UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

          (Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d)

Of the Securities Exchange Act of 1934

For Quarter Ended March 31, 2003

OR

 

[ ] Transition Report Pursuant to Section 13 or 15(d)

Of the Securities Exchange Act of 1934

For Quarter Ended March 31, 2003

Commission File Number 001-12217

----

MISSISSIPPI CHEMICAL CORPORATION

 

Organized in the State of Mississippi

Tax Identification No. 64-0292638

P. O. Box 388, Yazoo City, Mississippi 39194

Telephone No. 662+746-4131

 

               Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [x]    No [ ]

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

               The number of shares outstanding of each of the issuer's classes of common stock, as of May 15, 2003.

Class
Number of Shares
Common Stock, $0.01 par value
26,211,633
MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

INDEX

 
   
Page   
Number
PART I. 
FINANCIAL INFORMATION:
  
Item 1.
Financial Statements       
Consolidated Statements of Operations
3  
     Three months ended March 31, 2003 and 2002 and    
     Nine months ended March 31, 2003 and 2002       
Consolidated Balance Sheets
4 - 5  
     March 31, 2003 and June 30, 2002       
Consolidated Statements of Shareholders' Equity
6  
     Fiscal Year ended June 30, 2002 and   
     Nine months ended March 31, 2003       
Consolidated Statements of Cash Flows
7  
     Nine months ended March 31, 2003 and 2002       
Notes to Consolidated Financial Statements
8 - 26     
Item 2.
Management's Discussion and Analysis of Results    
of Operations and Financial Condition
27 - 50     
Item 3.
Quantitative and Qualitative Disclosure About    
Market Risk
51     
Item 4.
Controls and Procedures
52    
PART II.
OTHER INFORMATION:      
Item 3.
Defaults Under Senior Securities
53     
Item 6.
Exhibits and Reports on Form 8-K
53     
Signatures 
53     
Certifications 
54 - 55
 
**PART I.**FINANCIAL INFORMATION  **ITEM 1.**FINANCIAL STATEMENTS.
 

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
 
Three months ended 
Nine months ended 
March 31, 
March 31, 
2003 
2002 
2003 
2002 
(In thousands, except per share data)
Revenues:       
   Net sales
$115,440  
$  94,694  
$329,792  
$318,552 
   Other
         800  
        -       
         800  
       -        
116,240  
94,694  
330,592  
318,552         
Operating expenses:       
   Cost of products sold
107,906  
95,610  
319,207  
309,844 
   Selling, general and       
             administrative
9,052  
7,009  
23,765  
20,643 
   Impairment of long-lived assets
58,497  
-      
70,848  
-     
   Other
      6,980  
     1,135  
    12,711  
     8,986  
  182,435  
 103,754  
  426,531  
 339,473         
Operating loss
(66,195) 
(9,060) 
(95,939) 
(20,921)        
Other (expense) income:       
   Interest, net
(8,256) 
(6,799) 
(22,475) 
(21,448)
   Other
        215  
    11,304  
      4,754  
     15,184         
Loss before income taxes
(74,236) 
(4,555) 
(113,660) 
(27,185)        
Income tax (benefit) expense
   (26,209) 
         432  
   (27,956) 
   (12,979)        
Net loss
$ (48,027) 
$   (4,987) 
$ (85,704) 
$ (14,206)        
Loss per share - basic and       
      diluted (see Note 4)
$     (1.83) 
$     (0.19) 
$     (3.27) 
$     (0.54)
 

 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS

 
  
March 31, 
June 30,  
2003 
2002  
(In thousands, except per share data)
Current assets:    
   Cash and cash equivalents 
$     2,095  
$      1,989 
   Accounts receivable, net 
 54,508  
46,384      
   Inventories:    
      Finished products 
 28,834  
25,865 
      Raw materials and supplies 
 6,326  
6,120 
      Replacement parts 
     32,844  
     34,761 
             Total inventories 
68,004  
66,746      
   Income tax receivable 
 -       
14,971 
   Prepaid expenses and other current assets 
 9,127  
3,784 
   Deferred income taxes 
      3,671  
       1,394      
                       Total current assets 
137,405  
135,268      
Investments in affiliates 
 111,903  
106,972      
Other assets 
 3,768  
7,071      
Property, plant and equipment, at cost 
 732,620  
840,797 
  less accumulated depreciation, depletion and    
  amortization 
 (432,762) 
 (459,823)
             Property, plant and equipment, net 
   299,858  
  380,974        
$ 552,934  
$ 630,285      
 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

 
  
March 31, 
June 30,  
2003 
2002  
(In thousands, except per share data)     
Current liabilities:    
   Long-term debt due within one year 
$360,513  
$110,172 
   Accounts payable 
28,977  
35,948 
   Accrued liabilities 
    16,915  
   11,129 
          Total current liabilities 
406,405  
157,249      
Long-term debt 
-       
214,215      
Other long-term liabilities and deferred credits 
17,261  
12,540      
Deferred income taxes 
38,830  
66,805      
Shareholders' equity:    
   Common stock ($.01 par, authorized 100,000    
      shares; issued 27,981) 
280  
280 
   Additional paid-in capital 
306,063  
305,901 
   Accumulated deficit 
(188,898) 
(102,577)
   Accumulated other comprehensive income 
 1,467  
4,983 
   Treasury stock, at cost (1,769 and     
      1,815 shares) 
   (28,474) 
 (29,111)
          Total shareholders' equity 
     90,438  
 179,476        
$ 552,934  
$630,285 
 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED JUNE 30, 2002

AND THE NINE MONTHS ENDED MARCH 31, 2003

(Unaudited)

 
   RetainedAccumulated    AdditionalEarningsOther   CommonPaid-In(Accumulated)ComprehensiveTreasury  
Stock
Capital
Deficit)
(Loss) Income
Stock
Total
(In thousands)            
Balances, July 1, 2001
$     280
$  305,901
$  18,963 
$     (5,808)
$(29,579)
$289,757 
  Comprehensive loss:      
     Net loss
-    
-      
(121,196)
-       
-       
(121,196)
     Net change in      
                unrealized loss on      
        hedges, net of tax      
                expense of $6,474
       -    
        -      
      -       
      10,791 
      -       
    10,791        
          Comprehensive loss
-    
-      
(121,196)
10,791 
-       
(110,405)       
     Treasury stock, net
       -    
        -      
       (344)
           -       
       468 
         124        
Balances, June 30, 2002
280
305,901
(102,577)
4,983 
(29,111)
179,476 
  Comprehensive loss:      
     Net loss
-    
-      
(85,704)
-       
-       
(85,704)
     Net change in      
                unrealized gain on      
        hedges, net of tax       
                benefit of $2,081
       -    
        -      
        -      
      (3,516)
      -       
    (3,516)       
          Comprehensive loss
       -    
        -      
    (85,704)
        (3,516)
      -       
   (89,220)       
     Stock based       
        compensation
-    
162 
-      
-      
-       
162 
     Treasury stock, net
         -    
         -      
        (617)
          -      
        637 
           20        
Balances, March 31, 2003
$      280
$  306,063
$(188,898)
$      1,467
$(28,474)
$ 90,438        
 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
  
Nine months ended March 31,  
2003 
2002  
(In thousands)
Cash flows from operating activities:    
  Net loss 
$  (85,704) 
$   (14,206)
  Reconciliation of net loss to net cash (used in)    
     provided by operating activities:    
       Net change in operating assets and liabilities 
(20,044) 
(1,772)
       Refund of federal taxes pursuant to the Job     
           Creation and Workforce Assistance Act of 2002 
 14,871  
26,446 
       Depreciation, depletion and amortization 
 30,437  
33,494 
       Impairment of long-lived assets 
 70,848  
-     
       Change in deferred (gain) loss on hedging     
                     activities, net of tax 
 (1,411) 
6,015 
       Deferred income taxes 
(28,989) 
(161)
       Equity earnings in unconsolidated affiliates 
(6,845) 
(9,024)
       Other 
        (890) 
     (2,545)     
Net cash (used in) provided by operating activities 
   (27,727) 
     38,247      
Cash flows from investing activities:    
  Purchases of property, plant and equipment 
(13,227) 
(7,868)
  Proceeds from sale of assets 
 3,330  
5,017 
  Other 
      1,643  
       3,300      
Net cash (used in) provided by investing activities 
     (8,254) 
         449      
Cash flows from financing activities:    
  Debt proceeds 
239,356  
167,904 
  Debt payments 
  (203,269) 
  (217,240)     
Net cash provided by (used in) financing activities 
     36,087  
    (49,336)     
Net increase (decrease) in cash and cash equivalents 
106  
(10,640)     
Cash and cash equivalents - beginning of period 
       1,989  
     11,797      
Cash and cash equivalents - end of period 
$     2,095  
$      1,157 
 

 

The accompanying notes are an integral part of these consolidated financial statements.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
** 

NOTE 1 - INTERIM FINANCIAL STATEMENTS**
The accompanying consolidated financial statements have been prepared by us without audit, and include Mississippi Chemical Corporation and its subsidiaries.  In our opinion, the financial statements reflect all adjustments necessary to present fairly our results of operations for the three-month and the nine-month periods ended March 31, 2003 and 2002, our financial position at March 31, 2003 and June 30, 2002, our consolidated statements of shareholders' equity for the nine months ended March 31, 2003 and the year ended June 30, 2002, and our cash flows for the nine months ended March 31, 2003 and 2002.  In our opinion, these adjustments are of a normal recurring nature which are necessary for a fair presentation of our financial position and results of operations for the interim periods.  We have reclassified certain prior-year information to conform with the current year's presentation.

Certain notes and other information have been condensed or omitted in our interim financial statements presented in this quarterly report on Form 10-Q.  Therefore, these financial statements should be read in conjunction with our 2002 Annual Report on Form 10-K and our consolidated financial statements and notes thereto included in our June 30, 2002, audited financial statements.

Our business is seasonal; therefore, the results of operations for the periods ended March 31, 2003, are not necessarily indicative of the operating results for the full fiscal year.

 
**NOTE 2 - BANKRUPTCY PROCEEDINGS**
On May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its subsidiaries, Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; Triad Nitrogen, L.L.C.; Mississippi Chemical Company, L.P.; Mississippi Chemical Management Company; Eddy Potash, Inc.; and Melamine Chemicals, Inc. (collectively, the "Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"), Joint Case Number 03-02984 WEE, collectively (the "Case").  The filings were made in order to facilitate the restructuring of the Debtors' obligations.  The Debtors will operate their businesses as debtors-in-possession subsequent to the Petition Date.  As debtors-in-possession, the Debtors are authorized to operate their businesses but may not engage in transactions outside the ordinary course of business without the approval of the Court.  On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request for interim financing (see Note 3).  The Court has set June 9, 2003, as the deadline for objections to the DIP Credit Facility and June 11, 2003, as the hearing date for such objections.

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

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

Pursuant to the provisions of the Bankruptcy Code, the Debtors are currently developing a plan of reorganization.  The principal objective of the plan of reorganization will be to restructure the Debtors' obligations to creditors in a manner which permits the Company to continue as a viable business organization.  The Bankruptcy Code allows the Debtors the exclusive right to file a plan of reorganization during the first 120 days of the Case, or such other time as the Court orders.  Although management expects to file a plan of reorganization, there can be no assurance at this time as to whether or when a plan of reorganization will be proposed by the Debtors, how liabilities and equity interests will be treated in the plan, that the plan will be approved by the various classes of creditors and equity holders, or that it will be approved or confirmed by the Court.  If the exclusivity period were to expire or be terminated, other interested parties, such as creditors, would have the right to propose alternative plans of reorganization.  The Debtors' plan of reorganization could substantially change the amounts and characterization of liabilities currently disclosed in the accompanying unaudited consolidated financial statements.

The ability of the Company to continue as a going concern is dependent upon, but not limited to, the development and confirmation of a plan of reorganization, continued access to adequate sources of capital, the continued compliance with all debt covenants under the debtor-in-possession credit facility, retention of key suppliers, customers and employees, and the ability to sustain positive cash flows sufficient to fund operations and repay debt.  No assurance can be given that the Debtors will be successful in reorganizing their affairs within the Case.  Because of the ongoing nature of the reorganization process, the outcome of which is not determinable until a plan of reorganization is confirmed and consummated, the accompanying unaudited Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of these uncertainties.
**NOTE 3 - LONG-TERM DEBT DUE WITHIN ONE YEAR**
DEBTOR-IN-POSSESSION FINANCING FACILITY

On May 16, 2003, in conjunction with the Case, we entered into a debtor-in-possession financing facility with Harris Trust and Savings Bank and a syndicate of six other lenders (the "DIP Lenders") to provide up to $37.5 million of financing (the "DIP Credit Facility").  As of the date of this filing, the DIP Lenders are also lenders under the Pre-Petition Harris Facility (as defined below under the heading "The Pre-Petition Harris Facility"), which consists of 13 lenders as of the date of this filing (the "Pre-Petition Lenders").  The DIP Credit Facility is a revolving credit facility under which Mississippi Chemical Corporation is the borrower and its subsidiaries that are included in the Case are guarantors.  The DIP Credit Facility terminates upon the earliest to occur of (a) August 16, 2004, (b) the date that a plan of reorganization confirmed by the Court becomes effective, or (c) the date on which the DIP Lenders terminate the DIP Credit Facility in connection with an event of default under the facility.  On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request on an interim basis to enter into the DIP Credit Facility.  The Court has set June 9, 2003, as the deadline for objections to the DIP Credit Facility, and June 11, 2003, as the hearing date for such objections.  The provisions of the DIP Credit Facility generally described below are more particularly described in the Post-Petition Credit Agreement filed as an exhibit to this Form 10-Q.

The DIP Credit Facility provides for maximum borrowings (the "DIP Commitment"), at any time, up to the lesser of (a) $37.5 million during the months of September, October and November 2003, and February and March 2004, and $35 million at all other times, or (b) a borrowing base equal to the sum of (i) 85% of eligible accounts receivable plus (ii) 65% of eligible inventory, minus (iii) a scheduled excess collateral availability requirement, minus (iv) from June 15, 2003, an amount equal to twice the amount of all the then accrued and unpaid charges owed to warehousemen and other third parties having inventory in their possession that have not executed and delivered to the lenders a warehouseman's waiver, minus (v) from June 15, 2003, an amount equal to six months' rent for all leased facilities where inventory is kept for which the landlord has not executed and delivered to the lenders a landlord's waiver.  The commitments of the DIP Lenders are subject to certain mandatory reductions described below.

The loans under the DIP Credit Facility bear interest at rates equal to the prime commercial rate from time to time in effect plus 4%.  Upon entry of the Interim Order, we paid a commitment fee equal to 1% of the full DIP Commitment to the DIP Lenders and an administrative fee of $75,000 to Harris Trust and Savings Bank, as "DIP Agent."  Upon entry of the Final Order, we will be obligated to pay an additional commitment fee of 1% to the DIP Lenders and an additional administrative fee of $75,000 to the DIP Agent.  The DIP Credit Facility also has a facility fee equal to 0.5% per annum of the average daily unused amount of the DIP Commitment.

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

The DIP Credit Facility (a) restricts our ability to incur debt, (b) requires us to generate certain minimum levels of EBITDA, (c) limits our expenditures to the types set forth in a budget, subject to permitted deviations, (d) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions outside the ordinary course of business, (e) permits the voluntary prepayment of loans under the DIP Credit Facility without penalty, and (f) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for debtor-in-possession revolving credit facilities.

In connection with entering into the DIP Credit Facility, we entered into an agreement with the Pre-Petition Lenders pursuant to which such lenders agreed not to take any action to enforce their rights under the guaranty by Mississippi Chemical Holdings, Inc. ("MCHI"), of our obligations under the Pre-Petition Harris Facility.  Upon the termination of the DIP Credit Facility or upon certain defaults, the Pre-Petition Lenders may enforce the MCHI guaranty.  In the event that MCHI receives proceeds from a refinancing or disposition event with respect to Farmland MissChem Limited ("Farmland MissChem"), MCHI has agreed to apply such proceeds to the Pre-Petition Harris Facility.

PRE-PETITION -  HARRIS FACILITY

On November 15, 2002, we amended and restated our $200.0 million secured revolving credit facility with Harris Trust and Savings Bank and a syndicate of other lenders (twelve as of the date of this filing) to extend the facility's maturity from November 25, 2002, to November 10, 2003, reduce the commitment to $165.0 million, and provide for other amendments that were less favorable to us (the "Pre-Petition Harris Facility").  Since that date, the commitment was automatically reduced to $163.4 million in accordance with the Pre-Petition Harris Facility due to sales of non-core assets.  Our bankruptcy filing was an event of default under the Pre-Petition Harris Facility, and as a result, we can no longer borrow under this facility.  The borrowings underthe facility are reflected as a current liability on our balance sheet.  The provisions of the Pre-Petition Harris Facility generally described below are more particularly described in the amended and restated credit agreement (the "Pre-Petition Credit Agreement") filed as an exhibit to our September 30, 2002 Form 10-Q. 

The Pre-Petition Harris Facility consists of "A Loans" and "B Loans" (collectively, the "Loans") that are guaranteed by each of the Company's wholly owned domestic subsidiaries and a foreign subsidiary as provided below.  The B Loans constitute a continuation of the $105 million principal amount of B Loans outstanding as of November 15, 2002.  Loans which are not B Loans are A Loans.  The Loans and the commitments of the lenders under the Pre-Petition Harris Facility are subject to mandatory prepayments and mandatory commitment reductions as described below.  The Loans bear interest at rates equal to the sum of (i) the greater of (a) the Prime Rate or (b) the Federal Funds Rate plus 1/2%, plus (ii) an "Applicable Margin."  The Applicable Margin is 5% on the first $105 million outstanding under the Pre-Petition Harris Facility and 1% on all amounts outstanding in excess of $105 million; provided, that once the amount of mandatory prepayments and commitment reductions on the Pre-Petition Harris Facility equals or exceeds $52.5 million, the Applicable Margin will reduce to 3%.  Pursuant to the DIP Credit Facility, interest on the loans and fees accrue at the default rate of an additional 2%.  The portion of post-petition interest and fees equal to the non-default rate shall be paid pursuant to the terms of the Pre-Petition Harris Facility, and the difference between interest and fees at the default rate and interest and fees at the non-default rate will be due and payable on the termination of the DIP Credit Facility.

We incurred approximately $4.0 million in costs and fees to close the Pre-Petition Harris Facility.  We are obligated to pay a facility fee equal to 0.5% per annum of the commitment ($825,000) payable quarterly in arrears (see Note 8).

Our weighted average interest rate under the Pre-Petition Harris Facility was 8.2% for the quarter and 8.1% at March 31, 2003.  We had letters of credit outstanding as of March 31, 2003, and May 15, 2003, in the amount of $900,000 that lowered our borrowing availability.  We had borrowings outstanding of $158.3 million on May 15, 2003.  As a result of the Case, no additional borrowings are available under the Pre-Petition Harris Facility. The A Loans are secured by a first priority lien on our inventory, accounts receivable, spare parts, and substantially all remaining assets which are not Principal Properties (as defined below in this paragraph) (collectively, the "Non-Principal Properties").  The B Loans are secured by (a) a first priority lien on our four domestic operating facilities and related real estate, the equity of the subsidiaries that own such facilities, and similar after-acquired properties and securities (collectively, the "Principal Properties") to the extent permitted by the Indenture governing our Senior Notes (see the heading "Liquidity and Capital Resources - Financing Activities - The Senior Notes," in Part 1, Item 2 of this report) and (b) a second priority lien on the Non-Principal Properties.  The Loans are guaranteed by all of our domestic subsidiaries and a foreign subsidiary, MCHI.  MCHI indirectly owns our equity interest in Farmland MissChem.  For information regarding the tax effect of this foreign subsidiary guarantee, see the discussion in Part I, Item 2, of this Form 10-Q under the headings "Critical Accounting Policies - Deferred Taxes," and "Results of Operations - Nine  Months Ended March 31, 2003 Compared to the Nine Months Ended March 31, 2002 - Income Tax Benefit."

The Pre-Petition Harris Facility provides for maximum borrowings up to the lesser of: $163.4 million (the "Loan Limit"), or the "Borrowing Base" that is equal to (a) the sum of (i) 85% of eligible accounts receivable, (ii) 65% of eligible inventory (subject to a $45 million limit), (iii) 50% of eligible spare parts, plus 75% of the appraised orderly liquidation value of Non-Principal Properties not included in items (a)(i)-(iii) above (subject to a combined $15 million limit), and (iv) $105 million (subject to reduction for mandatory prepayments); minus (b) $12.5 million through March 31, 2003, and $15 million thereafter (the "Block Amount").  To borrow the Loan Limit, the Borrowing Base (including the Block Amount) must equal or exceed $163.4 million.  If the Borrowing Base is less than the Loan Limit, the Loans shall not exceed the Borrowing Base.  The Pre-Petition Harris Facility also permits up to $20 million of letters of credit, which lower borrowing availability.

The Pre-Petition Harris Facility (a) requires us to generate certain minimum levels of EBITDA (as defined in the Pre-Petition Credit Agreement), (b) limits our capital expenditures, (c) prohibits the repurchase of our outstanding shares and the payment of dividends, (d) obligates us to actively and continuously market our equity interest in Farmland MissChem, (e) provides for certain commitment reductions equal to 50% of our Excess Cash Flow (as defined in the Pre-Petition Credit Agreement), (f) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions, tax refunds, and equity issues, (g) permits the voluntary prepayment of the Loans at any time without penalty, and (h) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for revolving credit facilities of this type.  

**NOTE 3 - LONG-TERM DEBT DUE WITHIN ONE YEAR (Continued)**

THE INDUSTRIAL REVENUE BONDS

In August 1997, we issued $14.5 million in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of our new phosphogypsum disposal facility at our Pascagoula, Mississippi, DAP manufacturing plant.  On April 1, 1998, we issued $14.5 million in tax-exempt industrial revenue bonds, the proceeds of which were used to redeem the initial industrial revenue bonds issued in August 1997.  The bonds issued on April 1, 1998, mature on March 1, 2022, and carry a 5.8% fixed rate.  The bonds may be redeemed at our option at a premium from March 1, 2008, to February 28, 2010, and may be redeemed at face value at any time after February 28, 2010, through the maturity date.  The bonds are the obligation of our subsidiary, Mississippi Phosphates Corporation, but are guaranteed by Mississippi Chemical 

Corporation.  We were in compliance with the terms and conditions related to the bonds as of March 31, 2003.  However, our bankruptcy filing was an event of default under the industrial revenue bonds.

 

THE SENIOR NOTES

On November 15, 1997, we issued $200.0 million of 7.25% Senior Notes (the "Senior Notes") due November 15, 2017, pursuant to a $300.0 million shelf registration statement filed with the Securities and Exchange Commission.  Semi-annual interest payments of approximately $7.3 million are due on each May 15 and November 15.  The holders may elect to have the Senior Notes repaid on November 15, 2007.  We were in compliance with the terms and conditions related to the Senior Notes as of March 31, 2003.  However, as a result of our bankruptcy filing, we did not make the semi-annual interest payment due with respect to the Senior Notes on May 15, 2003.  In addition, our bankruptcy filing constitutes an event of default under the Senior Notes.  

On January 9, 2003, Trustmark National Bank, the Trustee under the Indenture governing the Senior Notes, delivered a notice of resignation to us.  On March 21, 2003, BancorpSouth Bank, a national banking association, became the Trustee under the Indenture.  
** 

NOTE 4 - EARNINGS PER SHARE**
The number of weighted average common shares outstanding, net of treasury shares, used in our diluted earnings per share computations for the three months ended March 31, 2003 and 2002 were 26,208,000 and 26,139,000, respectively.  The number of weighted average common shares outstanding, net of treasury shares, used in our diluted earnings per share computations for the nine months ended March 31, 2003 and 2002 were 26,184,000 and 26,135,000, respectively.  Options outstanding at March 31, 2003 and 2002, were not included in our computations of diluted loss per share as a result of incurring a net loss in each of the three-month and nine-month periods, which renders the options anti-dilutive.
** 

NOTE 5 - SEGMENT INFORMATION**
Our reportable operating segments, nitrogen, phosphate and potash, are strategic business units that offer different products.  They are managed separately because each business unit requires different technology and marketing strategies.  Our nitrogen segment produces anhydrous ammonia, ammonium nitrate, urea, nitrogen solutions and nitric acid.  However, on December 19, 2002, we announced plans to close our urea facility located in Donaldsonville, Louisiana.  Urea production ended on January 31, 2003 (see Note 9).  We distribute these products to fertilizer dealers, distributors, and industrial users.  Our phosphate segment produces diammonium phosphate fertilizer (commonly referred to as "DAP").  The majority of our DAP is   marketed to agricultural users in international markets through a separate export association.  Our potash segment mines and produces agricultural and industrial potash products that are sold to fertilizer dealers, distributors, and industrial accounts, primarily for use in the southern and western regions of the United States, and into export markets.  Below is our segment information for the three-month and nine-month periods ended March 31, 2003 and 2002.  The Other caption includes corporate and consolidating eliminations.
  
Three months ended March 31, 2003
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$ 73,227 
$ 23,932 
$ 18,281 
$     -    
$115,440 
Net sales - intersegment 
4,892 
-     
-     
(4,892)
-      
Impairment of long-lived assets 
58,497 
-     
-     
-    
58,497 
Operating loss 
(59,840)
(5,172)
(1,450)
267 
(66,195)
Depreciation, depletion and      
  amortization 
5,241 
1,330 
1,818 
1,472 
9,861 
Capital expenditures 
1,308 
1,240 
547 
304 
3,399 
 
  
Three months ended March 31, 2002
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$ 50,631 
$  24,555 
$19,508 
$   -      
$ 94,694 
Net sales - intersegment 
4,086 
17 
-      
(4,103)
-      
Operating (loss) income 
(10,214)
1,667 
(798)
285 
(9,060)
Depreciation, depletion and      
  amortization 
6,687 
1,409 
1,900 
1,164 
11,160 
Capital expenditures 
367 
1,872 
488 
15 
2,742 ****
 
  
Nine months ended March 31, 2003
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$202,410 
$  77,619 
$49,763 
$     -     
$329,792 
Net sales - intersegment 
14,950 
17 
-     
(14,967)
-     
Impairment of long-lived assets 
70,848 
-     
-     
-     
70,848 
Operating loss 
(83,255)
(9,685)
(2,799)
(200)
(95,939)
Depreciation, depletion and      
  amortization 
16,765 
4,188 
5,385 
4,099 
30,437 
Capital expenditures 
6,284 
2,976 
3,542 
425 
13,227 ** **  
Nine months ended March 31, 2002
(In thousands) 
Nitrogen
Phosphate
Potash
Other
Total       
Net sales - external customers 
$184,830 
$  77,092 
$56,630 
$   -
$318,552 
Net sales - intersegment 
14,950 
52 
-      
(15,002)
-      
Operating (loss) income 
(18,842)
1,334 
(4,475)
1,062 
(20,921)
Depreciation, depletion and      
  amortization 
20,536 
4,206 
5,347 
3,405 
33,494 
Capital expenditures 
2,646 
3,387 
1,697 
138 
7,868 ** 

NOTE 6 - ACCUMULATED OTHER COMPREHENSIVE INCOME**
Comprehensive income is the total of net income (loss) and all other non-owner changes in equity.  The components of comprehensive income that relate to us are net income or loss and unrealized gains or losses on our natural gas derivative transactions, and, as permitted under the provisions of SFAS No. 130, "Reporting Comprehensive Income," are presented in the Consolidated Statements of Shareholders' Equity.  These derivative transactions may consist of futures contracts, options, swaps, or similar derivative instruments related to the price of natural gas.  The changes in the components of accumulated other comprehensive income during the nine months ended March 31, 2003, are included below.
  Before-Tax Tax Net-of-Tax  
Amount 
Effect 
Amount  
(In thousands)
Net unrealized gain on natural gas hedging       
   activities at June 30, 2002 
$  7,973  
$  (2,990) 
$  4,983        
       Net unrealized gain arising during period 
10,859 
(4,213) 
6,646
       Reclassification adjustment for net gains      
          realized in net loss 
  (16,456) 
     6,294  
 (10,162)       
Net unrealized gain on natural gas hedging       
   activities at March 31, 2003 
$   2,376  
$    (909) 
$   1,467 ** 

NOTE 7 - INCOME TAX RECEIVABLE**
In August 2002, we received a $14.9 million refund of federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002.

 
**NOTE 8 - PREPAID EXPENSES AND OTHER CURRENT ASSETS**
As of March 31, 2003, our prepaid expenses and other current assets had increased approximately $5.3 million from June 30, 2002.  This increase was primarily related to increased financing fees in connection with the Pre-Petition Harris Facility, the prepayment for natural gas (our primary raw material), and increased insurance premiums that we pre-pay and amortize over the year.  These increases were partially offset by decreased net unrealized gains associated with our natural gas hedging activities at March 31, 2003, as more particularly described in Note 6 - Accumulated Other Comprehensive Income of these Notes to Consolidated Financial Statements.  
** 

NOTE 9 - IMPAIRMENT OF LONG-LIVED ASSETS**
On December 19, 2002, we announced plans to close our urea facility located in Donaldsonville, Louisiana, and on February 26, 2003, we announced plans to close our No. 2 anhydrous ammonia plant, also located in Donaldsonville, Louisiana (the "No. 2 AA Plant").  Both closures were due to continued negative operating results from unfavorable natural gas prices and market conditions.  While we continued to evaluate alternative uses for these assets, we concluded, at that time, that the long-lived assets associated with the prilling section of the urea plant and the assets associated with the No. 2 AA Plant would be idled indefinitely.  These assets were determined to be impaired and will not contribute to our ongoing operations.  The long-lived assets associated with our total urea operation had a book value of approximately $23.3 million as of December 31, 2002.  The carrying value of the impaired prilled urea assets was approximately $12.5 million as of December 31, 2002.  This amount has been written off and recorded as a component of operating expenses.  Urea production ended on January 31, 2003.  Approximately 40 employees were impacted by this change in production and are being provided severance benefits based upon their years of service.  Total severance cost was approximately $960,000 and has been accrued in accordance with SFAS No. 146.  The long-lived assets associated with the No. 2 AA Plant had a book value of approximately $68.0 million as of February 28, 2003.  This amount has been written down to estimated salvage value and the impairment has been recorded as a component of operating expenses.  Production from the No. 2 AA Plant has been down since early January 2003.  Approximately 24 employees were impacted by this change in production and are being provided severance benefits based upon their years of service.  Total severance cost was approximately $438,000 and has been accrued in accordance with SFAS No. 146. 

 
**NOTE 10 - ACCOUNTING FOR STOCK OPTIONS**
At March 31, 2003, we had a stock option plan for certain officers and key employees, as well as a stock option plan for non-employee directors.  On May 14, 2003, the Board of Directors voted to terminate the stock option plan for certain officers and key employees.  These plans are described more fully in Note 9 - Stock Options in our Notes to Consolidated Financial Statements appearing in Item 8 of our most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission.  Prior to July 1, 2002, we had applied the recognition and measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees".  Under these provisions, we were not required to record any stock based compensation expense.

Effective July 1, 2002, we adopted the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation," prospectively to all new awards granted on or after July 1, 2002.  Awards under the plans vest over periods ranging from six months to six years. 

The following table illustrates the effect on net loss and loss per share if the fair value method had been applied to outstanding and unvested awards in each period:
 
Three months ended 
Nine months ended 
March 31, 
March 31, 
2003 
2002 
2003 
2002        
Net loss, as reported
$  (48,027) 
$   (4,987) 
$  (85,704) 
$ (14,206)
Add:      Stock-based compensation        
               expense included in       
               reported net loss, net of tax
-      
-      
100  
-     
Deduct: Total stock-based                    compensation expense       
             determined under fair       
             value method, net of tax
         -       
        -      
       (100) 
       (346)        
Pro forma net loss
$ (48,027) 
$  (4,987) 
$ (85,704) 
$(14,552)        
Loss per share:       
              Basic - as reported
$     (1.83) 
$    (0.19) 
$     (3.27) 
$    (0.54)
              Basic - pro forma
$     (1.83) 
$    (0.19) 
$     (3.27) 
$    (0.56)        
              Diluted - as reported
$     (1.83) 
$    (0.19) 
$     (3.27) 
$    (0.54)
              Diluted - pro forma
$     (1.83) 
$    (0.19) 
$     (3.27) 
$    (0.56)** 

NOTE 11 - INCOME TAX BENEFIT**
For the nine-month period ended March 31, 2003, our income tax benefit was $28.0 million, as compared to an income tax benefit of $13.0 million for the nine-month period ended March 31, 2002.  This income tax benefit is primarily the result of our net losses, partially offset by U.S. tax expense on cumulative foreign earnings triggered by the guarantee of our debt under the Pre-Petition Harris Facility by one of our foreign subsidiaries.

Under the Pre-Petition Harris Facility, our wholly owned subsidiary, MCHI, provided a guarantee of the debt.  MCHI indirectly owns our 50% joint venture interest in Farmland MissChem, which operates an anhydrous ammonia facility in Point Lisas, Trinidad.  Under U.S. tax laws, this guarantee resulted in a deemed non-cash distribution to us of earnings from MCHI (and effectively our portion of the earnings from Farmland MissChem).  As of March 31, 2003, these cumulative earnings approximated $38.7 million.  No U.S. taxes are currently payable on these earnings due to significant book and tax accounting differences, primarily with respect to depreciation.  We have recorded non-current deferred tax liabilities on these earnings of approximately $14.8 million.  While the guarantee remains in place, we expect to record U.S. tax expenses on future earnings from MCHI and FarmlandMissChem.  

In addition to the U.S. tax expense resulting from the MCHI guarantee, we are providing tax benefits based on an estimated annual effective tax rate of approximately 35%.  This rate reflects our anticipation of establishing valuation allowances for all deferred state tax assets generated during the year.

 
**NOTE 12 - ASSET RETIREMENT OBLIGATIONS**
Effective July 1, 2002, we adopted SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible, long-lived assets and the associated asset retirement costs.  As of March 31, 2003, estimated closure costs of approximately $11.4 million have been accrued to close our West and East phosphogypsum disposal facilities at our Pascagoula, Mississippi, facility.  This amount was reduced by $400,000 during the quarter ended March 31, 2003, as certain costs came in under our initial estimate.  Currently, we are in the process of closing our West Facility.  We discontinued the use of this storage facility during the second quarter of fiscal 2003.  The East Facility that was completed in 1998 is currently in full operation.  During the nine-month period ended March 31, 2003, we recorded an asset and a liability in the amount of $3.9 million as the estimated asset retirement obligation for the East Facility in accordance with SFAS No. 143.  The asset recorded will be depreciated over its estimated useful life.  The liability will be accreted based on the effective interest method and the useful life of the facility.  As required by SFAS No. 143, we will make periodic assessments as to the reasonableness of our closure cost estimates.  Accordingly, adjustments will be made to the estimated costs of closure as needed.  The respective asset and liability balance will be adjusted on our consolidated balance sheet, which will correspondingly increase or decrease the amounts expensed in future periods.
****
As of March 31, 2003, estimated closure costs of approximately $2.4 million have been accrued to close our potash mining facilities.  Of this amount, approximately $2.3 million is attributable to our Eddy Potash, Inc. ("Eddy") facility that was idled in 1997.  We estimate that we have fully accrued closure costs for Eddy.  Our remaining potash facilities have estimated useful lives spanning several decades.  Our current estimates of closure costs for these facilities are not material to our operations at this time.  We will continue to evaluate our estimates and make adjustments accordingly.
** 

NOTE 13 - INVESTMENT IN FARMLAND MISSCHEM LIMITED**
Our 50-50 joint venture, Farmland MissChem, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant located near Point Lisas, The Republic of Trinidad and Tobago.  Farmland MissChem's financial statements are summarized as follows:

Summarized balance sheet information:
 
March 31,
June 30, 
2003
2002
Current assets
$   65,373   
$  67,620
Non-current assets
260,548
  268,778
Current liabilities
127,852
  149,773
Stockholders' equity
198,069
  186,625
 

Summarized statements of operation information:
 
Three months ended 
Nine months ended 
March 31, 
March 31, 
2003
2002 
2003
2002      
Revenues
$23,976
$36,794 
$57,939  
$56,786  
Operating income
    3,871
    6,992 
  6,933
12,493
Net income
   5,358
    9,998 
11,444
17,036
 

On May 15, 2003, the filing of the Case resulted in an event of default under the Ex-Im Bank loan documents and our anhydrous ammonia offtake agreement with Farmland MissChem, which requires us to purchase one-half of the output of Farmland MissChem.  As of the date of this filing, Ex-Im Bank has not provided notice to Farmland MissChem that it intends to accelerate the repayment of its loan.
** 

NOTE 14 - GUARANTOR SUBSIDIARIES**
Payment obligations under our 7.25% Senior Notes, due November 15, 2017, issued pursuant to that certain indenture, dated as of November 25, 1997, are fully and unconditionally guaranteed on a joint and several basis by Mississippi Nitrogen, Inc., and MissChem Nitrogen, L.L.C. (the "Guarantor Subsidiaries"), our wholly owned direct subsidiary and our wholly owned indirect subsidiary, respectively.  Condensed consolidating financial information regarding the parent company, Guarantor Subsidiaries and non-guarantor subsidiaries for March 31, 2003 and 2002 is presented below for purposes of complying with the reporting requirements of the Guarantor Subsidiaries.

CONDENSED CONSOLIDATING STATEMENT OF INCOME
****  
Three months ended March 31, 2003  
Parent
Guarantor
Non-Guarantor  
(In thousands) 
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$      -      
$  38,511 
$ 116,025 
$ (39,096)
$ 115,440 
  Other 
        -      
          800 
         -       
         -       
            800   
-      
39,311 
116,025 
(39,096)
116,240        
Operating expenses:      
  Cost of products sold 
-       
39,988 
107,433 
(39,515)
107,906 
  Selling, general and      
    administrative 
(270)
2,187 
7,135 
-      
9,052 
  Impairment of long-lived      
    assets 
-       
-      
58,497 
-      
58,497 
  Other 
       -       
      1,798 
         5,182 
              -      
        6,980   
        (270)
      43,973 
  178,247 
   (39,515)
  182,435 
Operating income (loss) 
270 
(4,662)
(62,222)
419 
(66,195)       
Other (expense) income:      
  Interest, net 
(4,086)
(884)
(3,286)
-      
(8,256)
  Other 
  (43,741)
  (31,668)
           17  
    75,607 
           215         
Loss before income taxes 
(47,557)
(37,214)
(65,491)
76,026 
(74,236)       
Income tax expense (benefit) 
          470 
      2,966 
    (29,216)
       (429)
   (26,209)       
Net loss 
$(48,027)
$(40,180)
$(36,275)
$ 76,455 
$(48,027)****
CONDENSED CONSOLIDATING STATEMENT OF INCOME
  
Three months ended March 31, 2002  
Parent
Guarantor
Non-Guarantor  
(In thousands) 
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$      -      
$   30,851 
$  95,917 
$   (32,074)          
$   94,694        
Operating expenses:      
  Cost of products sold 
  -      
36,022 
90,522 
(30,934)
95,610 
  Selling, general and      
    administrative 
(293)
1,337 
5,965 
-      
7,009 
  Other 
        -      
         853
         282 
          -      
       1,135   
        (293)
    38,212 
     96,769 
   (30,934)
   103,754 
Operating income (loss) 
293 
(7,361)
(852)
(1,140)
(9,060)       
Other (expense) income:      
  Interest, net 
(3,552)
(2,140)
(1,107)
-       
(6,799)
  Other 
      3,215 
      1,480 
         142 
      6,467 
      11,304        
Loss before income taxes 
(44)
(8,021)
(1,817)
5,327 
(4,555)       
Income tax expense (benefit) 
      4,943 
      3,455 
    (2,895)
     (5,071)
          432        
Net (loss) income 
$   (4,987)
$ (11,476)
$    1,078 
$  10,398
$   (4,987)**NOTE 14 - GUARANTOR SUBSIDIARIERS (Continued)**
CONDENSED CONSOLIDATING STATEMENT OF INCOME
  
Nine months ended March 31, 2003  
Parent
Guarantor
Non-Guarantor  
(In thousands) 
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$       -      
$ 110,356 
$ 331,535 
$(112,099)
$329,792 
  Other 
         -      
           800 
          -       
           -       
          800   
-      
111,156 
331,535 
(112,099)
330,592 
Operating expenses:      
  Cost of products sold 
-      
114,422 
317,898 
(113,113)
319,207 
  Selling, general and      
    administrative 
175 
5,050 
18,540 
-       
23,765 
  Impairment of long-lived      
    assets 
-      
-      
70,848 
-       
70,848 
  Other 
        -      
      4,319 
       8,392 
          -       
     12,711   
        175 
  123,791 
  415,678 
 (113,113)
  426,531 
Operating loss 
(175)
(12,635)
(84,143)
1,014 
(95,939)       
Other (expense) income:      
  Interest, net 
(11,660)
(4,204)
(6,611)
-       
(22,475)
  Other 
  (57,878)
  (31,214)
      3,825  
     90,021 
      4,754         
Loss before income taxes 
(69,713)
(48,053)
(86,929)
91,035 
(113,660)       
Income tax expense (benefit) 
    15,991 
       2,316 
   (43,856)
     (2,407)
   (27,956)       
Net loss 
$( 85,704)
$(50,369)
$ (43,073)
$  93,442 
$ (85,704)
 

CONDENSED CONSOLIDATED STATEMENT OF INCOME
  
Nine months ended March 31, 2002  
Parent
Guarantor
Non-Guarantor  
(In thousands) 
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
Revenues:      
  Net sales 
$    -      
$  104,162 
$  320,911 
$ (106,521)
$  318,552        
Operating expenses:      
  Cost of products sold 
-      
116,172 
300,563 
(106,891)
309,844 
  Selling, general and      
    administrative 
(1,082)
 3,810 
17,915 
-      
20,643 
  Other 
             -      
      5,539 
       3,447 
           -      
       8,986   
   (1,082)
  125,521 
   321,925 
  (106,891)
   339,473 
Operating income (loss) 
1,082  
(21,359)
(1,014)
370 
(20,921)       
Other (expense) income:      
  Interest, net 
(18,211)
(7,904)
(4,284)
8,951  
(21,448)
  Other 
       11,288 
         6,409 
          3,812 
     (6,325)
         15,184        
Loss before income taxes 
(5,841)
(22,854)
(1,486)
2,996 
(27,185)       
Income tax expense (benefit) 
        8,365 
    (10,145)
        (8,731)
        (2,468)
      (12,979)       
Net (loss) income 
$ (14,206)
$ (12,709)
$     7,245 
$     5,464 
$  (14,206)**NOTE 14 - GUARANTOR SUBSIDIARIES (Continued)**
CONDENSED CONSOLIDATING BALANCE SHEET

 
 
March 31, 2003 
Parent
Guarantor
Non-Guarantor  
(In thousands)
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
Assets     
Current assets:     
   Cash and cash equivalents
$    2,059 
$             8 
$           28 
$        -       
$    2,095 
   Receivables, net
30,158 
7,818 
61,142 
(44,610)
54,508 
   Inventories
-       
19,184 
48,013 
807 
68,004 
   Prepaid expenses and other     
     current assets
     6,699
      3,155 
       4,926 
    (1,982)
   12,798       
           Total current assets
38,916 
30,165 
114,109 
(45,785)
137,405       
Investments in affiliates
201,715 
69,008 
97,701 
(256,521)
111,903 
Other assets
220,500 
-       
5,219 
(221,951)
3,768 
Property, plant and equipment, net
       5,011 
    123,229 
    171,618 
                -       
  299,858       
           Total assets
$466,142 
$222,402 
$388,647 
$(524,257)
$552,934             
Liabilities and Shareholders' Equity     
Current liabilities:     
   Long-term debt due within      
            one year
$346,013 
$        -      
$ 14,500 
$         -      
$360,513 
   Accounts payable
17,957 
35,852 
60,739 
(85,571)
28,977 
   Accrued liabilities and other
        7,717 
         3,179 
       7,548 
       (1,529)
      16,915       
            Total current liabilities
371,687 
39,031 
82,787 
(87,100)
406,405       
Long-term debt
-      
64,575 
250,005 
(314,580)
-      
Other long-term liabilities and     
   deferred credits
4,017 
21,177 
14,040 
16,857 
56,091       
Shareholders' equity:     
   Common stock
280 
1 
58,940 
(58,941)
280 
   Additional paid-in capital
306,063 
324,715 
335,618 
(660,333)
306,063 
   Accumulated deficit
(188,898)
(227,097)
(352,743)
579,840 
(188,898)
   Accumulated other      
      comprehensive income
1,467 
-       
-      
-      
1,467 
   Treasury stock, at cost
     (28,474)
               -       
               -      
                -      
   (28,474)      
   Total shareholders' equity
     90,438 
       97,619  
     41,815 
  (139,434)
     90,438       
          Total liabilities and     
              shareholders' equity
$466,142 
$222,402 
$388,647 
$(524,257)
$552,934       
 
**NOTE 14 - GUARANTOR SUBSIDIARIES (Continued)**
CONDENSED CONSOLIDATING BALANCE SHEET

 

June 30, 2002 
Parent
Guarantor
Non-Guarantor  
(Dollars in thousands)
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated
Assets     
Current assets:     
     Cash and cash equivalents
$    1,920 
$          16 
$          53 
$        -      
$    1,989 
     Receivables, net
21,126 
9,704 
55,129 
(24,604)
61,355 
     Inventories
-      
19,525 
47,428 
(207)
66,746 
     Prepaid expenses and     
         other current assets
     5,000 
       1,251 
       3,112 
      (4,185)
      5,178       
     Total current assets
28,046 
30,496 
105,722 
(28,996)
135,268       
Investments in affiliates
259,932 
203,554 
91,982 
(448,496)
106,972 
Other assets
307,956 
-      
90,830 
(391,715)
7,071 
Property, plant and equipment, net
      7,913 
   126,792 
   246,269 
         -      
   380,974       
            Total assets
$ 603,847 
$ 360,842 
$ 534,803 
$ (869,207)
$ 630,285             
Liabilities and Shareholders' Equity     
Current liabilities:     
     Long-term debt due within      
         one year
$ 110,172 
$       -      
$      -      
$      -      
$ 110,172 
     Accounts payable
  15,361 
   11,938 
   48,237 
  (39,588)
  35,948 
     Accrued liabilities and other  
     7,220 
      2,954 
      5,964 
      (5,009)
         11,129       
     Total current liabilities
132,753 
14,892 
54,201 
(44,597)
157,249       
Long-term debt
290,285 
166,035 
137,578 
(379,683)
214,215 
Other long-term liabilities and     
   deferred credits
1,333 
31,928 
58,585 
(12,501)
79,345       
Shareholders' equity:     
     Common stock
280 
1 
58,940 
(58,941)
280 
     Additional paid-in capital
305,901 
324,715 
335,617 
(660,332)
305,901 
     Accumulated deficit
(102,577)
(176,729)
(110,118)
286,847 
(102,577)
     Accumulated other      
         comprehensive income
4,983 
-      
-      
-      
4,983 
     Treasury stock, at cost
   (29,111)
        -      
        -      
         -      
    (29,111)      
     Total shareholders' equity
   179,476 
   147,987 
   284,439 
  (432,426)
    179,476       
           Total liabilities and     
               shareholders' equity
$ 603,847 
$ 360,842 
$ 534,803 
$(869,207)
$  630,285 **NOTE 14 - GUARANTOR SUBSIDIARIES (Continued)**
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

 
 
Nine months ended March 31, 2003 
Parent
Guarantor
Non-Guarantor  
(In thousands)
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated      
Cash flows from operating activities:     
   Net loss
$ (85,704)
$ (50,369)
$  (43,073)
$  93,442 
$ (85,704)
   Reconciliation of net loss     
      to net cash (used in) provided by     
      operating activities:     
          Net change in operating assets     
             and liabilities
(21,733)
24,479 
3,700 
(26,490)
(20,044)
          Depreciation, depletion and     
             amortization
4,099 
9,573 
16,765 
-      
30,437 
          Change in deferred loss on     
                 hedging activities, net of tax
(1,411)
-      
-      
-      
(1,411)
          Equity earnings in      
             unconsolidated affiliates
57,678 
31,231 
(5,733)
(90,021)
(6,845)
          Refund of federal taxes      
             pursuant to the Job Creation     
             and Workforce Assistance      
             Act of 2002
14,871 
-      
-      
-      
14,871 
          Impairment of long-lived assets
-      
-      
70,848 
-      
70,848 
          Deferred income taxes and      
             other
     11,632 
   (10,773)
  (53,807)
    23,069 
   (29,879)
Net cash (used in) provided by      
   operating activities
   (20,568)
        4,141 
   (11,300)
          -      
   (27,727)      
Cash flows from investing activities:     
   Purchases of property, plant and     
      equipment
(425)
(6,009)
(6,793)
-      
(13,227)
      Proceeds from sale of assets
3,218  
4  
108  
-      
3,330  
   Other
         268  
       1,361 
           14  
          -      
      1,643  
Net cash (provided by) used in     
   investing activities
      3,061  
     (4,644)
     (6,671)
          -      
     (8,254)      
Cash flows from financing activities:     
   Debt proceeds
239,356  
-      
-      
-      
239,356  
   Debt payments
(203,269)
-      
-      
-      
(203,269)
   Net change in affiliate notes
   (18,441)
         495 
    17,946 
          -      
         -        
Net cash provided by financing     
   activities
    17,646  
         495 
    17,946 
          -      
     36,087       
Net increase (decrease) in cash and      
   cash equivalents
139  
(8)
(25)
-      
106       
Cash and cash equivalents -     
   beginning of period
       1,920 
           16 
           53 
         -      
      1,989       
Cash and cash equivalents -     
   end of period
$    2,059 
$           8 
$         28 
$      -       
$   2,095 **NOTE 14 - GUARANTOR SUBSIDIARIES (Continued)**
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

 
 
Nine months ended March 31, 2002 ParentGuarantorNon-Guarantor  
(In thousands)
Company
Subsidiaries
Subsidiaries
Eliminations
Consolidated      
Cash flows from operating activities:     
   Net (loss) income
$ (14,206)        
$ (12,709) 
$    7,245 
$     5,464 
$   (14,206)
   Reconciliation of net (loss) income     
      to net cash (used in) provided by     
      operating activities:     
          Net change in operating assets     
             and liabilities
(36,979)
118 
33,768 
1,321 
(1,772)
          Depreciation, depletion and     
             amortization
3,404 
9,472 
20,618 
-      
33,494 
          Change in deferred loss on                    
             hedging activities, net of tax
6,015 
-      
-      
-      
6,015 
          Equity earnings in      
             unconsolidated affiliates
8,685 
(6,505)
(8,523)
(2,681)
(9,024)
          Refund of federal taxes     
             pursuant to the Job Creation     
             and Workforce Assistance      
             Act of 2002
26,446 
-      
-      
-      
26,446 
          Deferred income taxes and      
             other
     6,004 
                 142 
           (4,748)
          (4,104)
        (2,706)
Net cash (used in) provided by     
   operating activities
       (631)
        (9,482)
          48,360 
                -      
       38,247       
Cash flows from investing activities:     
   Purchases of property, plant and     
      equipment
(139)
(1,374)
(6,355)
-      
(7,868)
   Proceeds from sale of assets
42 
120 
4,855 
-      
5,017 
   Other
              -      
                990 
             2,310 
               -      
          3,300 
Net cash (used in) provided by     
   investing activities
                (97)
             (264)
                 810 
               -       
               449       
Cash flows from financing activities:     
   Debt proceeds
167,904 
-      
-      
-      
167,904 
   Debt payments
(217,240)
-      
-      
-      
(217,240)
   Net change in affiliate notes
     39,426 
           9,746 
        (49,172)
                -      
               -       
Net cash (used in) provided by     
   financing activities
         (9,910)
           9,746 
        (49,172)
                -      
     (49,336)      
Net decrease in cash and cash     
   equivalents
(10,638)
-      
(2)
-      
(10,640)      
Cash and cash equivalents -     
   beginning of period
         11,728       
                  16 
                      53 
               -      
        11,797       
Cash and cash equivalents -     
   end of period
$     1,090  
$         16 
$           51 
$       -      
$     1,157 
 

**ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION**
GENERAL.  The following is management's discussion and analysis of results of operations and financial condition, which should be read in conjunction with our audited financial statements and related notes for the fiscal year ended June 30, 2002, in our most recent Annual Report on Form 10-K which is on file with the Securities and Exchange Commission. 

PETITION FOR RELIEF UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE.  On May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its subsidiaries, Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; Triad Nitrogen, L.L.C.; Mississippi Chemical Company, L.P.; Mississippi Chemical Management Company; Eddy Potash, Inc.; and Melamine Chemicals, Inc. (collectively, the "Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"), Joint Case Number 03-02984 WEE, collectively (the "Case").  The filings were made in order to facilitate the restructuring of the Debtors' obligations.  The Debtors will operate their businesses as debtors-in-possession subsequent to the Petition Date.  As debtors-in-possession, the Debtors are authorized to operate their businesses but may not engage in transactions outside the ordinary course of business without the approval of the Court.  On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request for interim financing (see Liquidity and Capital Resources - Financing Activities - Debtor-in-Possession Financing Facility).  The Court has set June 9, 2003, as the deadline for objections to the DIP Credit Facility and June 11, 2003, as the hearing date for such objections.

The Debtors sought relief under Chapter 11 of the Bankruptcy Code because of a lack of liquidity.  The combination of the depression in the agricultural sector and the extreme increase in price level and price volatility of domestic natural gas, the Company's primary raw material, has resulted in substantial financial losses for the Company for the last five years.

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

Pursuant to the provisions of the Bankruptcy Code, the Debtors are currently developing a plan of reorganization.  The principal objective of the plan of reorganization will be to restructure the Debtors' obligations to creditors in a manner which permits the Company to continue as a viable business organization.  The Bankruptcy Code allows the Debtors the exclusive right to file a plan of reorganization during the first 120 days of the Case, or such other time as the Court orders.  Although management expects to file a plan of reorganization, there can be no assurance at this time as to whether or when a plan of reorganization will be proposed by the Debtors, how liabilities and equity interests will be treated in the plan, that the plan will be approved by the various classes of creditors and equity holders, or that it will be approved or confirmed by the Court.  If the exclusivity period were to expire or be terminated, other interested parties, such as creditors, would have the right to propose alternative plans of reorganization.  The Debtors' plan of reorganization could substantially change the amounts and characterization of liabilities currently disclosed in the accompanying unaudited consolidated financial statements.

The ability of the Company to continue as a going concern is dependent upon, but not limited to, the development and confirmation of a plan of reorganization, continued access to adequate sources of capital, the continued compliance with all debt covenants under the debtor-in-possession credit facility, retention of key suppliers, customers and employees, and the ability to sustain positive cash flows sufficient to fund operations and repay debt.  No assurance can be given that the Debtors will be successful in reorganizing their affairs within the Case.  Because of the ongoing nature of the reorganization process, the outcome of which is not determinable until a plan of reorganization is confirmed and consummated, the accompanying unaudited consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

SEGMENTS.  Our operations are organized into three strategic business units: nitrogen, phosphate and potash.  Our nitrogen business unit produces nitrogen products that are sold to fertilizer dealers, distributors, and industrial users located primarily in the southern region of the United States.  Our phosphate business unit produces diammonium phosphate fertilizer (commonly referred to as "DAP") and exports the majority of this production through a separate export association, Phosphate Chemicals Export Association, Inc., a Webb-Pomerene corporation known as "PhosChem."  Our potash business unit mines and produces agricultural and industrial potash products that are sold to fertilizer dealers, distributors, and industrial accounts for use primarily in the southern and western regions of the United States and into export markets. 

SEASONALITY.  Consistent with the historical nature of our business, the usage of fertilizer in our trade territory is seasonal, and our quarterly results reflect the fact that more fertilizer is traditionally sold during the last four months of our fiscal year (March through June).  Therefore, in most years, a large portion of our agricultural sales are generated in the spring planting season.  Since interim period operating results reflect the seasonal nature of our business, they may not necessarily be indicative of results expected for the full fiscal year.  We incur substantial expenditures for fixed costs and inventory throughout the year.

OTHER FACTORS.  Our products and primary raw materials (particularly natural gas) are commodities, the prices for which may vary significantly from quarter to quarter.  These prices and the global supply/demand balance for our products do not necessarily change in relation to one another and may impact our performance in different ways.  In addition, quarterly results can vary significantly from year to year due to a number of other factors as detailed under "Outlook" and "Forward Looking Statements" in this quarterly report and under the heading "Certain Business Factors" and elsewhere in our most recent Annual Report on Form 10-K which is on file with the Securities and Exchange Commission.  

CRITICAL ACCOUNTING POLICIES.  The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

We have identified and described the accounting policies that involve those estimates and assumptions that we believe are critical to an understanding of our financial statements.  Our management has discussed the development and selection of each critical accounting estimate with the Audit Committee of our Board of Directors and the Audit Committee has reviewed these related disclosures.  Since application of these accounting policies involves the exercise of judgment and use of estimates, actual results could differ from those estimates.  Details regarding these policies are described in our most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission.  There have been no material changes to our critical accounting policies that impacted our financial condition or results of operations during the nine-month period ended March 31, 2003, except as described below.
*Deferred Taxes.  Deferred income taxes are estimated based upon temporary differences in the income and losses that we report in our financial statements compared to our taxable income and losses as determined under applicable tax laws.  We estimate the amount of deferred income taxes based upon existing tax rates and laws, and our expectations of future earnings.  We estimate our composite statutory tax rate to be approximately 38%.

We are required to evaluate the likelihood of our ability to generate sufficient future taxable income that will enable us to realize the value of our deferred tax assets.  If, in our judgment, it is more likely than not that we will realize value for any deferred tax assets, then we are not required to record valuation allowances against those deferred tax assets.  As of March 31, 2003, we had recorded deferred tax assets arising from federal and state net operating loss carryforwards amounting to approximately $36.2 million and approximately $19.1 million, respectively.  We estimate that certain deferred state tax assets, including these arising from certain state net operating loss carryforwards, will not be realized, and we have recorded valuation allowances against these assets totaling $7.8 million as of March 31, 2003.  We anticipate recording valuation allowances for all deferred state tax assets generated for fiscal year 2003.

As part of the Pre-Petition Harris Facility (as defined below under the heading Liquidity and Capital Resources - Financing Activities - The Pre-Petition Facility), our wholly owned subsidiary, Mississippi Chemical Holdings, Inc. ("MCHI"), provided a guarantee of the debt.  MCHI indirectly owns our 50% joint venture interest in Farmland MissChem Limited ("Farmland MissChem"), which operates an anhydrous ammonia facility in Point Lisas, Trinidad.  Under U.S. tax laws, this guarantee resulted in a deemed non-cash distribution to us of earnings from MCHI (and effectively our portion of the earnings from Farmland MissChem).  As of March 31, 2003, these cumulative earnings approximated $38.7 million.  No U.S. taxes are currently payable on these earnings due to significant book and tax accounting differences, primarily with respect to depreciation.  We have recorded non-current deferred tax liabilities on these earnings of approximately $14.8 million.  While the guarantee remains in place, we expect to record U.S. tax expense on future earnings from MCHI and Farmland MissChem.

          We use significant management judgments and estimates when estimating deferred taxes. If our judgments and estimates prove to be inaccurate, or if applicable tax rates and laws should change, our financial results could be materially adversely impacted in future periods.  
*          Asset*Retirement**Obligations*.  We estimate closure costs for our Pascagoula, Mississippi,facilities and our potash mining facilities located in Carlsbad, New Mexico.  These closure costs are recognized over the estimated lives of the related facilities and have been recorded as a component of operating expenses in our consolidated statements of income. 

          As of March 31, 2003, estimated closure costs of approximately $11.4 million have been accrued to close our West and East phosphogypsum disposal facilities in Pascagoula.  This amount was reduced by $400,000 during the quarter ended March 31, 2003, as certain costs came in under our initial estimate.  Currently, we are in the process of closing our West Facility.  We discontinued the use of this storage facility during the second quarter of fiscal 2003.  The East Facility that was completed in 1998 is currently in full operation.  During the nine-month period ended March 31, 2003, we recorded an asset and a liability in the amount of $3.9 million as the estimated asset retirement obligation for the East Facility in accordance with SFAS No. 143 - "Accounting for Asset Retirement Obligations," as described more fully below.

          As of March 31, 2003, estimated closure costs of approximately $2.4 million have been accrued to close our potash mining facilities.  Of this amount, approximately $2.3 million is attributable to our Eddy Potash, Inc. ("Eddy") facility that was idled in 1997.  We estimate that we have fully accrued closure costs for Eddy.  Our remaining potash facilities have estimated useful lives spanning several decades.  Our current estimates of closure costs for these facilities are not material to our operations at this time.  We will continue to evaluate our estimates and make adjustments accordingly.

          Effective July 1, 2002, we adopted SFAS No. 143, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  The assets recorded will be depreciated over their useful lives.  The liabilities will be accreted based on the effective interest method and the useful lives of the related facilities.  As required by SFAS No. 143, we will make periodic assessments as to the reasonableness of closure cost estimates for each of our facilities.  Accordingly, adjustments will be made to the estimated costs of closure as needed.  The respective asset and liability balance will be adjusted on our consolidated balance sheet, which will correspondingly increase or decrease the amounts expensed in future periods.

          Significant management judgments and estimates are made when estimating closure costs.  If our judgments and estimates prove to be inaccurate, or if applicable laws or regulatory requirements should change, our financial results could be materially adversely impacted in future periods.
*          Impairment of Long-Lived Assets.  We evaluate the recoverability of our long-lived assets whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable, as required by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  These evaluations utilize various estimates and judgments.  The recoverability of these assets is highly dependent upon the accuracy of certain underlying assumptions, such as future product prices and natural gas costs.  During our second and third quarters of fiscal 2003,  events occurred that necessitated such an evaluation of recoverability of certain assets at our Donaldsonville facility.

          On December 19, 2002, we announced plans to close our urea facility located in Donaldsonville, Louisiana, and on February 26, 2003, we announced plans to close our No. 2 anhydrous ammonia plant also located in Donaldsonville, Louisiana (the "No. 2 AA Plant").  Both closures were due to continued negative operating results from unfavorable natural gas prices and market conditions.  While we continued to evaluate alternative uses for these assets, we concluded at that time that the long-lived assets associated with the prilling section of the urea plant and the assets associated with the No. 2 AA Plant would be idled indefinitely.  These assets were determined to be impaired and will not contribute to our ongoing operations.  The long-lived assets associated with our total urea operation had a book value of approximately $23.3 million as of December 31, 2002.  The carrying value of the impaired prilled urea assets was approximately $12.5 million as of December 31, 2002.  This amount has been written off and recorded as a component of operating expenses.  Prilled urea production ended on January 31, 2003.  The long-lived assets associated with the No. 2 AA Plant had a book value of approximately $68.0 million as of February 28, 2003.  This amount has been written down to estimated salvage value and the impairment has been recorded as a component of operating expenses.  The No. 2 AA Plant has not been in production since early January 2003.
*          Exit Costs and Disposal Activities.  In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit and Disposal Activities."  This statement revises the accounting for activities relating to exiting or disposing of businesses or assets under EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity."  A formal commitment to a plan to exit an activity or dispose of long-lived assets will no longer be sufficient to record a one-time charge for most exit and disposal costs.  Instead, companies will record exit or disposal costs when they are incurred and can be measured at fair value, and will subsequently adjust the recorded liability for changes in estimated cash flows.  The provisions of SFAS No. 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002.

          As encouraged by the FASB, we elected to early adopt this accounting standard.  On December 19, 2002, approximately 40 employees were provided a 60-day notice that operations would cease at our urea facility located in Donaldsonville, Louisiana.  These employees are being provided severance benefits based upon their years of service.  Such benefits are payable to those employees whose service ended after the 60-day period.  Total severance cost was approximately $960,000, and has been accrued in accordance with SFAS No. 146.  On February 26, 2003, approximately 24 employees were impacted by the change in our anhydrous ammonia production at our Donaldsonville, Louisiana, facility.  They are also being provided severance benefits based upon their years of service.  Total severance cost was approximately $438,000 and has been accrued in accordance with SFAS No. 146.

 
**RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2002**
OVERVIEW.  For the quarter ended March 31, 2003, we incurred a net loss of $48.0 million (or $1.83 per diluted share) compared to a net loss of $5.0 million (or $0.19 per diluted share) for the same quarter during the prior year.  Net sales increased to $115.4 million for the quarter ended March 31, 2003, from $94.7 million for the quarter ended March 31, 2002.  We incurred an operating loss of $66.2 million for the quarter ended March 31, 2003, compared to an operating loss of $9.1 million for the quarter ended March 31, 2002.  Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter ended March 31, 2003, were positive $2.4 million excluding a non-cash impairment charge of $58.5 million primarily related to the write-down of one of our anhydrous ammonia plants at our Donaldsonville, Louisiana, nitrogen facility, and were negative $56.1 million after the non-cash impairment charge.  This compares to positive EBITDA of $13.4 million for the quarter ended March 31, 2002.  
****
The following table reconciles cash flows from operations to EBITDA:
  
Three months ended March 31,  
2003 
2002  
(In thousands)
Net cash (used in) provided by operating activities 
$ (6,723) 
$36,587 
Net change in operating assets and liabilities 
(4,061) 
13,417 
Refund of federal taxes pursuant to the Job Creation and    
   Workforce Assistance Act of 2002 
-       
(26,446)
Impairment of long-lived assets 
(58,497) 
-      
Change in deferred (gain) loss on hedging activities,    
   net of tax 
1,990  
(5,396)
Deferred income taxes 
27,580  
(13,079)
Equity earnings in unconsolidated affiliates 
3,022  
1,706 
Other 
(1,477) 
(615)
Income tax (benefit) expense 
(26,209) 
432 
Interest, net 
     8,256  
     6,799 
        EBITDA, including impairment of long-lived assets 
(56,119) 
13,405 
Impairment of long-lived assets 
   58,497  
       -      
        EBITDA, excluding impairment of long-lived assets 
$   2,378  
$ 13,405 
NET SALES

OVERVIEW.  Our net sales increased 22% to $115.4 million for the quarter ended March 31, 2003, from $94.7 million for the quarter ended March 31, 2002.  This increase was primarily the result of higher average sales prices for our nitrogen and DAP products and higher sales volumes for our nitrogen products, partially offset by lower sales volumes for our DAP and potash products.

The following tables summarize our sales results by product categories for the three months endedMarch 31:

    
%  
2003
2002
Inc. (Dec.)
Net Sales (in thousands):    
   Nitrogen 
 $ 73,047
$ 50,469
45%
   DAP 
23,919
24,538
(3%)
   Potash 
18,281
19,508
(6%)
   Other 
        193
        179
      8%     
       Net Sales 
$115,440
$ 94,694
    22%
 

    
%  
2003
2002
Inc. (Dec.)
Tons Sold (in thousands):    
   Nitrogen:    
       Anhydrous ammonia 
185
162
14% 
       Ammonium nitrate 
170
142
20% 
       Urea 
68
96
(29%)
       Nitrogen solutions 
107
109
(2%)
       Nitric acid 
       5
       2
  150% 
            Total Nitrogen 
535
511
5%      
   DAP 
168
186
(10%)
   Potash 
211
226
(7%)
 

    
%  
2003
2002
Inc. (Dec.)
Average Sales Price Per Ton:    
   Nitrogen 
$    137 
$       99
38% 
   DAP 
$    143 
$     132
8% 
   Potash 
$      87 
$       86
1%      
NITROGEN.  Our nitrogen net sales increased 45% as a result of a 38% increase in average sales prices and a 5% increase in sales volumes. 

Our average anhydrous ammonia sales prices increased 74%, and our anhydrous ammonia sales volumes increased 14%.  We sell substantially all of our anhydrous ammonia into industrial markets; however, during the quarter ended March 31, 2003, we made additional sales of anhydrous ammonia in the agricultural market which increased our sales volumes.  Sales prices continued to increase from levels experienced during the second fiscal quarter ending December 31, 2002, because of reduced supply in the world market.  Over the past several months, there has been downtime at plants in various countries due to political unrest and natural gas supply issues.  This situation was intensified during late February when domestic natural gas prices spiked to record levels forcing approximately 65% of the U.S. nitrogen industry to briefly curtail production.  The spike in natural gas prices was caused by colder than normal temperatures in the U.S. during late February 2003, and a concern about the level of natural gas storage in the U.S. and its ability to meet demand.  Anhydrous ammonia prices peaked during mid-March of 2003, but had begun to decline by the end of the quarter as U.S. producers restarted production by mid-March.  Prices have continued to decline since the end of the quarter.  We ended the quarter with anhydrous ammonia inventory 63% lower than the prior year level. 

Our ammonium nitrate sales prices increased 11%, and our ammonium nitrate sales volumes increased 20%.  Sales were strong throughout the previous two quarters and this continued through the quarter ended March 31, 2003.  Application on winter wheat and pastures, combined with supply-side pressure due to high natural gas prices, resulted in strong sales throughout the quarter ended March 31, 2003.  Lower industry inventories also contributed to upward pressure on market prices.  Sales prices peaked during the quarter ended March 31, 2003, and had begun to fall by the end of the quarter with the restart of U.S. production and an excess supply of imported product still remaining in our primary trade area.

Our urea sales prices increased 17%, while our urea sales volumes decreased 29%.  The decrease in sales volumes was caused by the closure of our prilled urea plant on January 31, 2003.  The increase in sales prices was the result of the temporary shutdown of a large portion of U.S. production due to high natural gas prices during the quarter ended March 31, 2003.  Sales prices peaked during the quarter and had started to decline by the end of the quarter due to the restart of U.S. and Venezuelan production.  We ended our most recent quarter with urea inventory 63% below the prior year level.

Our nitrogen solutions sales prices increased 25%, while our nitrogen solutions sales volumes decreased 2%.  During the quarter ended March 31, 2002, inventory levels were high as a result of an influx of low priced imports that kept prices low and delayed customer buying decisions.  In contrast, sales prices during the March 31, 2003 quarter, benefited from lower industry inventory levels and limited reductions in supply as a result of brief curtailments during March.  Prices peaked during the quarter, but had declined somewhat by the end of the quarter.  We ended our most recent quarter with nitrogen solutions inventory 86% below the prior year level.  

PHOSPHATES.  Our DAP sales prices increased 8%, while our sales volumes decreased 10%.   Limited availability of sulfur and sulfuric acid reduced production by approximately 59,000 tons compared to the same prior-year period.  The shortfall in production resulted in lower sales and ending inventory levels at March 31, 2003, that were approximately 90% below the same prior-year level.  Prices were higher as world supply/demand was more in balance, spurred by better demand in China and reduced production in the U.S.

POTASH.  Our potash sales prices increased 1%, while sales volumes decreased 7%.  Sales volumes were lower primarily as a result of our voluntary reduction in export sales volumes due to unfavorable pricing in those markets.  In addition, slow domestic demand resulted in an ending inventory level that was 45% higher than the same prior-year period.  Sales prices did not change significantly as customers have not been concerned about supply for spring.

 

OTHER REVENUES

Our other revenues consist of facility fees earned from our newly constructed facility that will supply nitrogen tetroxide to the United States Department of Defense.

 

COST OF PRODUCTS SOLD
****
OVERVIEW.  Our cost of products sold increased to $107.9 million for the quarter ended March 31, 2003, from $95.6 million for the quarter ended March 31, 2002.  As a percentage of net sales, cost of products sold decreased to 93% for the quarter ended March 31, 2003, from 101% for the quarter ended March 31, 2002.  This decrease was primarily the result of higher sales prices for our nitrogen and DAP products, partially offset by higher costs per ton for our nitrogen, DAP and potash products.  During the quarter ended March 31, 2003, the average natural gas price for our domestic operations, net of futures gains and losses, increased 65% from $2.74 to $4.52 per MMBtu over the quarter ended March 31, 2002.

NITROGEN.  Our nitrogen costs per ton increased 7% primarily as a result of higher natural gas costs at our domestic production facilities.  The average price of natural gas, net of futures gains and losses, at our domestic nitrogen production facilities increased approximately 60% from $2.75 to $4.40 per MMBtu.  This increase in production cost due to higher natural gas prices was partially offset by higher volumes of lower-cost anhydrous ammonia from Farmland MissChem.  In addition, we purchased anhydrous ammonia in the current year at prices below our average production cost for the quarter.  During the quarter ended March 31, 2003, we had higher equity earnings at our joint venture anhydrous ammonia plant in Trinidad, Farmland MissChem, which also offset our higher nitrogen costs per ton.  Our portion of the earnings from Farmland MissChem (which is reflected on our income statement as a reduction in cost of goods sold) was $2.7 million as compared to $1.5 million for the quarter ended March 31, 2002. 

PHOSPHATES.  Our DAP costs per ton increased 41% for the quarter ended March 31, 2003.  This increase was primarily the result of lower production and higher raw material costs, primarily for sulfur, sulfuric acid and anhydrous ammonia.  Sulfur and sulfuric acid raw material costs were higher as a result of short supply in the market.  These higher costs, coupled with limited supply, resulted in decreased DAP production of approximately 59,000 tons when compared to the prior-year period.

POTASH.  Our potash costs per ton increased 6% for the quarter ended March 31, 2003.  This increase was primarily the result of higher energy costs.  These higher costs were partially offset by lower labor and maintenance costs that resulted from a reduction in workforce at our East facility announced in August 2002.

SELLING, GENERAL AND ADMINISTRATIVE

Our selling, general and administrative expenses increased to $9.1 million for the quarter ended March 31, 2003, from $7.0 million for the quarter ended March 31, 2002.  This increase resulted primarily from incurring expenses associated with reductions in workforce and the completion of an early retirement program.  We also incurred additional costs associated with our refinancing efforts.  These higher costs were partially offset by the absence of goodwill amortization.  At 

June 30, 2002, in accordance with SFAS No. 121, we wrote off the remaining balance of goodwill attributable to the Donaldsonville facility because we determined that the value of its assets was permanently impaired.

IMPAIRMENT OF LONG-LIVED ASSETS

We evaluate the recoverability of our long-lived assets whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable, as required by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  These evaluations utilize various estimates and judgments.  The recoverability of these assets is highly dependent upon the accuracy of certain underlying assumptions, such as future product prices and natural gas costs.  During our third quarter of fiscal 2003, events occurred that necessitated such an evaluation of recoverability of certain assets at our Donaldsonville facility.

On February 26, 2003, we announced plans to close the No. 2 AA Plant due to continued pressure from unfavorable natural gas prices and market conditions.  While we continue to evaluate alternative uses for these assets, we have concluded that the long-lived assets associated with the No. 2 AA Plant will be idled indefinitely.  These assets were determined to be impaired and will not contribute to our ongoing operations.  The long-lived assets associated with the No. 2 AA Plant had a book value of approximately $68.0 million as of February 28, 2003.  This amount has been written down to estimated salvage value and the impairment has been recorded as a component of operating expenses.  Production from the No. 2 AA Plant has been down since early January 2003.

OTHER OPERATING EXPENSES

Our other operating expenses increased to $7.0 million for the quarter ended March 31, 2003, from $1.1 million for the quarter ended March 31, 2002.  This increase resulted from lower production rates at our nitrogen facilities and the corresponding increase in idle plant costs.  During the quarter ended March 31, 2003, portions of our anhydrous ammonia, nitric acid, ammonium nitrate, urea and nitrogen solutions production facilities were temporarily idled primarily as a result of the unfavorable relationship between product prices and the cost of natural gas.

INTEREST, NET

Our net interest expense for the quarter ended March 31, 2003, increased to $8.3 million from $6.8 million.  This increase was the result of higher average interest rates and increased costs associated with our Pre-Petition Harris Facility.  These higher costs were partially offset by lower average debt balances under our Pre-Petition Harris Facility during the quarter ended March 31, 2003.

OTHER INCOME

Other income decreased to $215,000 from $11.3 million.  This decrease was primarily the result of settling during the quarter ended March 31, 2002, the defamation action we filed against Terra International, Inc. in August 1995.  We received $11.0 million from Terra's liability carrier during the quarter ended March 31, 2002. 

INCOME TAX (BENEFIT) EXPENSE

For the quarter ended March 31, 2003, our income tax benefit was $26.2 million, as compared to income tax expense of $432,000 for the quarter ended March 31, 2002.  This income tax benefit is primarily the result of our net losses.
** 

RESULTS OF OPERATIONS - NINE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE NINE MONTHS ENDED MARCH 31, 2002**
OVERVIEW.  For the nine-month period ended March 31, 2003, we incurred a net loss of $85.7 million (or $3.27 per diluted share) compared to a net loss of $14.2 million (or $0.54 per diluted share) for the same period during the prior year.  Net sales increased to $329.8 million for the nine-month period ended March 31, 2003, from $318.6 million for the nine-month period ended March 31, 2002.  We incurred an operating loss of $95.9 million for the nine-month period ended March 31, 2003, compared to an operating loss of $20.9 million for the nine-month period ended March 31, 2002.  Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the nine-month period ended March 31, 2003, were positive $10.1 million excluding a non-cash impairment charge of $70.8 million related to the write-down of our prilled urea assets and the No. 2 AA Plant, and were negative $60.7 million after the non-cash impairment charge.  This compares to positive $27.8 million for the nine-month period ended March 31, 2002. 

The following table reconciles cash flows from operations to EBITDA:
  
Nine months ended March 31,  
2003 
2002  
(In thousands)
Net cash (used in) provided by operating activities 
$ (27,727) 
$38,247 
Net change in operating assets and liabilities 
20,044  
1,772 
Refund of federal taxes pursuant to the Job Creation and    
   Workforce Assistance Act of 2002 
(14,871) 
(26,446)
Impairment of long-lived assets 
(70,848) 
-      
Change in deferred (gain) loss on hedging activities, net of tax 
1,411  
(6,015)
Deferred income taxes 
28,989  
161 
Equity earnings in unconsolidated affiliates 
6,845  
9,024 
Other 
890  
2,545 
Income tax benefit 
(27,956) 
(12,979)
Interest, net 
    22,475  
    21,448 
        EBITDA, including impairment of long-lived assets 
(60,748) 
27,757 
Impairment of long-lived assets 
   70,848  
       -      
        EBITDA, excluding impairment of long-lived assets 
$ 10,100  
$ 27,757 
 

NET SALES

OVERVIEW.  Our net sales increased 4% to $329.8 million for the nine-month period ended March 31, 2003, from $318.6 million for the nine-month period ended March 31, 2002.  This increase was primarily the result of higher average sales prices for our nitrogen and DAP products partially offset by lower sales volumes for our DAP and potash products.

The following tables summarize our sales results by product categories for the nine-month periods ended March 31:

    
%  
2003
2002
Inc. (Dec.)
Net Sales (in thousands):    
   Nitrogen 
 $201,871
$183,985
10%
   DAP 
77,582
76,958
1%
   Potash 
49,763
56,630
(12%)
   Other 
        576
        979
   (41%)     
       Net Sales 
$329,792
$318,552
       4%
 
    
%  
2003
2002
Inc. (Dec.)
Tons Sold (in thousands):    
   Nitrogen:    
       Anhydrous ammonia 
533
567
(6%)
       Ammonium nitrate 
534
482
11% 
       Urea 
247
358
(31%)
       Nitrogen solutions 
379
250
52% 
       Nitric acid 
      17
      31
   (45%)
            Total Nitrogen 
1,710
1,688
1%      
   DAP 
556
620
(10%)
   Potash 
579
663
(13%)
    
%  
2003
2002
Inc. (Dec.)
Average Sales Price Per Ton:    
   Nitrogen 
$     118
$     109
8%
   DAP 
$     140
$     124
13%
   Potash 
$       86
$       85
1%
NITROGEN.  Our nitrogen net sales increased 10% primarily as a result of an increase in average sales prices.  

Our average anhydrous ammonia sales prices increased 31%, while our anhydrous ammonia sales volumes decreased 6%.  Substantially all of our anhydrous ammonia sales are made to industrial customers.  Our sales volumes were negatively impacted by the cancellation of an industrial contract that was partially offset by shifting such tonnage to other contracts.  Sales prices increased as a result of several factors.  The political and labor unrest in Venezuela interrupted anhydrous ammonia exports from that country during part of our second and third fiscal quarters.  The anticipation and outbreak of war in Iraq caused international oil prices to rise dramatically, and this, combined with colder than normal temperatures in the U.S. and a concern about the low levels of natural gas storage in the U.S., increased U.S. natural gas prices.  A sudden spike in U.S. natural gas prices during late February 2003, caused the temporary shutdown of approximately 65% of U.S. nitrogen production for approximately two - three weeks and a responding increase in sales prices.  Sales prices peaked during mid-March of 2003, but had decreased some by the end of the quarter as production was restarted in the U.S.

Our ammonium nitrate sales prices decreased 1%, while our ammonium nitrate sales volumes increased 11%.  Sales volumes increased because of high customer demand due to low starting industry inventories, decreased supply due to the absence of unfairly traded imports, and improved winter wheat and pasture applications.  

Our urea sales prices decreased 1%, and our urea sales volumes decreased 31%.  The decrease in sales volumes was caused by the closure of our prilled urea plant on January 31, 2003. 

Our nitrogen solutions sales prices increased 10%, and our nitrogen solutions sales volumes increased 52%.  Sales volumes increased due to lower industry inventories, less imported product believed to be due to the U.S. Department of Commerce anti-dumping margin in effect for imports during the majority of this time period, and improved crop futures pricing.  These factors led customers to make early spring purchasing decisions.  Sales prices increased during the nine-month period ended March 31, 2003, due to a reduction of unfairly traded imports after the filing of the anti-dumping action in April 2002. 

PHOSPHATES.  Our DAP sales prices increased 13%, while our sales volumes decreased 10%.  Sales volumes were lower due to limited availability of certain raw materials, primarily sulfur and sulfuric acid, which resulted in decreased DAP production of approximately 87,000 tons compared to the prior-year period.  Prices were higher because the world supply/demand balance continued to improve.  Better demand in China, reduced production in the U.S., and improved crop prices in the domestic market contributed to the tightening of world supply/demand.

POTASH.  Our potash sales prices increased 1%, while sales volumes decreased 13%.  Sales volumes were lower primarily as a result of our voluntary reduction in export sales volumes due to unfavorable pricing in those markets as well as reduced domestic demand.  Sales prices did not change significantly during the quarter because customers were not concerned about spring supply. 

OTHER REVENUES

Our other revenues consist of facility fees earned from our newly constructed facility that will supply nitrogen tetroxide to the United States Department of Defense.

COST OF PRODUCTS SOLD

OVERVIEW.  Our cost of products sold increased to $319.2 million for the nine-month period ended March 31, 2003, from $309.8 million for the nine-month period ended March 31, 2002.  The average natural gas price for our domestic operations, net of futures gains and losses, increased 22% from $3.02 to $3.70 per MMBtu for the nine-month period ended March 31, 2003.  However, as a percentage of net sales, cost of products sold was 97% for the nine-month periods ended March 31, 2003 and 2002.  Cost of goods sold as a percentage of net sales remained the same because higher sales prices for our nitrogen and DAP products offset the higher costs per ton for such products.  

NITROGEN.  Our nitrogen costs per ton increased 3% primarily as a result of higher natural gas costs at our domestic production facilities.  The average price of natural gas, net of futures gains and losses, at our domestic nitrogen production facilities increased approximately 20% from $3.04 to $3.66 per MMBtu.  Also, we had lower equity earnings at Farmland MissChem during this nine-month period that contributed to our increased nitrogen costs per ton.  A scheduled maintenance turnaround during September 2002 was the primary cause of our reduced equity earnings from Farmland MissChem.  Our portion of the earnings from Farmland MissChem was $5.7 million as compared to $8.5 million for this nine-month period.  Our average nitrogen costs increased only 3% over the prior year due to increased volumes of our lower cost products (nitrogen solutions and ammonium nitrate).

PHOSPHATES.  Our DAP costs per ton increased 27% for the nine-month period ended March 31, 2003.  This increase was primarily the result of lower production rates and higher raw material costs, primarily for sulfur and sulfuric acid as a result of their short supply in the market.  In addition, significant rainfall during this nine-month period increased our water treatment cost related to our gypsum disposal facilities.

POTASH.  Our potash costs per ton decreased 1% for the nine-month period ended March 31, 2003.  This decrease was primarily the result of lower electricity costs and lower fixed costs per ton due to higher production volumes.  These lower costs were partially offset by higher natural gas costs.

 

SELLING, GENERAL AND ADMINISTRATIVE

Our selling, general and administrative expenses increased to $23.8 million for the nine-month period ended March 31, 2003, from $20.6 million for the nine-month period ended March 31, 2002.  This increase resulted primarily from expenditures associated with our efforts to refinance the Pre-Petition Harris Facility, increased insurance costs, and expenses associated with reductions in workforce and completion of an early retirement program.  These higher costs were partially offset by the absence of goodwill amortization.  At June 30, 2002, in accordance with SFAS No. 121, we wrote off the remaining balance of goodwill attributable to the Donaldsonville facility because we determined the value of its assets was permanently impaired.

IMPAIRMENT OF LONG-LIVED ASSETS

We evaluate the recoverability of our long-lived assets whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable, as required by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."  These evaluations utilize various estimates and judgments.  The recoverability of these assets is highly dependent upon the accuracy of certain underlying assumptions, such as future product prices and natural gas costs.  During our second and third quarter of fiscal 2003, events occurred that necessitated such an evaluation of recoverability of certain assets at our Donaldsonville facility.

On December 19, 2002, we announced plans to close our urea facility located in Donaldsonville, Louisiana, and on February 26, 2003, we announced plans to close the No. 2 AA Plant.  Both closures were due to continued pressure from unfavorable natural gas prices and market conditions.  While we continued to evaluate****alternative uses for these assets, we concluded, at the time, that the long-lived assets associated with the prilling section of our urea plant and assets associated with the No. 2 AA Plant would be idled indefinitely.  These assets are determined to be impaired and will not contribute to our ongoing operations.  The long-lived assets associated with our total urea operation had a book value of approximately $23.3 million as of December 31, 2002.  The value of the impaired prilled urea assets was approximately $12.5 million as of December 31, 2002, which amount has been written off and recorded as a component of operating expenses in our consolidated statement of income.  The long-lived assets associated with the No. 2 AA Plant had a book value of approximately $68.0 million as of February 28, 2003.  This amount has been written down to estimated salvage value and the impairment has been recorded as a component of operating expenses.  Production from the No. 2 AA Plant has been down since early January 2003.

OTHER OPERATING EXPENSES

Our other operating expenses increased to $12.7 million for the nine-month period ended March 31, 2003, from $9.0 million for the nine-month period ended March 31, 2002.  This increase resulted from increased idle plant costs at our nitrogen facilities.  During the nine-month period ended March 31, 2003, portions of all of our nitrogen facilities were temporarily idled.  During the nine-month period ended March 31, 2002, portions of all of our nitrogen facilities except ammonium nitrate were temporarily idled.  The unfavorable relationship between product prices and natural gas cost was the primary reason we idled our nitrogen plants during these periods.

INTEREST, NET

Our net interest expense for the nine-month period ended March 31, 2003, increased to $22.5 million from $21.4 million because of increased costs associated with our Pre-Petition Harris Facility and its higher average interest rates.  These higher costs were partially offset by lower average debt balances under the Pre-Petition Harris Facility during the nine-month period ended March 31, 2003.

OTHER INCOME

Other income decreased to $4.8 million from $15.2 million.  This decrease was primarily the result of settling during the nine months ended March 31, 2002, the defamation action we filed against Terra International, Inc. in August 1995.  We received $11.0 million from Terra's liability carrier during the nine-month period ended March 31, 2002.  During the prior-year period, we also had gains of approximately $3.0 million related to the sale of non-core assets.  During the nine-month period ended March 31, 2003, we received $3.6 million in net proceeds from the conclusion of litigation related to a breach of contract claim involving performance guarantees for one of our anhydrous ammonia plants at our nitrogen facility in Donaldsonville, Louisiana.  

INCOME TAX BENEFIT

For the nine-month period ended March 31, 2003, our income tax benefit was $28.0 million, as compared to $13.0 million for the nine-month period ended March 31, 2002.  This income tax benefit is primarily the result of our net losses, partially offset by U.S. tax expense on cumulative foreign earnings (as more particularly described above under the heading "Critical Accounting Policies - Deferred Taxes").  In addition to the tax expense resulting from the MCHI guarantee of the Pre-Petition Harris Facility, our income tax benefit is based on an estimated annual effective tax rate of approximately 35%.  This rate reflects our anticipation of establishing valuation allowances for all deferred state tax assets generated during the year. 
** 

LIQUIDITY AND CAPITAL RESOURCES**
At March 31, 2003, we had cash and cash equivalents of $2.1 million, compared to $2.0 million at June 30, 2002, an increase of approximately $100,000.

OPERATING ACTIVITIES

Our net cash used in operating activities was $27.8 million for the nine-month period ended March 31, 2003, and included a $14.9 million refund of federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002 (the "JCWA Act").  Our net cash provided by operating activities was $38.2 million for the nine-month period ended March 31, 2002, and included a $26.4 million refund of federal taxes pursuant to the JCWA Act.

INVESTING ACTIVITIES

Our net cash used in investing activities was $8.3 million for the nine-month period ended March 31, 2003, and included $13.2 million in capital expenditures.  These expenditures included normal improvements and modifications to our facilities deemed necessary for safe and efficient operations and improvements related to the construction of our nitrogen tetroxide plant that will supply the Department of Defense ("DOD").  We were reimbursed $3.1 million by the DOD for the nitrogen tetroxide construction costs in our third fiscal quarter.  These expenditures were partially offset by $3.3 million in proceeds from the sale of non-core assets and $1.6 million in dividend income from equity investees.  For the nine-month period ended March 31, 2002, our net cash provided by investing activities was $449,000, and included $5.0 million in proceeds from the sale of non-core assets and $3.3 million primarily related to the collection of a note for the sale of non-core real estate.  These proceeds were partially offset by $7.9 million in capital expenditures for normal improvements and modifications to our facilities that were necessary for safe and efficient operations.

FINANCING ACTIVITIES

Our net cash provided by financing activities was $36.1 million for the nine-month period ended March 31, 2003, which reflected the excess of debt borrowings over our payments under the Pre-Petition Harris Facility.  Our net cash used in financing activities was $49.3 million for the nine-month period ended March 31, 2002, which reflected net debt payments under the Pre-Petition Harris Facility attributable to the $11.0 million cash settlement from the Terra lawsuit, plus the receipt of the federal tax refund of $26.4 million pursuant to the JCWA Act.
*****          Debtor-in-Possession Financing Facility.*
          On May 16, 2003, in conjunction with the Case, we entered into a debtor-in-possession financing facility with Harris Trust and Savings Bank and a syndicate of six other lenders (the "DIP Lenders") to provide up to $37.5 million of financing (the "DIP Credit Facility").  As of the date of this filing, the DIP Lenders are also lenders under the Pre-Petition Harris Facility (as defined below under the heading "The Pre-Petition Harris Facility"), which consists of 13 lenders as of the date of this filing (the "Pre-Petition Lenders").  The DIP Credit Facility is a revolving credit facility under which Mississippi Chemical Corporation is the borrower and its subsidiaries that are included in the Case are guarantors.  The DIP Credit Facility terminates upon the earliest to occur of (a) August 16, 2004, (b) the date that a plan of reorganization confirmed by the Court becomes effective, or (c) the date on which the DIP Lenders terminate the DIP Credit Facility in connection with an event of default under the facility.  On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request on an interim basis to enter into the DIP Credit Facility.  The Court has set June 9, 2003, as the deadline for objections to the DIP Credit Facility, and June 11, 2003, as the hearing date for such objections.  The provisions of the DIP Credit Facility generally described below are more particularly described in the Post-Petition Credit Agreement filed as an exhibit to this Form 10-Q.

*          Maximum Borrowings*.  The DIP Credit Facility provides for maximum borrowings (the "DIP Commitment"), at any time, up to the lesser of (a) $37.5 million during the months of September, October and November 2003, and February and March 2004, and $35 million at all other times, or (b) a borrowing base equal to the sum of (i) 85% of eligible accounts receivable plus (ii) 65% of eligible inventory, minus (iii) a scheduled excess collateral availability requirement, minus (iv) from June 15, 2003, an amount equal to twice the amount of all the then accrued and unpaid charges owed to warehousemen and other third parties having inventory in their possession that have not executed and delivered to the lenders a warehouseman's waiver, minus (v) from June 15, 2003, an amount equal to six months' rent for all leased facilities where inventory is kept for which the landlord has not executed and delivered to the lenders a landlord's waiver.  The commitments of the DIP Lenders are subject to certain mandatory reductions described below.

*          Rates and Fees.*The loans under the DIP Credit Facility bear interest at rates equal to the prime commercial rate from time to time in effect plus 4%.  Upon entry of the Interim Order, we paid a commitment fee equal to 1% of the full DIP Commitment to the DIP Lenders and an administrative fee of $75,000 to Harris Trust and Savings Bank, as "DIP Agent."  Upon entry of the Final Order, we will be obligated to pay an additional commitment fee of 1% to the DIP Lenders and an additional administrative fee of $75,000 to the DIP Agent.  The DIP Credit Facility also has a facility fee equal to 0.5% per annum of the average daily unused amount of the DIP Commitment.

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

*          Covenants.*The DIP Credit Facility (a) restricts our ability to incur debt, (b) requires us to generate certain minimum levels of EBITDA, (c) limits our expenditures to the types set forth in a budget, subject to permitted deviations, (d) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions outside the ordinary course of business, (e) permits the voluntary prepayment of loans under the DIP Credit Facility without penalty, and (f) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for debtor-in-possession revolving credit facilities.

*          Standstill Agreement.*In connection with entering into the DIP Credit Facility, we entered into an agreement with the Pre-Petition Lenders pursuant to which such lenders agreed not to take any action to enforce their rights under the MCHI guaranty, of our obligations under the Pre-Petition Harris Facility.  Upon the termination of the DIP Credit Facility or under certain defaults, the Pre-Petition Lenders may enforce the MCHI guaranty.  In the event that MCHI received proceeds from a refinancing or disposition event with respect to Farmland MissChem, MCHI has agreed to apply such proceeds to the Pre-Petition Harris Facility.
*          The Pre-Petition Harris Facility.  

          On November 15, 2002, we amended and restated our $200.0 million secured revolving credit facility with Harris Trust and Savings Bank and a syndicate of other lenders (twelve as of the date of this filing) to extend the facility's maturity from November 25, 2002, to November 10, 2003, reduce the commitment to $165.0 million, and provide for other amendments that were less favorable to us (the "Pre-Petition Harris Facility").  Since that date, the commitment was automatically reduced to $163.4 million in accordance with the Pre-Petition Harris Facility due to sales of non-core assets.  The filing of the Case was an event of default under the Pre-Petition Harris Facility and, as a result, we can no longer borrow under this facility.  The borrowings under the facility are reflected as a current liability on our balance sheet.  The provisions of the Pre-Petition Harris Facility generally described below are more particularly described in the amended and restated credit agreement (the "Pre-Petition Credit Agreement") filed as an exhibit to our Form 10-Q for the quarter ended September 30, 2002, which is on file with the Securities and Exchange Commission.

*          Rates and Fees.*  The Pre-Petition Harris Facility consists of "A Loans" and "B Loans" (collectively, the "Loans") that are guaranteed by each of the Company's wholly-owned domestic subsidiaries and a foreign subsidiary as provided below.  The B Loans constitute a continuation of the $105 million principal amount of B Loans outstanding as of November 15, 2002.  Loans which are not B Loans are A Loans.  The Loans and the commitments of the lenders under the Pre-Petition Harris Facility are subject to mandatory prepayments and mandatory commitment reductions as described below.  The Loans bear interest at rates equal to the sum of (i) the greater of (a) the Prime Rate or (b) the Federal Funds Rate plus 1/2%, plus (ii) an "Applicable Margin."  The Applicable Margin is 5% on the first $105 million outstanding under the Pre-Petition Harris Facility and 1% on all amounts outstanding in excess of $105 million; provided, that once the amount of mandatory prepayments and commitment reductions on the Pre-Petition Harris Facility equals or exceeds $52.5 million, the Applicable Margin will reduce to 3%.  Pursuant to the DIP Credit Facility, interest on the loans and fees accrue at the default rate of an additional 2%.  The portion of post-petition interest and fees equal to the non-default rate shall be paid pursuant to the terms of the Pre-Petition Harris Facility, and the difference between interest and fees at the default rate and interest and fees at the non-default rate will be due and payable on the termination of the DIP Credit Facility.

We incurred approximately $4.0 million in costs and fees to close the Pre-Petition Harris Facility.  We are obligated to pay a facility fee equal to 0.5% per annum of the commitment ($825,000) payable quarterly in arrears.

Our weighted average interest rate under the Pre-Petition Harris Facility was 8.2% for the quarter and 8.1% at March 31, 2003.  We had letters of credit outstanding as of March 31, 2003, in the amount of $900,000 that lowered our borrowing availability and borrowings outstanding in the amount of approximately $146.3 million.  Based on our borrowing base calculation under the Pre-Petition Harris Facility, we had additional borrowing capacity of approximately $9.3 million as of March 31, 2003.

*          Collateral Security and Guarantees.*  The A Loans are secured by a first priority lien on our inventory, accounts receivable, spare parts, and substantially all remaining assets which are not Principal Properties (as defined below in this paragraph) (collectively, the "Non-Principal Properties").  The B Loans are secured by (a) a first priority lien on our four domestic operating facilities and related real estate, the equity of the subsidiaries that own such facilities, and similar after-acquired properties and securities (collectively, the "Principal Properties") to the extent permitted by the Indenture governing our Senior Notes (as defined below under the heading "The Senior Notes") and (b) a second priority lien on the Non-Principal Properties.  The Loans are guaranteed by all of the Company's domestic subsidiaries and a foreign subsidiary, MCHI.  For information regarding the tax effect of this foreign subsidiary guarantee, see the discussion in Part I, Item 2, of this Form 10-Q under the headings "Critical Accounting Policies - Deferred Taxes," and "Results of Operations - Nine Months Ended March 31, 2003 Compared to the Nine Months Ended March 31, 2002 - Income Tax Benefit."

*          Borrowing Base*.  The Pre-Petition Harris Facility provides for maximum borrowings up to the lesser of:$163.4 million (the "Loan Limit"), or the "Borrowing Base" that is equal to (a) the sum of (i) 85% of eligible accounts receivable, (ii) 65% of eligible inventory (subject to a $45 million limit), (iii) 50% of eligible spare parts, plus 75% of the appraised orderly liquidation value of Non-Principal Properties not included in items (a)(i)-(iii) above (subject to a combined $15 million limit), and (iv) $105 million (subject to reduction for mandatory prepayments); minus (b) $12.5 million through March 31, 2003, and $15 million thereafter (the "Block Amount").  To borrow the Loan Limit, the Borrowing Base (including the Block Amount) must equal or exceed $163.4 million.  If the Borrowing Base is less than the Loan Limit, the Loans shall not exceed the Borrowing Base.  The Pre-Petition Harris Facility also permits up to $20 million of letters of credit, which lower borrowing availability.

*          Covenants*.  The Pre-Petition Harris Facility (a) requires us to generate certain minimum levels of EBITDA (as defined in the Pre-Petition Credit Agreement), (b) limits our capital expenditures, (c) prohibits the repurchase of our outstanding shares and the payment of dividends, (d) obligates us to actively and continuously market our equity interest in Farmland MissChem, (e) provides for certain commitment reductions equal to 50% of our Excess Cash Flow (as defined in the Pre-Petition Credit Agreement), (f) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions, tax refunds, and equity issues, (g) permits the voluntary prepayment of the Loans at any time without penalty, and (h) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for revolving credit facilities of this type.  

*          The Industrial Revenue Bonds*
          In August 1997, we issued $14.5 million in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of our new phosphogypsum disposal facility at our Pascagoula, Mississippi, DAP manufacturing plant.  On April 1, 1998, we issued $14.5 million in tax-exempt industrial revenue bonds, the proceeds of which were used to redeem the initial industrial revenue bonds issued in August 1997.  The bonds issued on April 1, 1998, mature on March 1, 2022, and carry a 5.8% fixed rate.  The bonds may be redeemed at our option at a premium from March 1, 2008, to February 28, 2010, and may be redeemed at face value at any time after February 28, 2010, through the maturity date.  The bonds are the obligation of our subsidiary, Mississippi Phosphates Corporation, but are guaranteed by Mississippi Chemical Corporation.  We were in compliance with the terms and conditions related to the bonds as of March 31, 2003.  However, our bankruptcy filing was an event of default under the industrial revenue bonds.

*          The Senior Notes.*

          On November 25, 1997, we issued $200.0 million of 7.25% Senior Notes (the "Senior Notes") due November 15, 2017, pursuant to a $300.0 million shelf registration statement filed with the Securities and Exchange Commission.  Semiannual interest payments of approximately $7.3 million are due on each May 15 and November 15.  The holders may elect to have the Senior Notes repaid on November 15, 2007.  We were in compliance with the terms and conditions related to the Senior Notes as of March 31, 2003.  However, our bankruptcy filing was an event of default under the Senior Notes.  

          On January 9, 2003, Trustmark National Bank, the Trustee under the Indenture governing the Senior Notes, delivered a notice of resignation to us.  On March 21, 2003, BancorpSouth Bank, a national banking association, became the Trustee under the Indenture.

*          The Ex-Im Loan to FarmlandMissChem.*

          On May 31, 2002, our joint venturer in Farmland MissChem, Farmland Industries, Inc. ("FII"), filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court, Western District of Missouri ("Bankruptcy Court").  This filing and FII's default under its offtake agreement with Farmland MissChem are events of default under Farmland MissChem's loan agreement with the Export-Import Bank of the United States ("Ex-Im Bank"). 

          On May 7, 2003, FII cured its defaults under the Ex-Im Bank loan documents and sold its interests in Farmland MissChem to certain subsidiaries of Koch Industries, Inc.

          On May 15, 2003, the filing of the Case resulted in an event of default under the Ex-Im Bank loan documents, and our anhydrous ammonia offtake agreement with Farmland MissChem, which requires us to purchase one-half of the output of Farmland MissChem.  As of the date of this filing, Ex-Im Bank has not provided notice to Farmland MissChem that it intends to accelerate the repayment of its loan.
*          Purchase of Melamine Chemicals, Inc.*
          On April 15, 2003, we issued a press release announcing the purchase of all of the common stock of Melamine Chemicals, Inc. ("MCI"), that owns a melamine crystal production facility located within our Donaldsonville, Louisiana, complex.  The terms of the transaction were not material to either party.  Melamine crystal is a raw material for manufacturers in the construction/remodeling and automotive industries.  MCI owns two production units with the combined capacity to produce approximately 115 million pounds of melamine a year.  Initially, we intend to operate only one facility that will produce approximately 80 million pounds of melamine a year.  MCI's facility has been idled since January 2002 when MCI's former owner announced its intention to sell MCI.

*          Liquidity.*

          Natural gas prices remain volatile and high compared to historical levels.  If these prices continue at their current high levels or increase without corresponding increases in the market prices for our products, our increased natural gas costs will continue to have a material adverse effect on our liquidity and results of operations.  The Case may inhibit our ability to meet financial covenants under our DIP Credit Facility.  The Case could (i) limit our ability to operate pursuant to the terms of the DIP Credit Facility, (ii) result in operating constraints, costs and uncertainties, (iii) limit our ability to develop, prosecute, confirm and consummate a plan of reorganization with respect to the Case, and (iv) limit our ability to receive trade credit, and (v) limit our ability to maintain contracts that are critical to our operations.
**OUTLOOK

Currently, corn future prices remain higher than last year.  However, the projected increase in corn acreage has not materialized because of rainy weather conditions and higher than anticipated nitrogen fertilizer prices.  Planted corn acres are now projected to be about even with last year, but cotton, the second highest nitrogen consuming crop, should reflect increased acreage.

Nitrogen prices have increased since the end of our second fiscal quarter.  The lack of supply from Venezuela along with several other constraints outside of the U.S. supported anhydrous ammonia prices.  Higher oil prices, colder than expected weather and a concern about very low storage levels increased the U.S. natural gas price and caused numerous U.S. nitrogen facility shutdowns for several weeks during the quarter ended March 31, 2003.  These shutdowns, just prior to the beginning of the U.S. spring application season, resulted in a rapid firming of nitrogen prices.  All nitrogen product prices peaked during the middle of March and started to decrease by the end of the quarter as U.S. producers restarted facilities.  Nitrogen solutions pricing may be adversely affected by the negative ruling during the March 31, 2003, quarter of the U.S. International Trade Commission in the anti-dumping case against Russia, Belarus and the Ukraine, which ruling held that imports from these countries neither materially injured nor threatened with material injury the domestic nitrogen solutions industry.

Natural gas prices continue to remain at very high levels through the summer months according to the current NYMEX futures strip.  The amount of natural gas in storage at the beginning of May was at a very low level.  If natural gas production does not increase or if demand for natural gas does not decrease over the next several months, natural gas prices are likely to remain at high levels.  This may force U.S. nitrogen producers to curtail or permanently shut down facilities.

DAP fundamentals improved during the quarter and were stable at the end of the quarter.  The price continued to improve during the quarter and appears that it will remain flat during our fourth fiscal quarter.  Raw material limitations continued to result in low production levels at our DAP operation during April 2003.  International DAP demand was flat in 2002 versus 2001.  In 2003, as usual, China and India will be the keys to demand.  A potential Chinese non-tariff trade barrier related to metals limits that was slated to become effective April 1, 2003, could hinder U.S. exports to China if it implements such standards. 

Potash demand has been lackluster in the first three quarters of fiscal 2003.  The agricultural demand has been depressed by the higher nitrogen and phosphate prices.  As the farmer has only so many dollars to spend on fertilizer, these will go first to nitrogen, then phosphates, and potash last.  Demand from the industrial market for potash has shown some positive signs with the increased oil and gas rig count.  We will monitor our high inventory levels through our fourth fiscal quarter and make appropriate adjustments to our production levels through the summer months.

Other variables can affect our results of operations as stated elsewhere in our discussions under the headings titled "Results of Operations" and "Forward-Looking Statements," as well as under the heading "Certain Business Factors" and elsewhere in our most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission.
**FORWARD-LOOKING STATEMENTS**
Except for the historical statements and discussion contained herein, statements set forth in this report constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "believes," "plans," "anticipates," "estimates," "potential," or "continue," the negatives of such words, or other comparable terminology.  Since these forward-looking statements rely on a number of assumptions concerning future events, risks and other uncertainties that are beyond our ability to control, readers are cautioned that actual results may differ materially from such forward-looking statements. Future events, risks and uncertainties that could cause a material difference in such results include, but are not limited to, (i) the ability of the Company to operate pursuant to the terms of the debtor-in-possession financing facility, (ii) operating constraints, costs and uncertainties associated with the bankruptcy proceedings, (iii) the ability of the Company to develop, prosecute, confirm and consummate a plan of reorganization with respect to the Case, (iv) the ability of the Company to receive trade credit, (v) the ability of the Company to maintain contracts that are critical to its operations, (vi) changes in matters which affect the global supply and demand of fertilizer products, (vii) the volatility of the natural gas market, (viii) a variety of conditions in the agricultural industry such as grain prices, planted acreage, projected grain stock, U. S. government policies, weather, and changes in agricultural production methods, (ix) possible unscheduled plant outages and other operating difficulties, (x) price competition and capacity expansions and reductions from both domestic and international competitors, (xi) foreign government agricultural policies (in particular, the policies of the governments of India and China regarding fertilizer imports), (xii) the relative unpredictability of international and local economic conditions, (xiii) the relative value of the U.S. dollar, (xiv) regulations regarding the environment and the sale and transportation of fertilizer products, (xv) oil costs and the impact of war in the Middle East, (xvi) the continuing efficacy of unfair trade remedies, and the outcome of pending unfair trade remedy (antidumping) cases, and (xvii) other important factors affecting the fertilizer industry and us as detailed in Item 1 under the heading "Certain Business Factors" and elsewhere in our most recent Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission.
** 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.**
OVERVIEW.  We are exposed to changes in natural gas prices and interest rates.  For more information about how we manage specific risk exposures, see "Critical Accounting Policies - Hedging Activities," Note 12 - Hedging Activities, and Note 5 - Credit Agreements and Long-Term Debt, in our Notes to Consolidated Financial Statements appearing in Item 8 of our most recent Annual Report on Form 10-K which is on file with the Securities and Exchange Commission.

NATURAL GAS.  To manage our natural gas price risks, we enter into derivative transactions as the opportunity arises.  These derivative transactions may consist of futures contracts, options, swaps, or similar derivative instruments that mature at various dates.  We do not hold or issue derivative instruments for trading purposes.  We maintain formal policies with respect to entering into and monitoring derivative transactions.  Our derivative transactions are intended to hedge our future natural gas costs.  The volume of natural gas hedged varies from time to time based on management's judgment of market conditions, particularly natural gas prices and nitrogen product prices.  At March 31, 2003, we had no open natural gas derivative instruments; however, the effect of prior derivative transactions will carry forward through fiscal 2003 (see Note 6). 

INTEREST.  At March 31, 2003, our weighted average interest rate was 8.1% under the Pre-Petition Harris Facility.  Under the Pre-Petition Harris Facility, our rates are related to the Prime Rate or Federal Funds Rate, plus an increased margin.  For more information on our debt subject to a variable rate of interest, see the heading "Liquidity and Capital Resources - The Harris Bank Facility," in Part I, Item 2 of this report.
**ITEM 4.  CONTROLS AND PROCEDURES**
DISCLOSURE CONTROLS AND PROCEDURES.  Within 90 days before filing this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures.  Our disclosure controls and procedures are the controls and procedures that we designed to ensure that we record, process, summarize and report in a timely manner the information we must disclose in reports that we file with or submit to the Securities and Exchange Commission.  Charles O. Dunn, our President and Chief Executive Officer, and Timothy A. Dawson, our Senior Vice President and Chief Financial Officer, reviewed and participated in this evaluation.  Based on this evaluation, Messrs. Dunn and Dawson concluded that, as of the date of their evaluation, our disclosure controls were effective.

INTERNAL CONTROLS.  Since the date of the evaluation described above, there have not been any significant changes in our internal accounting controls or in other factors that could significantly affect those controls.
** 

PART II.  OTHER INFORMATION

ITEM 3.  DEFAULTS UNDER SENIOR SECURITIES**
As a result of the commencement of our voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code as further described under "Part I. Item II. Management's Discussion and Analysis of Results of Operations and Financial Condition - Chapter 11 Reorganization," we are currently in default on $159.9 million of indebtedness under the Pre-Petition Harris Facility, $14.5 million of indebtedness under our industrial revenue bonds, and $200 million of indebtedness under the Senior Notes.  In addition, as a result of our bankruptcy filing, we did not make the $7.3 million semi-annual interest payment due with respect to the Senior Notes on May 15, 2003.
**ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K**-  See Index of Exhibits on page 56.No reports on Form 8-K have been filed for the quarter for which this report is filed, except for the Form 8-K filed on February 4, 2003, regarding the delisting of our common stock from the New York Stock Exchange.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
MISSISSIPPI CHEMICAL CORPORATION    
Date:  May 22, 2003
By: ____________________________                              
Timothy A. Dawson 
Senior Vice President and Chief Financial Officer 
(Principal Financial Officer and 
  Chief Accounting Officer)**CERTIFICATION**
I, Charles O. Dunn, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of Mississippi Chemical Corporation;

2.   Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3.  Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
- designed such disclosure controls and procedures to ensure that material information relating to the 
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 

90 days prior to the filing date of this Quarterly Report (the "Evaluation Date"); and
presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls 

and procedures based on our evaluation as of the Evaluation Date;

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:
- all significant deficiencies in the design or operation of internal controls which could adversely affect 
the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 
- any fraud, whether or not material, that involves management or other employees who have a 

significant role in the registrant's internal controls; and 
- The registrant's other certifying officer and I have indicated in this Quarterly Report whether or not 

there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  May 22, 2003

                                                                          /s/ Charles O. Dunn
                                                                         Charles O. Dunn

                                                                          President and Chief Executive Officer
**CERTIFICATION**
I, Timothy A. Dawson, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of Mississippi Chemical Corporation;

2.   Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3.  Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;
- The registrant's other certifying officer and I are responsible for establishing and maintaining 

disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

b)  evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the "Evaluation Date"); and- presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls 

and procedures based on our evaluation as of the Evaluation Date;

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:
-  all significant deficiencies in the design or operation of internal controls which could adversely affect 
the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 
- any fraud, whether or not material, that involves management or other employees who have a 

significant role in the registrant's internal controls; and 

6.  The registrant's other certifying officer and I have indicated in this Quarterly Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  May 22, 2003

                                                                  /s/ Timothy A. Dawson
                                                                  Timothy A. Dawson

                                                                  Senior Vice President and Chief Financial Officer
**INDEX OF EXHIBITS*****************