.3



(41.8
)


-62
%


17.4



35
%Net income attributable to Terra Industries Inc.

$
152.6


$
641.0


$
201.9


$
(488.4
)


-76
%

$
439.1



217
%Diluted earnings per share

$
1.53


$
6.20


$
1.90Weighted average diluted shares


99,992



103,359



106,454  40




---



##### Table of Contents



2009


2008


2007(quantities in

Sales


Average


Sales


Average


Sales


Averagethousands of tons)

Volumes


Unit
    Price(1)


Volumes


Unit
    Price(1)


Volumes


Unit
    Price(1)Ammonia(2)


1,607


$
313



1,670


$
552



1,765


$
337UAN-32% basis


3,226


$
196



3,917


$
335



4,072


$
226Urea(3)


284


$
307



249


$
467



247


$
333Ammonium nitrate
    (2)(4)


879


$
196



990


$
309



968


$
224   (1)
    
    After deducting
    $150.0 million, $159.0 million and $137.3 million
    outbound freight costs for 2009, 2008 and 2007, respectively.(2)
    
    The 2007 ammonia and AN sales
    volumes and prices have been adjusted to exclude Terras
    U.K. operations for comparability to 2008 and 2009 volumes and
    pricing.(3)
    
    Urea sales volumes and prices
    include granular urea and urea solutions data.(4)
    
    Ammonium nitrate sales volumes and
    prices include agricultural grade AN, industrial grade AN (IGAN)
    and ammonium nitrate solution (ANS). 41




---



##### Table of Contents



Results of
    Operations2009 Compared with 2008
              Discontinued
    Operations
   42




---



##### Table of Contents



Selling, General
    and Administrative Costs and Other Operating Expenses
    Equity Earnings
    of Unconsolidated AffiliatesNorth America
  2,
    Equity Earnings
    of Unconsolidated AffiliatesGrowHow
      Loss on Early
    Retirement of Debt
    Noncontrolling
    Interest
     43




---



##### Table of Contents



Income
    Taxes
        Income Taxes Financial Statements and
    Supplementary Data Form 10-K.
  Results of
    Operations2008 Compared with 2007
      Summary of Significant Accounting Policies Financial Statements and Supplementary Data Form 10-K.
   44




---



##### Table of Contents



Discontinued
    Operations
      Selling, General
    and Administrative Costs
    Equity Earnings
    of Unconsolidated AffiliatesNorth America
    Equity Earnings
    of Unconsolidated AffiliatesGrowHow
    Noncontrolling
    Interest
    Income
    Taxes
      Income Taxes Financial Statements and
    Supplementary Data Form 10-K.
 45




---



##### Table of Contents



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

2009


2008


2007Operating activities

$
204.1


$
483.1


$
747.9Investing activities


(93.1
)


51.6



(94.5
)Financing activities


(572.2
)


(262.2
)


(133.6
)Effect of exchange rate changes on cash


(4.2
)


(4.0
)


(0.6
)Increase (decrease) in cash and cash equivalents

$
(465.4
)

$
268.5


$
519.2   Operating
    Activities
      Investing
    Activities
    Financing
    Activities
   46




---



##### Table of Contents



Long-term Debt
    and Revolving Credit Facilities
          Quantitative and
    Qualitative Disclosures about Market Risk.
    Preferred Shares
    and Common Stock
  thirty-day
 47




---



##### Table of Contents



Share
    Repurchases
    Capital
    Expenditures
        Off-Balance Sheet
    Transactions
   48




---



##### Table of Contents



Contractual
    Obligations
    (in millions)

Payments Due InTotal


2010


2011-2012


2013-2014


ThereafterLong-term debt

$
612.5


$



$



$



$
612.5Interest payments on long-term debt


472.0



47.4



94.8



94.8



235.0Operating leases


157.1



43.3



70.2



33.0



10.6Ammonia purchase
    obligations(1)


923.4



102.6



205.2



205.2



410.4Natural gas and other purchase obligations


348.1



276.4



47.0



24.7



Total(2)

$
2,513.1


$
469.7


$
417.2


$
357.7


$
1,268.5   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
    three year average price paid. This contract expires in October
    2018.2.
    
    The total contractual obligations
    and commitments do not include an ASC 740 liability of
    $62.4 million. (See Note 21, Unrecognized Tax
    Benefit, to our Consolidated Financial Statements included
    in Item 8, Financial Statements and Supplemental
    Data, of this Annual Report on
    Form 10-K.)  Remediation of
    Severnside under Joint Venture Agreement
    Pension Assets
    and Liabilities
      and/or Retirement Benefit Plans Financial Statements and Supplementary
    Data, Form 10-K
  Environmental,
    Health and Safety
   49




---



##### Table of Contents



Noncontrolling
    Interest
        Application of
    Critical Accounting Policies and Estimates
  Summary of Significant Accounting Policies Financial Statements and Supplemental
    Data Form 10-K
  Derivative and
    Financial Instruments
   50




---



##### Table of Contents



Revenue
    Recognition
    Inventory
    Valuation
  first-in,
  Pension Assets
    and Liabilities
    Deferred Income
    Taxes
  Income Taxes
 51




---



##### Table of Contents



Income Taxes Accounting for Uncertainty to Income Taxes
  Plant Turnaround
    Costs
  and/or
  and/or and/or
  Impairment of
    Long-Lived Assets
   52




---



##### Table of Contents



Recently Issued
    Accounting Standards
             53




---



##### Table of Contents



other-than-temporary other-than-temporary other-than-temporary other-than-temporary other-than-temporary
           54




---



##### Table of Contents



No. 2010-06, Improving Disclosures about Fair Value Measurements 820-10
   ITEM 7A. QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Risk Management
    and Financial Instruments
  Derivative Financial
    Instruments Financial Statements and
    Supplementary Data, Form 10-K
      Foreign Currency
    Fluctuations
    Natural Gas
    PricesNorth American Operations
   55




---



##### Table of Contents



Natural Gas
    PricesTrinidad Operation
    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 and biofuel); and§
    Price fluctuations in natural gas, the principal raw material
    used to produce nitrogen fertilizer.    Nitrogen
    Prices
    Interest Rate
    Fluctuations
    Interest Rate
    Sensitivity
  (in millions)

Expected Maturity Date2010


2011


2012


2013


2014


Thereafter


Total


Fair ValueLong-Term DebtSenior Unsecured Notes fixed rate of 7.75% ($US)

$



$



$



$



$



$
600.0


$
600.0


$
639.7Senior Unsecured Notes fixed rate of 7.00% ($US)

$



$



$



$



$



$
12.5


$
12.5


$
12.9  56




---



##### Table of Contents



ITEM 8.   FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K
   57




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
            Internal ControlIntegrated Framework
  
  Omaha, Nebraska
 February 25, 2010
 58




---



##### Table of Contents



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

2009


2008AssetsCash and cash equivalents

$
501,310


$
966,700Accounts receivable, less allowance for 
    doubtful accounts of $1,403 and $290


100,216



130,390Inventories, net


137,073



197,091Margin deposits with derivative counterparties






36,945Other current assets


87,703



61,338Total current assets


826,302



1,392,464Property, plant and equipment, net


456,702



403,313Equity method investments


258,860



270,915Deferred plant turnaround costs, net


25,011



23,467Other assets


32,868



22,858Total assets

$
1,599,743


$
2,113,017LiabilitiesAccounts payable

$
87,898


$
99,893Customer prepayments


39,238



111,592Derivative hedge liabilities


281



125,925Accrued and other current liabilities


78,792



127,770Total current liabilities


206,209



465,180Long-term debt


602,434



330,000Deferred taxes


76,819



61,443Pension liabilities


27,521



9,170Other liabilities


101,126



78,553Total liabilities


1,014,109



944,346Commitments and contingencies(Note 13)






Preferred Sharesliquidation value of $500 and $1,600


483



1,544Common Stockholders EquityCapital stockCommon Shares, authorized 133,500 shares;
    99,841 and 99,330 shares outstanding


152,802



152,111Paid-in capital


446,078



579,164Accumulated other comprehensive loss


(120,362
)


(175,529
)Retained earnings


12,219



507,299Total common stockholders equity


490,737



1,063,045Noncontrolling interest


94,414



104,082Total equity


585,151



1,167,127Total liabilities and equity

$
1,599,743


$
2,113,017   See accompanying Notes to the
    Consolidated Financial Statements
 59




---



##### Table of Contents



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

2009


2008


2007Product revenues

$
1,576,528


$
2,880,255


$
2,335,874Other income


4,904



11,224



7,055Total Revenue


1,581,432



2,891,479



2,342,929Cost and ExpensesCost of sales


1,195,176



2,028,252



1,815,421Selling, general and administrative expenses


67,137



70,736



91,971Other operating expenses


18,000







Equity in earnings of North American affiliates


(17,702
)


(56,237
)


(16,209
)1,262,611



2,042,751



1,891,183Income from operations


318,821



848,728



451,746Interest income


4,136



23,370



17,262Interest expense


(31,860
)


(27,369
)


(29,100
)Loss on early retirement of debt


(53,476
)






(38,836
)Income before income taxes, noncontrolling interest 
    and equity earnings (loss) of GrowHow UK Limited


237,621



844,729



401,072Income tax provision


(74,299
)


(239,851
)


(127,316
)Equity earnings (loss) of GrowHow UK Limited


14,177



95,578



(2,718
)Income from continuing operations, net of tax


177,499



700,456



271,038Income (loss) from discontinued operations, 
    net of tax


1,118



8,269



(18,861
)Net income


178,617



708,725



252,177Less: Net income attributable to the noncontrolling interest


25,984



67,684



50,281Net income attributable to Terra Industries Inc.

$
152,633


$
641,041


$
201,896Amounts attributable to Terra Industries Inc. common
    stockholders:Income from continuing operations, net of tax

$
151,515


$
632,772


$
220,757Income (loss) from discontinued operations, net of tax


1,118



8,269



(18,861
)Less: Inducement payment of preferred stock conversion






5,266



Less: Preferred share dividends


56



3,876



5,100Net income attributable to Terra Industries Inc. 
    common stockholders

$
152,577


$
631,899


$
196,796Basic income per common share attributable to 
    Terra Industries Inc. common stockholders:Continuing operations

$
1.53


$
6.65


$
2.38Discontinued operations


0.01



0.09



(0.21
)Earnings per share

$
1.54


$
6.74


$
2.17Diluted income per common share attributable to 
    Terra Industries Inc. common stockholders:Continuing operations

$
1.52


$
6.12


$
2.07Discontinued operations


0.01



0.08



(0.17
)Earnings per share

$
1.53


$
6.20


$
1.90Weighted Average Shares Outstanding:Basic


99,386



93,827



90,575Diluted


99,992



103,359



106,454   See accompanying Notes to the
    Consolidated Financial Statements
 60




---



##### Table of Contents



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

2009


2008


2007Operating ActivitiesNet income

$
178,617


$
708,725


$
252,177Income (loss) from discontinued operations, net of tax


1,118



8,269



(18,861
)Income from continuing operations, net of tax


177,499



700,456



271,038Adjustments to reconcile income from continuing operations 
    to net cash flows from operating activities:Depreciation of property, plant and equipment and amortization
    of deferred plant turnaround costs


84,840



78,854



94,784Loss on sale of property, plant and equipment


827



2,321



Deferred income taxes


(18,236
)


(15,180
)


103,400Distributions in excess of equity earnings 
    of North American affiliates


4,074



8,343



8,536Equity (earnings) loss of GrowHow UK Limited


(14,177
)


(95,578
)


2,718Non-cash loss on derivatives


675



39,779



1,300Share-based compensation


16,174



8,104



28,102Amortization of intangible and other assets


9,719



8,705



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


4,546







4,662Change in operating assets and liabilities:Accounts receivable


27,874



36,310



(38,180
)Inventories


65,036



(71,422
)


45,772Accounts payable and customer prepayments


(87,584
)


(197,452
)


218,081Margin deposits with derivative counterparties


36,945



(36,307
)


(601
)Derivative hedge liabilities


(125,644
)


111,192



(7,858
)Other assets and liabilities, net


20,435



(103,142
)


(4,924
)Net cash flows from operating
    activities  continuing operations


203,003



474,983



733,784Net cash flows from operating
    activities  discontinued operations


1,118



8,161



14,081Net Cash Flows from Operating Activities


204,121



483,144



747,865Investing ActivitiesCapital expenditures and plant turnaround expenditures


(133,934
)


(89,307
)


(82,376
)Proceeds from the sale of property, plant and equipment


188



2,073



24Distributions received from North American affiliates


14,049



8,180



4,705Cash retained by GrowHow UK Limited










(16,788
)Contribution settlement received from GrowHow UK Limited






27,427



Balancing consideration and other payments from GrowHow UK
    Limited


21,205



61,272



Net cash flows from investing
    activities  continued operations


(98,492
)


9,645



(94,435
)Net cash flows from investing
    activities  discontinued operations


5,356



41,879



Net Cash Flows from Investing Activities


(93,136
)


51,524



(94,435
)Financing ActivitiesIssuance of debt


589,788







330,000Payments under borrowing arrangements


(317,475
)






(331,300
)Payments for debt issuance costs


(14,360
)






(6,444
) 61




---



##### Table of Contents



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

2009


2008


2007Preferred share dividends paid


(56
)


(3,876
)


(5,100
)Inducement payment to preferred stockholders






(5,266
)


Common stock dividends paid


(788,588
)


(28,274
)


Common stock issuances and vestings


(6,642
)


(9,839
)


(1,424
)Excess tax benefits from equity compensation plans


6,304



12,122



3,317Payments under share repurchase program






(157,500
)


(87,426
)Distribution to noncontrolling interests


(41,149
)


(69,557
)


(35,239
)Net Cash Flows from Financing Activities


(572,178
)


(262,190
)


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


(4,197
)


(4,016
)


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


(465,390
)


268,462



519,221Cash and Cash Equivalents at Beginning of Year


966,700



698,238



179,017Cash and Cash Equivalents at End of Year

$
501,310


$
966,700


$
698,238Supplemental cash flow information:Interest paid

$
29,625


$
24,256


$
23,200Income tax refunds received


3,774



1,455



558Income taxes paid


146,048



200,528



22,697Supplemental schedule of non-cash investing and
    financing activities:Conversion of warrants to common stock

$



$
2,496


$
568Conversion of preferred shares to common stock


1,061



114,256



Terra Nitrogen U.K. contributed for equity investment










213,235Supplemental schedule of unconsolidated affiliates
    distributions:Distributions received from North American affiliates

$
35,825


$
72,760


$
29,450Contribution settlement payments, balancing consideration
    and other payments received from GrowHow UK Limited


21,205



88,699



Total Cash Received from Unconsolidated Affiliates

$
57,030


$
161,459


$
29,450   See accompanying Notes to the
    Consolidated Financial Statements
 62




---



##### Table of Contents



Statements of
    Changes in Common Stockholders Equity
  Accumulated





(AccumulatedOther





Deficit)Common Stock


Paid-In


Comprehensive


Noncontrolling


Retained





Comprehensive(in thousands)

Shares


Amount


Capital


Loss


Interest


Earnings


Total


IncomeJanuary 1, 2007


92,630


$
144,976


$
693,896


$
(63,739
)

$
94,687


$
(292,137
)

$
577,683Comprehensive Income:Net income


















50,281



201,896



252,177


$
252,177Foreign currency translation adjustments














(46,882
)










(46,882
)


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














7,372



(1,148
)






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






























227,316Comprehensive income attributable to noncontrolling interest






























(49,133
)Comprehensive income attributable to Terra Industries Inc.





























$
178,183Distributions to noncontrolling interest


















(35,239
)






(35,239
)Preferred 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


$
(44,180
)

$
108,581


$
(95,341
)

$
730,104 63




---



##### Table of Contents



Statements of
    Changes in Common Stockholders Equity
    (contd)
  Accumulated





(AccumulatedOther





Deficit)Common Stock


Paid-In


Comprehensive


Noncontrolling


Retained





Comprehensive(in thousands)

Shares


Amount


Capital


Loss


Interest


Earnings


Total


IncomeJanuary 1, 2008


89,587


$
142,170


$
618,874


$
(44,180
)

$
108,581


$
(95,341
)

$
730,104Comprehensive Income:Net income


















67,684



641,041



708,725


$
708,725Foreign currency translation adjustments














(98,308
)










(98,308
)


(98,308
)Change in fair value of derivatives, net of taxes of ($22,157)














(31,861
)


(2,626
)






(34,487
)


(34,487
)Pension and post-retirement benefit liabilities, net of taxes of
    ($1,947)














(1,180
)










(1,180
)


(1,180
)Comprehensive income






























574,750Comprehensive income attributable to noncontrolling interest






























(65,058
)Comprehensive income attributable to Terra Industries Inc.





























$
509,692Distribution to noncontrolling interest


















(69,557
)






(69,557
)Preferred share dividends






















(3,876
)


(3,876
)Common stock dividends






















(28,274
)


(28,274
)Excess tax benefit










14,603















14,603Exercise of stock options


11



11



23















34Net vested stock


277



475



(12,897
)














(12,422
)Net conversion of warrants


2,961



2,961



(413
)














2,548Inducement of preferred stock


11,887



11,887



102,368











(5,266
)


108,989Shares purchased and retired under the share repurchase program


(5,393
)


(5,393
)


(152,107
)














(157,500
)Share-based compensation










8,713















8,713Adoption of SFAS 158 measurement to date






















(985
)


(985
)December 31, 2008


99,330


$
152,111


$
579,164


$
(175,529
)

$
104,082


$
507,299


$
1,167,127  64




---



##### Table of Contents



Statements of
    Changes in Common Stockholders Equity
    (contd)
  AccumulatedOtherCommon Stock


Paid-In


Comprehensive


Noncontrolling


Retained





Comprehensive(in thousands)

Shares


Amount


Capital


Loss


Interest


Earnings


Total


IncomeJanuary 1, 2009


99,330


$
152,111


$
579,164


$
(175,529
)

$
104,082


$
507,299


$
1,167,127Comprehensive Income:Net income


















25,984



152,633



178,617


$
178,617Foreign currency translation adjustments














25,211











25,211



25,211Change in fair value of derivatives, net of taxes of $28,403














39,746



5,497







45,243



45,243Pension and post-retirement benefit liabilities, net of taxes of
    ($6,710)














(9,790
)










(9,790
)


(9,790
)Comprehensive income






























239,281Comprehensive income attributable to noncontrolling interest






























(31,481
)Comprehensive income attributable to Terra Industries Inc.





























$
207,800Distributions to noncontrolling interest


















(41,149
)






(41,149
)Preferred share dividends






















(56
)


(56
)Common stock dividends










(140,664
)










(647,924
)


(788,588
)Excess tax benefit










6,304















6,304Net vested stock


401



581



(7,223
)














(6,642
)Inducement of preferred stock


110



110



951















1,061Share-based compensation










7,546















7,546Other






















267



267December 31, 2009


99,841


$
152,802


$
446,078


$
(120,362
)

$
94,414


$
12,219


$
585,151   See accompanying Notes to the
    Consolidated Financial Statements
 65




---



##### 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: and/or
   66




---



##### Table of Contents



and/or and/or
            Equity investments: step-up other-than-temporary
    Intangible assetcustomer relationships:
 67




---



##### Table of Contents



Debt issuance costs:
  Impairment of long-lived assets:
  Discontinued
    Operations
  Noncontrolling interests:
  Comprehensive Income,
  Derivatives and financial instruments:
   68




---



##### Table of Contents



Revenue recognition:
      Cost of sales and hedging transactions:
  Share-based compensation: CompensationStock Compensation, Share-Based Compensation
  Per share results:
  Estimates:
  Recently issued accounting standards:
 69




---



##### Table of Contents



70




---



##### Table of Contents



other-than-temporary other-than-temporary other-than-temporary other-than-temporary other-than-temporary
            No. 2010-06, Improving Disclosures about Fair Value Measurements 820-10
 71




---



##### Table of Contents



2. Discontinued
    Operations
    asset-by-asset
  Summarized
    Financial Results of Discontinued Operations
  Year Ended December 31,(in thousands)

2009


2008


2007Operating revenue

$
1,848


$
18,333


$
17,137Operating and other expenses






(4,574
)


(48,519
)Pretax income (loss) from operations of
    discontinued components


1,848



13,759



(31,382
)Income tax (expense) benefit


(730
)


(5,490
)


12,521Income (loss) from discontinued operations

$
1,118


$
8,269


$
(18,861
)     3. Earnings Per
    Share
   72




---



##### Table of Contents



(in thousands, except per-share
    data)

2009


2008


2007Basic income per common share attributed to
    Terra Industries Inc. common stockholders:Income from continuing operations attributable to
    Terra Industries Inc.

$
151,515


$
632,772


$
220,757Less: Preferred share dividends


(56
)


(3,876
)


(5,100
)Inducement of preferred shares






(5,266
)


Income from continuing operations
    available to common stockholders


151,459



623,630



215,657Income (loss) from discontinued operations
    available to common stockholders


1,118



8,269



(18,861
)Income available to
    common stockholders

$
152,577


$
631,899


$
196,796Weighted average shares outstanding


99,386



93,827



90,575Income per share  continuing operations

$
1.53


$
6.65


$
2.38Income (loss) per share  discontinued operations


0.01



0.09



(0.21
)Net income per share

$
1.54


$
6.74


$
2.17Diluted income per common share attributed to
    Terra Industries Inc. common shareholders:Income from continuing operations available to
    common stockholders

$
151,459


$
623,630


$
215,657Add: Preferred share dividends


56



3,876



5,100Inducement of preferred shares






5,266



Income available to common stockholders
    and assumed conversions

$
151,515


$
632,772


$
220,757Weighted average shares outstanding


99,386



93,827



90,575Add incremental shares from assumed conversions:Preferred Shares


128



8,090



12,048Nonvested stock


478



619



823Common stock options






1



111Common stock warrants






822



2,897Dilutive potential common shares


99,992



103,359



106,454Income per share  continuing operations

$
1.52


$
6.12


$
2.07Income (loss) per share  discontinued operations


0.01



0.08



(0.17
)Net income per share

$
1.53


$
6.20


$
1.90  73




---



##### Table of Contents



Common Stockholders
    Equity
      4.
    Inventories
    (in thousands)

2009


2008Raw materials

$
19,757


$
17,805Supplies


37,770



33,825Finished goods


79,546



145,461Total

$
137,073


$
197,091   5. Derivative
    Financial Instruments
     74




---



##### Table of Contents



1.
    The item to be hedged must expose us to currency, interest or
    price risk;2.
    It must be probable that the results of the hedge position
    substantially offset the effects of currency, interest or price
    changes on the hedged item (i.e., there is a high correlation
    between the hedge position and changes in market value of the
    hedge item); and3.
    The derivative financial instrument must be designated as a
    hedge of the item at the inception of the hedge.            75




---



##### Table of Contents



Asset Derivatives
    (a)December 31,

December 31,Derivative Instrument

Location

2009

2008Commodity Derivatives


Other current assets


$
9,076


$
25,773   Liability Derivatives
    (a)December 31,

December 31,Derivative Instrument

Location

2009

2008Commodity Derivatives


Derivative hedge liabilities


$
(281
)

$
(125,925
)   (a)
    
    Amounts are disclosed at gross
    fair value as required by the Derivative and Hedging topic of
    the FASB Accounting Standards Codification. All of our commodity
    derivatives are designated as cash flow hedging instruments. The
    deferred taxes related to these commodity derivatives for the
    periods ended December 31, 2009 and 2008 were
    $(3.2) million and $25.2 million, respectively.             76




---



##### Table of Contents



Year Ended
    December 31,Location of Gain

Amount of Gain (Loss)

Location ofAmount of Gain (Loss)

(Loss) Reclassified

Reclassified from AOCI

Gain (Loss)

Amount of Gain (Loss)Recognized in OCI

from AOCI into

into Income

Recognized

Recognized in
    Income(b)2009

2008

Income(a)

2009

2008

in
    Income(b)

2009

2008$
8,367


$
(65,279
)


Cost of Sales


$
(112,119
)

$
(172,521
)


Cost of Sales


$
(675
)

$
(7,332
)   (a)
    
    Effective portion of gain (loss)(b)
    
    The amount of gain or (loss)
    recognized in the income represents $(0.7) million and
    $(3.0) million related to the ineffective portion of the
    hedging relationships and $0.0 million and
    $(4.3) million related to the amount excluded from the
    assessment of hedge effectiveness.  marked-to-market
  6. Fair Value
    Measurements, Financial Instruments and Concentrations of Credit
    Risk
      Level 1
  Level 2
  Level 3
   77




---



##### Table of Contents



Quoted Market


Significant Other


SignificantPrices in Active


Observable


UnobservableMarkets


Inputs


Inputs(in thousands)

(Level 1)


(Level 2)


(Level 3)AssetsMoney market funds

$
280,470


$



$
Derivative contracts






9,076



Total

$
280,470


$
9,076


$
LiabilitiesDerivative contracts

$



$
(281
)

$
Total

$



$
(281
)

$
     Quoted Market


Significant Other


SignificantPrices in Active


Observable


UnobservableMarkets


Inputs


Inputs(in thousands)

(Level 1)


(Level 2)


(Level 3)AssetsMoney market funds

$
755,501


$



$
Derivative contracts






25,773



Total

$
755,501


$
25,773


$
LiabilitiesDerivative contracts

$



$
(125,925
)

$
Total

$



$
(125,925
)

$
     2009


2008Carrying


Fair


Carrying


Fair(in millions)

Amount


Value


Amount


ValueFinancial AssetsCash and cash equivalents

$
501.3


$
501.3


$
966.7


$
966.7Margin deposits with derivative counterparties










36.9



36.9Financial liabilitiesLong-term debt


602.4



652.6



330.0



241.3Preferred shares


0.5



1.6



1.5



2.7  78




---



##### Table of Contents



§
    Cash and receivables:The carrying amounts approximate
    fair value because of the short maturity of those instruments.§
    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:
  7. Property,
    Plant and Equipment, Net
    (in thousands)

2009


2008Land

$
8,444


$
8,416Buildings and improvements


60,985



57,352Plant and equipment


948,441



862,057Construction in progress


78,274



46,3831,096,144



974,208Less accumulated depreciation and amortization


(639,442
)


(570,895
)Total

$
456,702


$
403,313     8. Equity
    Investments
  North
    America
  2 2
 79




---



##### Table of Contents



(in thousands)

2009


2008


2007Condensed income statement information:Net sales

$
168,234


$
380,540


$
151,723Net income

$
48,554


$
123,019


$
38,411Terras equity in earnings of North American affiliates

$
17,702


$
56,237


$
16,209   (in thousands)

2009


2008Condensed balance sheet information:Current assets

$
52,701


$
50,582Long-lived assets


156,825



173,631Total assets

$
209,526


$
224,213Current liabilities

$
23,041


$
20,212Long-term liabilities


19,083



19,380Equity


167,402



184,621Total liabilities and equity

$
209,526


$
224,213   step-up
      United
    Kingdom
     80




---



##### Table of Contents



(in thousands)

2009


2008


2007Condensed income statement information:Net sales

$
494,202


$
1,111,272


$
233,103Net income

$
38,691


$
191,781


$
4,253Terras equity in earnings (losses)
    of GrowHow

$
14,177


$
95,578


$
(2,718
)   (in thousands)

2009


2008Condensed balance sheet information:Current assets

$
206,225


$
212,992Long-lived assets


288,101



239,589Total assets

$
494,326


$
452,581Current liabilities

$
82,877


$
86,471Long-term liabilities


186,257



132,754Equity


225,192



233,356Total liabilities and equity

$
494,326


$
452,581    81




---



##### Table of Contents



9. Revolving
    Credit Facility and Long-Term Debt
    (in thousands)

2009


2008Unsecured Senior Notes, 7.0%
    due 2017

$
12,525


$
330,000Unsecured Senior Notes, 7.75%
    due 2019


600,000



612,525



330,000Less net unamortized debt discount


(10,091
)


Less current maturities






Total long-term debt

$
602,434


$
330,000   Guarantor
    Subsidiaries,
    Subsequent Events
     82




---



##### Table of Contents



Subsequent
    Events
  10. Turnaround
    Costs
    Turnaround





CurrencyBeginning


Costs


Turnaround


Translation


Ending(in thousands)

Balance


Capitalized


Amortization


Adjustments


BalanceYear ended:December 31, 2009

$
23,467


$
25,427


$
(24,267
)

$
384


$
25,011December 31, 2008

$
42,190


$
10,125


$
(27,017
)

$
(1,831
)

$
23,467   11.
    Accrued and Other
    Current Liabilities    (in thousands)

2009


2008Payroll and benefit costs

$
18,913


$
27,104Accrued CF defense costs


14,730



Income taxes payable


9,441



63,999Accrued interest


8,898



9,748Accrued property taxes


3,554



3,291Current accrued phantom shares


3,449



4,341Accrued consulting


1,972



1,390Deferred revenue


1,530



3,346Unrecognized tax benefit (see Note 21)


1,506



Other


14,799



14,551Total

$
78,792


$
127,770  83




---



##### Table of Contents



12. Other
    Liabilities
   (In thousands)

2009


2008Unrecognized tax benefit (See Note 21)

$
60,904


$
35,949Long-term medical and closed facilities reserve


21,483



23,887Long-term deferred revenue


9,178



10,488Accrued phantom shares


2,355



2,430Other


7,206



5,799Total

$
101,126


$
78,553   13. Commitments
    and Contingencies
      (in thousands)2010

$
43,2732011


39,1852012


31,0582013


21,2002014


11,7412015 and thereafter


10,600Net minimum lease payments

$
157,057       (in thousands)2010

$
378,9612011


126,9872012


125,1882013


118,3172014


111,6432015 and thereafter


410,400Total obligations

$
1,271,496      84




---



##### Table of Contents



14. Preferred
    Shares
    2009


2008Number


Carrying


Number


Carrying(in thousands)

of shares


Value


of shares


ValueSeries A Preferred Shares 
    (120,000 shares authorized, 
    $1,000 per share liquidation value)


500


$
483



1,600


$
1,544   Subsequent
    Events
 85




---



##### Table of Contents



15. Common
    Stockholders Equity
      Declared and PaidDate of Declaration

Date of Record

Date of Payment

Per Common ShareFebruary 10, 2009

March 18, 2009

April 7, 2009

$
0.10April 21, 2009

May 20, 2009

June 9, 2009


0.10July 23, 2009

August 20, 2009

September 10, 2009


0.10October 22, 2009

November 23, 2009

December 11, 2009


0.10October 29, 2009

November 23, 2009

December 11, 2009


7.50$
7.90     Declared and PaidDate of Declaration

Date of Record

Date of Payment

Per Common ShareMay 8, 2008

May 28, 2008

June 13, 2008

$
0.10July 24, 2008

August 25, 2008

September 12, 2008


0.10October 23, 2008

November 24, 2008

December 12, 2008


0.10$
0.30        86




---



##### Table of Contents



16. Share-Based
    Compensation
            CompensationStock Compensation,
 87




---



##### Table of Contents



Year ended December 31,(in thousands)

2009


2008


2007Compensation cost charged to SG&A expense

$
16,174


$
8,104


$
31,452Total compensation cost charged to income

$
16,174


$
8,104


$
31,452Income tax benefit

$
6,389


$
2,836


$
11,008   Nonvested
    Stock Shares and Phantom Share Awards
    year-over-year
    Weighted AverageGrant-Date(in thousands, except fair values)

Shares


Fair ValueOutstanding at January 1, 2009


897


$
14.49Granted


274



25.87Vested


(624
)


14.25Terminated






Outstanding at December 31, 2009


547


$
27.66      88




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##### Table of Contents



17. Retirement
    Benefit Plans
        (in thousands)

2009


2008


2007Service cost

$
2,754


$
3,665


$
3,113Interest cost


19,339



23,239



17,648Adjustment for measurement date change






(5,380
)


Expected return on plan assets


(19,125
)


(18,804
)


(18,063
)Amortization of prior service cost


(38
)


(37
)


(36
)Amortization of actuarial loss


963



646



1,871Pension expense

$
3,893


$
3,329


$
4,533    89




---



##### Table of Contents



(in thousands)

U.S.

Canada

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

$251,835

$40,170

$292,005Service cost

1,725

1,029

2,754Interest cost

16,440

2,899

19,339Actuarial gain

24,706

(738)

23,968Foreign currency exchange rate changes



6,751

6,751Benefits paid

(15,861)

(1,509)

(17,370)Projected benefit obligationend of year

278,845

48,602

327,447Change in Plan AssetsFair value plan assetsbeginning of year

243,709

41,542

285,251Actual return on plan assets

22,146

5,931

28,077Foreign currency exchange rate changes



7,351

7,351Employer contribution

706

1,686

2,392Benefits paid

(15,861)

(1,509)

(17,370)Fair value plan assetsend of year

250,700

55,001

305,701Funded Status

(28,145)

6,399

(21,746)Unrecognized net actuarial loss

37,236

5,341

42,577Unrecognized prior service cost

(199)



(199)Prepaid benefit cost

$ 8,892

$ 11,740

$ 20,632  90




---



##### Table of Contents



(in thousands)

U.S.


Canada


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

$
253,446


$
52,171


$
305,617Service cost


2,134



1,531



3,665Interest cost


19,808



3,431



23,239Actuarial gain


(4,118
)


(4,501
)


(8,619
)Foreign currency exchange rate changes






(10,131
)


(10,131
)Benefits paid


(19,435
)


(2,331
)


(21,766
)Projected benefit obligationend of year


251,835



40,170



292,005Change in Plan AssetsFair value plan assetsbeginning of year


250,319



56,000



306,319Actual return on plan assets


12,137



(3,395
)


8,742Foreign currency exchange rate changes






(10,634
)


(10,634
)Employer contribution


688



1,902



2,590Benefits paid


(19,435
)


(2,331
)


(21,766
)Fair value plan assetsend of year


243,709



41,542



285,251Funded Status


(8,126
)


1,372



(6,754
)Unrecognized net actuarial loss


18,394



9,147



27,541Unrecognized prior service cost


(236
)






(236
)Prepaid benefit cost

$
10,032


$
10,519


$
20,551     (in thousands)

2009


2008Accrued (prepaid) benefit cost

$
(20,632
)

$
(20,551
)Accumulated other comprehensive loss


26,093



17,179Deferred tax asset


16,285



10,126Funding subsequent to valuation






Amount recognized (net)


21,746



6,754Pension asset


6,481



3,275Less: current portion


(706
)


(859
)Pension liabilities (gross)

$
27,521


$
9,170      91




---



##### Table of Contents



2009


2008


2007Weighted average discount rate


5.9
%


6.7
%


6.3
%Long-term per annum compensation increase


3.5
%


4.1
%


3.6
%Long-term return on plan assets


6.2
%


6.6
%


5.4
%         2009


2008Asset AllocationEquities


12.3
%


11.3
%Bonds


81.1
%


81.7
%Cash and cash equivalents


6.6
%


7.0
%100.0
%


100.0
%   Fair Value
    Measurements
  CompensationRetirement Benefits
  Cash and cash equivalents
  Corporate, state, mortgage, and municipal debt
    securities non-U.S. corporations,
  Common collective trusts
 92




---



##### Table of Contents



Registered investment companies
  Common and preferred stock non-U.S. corporations.
  Government securities non-U.S. governments.
  Options, futures, and swaps
    Quoted Prices in Active





SignificantMarkets for Identical


Significant Other


UnobservableAssets


Observable Inputs


Inputs(in thousands)

Level 1


Level 2


Level 3


TotalCash and cash equivalents

$
7,396


$
12,652


$



$
20,048Corporate debt instruments






170,396







170,396Exchange-traded mutual funds


77,467











77,467Collective mutual funds






88







88Corporate and preferred stock






562







562U.S. government securities






6,985







6,985Non-U.S.
    government securities






7,729







7,729State and municipal securities






12,949







12,949Mortgage obligations






5,496







5,496Options, futures and swaps


(265
)


4,246







3,981Totals

$
84,598


$
221,103


$



$
305,701  93




---



##### Table of Contents



(in thousands)

PaymentsEstimated Future Benefit Payments2010

$
19,0852011


19,7052012


20,5512013


21,2872014


22,1392015-2019


122,189       (in thousands)Net actuarial loss

$
42,577Net prior service cost (credit)


(199
)Net transition obligation (asset)


$
42,378     (in thousands)Amortization of net transition obligation

$
Amortization of prior service cost


(40
)Amortization of net losses


928$
888    94




---



##### Table of Contents



18.
    Post-Retirement Benefits
      (in thousands)

2009


2008Change in Benefit ObligationProjected benefit obligationbeginning of year

$
4,702


$
5,235Service cost


11



17Interest cost


309



397Participants contributions


149



194Actuarial loss


1,592



183Foreign currency exchange rate changes


135



(198
)Benefits paid


(1,063
)


(1,126
)Projected benefit obligationend of year


5,835



4,702Change in Plan AssetsFair value plan assetsbeginning of year






Employer contribution


914



932Participants contributions


149



194Benefits paid


(1,063
)


(1,126
)Fair value plan assetsend of year






Funded Status


(5,835
)


(4,702
)Unrecognized net actuarial loss


3,140



1,645Unrecognized prior service cost


536



605Employer contribution






Accrued benefit cost

$
(2,158
)

$
(2,452
)     (in thousands)

2009


2008


2007Service cost

$
11


$
17


$
12Interest cost


309



397



311Adjustment for measurement date change






(65
)


Amortization of prior service cost


69



69



69Amortization of actuarial gain


103



96



89Post-retirement medical benefit expense

$
492


$
514


$
481      95




---



##### Table of Contents



Estimated future
    benefit payments
  (in thousands)

Payments2010

$
5712011


6112012


6472013


6562014


6752015-2019


3,321       (in thousands)Net actuarial loss

$
3,140Net prior service cost


536Net transition obligation


$
3,676     (in thousands)Amortization of net transition obligation

$
Amortization of prior service cost


69Amortization of net losses


224$
293  96




---



##### Table of Contents



19. Comprehensive
    Income
    Year Ended December 31,(in thousands)

2009


2008


2007Net income

$
178,617


$
708,725


$
252,177Changes in cumulative foreign currency
    translation adjustment


25,211



(98,308
)


(46,882
)Changes in market value of derivative financial instruments
    classified as cash flow hedges, net of tax


45,243



(34,487
)


6,224Changes in pension and post-retirement benefit liabilities, net
    of tax


(9,790
)


(1,180
)


15,797Comprehensive income


239,281



574,750



227,316Comprehensive income attributable to noncontrolling interest


(31,481
)


(65,058
)


(49,133
)Comprehensive income attributable to Terra Industries Inc.

$
207,800


$
509,692


$
178,183     Year Ended December 31,(in thousands)

2009


2008


2007Noncontrolling interest, January 1

$
104,082


$
108,581


$
94,687Net income attributable to noncontrolling interest


25,984



67,684



50,281Distributions to noncontrolling interests


(41,149
)


(69,557
)


(35,239
)Changes in market value of derivative financial instruments
    classified as cash flow hedges, net of tax, attributable to the
    noncontrolling interest


5,497



(2,626
)


(1,148
)Noncontrolling interest, December 31

$
94,414


$
104,082


$
108,581   20.
    Income
    Taxes    (in thousands)

2009


2008


2007Current:Federal

$
73,537


$
210,635


$
3,892International


10,739



24,678



6,056State


8,259



19,718



13,96892,535



255,031



23,916Deferred:Federal


(14,213
)


(11,974
)


87,209International


(3,832
)


3,246



14,653State


(191
)


(6,452
)


1,538(18,236
)


(15,180
)


103,400Total income tax provision

$
74,299


$
239,851


$
127,316  97




---



##### Table of Contents



(in thousands)

2009


2008


2007Income before income taxes:Domestic

$
273,408


$
687,718


$
270,857International


(47,594
)


184,905



77,216225,814



872,623



348,073Statutory income tax expense:Domestic


107,732



270,541



108,071International


(12,911
)


29,392



24,69994,821



299,933



132,770Nontaxable foreign earnings


(52,432
)


(33,299
)


Repatriation of foreign earnings


42,778







State and federal tax credits


(9,707
)


(19,510
)


Domestic production activity deduction


(5,348
)


(13,275
)


Change in statutory tax rates


2,215



(507
)


(4,043
)Valuation allowance


6,518



414



4,178Foreign tax credit










(6,765
)Other


(4,546
)


6,095



1,176Income tax expense

$
74,299


$
239,851


$
127,316  98




---



##### Table of Contents



(in thousands)

2009


2008Current deferred tax assetAccrued liabilities

$
15,715


$
6,428Inventory valuation


1,419



760Unsettled derivative losses


1,973



Net current deferred tax asset


19,107



7,188Non-current deferred tax liability 
    Depreciation


(90,464
)


(94,467
)Investments in partnership


(2,755
)


(1,195
)Investment in affiliates


(2,278
)


(2,578
)Intangible asset






(732
)Unfunded employee benefits


(4,755
)


(5,723
)Discontinued business costs


7,819



8,664Deferred revenueslong-term


3,566



4,079NOL, capital loss and tax credit carryforwards


38,703



32,633Valuation allowance


(38,672
)


(32,154
)Accumulated other comprehensive income


14,510



36,203Other, net


(2,493
)


(6,173
)Net noncurrent deferred tax liability


(76,819
)


(61,443
)Net deferred tax liability

$
(57,712
)

$
(54,255
)    99




---



##### Table of Contents



21. Unrecognized
    Tax Benefit
  Income Taxes Accounting for Uncertainty to Income Taxes
    (in thousands)

2009


2008


2007Unrecognized tax benefits at January 1

$
33,560


$
33,560


$
33,560Gross increases (decreases)  tax positions in
    prior periods


27,415







Gross increases (decreases)  tax positions in
    current period


898







Decreases relating to settlements with tax authorities










Decreases from the lapse of applicable statue of limitations


(6,712
)






Unrecognized tax benefits at December 31

$
55,161


$
33,560


$
33,560Accrued interest and penalties


7,249



2,389



Total ASC 740 liability

$
62,410


$
35,949


$
33,560        100




---



##### Table of Contents



22. Industry
    Segment Data
      Revenues


Long-lived AssetsYear Ended December 31,


December 31,(in thousands)

2009


2008


2007


2009


2008(1)


2007(1)United States

$
1,522,126


$
2,785,269


$
1,954,060


$
571,446


$
523,968


$
572,329Canada


59,306



106,210



69,760



201,995



196,585



286,088United
    Kingdom(1)










319,109











$
1,581,432


$
2,891,479


$
2,342,929


$
773,441


$
720,553


$
858,417   1.
    
    On September 14, 2007, we
    completed the formation of GrowHow UK Limited (GrowHow), a joint
    venture between Terra and Kemira GrowHow Oyj. Pursuant to the
    joint venture agreement, we contributed our United Kingdom
    subsidiary Terra Nitrogen (UK) Limited to the joint venture for
    a 50 percent interest. Subsequent to the formation, we have
    accounted for our investment in GrowHow as an equity method
    investment and it is included in our Canadian long-lived assets.  23.
    Noncontrolling interest
        24. Guarantor
    Subsidiaries
   101




---



##### Table of Contents



Revolving Credit
    Facility and Long-Term Debt
  Guarantor subsidiaries include: Discontinued Operations
 102




---



##### Table of Contents



Condensed
    Consolidating Statement of Financial Position at
    December 31, 2009:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedAssetsCash and cash equivalents

$



$
74,541


$
180,140


$
246,629


$



$
501,310Accounts receivable, net










59,120



41,096







100,216Inventories, net










86,291



50,782







137,073Other current assets


52,850



532



14,756



19,565







87,703Total current assets


52,850



75,073



340,307



358,072







826,302Property, plant and equipment, net






6,037



322,062



128,603







456,702Equity method investments










9,462



249,398







258,860Other current assets






15,588



21,434



20,857







57,879Investments in and advances to (from) affiliates


643,853



849,707



2,975,069



533,631



(5,002,260
)


Total Assets

$
696,703


$
946,405


$
3,668,334


$
1,290,561


$
(5,002,260
)

$
1,599,743LiabilitiesAccounts payable

$
277


$



$
60,042


$
27,579


$



$
87,898Customer prepayments










14,857



24,381







39,238Derivative hedge liabilities


130







85



66







281Accrued and other current liabilities


21,860



8,375



32,370



16,187







78,792Total current liabilities


22,267



8,375



107,354



68,213







206,209Long-term debt






602,434















602,434Deferred taxes


70,564











6,255







76,819Pension and other liabilities


112,652







10,187



5,808







128,647Total liabilities


205,483



610,809



117,541



80,276







1,014,109Preferred Shares


483



















483Common Stockholders EquityCommon stock


152,802







73



92,262



(92,335
)


152,802Paid in capital


446,078



150,218



1,892,773



699,191



(2,742,182
)


446,078Accumulated other comprehensive loss


(120,362
)










(88,563
)


88,563



(120,362
)Retained earnings


12,219



166,929



1,581,982



507,395



(2,256,306
)


12,219Total common stockholders equity


490,737



317,147



3,474,828



1,210,285



(5,002,260
)


490,737Noncontrolling interest






18,449



75,965











94,414Total equity


490,737



335,596



3,550,793



1,210,285



(5,002,260
)


585,151Total liabilities and equity

$
696,703


$
946,405


$
3,668,334


$
1,290,561


$
(5,002,260
)

$
1,599,743  103




---



##### Table of Contents



Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2009:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenuesProduct revenues

$



$



$
908,089


$
668,439


$



$
1,576,528Other income










3,544



1,360







4,904Total revenues










911,633



669,799







1,581,432Cost and ExpenseCost of sales






333



699,811



495,032







1,195,176Selling, general and administrative expenses


2,726



(8,309
)


41,979



30,741







67,137Other operating expenses


18,000



















18,000Equity earnings of North American affiliates










(1,219
)


(16,483
)






(17,702
)Total cost and expenses


20,726



(7,976
)


740,571



509,290







1,262,611Income (loss) from operations


(20,726
)


7,976



171,062



160,509







318,821Interest income


157



1,970



996



1,013







4,136Interest expense


(1,860
)


(29,667
)


103,626



(103,959
)






(31,860
)Loss on early retirement of debt






(53,476
)














(53,476
)Income (loss) before income taxes, noncontrolling interest and
    equity earnings


(22,429
)


(73,197
)


275,684



57,563







237,621Income tax benefit (provision)


5,039



(10,374
)


(61,931
)


(7,033
)






(74,299
)Equity earnings of unconsolidated affiliates


170,023



285,609







14,177



(455,632
)


14,177Income from continuing operations, net of tax


152,633



202,038



213,753



64,707



(455,632
)


177,499Income from discontinued operations, net of tax










1,118











1,118Net income


152,633



202,038



214,871



64,707



(455,632
)


178,617Less: Net income attributable to the noncontrolling interest






5,015



20,969











25,984Net Income attributable to Terra Industries Inc.

$
152,633


$
197,023


$
193,902


$
64,707


$
(455,632
)

$
152,633  104




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2009:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedOperating ActivitiesNet income

$
152,633


$
202,038


$
214,871


$
64,707


$
(455,632
)

$
178,617Income from discontinued operations, net of tax










1,118











1,118Income from continuing operations, 
    net of tax


152,633



202,038



213,753



64,707



(455,632
)


177,499Adjustments to reconcile income from continuing operations to
    net cash flows from operating activities:Depreciation and amortization










55,976



28,864







84,840Loss on sale of property, plant and equipment










767



60







827Deferred income taxes


(18,236
)


















(18,236
)Distributions in excess of (less than) equity earnings


(170,023
)


(285,609
)


186



3,888



455,632



4,074Equity earnings of GrowHow UK Limited














(14,177
)






(14,177
)Non-cash loss on derivatives


675



















675Share-based compensation


16,174



















16,174Amortization of intangible and other assets






121



7,410



2,188







9,719Non-cash loss on early retirement of debt






4,546















4,546Change in operating assets and liabilities 
    continuing operations


28,981



41,260



(72,981
)


(60,198
)






(62,938
)Net cash flows from operating activities  continuing
    operations


10,204



(37,644
)


205,111



25,332







203,003Net cash flows from operating activities 
    discontinued operations










1,118











1,118Net Cash Flows from 
    Operating Activities


10,204



(37,644
)


206,229



25,332







204,121Investing ActivitiesCapital expenditures and plant turnaround expenditures










(92,991
)


(40,943
)






(133,934
)Proceeds from the sale of property, plant and equipment










102



86







188Distributions received from North American affiliates










470



13,579







14,049Balancing consideration and other payments received from GrowHow
    UK Limited














21,205







21,205  105




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows at December 31, 2009
    (continued):
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet cash flows from investing activities  continuing
    operations










(92,419
)


(6,073
)






(98,492
)Net cash flows from investing activities 
    discontinued operations










5,356











5,356Net Cash Flows from Investing Activities










(87,063
)


(6,073
)






(93,136
)Financing ActivitiesIssuance of debt






589,788















589,788Payments under borrowing arrangements






(317,475
)














(317,475
)Payments for debt issuance costs






(14,360
)














(14,360
)Preferred share dividends paid


(56
)


















(56
)Common stock dividends paid


(788,588
)


















(788,588
)Common stock issuances and vestings


(6,642
)


















(6,642
)Change in investments and advances from (to) affiliates


778,778



(469,767
)


(190,250
)


(118,761
)






Excess tax benefits from equity compensation plans


6,304



















6,304Distributions to noncontrolling interests






(7,715
)


(33,434
)










(41,149
)Net Cash Flows from Financing Activities


(10,204
)


(219,529
)


(223,684
)


(118,761
)






(572,178
)Effect of Foreign Exchange Rate on Cash














(4,197
)






(4,197
)Decrease in Cash and Cash Equivalents






(257,173
)


(104,518
)


(103,699
)






(465,390
)Cash and Cash Equivalents at Beginning of Year






331,714



284,658



350,328







966,700Cash and Cash Equivalents at End of Year

$



$
74,541


$
180,140


$
246,629


$



$
501,310  106




---



##### Table of Contents



Condensed
    Consolidating Statement of Financial Position at
    December 31, 2008:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedAssetsCash and cash equivalents

$



$
331,714


$
284,658


$
350,328


$



$
966,700Accounts receivable, net


9



74



73,358



56,949







130,390Inventories, net










111,295



85,796







197,091Margin deposits with derivative counterparties






36,945















36,945Other current assets


23,807



10,440



13,596



13,495







61,338Total current assets


23,816



379,173



482,907



506,568







1,392,464Property, plant and equipment, net






6,037



288,449



108,827







403,313Equity method investments










10,117



260,798







270,915Other current assets


2,230



7,156



21,146



15,793







46,325Investments in and advances to (from) affiliates


1,252,608



94,542



3,103,357



588,172



(5,038,679
)


Total Assets

$
1,278,654


$
486,908


$
3,905,976


$
1,480,158


$
(5,038,679
)

$
2,113,017LiabilitiesAccounts payable

$
205


$
62


$
70,473


$
29,153


$



$
99,893Customer prepayments










58,922



52,670







111,592Derivative hedge liabilities


35,254



7,476



39,880



43,315







125,925Accrued and other current liabilities


51,861



8,947



42,261



24,701







127,770Total current liabilities


87,320



16,485



211,536



149,839







465,180Long-term debt






330,000















330,000Deferred taxes


51,770











9,673







61,443Pension and other liabilities


74,975







10,983



1,765







87,723Total liabilities


214,065



346,485



222,519



161,277







944,346Preferred Shares


1,544



















1,544Common Stockholders EquityCommon stock


152,111







73



83,332



(83,405
)


152,111Paid in capital


579,164



150,218



2,201,646



963,435



(3,315,299
)


579,164Accumulated other comprehensive loss


(175,529
)










(170,574
)


170,574



(175,529
)Retained earnings (accumulated deficit)


507,299



(30,094
)


1,397,955



442,688



(1,810,549
)


507,299Total common stockholders equity


1,063,045



120,124



3,599,674



1,318,881



(5,038,679
)


1,063,045Noncontrolling interest






20,299



83,783











104,082Total equity


1,063,045



140,423



3,683,457



1,318,881



(5,038,679
)


1,167,127Total liabilities and equity

$
1,278,654


$
486,908


$
3,905,976


$
1,480,158


$
(5,038,679
)

$
2,113,017  107




---



##### Table of Contents



Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2008:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenuesProduct revenues

$



$



$
1,709,509


$
1,170,746


$



$
2,880,255Other income










8,064



3,160







11,224Total revenues










1,717,573



1,173,906







2,891,479Cost and ExpenseCost of sales






333



1,368,161



659,758







2,028,252Selling, general and administrative expenses


2,776



(11,595
)


47,326



32,229







70,736Equity (earnings) loss of North American affiliates










(58,923
)


2,686







(56,237
)Total cost and expenses


2,776



(11,262
)


1,356,564



694,673







2,042,751Income (loss) from operations


(2,776
)


11,262



361,009



479,233







848,728Interest income






13,044



777



9,549







23,370Interest expense


(1,860
)


(24,840
)


8,012



(8,681
)






(27,369
)Income (loss) before income taxes and noncontrolling interest


(4,636
)


(534
)


369,798



480,101







844,729Income tax benefit (provision)


1,368



(104,556
)


(109,165
)


(27,498
)






(239,851
)Equity earnings of unconsolidated affiliates


644,309



762,462







95,578



(1,406,771
)


95,578Income from continuing operations  net of tax


641,041



657,372



260,633



548,181



(1,406,771
)


700,456Income from discontinued operations  net of tax










8,269











8,269Net income


641,041



657,372



268,902



548,181



(1,406,771
)


708,725Less: Net income attributable to the noncontrolling interest






13,063



54,621











67,684Net Income attributable to Terra Industries Inc.

$
641,041


$
644,309


$
214,281


$
548,181


$
(1,406,771
)

$
641,041  108




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows for the Year Ended
    December 31, 2008:
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedOperating ActivitiesNet income

$
641,041


$
657,372


$
268,902


$
548,181


$
(1,406,771
)

$
708,725Income from discontinued operations










8,269











8,269Income from continuing operations


641,041



657,372



260,633



548,181



(1,406,771
)


700,456Adjustments to reconcile income (loss) from continuing
    operations to net cash flows from operating activities:Depreciation and amortization










43,657



35,197







78,854Loss on sale of property, plant and equipment










1,146



1,175







2,321Deferred income taxes


(15,180
)


















(15,180
)Distributions in excess of (less than) equity earnings


(644,309
)


(762,462
)


5,657



2,686



1,406,771



8,343Equity earnings  GrowHow UK Limited














(95,578
)






(95,578
)Non-cash loss on derivatives


39,779



















39,779Share-based compensation


8,104



















8,104Amortization of intangible and other assets










5,284



3,421







8,705Change in operating assets and liabilities 
    continuing operations


(142,756
)


(57,788
)


(8,762
)


(51,515
)






(260,821
)Net cash flows from operating activities  continuing
    operations


(113,321
)


(162,878
)


307,615



443,567







474,983Net cash flows from operating activities 
    discontinued operations










8,161











8,161Net Cash Flows from 
    Operating Activities


(113,321
)


(162,878
)


315,776



443,567







483,144Investing ActivitiesCapital expenditures and plant turnaround expenditures










(77,109
)


(12,198
)






(89,307
)Proceeds from the sale of property, plant and equipment










1,666



407







2,073Distributions received from unconsolidated affiliate










8,180











8,180  109




---



##### Table of Contents



Condensed
    Consolidating Statement of Cash Flows at December 31, 2008
    (continued):
  Guarantor


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedContribution settlement received from GrowHow UK Limited














27,427







27,427Balancing consideration payment from GrowHow UK Limited














61,272







61,272Net cash flows from investing activities  continuing
    operations










(67,263
)


76,908







9,645Net cash flows from investing activities 
    discontinued operations










41,879











41,879Net Cash Flows from Investing Activities










(25,384
)


76,908







51,524Financing ActivitiesPreferred share dividends paid


(3,876
)


















(3,876
)Preferred share inducement


(5,266
)


















(5,266
)Common stock dividends paid


(28,274
)


















(28,274
)Common stock issuances and vestings


(9,839
)


















(9,839
)Change in investments and advances from (to) affiliates


305,954



438,735



(203,322
)


(1,072,883
)


531,516



Excess tax benefits from equity compensation plans


12,122



















12,122Payments under share repurchase program


(157,500
)


















(157,500
)Distributions to noncontrolling interests










(69,557
)










(69,557
)Net cash flows from financing activities  continuing
    operations


113,321



438,735



(272,879
)


(1,072,883
)


531,516



(262,190
)Net cash flows from financing activities 
    discontinued operations






















Net Cash Flows fromFinancing Activities


113,321



438,735



(272,879
)


(1,072,883
)


531,516



(262,190
)Effect of Foreign Exchange Rate on Cash














(4,016
)






(4,016
)Increase (Decrease) in Cash and Cash Equivalents






275,857



17,513



(556,424
)


531,516



268,462Cash and Cash Equivalents at Beginning of Year






55,857



267,145



906,752



(531,516
)


698,238Cash and Cash Equivalents at End of Year

$



$
331,714


$
284,658


$
350,328


$



$
966,700  110




---



##### Table of Contents



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


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenuesProduct revenues

$



$



$
1,181,736


$
1,154,138


$



$
2,335,874Other income










5,104



1,951







7,055Total revenues










1,186,840



1,156,089







2,342,929Cost and ExpenseCost of sales


900



345



982,627



831,548



1



1,815,421Selling, general and administrative expenses


2,179



(10,611
)


32,439



67,962



2



91,971Equity earnings of North American affiliates










(16,209
)










(16,209
)Total cost and expenses


3,079



(10,266
)


998,857



899,510



3



1,891,183Income (loss) from operations


(3,079
)


10,266



187,983



256,579



(3
)


451,746Interest income






6,093



5,077



6,092







17,262Interest expense


(1,860
)


(26,909
)


(6
)


(325
)






(29,100
)Loss on early retirement of debt






(38,836
)














(38,836
)Foreign currency gain (loss)






(1,886
)


8



1,878







Income (loss) before income taxes and noncontrolling interest


(4,939
)


(51,272
)


193,062



264,224



(3
)


401,072Income tax benefit (provision)


1,790



(37,582
)


(70,815
)


(20,709
)






(127,316
)Equity (earnings) loss of unconsolidated affiliates


205,045



303,602







(2,718
)


(508,647
)


(2,718
)Income from continuing operations  net of tax


201,896



214,748



122,247



240,797



(580,650
)


271,038Income from discontinued operations  net of tax










(18,861
)










(18,861
)Net income


201,896



214,748



103,386



240,797



(580,650
)


252,177Less: Net income attributable to the noncontrolling interest






9,704



40,577











50,281Net income attributable to 
    Terra Industries Inc.

$
201,896


$
205,044


$
62,809


$
240,797


$
(508,650
)

$
201,896  111




---



##### 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

$
201,896


$
214,748


$
103,386


$
240,797


$
(508,650
)

$
252,177Loss from discontinued operations










(18,861
)










(18,861
)Income from continuing operations


201,896



214,748



122,247



240,797



(508,650
)


271,038Adjustments to reconcile income (loss) from continuing
    operations to net cash flows from operating activities:Depreciation and amortization










40,407



54,377







94,784Deferred income taxes


90,879







12,521











103,400Distributions in excess of (less than) equity earnings


(205,045
)


(303,602
)


8,536



379,935



128,712



8,536Equity earnings  GrowHow UK Limited














2,718







2,718Non-cash loss on derivatives


1,300



















1,300Share-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 
    continuing operations


(83,235
)


(1,849
)


84,546



460,090



(247,262
)


212,290Net cash flows from operating activities  continuing
    operations


33,898



(86,041
)


271,970



1,141,157



(627,200
)


733,784Net cash flows from operating activities 
    discontinued operations










14,081











14,081Net Cash Flows from 
    Operating Activities


33,898



(86,041
)


286,051



1,141,157



(627,200
)


747,865Investing ActivitiesCapital expenditures and plant turnaround expenditures










(18,676
)


(63,699
)


(1
)


(82,376
)Cash retained by GrowHow UK Limited














(16,788
)






(16,788
)Proceeds from the sale of property, plant and equipment










24











24Distributions received from unconsolidated affiliate










4,705











4,705  112




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##### Table of Contents



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


Non-GuarantorParent


TCAPI


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedNet 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
)Payments for debt issuance costs






(6,444
)














(6,444
)Preferred share dividends paid


(5,100
)


















(5,100
)Common stock issuances and vestings


(1,424
)


















(1,424
)Change in investments and advances from (to) affiliates


56,734



48,906



30,281



(231,607
)


95,686



Excess tax benefits from equity compensation plans


3,317



















3,317Payments under share repurchase program


(87,426
)


















(87,426
)Distributions to noncontrolling interests










(35,239
)










(35,239
)Net Cash Flows from 
    Financing Activities


(33,899
)


41,162



(4,959
)


(231,607
)


95,687



(133,616
)Effect of Foreign Exchange
    Rate Changes 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  113




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##### Table of Contents



25.
    Quarterly
    Financial Data (Unaudited)  (in thousands, except per-share
    data)

March 31


June 30


Sept. 30


Dec. 312009Revenues

$
419,753


$
453,503


$
347,046


$
361,130Cost of sales


342,957



296,690



281,621



273,908Gross profit

$
76,796


$
156,813


$
65,425


$
87,222Amounts attributable to Terra Industries Inc.:Income (loss) from continuing operations, net of tax

$
29,995


$
80,474


$
45,118


$
(4,072
)Income from discontinued operations, net of tax










810



308Net income (loss) attributable to 
    Terra Industries Inc.

$
29,995


$
80,474


$
45,928


$
(3,764
)Net income

$
37,903


$
89,948


$
48,900


$
1,866Less: Net income attributable to noncontrolling interest


7,908



9,474



2,972



5,630Net income (loss) attributable to Terra Industries Inc.

$
29,995


$
80,474


$
45,928


$
(3,764
)Per Share Data:Basic income (loss) per common share attributable to Terra
    Industries Inc.:Continuing operations

$
0.30


$
0.81


$
0.46


$
(0.04
)Discontinued operations










0.01



Basic income (loss) per common share

$
0.30


$
0.81


$
0.47


$
(0.04
)Diluted income (loss) per common share attributable to Terra
    Industries Inc.:Continuing operations

$
0.30


$
0.81


$
0.45


$
(0.04
)Discontinued operations










0.01



Diluted income (loss) per common share

$
0.30


$
0.81


$
0.46


$
(0.04
)2008Revenues

$
574,704


$
843,097


$
790,214


$
683,464Cost of sales


406,989



547,070



578,310



495,883Gross profit

$
167,715


$
296,027


$
211,904


$
187,581Amounts attributable to Terra Industries Inc.:Income from continuing operations, net of tax

$
101,305


$
196,116


$
171,270


$
164,081Income from discontinued operations, net of tax


152



7,319



141



657Net income attributable to Terra Industries Inc.

$
101,457


$
203,435


$
171,411


$
164,738Net income

$
119,583


$
221,930


$
187,159


$
180,053Less: Net income attributable to noncontrolling interest


18,126



18,495



15,748



15,315Net income attributable to Terra Industries Inc.

$
101,457


$
203,435


$
171,411


$
164,738 114




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##### Table of Contents



Per Share Data:Basic income per common share attributable to Terra Industries
    Inc.:Continuing operations

$
1.11


$
2.14


$
1.75


$
1.65Discontinued operations






0.08







0.01Basic income per common share

$
1.11


$
2.22


$
1.75


$
1.66Diluted income per common share attributable to Terra Industries
    Inc.:Continuing operations

$
0.97


$
1.87


$
1.64


$
1.64Discontinued operations






0.07







0.01Diluted income per common share

$
0.97


$
1.94


$
1.64


$
1.65   26.  Unsolicited
    Proposals for a Business Combination by CF Industries Holdings,
    Inc.
        27.
    Subsequent
    Events         115




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##### 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
    Rules 13a-15(e) 15d-15(e)
  (b)
    Changes in
    Internal Control over Financial Reporting  Rules 13a-15(f)
  (c)
    Managements
    Report on Internal Control over Financial Reporting  Form 10-K Form 10-K.
  (d)
    Certifications  Form 10-K.
 116




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##### Table of Contents



Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f) 15a-15(f)
  1.
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect our transactions and the
    dispositions of our assets;2.
    Provide reasonable assurance that our transactions are recorded
    as necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and Board of
    Directors; and3.
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on our financial
    statements.    Internal Control  Integrated Framework
  Form 10-K.
 117




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
  To the Board of Directors and Stockholders of Terra
    Industries Inc.:
  Internal Control  Integrated Framework Managements Annual Report on Internal Control Over
    Financial Reporting.
        Internal Control  Integrated Framework
    
  Omaha, Nebraska
 February 25, 2010
 118




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##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION  Form 8-K Form 10-K
 119




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##### Table of Contents



Part III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE      ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    Share-Based Compensation Financial Statements and Supplementary Data Form 10-K.
  Equity Compensation Plan
    Information(a)


(b)


(c)Number of securities to be


Weighted-average


Number of securities remaining availableissued upon exercise of


exercise price of


for future issuance under equityoutstanding options, warrants


outstanding options,


compensation plans (excluding securitiesPlan category


and rights


warrants and rights


reflected in column (a))Equity compensation plans approved by security holders


-0-


-0-


3,832,433Equity compensation plans not approved by security holders


-0-


-0-


-0-Total


-0-


$-0-


3,832,433  120




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##### 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
   121




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##### 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.Consolidated Statements of Financial Position at December 31,
    2009 and 2008Consolidated Statements of Operations for the years ended
    December 31, 2009, 2008 and 2007Consolidated Statements of Cash Flows for the years ended
    December 31, 2009, 2008 and 2007Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 31, 2009, 2008 and 2007Notes to the Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm2.

Index to Financial Statement Schedules, Reports and ConsentsSee Index to Financial Statement Schedules of Terra and its
    subsidiaries at
    page S-13.

Other Financial StatementsIndividual financial statements of Terras 50 percent
    owned joint ventures accounted for on the equity method have
    been omitted because they do not constitute a significant
    subsidiary.   (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.2
.2

Agreement and Plan of Merger dated as of February 12, 2010
    by and among Yara International ASA, Yukon Merger Sub Inc., and
    Terra Industries Inc., filed as Exhibit 2.1 to Terra
    Industries Inc.s
    Form 8-K
    dated February 16, 2010, 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 3.3 to Terra Industries Inc.s
    Form 8-K
    dated August 3, 2005, 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 3.4 to Terra
    Industries Inc.s
    Form 8-K,
    dated August 3, 2005, are incorporated herein by reference.3
.3

Amendment No. 1 to the Amended and Restated By-Laws of
    Terra Industries Inc., filed as Exhibit 3.1 to Terra
    Industries Inc.s
    Form 8-K
    dated April 14, 2009, is incorporated herein by reference.3
.4

A Certificate of Correction to correct errors and omissions to
    the August 3, 2005 Articles of Restatement for Terra
    Industries Inc., as filed with the State Department of
    Assessments and Taxation of Maryland on April 30, 2008, was
    included as Exhibit 99.1 to Terra Industries Inc.s
    Form 8-K
    dated May 5, 2008, and is incorporated herein by reference.3
.5

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
.6

Certificate of Incorporation of Beaumont Ammonia Inc. filed as
    Exhibit 3.i.(b) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.7

Certificate of Incorporation of Beaumont Holdings Corporation,
    filed as Exhibit 3.i.(c) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.
 122




---



##### Table of Contents



3
.8

Certificate of Incorporation of BMC Holdings Inc. filed as
    Exhibit 3.1.(d) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 3, 2001, is incorporated herein by reference.3
.9

Certificate of Incorporation of Port Neal Corporation filed as
    Exhibit 3.i.(e) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.10

Certificate of Incorporation of Terra (U.K.) Holdings Inc. filed
    as Exhibit 3.i.(f) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.11

Certificate of Incorporation of Terra Capital Holdings, Inc.
    filed as Exhibit 3.1.(g) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.12

Certificate of Incorporation of Terra International (Oklahoma)
    Inc. filed as Exhibit 3.i.(k) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.13

Certificate of Incorporation of Terra International, Inc. filed
    as Exhibit 3.i.(l) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.14

Certificate of Incorporation of Terra Methanol Corporation filed
    as Exhibit 3.i.(m) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.15

Certificate of Incorporation of Terra Nitrogen Corporation filed
    as Exhibit 3.i.(n) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.16

Certificate of Incorporation of Terra Real Estate Corporation
    filed as Exhibit 3.i.(o) to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.17

By-Laws of Terra Capital, Inc. filed as Exhibit 3.ii.(a) to
    Terra Capital, Inc.s Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.18

By-Laws of Beaumont Ammonia Inc. filed as Exhibit 3.ii.(b)
    to Terra Capital, Inc.s Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.19

By-Laws of Beaumont Holdings Corporation filed as
    Exhibit 3.ii.(c) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.20

By-Laws of BMC Holdings, Inc. filed as Exhibit 3.ii.(d) to
    Terra Capital, Inc.s Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.21

By-Laws of Port Neal Corporation filed as Exhibit 3.ii.(e)
    to Terra Capital, Inc.s Registration Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.22

By-Laws of Terra (U.K.) Holdings Inc. filed as
    Exhibit 3.ii.(f) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.23

By-Laws of Terra Capital Holdings, Inc. filed as
    Exhibit 3.ii.(g) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.24

By-Laws of Terra International (Oklahoma) Inc. filed as
    Exhibit 3.ii.(i) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.25

By-Laws of Terra International, Inc. filed as
    Exhibit 3.ii.(j) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.26

By-Laws of Terra Methanol Corporation filed as
    Exhibit 3.ii.(k) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.27

By-Laws of Terra Nitrogen Corporation filed as
    Exhibit 3.ii.(l) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.28

By-Laws of Terra Real Estate Corporation filed as
    Exhibit 3.ii.(m) to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on November 13, 2001, is incorporated herein by reference.3
.29

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.
 123




---



##### Table of Contents



3
.30

By-Laws of Terra Nitrogen GP Inc., filed as Exhibit 3.3 to
    the September 7, 2005 Terra Nitrogen Company, L.P.s
    Form 8-K,
    are incorporated herein by reference.3
.31

Certificate of Incorporation of Terra Nitrogen GP Holdings Inc.,
    filed as Exhibit 3.29 to Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 2006, is incorporated
    herein by reference.3
.32

By-Laws of Terra Nitrogen GP Holdings Inc., filed as
    Exhibit 3.30 to Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 2006, is incorporated
    herein by reference.3
.33

Certificate of Incorporation of Terra Environmental Technologies
    Inc., filed as Exhibit 3.33 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.34

By-Laws of Terra Environmental Technologies Inc. filed as
    Exhibit 3.34 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, in incorporated herein by reference.3
.35

Certificate of Incorporation of Terra Global Holding Company
    Inc., filed as Exhibit 3.35 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.36

By-Laws of Terra Global Holding Company Inc., filed as
    Exhibit 3.36 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.37

Operating Agreement of Terra Investment Fund LLC, filed as
    Exhibit 3.37 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.38

Articles of Organization of Terra Investment Fund LLC,
    filed as Exhibit 3.38 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.39

Operating Agreement of Terra Investment Fund II LLC, filed
    as Exhibit 3.39 to Terra Capital, Inc.s Registration
    Statement filed on
    form S-4
    on December 16, 29 , is incorporated herein by reference.3
.40

Articles of Organization of Terra Investment Fund II LLC,
    filed as Exhibit 3.40 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.41

Certificate of Incorporation of Terra Mississippi Holdings
    Corp., filed as Exhibit 3.41 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.42

By-Laws of Terra Mississippi Holdings Corp (f/k/a Mississippi
    Chemical Corporation), filed as Exhibit 3.42 to Terra
    Capital, Inc.s Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.43

Certificate of incorporation for Terra Mississippi Nitrogen,
    Inc., filed as Exhibit 3.43 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.44

By-Laws of Terra Mississippi Nitrogen, Inc. (f/k/a Mississippi
    Nitrogen, Inc.), filed as Exhibit 3.44 to Terra Capital,
    Inc.s Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.45

Certificate of Incorporation of Terra Houston Ammonia, Inc.,
    filed as Exhibit 3.45 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.46

By-Laws of Terra Houston Ammonia, Inc. (f/k/a Mississippi
    Chemical Management Company), filed as Exhibit 3.46 to
    Terra Capital, Inc.s Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.3
.47

Limited Liability Company Agreement of Terra LP Holdings LLC,
    filed as Exhibit 3.47 to Terra Capital, Inc.s
    Registration Statement filed on
    Form S-4
    on December 16, 2009, is 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 Inc.s
    Form 8-K
    dated October 10, 2001, is incorporated herein by
    reference.
 124




---



##### Table of Contents



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
    Inc.s
    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, filed as Exhibit 4.5 to Terra Industries
    Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.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, filed as
    Exhibit 4.6 to Terra Industries Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.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, filed as
    Exhibit 4.7 to Terra Industries Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.4
.8

Amendment No. 7 to the Amended and Restated Credit
    Agreement dated March 24, 2008, among Terra Capital, Inc.,
    Mississippi Chemical Corporation and Terra Nitrogen (U.K.)
    Limited, as the borrowers, Terra Industries Inc., Terra Capital
    Holdings, Inc., the financial institutions from time to time
    party thereto as lenders, and Citicorp USA, Inc., as
    administrative agent and collateral agent, filed as
    Exhibit 4.8 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.9

Amendment No. 8 to the to the Amended and Restated Credit
    Agreement dated July 16, 2008, among Terra Capital, Inc.,
    Mississippi Chemical Corporation and Terra Nitrogen (U.K.)
    Limited, as the borrowers, Terra Industries Inc., Terra Capital
    Holdings, Inc., the financial institutions from time to time
    party thereto as lenders, and Citicorp USA, Inc., as
    administrative agent and collateral agent, filed as
    Exhibit 4.9 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference
 125




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4
.10

Amendment No. 9 to the to the Amended and Restated Credit
    Agreement dated August 29, 2008, among Terra Capital, Inc.,
    Mississippi Chemical Corporation and Terra Nitrogen (U.K.)
    Limited, as the borrowers, Terra Industries Inc., Terra Capital
    Holdings, Inc., the financial institutions from time to time
    party thereto as lenders, and Citicorp USA, Inc., as
    administrative agent and collateral agent, filed as
    Exhibit 4.10 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.11

Amendment No. 10 to the Amended and Restated Credit
    Agreement dated November 17, 2008, among Terra Capital,
    Inc., Mississippi Chemical Corporation and Terra Nitrogen (U.K.)
    Limited, as the borrowers, Terra Industries Inc., Terra Capital
    Holdings, Inc., the financial institutions from time to time
    party thereto as lenders, and Citicorp USA, Inc., as
    administrative agent and collateral agent, filed as
    Exhibit 4.11 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.12

Amendment No. 11 to the Amended and Restated Credit
    Agreement dated October 9, 2009, among Terra Capital, Inc.,
    Mississippi Chemical Corporation and Terra Nitrogen (U.K.)
    Limited, as the borrowers, Terra Industries Inc., Terra Capital
    Holdings, Inc., the financial institutions from time to time
    party thereto as lenders, and Citicorp USA, Inc., as
    administrative agent and collateral agent, filed as
    Exhibit 4.12 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.13

Amendment No. 12 to the Amended and Restated Credit
    Agreement dated December 4, 2009, among Terra Capital,
    Inc., Mississippi Chemical Corporation and Terra Nitrogen (U.K.)
    Limited, as the borrowers, Terra Industries Inc., Terra Capital
    Holdings, Inc., the financial institutions from time to time
    party thereto as lenders, and Citicorp USA, Inc., as
    administrative agent and collateral agent, filed as
    Exhibit 4.8 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.14

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 Inc.s
    Form 10-Q
    for the quarter ended September 30, 2005, is incorporated
    herein by reference.4
.15

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
.16

Amendment No. 3 to the Credit Agreement dated
    October 9, 2009, 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 4.16 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.17

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
    Inc.s
    Form 10-Q
    for the quarter ended June 30, 2003, is incorporated herein
    by reference.4
.18

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
    Form 8-K
    dated August 3, 2005, are incorporated herein by reference.4
.19

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
    Form 8-K
    August 3, 2005, are incorporated herein by reference.
 126




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4
.20

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
.21

Registration Rights Agreement, dated as of December 16,
    2004, among Terra Industries Inc. and the initial purchasers
    named therein, filed as Exhibit 4.7 to Terras
    Form S-3/A
    filed February 9, 2005, is incorporated by reference.4
.22

Registration Rights Agreement, dated as of December 21,
    2004, among Terra Industries Inc., Värde Investment
    Partners, L.P., Perry Principals Investments LLC, Citigroup
    Financial Products, Inc., filed as Exhibit 4.7 to
    Terras
    Form S-3
    dated March 17, 2005, is incorporated herein by reference.4
.23

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
.24

$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 Terra Industries
    Inc.s
    Form 10-K
    for the fiscal year ended December 31, 2004, is
    incorporated herein by reference.4
.25

$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 Terra Industries Inc.s
    Form 10-K
    for the fiscal year ended December 31, 2004, is
    incorporated herein by reference.4
.26

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
.27

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 11
    1/2%
    Second Priority Senior Secured Notes due 2010, filed as
    Exhibit 4.2 to Terra Industries Inc.s
    Form 8-K
    dated January 30, 2007, is incorporated herein by reference.4
.28

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 6, 2007, is incorporated herein by reference.4
.29

First Supplemental Indenture, dated January 9, 2008, by and
    among Terra Capital, Inc., Terra Industries Inc., Terra
    Environmental Technologies, Inc., the existing guarantors named
    therein and U.S. Bank National Association, as trustee filed as
    Exhibit 4.1 to Terra Industries Inc.s
    Form 8-K
    dated January 10, 2008, is incorporated herein by reference.4
.30

Second Supplemental Indenture, dated as of April 27, 2009,
    by and among Terra Capital, Inc., Terra Industries Inc., each of
    the subsidiary guarantors listed in Appendix I thereto and
    U.S. Bank National Association, as trustee, filed as
    Exhibit 4.31 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.31

Third Supplemental Indenture, dated as of October 16, 2009,
    by and among Terra Capital, Inc., Terra Industries Inc., each of
    the subsidiary guarantors listed in Appendix I thereto and
    U.S. Bank National Association, as trustee, filed as
    Exhibit 4. 1 to Terra Industries Inc.s
    Form 8-K
    dated October 16, 2009, is incorporated herein by reference.4
.32

Form of Regulation S Global Note relating to 7% Senior
    Notes due 2017 (attached as an exhibit to Exhibit 4.30).
 127




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4
.33

Form of Regulation 144A Global Note relating to
    7% Senior Notes due 2017 (attached as an exhibit to
    Exhibit 4.30).4
.34

Form of Guarantee relating to 7% Senior Notes due 2017
    (attached as an exhibit to Exhibit 4.30).4
.35

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
.36

Indenture, dated October 26, 2009, by and among Terra
    Capital, Inc., Terra Industries Inc., the guarantors named
    therein and U.S. Bank national Association, as trustee, relating
    to the 7.75% Senior Notes due 2019, filed as
    Exhibit 4.37 to Terra Capital, Inc.s Registration
    Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.4
.37

First Supplemental Indenture, dated as of December 4, 2009,
    by and among Terra Capital, Inc., Terra Industries Inc., Terra
    LP Holdings LLC, each of the subsidiary guarantors listed in
    Appendix I thereto and U.S. Bank National Association, as
    trustee, filed as Exhibit 4.1 to Terra Industries
    Inc.s
    Form 8-K
    dated December 8, 2009, is incorporated herein by reference.4
.38

Form of Regulation S Global Note relating to the
    7.75% Senior Notes due 2019 (attached as an exhibit to
    Exhibit 4.37).4
.39

Form of Regulation 144A Global Note relating to the
    7.75% Senior Notes due 2019 (attached as an exhibit to
    Exhibit 4.37).4
.40

Form of Guarantee relating to the 7.75% Senior Notes due
    2019 (attached as an exhibit to Exhibit 4.37).4
.41

Exchange and Registration Rights to Agreement, dated as of
    October 26 2009, by and among Terra Capital, Inc., the
    guarantors named therein, and Credit Suisse Securities (USA) LLC
    and Citigroup Global Markets Inc., relating to the
    7.75% Senior Notes due 2019, filed as Exhibit 4.42 to
    Terra Capital, Inc.s Registration Statement filed on
    Form S-4
    on December 16, 2009, is incorporated herein by reference.10
.1.1

Excess Benefit Plan of Terra Industries Inc., as amended and
    restated effective as of January 1, 2008, was included as
    Exhibit 10.1 to Terra Industries Inc.s
    Form 10-Q
    filed with the Securities and Exchange Commission on
    April 29, 2008, and is incorporated herein by reference.10
.1.2

Terra Industries Inc. Supplemental Deferred Compensation Plan
    effective as of December 20, 1993 filed as
    Exhibit 10.1.9 to Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 1993, is incorporated
    herein by reference.10
.1.3

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 June 30, 1995, is incorporated herein
    by reference.10
.1.4

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 Inc.s
    Form 10-K
    for the year ended December 31, 2000, is incorporated
    herein by reference.10
.1.5

Amendment No. 3 to the Terra Industries Inc. Supplemental
    Deferred Compensation Plan, dated March 29, 2002, filed as
    Exhibit 10.1.8.b. to Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 2001, is incorporated
    herein by reference.10
.1.6

Amendment No. 4 to the Terra Industries Inc. Supplemental
    Deferred Compensation Plan, dated December 29, 2004, filed
    as Exhibit 10.1.6 to Terra Industries Inc.s
    Form 10-K/A
    filed with the Securities and Exchange Commission on
    April 28, 2008, is incorporated herein by reference.10
.1.7

Terra Industries Inc. Stock Incentive Plan of 2002, filed as
    Exhibit 10.1.18 to Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 2001, is incorporated
    herein by reference.10
.1.8

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 Terra Industries Inc.s
    Form 10-K
    for the year ended December 31, 2002, is incorporated
    herein by reference.
 128




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10
.1.9

Form of Restricted Stock Award to Officers and Other Key
    Employees under Terra Industries Inc. Stock Incentive Plan of
    2002, filed as Exhibit 10.1.24 to Terra Industries
    Inc.s
    Form 10-K
    for the year ended December 31, 2002, is incorporated
    herein by reference.10
.1.10

Revised Form of Restricted Stock Award of Terra Industries Inc.
    under its Stock Incentive Plan of 2002, filed as
    Exhibit 10.9 to Terra Industries Inc.s
    Form 10-Q
    for the fiscal quarter ended September 30, 2005, is
    incorporated herein by reference.10
.1.11

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 Terra Industries
    Inc.s
    10-Q for the
    fiscal quarter ended September 30, 2005, is incorporated
    herein by reference.10
.1.12

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
    Terra Industries Inc.s
    Form 10-Q
    for the fiscal quarter ended September 30, 2005, is
    incorporated herein by reference.10
.1.13

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 Terra Industries Inc.s
    Form 10-K
    for the year ended 2005, is incorporated by reference.10
.1.14

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 Terra Industries Inc.s
    Form 10-K
    for the year ended 2005, is incorporated by reference.10
.1.15

Form of Indemnity Agreement of Terra Industries Inc., filed as
    Exhibit 10.1 to Terra Industries Inc.s
    Form 8-K
    dated July 7, 2006, is incorporated by reference.10
.1.16

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
.1.17

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
.1.18

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
.1.19

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
.1.20

Amendment Number One to Employment Severance Agreement, filed as
    Exhibit 10.1.31 to Terra Industries Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.10
.1.21

Amendment to Restricted Share Agreement, filed as
    Exhibit 10.1.32 to Terra Industries Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.10
.1.22

Amendment to Performance Share Award Agreement, filed as
    Exhibit 10.1.33 to Terra Industries Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.10
.1.23

Amendment to Terra Long Term Incentive Award dated
    October 23, 2007, for former Terra, now GrowHow UK Limited
    joint venture employees, filed as Exhibit 10.1.34 to Terra
    Industries Inc.s
    Form 10-K
    for the year ended 2007, is incorporated by reference.10
.1.24

Form of Phantom Performance Share Award agreement of February
    2008, filed as Exhibit 10.1 to Terra Industries Inc.s
    Form 10-Q
    dated July 25, 2008, is incorporated herein by reference.10
.1.25

Form of Performance Share Award agreement as of February 2008,
    filed as Exhibit 10.2 to Terra Industries Inc.s
    Form 10-Q
    dated July 25, 2008, is incorporated herein by reference.
 129




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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 Terra Nitrogen Company,
    L.P.s
    Form 8-K
    dated September 7, 2005, 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 Terra
    Nitrogen Company, L.P.s
    Form 8-K
    dated September 7, 2005, 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 Terra
    Nitrogen Company, L.P.s
    Form 8-K
    dated September 7, 2005, 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 Terra Nitrogen Company,
    L.P.s
    Form 10-Q
    filed on October 29, 2007, is incorporated herein by
    reference.10
.7

Reorganization Agreement among Terra Nitrogen Company, L.P.,
    Terra Nitrogen, Limited Partnership and Terra Nitrogen
    Corporation dated September 1, 2005, filed as
    Exhibit 10.1 to Terra Nitrogen Company, L.P.s
    Form 8-K
    dated September 7, 2005, is incorporated herein by
    reference.10
.8

Conveyance, Assignment and Assumption Agreement by and between
    Terra Nitrogen Corporation and Terra Nitrogen GP Inc. dated
    September 1, 2005, filed as Exhibit 10.2 to Terra
    Nitrogen Company, L.P.s
    Form 8-K
    dated September 7, 2005, 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 Inc.s
    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
    Inc.s
    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.10
.12

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
    Inc.s
    Form 10-K
    for the year ended December 31, 2004, is incorporated
    herein by reference.10
.13

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
.14

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
.15

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.10
.16

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.
 130




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##### Table of Contents



10
.17

Consulting and Non-Competition Agreement between Terra
    Industries Inc. and Francis G. Meyer dated April 1, 2008,
    filed as Exhibit 10.1 to Terra Industries Inc.s
    Form 8-K
    dated April 1, 2008, is incorporated herein by reference.10
.18

Amended and Restated Services Agreement among Terra Industries
    Inc., BMC Holdings Inc., and Methanex Methanol Company dated
    December 2, 2008, filed as Exhibit 10.18 to Terra
    Capital, Inc.s Registration Statement filed on
    Form S-4/A
    on January 15, 2010, is incorporated herein by reference.10
.19

Carseland Facility Interest Purchase and Sale Agreement between
    Agrium, Agrium Products Inc., Agrium Inc., Terra Industries Inc.
    and Terra International (Canada) Inc. dated February 15,
    2010, filed as Exhibit 2.1 to Terra Industries Inc.s
    Form 8-K
    dated February 19, 2010, is incorporated herein by
    reference.12
.1 *

Ratio of Earnings to Fixed Charges.21
.1 *

Subsidiaries of Terra Industries Inc..23
.1 *

Consent of Deloitte & Touche LLP31
.1 *

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2 *

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1 *

Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2 *

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.
   *
    
    Filed herewith.
    
    Confidential treatment has been
    requested for portions of this document.  131




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##### Table of Contents



SIGNATURES    TERRA INDUSTRIES INC.Date: February 25, 2010

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/  JOHN
    N. LILLYJohn
    N. Lilly

Director/s/  DENNIS
    MCGLONEDennis
    McGlone

Director 132




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##### Table of Contents



/s/  DAVID
    A. WILSONDavid
    A. Wilson

Director/s/  IRVING
    B. YOSKOWITZIrving
    B. Yoskowitz

Director   Date: February 25, 2010
 133




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INDEX TO
    FINANCIAL STATEMENT SCHEDULES  Schedule No.I


Condensed Financial Information of Registrant, is included in
    Item 8 herein,
    Footnote 4, Column 1, Parent.II


Valuation and Qualifying Accounts:
    Years Ended December 31, 2009, 2008 and 2007

S-2    S-1




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##### Table of Contents



Schedule II
  Terra Industries
    Inc.Valuation and Qualifying
    AccountsYears
    Ended December 31, 2009, 2008, and 2007
 (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, 2009:Allowance for doubtful accounts

$
290


$
1,065


$
48


$
1,403Allowance for deferred tax assets

$
32,154


$
14,615


$
(8,097
)

$
38,672Year Ended December 31, 2008:Allowance for doubtful accounts

$
264


$
8


$
18


$
290Allowance for deferred tax assets

$
31,740


$



$
414


$
32,154Year Ended December 31, 2007:Allowance for doubtful accounts

$
332


$
15


$
(83
)

$
264Allowance for deferred tax assets

$
61,361


$
3,939


$
(33,560
)

$
31,740  S-2