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

(MarkOne)

| [x]                                          | ANNUAL REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended June 30, 2004                         |
|----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| OR                                                                         |
| [  ]                                                                  | TRANSITION REPORT PURSUANT  TO SECTION 13 or 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934  For the transition period from ____________ to ____________ |
| Commission File Number  001‐12217                                    |
| **MISSISSIPPI  CHEMICAL CORPORATION**                                      |
| (Exact name of  registrant as specified in its charter)                    |
| MISSISSIPPI(State or  other jurisdiction of incorporation or organization) |                                                                                                                                                         | 64‐0292638(IRS  Employer Identification Number) |  
3622 Highway 49 East, P.O. Box 388, Yazoo City, MS(Address  of principal executive offices)

39194(Zip Code)

 
Registrant's telephone  number, including area code:

(662) 746‐4131

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

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

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

Indicate by check markwhether the registrant:  (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.Yes  [X]  No  [  ] 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S‐K is not contained herein, and will not be contained, to thebest of registrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10‐K or anyamendment to this Form 10‐K.  [X]

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

On September 15, 2004, the registrant had24,250,109 shares of common stock, par value $.01, outstanding.  OnDecember 31, 2003 (the last business day of the registrant's most recentlycompleted second fiscal quarter), the aggregate market value of theregistrant's common stock held by approximately 12,255 nonaffiliates was$3,606,848 (based upon the December 31, 2003, closing price of $0.15 ofthe common stock on the OTC Bulletin Board).  Shares of the registrant's commonstock held by each officer, director, and holder of 10% or more of theregistrant's outstanding common stock have been excluded because such personsmay be deemed affiliates of the registrant, which deemed affiliation status isnot necessarily a conclusive determination for other purposes.

**DOCUMENTS INCORPORATEDBY REFERENCE**

None.

INDEX TO EXHIBITS BEGINSON PAGE 114

**TABLE OF CONTENTS**

** **

**Page**

**PART I**

4

   Item  1.  Business

4

      General

4

      Operations

4

          Products

4

          Production and Properties

6

          Marketing and Distribution

7

          Raw Materials

8

          Employees

9

          Discontinued Segments

9

      Certain Business Factors

10

          Factors Affecting Fertilizer Demand and Prices

10

          Dependence on Natural Gas

10

          Seasonality

10

           Competition

11

          Compliance With Environmental Regulations

11

          Financial Information About Foreign and Domestic Sales and  Operations

12

          Reorganization

12

   Item  2.  Properties

12

   Item  3.  Legal Proceedings

12

   Item  4.  Submission of Matters to a Vote of Security Holders

12

**PART II**

13

   Item  5.  Market for Registrant's Common Equity, Related Stockholder Matters                  and  Issuer Purchases of Equity Securities

  13

   Item  6.  Selected Financial Data

13

   Item  7.  Management's Discussion and Analysis of Financial Condition and Results  of Operations

14

      General

14

      Petition for Relief Under Chapter 11 of the United  States Bankruptcy Code

14

      Critical Accounting Policies

17

      Recent Accounting Pronouncements

21

      Results of Operations ‐ Fiscal 2004  Compared to Fiscal 2003

22

      Results of Operations ‐ Fiscal  2003 Compared to Fiscal 2002

28

      Liquidity and Capital Resources

33

      Outlook

38

      Forward‐Looking Statements

39

   Item  7A.  Quantitative and Qualitative Disclosures About Market Risk

39

   Item  8.  Financial Statements and Supplementary Data

41

      Quarterly Results

92

   Item 9.  Changes in and  Disagreements With Accountants on Accounting and        Financial Disclosure

  93

   Item 9A.  Controls and  Procedures

93

**     ** Evaluation of Disclosure Controls and  Procedures

93

     Changes in Internal Controls

93

**PART III**

94

   Item  10.  Directors and Executive Officers of the Registrant

94

      Directors

94

      Executive Officers

95

      Certain Relationships

96

      Code of Ethics for  Senior Financial Officers

96

   Item  11.  Executive Compensation

97

      Summary Compensation Table

97

      Stock Options

98

      Option Exercises and Holdings

98

      Pension Benefits

98

      Retention and Severance

99

      Compensation Committee Report

100

      Directors' Compensation

104

   Item  12.  Security Ownership of Certain Beneficial Owners and Management

105

      Equity Compensation Plan Information

105

      Security Ownership of Certain  Beneficial Owners

106

      Security Ownership of Management      

106

      Section 16(a) Beneficial  Ownership Reporting Compliance

109

   Item  13.  Certain Relationships and Related Transactions

109

   Item  14.  Principal Accountant Fees and Services

109

      Overview

109

      Independent Auditors

110

      Audit Fees

110

**PART IV**

111

   Item  15.  Exhibits, Financial Statement Schedules, and Reports on Form 8‐K

111

      Documents Filed as Part of this Annual Report on Form  10-K

111

      Reports on Form 8-K

111

      Signatures

112

      Exhibit Index

114
****
**PARTI**

**ITEM1.  BUSINESS**

**GENERAL**

            Mississippi Chemical Corporation(the "Company") was incorporated in Mississippi on May 23, 1994, and is thesuccessor by merger, effective July 1, 1994, to a business which wasincorporated in Mississippi in September 1948 as the first fertilizercooperative in the United States (the "Cooperative").  The address of theCompany's principal executive office is Owen Cooper Administration Building,3622 Highway 49 East, Yazoo City, Mississippi 39194, and itstelephone number is (662) 746‐4131.  The Company maintains a site on theWorld Wide Web at www.misschem.com.  Information appearing on the Company'swebsite should not be considered a part of this Annual Report on Form 10‐K. The term "Company" includes Mississippi Chemical Corporation and itssubsidiaries:  Mississippi Phosphates Corporation; Mississippi Potash, Inc.;Eddy Potash, Inc.; Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; TriadNitrogen, L.L.C.; Mississippi Chemical Management Company; Mississippi ChemicalCompany, L.P.; Melamine Chemicals, Inc.; Mississippi Chemical Holdings,Inc.; MissChem (Barbados) SRL; and MissChem Trinidad Limited; and MississippiChemical Corporation's affiliates:  Point Lisas Nitrogen Limited , our 50/50ammonia production joint venture with Koch Nitrogen Company; FMCL LimitedLiability Company, our 50/50 ammonia shipping joint venture with Koch NitrogenCompany; and Houston Ammonia Terminal, L.P., our 50/50 ammonia storage jointventure with Potash Corporation of Saskatchewan.  Any reference to anindustrial customer or user herein includes, but is not limited to, producerswho convert products purchased from the Company to other fertilizer products.

            OnMay 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation andnine of its direct and indirect subsidiaries (collectively, the "Debtors"),filed voluntary petitions to reorganize under Chapter 11 of the United StatesBankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Courtfor the Southern District of Mississippi, Jackson, Mississippi (the "Court"),the cases being administered jointly in Joint Case Number 03‐02984 WEE("Case"). As debtors‐in‐possession, the Debtors are authorized tooperate their business but may not engage in transactions outside the ordinarycourse of business without the approval of the Court.  The Case and theDebtors' debtor‐in‐possession financing are more particularlydescribed below in Item 7 of this Annual Report on Form 10‐K.  OnAugust 9, 2004, the Company announced that it has entered into a definitiveagreement with Terra Industries Inc. ("Terra"), pursuant to which Terra willacquire the Company, subject to approval of the Court and other regulatoryapprovals, as more particularly described below in Item 7 of this Annual Reporton Form 10-K.  Consistent with the Terra transaction, we filed our firstamended joint plan of reorganization with the Court on September 2, 2004.

**OPERATIONS**

            The Company's nitrogen business isits only reportable operating segment.  The Company's phosphate, potash, andmelamine segments have been classified as discontinued operations. The amountsof revenue, operating profit or loss and identifiable assets attributable tothe nitrogen segment and each of our discontinued segments are set forth inItem 7 and Item 8 of this Annual Report on Form 10‐K. Additional information about our nitrogen operating segment is set forth below.

**Products**

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

            In fiscal 2004, the Company soldapproximately 1.7 million tons of nitrogen products to fertilizer dealersand distributors and industrial users located primarily in the southern United States compared to1.9 million tons in fiscal 2003.  Net sales of nitrogen products by theCompany in fiscal 2004 were approximately $299.0 million, which representedapproximately 99.5% of consolidated net sales.

            ***Anhydrous Ammonia****. * In fiscal 2004, the Company produced approximately 793,000 tons ofanhydrous ammonia at its Yazoo City and Donaldsonvillefacilities.  The Company is obligated by contract to purchase one‐half ofthe anhydrous ammonia (approximately 358,000 tons per year) produced by PointLisas Nitrogen at a discount to market, subject to a minimum price.  In fiscal2004, the Company purchased approximately 375,000 tons pursuant to its contractwith Point Lisas Nitrogen and approximately 148,000 tons from nonaffiliates forresale or upgrade to other fertilizer products.  In fiscal 2004, the Companysold approximately 685,000 tons of anhydrous ammonia, approximately 645,000 tonsof which were sold as a raw material for industrial users.  The Companyconsumed approximately 633,000 tons of anhydrous ammonia as a raw material tomanufacture its other nitrogen products, melamine, and diammonium phosphate.

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

***            Ammonium Nitrate****.*  The Company producedapproximately 610,000 tons of solid ammonium nitrate fertilizer at its Yazoo City facility in fiscal2004.  During this period, the Company sold approximately 633,000 tons of solidammonium nitrate fertilizer to fertilizer dealers and distributors andapproximately 16,000 tons of ammonium nitrate synthesis to industrial users.

**           **The Company is the largest manufacturerand marketer of agricultural‐grade ammonium nitrate fertilizer in the United States, which is sold underthe registered trade name Amtrate®.  Ammonium nitrate, which is 34% nitrogen,is produced by reacting anhydrous ammonia and nitric acid.  Ammonium nitrate isless subject to volatilization (evaporation) losses than other nitrogenproducts.  Due to its stable nature, ammonium nitrate is the product of choicefor such uses as pastures and no‐till row crops where fertilizer isspread upon the surface and is subject to volatilization losses.  The use ofconservation tillage, which reduces soil erosion, is increasing in the United States and should have apositive impact on ammonium nitrate demand.

***            UAN Solution****.*  The Company producedapproximately 323,000 tons of UAN solution at its Yazoo City facility in fiscal2004.  The Company sold approximately 323,000 tons of UAN solution tofertilizer dealers and distributors in fiscal 2004 under the N‐Sol 32® trade name.  

            The N‐Sol 32® product is a 32% nitrogen product thatis made by mixing urea liquor and ammonium nitrate liquor.  The N‐Sol 32® product is used as a direct applicationproduct for cotton, corn, grains, and pastures, as well as for use in liquidfertilizer blends. The growth in agricultural use of UAN solution isattributable to its effectiveness as a replacement product for ammonia, whichevaporates more quickly and costs more to apply.

*            **Nitric Acid**.*  In fiscal 2004, theCompany produced approximately 660,000 tons of nitric acid at its Yazoo City facility.  The Companyuses substantially all of its nitric acid as a raw material for the productionof ammonium nitrate and UAN solutions.  In fiscal 2004, the Company soldapproximately 41,000 tons of nitric acid to industrial users.

            Nitric acid is made by oxidizingammonia with air.  Nitric acid is used by industrial customers to produce endproducts such as nylon fibers, polyurethane foams, rubber chemicals andspecialty fibers.  The Yazoo City facility has thelargest single site capacity for nitric acid in the United States.

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

            N2O4 is thepropellant oxidizer used in various satellite, rocket, and missile propulsionsystems.  It is also used by industrial customers in the manufacture ofpharmaceuticals and in the manufacture of pulp and paper.         N2O4is produced by cooling and condensing a slipstream of process gas from a nitricacid plant containing various oxides of nitrogen.  The recovered product isfiltered and its composition adjusted to meet the final product specifications.

**Productionand Properties**

***             Yazoo City,  Mississippi****.*  The Yazoo City facility is a closelyintegrated, multiplant production complex located on approximately 2,240 acres,with approximately 60 acres of such land subject to a long‐term leasewith Yazoo  County, Mississippi.  The complex includestwo anhydrous ammonia plants, five nitric acid plants, an ammonium nitrateplant, two urea plants, a UAN solution plant and an N2O4production and storage facility.  The Company's corporate headquarters islocated adjacent to the Yazoo City plant.

            The Company's annual anhydrousammonia production capacity at the Yazoo City facility is approximately 669,000 tons, and itsannual solid ammonium nitrate production capacity is approximately 835,000tons.  During fiscal 2004, the operating rates for ammonia and ammonium nitrateat the Yazoo City facility wereapproximately 58% and 73%, respectively.  The Yazoo City facility also has annual nitric acid productioncapacity of approximately 1,055,000 tons, annual UAN solution production capacityof approximately 588,000 tons, and annual urea synthesis production capacity ofapproximately 197,000 tons.  During fiscal 2004, the operating rate for UANsolution at the Yazoo City facility wasapproximately 55%.  The Yazoo City facility is undercontract through August 2007 as the sole provider of N2O4for the DESC.  The N2O4 plant is fully capable of meetingthe annual contract requirements of the DESC.

            The Yazoo City facility has storage facilities for anhydrousammonia (36,000 tons), ammonium nitrate (51,700 tons), nitric acid (4,300tons), and UAN solution (48,000 tons).

            The Yazoo City facility includes a 20.5 megawatt cogenerationfacility that produces savings by the simultaneous efficient generation ofelectricity and steam.  Adequate backup electricity, water supply, and steamgeneration capacity are available.  The Yazoo City plant and port facility have direct access tobarge, rail, and truck transportation and the plant is strategically locatedfor the purchase of competitively priced natural gas.

***             Donaldsonville,  Louisiana***. The Donaldsonvillefacility is a closely integrated, multi-plant production complex located onapproximately 766 acres fronting the Mississippi River at Donaldsonville, Louisiana.  The facility includes two anhydrous ammoniaplants with a combined annual production capacity of approximately 1,004,000tons, a urea plant with an annual urea synthesis production capacity ofapproximately 587,000 tons, an annual prilled urea capacity ofapproximately 396,000 tons, and two melamine crystal production plants with acombined annual production capacity of approximately 115 million pounds. Only one of the melamine plants, which has a capacity of 80 million tons,was run in fiscal year 2004.

            In April 2004, the ammoniaNo. 1 plant, urea plant, and melamine M‐I plant were indefinitelyidled due to market conditions.  The ammonia No. 2 plant, which has a capacityof 534,000 tons, operates on a swing basis as market conditions dictate. During fiscal 2004, the operating rates for ammonia, prilled urea, and melaminewere 40%, 11% and 46% (M‐I only), respectively.  The plant has storagefacilities for anhydrous ammonia (60,000 tons), bulk urea (40,000 tons), andmelamine (6,000,000 pounds).

            The Donaldsonville facility hasready access to rail, truck, and ammonia pipeline transportation.  The plant isalso equipped with a deep‐water port facility on the Mississippi River, allowing access toeconomical oceangoing vessel and barge transportation for its urea and ammoniaproducts.  The facility has adequate supplies of electricity and water and iswell‐positioned for the purchase of competitively priced natural gas.

***            Point Lisas,  Trinidad***.  The Point LisasNitrogen facility has an annual production capacity attributable to theCompany's 50% interest of approximately 358,000 tons.  In fiscal 2004, theCompany purchased approximately 375,000 tons of ammonia from the Point LisasNitrogen facility.  This ammonia was used as a raw material for upgrading intofinished fertilizer products at the Company's existing facilities and to meetthe Company's contractual commitments to certain industrial customers.

**Marketingand Distribution**

            The Company sells its nitrogenproducts to fertilizer dealers and distributors as well as industrial userslocated primarily in the southern region of the United States where its facilitiesare located.  In fiscal 2004, approximately 42% of the Company's nitrogen tonssold were to industrial users, which represents approximately 53% of nitrogennet sales.  Although the Company has traditionally sold the majority of itsnitrogen products through the agricultural fertilizer distribution chain, theCompany continues to focus its efforts on increasing the percentage of nitrogenproduct sold to industrial users in order to reduce the Company's exposure tothe seasonal and cyclical nature of the agricultural fertilizer markets. However, during fiscal 2004, industrial sales tons were unchanged compared tofiscal 2003, primarily due to our lack of liquidity needed to improve ourindustrial ammonia sales and terminal activities, as well as our bankruptcystatus.

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

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

**Raw Materials**

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

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

            During normal operations, naturalgas requirements for the Yazoo City facility areapproximately 54,500 MMBtu's per day.  Routinely, the Company purchasesnatural gas for the Yazoo City facility via market‐sensitive pricingfrom three natural gas marketers, Interconn Resources, Inc. ("Interconn")Bridgeline Gas Marketing LLC ("Bridgeline"), and Crosstex Gulf Coast Marketing,Ltd. ("Crosstex"). Natural gas is also purchased directly from a producer withreserves located in Rankin County, Mississippi, Pursue Energy Corporation("Pursue").  Delivery of gas purchased from Interconn and Bridgeline iseffected through the Yazoo City facility's directconnections to the interstate pipeline systems operated by Southern Natural GasCompany and Texas Eastern Transmission Corporation, respectively.  Purchasesfrom Crosstex and Pursue are delivered via a natural gas pipeline owned byCenterPoint Energy Entex ("Entex").  The Entex pipeline facilities connectCrosstex's intrastate pipeline affiliate, Crosstex Energy, L.P. (from which Crosstexsources on‐system gas) and Pursue's processing plant with the Company's Yazoo City plant.  The Entexpipeline also provides direct access to the Gulf South interstate pipelinesystem providing additional flexibility of supply to the Yazoo City plant.

            Natural gas requirements for theDonaldsonville facility, when operating, are approximately 49,000 MMBtu's perday under its current configuration.  The Donaldsonville facility is located inone of the primary natural gas producing regions of the United States.  The facility iscurrently connected to five intrastate pipeline systems.  The Donaldsonvillefacility's current natural gas requirements are being served via purchases fromtwo marketers, Bridgeline and Cypress Gas Marketing, LLC via market‐sensitivepricing with delivery effected through the pipeline systems of BridgelineHoldings, L.P., Cypress Gas Pipeline, LLC, and Acadian Gas Pipeline System.

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

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

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

**Employees**

            As of September 15, 2004, the Company employedapproximately 517 persons throughout all of its locations, none of whom arerepresented by unions.

**Discontinued Segments**

            ***Phosphates.***  InJune 2004, the Company's Board of Directors authorized management topursue the divestiture of its wholly owned subsidiary Mississippi PhosphatesCorporation as part of its plan to emerge from bankruptcy.  The Pascagoula facility is still inoperation as market conditions dictate, but such assets are classified asdiscontinued assets on the Company's 2004 consolidated balance sheet.  Infiscal 2004, the Pascagoula facility sold all ofthe approximately 657,000 tons of diammonium phosphate it produced.  Net salesby Mississippi Phosphates in fiscal 2004 were approximately $116.4 million.

            ***Potash.***  On March 1, 2004, the Company soldsubstantially all of its Carlsbad, New Mexico, potash assets toaffiliates of Intrepid Mining LLC. In fiscal 2004, the Carlsbad facility soldapproximately 518,000 tons and produced approximately 428,000 tons of potash. Net sales of potash in fiscal 2004 were approximately $46.8 million.

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

**CERTAINBUSINESS FACTORS**

**Factors AffectingFertilizer Demand and Prices**

            With virtually all of our net salesfrom continuing operations in fiscal 2004 derived from domestic markets, theCompany's operating results are highly dependent upon conditions in the U.S. agricultural industry. A variety of factors beyond the Company's control can materially affectdomestic fertilizer demand and pricing.  These factors include, but are notlimited to, futures prices for crops that require significant fertilizerapplication, U.S. planted acreage,government agricultural policies, fertilizer application rates and productselection, projected grain stocks, crop failure, weather, changing orunpredictable crop choices by farmers and changes in agricultural productionmethods.  Since fertilizers, particularly anhydrous ammonia, are also used forindustrial applications, industrial markets and the general economy can alsoaffect product demand and prices.

            International market conditions alsosignificantly influence the Company's operating results.  The market forfertilizers is influenced by such factors as the availability of inexpensivenatural gas in foreign countries, the relative value of the U.S. dollar and itsimpact upon the cost of importing or exporting fertilizers, foreignagricultural policies, the existence of, or changes in, import or foreigncurrency exchange barriers in certain foreign markets, changes in the hardcurrency demands of certain countries, and other regulatory policies of foreigngovernments, as well as the laws and policies of the United States affectingforeign trade and investment.  The Company is also subject to general risks ofdoing business abroad, including risks associated with economic or politicalinstability.

            Fertilizer prices can be extremelyvolatile, with significant price changes from one growing season to the next. Fertilizers are global commodities and can be subject to intense pricecompetition from domestic and foreign sources.  No assurance can be given thataverage realized prices paid for the Company's fertilizer products will be atany given level.

**Dependence on NaturalGas**

            Natural gas is the primary rawmaterial used in the manufacture of nitrogen products.  Natural gas is used asboth a chemical feedstock and a fuel to produce anhydrous ammonia, which isthen used in the production of all other nitrogen products.  Anhydrous ammoniais also a raw material in the production of DAP.  Accordingly, the Company'sprofitability is dependent upon the price and availability of natural gas.  Asignificant increase in the price of natural gas without a correspondingincrease in the price of the Company's nitrogen products, or an extendedinterruption in the supply of natural gas to our production facilities, willhave a material adverse effect on our results of operations and financial condition.

**Seasonality**

            Sales of the Company's fertilizerproducts to agricultural customers are typically seasonal in nature and usuallyresult in the Company's generating a greater amount of net sales and operatingincome in the Spring (the Company's third and fourth fiscal quarters). However, quarterly results can vary significantly from one year to the next dueprimarily to weather‐related shifts in planting schedules and purchasepatterns, as well as the relationship between natural gas and nitrogen productprices.  In addition, the seasonal nature of our business requires us to incurappreciable expenditures for fixed costs throughout the year and for inventoryin advance of the spring planting season.  The Company plans to increase thepercentage of its net sales to industrial customers whose purchases are moreevenly spread over the Company's fiscal year.

**Competition**

            Since fertilizers are globalcommodities available from numerous sources, fertilizer suppliers competeprimarily on the basis of delivered price.  Other competitive factors includeproduct quality, customer service, plant efficiency, and availability ofproduct.  As a result, markets for our products are highly competitive.  TheCompany competes with a broad range of domestic and international producers,including farmer cooperatives, subsidiaries of larger companies, andindependent fertilizer companies.  Many of the Company's competitors havelarger financial resources and sales than the Company.  Foreign competitorsoften have access to cheaper raw materials or are owned or subsidized by theirgovernments and, as a result, may have cost advantages over domesticcompanies.  Additionally, foreign competitors are frequently motivated bynonmarket factors such as the need for hard currency.

            Maintaining low production costs iscritical to competitiveness.  Natural gas comprises a significant portion ofthe raw materials cost of the Company's nitrogen products.  Thus, competitivenatural gas purchasing is essential to maintaining the Company's costcompetitiveness.  This is especially true considering that certain of theCompany's foreign competitors can purchase natural gas at a lower price thanthe price typically paid by the Company.  Also important to maintainingcompetitiveness is efficient use of natural gas because of the energy‐intensivenature of the nitrogen business.  Therefore, cost‐competitive productionfacilities that allow flexible upgrading of ammonia to other finished productsare critical to a low‐cost competitive position.  In the highlyfragmented nitrogen market, product quality and customer service also can besources of product differentiation.

**Compliance WithEnvironmental Regulations**

            The Company's operations are subjectto federal, state, and local laws and regulations pertaining to theenvironment, among which are the Clean Air Act, the Clean Water Act, theResource Conservation and Recovery Act, the Comprehensive EnvironmentalResponse, Compensation and Liability Act, the Toxic Substances Control Act, andvarious other federal and state statutes.  The Company's facilities requireoperating permits that are subject to review by governmental agencies.

            Capital expenditures related toenvironmental obligations for the past three fiscal years were approximately asfollows:  2004 - $1.86 million; 2003 - $725,000; and 2002 -$3.6 million.  Fiscal 2004 environmental capital expenditures wereprimarily attributable to costs at our Pascagoula facility and the ongoing closure of the West phosphogypsum disposal facility (the"West Disposal Facility").

            Projectedenvironmental capital expenditures are approximately $1.19 million forfiscal year 2005 and approximately $750,000 for fiscal year 2006.  Fiscal 2005projected expenses include $305,000 for the West Disposal Facility closure, $350,000in capital expenditures at our Donaldsonville, Louisiana, facility to complywith new federal emissions control rules for the Baton Rouge OzoneNonattainment Area, and $237,500 to remediate Laguna Toston in Carlsbad,New Mexico.  Fiscal 2006 projected expenses include $388,000 to completethe West Disposal Facility closure.

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

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

**Financial InformationAbout Foreign and Domestic Sales and Operations**

            The amount of revenue attributableto the Company's sales to foreign and domestic markets over the last threefiscal years and the carrying value of the Company's foreign and domesticassets over the last three fiscal years is set forth in Item 8 of thisAnnual Report on Form 10‐K under the caption "Note 15 ‐ SegmentInformation" contained in the "Notes to Consolidated Financial Statements."

**Reorganization**

            Ourability to continue as a going concern is dependent upon, but not limited to,the confirmation of a plan of reorganization, continued access to adequatesources of capital, continued compliance with debt covenants under theReplacement DIP, the ability to sustain positive cash flows sufficient to fundoperations and repay debt, and retention of key suppliers, customers andemployees.  No assurance can be given that we will be successful inreorganizing our affairs through the Case.

**ITEM2.   PROPERTIES**

            Information regarding the locationand general character of the Company's material properties is included in thisAnnual Report on Form 10‐K in Part I, Item 1 "Business," underthe heading "OPERATIONS".

**ITEM3.  LEGAL PROCEEDINGS**

            Information required by this Itemregarding the Company's bankruptcy filing is included in this Annual Report onForm 10‐K in Part II, Item 7 "Management's Discussion andAnalysis of Financial Condition and Results of Operations" under the heading"Petition for Relief Under Chapter 11 of the United States BankruptcyCode."

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

            None.
****
**PART II**

**ITEM5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED               STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

**Market Information**

            Our common stock is traded "over‐the‐counter"on the OTC Bulletin Board under the symbol "MSPIQ".  The high and low salesprices as reported by the OTC Bulletin Board for each quarter of fiscal 2004and 2003 required by this Item 5 appear in the quarterly results tablesunder the heading "Quarterly Results" at the end of Item 8 of this AnnualReport on Form 10‐K.

**Holders**

            As of September 15, 2004, the record number ofholders of our common stock was 12,140.

**Dividends**

            Due to our performance, the Boarddiscontinued the payment of cash dividends with the first quarter of fiscal2001.  The Company's secured financing does not permit the payment of a cashdividend.

**ITEM6.  SELECTED FINANCIAL DATA**

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

**Income Statement Data:**

**Fiscal Years Ended June 30**

(In  thousands, except per share data)

**2004**

**2003**

**2002**

**2001**

**2000**

Net sales

$  300,450 

$  237,919 

$  207,855 

$  370,012 

$ 291,268 

Operating  income (loss)

$    28,030 

$  (77,615)

$(135,242)

$  (93,472)

$ (28,389)

Loss  from continuing operations

$  (68,331)

$  (80,248)

$(115,621)

$  (84,356)

$ (22,524)

Loss  from discontinued operations

$  (68,663)

$  (25,605)

$    (5,575)

$  (10,893)

$   (1,140)

Net  loss

$(136,994)

$(105,853)

$(121,196)

$  (95,249)

$ (23,664)

Loss  per share from continuing operations ‐ basic    and  diluted

  $      (2.77)

  $     (3.06)

  $      (4.42)

  $      (3.23)

  $     (0.86)

Loss  per share from discontinued operations ‐ basic    and  diluted

  $      (2.79)

  $     (0.98)

  $      (0.22)

  $      (0.41)

  $     (0.05)

Net loss per share

$      (5.56)

$     (4.04)

$      (4.64)

$      (3.64)

$     (0.91)

Weighted  average common shares outstanding -    basic and diluted

  24,627 

  26,190

  26,141 

  26,132 

  26,132 

**Balance Sheet Data:**

**June 30**

(In  thousands, except per share data)

**2004**

**2003**

**2002**

**2001**

**2000**

Working capital (deficit)

$  (63,509)

$  (41,878)

$  (21,981)

$ 113,785 

$   90,706 

Total  assets

$ 387,636 

$ 548,090 

$ 630,285 

$ 779,607 

$ 870,689 

Long‐term  debt, excluding long‐term debt due      within one year

  $             - 

  $             - 

  $ 104,043 

  $ 386,285 

  $ 330,307 

Other  long‐term liabilities and deferred credits

$   26,368 

$   36,872 

$   12,540 

$   10,922 

$     9,995 

Liabilities  subject to compromise

$ 231,899 

$ 249,132 

$             - 

$            - 

$             - 

Shareholders'  (deficit) equity

$  (78,983)

$   56,776 

$ 179,476 

$ 289,757 

$ 391,598 

Cash dividends  declared per common share

$             - 

$            - 

$             - 

$       0.03 

$       0.19 
****
**ITEM7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION                ANDRESULTS OF OPERATIONS**

**GENERAL**

               Ournitrogen business unit produces nitrogen products for distribution tofertilizer dealers and distributors and industrial users located primarily inthe southern region of the United States. Our products and primary raw materials (particularly natural gas) arecommodities, prices for which can be very volatile.  These commodities' pricesand the global supply/demand balance for our products do not necessarily changein relation to one another and may impact our performance in different ways.

               Duringfiscal 2004, we reduced the size and scope of our operations.  On March 2, 2004, our potash assets in Carlsbad, New  Mexico, were sold for approximately $28.4 million and theproceeds were used to reduce debt.  Our melamine and related urea operations inDonaldsonville, Louisiana, were permanently shutdown on March 24, 2004.  In June 2004, our boardof directors authorized management to pursue a divestiture of our wholly ownedsubsidiary, Mississippi Phosphates Corporation ("MississippiPhosphates"), as part of our plan to emerge from bankruptcy.  As a resultof these changes, the financial results of these operations are classified asdiscontinued operations.

               Ourcontinuing operations consist of nitrogen facilities in Yazoo  City, Mississippi, and Donaldsonville, Louisiana,our 50% interest in Point Lisas Nitrogen Limited in The Republic of Trinidadand Tobago, and our 50% interest in an ammonia terminal located near Houston, Texas.

               Thetrading of our common stock commenced on the Over the Counter Bulletin Board ofFebruary 10, 2003.  Our current trading symbol isMSPIQ.  As of September 15, 2004, our shareholders ofrecord numbered 12,140.

**Petitionfor Relief Under Chapter 11 of the****United StatesBankruptcy Code**

               OnMay 15, 2003 (the "Petition Date"), Mississippi Chemical Corporationand nine of its direct and indirect subsidiaries (collectively, the"Debtors"), filed voluntary petitions to reorganize underChapter 11 of the United States Bankruptcy Code (the "BankruptcyCode") in the United States Bankruptcy Court for the Southern District ofMississippi, Jackson, Mississippi (the "Court").  The cases are beingadministered jointly in Joint Case Number 03-02984 WEE, collectively (the"Case").  The Debtors sought relief under Chapter 11 of theBankruptcy Code because of a lack of liquidity.  The combination of thedepression in the agricultural sector, several waves of low priced imports, andthe extreme increase in price level and price volatility of domestic naturalgas, the Company's primary raw material, had resulted in substantial financiallosses for the Company for the last five years.

               Asdebtors-in-possession, the Debtors, subject to any required Court approval, mayelect to assume or reject real estate leases, employment contracts, personalproperty leases, service contracts, and other unexpired executory pre-petitioncontracts.  We do not believe that rejection damages will be material; however,we cannot currently determine with certainty the aggregate liability that willresult from the filing and settlement of claims related to any rejectedcontracts.

               Asdebtors-in-possession, the Debtors are authorized to operate their business butmay not engage in transactions outside the ordinary course of business withoutthe approval of the Court.  On May 16, 2003, the Court rendered an InterimOrder approving the Debtors' request for interim financing, and onOctober 2, 2003, the Court entered a Final Order approvingdebtor-in-possession revolving credit financing of $32.5 million, which wasautomatically reduced to $22.5 million on March 2, 2004, immediately followingthe sale of our Potash Assets (see Note 21 to our consolidated financialstatements in Item 8 below).  On December 19, 2003, the Court entered a Final Order (the "SupplementalDIP Order") approving supplemental debtor-in-possession term loanfinancing of $96.7 million (the "Supplemental DIP").  On July 15, 2004, the Court entered a Final Order approving a new $182.5million credit facility (the "Replacement DIP") to refinance all ourpre-petition and post-petition secured debt (as more particularly describedbelow).

               OnJune 6, 2003, the Court appointed the Official Committee of UnsecuredCreditors (the "Creditors' Committee") to represent the interests ofthe unsecured creditors.  The Creditors' Committee monitors our financialcondition and restructuring activities.  We are required to reimburse certainfees and expenses of the Creditors' Committee, including fees for attorneys andother professionals to the extent allowed by the Court.  As of June 30, 2004, we have paid fees and expenses of the Creditor'sCommittee during the Case in the amount of $3.5 million.

               OnOctober 8, 2003, we signed an agreement with Koch Nitrogen Company("Koch") to sell our interests in Point Lisas Nitrogen Limited("Point Lisas Nitrogen") for an estimated cash amount of $92.0million, plus certain assumed liabilities (the "Koch Stalking HorseAgreement").  Subsequently, and in conjunction with the Supplemental DIPOrder, we withdrew our motion to sell pursuant to the Koch Stalking HorseAgreement, resulting in the payment of a break-up fee to Koch of approximately$3.8 million (the "Koch Break-Up Fee").

               OnNovember 26, 2003, our subsidiaries, Mississippi Potash, Inc. and EddyPotash, Inc., entered into a stalking horse agreement to sell substantially allof their assets to subsidiaries of Intrepid Mining LLC (the "IntrepidStalking Horse Agreement").  On March 2, 2004, these assets were sold.  As of June 30, 2004, we had received approximately $27.9 million related tothe sale and had a receivable of approximately $500,000 recorded on our booksfor the remainder of the purchase price attributable to a purchase priceholdback held in escrow for contingent indemnification obligations.

               OnApril 16, 2004, the Debtors filed with the Court a joint plan ofreorganization and disclosure statement (the "Original Plan").  Theprincipal objective of the Original Plan was to restructure the Debtors'obligations to creditors in a manner that would permit us to continue as aviable business organization.  There were objections to the Original Plan. Based on these objections, other alternatives were analyzed.

               OnJune 25, 2004, the Court entered an Interim Order permitting the$182.5 million Replacement DIP provided by the New York-based lenders CitigroupGlobal Markets, Inc., an affiliate of Citigroup, Perry Principals Investments,LLC, an affiliate of Perry Capital and Varde Investment Partners, L.P., anaffiliate of Varde Partners, Inc.  The parties entered into the Replacement DIPon July 1, 2004, and the Court entered aFinal Order approving the Replacement DIP on July 15, 2004.  The Replacement DIP, which includes a $22.5 millionrevolving credit facility provided solely by an affiliate of Citigroup,replaced all of the Company's pre-petition and post-petition secured debt, aportion of which matured on June 30, 2004.  The maturity of the Replacement DIPis the earlier of the Company's exit from bankruptcy or December 31, 2004, and the Company has the option to extend the maturitythrough June 30, 2005, under certain conditions.

               OnAugust 9, 2004, Terra Industries Inc. (NYSE: TRA) and the Companyannounced a definitive agreement under which Terra will acquire the Company foran estimated total value as of that date of approximately $268 million.  As ofthe announcement date, the transaction consideration included estimated cashand assumed debt of $161 million and stock of $107 million, and the final valuewill depend on Terra's share price at closing and closing adjustments.  Priorto the close of the transaction, Mississippi Phosphates will either be sold toa third party or transferred to its unsecured creditors pursuant to the amendedplan.  Both companies' Boards of Directors have unanimously approved thetransaction.  The Creditors' Committee, our largest unsecured creditors, andthe Replacement DIP lenders also support the transaction.  The Terratransaction is expected to close no later than the first quarter of calendar2005.  More information related to the transaction can be found in the StockPurchase Agreement filed on Form 8-K by Terra on August 9, 2004,and in our Current Reports on Form 8-K filed with the SEC on August 9, 2004 and September 8, 2004.

               OnSeptember 2, 2004, the Debtors filed an amended joint plan ofreorganization with the Court that replaced the Original Plan (the"Amended Plan").  The primary purpose of the Amended Plan is to facilitate theacquisition of the Company by Terra.  If the Terra transaction is notconsummated, the Amended Plan provides that the Company will emerge frombankruptcy on a stand-alone basis.  In either instance, the Amended Planobligates the Company to dispose of Mississippi Phosphates either through asale of stock or assets, or if such sale is not consummated, by a distributionof the stock or assets of such business to the unsecured creditors ofMississippi Phosphates.

               Underthe Amended Plan, Terra will acquire the Company.  Perry Principals InvestmentsLLC, an affiliate of Perry Capital Management Inc., and Citigroup Global Markets,Inc., an affiliate of Citigroup, have entered into a commitment to extend theterm of the term loan portion of the Replacement DIP beyond MississippiChemical's emergence from bankruptcy until four years from the closing of theTerra transaction.  Terra and the Company will use existing cash on hand toreduce the principal amount of this term loan to $125 million from $160 millionand satisfy all other cash payments to creditors required by the Amended Plan. In addition, Terra would issue to certain of the Company's unsecured creditors14.75 million shares of Terra common stock and an amount of preferred stock,subject to certain post-closing adjustments as specified in the definitiveagreement.  Assuming the Closing Share Price (as defined in the definitiveagreement) is equal to $6.14, (Terra's closing share price on Friday, August 6, 2004, the last trading dayprior to the announcement of the agreement), the Company's unsecured creditorswould receive Terra common stock with a value of $90.6 million plus thepreferred stock.  The preferred stock to be issued to unsecured creditors willinitially be set with a liquidation preference of $32.2 million.  The projectedworking capital and other closing adjustments are currently anticipated tototal a negative $17.4 million.  Under this projected scenario, Terra will issuepreferred stock with a liquidation preference of $14.8 million and, within tenmonths of closing, Terra will have the option, but not the obligation, toredeem the preferred stock for 2.4 million to 3.4 million shares of Terracommon stock to be determined based upon Terra's stock price at closing.  Basedupon a Closing Share Price of $6.14 per share, Terra would have the right toredeem the preferred stock for 2.4 million Terra common shares.  The finalamount of the working capital and other post-closing adjustments will depend onvarious factors including, but not limited to: business performance, commodityprices and the terms of final separation of Mississippi Phosphates.  Theagreement also provides that Terra will issue 250,000 additional shares of Terracommon stock for distribution to the Company's shareholders.

               Underthe Amended Plan, the Company expects that substantially all unsecuredcreditors with allowed claims of $5,000 or less from the nitrogen business willbe paid in cash, in full.  Substantially all other unsecured creditors withallowed claims from the nitrogen business will be paid either cash equal to aspecified percentage of their allowed claim or a pro-rata share of the pool ofTerra common and preferred stock.  The Terra transaction and Amended Plan aresubject to Court approval, successful completion of the restructuring of theCompany's nitrogen and phosphate business, as well as customary regulatoryapprovals.  The Terra transaction is also subject to Terra's ability to obtainthe consent of Terra's current working capital lenders.

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

               Ourability to continue as a going concern is dependent upon, but not limited to,the confirmation of a plan of reorganization, continued access to adequatesources of capital, continued compliance with debt covenants under theReplacement DIP, the ability to sustain positive cash flows sufficient to fundoperations and repay debt, and retention of key suppliers, customers andemployees.  No assurance can be given that we will be successful inreorganizing our affairs through the Case.  Because of the ongoing nature ofthe reorganization process, the outcome of which is not determinable until aplan of reorganization is confirmed and implemented, the accompanyingconsolidated financial statements do not include any adjustments that mightresult from the resolution of these uncertainties.

**Critical Accounting Policies**

               ***Overview.*** Management's discussion and analysis of our financial condition and results ofoperations should be read in conjunction with our consolidated financialstatements and related notes appearing in Item 8 of this Annual Report on Form10-K.  The preparation of these financial statements requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements, and the reported amounts of revenues and expensesduring the reporting period.  The accompanying consolidated financialstatements have been prepared on a going concern basis.  The suitability ofusing a going concern basis is dependent upon, but not limited to, theconfirmation of a plan of reorganization, continued access to adequate sourcesof capital, continued compliance with debt covenants under the Replacement DIP,the ability to sustain positive cash flows sufficient to fund operations andrepay debt, and retention of key suppliers, customers and employees.

               Wehave identified the accounting policies that involve those estimates andassumptions that we believe are critical to an understanding of our financialstatements.  Our management has discussed the development and selection of eachcritical accounting estimate with the Audit Committee of our Board ofDirectors, and the Audit Committee has reviewed the related disclosures in thisItem 7.  Since application of these accounting policies involves the exerciseof judgment and use of estimates, actual results could differ from thoseestimates.

               ***Adoptionof AICPA Statement of Position 90-7.***  As a result of filing petitionsunder Chapter 11 of the Bankruptcy Code, our consolidated financial statementshave been prepared in accordance with AICPA Statement of Position("SOP") 90-7, "Financial Reporting by Entities in Reorganizationunder the Bankruptcy Code."  SOP 90-7 does not change the application of U.  S. generally accepted accounting principles in thepreparation of financial statements.  However, it does require that thefinancial statements for the periods included and subsequent to filing aChapter 11 petition distinguish transactions and events that are directlyassociated with the reorganization from the ongoing operations of the business.

               SOP90-7 requires (a) that pre-petition liabilities that are subject to compromisebe segregated in the consolidated balance sheets as liabilities subject to compromise,and (b) that revenues, expenses, realized gains and losses, and provisions forlosses resulting from the reorganization of the Company be reported separatelyas reorganization expense in the consolidated statement of operations.

               ***HedgingActivities.***  Management estimates its natural gas requirements based onthe relationship between nitrogen product prices and the cost of natural gas. We enter into derivative transactions to protect future production costsagainst price fluctuations of natural gas, which is the primary raw material inthe production of our nitrogen products.  These derivative transactions mayconsist of futures contracts, options, swaps or similar derivative instrumentsrelated to the price of natural gas.  Gains and losses on the derivativetransactions that are designated and effective as cash flow hedges are deferredand, at the time the related finished product inventory is sold, are recognizedas an increase or decrease in the purchase cost of the related natural gas.  Weaccount for these transactions as cash flow hedges in accordance with Statementof Financial Accounting Standards ("SFAS") No. 133, "Accountingfor Derivative and Hedging Activities," as amended by SFAS No. 149,"Amendment of FASB Statement No. 133 on Derivative and HedgingActivities," and SFAS No. 138, "Accounting for Certain DerivativeInstruments and Certain Hedging Activities."  Accordingly, we record thefair value of these instruments on our consolidated balance sheets as acomponent of shareholders' equity under the heading "Accumulated OtherComprehensive Income (Loss)".  At certain times, we determine that it isnot economical to operate our nitrogen production facilities because of anunfavorable relationship between nitrogen product prices and the cost ofnatural gas.  When this occurs, the quantity of natural gas we purchase may beless than the quantity we have hedged, and therefore, we"undesignate" the difference and recognize the ineffective portionimmediately in our consolidated statements of operations.  

               Materialchanges to our results of operations could occur if our hedging instruments arenot highly effective in offsetting cash flows attributable to the hedged risks. We calculate the fair value of our derivative instruments using quoted marketprices on the New York Mercantile Exchange ("NYMEX") or valuationsdetermined by our counterparties.  Because of delays relating to the Case, wewere unable to hedge natural gas from May 16, 2003 through September 28, 2003.  Under a Final Orderentered on October 20, 2003,we obtained authority to hedge 150 natural gas contracts per month on a rollingtwo-month basis.  Under a Final Order entered on January 22, 2004, we were permitted tohedge 450 natural gas contracts per month on a rolling two-month basis.  Undera Final Order dated August 19, 2004, approving hedging activities, the Companyis permitted to hedge up to 325 natural gas contracts per month for the firstand second months of a four-month revolving period and up to an additional 150natural gas contracts per month for the third and fourth months of said period.

               Duringfiscal 2004, natural gas hedging activities resulted in an average costincrease of approximately $0.32 per MMBtu on volumes hedged of 18.1 millionMMBtu's.  During fiscal 2003, natural gas hedging activities resulted in anaverage cost decrease of approximately $0.52 per MMBtu on volumes hedged of33.5 million.  During fiscal 2002, natural gas hedging activities resulted inan average cost increase of approximately $0.39 per MMBtu on volumes hedged of39.4 million.  At June 30, 2004, we had open natural gasderivative contracts covering a total volume of 640,000 MMBtu's with contractsextending through August 2004.  The net unrealized loss on these contracts at June 30, 2004, was $277,000 and was recorded as a component of othercomprehensive loss in our consolidated balance sheet.  As of the same date, wehad unrecognized losses of $942,000 on closed natural gas derivative contractsrelated to our hedging activities that were recorded as a component of othercomprehensive loss in our 2004 consolidated balance sheet.

               ***AssetRetirement Obligations.***  We estimate closure costs for our Pascagoula, Mississippi,facilities, and at June 30, 2004, had $6.9 million accruedas a component of liabilities of discontinued operations.  These closure costsare recognized over the estimated life of the related facilities and have beenrecorded as a component of discontinued operations in our consolidatedstatements of operations.

               Asof June 30, 2004, estimated closure costsof approximately $2.4 million for our West phosphogypsum disposal facility in Pascagoulahave been recorded as a component of liabilities of discontinued operations. We are currently in the process of closing this facility after discontinuingits use during the second quarter of fiscal 2003.  The East phosphogypsumdisposal facility (the "East Facility"), completed in 1998, is infull operation.  At June 30, 2004, we had recorded closurecosts of $4.5 million related to this facility, and it is included inliabilities of discontinued operations.

               Inaddition to accruing for the closure of the East Facility, MississippiPhosphates has developed a financial assurance mechanism with the MississippiDepartment of Environmental Quality.  Quarterly payments will be made into atrust fund managed by Morgan Keegan Trust Company, FSB.  This fund will be usedfor closure and post-closure care of the East Facility.  The first payment wasmade April 1, 2004, and as of June 30, 2004, we had deposited $201,000 into this trust fund. Quarterly payment amounts will be reviewed annually and adjusted forinflation.  These payments will continue until funds in the trust are adequateto cover estimated costs related to the closure of the East Facility.  The EastFacility has an estimated remaining useful life of 22 years.

               EffectiveJuly 1, 2002, we adopted SFAS No. 143, "Accounting for Asset RetirementObligations," which addresses financial accounting and reporting forobligations associated with the retirement of tangible long-lived assets andthe associated asset retirement costs.  The assets recorded will be depreciatedover the useful lives of the assets to be retired.  The liabilities will beaccreted based on the effective interest method and the useful lives of therelated facilities.  As required by SFAS No. 143, we will make periodicassessments of the reasonableness of closure cost estimates for each of ourfacilities and make adjustments as needed.  The resulting adjustments in ourconsolidated balance sheet will increase or decrease the amounts expensed infuture periods.  The related assets and liabilities are included as part ofassets and liabilities of discontinued operations on our 2004 consolidatedbalance sheet.

               Significantmanagement judgments and estimates are made when estimating these costs.  Ifour judgments and estimates prove to be inadequate, our financial results couldbe materially adversely impacted in future periods.

               ***DeferredTaxes.***  Deferred income taxes are estimated based upon temporarydifferences between the income and losses that we report in our financialstatements and our taxable income and losses as determined under applicable taxlaws.  In making such estimates, we use existing tax rates and laws and ourexpectations of future earnings.  Our composite statutory tax rate is estimatedto be approximately 38%.

               Weare required to evaluate the likelihood of our ability to generate sufficientfuture taxable income that will enable us to realize the value of our deferredtax assets.  If we, in our judgment, are not more likely than not to realizeany deferred tax assets, then we record valuation allowances against thedeferred tax assets.  As of June 30, 2004,we had recorded deferred tax assets arising from federal and state netoperating loss carryovers amounting to approximately $62.0 million andapproximately $16.0 million, respectively.  We estimate that certain deferredtax assets, principally those arising from federal net operating losscarryforwards and certain state net operating loss carryforwards, may not berealized.  Therefore, we have recorded federal and state valuation allowancesagainst these assets amounting to $41.6 million and $12.8 million as of June 30, 2004, respectively.

               Inconnection with the Supplemental DIP that was repaid on July 1, 2004, our wholly owned subsidiary, Mississippi ChemicalHoldings, Inc. ("MCHI"), had provided a guarantee on such secureddebt.  MCHI indirectly owns our 50% joint venture interest in Point LisasNitrogen, the operator of an ammonia facility in Point Lisas, Trinidad.  Under U.S.tax laws, this guarantee resulted in a deemed non-cash distribution to us ofearnings from MCHI (and effectively our portion of the earnings from PointLisas Nitrogen).  As of June 30, 2004, these cumulative earningsapproximated $53.0 million.  We recorded non-current deferred tax liabilitieson these earnings of approximately $20.3 million.  Pursuant to a Final Orderentered on July 15, 2004, (as defined in more detail under the heading"Liquidity and Capital Resources - Financing Activities - ReplacementDebtor-in-Possession Credit Facility"), the debt guarantee was released.  Effective July 1, 2004, we no longer considerPoint Lisas Nitrogen's earnings to be reinvested indefinitely.  Accordingly, weexpect to record U.S. taxes on those earnings.  

               Weuse significant management judgments and estimates when recording deferredtaxes.  If our judgments and estimates prove to be inadequate, or if certaintax rates and laws should change, our financial results could be materiallyadversely impacted in future periods.

               ***Impairmentor Disposal of Long-Lived Assets.***  We evaluate the recoverability ofcertain long-lived assets whenever events or changes in circumstances indicatethat an asset's carrying amount may not be recoverable, as required by SFAS No.144, "Accounting for the Impairment or Disposal of Long-LivedAssets."  These evaluations utilize various estimates and judgments.  Therecoverability of these assets is highly dependent upon the accuracy of variousunderlying assumptions, such as future product prices and natural gas costs. The impairment of an asset is measured by the amount the carrying value of theasset exceeds its fair value.  Impairment charges occurring after May 15, 2003 are reflected in reorganization expense, except forthose charges relating to assets of discontinued operations.

               Duringfiscal 2004, we evaluated the recoverability of our long-lived assets anddetermined that certain of those assets were impaired.  We recognized a pre-taximpairment charge totaling $21.2 million relating to our remaining ammoniaproduction assets located in Donaldsonville, Louisiana. This charge was reflected as a component of reorganization expense in the 2004consolidated statement of operations.  We recognized additional pre-taximpairment charges to our discontinued operations related to potash of $34.0million, melamine/urea of $9.3 million and phosphate of $39.0 million.  Thesecharges are included in discontinued operations on the 2004 consolidatedstatement of operations.

               Duringfiscal 2003, we evaluated the recoverability of our long-lived assets anddetermined that certain of those assets were impaired.  We recognized animpairment charge totaling $62.9 million relating to our remaining ammoniaproduction assets located in Donaldsonville, Louisiana. We recognized an additional pre-tax impairment charge to our urea assets of$12.2 million, which is included in discontinued operations on the 2003consolidated statement of operations.

               Duringfiscal 2002, we assessed the recoverability of the tangible and intangiblelong-lived assets related to our nitrogen operations pursuant to SFAS No. 121,"Accounting for the Impairment of Long-lived Assets and for Long-livedAssets to Be Disposed Of."  We projected the undiscounted future cashflows for these operations to test recoverability and determined that, incertain cases, such cash flows were less than the value of such assets on theconsolidated balance sheet, indicating that impairment was likely.  Our cash flowprojections were based on a third party appraisal of our long-lived assets andincluded additional third party and internally developed forecasts of futurenitrogen prices and natural gas costs.  We determined that we had an impairmentin the value of goodwill related to our Donaldsonville, Louisiana,nitrogen production assets acquired in December 1996.  Accordingly, a non-cashcharge for goodwill impairment of $101.3 million was recorded in our fourthquarter of fiscal 2002.  Estimates of such future cash flows are subject tosignificant uncertainties and assumptions.  Accordingly, actual results couldvary significantly from such estimates.

               Theimpairment analysis has been prepared on a going concern basis and theCompany's carrying value for its long-lived assets is presumed to berecoverable through future cash flows.  If the Company does not continue as agoing concern, further impairment charges may be necessary.

               ***ExitCosts and Disposal Activities. ***SFAS No. 146, "Accounting forCosts Associated with Exit and Disposal Activities," issued in July 2002,revised the accounting for activities relating to exiting or disposing ofbusinesses or assets under EITF Issue No. 94-3, "Liability Recognition forCertain Employee Termination Benefits and Other Costs to Exit anActivity."  For most exit and disposal activities initiated after December31, 2002, costs can no longer be recorded as a one-time charge when a formalcommitment is made to a plan to exit an activity or dispose of long-livedassets.  Instead, we will record exit and disposal costs when they are incurredand can be measured at fair value, and will subsequently adjust the recordedliability for changes in estimated cash flows according to SFAS No. 146.

               ***InventoryValuation.***  The value of our finished product inventories is stated atthe lower of cost or market.  Cost has been determined under a moving averagecost method.  Under certain market conditions, we make certain estimates andjudgments regarding the valuation of our inventory based on management'sevaluation of the price at which we can sell our products.  The price anddemand for our products is very volatile.  A decline in price could result in alower of cost or market adjustment.

               ***Investmentin Affiliates.***  The Company's investment in affiliates primarilyconsists of an investment in Point Lisas Nitrogen, FMCL Limited LiabilityCompany, and a 50% interest in an ammonia storage terminal in Pasadena, Texas. The Company accounts for its investments in affiliates under the equity methodof accounting.  Accordingly, the Company records its proportionate share of thejoint venture's earnings in Point Lisas Nitrogen as a component of cost ofproducts sold.  Our proportionate share of earnings for all other investmentsis recorded as a component of other income.  Periodically, the Company assessesthe carrying value of its investment in affiliates.  The Company will record aloss on its investment in affiliates at that point in time management concludesthat a decline in the fair value of the investment is other than temporary. During 2004 and 2003, no such losses have been recorded on its investment inaffiliates.

**Recent Accounting Pronouncements**

               InJanuary 2003, the FASB issued FASB Interpretation No. 46, "Consolidationof Variable Interest Entities."  This interpretation of AccountingResearch Bulletin No. 51, "Consolidated Financial Statements,"addresses consolidation by business enterprises of variable interest entitiesin which the equity investors do not have a majority voting interest and/or donot have sufficient equity at risk for the entity to finance its operationswithout additional subordinated financial support from other parties.  Weadopted and applied the provisions of this interpretation during fiscal 2004,without a material effect on our consolidated financial statements.  The FASBrevised the Interpretation to address certain technical corrections and toclarify many of the implementation issues.  We have evaluated the provisions ofthe revised Interpretation and concluded that its adoption did not have amaterial effect on the consolidated financial statements.

               InApril 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 onDerivative Instruments and Hedging Activities."  This statement amends andclarifies financial accounting and reporting for derivative instruments,including certain derivative instruments embedded in other contracts and forhedging activities under FASB Statement No. 133, "Accounting forDerivative Instruments and Hedging."  This amendment clarifies under whatcircumstances a contract with an initial net investment meets thecharacteristic of a derivative, clarifies when a derivative contains a financialcomponent, and amends the definition of an underlying to conform it to languageused in FASB Interpretation No. 45.  These changes will result in moreconsistent reporting of contracts as either derivatives or hybrid instruments. We adopted this statement on July 1, 2003, with no material effect on our consolidatedfinancial statements.

               InMay 2003, the FASB issued SFAS No. 150, "Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity."  Thisstatement establishes standards for how an issuer classifies and measurescertain financial instruments with characteristics of both liabilities andequity.  It requires that any financial instrument that is within the scope ofthis statement be classified as a liability.  We adopted this statement on July 1, 2003, with no materialeffect on our consolidated financial statements.

**RESULTS OF OPERATIONS - FISCAL 2004 COMPARED TOFISCAL 2003**

**Overview**

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

               Ourcontinuing operations now consist of our nitrogen facilities in Yazoo  City, Mississippi, and Donaldsonville, Louisiana,our 50% interest in Point Lisas Nitrogen in The Republic of Trinidad andTobago, and our 50% interest in an ammonia terminal located near Houston, Texas.

               Netsales increased to $300.5 million in fiscal 2004 from $237.9 million in fiscal2003.  We had operating income from continuing operations of $28.0 million infiscal 2004, compared to an operating loss from continuing operations of $77.6million in fiscal 2003, which included a non-cash impairment charge of $62.9million.

               Ourresults of operations have historically been influenced by a number of factorsbeyond our control, which have at times had a significant impact on ouroperating results.  Fertilizer demand and sales prices are highly dependentupon a variety of conditions stated in this Annual Report on Form 10‐K underthe headings "Certain Business Factors" in Item 1, and"Outlook" and "Forward-Looking Statements" in thisItem 7.

**Net Sales**

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

               Summariesof our sales results by business unit are set forth below:

Fiscal  Years Ended June 30

%

2004

2003

Inc.  (Dec.)

(Dollars  in thousands)

Net Sales:

     Nitrogen

$298,953

$236,850

26% 

     Other

       1,497 

     1,069

     40% 

          Net  Sales

$300,450   

$237,919

      26% 

Fiscal  Years Ended June 30

%

2004

2003

Inc.  (Dec.)

(Tons  in thousands)

Tons Sold:

     Nitrogen:

        Ammonia

685

689

(1%)

        Ammonium  Nitrate

649

675

(4%)

        Nitrogen  solutions

323

475

(32%)

        Nitric  acid

       41    

     28

   46% 

             Total  Nitrogen

 1,698

1,867

    (9%)

Fiscal  Years Ended June 30

%

2004

2003

Inc.  (Dec.)

Average Sales Price Per Ton:

     Nitrogen

$   176

$     127

39%

***              ***Ournitrogen sales increased 26% as a result of higher sales prices.  The averageselling price for ammonia, ammonium nitrate, and nitrogen solutions increased34%, 35%, and 43%, respectively.  A decrease in U.S.nitrogen production, along with a tightening of world supply/demand balances,led to these nitrogen price increases.  During fiscal 2004, nitrogen productsin the U.S. continued to be impacted by highnatural gas prices, resulting in industry-wide production curtailments atvarious points during the fiscal year.  During most of the first quarter offiscal 2004, we shut down significant portions of our Yazoo Cityfacility in an effort to manage inventory levels in response to high naturalgas costs and as a result of a poor spring demand.  This allowed the Company toconserve cash flow during the negotiation of its debtor-in-possession creditfacility with a group of lenders.  The Yazoo Cityfacility returned to production in late September 2003.

               Substantiallyall of our ammonia sales are to industrial customers.  Our ammonia sales pricesincreased 34%, while our volumes decreased 1%.  This decrease in volume is dueto decreased purchases by some of our contract customers, largely offset by newbusiness.  Ammonia sales prices increased as downtime at production points in Indonesia, Malaysiaand Venezuela related to politicaldisruptions and natural gas shortages, caused the world supply/demand balanceto tighten.  In addition, U.S. producers curtailedproduction at various points during fiscal 2004 in response to high natural gasprices and concerns about volatile U.S.natural gas prices.

               Ammoniumnitrate sales prices increased 35%, while sales volumes decreased 4%.  Thedecrease in sales volumes was due primarily to the reduced production at Yazoo Cityduring the first quarter as noted above.  Prices were higher due to a reductionin market supply and concerns about volatile U.S.natural gas prices.

               Nitrogensolutions sales prices increased 43%, while sales volumes decreased 32%.  Thisdecrease in sales volumes was primarily due to the shutdown of production ofnitrogen solutions at Yazoo Cityduring the first quarter of fiscal 2004.  Prices were higher due to a reductionin market supply and concerns about volatile U.S.natural gas prices.

**Other Revenues**

               Ourother revenues for fiscal 2004 and 2003 were $4.6 million and $2.0 million,respectively, and consisted primarily of facility fees earned by our Yazoo Cityfacility that supplies dinitrogen tetroxide (N204) to theUnited States Department of Defense.  This facility was placed in service atour Yazoo Cityfacility during the third quarter of fiscal 2003.

**Cost of Products Sold**

               Ourcost of products sold increased in fiscal 2004 to $249.2 million, from $215.5million in fiscal 2003.  As a percentage of net sales, cost of products solddecreased to 83% for fiscal 2004 from 91% for fiscal 2003.  This decrease wasprimarily the result of higher sales prices partially offset by higher costsper ton.

***               ***Ournitrogen costs per ton increased 26%, primarily as a result of higher naturalgas costs at our domestic production facilities.  The average price of naturalgas, net of futures gains and losses, at our domestic nitrogen productionfacilities increased approximately 41% to $5.70 per MMBtu.  During fiscal 2004,we experienced higher costs related to the purchase of ammonia from third partiesand Point Lisas Nitrogen as the global supply/demand balance tightened andpushed nitrogen prices higher.  Equity in earnings of approximately $21.8million at Point Lisas Nitrogen reduced the effect of higher domestic naturalgas prices and purchased ammonia prices.  These equity in earnings arereflected in our consolidated statements of operations as a reduction in costof products sold.

               Ourportion of the earnings from Point Lisas Nitrogen was $21.8 million for fiscal2004, compared to $5.6 million for fiscal 2003.  During fiscal 2004, PointLisas Nitrogen incurred higher natural gas costs because its gas contract tiesthe price of natural gas to the market price of ammonia, which increased duringfiscal 2004.  Results for fiscal 2004 were improved from fiscal 2003 becausethe ammonia prices received by Point Lisas Nitrogen more closely reflected themarket price.  Sales prices during fiscal 2003 were below prevailing marketprices because of product offtake agreements with us and our joint venturepartner, Koch Nitrogen Company.  The agreements required Point Lisas Nitrogento make sales to us at prices below the prevailing market price to recoveramounts paid in previous years that were in excess of prevailing market prices.

**Selling, General andAdministrative**

               Ourselling, general and administrative expenses decreased to $21.1 million infiscal 2004, from $26.5 million in fiscal 2003.  This decrease was primarilythe result of lower spending for insurance and professional consultants relatedto operating activities.  In addition, the prior year amount includedapproximately $1.9 million of severance related charges at Donaldsonville.  Asa percentage of net sales, selling, general and administrative expensesdecreased to 7% in fiscal 2004 from 11% in fiscal 2003.

**Impairment of Long-LivedAssets**

               ***AmmoniaAssets.***  In February 2003, we announced closure plans for one of ourammonia plants located in Donaldsonville, Louisiana. This closure was the result of unfavorable natural gas prices and marketconditions.  We decided to idle this ammonia plant indefinitely because we didnot expect it to contribute to future operations.  The long-lived assetsassociated with this ammonia plant had a book value of approximately $70.3million.  We tested this asset for impairment in accordance with SFAS No. 144,"Accounting for the Impairment or Disposal of Long-Lived Assets," andrecorded a pre-tax impairment charge totaling $62.9 million during fiscal2003.  This amount has been reflected in the 2003 consolidated statements ofoperations as impairment of long-lived assets.

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

               ***Melamine/UreaAssets.***  In December 2002, we announced plans to close our ureafacility located in Donaldsonville, Louisiana. This closure was also the result of unfavorable natural gas prices and marketconditions.  We evaluated the utility of these long-lived assets and initiallyconcluded that the prilling section of the urea plan was not expected tocontribute to ongoing operations and production would cease.  We tested theassets associated with the urea prilling section for impairment in accordancewith SFAS No. 144, and recorded a pre-tax impairment charge totaling $12.2million at December 31, 2002.  This amount has been included in loss fromdiscontinued operations in the 2003 consolidated statement of operations.

               InMarch 2004, we announced the permanent closure of our melamine and ureaoperations at our Donaldsonville, Louisiana,facility because we decided to exit this business operation completely.  Actingon authority granted by our board of directors, we have committed to a plan ofdisposal and have initiated efforts to locate a buyer for these assets.  Inaccordance with SFAS No. 144, these assets have been reflected as discontinuedoperations at June 30, 2004, and prior reportingperiods have also been reclassified.  We have recorded a pre-tax impairmentcharge for the melamine/urea assets totaling $9.3 million for fiscal 2004.  Weceased production at this facility during the first week in April 2004.

               ***PotashAssets.***  During our first quarter of fiscal 2004, our board ofdirectors authorized management to actively market for sale the long-livedassets of Mississippi Potash, Inc. and its subsidiary (the "PotashAssets").  Accordingly, as required by SFAS No. 144, we tested the PotashAssets for impairment at September 30, 2003.  This test resulted in apre-tax impairment charge of approximately $34.0 million, which is reflected asa component of discontinued operations in the 2004 consolidated statement ofoperations.  On March 2, 2004, these assets were soldfor approximately $28.4 million.

               ***PhosphateAssets.***  In June 2004, our board of directors authorized management'scommitment to a plan to dispose of Mississippi Phosphates as part of our planto emerge from bankruptcy.  This subsidiary will be either sold to a thirdparty or transferred to the unsecured creditors of Mississippi Phosphatespursuant to the Amended Plan.  The long-lived assets associated with this planthad a book value of approximately $51.0 million.  As required by SFAS No. 144,we evaluated the carrying amount of the Phosphate Assets for recoverability. This evaluation resulted in a pre-tax impairment charge totaling $39.0 millionat June 30, 2004, and is reflected as acomponent of discontinued operations in the 2004 consolidated statement ofoperations.

               ***Impairmentof long-lived assets summary:***

Years Ended June 30

2004

2003

2002

(Dollars in thousands)

Consolidated  Statements of Operations 

  Classification

Impairment  of long-lived assets

   Ammonia  assets

$      -     

$ 62,912

$      -      

Reorganization  expense

   Ammonia  assets

21,191

-      

-      

Loss  from discontinued operations

   Melamine/Urea  assets

9,255

12,206

-      

   Potash  assets

34,022

-      

-      

   Phosphate  assets

    39,000

       -      

        -      

    82,277

   12,206

        -      

**   Total  impairment charges**

**$103,468**

** **

**$ 75,118**

** **

**$      -      **

Significant judgments and estimates are required inperforming impairment tests in accordance with SFAS No. 144.

**Other Operating Expenses**

               Ourother operating expenses decreased to $6.7 million in fiscal 2004, from $12.7million in fiscal 2003.  This decrease resulted from a reduction in idle plantcosts.  Portions of our ammonia, ammonium nitrate and nitric acid productioncapacities were idled for various periods during fiscal 2004 and 2003,primarily due to the unfavorable relationship between product prices andnatural gas prices.  During the first three months of fiscal 2004, our Yazoo Citynitrogen operation was idled in order to reduce inventory levels and conservecash as we negotiated a debtor-in-possession credit facility.

**Interest, Net**

               Ournet interest expense increased to $20.1 million in fiscal 2004, from $19.5million in fiscal 2003.  During fiscal 2004, we did not record any interestexpense on our Senior Notes and 1998 IRBs (each as defined below in this Item 7under the heading "Liquidity and Capital Resources") as they are apart of our pre-petition liabilities subject to compromise.  We did recordinterest during fiscal 2004 on our Pre-Petition Harris Facility (as definedbelow in this Item 7 under the heading "Liquidity and CapitalResources") because it was adequately secured and on our DIP andSupplemental DIP loans which were post-petition loans.  The interest rates onour secured debt during fiscal 2004 were higher than the rates on such debt infiscal 2003.

               TheCompany has allocated a portion of its consolidated interest expense todiscontinued operations in accordance with the provisions of Emerging IssuesTask Force (EITF) Issue No. 87-24, "Allocation of Interest to DiscontinuedOperations."  For the fiscal year ended June 30, 2003, such allocation, in the amount of $9.7 million, wasbased on actual interest calculations on intercompany notes payable between therelevant subsidiaries and Mississippi Chemical Corporation.  As a result of theCompany's bankruptcy filing, these intercompany notes have been classified asliabilities subject to compromise, which resulted in no interest expense beingcalculated on these intercompany notes payable in 2004.  In fiscal 2004,interest allocated to discontinued operations was $4.1 million and wasdetermined based on the proceeds received from the sale of the Company's PotashAssets and an estimated fair market value of its Phosphate Assets, ascalculated in accordance with SFAS No. 144.  All proceeds received from thesale of the Company's assets are required to be used to repay the Company'ssecured borrowings.

**Settlement of Litigation**

               Duringfiscal 2003, we concluded litigation related to a breach of contract claiminvolving performance guarantees for work done at one of the ammonia plants in Donaldsonville, Louisiana. We received $3.6 million in net proceeds from this settlement.

**Other Income**

               Otherincome increased to $3.4 million in fiscal 2004, from $1.6 million in fiscal2003.  This increase was primarily related to better performance by one of ourequity investments and a $1.2 million gain on the sale of a non-core asset.

**Reorganization Expense**

               Costsdirectly related to our reorganization under Chapter 11 of the Bankruptcy Codeare reflected as reorganization expense in our consolidated statements of operations. Reorganization expense for the fiscal year ended June 30, 2004, wasapproximately $45.2 million and consisted primarily of an impairment loss ofapproximately $21.2 million related to our ammonia plants located inDonaldsonville, Louisiana, professional fees, severance and employee retention expensesand a $3.8 million break-up fee paid to Koch for terminating the sale of ourinterest in Point Lisas Nitrogen.  Reorganization expense for the fiscal yearended June 30, 2003, was approximately $3.5million and consisted of legal and other professional fees.

**Income Tax Expense(Benefit)**

               Forfiscal 2004, our income tax expense from continuing operations was $34.5million, as compared to a $15.1 million benefit in fiscal 2003.  The income taxexpense for fiscal 2004 was primarily the result of the establishment of avaluation allowance for the deferred tax assets related to federal operatingloss carryforwards that may expire unutilized.  The income tax benefit for theprior fiscal year was primarily the result of our net losses from continuingoperations, partially offset by U.S. tax expense on cumulative foreign earningstriggered by the guarantee of our secured debt by MCHI (as described above inthis Item 7 under the heading "Critical Accounting Policies - DeferredTaxes").

               Ourestimated annual effective rate attributable to the loss from continuingoperations increased to 101.8% in fiscal 2004, from 15.9% in fiscal 2003.

               Ourincome tax benefit from discontinued operations for fiscal 2004 was $45.4million, as compared to a $16.6 million tax benefit for fiscal 2003.  Theincome tax benefits were primarily the result of our net losses fromdiscontinued operations.

**Discontinued Operations**

               ***Melamineand Urea Asset*s.**  In March 2004, we announced the permanent closure ofour melamine and urea operations at our Donaldsonville, Louisianafacility.  Acting on authority granted by our board of directors, we havecommitted to a plan of disposal of these assets.  As a result of thisannouncement and meeting the requirements for classification as discontinuedoperations in accordance with SFAS No. 144, at June 30, 2004,our melamine and urea operations have been reflected as discontinuedoperations.  Melamine and urea operations in previous periods presented havealso been reclassified in accordance with SFAS No. 144.  We have recorded anafter-tax loss from discontinued operations of $9.3 million, which includes apre-tax impairment charge of $9.3 million for fiscal 2004.  We have recorded anafter-tax loss from discontinued operations of $14.1 million, which includes apre-tax impairment charge of $12.2 million for fiscal 2003.  Corporateallocations have been excluded from discontinued operations.

               ***PotashAssets.***  During our first quarter of fiscal 2004, our board ofdirectors authorized management to actively market for sale the Potash Assets. On March 2, 2004, these assets were soldfor approximately $28.4 million.  As a result, at June 30, 2004,our potash operations have been reflected as discontinued operations.  Potashoperations in previous periods have also been reclassified in accordance withSFAS No. 144.  We have recorded an after-tax loss on the disposal of our potashassets of $11.4 million in fiscal 2004.  In addition, we recorded in fiscal2004 an after-tax loss from discontinued operations of $20.5 million, whichincludes the pre-tax impairment charge of $34.0 million.  In fiscal 2003, werecorded an after-tax loss of $4.0 million in discontinued operations.  Corporate allocations have been excluded from discontinued operations.

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

**RESULTS OF OPERATIONS - FISCAL 2003 COMPARED TOFISCAL 2002**

**Overview**

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

               Netsales increased to $237.9 million in fiscal 2003 from $207.9 million in fiscal2002.  We incurred an operating loss of $14.7 million in fiscal 2003 before anon-cash impairment charge of $62.9 million, compared to an operating loss of$34.0 million in fiscal 2002 before a non-cash impairment charge of $101.3million.

               Theseresults reflect our continuing operations which consist of nitrogen facilitiesin Yazoo City, Mississippiand Donaldsonville, Louisiana,our 50% interest in Point Lisas Nitrogen Limited in the Republic of Trinidad and Tobago, and our 50% interest inan ammonia terminal located near Houston, Texas. Based on the changes that occurred in fiscal 2004, our potash, phosphate andmelamine segments have been reclassed to discontinued operations for fiscal2003 and 2002.

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

**Net Sales**

***               ***Forfiscal 2003, our net sales increased 14% to $237.9 million, from $207.9 millionfor fiscal 2002.  This increase was primarily the result of higher sales pricesfor all of our nitrogen products, partially offset by lower nitrogen salesvolumes.

               Summariesof our sales results by business unit are set forth below:

Fiscal  Years Ended June 30

%

2003

2002

Inc.  (Dec.)

(Dollars  in thousands)

Net Sales:

     Nitrogen

$236,850

$206,871

14% 

     Other

     1,069

        984

     9% 

          Net  Sales

$237,919

$207,855

   14% 

 
Fiscal  Years Ended June 30

%

2003

2002

Inc.  (Dec.)

(Tons  in thousands)

Tons Sold:

     Nitrogen:

        Ammonia

689

742

(7%)

        Ammonium  Nitrate

675

779

(13%)

        Nitrogen  solutions

475

474

0% 

        Nitric  acid

     28

     33

   (15%)

             Total  Nitrogen

1,867

2,028

     (8%)

  Fiscal  Years Ended June 30

%

2003

2002

Inc.  (Dec.)

Average Sales Price Per Ton:

     Nitrogen

$     127

$     102

25% 

***               ***Ournitrogen sales increased 14% as a result of higher sales prices.  The averageselling price for ammonia, ammonium nitrate and nitrogen solutions increased40%, 10% and 17%, respectively.  A decrease in U.S.nitrogen production, along with a tightening of world supply/demand balances,led to these nitrogen price increases.  During fiscal 2003, nitrogen productsin the U.S. continued to be impacted by highnatural gas prices, resulting in production curtailments at various pointsduring the fiscal year.  In late June 2003, we shut down significant portionsof our Yazoo Cityfacility in an effort to manage inventory levels in response to high naturalgas cost and as a result of poor spring demand.  This allowed the Company toconserve cash flow during the negotiation of its debtor-in-possession creditfacility with a group of lenders.  The Yazoo Cityfacility returned to production in late September 2003.

               Substantiallyall of our ammonia sales are to industrial customers.  Our ammonia salesvolumes decreased 7% because of lower demand from industrial customers affectedby a slowdown in economies worldwide, resulting in industrial customerproduction curtailments and, in some instances, plant closures.  Our averageammonia sales price increased 40% as downtime at production points in certainforeign countries, related to political disruptions and natural gas shortages,caused the world supply/demand balance to tighten.  In addition, U.S.producers curtailed production at various points during fiscal 2003 in responseto high natural gas prices.

               Ammoniumnitrate sales prices increased 10% while sales volumes decreased 13%.  Thedecrease in sales volumes was due primarily to poor weather during the fourthquarter of fiscal 2003.  During the first three quarters of the fiscal year,sales volumes were running ahead of the previous year due to good demand forfall/winter wheat plantings and strong pasture applications.  Unfavorableweather during the fourth quarter significantly reduced demand, resulting inapproximately 155,000 fewer tons sold in the fourth quarter compared to thesame prior-year period.  Prices were higher due to a reduction in supply at thebeginning of the spring planting season as a result of production curtailmentsin the U.S. during February and March 2003.  Thosecurtailments were caused by a substantial natural gas price increase.

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

**Other Revenues**

               Infiscal 2003, other revenues totaled $2.0 million related to our dinitrogentetroxide (N204) contract with the U.S. Government("Government").  In February 2003, we completed the construction ofour N204 production plant at our Yazoo City, Mississippifacility.  We received approximately $3.0 million from the Government duringour third fiscal quarter as a reimbursement for constructing the N204plant.  This payment represents deferred revenue and will be recognizedsystematically over five years, the term of the contract.  In addition to thedeferred revenue, we are reimbursed by the Government for other out-of-pocketcosts associated with the production of N204.  Theseamounts have been included and classified as other revenues for fiscal yearended June 30, 2003.

**Cost of Products Sold**

               Ourcost of products sold increased in fiscal 2003 to $215.5 million, from $205.0million in fiscal 2002.  As a percentage of net sales, cost of products solddecreased to 91% in fiscal 2003 from 99% in 2002.  This decrease resulted fromhigher sales prices partially offset by higher costs per ton.

***               ***Ournitrogen costs per ton increased 14%, primarily as a result of higher naturalgas costs at our domestic production facilities.  The average price of naturalgas, net of futures gains and losses, at our domestic nitrogen productionfacilities increased approximately 33% to $4.04 per MMBtu.  In addition, we hadhigher costs related to third-party purchases of ammonia and lower equity inearnings at Point Lisas Nitrogen.  These equity in earnings are reflected in ourconsolidated statements of operations as a reduction in cost of products sold.

               Ourportion of the earnings from Point Lisas Nitrogen was $5.6 million for fiscal2003, compared to $12.0 million for fiscal 2002.  During fiscal 2003, Point LisasNitrogen incurred higher natural gas costs because its gas contract ties theprice of natural gas to the market price of ammonia, which increased duringfiscal 2003.  A scheduled maintenance turnaround at Point Lisas Nitrogen duringSeptember 2002 added more costs during the fiscal year.  Sales prices duringfiscal 2003 were below prevailing market prices because of product offtakeagreements with us and our joint venturer, Koch Nitrogen Company and itspredecessor, Farmland Industries, Inc.  The agreements required Point LisasNitrogen to make sales to us at prices below the prevailing market price torecover amounts paid in previous years that were in excess of prevailing marketprices.

**Selling, General andAdministrative**

               Ourselling, general and administrative expenses increased to $26.5 million infiscal 2003, from $24.5 million in fiscal 2002. This increase was primarily theresult of increases in severance and early retirement expenses, propertyinsurance costs and professional financial consulting expenses.  Theseincreases were partially offset by the absence of goodwill amortization costsin fiscal 2003.  As a percentage of net sales, selling, general andadministrative expenses decreased to 11% in fiscal 2003 from 12% in fiscal 2002.

**Impairment of Long-LivedAssets**

               Duringfiscal 2003, we recognized impairment charges relating to one of our ammoniaplants located in Donaldsonville, Louisiana,totaling $62.9 million.  This impairment was the result of continued negativeoperating performance caused by unfavorable natural gas prices and marketconditions.  We incurred similar impairment charges totaling $101.3 million forfiscal 2002 relating to goodwill for our Donaldsonville, Louisiananitrogen production facility.

**Other Operating Expenses**

               Ourother operating expenses increased to $12.7 million in fiscal 2003, from $12.4million in fiscal 2002.  This increase resulted from an increase in idle plantcosts.  Portions of our ammonia, ammonium nitrate and nitric acid productioncapacities were idled for various periods during fiscal 2003 and 2002,primarily due to the unfavorable relationship between product prices andnatural gas prices.

**Interest, Net**

               Ournet interest expense increased to $19.5 million in fiscal 2003, from $18.2million in fiscal 2002.  This increase was primarily the result of higheraverage interest rates and increased costs associated with our Pre-PetitionHarris Facility, partially offset by lower average debt balances.  After thePetition Date, we ceased accruing interest on the unsecured debt balances ofthe Senior Notes and the Industrial Revenue Bonds (each as more particularlydescribed below under the heading "Liquidity and Capital Resources -Financing Activities").

**Settlement of Litigation**

               Duringfiscal 2003, we concluded litigation related to a breach of contract claiminvolving performance guarantees for work done at one of the anhydrous ammoniaplants in Donaldsonville, Louisiana. We received $3.6 million in net proceeds from this settlement.

               Duringfiscal 2002, we settled the defamation action we filed against TerraInternational, Inc. ("Terra International") in August 1995.  Wereceived $11.0 million from Terra International's liability insurance carrier. Also in fiscal 2002, we received $4.4 million in net proceeds from theconclusion of litigation related to defective equipment purchased at our YazooCity, Mississippi, nitrogen production facility.  The problems with thisequipment occurred during periods prior to fiscal 2002.

**Other Income**

               Otherincome decreased to $1.6 million in fiscal 2003, from $6.0 million in fiscal2002.  During fiscal 2002, we had gains of approximately $5.1 million relatedto the sale of non-core assets.

**Reorganization Expense**

               Costsdirectly related to our reorganization under Chapter 11 of the Bankruptcy Codeare reflected as reorganization expense in the consolidated statements of operations. Reorganization expense for the year ended June 30, 2003, was approximately $3.5 million and consisted of legaland professional fees.

**Income Tax Benefit**

               Ourincome tax benefit from continuing operations decreased to $15.1 million infiscal 2003, from $16.4 million in fiscal 2002.  These income tax benefits areprimarily the result of our net losses from continuing operations.  The incometax benefit in fiscal 2003 was partially offset by U.S.tax expense on cumulative foreign earnings in fiscal 2003 (as more particularlydescribed above under the heading "Critical Accounting Policies - DeferredTaxes").  For fiscal 2002 and prior, we did not provide for taxes on ourpermanently reinvested foreign earnings from our investment in Point LisasNitrogen.

               Ourestimated annual effective rate attributable to the loss from continuingoperations increased to 15.9% in fiscal 2003, from 12.4% in fiscal 2002.

               Ourincome tax benefit from discontinued operations for fiscal 2003 was $16.6million, as compared to $1.5 million for fiscal 2002.  These tax benefits wereprimarily the result of our net losses from discontinued operations.

**Discontinued Operations**

               ***Melamineand Urea Assets.***  In March 2004, we announced that permanent closure ofour melamine and urea operations at our Donaldsonville, Louisianafacility.  Acting on authority granted by our board of directors, we havecommitted to a plan of disposal and have initiated efforts to locate a buyerfor these assets.  As a result of this announcement and meeting therequirements for classification as discontinued operations in accordance withSFAS No. 144, our melamine and urea operations have been reflected asdiscontinued operations.  We have recorded an after-tax loss from discontinuedoperations of $14.1 million, which includes a pre-tax impairment charge of$12.2 million for fiscal 2003.  During fiscal 2002, we had a loss fromdiscontinued operations of $541,000.  Corporate allocations have been excludedfrom discontinued operations.

               ***PotashAssets.***  During our first quarter of fiscal 2004, our board ofdirectors authorized management to actively market for sale the Potash Assets. On March 2, 2004, these assets were soldfor approximately $28.4 million.  As a result, our potash operations have beenreflected as discontinued operations.  We have recorded an after-tax loss fromdiscontinued operations of $4.0 million for fiscal 2003 and $6.5 million forfiscal 2002.  Corporate allocations have been excluded from discontinuedoperations.

               ***PhosphateAssets.***  In June 2004, our board of directors authorized management'scommitment to a plan to dispose of Mississippi Phosphates Corporation, a whollyowned subsidiary, as part of its plan to emerge from bankruptcy.  Thissubsidiary will either be sold to a third party or transferred to the unsecuredcreditors of Mississippi Phosphates pursuant to the Amended Plan.  Based onthat decision and in accordance with SFAS No. 144, our phosphate operationshave been reflected as discontinued operations.  Corporate allocations havebeen excluded from discontinued operations.  We recorded an after-tax loss fromdiscontinued operations of $7.5 million for fiscal 2003 and income of $1.5million for fiscal 2002.

**LIQUIDITY AND CAPITAL RESOURCES**

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

               **Debtor-in-PossessionFinancing Overview**

               OnMay 16, 2003, the Court entered an Interim Order approving our request, on aninterim basis, for a debtor-in-possession financing facility with Harris Trustand Savings Bank and a syndicate of six other lenders (the "Original DIPLenders") to provide up to $37.5 million in financing (the "InterimCredit Facility").  On October 2, 2003, the Court entered a Final Order thatapproved certain amendments to the Interim Credit Facility to permit borrowingsof up to $32.5 million on a revolving credit basis (the "DIP CreditFacility") through June 30, 2004.  The DIP Credit Facility was reduced to$22.5 million as a result of the sale of our Potash Assets in March 2004. Pursuant to a Final Order entered on December 19, 2003, the Investors (asdefined below in this Item 7 under the heading "SupplementalDebtor-in-Possession Term Loan") provided the Supplemental DIP to us inthe amount of $96.7 million, and subsequently concluded a tender offer to theOriginal DIP Lenders on January 23, 2004 for the remainder of our pre-petitionsecured debt.  On July 15, 2004, the Court entered a Final Orderauthorizing the Replacement DIP entered into on July 1, 2004, which paid offall of our prior secured debt.

               ***ReplacementDebtor-in-Possession Credit Facility***

               OnJune 25, 2004, theCourt entered an Interim Order approving our request, on an interim basis, forthe Replacement DIP with Citigroup Global Markets, Inc., Perry PrincipalsInvestments, LLC, Varde Partners, Inc. and Citicorp North America, Inc. (the"Replacement DIP Lenders") to provide up to $182.5 million infinancing.  The Replacement DIP consists of a $160 million term loan (the"Term Loan") provided by Citigroup (34.375%), Perry (50%), and Varde(15.625%) and up to $22.5 million in revolving credit loans provided solely byCitigroup (the "Revolving Loans" and collectively with the Term Loan,the "Replacement Loans").  The Replacement loans were funded on July 1, 2004.  On July 15, 2004, the Court entered aFinal Order that approved the Replacement DIP.  The Replacement DIP terminatesupon the earlier to occur of (a) December 31, 2004, (b) the date that aplan of reorganization confirmed by the Court becomes effective, or (c) thedate on which the Replacement DIP Lenders terminate the Replacement DIP inconnection with an event of default thereunder.  We have the option to extendthe maturity through June 30, 2005,under certain conditions.  Mississippi Chemical Corporation is the borrowerunder the Replacement DIP and its subsidiaries who are Debtors are guarantors. MCHI is not a guarantor, but is obligated to provide a guaranty of theReplacement DIP in the event that the contractual restrictions prohibiting suchgrant are waived or released.

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

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

               *CollateralSecurity and Guarantees. *Pursuant to the Final Order for the ReplacementDIP, the Replacement DIP Lenders have been granted superpriority claim statusin the Case with a first lien on substantially all of the Debtors' assets(including all cash collateral and proceeds of inventory and accountsreceivable).  Our use of cash collateral and proceeds of inventory and accountsreceivable generated in the ordinary course of business is limited to thepayment of certain expenses and application to the Replacement DIP.  All of oursubsidiaries which are Debtors have guaranteed the Replacement DIP (the"Replacement DIP Guarantors"). 

*               Covenants. *The Replacement DIP (a) restricts our ability to incurdebt, (b) requires us to generate certain monthly minimum levels of earningsbefore interest, taxes, depreciation and amortization ("EBITDA"), asdefined in the agreement, (c) limits our expenditures to the types set forth ina budget, subject to permitted deviations, (d) limits the amount of capitalexpenditures, (e) provides for mandatory prepayments and commitment reductionsfrom all or part of the net proceeds of certain liquidity events (such as assetdispositions outside the ordinary course of business) as detailed below in thisparagraph, (f) permits the voluntary prepayment of the Replacement DIP withoutpenalty, and (g) contains representations, warranties, other affirmative andnegative covenants, and events of default that are customary fordebtor-in-possession revolving credit facilities.  As of the date of thisfiling, we were in compliance with all covenants under the Replacement DIP. The minimum cumulative EBITDA requirements are as follows:

Dollars in Millions

Through end of:

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Minimum   EBITDA

$ (3.5)

$  (3.5)

$ (3.0)

$ (2.5)

$  (2.0)

$  (2.0)

$     -  

$   1.0

$   2.0

$   4.0

$   5.5

$   6.5

Atthe time of a disposition of Mississippi Phosphates, the minimum EBITDAcovenant changes as shown below:

Dollarsin Millions

Through end of:

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Month of  Transaction Consummation

Sep-04

$  (3.7)

$  (4.3)

$  (3.4)

$  (3.8)

$  (3.0)

$  (2.3)

$  (1.9)

$   1.1

$   2.2

$   3.0

Oct-04

$  (3.6)

$  (2.6)

$  (3.1)

$  (2.3)

$  (1.5)

$  (1.2)

$   1.9

$   2.9

$   3.7

Nov-04

$  (1.5)

$  (2.0)

$  (1.2)

$  (0.4)

$  (0.1)

$   3.0

$   4.0

$   4.8

Dec-04

$  (2.5)

$  (1.7)

$  (0.9)

$  (0.5)

$   2.5

$   3.5

$   4.3

Jan-05

$  (1.2)

$  (0.4)

$  (0.1)

$   3.0

$   4.0

$   4.8

Feb-05

$   0.7 

$   1.1 

$   4.1

$   5.2

$   6.0

Mar-05

$   1.4 

$   4.4

$   5.4

$   6.2

Apr-05

$   5.0

$   6.1

$   6.9

May-05

$   5.0

$   5.8

Jun-05

$   6.3

Ourcumulative capital expenditures are limited as follows:

Dollarsin Millions

Through end of:

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Minimum Capital     Expenditures

$ 1.50

$  3.00

$  4.25

$  5.25

$  6.25

$  7.00

$  7.50

$  8.00

$  8.50

$  9.00

$  9.50

$ 10.25

Atthe time of a disposition of Mississippi Phosphates, the capital expenditurecovenant changes as shown below:

Dollarsin Millions

Through end of:

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Feb-05

Mar-05

Apr-05

May-05

Jun-05

Month of  Transaction Consummation

Sep-04

$  3.87

$  4.44

$  4.78

$  5.34

$  5.68

$  5.97

$  6.30

$  6.60

$  6.81

$  7.37

Oct-04

$  4.81

$  5.16

$  5.72

$  6.06

$  6.35

$  6.67

$  6.97

$  7.19

$  7.75

Nov-04

$  5.59

$  6.15

$  6.49

$  6.78

$  7.11

$  7.41

$  7.62

$  8.19

Dec-04

$  6.81

$  7.15

$  7.44

$  7.77

$  8.06

$  8.28

$  8.84

Jan-05

$  7.34

$  7.63

$  7.96

$  8.25

$  8.47

$  9.03

Feb-05

$  7.79

$  8.12

$  8.42

$  8.63

$  9.19

Mar-05

$  8.33

$  8.62

$  8.84

$  9.40

Apr-05

$  8.80

$  9.01

$  9.57

May-05

$  9.22

$  9.78

Jun-05

$10.06

               ***SupplementalDebtor-in-Possession Term Loan***

               OnDecember 19, 2003, the Court entered a Final Order approving the SupplementalDIP and our entering into the Supplemental Post-Petition Credit Agreement,dated as of December 15, 2003, with certain funds or affiliates managed oradvised by Delaware Street Capital, L.P. and DDJ Capital Management LLC(together with their participants and assigns, the "Investors"),pursuant to which the Investors made a $96.7 million term loan to us onDecember 30, 2003.  The proceeds of the Supplemental DIP were used to reducethe principal amount of the Pre-Petition Harris Facility (as defined below inthis Item 7) by $90.0 million and to pay certain transaction-related fees andexpenses of $6.7 million.  The Supplemental DIP was to mature on the earlier of(a) October 31, 2004, (b) the effective date ofa plan of reorganization in our Case, (c) the conversion of our Case to aChapter 7 case, or (d) the dismissal or appointment of a trustee in any of ourChapter 11 cases.  At June 30, 2004, we had borrowingsoutstanding under the Supplemental DIP in the amount of $100.7 million, whichincluded $4.0 million of accrued payment-in-kind interest.  Amounts due underthe Supplemental DIP were repaid on July 1, 2004, with funding provided by the Replacement DIP.

               Inaddition, the Investors agreed to tender for the approximately $68.4 millionremaining secured debt under the Pre-Petition Harris Facility and theobligations under the DIP Credit Facility, at par plus accrued interest(excluding default interest).  The tender was conditioned upon acceptance by atleast 51 percent in number of the lenders representing not less than 66-2/3percent of the outstanding principal amount under these facilities.  More than51 percent in number of the Pre-Petition Lenders and the Original DIP Lenderstendered, respectively, 93 percent and 85 percent of the Pre-Petition HarrisFacility and the DIP Credit Facility.  The tender closed on January 23, 2004.  As a result, the Investors held substantially all ofour secured debt at such time.

               OnJuly 1, 2004, we entered into the Replacement DIP to refinance all ofour pre- and post-petition secured debt.

               ***ThePre-Petition Harris Facility***

               Asof the Petition Date, we had a secured revolving credit facility with HarrisTrust and Savings Bank and a syndicate of twelve other lenders totaling $158.4million.  The Pre-Petition Harris Facility bore interest at rates related tothe Prime Rate.  In December 2003, we paid down $90.0 million on thePre-Petition Harris Facility with proceeds from the Supplemental DIP.  In March2004, we paid down $16.1 million on the Pre-Petition Harris Facility withproceeds from the sale of our Potash Assets.  As of June 30, 2004,our weighted average interest rate was 9.2% (which includes the default rate)and we had borrowings outstanding in the amount of $50.8 million.  Thebankruptcy filing was an event of default under the Pre-Petition HarrisFacility and, as a result, we were no longer permitted to borrow under thisfacility.  As adequate protection for the use of the Pre-Petition Lenders' cashcollateral, we were required to pay interest on the Pre-Petition HarrisFacility.  Interest was paid monthly in arrears at the non-default rate (PrimeRate + 5% on the first $105 million until this debt was reduced to $52.5million, at which point such rate was Prime Rate + 3%).  An additional 2% ofdefault rate interest accrued until payoff of the Pre-Petition HarrisFacility.  Since the Pre-Petition Harris Facility was a secured facility, itwas not classified as a liability subject to compromise on our consolidatedbalance sheets.  On July 1, 2004, this facility was paid inits entirety.

***               TheIndustrial Revenue Bonds***

               InAugust 1997, we issued $14.5 million in industrial revenue bonds, a portion ofwhich were tax-exempt, to finance the development of our new phosphogypsumdisposal facility at our Pascagoula, Mississippi, DAP manufacturing plant.  On April 1, 1998, we issued $14.5 million intax-exempt industrial revenue bonds (the "1998 IRBs"), the proceedsof which were used to redeem the initial industrial revenue bonds issued inAugust 1997.  The 1998 IRBs, issued on April 1, 1998, mature on March 1, 2022, and carry a 5.8% fixed rate ofinterest.  The 1998 IRBs 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 timeafter February 28, 2010, through thematurity date.  The 1998 IRBs are the obligation of Mississippi Phosphates, butare guaranteed by Mississippi Chemical Corporation.  The bankruptcy filing wasan event of default under the 1998 IRBs.  At June 30, 2004 and 2003, the 1998 IRBs arereflected as a component of liabilities subject to compromise on ourconsolidated balance sheets.

               ***TheSenior Notes***

               OnNovember 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 theSecurities and Exchange Commission.  The holders may elect to have the SeniorNotes repaid on November 15, 2007.  The Senior Notes do notcontain any financial covenants, but do contain certain cross-defaultprovisions with our other debt instruments.  As a result of our bankruptcyfiling, we did not make the semi-annual interest payment due on May 15, 2003, and were in default under the Senior Notes.  At June 30, 2004 and 2003, the Senior Notes, net of unamortized discountsof $239,000, are reflected as a component of liabilities subject to compromiseon our consolidated balance sheets.

*               **Investmentin Point Lisas Nitrogen Limited***

*               *Our50-50 joint venture, Point Lisas Nitrogen Limited, owns and operates a 2,040short-ton-per-day anhydrous ammonia plant near Point Lisas, The Republic ofTrinidad and Tobago.  Point Lisas Nitrogen's loan with Export Import Bank ofthe United States ("Ex-Im Bank")is a non-recourse loan and is not guaranteed by the joint venture partners.  Inthe event of default, Ex-Im Bank could demand immediate payment of all or anyportion of the principal amount of its loan with Point Lisas Nitrogen.

               Asa result of our filing bankruptcy, at June 30, 2003, we had a payment default of approximately $2.6 millionunder our ammonia offtake agreement with Point Lisas Nitrogen.  The bankruptcyfiling also resulted in a default on Point Lisas Nitrogen's loan with Ex-ImBank.  Because of this default, the total loan obligation to Ex-Im Bankcontinues to be classified as a current liability on Point Lisas Nitrogen'sbalance sheet.  The payment default amount under the ammonia offtake agreementcaused us to pay market prices for ammonia from the Petition Date throughSeptember 30, 2003, and prevented us from recovering accumulated amounts paidin previous years that were in excess of prevailing market prices.  As a resultof payment of the cure amount under the offtake agreement, and uponsatisfaction of other conditions, Koch and Ex-Im Bank agreed to permit us torecover amounts paid in previous years, approximately $6.4 million, that werein excess of prevailing market prices on purchases after October 1, 2003, whichamounts have been recovered.  As of the date of this filing, Ex-Im Bank has notdemanded that Point Lisas Nitrogen make payment of the outstanding debt.  PointLisas Nitrogen is continuing to repay the loan obligation, and made a $64.1million prepayment on August 31, 2004.  As a result of thispayment and cash currently on hand, Point Lisas Nitrogen expects the Ex-Imobligation to be paid off by August 31, 2005.

               OnOctober 8, 2003, we signed the Koch Stalking Horse Agreement with Kochto sell our interests in Point Lisas Nitrogen.  Subsequently, and inconjunction with the Supplemental DIP Order, we withdrew our motion to sellpursuant to the Koch Stalking Horse Agreement, resulting in the payment of theKoch Break-Up Fee.

***               Sale ofPotash Assets***

*               *On March 2, 2004, our potash subsidiaries, Mississippi Potash, Inc. andEddy Potash, Inc., sold substantially all of their assets to wholly ownedsubsidiaries of Intrepid Mining LLC, a privately held Denver-based natural gasresource company.  As of June 30, 2004, we had receivedapproximately $27.9 million related to the sale and had a receivable ofapproximately $500,000 recorded on our books for the remainder of the purchaseprice attributable to a purchase price holdback held in escrow for contingentindemnification obligations.  
**
*               **Liquidity***** **

               Basedon natural gas and product market prices for nitrogen and DAP, as of the dateof this filing, and our current gas hedge positions, we believe that ourexisting cash, cash generated from operations, and cash available under theReplacement DIP should be sufficient to satisfy our financing requirements foroperations and capital projects through the emergence from bankruptcy.  Naturalgas prices remain volatile, and if they increase without correspondingincreases in the market prices for our products, our natural gas costs willhave a material adverse impact on our liquidity and results of operations.  Weestimate our capital expenditure requirements for fiscal 2005 to beapproximately $9.5 million, which includes normal improvements andmodifications to our facilities necessary for safe and efficient operations.  Our ability to continue as a going concern is dependent upon, but not limited to,the confirmation of a plan of reorganization, continued access to adequatesources of capital, compliance with the covenants under the Replacement DIP,the ability to sustain positive cash flows sufficient to fund operations andrepay debt, and retention of key suppliers, customers and employees.  Noassurance can be given that we will be successful in reorganizing ourbusinesses and successfully emerging from the bankruptcy proceedings.

**Contractual Obligations**

               Knowncontractual obligations of the Company existing as of June 30, 2004,and their respective estimated due dates are as follows (in thousands):

Total

2005

2006-2008

2009-2011

After  2011

Supplemental DIP

$100,723

$100,723

$      -     

$      -      

$      -      

Pre-petition  Harris Facility

$  50,810

$  50,810

$      -     

$      -      

$      -      

Operating leases

$    3,443

$    2,034

$    1,409

$      -      

$      -      

Ammonia purchase     obligation (1)

  $422,699

  $  66,742

  $200,226

  $155,731

  $      -      

(1)  The Company has a contractual obligation to purchaseone-half of the ammonia, approximately 358,000 short-tons per year, produced byPoint Lisas Nitrogen, our 50-50 joint venture ammonia plant located in Trinidad(see Note 4).  The purchase price is based on the average market price ofammonia, F.O.B. Caribbean, less a discount.  Obligations in the above table arebased on purchasing 358,000 short tons per year at the June 2004 average pricepaid.  This contract expires in October, 2010.

               AtJune 30, 2004, our pension liability was $24.3 million.  Thisliability could increase or decrease depending on actual returns on pensionplan assets and changes in the discount rate related to the benefitobligation.  The plan is funded annually by the Company, subject to theInternal Revenue Code funding limitation.  The Company does not anticipatemaking any contributions to the plan in fiscal 2005.

**OUTLOOK**

               Aswe move into the fall, the supply/demand balance remains tight causing nitrogenprices to be at high levels compared to historical averages.  Low globalinventory levels for nitrogen products, downtime at plants in variouscountries, and continued volatility in U.S. natural gas prices are some of the factorsaffecting the global supply/demand balance that will determine price levelsover the coming months.  The ratio of ending grain stock to use, both insideand outside the U.S., remains at low levels,which is a positive indicator for the farm economy and spring planting levels. Weather conditions, oil prices, and the U.S. economic recovery are among the most importantfundamental factors in determining demand for natural gas.  This will, in turn,determine the natural gas price level and volatility that we will face duringfiscal 2005.  To maximize results in the current environment, we continue todetermine operating levels for our plants based on our commitments to customersand the relationship between nitrogen product prices and natural gas prices.

**FORWARD‐LOOKING STATEMENTS**

               Exceptfor the historical statements and discussion contained herein, statements setforth in this Annual Report on Form 10‐K constitute "forward‐lookingstatements" within the meaning of Section 21E of the Securities ExchangeAct of 1934, as amended.  In some cases, forward‐looking statements canbe identified by the use of terms such as "may," "will,""expects," "believes," "plans,""anticipates," "estimates," "potential," or"continue," the negatives of such words, or other comparablelanguage.  Since these forward‐looking statements rely on a number ofassumptions concerning future events, risks and uncertainties that are beyondour ability to control or predict, readers are cautioned that actual resultsmay differ materially from such forward‐looking statements. Futureevents, risks and uncertainties that could cause a material difference in suchresults include, but are not limited to, (i) our ability to operatepursuant to the terms of the Replacement DIP, (ii) operating constraints, costsand uncertainties associated with the Case, (iii) our ability to prosecute,confirm and consummate the amended plan of reorganization and the satisfactionof closing conditions to the related proposed transactions with Terra or ouralternate standalone transaction, (iv) our ability to receive trade credit, (v)our ability to maintain contracts that are critical to its operation,(vi) changes in matters which affect the global supply and demand offertilizer products and industrial chemicals, (vii) high natural gasprices and the volatility of the natural gas market, (viii) a variety ofconditions in the agricultural industry such as grain prices, planted acreage,projected grain stock, U.S. government policies, weather, and changes in agriculturalproduction methods, (ix) possible unscheduled plant outages and other operatingdifficulties, (x) price competition and capacity expansions and reductions fromboth domestic and international competitors, (xi) foreign governmentagricultural policies, in particular, the policies of the governments of Indiaand China regarding fertilizer imports, (xii) the relative unpredictability ofinternational and local economic conditions, (xiii) the relative value of theU.S. dollar, (xiv) regulations regarding the environment and the sale andtransportation of fertilizer products, (xv) oil costs and the impact of war inthe Middle East, (xvi) the occurrence of any national calamity or crisis,including an act of terrorism, (xvii) the continuing efficacy of unfair traderemedies and the outcome of pending unfair trade (antidumping) cases, and(xviii) the ability of the Company to retain key employees, and (xix) otherimportant factors affecting us and the fertilizer industry generally asdetailed in Item 1 under the heading "Certain Business Factors" andelsewhere in this Annual Report on Form 10‐K.

**ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

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

               ***NaturalGas.***  To manage our natural gas price risks, we enter into derivativetransactions as the opportunity arises.  These derivative transactions mayconsist of futures contracts, options, swaps, or similar derivative instrumentsthat mature at various dates.  We do not hold or issue derivative financialinstruments for trading purposes.  We maintain formal policies with respect toentering into and monitoring derivative transactions.  Our derivativetransactions are intended to hedge our future natural gas costs.  The volume ofnatural gas hedged varies from time to time based on management's judgment ofmarket conditions, particularly natural gas prices and nitrogen productprices.  Because of delays relating to the Case, we were unable to hedgenatural gas from May 16, 2003 through September 28, 2003.  Under a Final Order on October 20, 2003,we obtained authority to hedge 150 natural gas contracts per month on a rollingtwo-month basis.  Under a Final Order entered on January 22, 2004, we were permitted to hedge 450 natural gas contractsper month on a rolling two-month basis.  Under a Final Order dated August 19,2004, approving hedging activities, the Company is permitted to hedge up to 325natural gas contracts per month for the first and second months of a four-monthrevolving period and up to an additional 150 natural gas contracts per monthfor the third and fourth months of said period.

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

               ***InterestRates****.*  The table below provides information, as of June 30,about our financial instruments which are sensitive to changes in interestrates.

(Dollars in thousands)

Maturity  Date

Fair  Value

2005

Thereafter

Total

2004

2003

Variable Rate Debt

     Pre-Petition Harris  Facility

        Principal  Amount (1)

$   50,810

-     

$   50,810

$   50,810

$158,423

        Average  interest rate (2)

9.20%

-     

9.20%

     Supplemental DIP

        Principal  Amount (1)

$100,723

-     

$100,723

$100,723

$      -     

        Average  interest rate (2)

16.10%

-     

16.10%

Assuming a plus or minus 1% interest rate charge, ourconsolidated statement of operations would increase or decrease approximately$1.5 million.

(1)   The Pre-Petition Harris Facility and the Supplemental DIPwere paid in their entirety on July 1, 2004.  Bothhad variable interest rates and, therefore, the balances are representative offair value.

(2)   Theaverage interest rate was based on June 30, 2004, variable rates.  Actual rates could differ.
****
**ITEM8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

******REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and   Shareholders of   Mississippi Chemical Corporation:

We have audited the accompanying consolidatedbalance sheets of Mississippi Chemical Corporation and subsidiaries as of June 30, 2004 and 2003, and therelated consolidated statements of operations, shareholders' (deficit) equity,and cash flows for each of the years in the three-year period ended June 30, 2004.  These consolidatedfinancial statements are the responsibility of the Company's management.  Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.  We did not audit the financial statements ofPoint Lisas Nitrogen Limited, an investment which is reflected in theaccompanying consolidated financial statements using the equity method ofaccounting.  The investment in Point Lisas Nitrogen Limited represents 32.4percent and 17.8 percent of total assets as of June 30, 2004 and 2003,respectively.  Those statements were audited by other auditors whose report hasbeen furnished to us, and our opinion, insofar as it relates to the amountsincluded for Point Lisas Nitrogen Limited, is based solely on the report of theother auditors.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believethat our audits and the report of other auditors provide a reasonable basis forour opinion.

In our opinion, based on our audits and thereport of other auditors, the consolidated financial statements referred toabove present fairly, in all material respects, the financial position ofMississippi Chemical Corporation and subsidiaries as of June 30, 2004 and 2003,and the results of their operations and their cash flows for each of the yearsin the three-year period ended June 30, 2004, in conformity with U.S. generallyaccepted accounting principles.

The accompanying consolidated financial statements,as of June 30, 2004and 2003, have been prepared assuming that Mississippi Chemical Corporation andsubsidiaries will continue as a going concern.  As discussed in Note 1 to theconsolidated financial statements, the Company has suffered recurring lossesand because of insufficient liquidity, Mississippi Chemical Corporation andnine of its subsidiaries ("Debtors"), filed voluntary petitions toreorganize under Chapter 11 of the United States Bankruptcy Code("Code") on May 15, 2003. The Debtors are currently operating as debtors in possession under the Code. On April 16, 2004,the Debtors filed a plan of reorganization with the U.S. Bankruptcy Court, andon September 2, 2004,the Debtors filed an amended plan of reorganization for the purpose ofincorporating a proposed transaction for the sale of the Company's nitrogenoperations and other matters related to that proposed transaction (see Note 1 -Bankruptcy Proceedings).  However, there can be no assurance that this plan ofreorganization will be approved or confirmed by the bankruptcy court or otherinterested parties.  On July 1, 2004,the Debtors obtained replacement debtor-in-possession financing (see Note 7 -Credit Agreements); however, there can be no assurance that such financingfacility will be sufficient to meet the Company's cash flow requirements. These matters raise substantial doubt about the Company's ability to continueas a going concern.  The accompanying consolidated financial statements do notinclude any adjustments that might result from these uncertainties.

                                                                                                    /s/KPMG LLP

Jackson, MississippiSeptember 3, 2004

INDEPENDENT AUDITORS' REPORT

TOTHE MEMBERS OF POINT LISAS NITROGEN LIMITED

Wehave audited the balance sheets of Point Lisas Nitrogen Limited as of June 30, 2004 and 2003 and therelated statements of income, changes in shareholders' equity and cash flowsfor each of the three years ended June 30, 2004 (not presentedseparately herein).  These financial statements are the responsibility of theCompany's management.  Our responsibility is to express an opinion on thesefinancial statements based on our audits.

Weconducted our audits in accordance with the standardsof the Public Company Accounting Oversight Board (United  States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements.  An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation.  We believe that our audits provide a reasonable basisfor our opinion.

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

/s/ERNST & YOUNG

Port  of Spain,TRINIDAD:July 16, 2004

**MississippiChemical Corporation and Subsidiaries(Debtors-In-Possession)Consolidated Balance Sheets**

June  30

** **

2004

2003

(Dollars  in thousands, except  per share data)

**ASSETS**

**Current  assets:**

   Cash  and cash equivalents

$   22,407 

$     6,102 

   Accounts  receivable (less allowances of $1,258 in 2004 and        $1,839 in 2003)

  27,925 

   56,375 

   Inventories

31,497 

66,286 

   Prepaid  expenses and other current assets

10,389 

5,039 

   Deferred  income taxes

2,492 

3,112 

   Assets  of discontinued operations

    34,344 

        -      

               Total  current assets

129,054 

136,914 

**Investments  in affiliates**

133,119 

111,509 

**Other  assets**

6,437 

10,305 

** **

**Property,  plant and equipment, at cost, less**   **accumulated depreciation,  depletion and amortization**

      119,026 

    289,362 

$ 387,636 

$548,090 

**LIABILITIES  AND SHAREHOLDERS' (DEFICIT) EQUITY**

**Current  liabilities:**

   Long-term  debt due within one year

$ 151,533 

$158,423  

   Accounts  payable

16,402 

15,736  

   Accrued  liabilities

10,281 

4,633  

   Liabilities  of discontinued operations 

     14,347 

         -        

               Total  current liabilities

192,563 

178,792  

**Other  long-term liabilities and deferred credits**

26,368 

36,872  

**Deferred  income taxes**

15,789 

26,518  

**Liabilities  subject to compromise**

231,899 

249,132  

** **

**Commitments  and contingencies**

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

**Shareholders'  (deficit) equity:**

   Common  stock ($.01 par; authorized 100,000,000 shares;          issued 27,980,973)

  280 

  280  

   Additional  paid-in capital

306,063 

306,063  

   Accumulated  deficit

(346,041)

(209,047)

   Accumulated  other comprehensive loss, net

(10,811)

(12,046)

   Treasury  stock, at cost (3,730,864 shares and 1,769,340 shares)

  (28,474)

   (28,474)

               Total  shareholders' (deficit) equity

   (78,983)

     56,776 

 

$387,636 

$548,090 

The accompanying notes to consolidated financial statementsarean integral part of these financial statements.
****
**MississippiChemical Corporation and Subsidiaries(Debtors-In-Possession)Consolidated Statements of Operations**

Years  Ended June 30

2004

2003

2002

** **

(Dollars  in thousands, except per share data)

**Revenues:**

   Net  sales

$ 300,450 

$ 237,919 

$ 207,855 

   Other

       4,570 

       2,022 

          -      

305,020 

239,941 

207,855 

**Operating  expenses:**

   Cost  of products sold

249,175 

215,470 

204,958 

   Selling,  general and administrative

21,108 

26,483 

24,467 

   Impairment  of long-lived assets

-      

62,912 

-      

   Loss  on goodwill impairment

-      

-      

101,263 

   Other

       6,707 

      12,691 

      12,409 

   276,990 

   317,556 

   343,097 

** **

** **

** **

** **

** **

** **

** **

**Operating  income (loss)**

28,030 

(77,615)

(135,242)

**Other  (expense) income:**

   Interest,  net

(20,131)

(19,479)

(18,168)

   Settlement  of litigation

-      

3,581 

15,363 

   Other

       3,442 

       1,581 

        6,014 

**Income  (loss) from continuing operations before**   **reorganization expense and income  taxes**

  11,341 

  (91,932)

  (132,033)

**Reorganization  expense**

      45,195 

      3,456 

         -       
                     
**Loss  from continuing operations before income taxes**

(33,854)

(95,388)

(132,033)
                     
**Income  tax expense (benefit)**

    34,477  

    (15,140)

     (16,412)
                     
**Loss  from continuing operations**

(68,331)

(80,248)

(115,621)
                     
**Discontinued  operations**:

 

 

   Loss  from operations, net of income tax benefits of       $37,188, $16,617 and $1,507, respectively

  (57,258)

  (25,605)

  (5,575)

   Loss  on disposal, net of income tax benefits of  $8,250

    (11,405)

          -      

        -       
                     
**Loss  from discontinued operations**

    (68,663)

    (25,605)

     (5,575)
                     
**Net  loss**

$(136,994)

$(105,853)

$(121,196)
                     
Loss per share  from continuing operations -     basic and diluted 

  $      (2.77)

  $      (3.06)

  $      (4.42)

Loss per share  from discontinued operations -     basic and diluted 

          (2.79)

          (0.98)

          (0.22)
                     
**Net  loss per share**

$      (5.56)

$       (4.04) 

$       (4.64)

The accompanying notes to consolidated financial statementsarean integral part of these financial statements.
****
**MississippiChemical Corporation and Subsidiaries(Debtors-In-Possession)Consolidated Statements of Shareholders' (Deficit) EquityYears Ended  June 30, 2004, 2003 and 2002**

Retained

Accumulated

Additional

Earnings

Other

Common

Paid-In

(Accumulated

Comprehensive

Treasury

Stock

Capital

Deficit)

Income  (Loss)

Stock  (1)

Total

(Dollars  in thousands, except per share data)

Balances, June 30,   2001

$    280

$305,901

$  18,963 

$    (5,808)

$(29,579)

$ 289,757 

    Comprehensive loss:

     Net  loss

-    

-     

(121,196)

-       

-     

(121,196)

     Net  change in          unrealized loss

        on  hedges, net of tax

        expense  of $6,474

     -    

       -     

      -      

       10,791 

        -     

      10,791 

          Comprehensive  loss

-    

-     

(121,196)

10,791 

-     

(110,405)

     Treasury  stock, net

     -    

       -     

      (344)

         -      

      468 

        124 

Balances, June 30,   2002

280

305,901

(102,577)

4,983 

(29,111)

179,476 

   Comprehensive  loss:

      Net  loss

-    

-     

(105,853)

-       

-     

(105,853)

      Net  change in         unrealized

         gain  on hedges, net         of tax

        benefit  of $2,910

     -    

       -     

       -     

               (4,853) 

       -     

(4,853)

      Deferred  pension        liability,

 

 

 

 

 

 

        net  of tax benefit       of  $6,557

      -    

       -     

           -     

    (12,176)

       -    

     (12,176)

          Comprehensive  loss

-    

-     

(105,853)

(17,029)

-     

(122,882)
                                       
     Stock-based        compensation

-    

162

-     

-     

-     

162 
                                       
     Treasury  stock, net

      -    

       -    

         (617)

         -     

       637 

             20 

 

Balances, June 30,   2003

280

306,063

(209,047)

(12,046)

(28,474)

56,776 

   Comprehensive  loss:

 

     Net  loss

-    

-    

(136,994)

-     

-     

(136,994)

     Net  change in       unrealized 

 

       loss  on hedges, net of       tax

 

       benefit  of $506

-    

-    

-     

(923)

-     

(923)

     Deferred pension       liability,

 

       net  of tax expense of       $1,163

       -    

         -    

             -     

      2,158 

          -     

         2,158 
                                       
         Comprehensive  loss

       -   

       -    

   (136,994)

      1,235 

          -    

   (135,759)
                                       
Balances, June 30,   2004

$     280

$ 306,063

$ (346,041)

$ (10,811)

$(28,474)

$   (78,983)

(1)   During fiscal 2004, approximately 1,962,000 shares of theCompany's common stock were returned at no cost to the Company by formershareholders.  Such shares are included in the number of treasury shares heldat June 30, 2004.

The accompanying notes to consolidated financial statements are anintegralpart of these financial statements.

**MississippiChemical Corporation and Subsidiaries(Debtors-In-Possession)Consolidated Statements of Cash Flows**

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

**Cash  flows from operating activities:**

   Net  loss

$(136,994)

$(105,853)

$(121,196)

   Reconciliation  of net loss to net cash provided by (used in)        operating activities:

          Net  change in operating assets and liabilities -               continuing  operations

  4,331

  (44,688)

  6,025 

          Net  change in operating assets and liabilities -               discontinued  operations

  15,655 

  35,004 

  10,931 

          Refund  of federal taxes pursuant to the Job Creation               and  Workforce Assistance Act of 2002

  -     

  14,878 

  26,446 

          Depreciation,  depletion and amortization

27,267 

39,232 

44,743 

          Loss  on asset impairments and sale of discontinued               operations

  122,583 

  75,118 

  -     

          Loss  on goodwill impairment

-     

-     

101,263 

          Change  in deferred gain on hedging activities, net of tax

(744)

(2,747)

4,780 

          Deferred  income taxes

(11,174)

(34,186)

(1,040)

          Equity  in earnings in unconsolidated affiliates

(23,870)

(7,141)

(12,769)

          Other

     5,152 

     (4,515)

     (5,483)
                  
**Net  cash provided by (used in) operating activities**

    2,206

   (34,898)

     53,700 
                  
**Cash  flows from investing activities:**
               
   Purchases  of property, plant and equipment -         continuing operations

  (1,172)

  (6,996)

  (4,959)

   Purchases  of property, plant and equipment -        discontinued operations

  (5,389)

  (7,870)

  (7,442)

   Proceeds  from sale of potash operations

27,883 

-     

-     

   Proceeds  from sale of other assets

1,444 

3,383 

8,043 

   Other

       1,900 

       2,243 

       2,800 
                  
**Net  cash provided by (used in) investing activities**

     24,666 

     (9,240)

     (1,558)
                  
**Cash  flows from financing activities:**

   Debt  proceeds

233,610 

285,685 

224,395 

   Debt  payments

 (240,500)

 (237,434)

 (286,345)

   Financing  fees

      (3,677)

          -      

          -      
                  
**Net  cash (used in) provided by financing activities**

      (10,567)

     48,251 

   (61,950)
                  
**Net  increase (decrease) in cash and cash equivalents**

16,305 

4,113 

(9,808)
                  
**Cash  and cash equivalents - beginning of year**

       6,102 

       1,989 

     11,797 
                  
**Cash  and cash equivalents - end of year**

$   22,407 

$    6,102 

$     1,989 

The accompanying notes to consolidated financial statementsarean integral part of these financial statements.
****
**MississippiChemical Corporation and Subsidiaries(Debtors-In-Possession)Notes to Consolidated Financial StatementsJune 30, 2004, 2003 and 2002**

**NOTE1 - BANKRUPTCY PROCEEDINGS**

**               **OnMay 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation andnine of its direct and indirect subsidiaries, Mississippi Nitrogen, Inc.;MissChem Nitrogen, L.L.C.; Mississippi Chemical Company, L.P.; MississippiChemical Management Company; Mississippi Phosphates Corporation; MississippiPotash, Inc.; Eddy Potash, Inc.; Triad Nitrogen, L.L.C.; and MelamineChemicals, Inc. (collectively, the "Company" or the"Debtors"), filed voluntary petitions to reorganize under Chapter 11of the United States Bankruptcy Code (the "Bankruptcy Code") in theUnited States Bankruptcy Court for the Southern District of Mississippi,Jackson, Mississippi (the "Court").  The cases are being administeredjointly in Joint Case Number 03-02984 WEE, (collectively the"Case").  The Debtors sought relief under Chapter 11 of theBankruptcy Code because of a lack of liquidity.  The combination of adepression in the agricultural sector, several waves of low priced imports, andthe extreme increase in price level and price volatility of domestic naturalgas, the Company's primary raw material, had resulted in substantial financiallosses for the Company for the last five years.

               Asdebtors-in-possession, the Debtors, subject to any required Court approval, mayelect to assume or reject real estate leases, employment contracts, personalproperty leases, service contracts, and other unexpired executory pre-petitioncontracts.  The Company does not believe that rejection damages will bematerial; however, the Company cannot currently determine with certainty theaggregate liability that will result from the filing and settlement of claimsrelated to any rejected contracts.

               Asdebtors-in-possession, the Debtors are authorized to operate their business butmay not engage in transactions outside the ordinary course of business withoutthe approval of the Court.  On May 16, 2003,the Court rendered an Interim Order approving the Debtors' request for interimfinancing, and on October 2, 2003, the Court entered a FinalOrder approving debtor-in-possession revolving credit financing of $32,500,000,which was automatically reduced to $22,500,000 on March 2, 2004,immediately following the sale of the Company's Potash Assets (see Note 21). On December 19, 2003, the Court entered a FinalOrder approving supplemental debtor-in-possession term loan financing of$96,700,000 (the "Supplemental DIP").  On July 15, 2004,the Court entered a Final Order approving a new $182,500,000 credit facility(the "Replacement DIP") to refinance the Company's pre-petition andpost-petition secured debt.

               OnJune 6, 2003, the Court appointed the Official Committee of UnsecuredCreditors (the "Creditors' Committee") to represent the interests ofthe unsecured creditors.  The Creditors' Committee monitors the Company'sfinancial condition and restructuring activities.  The Company is required toreimburse certain fees and expenses of the Creditors' Committee, including feesfor attorneys and other professionals to the extent allowed by the Court. These costs are reflected in reorganization expense in the 2004 and 2003consolidated statements of operations.

               OnOctober 8, 2003, the Company signed an agreement with Koch Nitrogen Company("Koch") to sell the Company's interests in Point Lisas NitrogenLimited ("Point Lisas Nitrogen") for an estimated cash amount of$92,000,000, plus certain assumed liabilities (the "Koch Stalking HorseAgreement").  Subsequently, and in conjunction with the Supplemental DIPOrder, the Company withdrew its motion to sell pursuant to the Koch StalkingHorse Agreement, resulting in the payment of a break-up fee to Koch ofapproximately $3,800,000 (the "Koch Break-Up Fee").  This fee isreflected in reorganization expense in the 2004 consolidated statement ofoperations.

               OnNovember 26, 2003, the Company's subsidiaries, Mississippi Potash, Inc.and Eddy Potash, Inc., entered into a stalking horse agreement to sellsubstantially all of their assets to subsidiaries of Intrepid Mining LLC (the"Intrepid Stalking Horse Agreement").  On March 2, 2004,these assets were sold.  As of June 30, 2004,the Company had received approximately $27,900,000 related to the sale and hada receivable of approximately $500,000 recorded on its books for the remainderof the purchase price attributable to a purchase price holdback held in escrowfor contingent indemnification obligations.

               OnApril 16, 2004, the Debtors filed with the Court a joint plan ofreorganization and disclosure statement (the "Original Plan").  Theprincipal objective of the Original Plan was to restructure the Debtors'obligations to creditors in a manner that would permit the Company to continueas a viable business organization.  There were objections to the OriginalPlan.  Based on these objections, other alternatives were analyzed.

**NOTE1 - BANKRUPTCY PROCEEDINGS (Continued)**

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

               OnAugust 9, 2004, the Company and Terra Industries Inc.("Terra") announced a definitive agreement under which Terra willacquire the Company for an estimated total value of approximately $268,000,000as of the announcement date.  The transaction consideration included cash andassumed debt of $161,000,000 and stock of $107,000,000, and the final valuewill depend on Terra's share price at closing and closing adjustments.  Bothcompanies' boards of directors have unanimously approved the transaction.  TheCreditors' Committee, the Company's largest unsecured creditors and theReplacement DIP Lenders also support the transaction.  

               OnSeptember 2, 2004, the Company filed an amended joint plan ofreorganization with the Court that replaced the Original Plan (the"Amended Plan").  The primary purpose of the Amended Plan is tofacilitate the acquisition of the Company by Terra.  If the Terra transactionis not consummated, the Amended Plan provides that the Company will emerge frombankruptcy on a stand-alone basis.  In either instance, the Amended Planobligates the Company to dispose of Mississippi Phosphates either through asale of stock or assets, or if such sale is not consummated, by a distributionof the stock or assets of such business to the unsecured creditors ofMississippi Phosphates.

               Underthe Amended Plan, Terra will acquire the Company.  Perry Principals InvestmentsLLC, an affiliate of Perry Capital Management Inc., and Citigroup Global Markets,Inc., an affiliate of Citigroup, have entered into a commitment to extend theterm of the term loan portion of the Replacement DIP beyond MississippiChemical's emergence from bankruptcy until four years from the closing of theTerra transaction.  Terra and the Company will use existing cash on hand toreduce the principal amount of this term loan to $125 million from $160 millionand satisfy all other cash payments to creditors required by the Amended Plan. In addition, Terra would issue to certain of the Company's unsecured creditors14.75 million shares of Terra common stock and an amount of preferred stock,subject to certain post-closing adjustments as specified in the definitiveagreement.  Assuming the Closing Share Price (as defined in the definitiveagreement) is equal to $6.14 (Terra's closing share price on Friday, August 6, 2004, the last trading day prior to the announcement of theagreement), the Company's unsecured creditors would receive Terra common stockwith a value of $90.6 million plus the preferred stock.  The preferred stock tobe issued to unsecured creditors will initially be set with a liquidationpreference of $32.2 million.  The projected working capital and other closingadjustments are currently anticipated to total a negative $17.4 million.  Underthis projected scenario, Terra will issue preferred stock with a liquidationpreference of $14.8 million and, within ten months of closing, Terra will havethe option, but not the obligation, to redeem the preferred stock for 2.4 millionto 3.4 million shares of Terra common stock to be determined based upon Terra'sstock price at closing.  Based upon a Closing Share Price of $6.14 per share,Terra would have the right to redeem the preferred stock for 2.4 million Terracommon shares.  The final amount of the working capital and other post-closingadjustments will depend on various factors including, but not limited to:business performance, commodity prices and the terms of final separation ofMississippi Phosphates.  The agreement also provides that Terra will issue250,000 additional shares of Terra common stock for distribution to theCompany's shareholders.

               Underthe Amended Plan, the Company expects that substantially all unsecuredcreditors with allowed claims of $5,000 or less from the nitrogen business willbe paid in cash, in full.  Substantially all other unsecured creditors withallowed claims from the nitrogen business will be paid either cash equal to aspecified percentage of their allowed claim or a pro-rata share of the pool ofTerra common and preferred stock.  The Terra transaction and Amended Plan aresubject to Court approval, successful completion of the restructuring of theCompany's nitrogen and phosphate businesses, as well as customary regulatoryapprovals.  The Terra transaction is also subject to Terra's ability to obtainthe consent of Terra's current working capital lenders.
**NOTE1 - BANKRUPTCY PROCEEDINGS (Continued)**
               Althoughthe Terra transaction is the primary basis of the Amended Plan, the AmendedPlan will also provide that if the Terra transaction is not consummated, thenthe Company would emerge from bankruptcy on a stand-alone basis.  The Company'semergence financing will be provided by an existing commitment from Citigroupand Perry Capital.  The existence of this alternate plan facilitates theCompany's exit from bankruptcy as expeditiously as possible.  Under thestand-alone alternative, the Replacement DIP would be fully retired, the samecash distributions would be made to holders of allowed unsecured claims as inthe Terra transaction, the Company's other unsecured creditors would receivesubstantially all of the common shares of the reorganized company, and theCompany's current shareholders would receive warrants to acquire common sharesin the reorganized company.

               Theability of the Company to continue as a going concern is dependent upon, butnot limited to, the confirmation of a plan of reorganization, continued accessto adequate sources of capital, continued compliance with  debt covenants underthe Replacement DIP, the ability to sustain cash flows sufficient to fundoperations and repay debt, and retention of key suppliers, customers andemployees.  No assurance can be given that the Company will be successful inreorganizing its affairs through the Case.  Because of the ongoing nature ofthe reorganization process, the outcome of which is not determinable until aplan of reorganization is confirmed and implemented, the accompanyingconsolidated financial statements do not include any adjustments that mightresult from the resolution of these uncertainties.

**NOTE2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Basisof Financial Statements***

               Asa result of the May 15, 2003 filing of petitions under Chapter 11 of theBankruptcy Code, the Company's consolidated financial statements have beenprepared in accordance with AICPA Statement of Position ("SOP") 90-7,"Financial Reporting by Entities in Reorganization under the BankruptcyCode" and U. S. generally accepted accounting principles applicable to agoing concern which, unless otherwise noted, assumes the realization of assetsand the payment of liabilities in the ordinary course of business.

               Giventhe uncertainties inherent in Chapter 11 bankruptcy proceedings, languageexpressing substantial doubt about the ability of the Company to continue as agoing concern appears in the report of independent registered public accountingfirm covering these consolidated financial statements.  The consolidatedfinancial statements do not include any adjustments relating to recoverabilityand classification of recorded asset amounts or the amount and classificationof liabilities that might be necessary should the Company be unable to continueas a going concern.

               TheCompany currently produces and supplies a nitrogen product line of chemicals,which are used primarily as fertilizers and for a broad range of industrialapplications.  The Company's principal nitrogen products include ammonia,fertilizer-grade ammonium nitrate, urea/ammonium nitrate ("UAN")solutions and nitric acid.  The Company currently produces nitrogen products atits production facilities in Yazoo City, Mississippi,and Donaldsonville, Louisiana,and produces ammonia at its 50-50 joint venture in The Republic of Trinidad andTobago.  The Company distributes its nitrogen products to agricultural andindustrial users primarily in the southern region of the United  States.

***Cashand Cash Equivalents***

               TheCompany considers all highly liquid investments purchased with an originalmaturity of three months or less to be cash equivalents.

***Inventories***

               Inventoriesare stated at the lower of cost or market.  Cost has been determined under amoving average cost method.

***Investmentsin Affiliates***

               TheCompany's investments in affiliates primarily consist of an investment in a50-50 ammonia production joint venture, Point Lisas Nitrogen, with KochNitrogen Company (Note 4).  The Company has a separate 50-50 joint venture withKoch Nitrogen Company that is responsible for the transportation of the ammoniaproduced at Point Lisas Nitrogen.  In addition, the Company also has a 50%interest in an ammonia storage terminal in Pasadena, Texas.
**NOTE2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
***Property,Plant and Equipment***

               Property,plant and equipment are stated at cost, less accumulated depreciation,depletion and amortization.  Expenditures for major improvements arecapitalized; expenditures for normal maintenance and repairs are charged toexpense as incurred.  Upon the sale or retirement of properties, the cost andaccumulated depreciation and amortization are removed from the accounts, andany resulting gain or loss is recognized in income.  Depreciation of theCompany's land improvements is based on the units-of-production method.  TheCompany used primarily the declining-balance method of depreciation for assetspurchased through June 30, 1995.  Effective July 1, 1995, the Company changed its method of depreciating newlyacquired long-lived assets from the declining-balance method to thestraight-line method.  Depletion of mineral properties was provided using theunits-of-production method over the estimated life of the reserves.  TheCompany's mineral properties were sold in connection with the sale of itsPotash Assets in March 2004 (see Note 21).  Depreciation of property, plant andequipment is provided over the estimated useful lives of the related assets asfollows:

                                                Buildings                                                          7-45years                                                Machinery and equipment                                 1-39years

               Interestcosts attributable to major construction projects under development arecapitalized in the appropriate property account and amortized over the life ofthe related asset.

               TheCompany maintains replacement parts at its production facilities in order tominimize downtime in the event of a part failure.  Substantially all parts thatexceed a minimum value and are repairable are capitalized as property, plantand equipment and are depreciated over their estimated useful lives.  Partsthat do not exceed the minimum value or are not repairable are maintained asreplacement parts and are included as inventory in the Company's currentassets.  These replacement parts are charged to cost of products sold as theyare installed in the facility.

***Impairmentof Long-Lived Assets***

               In2004 and 2003, as prescribed in Statement of Financial Accounting Standards("SFAS") No. 144, "Accounting for the Impairment or Disposal ofLong-Lived Assets," the Company used the undiscounted cash flow approachto assess the recoverability of long-lived assets related to its operations. This evaluation is made whenever events or changes in circumstances indicatethe carrying amount of long-lived assets may not be recoverable.  Estimatedcash flows are determined by disaggregating the Company's business segments tothe lowest organizational level for which meaningful and identifiable cashflows can be determined.  An asset is considered impaired if the sum of theexpected undiscounted future cash flows is less than the carrying amount of theasset.  The impairment of an asset is measured by the amount the carrying valueof the asset exceeds its fair value.  In those instances, the amount impairedis recorded as a component of the Company's results of operations (Note 6). Impairment charges occurring after May 15, 2003, are reflected in reorganization expense, except forthose charges relating to assets of discontinued operations.

               In2002, as prescribed in Statement of Financial Accounting Standards("SFAS") No. 121, "Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to Be Disposed Of," the Company used theundiscounted cash flow approach to assess the recoverability of long-livedassets related to its operations.  This evaluation was made whenever events orchanges in circumstances indicated the carrying amount of long-lived assets maynot be recoverable.  Estimated cash flows were determined by disaggregating theCompany's business segments to the lowest organizational level for whichmeaningful identifiable cash flows could be determined.  An asset wasconsidered impaired if the sum of the expected undiscounted future cash flowswas less than the carrying amount of the asset.  The impairment of an asset wasmeasured by the amount the carrying value of the asset exceeded its fairvalue.  In those instances, the amount impaired was recorded as a component ofthe Company's results of operations.

***AssetRetirement Obligations.***

               TheCompany recognizes its obligations to retire certain tangible long-lived assetsin accordance with SFAS No. 143, "Accounting for Asset RetirementObligations."  The amounts recorded are a component of operating expensesin the Company's consolidated statements of operations (Note 8).

***RevenueRecognition***

               Revenueis recognized by the Company upon the transfer of title to the customer, whichis at the time product is shipped.
****
**NOTE2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

***HedgingActivities***

               TheCompany enters into derivative transactions to protect future production costsagainst price fluctuations of natural gas, which is the primary raw material innitrogen production.  These derivative transactions may consist of futurescontracts, options, swaps, or similar derivative financial instruments relatedto the price of natural gas.  Gains and losses on the derivative transactionsthat are designated and effective as hedges are deferred and, at the time therelated inventory is sold, are recognized as an increase or decrease in thepurchase cost of the related natural gas.  The Company accounts for its hedgesin accordance with Statement of Financial Accounting Standards("SFAS") No. 133, "Accounting for Derivative Instruments andHedging Activities," as amended by SFAS No. 149, "Amendment of FASBStatement No. 133 on Derivative and Hedging Activities," and SFAS No. 138,"Accounting for Certain Derivative Instruments and Certain HedgingActivities."  The fair value of these instruments is recorded on theconsolidated balance sheets as an asset or liability as applicable, with acorresponding amount, net of tax, reflected as a component of shareholders'(deficit) equity under the heading "Accumulated Other ComprehensiveLoss."  At certain times, the Company determines that operating itsnitrogen production facilities is not economically beneficial because of theunfavorable relationship between nitrogen product prices and the price ofnatural gas.  When this occurs, the quantity of natural gas the Companypurchases may be less than the quantity hedged, and therefore, the Companyundesignates the difference and recognizes the ineffective portion immediatelyin its consolidated statement of operations.  Due to certain matters relatingto the Case, the Company was unable to hedge natural gas from May 16, 2003 through September 28, 2003. Under a Final Order entered on October 20, 2003,the Company obtained authority to hedge 150 natural gas contracts per month ona rolling two-month basis.  Under a Final Order entered on January 22, 2004, we were permitted to hedge 450 natural gas contractsper month on a rolling two-month basis.  Under a Final Order dated August 19,2004, approving hedging activities, the Company is permitted to hedge up to 325natural gas contracts per month for the first and second months of a four-monthrevolving period and up to an additional 150 natural gas contracts per monthfor the third and fourth months of said period.

***FairValue of Financial Instruments***

               SFASNo. 107, "Disclosure About Fair Value of Financial Instruments,"requires all entities to disclose the fair value of financial instruments, bothassets and liabilities recognized and not recognized in the consolidatedstatements of financial position, for which it is practicable to estimate fairvalue.  SFAS No. 107 defines fair value of a financial instrument as the amountat which the instrument could be exchanged in a current transaction betweenwilling parties.  If estimating fair value is not practicable, SFAS No. 107requires disclosure of descriptive information pertinent to estimating thevalue of a financial instrument.  The carrying amount of the Company's cash andcash equivalents, accounts receivable, accounts payable and accrued liabilitiesapproximates fair value of these financial instruments at June 30, 2004 and 2003 due to their short-term nature.  The carryingamount of the Company's revolving credit facilities carried variable interestrates and, therefore, the carrying amounts approximate fair value.  Theestimated fair value of the Company's Senior Notes and Industrial Revenue Bondsis determined using applicable trading price information and effective yieldinformation on similar debt instruments as quoted by independent sources (seeNote 7).

***IncomeTaxes***

               Incometaxes are accounted for under the asset and liability method.  Deferred taxassets and liabilities are recognized for future tax consequences attributableto differences between the financial statement carrying amounts of existingassets and liabilities and their respective tax bases and operating loss andtax credit carryforwards.  Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled.  Avaluation allowance is provided for those deferred tax assets for which theCompany has determined it is more likely than not that these assets may not berealized.  The effect on deferred tax assets and liabilities of a change in taxrates is recognized in income in the period that includes the enactment date.

***BankruptcyProceedings***

               Asa result of filing petitions under Chapter 11 of the Bankruptcy Code, theCompany's consolidated financial statements have been prepared in accordancewith AICPA Statement of Position ("SOP") 90-7, "FinancialReporting by Entities in Reorganization under the Bankruptcy Code."  SOP90-7 does not change the application of U. S.generally accepted accounting principles in the preparation of financialstatements.  However, it does require that the financial statements for theperiods including and subsequent to filing the Chapter 11 petition distinguishtransactions and events that are directly associated with the reorganizationfrom the ongoing operations of the business.
****
**NOTE2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

               SOP90-7 requires (a) that pre-petition liabilities that are subject to compromisebe segregated in the consolidated balance sheets, and (b) that revenues,expenses, realized gains and losses, and provisions for losses resulting fromthe reorganization of the Company be reported separately as reorganizationexpense in the consolidated statements of operations.  As a result of thereorganization proceedings under Chapter 11, the Company may be required totake actions which may cause assets to be realized or liabilities to beliquidated, for amounts other than those reflected in the consolidatedfinancial statements.

***Use of Estimates***

               Thepreparation of the Company's financial statements in conformity with U.  S. generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements, and the reported amounts of revenuesand expenses during the reporting period.  Actual results could differ fromthose estimates.

***RecentAccounting Pronouncements***

               InJanuary 2003, the FASB issued FASB Interpretation No. 46, "Consolidationof Variable Interest Entities."  This interpretation of AccountingResearch Bulletin No. 51, "Consolidated Financial Statements,"addresses consolidation by business enterprises of variable interest entitiesin which the equity investors do not have a majority voting interest and/or donot have sufficient equity at risk for the entity to finance its operationswithout additional subordinated financial support from other parties.  TheCompany adopted and applied the provisions of this Interpretation during fiscal2004 without a material effect on its consolidated financial statements.  TheFASB revised the Interpretation to address certain technical corrections and toclarify many of the implementation issues.  The Company has evaluated theprovisions of the revised Interpretation and concluded that its adoption didnot have a material effect on the consolidated financial statements.

               InApril 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 onDerivative Instruments and Hedging Activities."  This statement amends andclarifies financial accounting and reporting for derivative instruments,including certain derivative instruments embedded in other contracts and forhedging activities under FASB Statement No. 133, "Accounting forDerivative Instruments and Hedging."  This amendment clarifies under whatcircumstances a contract with an initial net investment meets thecharacteristic of a derivative, clarifies when a derivative contains afinancial component, and amends the definition of an underlying to conform itto language used in FASB Interpretation No. 45.  These changes will result inmore consistent reporting of contracts as either derivatives or hybridinstruments.  The Company adopted this statement on July 1, 2003,with no material impact to its consolidated financial statements.

               InMay 2003, the FASB issued SFAS No. 150, "Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity."  Thisstatement establishes standards for how an issuer classifies and measurescertain financial instruments with characteristics of both liabilities andequity.  It requires that any financial instrument that is within the scope ofthis statement be classified as a liability.  The Company adopted theprovisions of this statement on July 1, 2003,with no material impact to its consolidated financial statements.

**NOTE3 - INVENTORIES**

               Inventoriesconsisted of the following:

June  30

2004

2003

(Dollars  in thousands)

Finished products

$10,664

$29,121

Raw materials and  supplies

115

6,415

Replacement parts

  20,718

  30,750

$31,497

$66,286
****
**NOTE 4 - INVESTMENT IN POINT LISAS NITROGEN LIMITED**

               TheCompany's 50-50 joint venture, Point Lisas Nitrogen, owns and operates a 2,040short-ton-per-day anhydrous ammonia plant located near Point Lisas, TheRepublic of Trinidad and Tobago.  The plant was placed in service in late July1998.  The Company has a contractual obligation to purchase one-half of theammonia, approximately 358,000 short tons per year, produced by Point LisasNitrogen.  The Company uses its portion of the production from the jointventure as a raw material for upgrading into finished fertilizer products atits facilities and for sales into domestic markets.  The Company is accountingfor its investment in Point Lisas Nitrogen using the equity method.  Theseequity in earnings are reflected in the Company's consolidated statements ofoperations as a reduction in cost of products sold.  At June 30, 2004, the Company's investment in Point Lisas Nitrogen was$125,781,000 and included $5,080,000 of capitalized interest.  At June 30, 2003, the Company's investment in Point Lisas Nitrogen was$104,355,000 and included $5,441,000 of capitalized interest. Capitalizedinterest is being amortized over a 20-year period and represents a basisdifference in the Company's investment reflected in its consolidated financialstatements and its 50% equity reflected in Point Lisas Nitrogen's financialstatements.

               PointLisas Nitrogen's loan with Export-Import Bank of the United  States ("Ex-Im Bank") is a non-recourse loan and isnot guaranteed by the joint venture partners.  In the event of default, Ex-ImBank may demand immediate payment of all or any portion of the principal amountof its loan with Point Lisas Nitrogen.  On May 31, 2002, the Company's former joint venturer at Point LisasNitrogen, Farmland Industries, Inc. ("FII"), filed a voluntarypetition for protection under Chapter 11 of the United States Bankruptcy Codein the United States Bankruptcy Court, Western District of Missouri.  Thisfiling and FII's default under its offtake agreement with Point Lisas Nitrogenwere events of default under Point Lisas Nitrogen's loan agreement with Ex-ImBank.  Accordingly, Ex-Im Bank could have demanded immediate payment of all orany portion of the principal amount of its loan with Point Lisas Nitrogen. Because of this default, at June 30, 2002,the total loan obligation to Ex-Im Bank was reclassified as a current liabilityon Point Lisas Nitrogen's balance sheet.  FII continued to purchase and pay forammonia shipped under the offtake agreement after its bankruptcy filing.  InMay 2003, FII cured its default under its offtake agreement with Point LisasNitrogen in the amount of approximately $5,000,000 and sold its interest inPoint Lisas Nitrogen to Koch.  

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

               OnOctober 8, 2003, the Company signed the Koch Stalking Horse Agreement(see Note 1) with Koch to sell its interests in Point Lisas Nitrogen. Subsequently, and in conjunction with the Supplemental DIP Order, the Companywithdrew its motion to sell pursuant to the Koch Stalking Horse Agreement,resulting in the payment of the Koch Break-Up Fee of approximately $3,800,000. This payment is reflected in reorganization expense in the 2004 statement ofoperations.

**NOTE4 - INVESTMENT IN POINT LISAS NITROGEN LIMITED (Continued)**

               PointLisas Nitrogen's financial position as of June 30, 2004 and 2003, and its results of operations for the fiscalyears ended June 30, 2004, 2003 and 2002, aresummarized below:

               SummarizedBalance Sheet Information:

June  30

2004

2003

(Dollars  in thousands)

Assets

   Restricted  cash

$ 82,844

$ 50,398

   Other  current assets

22,027

18,241

   Non-current  assets

 243,026

 259,118

          Total  assets

$347,897

$327,757

Liabilities and  Stockholders' Equity

   Long-term  debt due within one year

$  93,473

$120,078

   Other  current liabilities

13,022

9,852

   Stockholders'  equity

 241,402

 197,827

 

 

          Total  liabilities and stockholders' equity

$347,897

$327,757

               SummarizedStatement of Operations Information:

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

Revenues

$127,312

$ 74,451

$ 77,941

Operating income

48,527

15,740

29,964

Net income

43,575

11,202

23,972

**NOTE 5 - PROPERTY, PLANT AND EQUIPMENT**

               Property,plant and equipment consisted of the following:

June  30

2004

2003

(Dollars  in thousands)

Mineral properties

$         -      

$   42,712 

Land and land  improvements

3,576 

27,226 

Buildings

22,975 

47,549 

Machinery and  equipment

352,699 

574,850 

Construction in  progress

           526 

       3,582 

379,776 

695,919 

Less accumulated  depreciation, depletion and amortization

 (260,750)

 (406,557)

$  119,026

$  289,362
****
**NOTE 6 - IMPAIRMENT OFLONG-LIVED ASSETS**

               AmmoniaAssets.  In February 2003, the Company announced closure plans for one of itsammonia plants located in Donaldsonville, Louisiana. This closure was the result of unfavorable natural gas prices and marketconditions.  The Company decided to idle this ammonia plant indefinitelybecause it was not expected to contribute to future operations.  The long-livedassets associated with this ammonia plant had a book value of approximately$70,300,000.  The Company tested this asset for impairment in accordance withSFAS No. 144, "Accounting for the Impairment or Disposal of Long-LivedAssets," and recorded a pre-tax impairment charge totaling $62,912,000during fiscal 2003.  This amount has been reflected in the 2003 consolidatedstatement of operations as impairment of long-lived assets.

               Dueto customer demand and improved market conditions in December 2003, the Companyrestarted an ammonia plant previously idled and produced through the first weekin April 2004.  On March 25, 2004, the Company announced thepermanent closure of one ammonia plant and its intent to indefinitely idle asecond ammonia plant.  Both ammonia plants are located at the Company'sfacility in Donaldsonville, Louisiana. Negative operating performance caused by persistently high natural gas priceswas the major contributing factor for the decision.  The Company tested theseassets for impairment as required by SFAS No. 144 and recorded a pre-tax impairmentcharge of approximately $21,191,000 during fiscal 2004. This impairment chargeis reflected as a component of reorganization expense in the 2004 consolidatedstatement of operations.

               Melamine/UreaAssets.  In December 2002, the Company announced plans to close its ureafacility located in Donaldsonville, Louisiana. This closure was also the result of unfavorable natural gas prices and marketconditions.  The Company evaluated the utility of these long-lived assets andinitially concluded that the prilling section of the urea plant was notexpected to contribute to ongoing operations and production would cease.  TheCompany tested the assets associated with the urea prilling section forimpairment in accordance with SFAS No. 144 and recorded a pre-tax impairmentcharge totaling $12,206,000 at December 31, 2002.  This amount has beenincluded in loss from discontinued operations in the 2003 consolidatedstatement of operations.

               OnMarch 25, 2004, the Company announced the permanent closure of itsmelamine and urea operations at its Donaldsonville, Louisiana,facility because the Company decided to exit this business operationcompletely.  Acting on authority granted by the Company's board of directors,the Company has committed to a plan of disposal and has formally initiatedefforts to locate a buyer for these assets.  In accordance with SFAS No. 144,these assets have been reflected as discontinued operations at June 30, 2004, and prior reporting periods have also been reclassified. The Company recorded a pre-tax impairment charge for the melamine/urea assetstotaling $9,255,000 for the year ended June 30, 2004.  The Company ceased production at this facility duringthe first week in April 2004.

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

               PhosphateAssets.  On June 24, 2004, the Company's board ofdirectors authorized management's commitment to a plan to dispose of theCompany's wholly-owned subsidiary, Mississippi Phosphates Corporation, as partof its plan to emerge from bankruptcy.  This subsidiary will either be sold toa third party or transferred to the unsecured creditors of MississippiPhosphates Corporation pursuant to the Amended Plan.  The long-lived assetsassociated with this plant had a book value of approximately $51,000,000.  Accordingly,as required by SFAS No. 144, the Company evaluated the carrying amount of thePhosphate Assets for recoverability.  This evaluation resulted in a pre-taximpairment charge of $39,000,000, which is reflected as a component ofdiscontinued operations in the 2004 consolidated statement of operations.
 
**NOTE 6 - IMPAIRMENT OFLONG-LIVED ASSETS (Continued)**

               Impairmentof long-lived assets summary:

Years  Ended June 30

2004

2003

2002

Consolidated Statements of Operations Classification

(Dollars  in thousands)

Impairment of  long-lived assets

   Ammonia  assets

$      -     

$ 62,912

$      -      

Reorganization  expense

   Ammonia  assets

21,191

-      

-      

Loss from  discontinued operations

   Melamine/Urea  assets

9,255

12,206

-      

   Potash  assets

34,022

-      

-      

   Phosphate  assets

    39,000

       -      

        -      

    82,277

   12,206

        -      

   Total  impairment charges

$103,468

$ 75,118

$      -      

Significant judgments and estimates are required inperforming impairment tests in accordance with SFAS No. 144.

**NOTE7 - CREDIT AGREEMENTS AND LONG-TERM DEBT**

***               TheDIP Credit Facility***

               OnMay 16, 2003, the Court entered an Interim Order approving the Company'srequest, on an interim basis, for a debtor-in-possession financing facilitywith Harris Trust and Savings Bank and a syndicate of six other lenders (the"Original DIP Lenders") to provide up to $37,500,000 in financing(the "Interim Credit Facility").  On August 13, 2003,the Court denied the Company's request for a Final Order with regard to theInterim Credit Facility, but granted it authority to use its cash collateral(i.e., cash and proceeds of inventories and receivables) for ordinary courseoperations through October 3, 2003.  On October 2, 2003, the Court entered a Final Order that approved certainamendments to the Interim Credit Facility to permit borrowings up to$32,500,000 (the "DIP Credit Facility").  This Facility was reducedto $22,500,000 as a result of the sale of the Company's Potash Assets in March2004.  The DIP Credit Facility was a revolving credit facility that expired on June 30, 2004.    Mississippi Chemical Corporation was the borrower underthe DIP Credit Facility and its subsidiaries who are Debtors, and MississippiChemical Holdings, Inc. ("MCHI"), were guarantors.  Pursuant to aFinal Order entered on December 19, 2003, the Investors (as definedbelow in the notes under the heading "Supplemental Debtor-in-PossessionTerm Loan") concluded a tender offer to the Original DIP Lenders on January 23, 2004.  The terms of the Pre-Petition Harris Facility and theSupplemental DIP were essentially unchanged by the tender offer.

               ***MaximumBorrowings.***  The DIP Credit Facility provided for maximum borrowings(the "DIP Commitment"), at any time, up to the lesser of (a)$22,500,000, or (b) a borrowing base equal to the sum of (i) 85% of theeligible accounts receivable plus (ii) 65% of eligible inventory, minus (iii) ascheduled excess collateral availability requirement, minus (iv) an amountequal to twice the amount of all the then accrued and unpaid charges owed towarehousemen and other third parties having inventories in their possessionthat have not executed and delivered to the lenders a warehouseman's waiver,minus (v) an amount equal to six months' rent for all leased facilities whereinventories are kept for which the landlord has not executed and delivered tothe lenders a landlord's waiver.  The DIP Commitment was subject to certainmandatory reductions described below.  At June 30, 2004, the Company had no borrowings outstanding.

               ***Ratesand Fees.***  The loans under the DIP Credit Facility bore interest atrates equal to the prime commercial rate from time to time in effect plus 4%. Upon entry of the Interim Order, the Company paid a facility fee of $375,000 tothe Original DIP Lenders and an administrative fee of $75,000 (of this amount,$60,000 was refunded to the Company subsequent to June 30, 2003) to HarrisTrust and Savings Bank, as "DIP Agent."  Upon entry of the FinalOrder, the Company paid an additional facility fee of $375,000 to the DIPLenders and an additional administrative fee of $75,000 to the DIP Agent.  TheDIP Credit Facility also had a commitment fee equal to 0.5% per annum of theaverage daily unused amount of the DIP Commitment.

**NOTE7 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued)**

               ***CollateralSecurity and Guarantees.***  Pursuant to the Final Order for the DIPCredit Facility, the DIP Credit Lenders were granted superpriority claim statusin the Case that is collateralized by first liens on substantially all of theCompany's assets and the assets of the other subsidiaries included in the Case(including all of the proceeds of inventories and accounts receivable and cashcollateral).  Our use of proceeds of inventories and accounts receivable andall cash collateral generated in the ordinary course of business was limited tothe payment of certain expenses and application to the DIP Credit Facilityprior to its termination and, following such termination, to the Pre-PetitionHarris Facility.  All of the Company's subsidiaries that are included in theCase guaranteed the DIP Credit Facility (the "DIP Guarantors").  Asadequate protection for the use of pre-petition cash collateral, the lendersunder the Pre-Petition Harris Facility were granted a replacement lien onsubstantially all of the Company's assets and the assets of the DIP Guarantors,subject only to the lien of the Original DIP Lenders and certain lienspermitted under the DIP Credit Facility.

               ***Covenants.*** The DIP Credit Facility (a) restricted the Company's ability to incur debt, (b)prior to the sale of the Company's Potash Assets, required the Company togenerate certain minimum levels of EBITDA as defined in the agreement, (c)limited our expenditures to the types set forth in a budget, subject topermitted deviations, (d) provided for mandatory prepayments and commitmentreductions from all or part of the net proceeds of certain liquidity eventssuch as asset dispositions outside the ordinary course of business, (e)permitted the voluntary prepayment of loans under the DIP Credit Facilitywithout penalty, (f) required that the obligations under the Pre-PetitionHarris Facility be reduced according to a schedule, and (g) containedrepresentations, warranties, other affirmative and negative covenants, andevents of default that were customary for debtor-in-possession revolving creditfacilities.  As of June 30, 2004, the Company was incompliance with all covenants under the DIP Credit Facility.

               ***AssetDispositions.***  The DIP Credit Facility required the Company to marketand dispose of specified assets.  The financing order entered by the Court on December 19, 2003, found that the transactions contemplated by theSupplemental DIP (as defined below under the heading "SupplementalDebtor-In-Possession Term Loan") satisfied our disposition requirement withrespect to our interests in Point Lisas Nitrogen.  The financing order enteredby the Court on February 12, 2004, found that the IntrepidStalking Horse Agreement satisfied our disposition requirement with respect toour potash assets.  Other than any disposition of our interest in Point LisasNitrogen, all net cash proceeds of asset dispositions outside the ordinarycourse in excess of $1,000,000 were applied to the Pre-Petition Harris Facilityand the DIP Credit Facility on an equal basis, provided that if the obligationsunder the DIP Credit Facility were otherwise satisfied as described in the DIPCredit Facility, the balance of any such proceeds would be applied to thePre-Petition Harris Facility.  In the event of a disposition of the Company'sinterest in Point Lisas Nitrogen, all net cash proceeds were to  be appliedfirst to the Pre-Petition Harris Facility and then to the DIP Credit Facility.

               ***SupplementalDebtor-In-Possession Term Loan ***

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

               Inaddition, the Investors agreed to tender for the approximately $68,400,000remaining secured debt under the Pre-Petition Harris Facility and theobligations under the DIP Credit Facility, at par plus accrued interest(excluding default interest).  The tender was conditioned upon acceptance by atleast 51 percent in number of the lenders representing not less than 66-2/3percent of the outstanding principal amount under these facilities.  More than51 percent in number of the Pre-Petition Lenders and the Original DIP Lenderstendered, respectively, 93 percent and 85 percent of the Pre-Petition HarrisFacility and the Harris DIP.  The tender closed on January 23, 2004. As a result, the Investors held substantially all of our secured debt at suchtime.

               Asa result of the Supplemental DIP Loan, the Company withdrew its motion to sellunder the Koch Stalking Horse Agreement, and the Court entered a Final Orderterminating such sale process.  Accordingly, the Company paid the Koch Break-UpFee (see Note 1) from the proceeds of the Supplemental DIP Loan.

**NOTE7 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued)**

               OnJuly 1, 2004, the Company entered into the Replacement DIP torefinance all of the Company's pre-petition and post-petition creditfacilities.

               ***Ratesand Fees.***  The Supplemental DIP loan bore cash interest, payablemonthly, at rates equal to the prime commercial rate from time to time ineffect plus 4% and accrues additional payment-in-kind interest monthly at the rateof 8% per annum for the first six months and 9% per annum thereafter.  Inconnection with the signing and closing of the Supplemental DIP loan, theCompany paid aggregate commitment fees of approximately $3,677,000 to theInvestors.  The Investors were also entitled to a Cash Out Commitment Fee ofapproximately $1,400,000 upon the termination of the Supplemental DIP loan.  Inaddition, the Investors were entitled to a Lost Opportunity Commitment Fee ofapproximately $2,900,000 payable on termination of the Supplemental DIP loan ifa plan of reorganization was not approved by the Investors.  Both the Cash OutCommitment Fee and the Lost Opportunity Commitment Fee were accrued at June 30, 2004, and were paid on July 1, 2004.

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

               TheSupplemental DIP Loan was secured by (a) liens and security interests insubstantially all of the assets of the Supplemental Loan Parties and (b) apledge of all stock and other equity interests owned by each of theSupplemental Loan Parties (provided that such pledge does not include the stockof MCHI, the membership interests in FMCL Limited Liability Company, a50%-owned Delaware limited liability company that ships product from PointLisas Nitrogen, or the partnership interests in Houston Ammonia Terminal, L.P.,a 50%-owned Delaware limited partnership).  The Investors' security interestsin the assets of the Supplemental Loan Parties are subordinate to the DIPCredit Facility and the Pre-Petition Harris Facility.

               ***Covenants.*** The Supplemental DIP Loan has covenants substantially the same as the DIPCredit Facility including (a) restrictions on the Company's ability to incur debt,(b) required the Company to generate the same minimum levels of EBITDA requiredby the DIP Credit Facility, (c) limits on the Company's expenditures to thetypes set forth in a budget, subject to permitted deviations, (d) limits on theamount of capital expenditures to the same amounts permitted by the DIP CreditFacility, (e) mandatory prepayments from all or part of the net proceeds ofcertain liquidity events (such as asset dispositions outside the ordinarycourse of business), and (f) other affirmative and negative covenants typicalfor this type of loan.  As of June 30, 2004,the Company was in compliance with all covenants under the Supplemental DIPLoan.

***               Pre-PetitionHarris Facility***

               Asof the Petition Date, the Company had a secured revolving credit facility withHarris Trust and Savings Bank and a syndicate of twelve other lenders totaling$158,400,000.  The Pre-Petition Harris Facility bore interest at rates relatedto the Prime Rate.  As of June 30, 2004,the Company's weighted average interest rate was 9.2% (which includes thedefault rate) and the Company had borrowings outstanding in the amount of$50,810,000.  The bankruptcy filing was an event of default under thePre-Petition Harris Facility and, as a result, the Company was no longerpermitted to borrow under this facility.  As adequate protection for the use ofthe Pre-Petition Lenders' cash collateral, the Company was required to payinterest on the Pre-Petition Harris Facility.  Interest was paid monthly inarrears at the non-default rate (Prime Rate + 5% on the first $105 millionuntil this debt was reduced to $52.5 million, at which point such rate wasPrime Rate + 3%).  An additional 2% of default rate interest accrues untilpayoff of the Pre-Petition Harris Facility.  Since the Pre-Petition HarrisFacility was a secured facility, it has not been classified as a liabilitysubject to compromise on the Company's consolidated balance sheets.  On July 1, 2004, this facility was paid in its entirety.

**NOTE7 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued)**

               ***ReplacementDebtor-In-Possession Credit Facility***

               OnJune 25, 2004, the Court entered an Interim Order approving theCompany's request, on an interim basis, for the Replacement DIP with theReplacement DIP Lenders to provide up to $182,500,000 in financing.  TheReplacement DIP consists of a $160,000,000 term loan (the "TermLoan") and up to $22,500,000 in revolving credit loans (the"Revolving Loans" and collectively with the Term Loan, the"Replacement Loans").  The Replacement Loans were funded on July 1, 2004.  On July 15, 2004,the Court entered a Final Order that approved the Replacement DIP.    TheReplacement DIP terminates upon the earlier to occur of (a) December 31, 2004, (b) the date that a plan of reorganization confirmed bythe Court becomes effective, or (c) the date on which the lenders terminate theReplacement DIP in connection with an event of default thereunder.  The Companycan extend the maturity to June 30, 2005,under certain conditions.  Mississippi Chemical Corporation is the borrowerunder the Replacement DIP and its subsidiaries who are Debtors are guarantors. MCHI is not a guarantor, but is obligated to provide a guaranty of theReplacement DIP in the event that the contractual restrictions prohibitingsuch  grant are waived or released.

               ***MaximumBorrowings****.*  The Revolving Loans provide for maximum borrowings(the "Revolver Commitment"), at any time, up to the lesser of (a)$22,500,000, or (b) a borrowing base equal to the sum of (i) 85% of eligibleaccounts receivable plus (ii) 65% of eligible inventories, minus (iii) anamount equal to twice the amount of all the then accrued and unpaid chargesowed to warehousemen and other third parties having inventories in theirpossession that have not executed and delivered to the lenders a warehouseman'swaiver, minus (iv) an amount equal to six months' rent for all leasedfacilities where inventory is kept for which the landlord has not executed and deliveredto the lenders a landlord's waiver.  No further borrowings are permitted on theTerm Loan.

               ***Ratesand Fees***.  The loans under the Replacement DIP bear cash interest,payable monthly, at rates equal to the Citibank Base Rate from time to time ineffect plus 3.75% and accrue additional payment-in-kind interest monthly at therate of 5.15% per annum.  On July 1, 2004,the Company paid the Replacement DIP Lenders a closing fee of $3,650,000 (2%)and a semi-annual agency fee of $75,000.  The Replacement DIP also has anunused commitment fee equal to 0.5% per annum of the average daily unusedamount of the Revolving Loans.

               ***CollateralSecurity and Guarantees*.**  Pursuant to the Final Order for theReplacement DIP, the Replacement DIP Lenders have been granted superpriorityclaim status in the Case with a first lien on substantially all of the Debtors'assets (including all cash collateral and proceeds of inventories and accountsreceivable).  Our use of cash collateral and proceeds of inventories andaccounts receivable generated in the ordinary course of business is limited tothe payment of certain expenses and application to the Replacement DIP.  All ofthe Company's subsidiaries which are Debtors have guaranteed the ReplacementDIP (the "Replacement DIP Guarantors").

               ***Covenants.*** The Replacement DIP (a) restricts the Company's ability to incur debt, (b)requires the Company to generate certain monthly minimum levels of EBITDA, asdefined in the agreement, (c) limits the Company's expenditures to the typesset forth in a budget, subject to permitted deviations, (d) limits the amountof capital expenditures, (e) provides for mandatory prepayments and commitmentreductions from all or part of the net proceeds of certain liquidity events(such as asset dispositions outside the ordinary course of business) asdetailed below in this paragraph, (f) permits the voluntary prepayment of theReplacement DIP without penalty, and (g) contains representations, warranties,other affirmative and negative covenants, and events of default that arecustomary for debtor-in-possession credit facilities.  As of August 31, 2004, the Company was in compliance with all covenants underthe Replacement DIP.

***               TheSenior Notes***

               OnNovember 25, 1997, the Company issued $200,000,000 of 7.25% Senior Notesdue November 15, 2017, pursuant to a shelfregistration statement filed with the Securities and Exchange Commission. Semi-annual interest payments of approximately $7,250,000 are due on each May15 and November 15.  The holders may elect to have the Senior Notes repaid on November 15, 2007.  The Senior Notes do not contain any financialcovenants, but do contain certain cross-default provisions with our other debtinstruments.  As a result of the Company's filing bankruptcy, the Company hasnot made the semi-annual interest payments, and is in default under the SeniorNotes.  At June 30, 2004 and 2003, the SeniorNotes, net of unamortized discounts of $239,000, are reflected as a componentof liabilities subject to compromise on the Company's consolidated balancesheets (Note 9).

**NOTE7 - CREDIT AGREEMENTS AND LONG-TERM DEBT (Continued)**

               ***TheIndustrial Revenue Bonds***

               InAugust 1997, the Company issued $14,500,000 in industrial revenue bonds, aportion of which was tax-exempt, to finance the development of a newphosphogypsum disposal facility at its Pascagoula, Mississippi,DAP manufacturing plant.  On April 1, 1998,the Company issued $14,500,000 in tax-exempt industrial revenue bonds (the"1998 IRBs"), the proceeds of which were used to redeem the initialindustrial revenue bonds issued in August 1997.  The 1998 IRBs issued on April 1, 1998, mature on March 1, 2022,and carry a 5.8% fixed rate of interest.  The 1998 IRBs may be redeemed at theCompany's 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 1998 IRBs are the obligation of our subsidiary,Mississippi Phosphates Corporation, but are guaranteed by the Company.  Thebankruptcy filing was an event of default under the 1998 IRBs.  At June 30, 2004 and 2003, the 1998 IRBs are reflected as a component ofliabilities subject to compromise on the Company's consolidated balance sheets(Note 9). 

               Long-termdebt consisted of the following:

June  30,

2004

2003

(Dollars  in thousands)

Supplemental  debtor-in-possession term loan (16.1% in 2004)

$100,723  

$       -       

Revolving credit  facility (9.2% in 2004 and 9.65% in 2003)

50,810  

158,423 

Senior Notes, net  of unamortized discount of  $239 and $239 (7.25%)

199,761  

199,761 

Industrial revenue  bonds (5.80%)

     14,500  

     14,500 

365,794  

372,684 

Debt due within  one year

(151,533)

  (158,423)

Liabilities  subject to compromise (Senior Notes and 1998 IRBs)

  (214,261)

 (214,261)

$         -      

$       -       

               Theestimated fair value of the Company's Senior Notes and 1998 IRBs at June 30, 2004, was $137,892,000.  The estimated fair value of theCompany's long-term debt at June 30, 2003was $34,345,000.  The estimated fair value for the Company's Senior Notes wascomputed using estimated trading price information for our Senior Notes.  Theestimated fair value for the 1998 IRBs was computed using the effective yieldon state and local bonds as quoted by the Federal Reserve.  The Company'srevolving credit facilities carried variable interest rates and, therefore, thecarrying amounts approximated fair value.

**NOTE8 - ACCRUED AND OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS**

               Accruedliabilities consisted of the following:

June  30

2004

2003

(Dollars  in thousands)

Accrued vacation

$  1,698

$       -     

Accrued interest

4,924

-     

Accrued taxes

2,234

907

Accrual for asset  retirement costs

-     

2,800

Other

    1,425

        926

 

 

$10,281

$  4,633

               AtJune 30, 2004, liabilities subject to compromise included $8,010,000in accrued interest.  At June 30, 2003, liabilities subject tocompromise included $4,114,000 in accrued vacation, $8,010,000 in accruedinterest, $1,593,000 in accrued taxes and $1,717,000 in other costs.
****
**NOTE8 - ACCRUED AND OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS (Continued)**

               Otherlong-term liabilities and deferred credits consisted of the following:

June  30

2004

2003

(Dollars  in thousands)

Accrual for  closure costs

$      -     

$  8,492

Deferred pension  liability

24,330

26,766

Other

     2,038

    1,614
            
$26,368

$36,872
            
               AtJune 30, 2004 and 2003, liabilities subject to compromise included$316,000 and $1,830,000, respectively, in other long-term liabilities anddeferred credits.

               EffectiveJuly 1, 2002, the Company adopted SFAS No. 143, "Accounting for AssetRetirement Obligations," which addresses financial accounting andreporting for obligations associated with the retirement of tangible,long-lived assets and the associated asset retirement costs.  As of June 30, 2004, estimated asset retirement costs of approximately$2,351,000 have been recorded as a component of liabilities of discontinuedoperations to close the Company's West phosphogypsum disposal facility at its Pascagoula, Mississippi,phosphate plant.  As of June 30, 2003, estimated assetretirement costs of approximately $2,043,000 were recorded as a component ofother long-term liabilities, and $2,800,000 were recorded as accruedliabilities to close the Company's West phosphogypsum disposal facility.  TheCompany discontinued the use of the West facility during the second quarter offiscal 2003.  The East Facility was completed in 1998 and was placed intooperation during the fourth quarter of fiscal 2002.  During fiscal 2003, theCompany recorded an asset and a liability for the estimated asset retirementobligation for the East Facility.  The asset recorded will be depreciated overthe remaining useful lives of the assets to be retired, estimated at 22 years. The liability will be accreted using the effective interest method and theuseful life of the facility.  As of June 30, 2004, the Company had recorded approximately $4,473,000related to this obligation and included it in liabilities of discontinued operationson the Company's 2004 consolidated balance sheet.  In addition to accruing forthe closure of the East Facility, Mississippi Phosphates has developed afinancial assurance mechanism with the Mississippi Department of EnvironmentalQuality.  Quarterly payments will be made into a trust fund managed by MorganKeegan Trust Company, FSB.  This fund will be used for closure and post-closurecare of the East Facility.  The first payment was made April 1, 2004, and as of June 30, 2004, the Company had deposited $201,000 into this trustfund.  Quarterly payment amounts will be reviewed annually and adjusted forinflation.  These payments will continue until funds in the trust are adequateto cover estimated costs related to the closure of the East Facility.  As of June 30, 2003, the Company had recorded approximately $4,009,000related to this obligation and included it in other long-term liabilities onthe Company's 2003 consolidated balance sheet.

               Asof June 30, 2003, estimated closure costs ofapproximately $2,440,000 were accrued to close the Company's potash miningfacilities.  Of this amount, approximately $2,290,000 was attributable to itsEddy Potash, Inc. ("Eddy") facility that was idled in 1997.  TheCompany estimated that Eddy's asset retirement costs were fully accrued.  TheCompany's other potash facilities had estimated useful lives spanning severaldecades; therefore, estimates of asset retirement costs for these facilitieswere not material to the Company's operations.  The Company's closure plans forits potash facilities were approved by the U.S. Department of theInterior-Bureau of Land Management ("BLM").  These potash facilitieswere sold in March 2004.

               Asrequired by SFAS No. 143, the Company will make periodic assessments as to thereasonableness of its asset retirement cost estimates and revise thoseestimates accordingly.  The respective asset and liability balance will beadjusted on the Company's consolidated balance sheet, which willcorrespondingly increase or decrease the amounts expensed in future periods.

               AtJune 30, 2004 and 2003, other long-term liabilities also include adeferred pension liability of $24,330,000 and $26,766,000, respectively,resulting from the accumulated benefit obligations exceeding pension planassets.  This was caused by a large decrease in pension plan asset values dueto lower investment returns, and the use of a lower discount rate for theaccumulated benefit obligations.
****
**NOTE 9 - LIABILITIESSUBJECT TO COMPROMISE**

               Asa result of the Company's Chapter 11 filing, substantially all unsecuredpre-petition indebtedness of the Company is subject to compromise.  Generally,actions to enforce or otherwise effect payment of pre-Chapter 11 liabilitiesare stayed.  These claims are reflected in the June 30, 2004and 2003 consolidated balance sheets as liabilities subject to compromise. Pre-petition claims secured by the Company's assets are also stayed, althoughthe holders of such claims have the right to move the Court for relief from thestay.  As of June 30, 2004, pre-petition secured claims (primarily representingamounts borrowed under the Company's pre-petition revolving credit facility)were secured by substantially all of the Company's accounts receivable,inventories, and property, plant and equipment.  These secured claims, whichwere satisfied July 1, 2004, are reflected aslong-term debt due within one year on the Company's 2004 and 2003 consolidatedbalance sheets.  Although pre-petition claims are generally stayed as part ofthe first day orders and subsequent motions granted by the Court, the Courtapproved the Company's motions to pay certain pre-petition obligationsessential for the ongoing operation of the Company's business.  The Company hasbeen paying and intends to continue to pay all undisputed post-petition claimsof all vendors and suppliers in the ordinary course of business.

               LiabilitiesSubject to Compromise consisted of the following:

June  30

2004

2003

(Dollars  in thousands)

Senior Notes, net of unamortized discount

$199,761

$ 199,761

Industrial revenue bonds

14,500

14,500

Accounts payable - trade

4,206

10,159

Other liabilities

    13,432

      24,712

 

 

 

$231,899

 

$ 249,132

               AtJune 30, 2003, the Company had pre-petition contingent liabilities forletters of credit of $790,000.

               Beloware condensed consolidated financial statements for the Company.

CONDENSEDCONSOLIDATED BALANCE SHEETJune 30, 2004

Mississippi

Chemical Corporation

Subsidiaries

and  Subsidiaries in

not  in

Reorganization

Reorganization

Eliminations

Consolidated

(Dollars  in thousands)

ASSETS

Current assets

$ 129,051 

$            3

$        -      

$ 129,054 

Investments and  long-term assets

139,519 

119,295

(119,258)

139,556 

Property, plant  and equipment, net

   119,026 

          -     

          -      

   119,026 

$ 387,596 

$ 119,298

$(119,258)

$ 387,636 

LIABILITIES AND     SHAREHOLDERS' DEFICIT

 

 

 

 
   
 
      
Current  liabilities

$ 192,521 

$          42

$         -      

$ 192,563 

Other long-term  liabilities and     deferred credits

  42,159 

  119,256

  (119,258)

  42,157 

Liabilities  subject to compromise

231,899 

-     

-      

231,899

Shareholders'  deficit

   (78,983)

          -     

          -      

    (78,983)

$ 387,596 

$ 119,298

$(119,258)

$ 387,636 

**NOTE 9 - LIABILITIESSUBJECT TO COMPROMISE (Continued)**

CONDENSED CONSOLIDATED BALANCE SHEETJune 30, 2003

Mississippi

Chemical  Corporation

Subsidiaries

and  Subsidiaries in

not  in

Reorganization

Reorganization

Eliminations

Consolidated

(Dollars  in thousands)

ASSETS

Current assets

$ 136,942 

$            1

$         (29)

$ 136,914 

Investments and  long-term assets

121,786 

97,507

(97,479)

121,814 

Property, plant  and equipment, net

   289,362 

         -     

          -      

   289,362 

$ 548,090 

$ 97,508

$ (97,508)

$ 548,090 

LIABILITIES AND     SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current  liabilities

$ 178,792 

$        29

$        (29)

$ 178,792 

Other long-term  liabilities and     deferred credits

  63,390 

  97,479

  (97,479)

  63,390 

Liabilities  subject to compromise

249,132 

-      

-      

249,132 

Shareholders'  equity

     56,776 

       -      

         -      

     56,776 

$ 548,090 

$ 97,508

$(97,508)

$ 548,090 

**NOTE9 - LIABILITIES SUBJECT TO COMPROMISE (Continued)**

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONSFor the year ended June 30, 2004

Mississippi

Chemical  Corporation

Subsidiaries

and  Subsidiaries in

not  in

Reorganization

Reorganization

Eliminations

Consolidated

(Dollars  in thousands)

Total revenues

$ 305,020 

$       -      

$      -      

$ 305,020 

Cost of products  sold

249,189 

(21,787)

21,773 

249,175  

Selling, general  and administrative

21,095 

13  

-      

21,108  

Other

       6,707 

         -      

         -      

       6,707  

   276,991 

  (21,774)

    21,773 

  276,990  

          Operating  income

28,029 

21,774 

(21,773)

28,030  

 

Other expense

      16,688

              1

         -      

    16,689  
                        
Income from  continuing operations     before reorganization expense     and income taxes

  11,341 

  21,773 

  (21,773)

  11,341 

Reorganization  expense

      45,195 

         -      

          -      

     45,195  
                        
(Loss) income from  continuing     operations before income taxes

  (33,854)

  21,773 

  (21,773)

  (33,854)

Income tax expense  -     continuing operations

       34,477 

           -      

            -      

       34,477  
                        
(Loss) income from  continuing     operations

      (68,331)

  21,773 

  (21,773)

  (68,331)
                        
Loss from  discontinued operations,     net of tax

      (68,663)

           -      

            -      

      (68,663)

 

Net (loss) income

$(136,994)

$  21,773 

$ (21,773)

$(136,994)

**NOTE 9 - LIABILITIESSUBJECT TO COMPROMISE (Continued)**

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONSFor the year ended June 30, 2003

Mississippi

Chemical  Corporation

Subsidiaries

and  Subsidiaries in

not  in

Reorganization

Reorganization

Eliminations

Consolidated

(Dollars  in thousands)

Total revenues

$ 239,941  

$      -        

$    -       

$ 239,941  

Cost of products  sold

215,491  

(5,601)

5,580 

215,470  

Selling, general  and administrative

26,462  

21  

-      

26,483  

Impairment of  long-lived assets

62,912  

-       

-      

62,912  

Other

      12,691  

        -       

       -      

     12,691  

    317,556  

    (5,580)

    5,580 

   317,556  

          Operating  (loss) income

(77,615)

5,580 

(5,580)

(77,615)
                        
Other expense

       14,317 

         -      

       -      

      14,317 
                        
(Loss) income from  continuing    operations before reorganization     expense and income taxes

  (91,932)

  5,580 

  (5,580)

  (91,932)

Reorganization  expense

        3,456  

        -      

        -     

       3,456  
                        
(Loss) income from  continuing     operations before income taxes

  (95,388)

  5,580 

  (5,580)

  (95,388)

Income tax benefit

     (15,140)

        -      

        -     

    (15,140)
                        
(Loss) income from  continuing     operations

  (80,248)

  5,580 

  (5,580)

  (80,248)
                        
Loss from  discontinued operations,     net of tax

       (25,605)

          -      

          -     

      (25,605)
                        
Net (loss) income

$ (105,853)

$    5,580 

$ (5,580)

$(105,853)

** **
****
**NOTE 9 - LIABILITIESSUBJECT TO COMPROMISE (Continued)**

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended June 30, 2004

Mississippi

Chemical  Corporation

Subsidiaries

and  Subsidiaries in

not  in

Reorganization

Reorganization

Eliminations

Consolidated

(Dollars  in thousands)

Cash flows from  operating     activities:

          Net  (loss) income

$ (136,994)

$ 21,773 

$(21,773)

$ (136,994)

          Reconciliation  of net (loss)               income  to net cash provided               by  operating activities:

             Net  change in operating assets                   and  liabilities

  19,975 

  11 

  -      

  19,986 

             Net  change in other long-term                   assets  and liabilities

  (30,625)

  (21,784)

  21,773 

  (30,636)

             Non-cash  items, net

   149,850 

         -      

        -     

    149,850  

Net cash provided  by operating     activities

         2,206 

           -      

          -     

          2,206  
                        
Net cash provided  by investing     activities

        24,666 

          -      

          -     

       24,666   
                        
Net cash used in  financing activities

    (10,567)

         -     

        -     

    (10,567) 
                        
Net increase in  cash and cash     equivalents

  16,305 

  -     

  16,305  
                        
Cash and cash  equivalents -     beginning of year

              6,102 

           -     

           -     

          6,102  
                        
Cash and cash  equivalents -     end of year

        $    22,407 

  $       -     

  $       -  _ 

  $    22,407  

**NOTE 9 - LIABILITIESSUBJECT TO COMPROMISE (Continued)**

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended June 30, 2003

Mississippi

Chemical  Corporation

Subsidiaries

and  Subsidiaries in

not  in

Reorganization

Reorganization

Eliminations

Consolidated

(Dollars  in thousands)

Cash flows from  operating     activities:

          Net  (loss) income

$ (105,853)

$   5,580 

$  (5,580)

$ (105,853)

          Reconciliation  of net (loss)               income  to net cash used in               operating  activities:

             Net  change in operating assets                   and  liabilities

  (9,680)

  (4)

  -      

  (9,684)

             Net  change in other assets                   and  liabilities

  (33,715)

  (5,576)

  5,580 

  (33,711)

             Non-cash  items, net

    114,350  

        -       

        -      

   114,350 

Net cash used in  operating activities

     (34,898)

        -       

        -      

   (34,898)
                        
Net cash used in  investing activities

       (9,240)

        -       

        -      

     (9,240)
                        
Net cash provided  by financing     activities

        48,251  

           -      

          -      

     48,251  
                        
Net increase in  cash and cash     equivalents

        4,113  

  -      

  -      

  4,113  
                        
Cash and cash  equivalents -     beginning of year

              1,988  

               1  

           -      

       1,989  
                        
Cash and cash  equivalents -     end of year

        $      6,101  

  $            1 

  $       -  _  

  $    6,102  

**NOTE10 - SHAREHOLDERS' (DEFICIT) EQUITY**

               AtJune 30, 2004, the Company had 100,000,000 authorized shares of commonstock at a par value of $.01.

               Commonstock issued and outstanding, net of treasury shares, consisted of thefollowing:

Common  Stock

(Shares  in thousands)

Shares outstanding, June   30, 2001

26,132 

          Shares  issued from Treasury

        35 

Shares outstanding, June   30, 2002

26,167 

          Shares  issued from Treasury

        45 

Shares outstanding, June   30, 2003

26,212 

          Shares  returned to Treasury

  (1,962)

Shares outstanding, June   30, 2004

  24,250 

** **
****
**NOTE10 - SHAREHOLDERS' (DEFICIT) EQUITY (Continued)**

               TheCompany's Articles of Incorporation authorize the Board of Directors, at itsdiscretion, to issue up to 500,000 shares of Preferred Stock, par value $.01per share.  The stock is issuable in classes or series that may vary as tocertain rights and preferences.  As of June 30, 2004, no such shares were outstanding and the Company isprohibited from issuing such shares under its secured financing arrangementwith its lenders.

**NOTE 11 - ACCUMULATED OTHERCOMPREHENSIVE LOSS**

               Comprehensiveloss is the total of net loss and all other non-owner changes in equity.  Thecomponents of comprehensive loss that relate to the Company are net loss,unrealized gains or losses on natural gas derivative transactions, and pensionliability adjustments.  As permitted under the provisions of SFAS No. 130,"Reporting Comprehensive Income," these are presented in theConsolidated Statements of Shareholders' (Deficit) Equity.  Derivativetransactions may consist of futures contracts, options, swaps, or similarderivative financial instruments related to the price of natural gas.  Thechanges in the components of accumulated other comprehensive loss during theyears ended June 30, 2004, 2003 and 2002 areincluded below:

Before-Tax

Tax

Net-of-Tax

Amount

Effect

Amount

(Dollars  in thousands)

Accumulated other  comprehensive loss at June 30, 2001

$  (9,292)

$   3,484  

$  (5,808)

          Net  unrealized gain on natural gas hedging activities               arising  during period

  2,014  

  (755)

  1,259  

          Reclassification  adjustment for net losses realized in net loss

    15,251  

    (5,719)

     9,532  

Accumulated other  comprehensive income at June 30, 2002

7,973  

(2,990)

4,983  

          Net  unrealized gain on natural gas hedging activities               arising  during period

  9,647  

  (3,749)

  5,898  

          Reclassification  adjustment for net gains realized in net loss

  (17,410)

     6,659  

  (10,751)

          Pension  liability adjustment (Notes 8 and 22)

  (18,733)

     6,557  

  (12,176)
                  
Accumulated other  comprehensive loss at June 30, 2003

(18,523)

   6,477  

(12,046)

          Net  unrealized loss on natural gas hedging activities               arising  during year

  (7,186)

  2,521  

  (4,665)

          Reclassification  adjustment for net losses realized in net loss

5,757 

(2,015)

3,742 

          Pension  liability adjustment (Notes 8 and 22)

     3,321 

   (1,163)

     2,158 
                  
Accumulated other  comprehensive loss at June 30, 2004

$(16,631)

$   5,820 

$(10,811)

**NOTE12 - STOCK OPTIONS**

               TheCompany maintains a stock option plan for non-employee directors of the Companywhich has been approved by the Company's shareholders.  Prior to May 14, 2003, the Company maintained a stock incentive plan forcertain officers and key employees.  On May 14, 2003, the Board of Directors voted to terminate this plan,except with respect to grants already issued.  Under both plans, options havebeen granted to purchase common stock of the Company at a price not less thanthe "fair market value" (average closing price on the New York StockExchange for the twenty days immediately preceding the date of grant) on thedate of grant.  (The Over the Counter Bulletin Board was substituted for theNew York Stock Exchange after the Company's stock was delisted from the NewYork Stock Exchange and began trading through the Over the Counter BulletinBoard.)  Stock options for officers and key employees were exercisable sixmonths from the date of grant.  Stock options for non-employee directors becomeexercisable in installments beginning one year after the date of grant andbecome fully exercisable six years after the date of grant.  All options expire10 years from the date of grant.  At June 30, 2004, exercisable options were 1,669,172, with a weightedaverage exercise price of $10.00.  At June 30, 2003 and 2002, exercisable options were 2,263,610 and1,965,185, respectively.  There were 2,080,137 shares available for option plangrants at June 30, 2004.  The summary of stockoption activity is shown below:

**NOTE12 - STOCK OPTIONS (Continued)**

Options

Weighted  Average

Outstanding

Exercise  Price

June 30, 2001

1,598,085  

$14.46

          Stock  options granted

464,500  

$  3.52

          Stock  options expired

    (21,000)

$21.40

June 30, 2002

2,041,585  

$11.90

          Stock  options granted

447,500  

$  1.33

          Stock  options expired

    (167,275)

$10.43

June 30, 2003

2,321,810  

$10.50

          Stock  options granted

19,000  

$  0.10

          Stock  options expired

   (620,947)

$10.08
      
June 30, 2004

 1,719,863  

$12.65

               Thefollowing table summarizes information about stock options outstanding at June 30, 2004:

Total  Options

Exercisable  Options

Outstanding

Outstanding

Weighted

Weighted

Weighted

Average

Average

Average

Remaining

Options

Exercise

Options

Exercise

Exercise Price Range

Contractual  Life

Outstanding

Price

Outstanding

Price

$  0.10 - $   9.87

6.7  Years

1,106,800

$  4.47

1,056,109

$  4.55

$15.00 - $16.44

2.5            

243,985

$15.79

243,985

$15.79

$18.22 - $21.00

2.6            

245,968

$20.64

245,968

$20.64

$23.96

1.4            

   123,110

$23.96

   123,110

$23.96
                              
1,719,863

1,669,172

               Duringfiscal 1997, the Company adopted SFAS No. 123, "Accounting for Stock-BasedCompensation," which requires companies to estimate the fair value ofstock options on the date of grant.  Under SFAS No. 123, the Company isrequired to record the estimated fair value of stock options issued ascompensation expense in its consolidated statements of operations over therelated service periods or, alternatively, continue to apply accountingmethodologies as prescribed by APB Opinion No. 25, "Accounting for StockIssued to Employees," and disclose the pro forma effects of the estimatedfair value of stock options issued in the accompanying notes to itsconsolidated financial statements.  The determination of fair value is requiredonly for stock options issued beginning in fiscal 1996. The Company followedthe accounting methodologies as prescribed by APB Opinion No. 25 through June 30, 2002.  Effective July 1, 2002, the Company adopted the fair value recognitionprovisions of SFAS No. 123 prospectively to all new awards granted on or after July 1, 2002. 

**NOTE12 - STOCK OPTIONS (Continued)**

               Thepro forma effects of the total compensation expense that would have beenrecognized under SFAS No. 123 are as follows:

June 30   2002

(Dollars in  thousands, except per share data)

Net loss, as  reported

$(121,196)

Add:       Stock-based  compensation expense included in                  reported  net loss, net of tax

  -       

Deduct:  Total  stock-based compensation expense                  determined  under fair value method, net of tax

           (345)
         
Pro forma net loss

$(121,541)
         
Loss per share:
   
                Basic  - as reported

$      (4.64)

                Basic  - pro forma

$      (4.65)

                Diluted  - as reported

$      (4.64)

                Diluted  - pro forma

$      (4.65)

               Inadopting SFAS No. 123, the Company utilized the Black-Scholes Option PricingModel to estimate the fair value of stock options granted using the followingassumptions:

2004

2003

2002

Expected option  lives

6  years

6  years

6  years

Risk-free interest  rates

4.24%

3.03%

4.52%

Expected dividend  yield

-     

-     

-     

Expected  volatility

33%

33%

33%

               Basedon the results of the model, the fair values of the stock options issued on thedate of grant are as follows:

Weighted  Average

Number

Grant  Date

Fiscal  Years

Issued

Fair  Value Per Option

2004

19,000

$0.01

2003

447,500

$0.35

2002

464,500

$1.19

**NOTE 13 - REORGANIZATION EXPENSE**

               Costsdirectly related to the Company's reorganization under Chapter 11 of theBankruptcy Code are reflected as reorganization expense in the consolidatedstatements of income.  Reorganization expense for the year ended June 30, 2004,was approximately $45,195,000, which consisted primarily of an impairment lossof approximately $21,191,000 related to the Company's ammonia plants located inDonaldsonville, Louisiana, professional fees, severance and employee retentionexpenses, and a $3,800,000 break-up fee paid to Koch for terminating the saleof our interest in Point Lisas Nitrogen.  Reorganization expense for the yearended June 30, 2003, was approximately$3,456,000 which consisted of legal and professional fees.
****
**NOTE14 - LOSS PER SHARE**

               Dilutedloss per share is computed by dividing net loss by the weighted average numberof common shares outstanding during the year, excluding the dilutive commonshare equivalents arising from stock options using the treasury stock method.

               Thenumber of weighted average common shares outstanding, net of treasury shares,used in the Company's diluted loss per share computations for the years ended June 30, 2004, 2003 and 2002, were 24,627,000, 26,190,000 and26,141,000, respectively.

               Commonstock equivalents outstanding at June 30, 2004,2003 and 2002 were not included in the computation of diluted loss per share asa result of the Company incurring a net loss in each of the years, whichrenders these equivalents antidilutive.  Weighted average common sharesoutstanding were lower during fiscal 2004 primarily as a result of abandonmentsof shares to the Company by shareholders.

**NOTE15 - SEGMENT INFORMATION**

               Asof June 30, 2004, the Company had onereportable segment, nitrogen.  The nitrogen segment produces ammonia, ammoniumnitrate, nitrogen solutions and nitric acid and distributes these products tofertilizer dealers and distributors, and industrial users.  Prior to June 30,2004, the Company had a phosphate segment that produced diammonium phosphate("DAP") that was marketed to agricultural users in domestic andinternational markets.  International DAP sales are made through a separateexport association (as described below in this Note).  Approximately 29%, 52%and 63% of the Company's DAP sales were made in international markets duringfiscal 2004, 2003 and 2002, respectively.  At June 30, 2004,the Company determined that its' phosphate segment would no longer be a part ofits continuing operations.  As a result, the phosphate segment has beenreflected as discontinued operations and the related assets and liabilitiesreflected as assets and liabilities from discontinued operations in theaccompanying consolidated financial statements.  Prior to December 2003, theCompany had a potash segment that mined and produced agricultural andindustrial potash products that were sold to farmers, fertilizer dealers,industries and distributors primarily for use in the Southern and Westernregions of the United States and into export markets.  On December 1, 2003, the Company announced that its wholly ownedsubsidiaries in its potash segment had signed a definitive agreement to sellsubstantially all of its potash assets.  As a result of this agreement, theCompany's potash operations have been sold and are reflected as discontinuedoperations.  Prior to March 2004, the Company had a melamine segment thatproduced melamine crystal, which is a raw material for manufacturers in theconstruction/remodeling and automotive industries.  The Company's production ofmelamine began in June 2003.  On March 25, 2004,the Company announced the permanent closure of its melamine operation and itsintent to sell this facility.  As a result, the melamine operation has beenreflected as discontinued operations and the related assets and liabilitiesreflected as assets and liabilities from discontinued operations in theaccompanying consolidated financial statements.

               Theaccounting policies of the segments are the same as those described in Note 2 -summary of significant accounting policies.  Intersegment sales prices areprimarily market-based.  For fiscal 2004, 2003 and 2002, a portion of thepurchase price on certain intercompany sales of anhydrous ammonia to thephosphate segment is subject to deferred payment until certain financialmilestones are achieved.  The Other caption includes corporate allocations,capital expenditures and depreciation, depletion and amortization for ourphosphate, potash and melamine/urea operations as well as other corporateactivities and consolidating intercompany eliminations.  The Company evaluatesperformance based on operating income of the respective business units.

               Segmentinformation consisted of the following:

2004

Nitrogen

Other

Total

(Dollars  in thousands)

Net sales -  external customers

$300,450

$      -      

$300,450

Net sales -  intersegment

32,218

(32,218)

-     

Other revenues

4,570

-     

4,570

Operating income  (loss)

34,124

(6,094)

28,030

Depreciation,  depletion and amortization

13,330

13,937 

27,267

Capital  expenditures

1,172

5,389 

6,561

Total assets

286,715

100,921 

387,636

Equity in income  of Point Lisas Nitrogen

21,787

-      

21,787

**NOTE15 - SEGMENT INFORMATION (Continued)**

2003

Nitrogen

Other

Total

(Dollars  in thousands)

Net sales -  external customers

$237,919

$      -      

$237,919 

Net sales -  intersegment

23,197 

(23,197)

-      

Other revenues

2,022 

-      

2,022 

Impairment of  long-lived assets

(62,912)

-      

(62,912)

Operating loss

(69,567)

(8,048)

(77,615)

Depreciation,  depletion and amortization

20,969 

18,263 

39,232 

Capital  expenditures

6,996 

7,870 

14,866 

Total assets

251,511 

296,579 

548,090 

Equity in income  of Point Lisas Nitrogen

5,601 

-      

5,601 

2002

Nitrogen

Other

Total

(Dollars  in thousands)

Net sales -  external customers

$207,855

$      -      

$207,855 

Net sales -  intersegment

21,728 

(21,728)

-      

Loss on goodwill  impairment

(101,263)

-      

(101,263)

Operating loss

(128,087)

(7,155)

(135,242)

Depreciation,  depletion and amortization

27,080 

17,663 

44,743 

Capital  expenditures

4,959 

7,442 

12,401 

Total assets

427,561 

202,724 

630,285 

Equity in income  of Point Lisas Nitrogen

11,986 

-      

11,986 

               The followingsummarizes geographic information about the Company's net sales:

2004

2003

2002

(Dollars  in thousands)

United States

$298,995

$235,969

$207,204

Other

       1,455

       1,950

          651

 

 

 

$300,450

$237,919

$207,855

               TheCompany is a member of Phosphate Chemicals Export Association, Inc.("PhosChem"), a Webb-Pomerene corporation.  Since becoming a member,all of the Company's phosphate sales into export markets, primarily Asia,are made through PhosChem.  During fiscal 2004, 2003 and 2002, sales to theCompany's exclusive export distributor were $33,400,000, $53,447,000 and$69,540,000, respectively, and were recorded as domestic sales by the Companyand are included in discontinued operations on the Company's consolidatedstatements of operations.  During fiscal 2004, the Company also had revenuesfrom two single customers that represented approximately 16% and 11% ofconsolidated net sales.  The Company had no other customers that representedten percent or more of its revenues during fiscal 2004, 2003 or 2002.

               AtJune 30, 2004, 2003 and 2002, the Company had an investment in a 50-50joint venture anhydrous ammonia plant located in The Republic of Trinidad andTobago which amounted to $125,781,000, $104,355,000 and $99,114,000, respectively (Note 4).  All other long-lived assets of the Company are locatedin the United States.

               Asignificant portion of the Company's trade receivables is due from entitiesthat operate in the chemical fertilizer and farm supply industry.  A severedownturn in the agricultural economy could have an adverse impact on thecollectibility of those receivables.
****
**NOTE 16 - HEDGINGACTIVITIES**

               Duringfiscal 2004, natural gas hedging activities resulted in an average costincrease of approximately $0.32 per MMBtu on volumes hedged of 18,100,000. During fiscal 2003, natural gas hedging activities resulted in an average costdecrease of approximately $0.52 per MMBtu on volumes hedged of 33,450,000. During fiscal 2002, natural gas hedging activities resulted in an average costincrease of approximately $0.39 per MMBtu on volumes hedged of 39,400,000.  At June 30, 2004, the Company had open natural gas derivative contractscovering a total volume of 640,000 MMBtu's with contracts extending throughAugust 2004.  The net unrealized loss on these contracts at June 30, 2004, was $277,000 and was recorded as a component of othercomprehensive loss in the Company's 2004 consolidated balance sheet.  The riskassociated with outstanding natural gas derivative contracts is directlyrelated to increases or decreases in the prices of natural gas in relation tothe contract prices.  At June 30, 2004, the Company also hadunrecognized losses of $942,000 on closed natural gas derivative contractsrelated to its hedging activities that were recorded as a component of othercomprehensive loss in the Company's 2004 consolidated balance sheet.  Due tocertain matters related to the Case, the Company was unable to hedge naturalgas from May 16, 2003, through September 28, 2003.  Under a Final Order on October 20, 2003,the Company obtained authority to hedge 150 natural gas contracts per month ona rolling two-month basis.  Under a Final Order entered on January 22, 2004, the Company was permitted to hedge 450 natural gascontracts per month on a rolling two-month basis.  Under a Final Order datedAugust 19, 2004, approving hedging activities, the Company is permitted tohedge up to 325 natural gas contracts per month for the first and second monthsof a four-month revolving period and up to an additional 150 natural gascontracts per month for the third and fourth months of said period.

**NOTE17 - LOSS ON GOODWILL IMPAIRMENT**

          Duringfiscal 2002, due to continued operating losses primarily caused by low productprices and increased natural gas costs, the Company assessed the recoverabilityof its tangible and intangible long-lived assets related to its nitrogenoperations pursuant to SFAS No. 121, "Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to Be Disposed Of."  TheCompany projected the undiscounted future cash flows for these operations totest recoverability and determined that in certain cases they were less thanthe carrying amount, indicating impairment was likely.  The impairment of anasset is measured by the amount the carrying value of the asset exceeds itsfair value.  The Company's projections were based upon a third party appraisalof our long-lived assets and included additional third party and internallydeveloped forecasts of future nitrogen prices and natural gas costs.  TheCompany determined that it had an impairment in the value of goodwill resultingfrom its December 1996 acquisition of the Donaldsonville, Louisiana,fertilizer operations of First Mississippi Corporation.  Accordingly, theCompany recorded a non-cash charge for impairment of $101,263,000 related toits goodwill during the fourth quarter of fiscal 2002.  Estimates of suchfuture cash flows are subject to significant uncertainties and assumptions. Accordingly, actual results could vary significantly from such estimates.   TheCompany had no goodwill recorded as of June 30, 2004, 2003 or 2002.

**NOTE 18 - INTEREST, NET**

               Interest,net consisted of the following:

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

Interest expense -  continuing operations

$(20,160)

$(19,595)

$(18,392)

Interest income -  continuing operations

            29 

        116  

        224  

     Interest,  net - continuing operations

(20,131)

(19,479)

(18,168)
                  
Interest expense  allocated to discontinued operations

     (4,527)

    (9,655)

    (9,718)
                  
     Total  interest, net

$(24,658)

$(29,134)

$(27,886)

**               **Asa result of the Company's filing bankruptcy, and in accordance with SOP 90-7,it is no longer required to record interest expense related to its unsecuredSenior Notes and its unsecured 1998 IRBs.  As of June 30, 2004,additional interest expense of $15,000,000 and $841,000 would have beenrecorded for the Senior Notes and 1998 IRBs, respectively, if the Company hadnot filed bankruptcy.  As of June 30, 2003,additional interest expense of $1,851,000 and $105,000 would have been recordedfor the Senior Notes and 1998 IRBs, respectively, if the Company had not filedbankruptcy.
****
**NOTE18 - INTEREST, NET (Continued)**

               TheCompany has allocated a portion of its consolidated interest expense todiscontinued operations in accordance with the provisions of Emerging IssuesTask Force (EITF) Issue No. 87-24, "Allocation of Interest to DiscontinuedOperations."  For the fiscal years ended June 20, 2003and 2002, such allocation was based on actual interest calculations onintercompany notes payable between the relevant subsidiaries and MississippiChemical Corporation.  As a result of the Company's bankruptcy filing, theseintercompany notes have been classified as liabilities subject to compromise,which resulted in no interest expense being calculated on these intercompanynotes payable in 2004.  In fiscal 2004, interest allocated to discontinuedoperations has been determined based on the proceeds received from the sale ofthe Company's Potash Assets and an estimated fair market value of its PhosphateAssets, as calculated in accordance with SFAS No. 144.  All proceeds receivedfrom the sale of the Company's assets are required to be used to repay theCompany's secured borrowings.

**NOTE19 - SETTLEMENT OF LITIGATION**

               InDecember 2002, the Company received $3,581,000 in net proceeds from theconclusion of litigation related to a breach of contract claim involvingperformance guarantees for one of its ammonia plants at its nitrogen facilityin Donaldsonville, Louisiana.

               InJanuary 2002, the Company settled the defamation action it filed against TerraInternational, Inc. in August 1995.  The Company received $11,000,000 duringfiscal 2002 related to this settlement.  This settlement was with ZurichSpecialties London, Ltd., which was Terra's liability carrier.  This paymentconcluded this litigation.

               InApril 2002, the Company received approximately $4,363,000 in net proceeds fromthe conclusion of litigation related to defective equipment purchased at its Yazoo  City, Mississippi, nitrogen productionfacility.  The problems arising from this equipment occurred during periodsprior to fiscal 2002.

**NOTE 20 - INCOME TAXES**

               Totalincome tax expense (benefit) was allocated as follows:

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

Income (loss) from  continuing operations

$  34,477 

$ (15,140)

$ (16,412)

Discontinued  operations

(45,438)

(16,617)

(1,507)

Stockholders'  equity (deficit)

        (657)

      9,467 

     (6,474)
                  
$ (11,618)

$ (22,290)

$ (24,393)

               Incometax expense (benefit) attributable to loss from continuing operations consistsof:

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

Current:

     Federal

$    -        

$       -      

$ (14,715)

     State

        165 

         123 

        (174)

        165 

         123 

   (14,889)

Deferred:

     Federal

30,605 

(29,635)

287 

     State

    3,707 

     14,372 

     (1,810)

  34,312 

    (15,263)

     (1,523)
                  
$  34,477 

$ (15,140)

$ (16,412)

**NOTE 20 - INCOME TAXES(Continued)**

               Thetax effect of the significant temporary differences and tax creditcarryforwards at June 30 follows:

2004

2003

Current

Non-current

Current

Non-current

(Dollars  in thousands)

Deferred  tax assets:

Employee benefit  obligations

$      981 

$        73 

$  1,975 

$          83 

Reserve for bad  debts

168 

-      

270 

-      

Employee  post-retirement

556 

251 

453 

296 

Accrual for  closure of gypsum disposal area

-      

-      

-     

809 

Inventories

357 

-      

919 

-     

Alternative  minimum tax credits

-      

-      

-     

663 

Pension

-      

-      

-      

261 

Net operating loss  carryforwards 

-      

78,462 

-     

45,655 

Renewal community  tax credits

-      

1,674 

-     

1,133 

Net deferred  pension

-      

6,164 

-     

7,492 

Accrued expenses -  subject to compromise

-      

6,841 

-     

10,779 

Reorganization  costs

-      

2,251 

-     

1,322 

Capital loss  carryforwards

-      

335 

-     

-     

Unrealized losses  on natural gas     derivative transactions

  486 

  -     

  -     

  -     

Other

           5 

         894 

       -     

     3,090 

               Total  deferred tax assets

2,553 

96,945 

     3,617 

     71,583 
                        
Valuation  allowance

       (61)

  (54,338)

     (424)

   (6,482)

Deferred tax  assets, net of valuation     allowance

      2,492 

      42,607 

      3,193 

     65,101 

Deferred  tax liabilities:

Property, plant  and equipment

-      

(34,400)

-     

(69,574)

Capitalized  interest on equity investments

-      

(1,943)

-     

(2,081)

Unrealized gains  on natural gas derivative     transactions

  -      

  -     

  (81)

  -     

Deferred foreign  income

-      

(20,278)

-     

(14,944)

Pension

-      

(293)

-     

-     

Accrual for  closure of gypsum disposal area

-      

(1,475)

-     

-     

Other

        -      

            (7)

       -     

    (5,020)

               Deferred  tax liabilities

        -      

   (58,396)

       (81)

  (91,619)
                        
Net deferred tax  asset (liability)

$   2,492 

$ (15,789)

  $ 3,112 

 $(26,518)

**NOTE 20 - INCOME TAXES(Continued)**

               Areconciliation of the statutory rate for income taxes and the effective taxrate attributable to the loss from continuing operations for the years endedJune 30 follows:

2004

2003

2002

%  of

%  of

%  of

Loss

Loss

Loss

Before

Before

Before

Amount

Taxes

Amount

Taxes

Amount

Taxes

(Dollars  in thousands)

Income taxes  computed at     Statutory rate

  $(11,849)

  (35.0%)

  $(33,386)

  (35.0%)

  $(46,211)

  (35.0%)

(Decrease)  increase in taxes     resulting from:

     State  taxes

604  

1.8% 

1,387 

1.5% 

(2,808)

(2.1%)

     Valuation  allowance - state

5,999  

17.7% 

5,621 

5.9% 

349 

0.3% 

     Valuation  allowance -          federal

  41,600  

  122.8% 

  -     

  -     

  -      

  -     

     Non-deductible  goodwill

-      

-     

-     

-     

36,024 

27.3% 

     Deferred  foreign income

-      

-     

11,539 

12.1% 

(4,187)

(3.2%)

     Reorganization  expenses

4,458 

13.2% 

-     

-     

-     

-    

     Renewal  Community Credit

(546)

(1.6%)

(1,133)

(1.2%)

-      

-    

     Contingency  reserve          release

  (4,701)

  (13.9%)

  -     

  -     

  -     

  -    

     Other,  net

    (1,088)

   (3.2%)

         832 

    0.8% 

        421 

    0.3% 
                                    
$  34,477 

 101.8%

$(15,140)

(15.9%)

$(16,412)

(12.4%)

               AtJune 30, 2004, the Company had federal and state loss carryforwards ofapproximately $177,036,000 and $398,525,000, respectively.  The federal losscarryforwards expire between 2020 and 2024.  The state loss carryforwardsexpire between 2005 and 2024.  Federal and state valuation allowances of$41,600,000 and $12,799,000, respectively, represent the deferred tax assetrelated to federal net operating loss carryforwards and certain state netdeferred tax assets that may expire unutilized.

               Undistributedearnings of foreign subsidiaries and joint ventures aggregated $53,015,000 at June 30, 2004.  The Company's wholly owned subsidiary, MCHI, had,prior to July 1, 2004, provided a guarantee ofthe debt.  MCHI indirectly owns the Company's 50% joint venture interest inPoint Lisas Nitrogen, which operates an ammonia facility in Point Lisas, Trinidad. Under U.S. tax laws, this guarantee resulted in adeemed non-cash distribution to the Company of earnings from MCHI (andeffectively our portion of the earnings from Point Lisas Nitrogen).  TheCompany has recorded non-current deferred tax liabilities on these earnings ofapproximately $20,278,000 and $14,944,000 at June 30, 2004 and 2003, respectively.

               Pursuantto a Final Order entered on July 15, 2004,the debt guarantee was released.  Effective July 1, 2004, the Company no longer considers Point Lisas Nitrogen'searnings to be reinvested indefinitely.  Accordingly, the Company expects torecord U.S. taxes on those earnings.

               TheCommunity Renewal Tax Relief Act of 2000 authorized up to 40 renewalcommunities in which businesses are eligible for tax incentives.  One of thetax incentives, the Federal Renewal Community Wage Credits ("RC")program, was established to revitalize the economies of select economicallydistressed communities.  Specifically, the RC provides an indefinite federalincome tax credit of 15% of the first $10,000 of an employee's annual wages. Tax credits are available January 1, 2002through December 31, 2009.  At June 30, 2004, the Company's renewal community tax credits totaled$1,674,000.

               Inprior years, the Company established federal and state contingency reserves totalingapproximately $3,800,000 and $900,000, respectively, for certain federal andstate contingent liabilities.  Due to our substantial federal and state netoperating loss positions, the Company no longer considers these contingentreserves necessary.  We have reversed these reserves and recorded a $4,701,000tax benefit for the year ending June 30, 2004.
****
**NOTE 20 - INCOME TAXES(Continued)**

                Incometaxes have been settled with the Internal Revenue Service ("IRS") forall years through June 30, 1999.  A review of the June 30, 2000 fiscal tax year was done in connection with the mostrecently settled IRS audit.  The Company has undergone an evaluation todetermine examination or acceptance without examination for the fiscal taxyears ended June 30, 2001 and June 30, 2002.  The IRS and the Congressional Joint Committee onTaxation have accepted, without examination, both fiscal tax years under theevaluation.

**NOTE 21 - DISCONTINUEDOPERATIONS**

               ***Melamineand Urea Assets.***  On March 25, 2004,the Company announced the permanent closure of its melamine and urea operationsat its Donaldsonville, Louisiana,facility.  The Company has committed to a plan of disposal and has initiatedefforts to locate a buyer for these assets.  In accordance with SFAS No. 144,at June 30, 2004, our melamine and ureaoperations have been reflected as discontinued operations and the relatedassets and liabilities classified as assets and liabilities from discontinuedoperations.  Melamine and urea operations in previous periods have also beenreclassified in accordance with SFAS No. 144.   Corporate allocations have beenexcluded from discontinued operations.

               ***PhosphateAssets.***  In June 2004, the Company's board of directors authorized aplan to dispose of the Company's wholly-owned subsidiary, MississippiPhosphates Corporation, as part of its plan to emerge from bankruptcy.  Thissubsidiary will either be sold to a third party or transferred to MississippiPhosphates' unsecured creditors.  In accordance with SFAS No. 144, ourphosphate operations have been reflected as discontinued operations and therelated assets and liabilities classified as assets and liabilities fromdiscontinued operations.  Phosphate operations in previous periods have alsobeen reclassified in accordance with SFAS No. 144.  Corporate allocations havebeen excluded from discontinued operations.

               ***PotashAssets.***  During the Company's first quarter of fiscal 2004, its boardof directors authorized its management to actively market for sale thelong-lived assets of Mississippi Potash, Inc. and its subsidiary (the"Potash Assets").  Accordingly, at September 30, 2003, the Potash Assets were classified as assets held forsale and all related depreciation expense ceased.  As required by SFAS No. 144,the Company tested the Potash Assets for impairment at September 30, 2003.  This test resulted in a pre-tax impairment charge of$34,022,000, which is reflected as a component of discontinued operations inthe consolidated statement of operations for fiscal 2004.  Significantjudgments and estimates were used in performing the impairment test inaccordance with SFAS No. 144.

               OnDecember 1, 2003, the Company committed to a plan of disposal with itsannouncement of a definitive agreement by its subsidiaries to sell the PotashAssets to two wholly-owned subsidiaries of Intrepid Mining LLC, a privatelyheld Denver-based natural resources company.  On March 2, 2004,these assets were sold.  As a result of this agreement, at June 30, 2004, the Company's potash operations have been reflected asdiscontinued operations.  Potash operations in previous periods presented havealso been reclassified in accordance with SFAS No. 144.  For fiscal 2004, theCompany has recorded an after-tax loss on the disposal of its potash assets of$11,405,000 and an after-tax loss from discontinued operations of $20,501,000,which includes the pre-tax impairment charge of $34,022,000 referred to above. Corporate allocations have been excluded from discontinued operations.

**NOTE 21 - DISCONTINUEDOPERATIONS (Continued)**

               Thefollowing tables summarize financial information for the Company's discontinuedoperations:

               Balancesheet of discontinued operations:

June 30,   2004

(Dollars in thousands)

Accounts  receivable

$     6,306          

Inventories

11,346          

Property, plant  and equipment

13,909          

Other

      2,783          

     Current  assets of discontinued operations

34,344          

Accounts payable

6,295          

Accrued  liabilities

4,028          

Other

      4,024          

     Current  liabilities of discontinued operations

     14,347          

          Net  assets of discontinued operations

$  19,997          

               Netsales and loss from discontinued operations:

Years  ended June 30,

2004

2003

2002

(Dollars  in thousands)

Net sales:

    Melamine  and urea assets

$  33,320 

$  34,172 

$  55,704 

    Potash  assets

46,824 

69,500 

77,477 

    Phosphate  assets

  116,352 

  102,755 

  110,258 

$196,496 

$206,427 

$243,439 

Income (loss) from  discontinued operations    before income taxes:

    Melamine  and urea assets

$(15,553)

$(23,532)

$     (905)

    Potash  assets

(34,791)

(6,689)

(9,629)

    Phosphate  assets

  (44,102)

  (12,001)

      3,452 

$(94,446)

$(42,222)

$  (7,082)

Income tax expense  (benefit):

    Melamine  and urea assets

$  (6,252)

$  (9,460)

$     (364)

    Potash  assets

(14,290)

(2,676)

(3,092)

    Phosphate  assets

  (16,646)

    (4,481)

     1,949 

$(37,188)

$(16,617)

$ (1,507)

Income (loss) from  discontinued operations:

    Melamine  and urea assets

$  (9,301)

$(14,072)

$    (541)

    Potash  assets

(20,501)

(4,013)

(6,537)

    Phosphate  assets

  (27,456)

    (7,520)

     1,503 

$(57,258)

$(25,605)

$ (5,575)
****
**NOTE 22 - RETIREMENT PLANS**

               TheCompany maintains a non-contributory defined benefit pension plan that providesbenefits to all eligible full-time employees.  Under the plan, retirementbenefits are primarily a function of both the employee's average annualcompensation and number of years of credited service.  The plan is fundedannually by the Company, subject to the Internal Revenue Code fundinglimitation.  The Company does not anticipate making any contributions to theplan in fiscal 2005.  The plan's assets consist primarily of cash, equityinvestments and fixed income securities.

               Thepercentage of assets by asset class as of the measurement date was as follows:

2004

2003

Cash or cash  equivalents

   3.1%

   6.5%

Equity investments

63.5%

56.5%

Fixed income  securities

33.4%

37.0%

               Duringfiscal 2003, the Company froze retirement benefits effective April 30, 2003.  Any participant who was an active employee on thefreeze date was automatically 100% vested regardless of years of service.  TheCompany continues to make contributions to the plan as required by law.  As aresult of this freeze, the following adjustment was made:

Accrued pension  cost

$(26,550)

Intangible asset

7,817 

Deferred income  taxes

      6,557 

Other  comprehensive loss

$(12,176)

               TheCompany's retirement plan committee employs a statement of investment policy,which is used to direct the activities of fund asset investment managers.  Thepolicy identifies and presents objectives, guidelines and performance standardsfor the assets of the plan.  The objectives are formulated in response toanticipated financial needs of the plan, consideration of risk tolerance andthe need to document and communicate objectives, guidelines and standards tothe investment managers and other fiduciaries of the plan's assets.

               Objectivesof the policy include the need to invest assets in such a manner to keep futurecontributions within a reasonable range; to maintain liquidity sufficient topay current benefits; and to maintain diversity among asset classes in order toearn a return reasonable with acceptable risk.

               Withrespect to the objective of maintaining diversity among asset classes, thepolicy sets certain asset allocation targets.  Outlined below is the statedtarget percentage by asset class, as well as the actual percentage effective atJune 30, 2004:

Asset Class

Policy  Target

Actual

Equity investments

   65%

 64.3%

Fixed income securities

   35%

 34.8%

Cash

    -   

   0.9%

100%

100.0%

**NOTE 22 - RETIREMENT PLANS(Continued)**

               Thefollowing tables, prepared in accordance with SFAS No. 132, "Employers'Disclosures about Pensions and Other Post-retirement Benefits," set forthpension benefit obligations and plan assets for the Company's defined benefitpension plan, based on an April 1 measurement date, as of June 30:

2004

2003

(Dollars  in thousands)

Change in benefit  obligation:

     Benefit  obligation at beginning of year

$113,901 

$108,668 

     Service  cost

-      

3,278 

     Interest  cost

7,139 

7,656 

     Plan  amendments

-      

3,074 

     Actuarial  loss 

10,988 

13,557 

     Benefit  payments

(8,463)

(7,984)

     Curtailments,  settlements, acquisitions

         -      

   (14,348)

               Benefit  obligation at end of year

  123,565 

  113,901 
            
Change in plan  assets:
         
     Fair  value of plan assets at beginning of year

86,777 

105,078 

     Actual  (loss) gain on plan assets

21,427 

(10,734)

     Employer  contributions

    36 

1,260 

     Benefit  payments

(8,463)

(7,984)

     Expenses

        (542)

       (843)

               Fair  value of plan assets at end of year

     99,235 

   86,777 
            
Funded status

(24,330)

(27,124)

Unrecognized  transition asset

-      

(72)

Unrecognized prior  service cost

-      

7,817 

Unrecognized net  gain

    15,411 

     18,804 

               Accrued  pension cost

$  (8,919)

$       (575)

               Thefollowing assumptions were used to measure net periodic pension expense for theplans for fiscal years ended June 30:

2004

2003

2002

Discount rate

6.50%

7.25%

7.50%

Average increase  in compensation levels

N/A

3.00%

3.00%

Expected long-term  rate of return on assets

8.50%

8.50%

8.50%

               Thegeneral approach for determining the long-term rate of return assumption is touse a weighted average of expected returns for each major asset class, based onthe target asset allocation percentages incorporated in the plan's investmentstrategy.  The expected returns for each major asset class are based primarilyon historical returns in the post-war period.  It is expected that future returnsof the plan may be slightly less than historical returns, and therefore theactual long-term rate of return on assets assumption is set at a slightly lowerlevel than would be determined based on historical returns alone.

**NOTE22 - RETIREMENT PLANS (Continued)**

               Netperiodic pension expense includes the following components:

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

Service cost -  benefits earned during the period

$     -     

$ 3,278 

$ 3,129 

Interest cost on  projected benefit obligations

7,139 

7,656 

7,482 

Expected return on  plan assets

(7,031)

(8,340)

(8,651)

Net amortization

(72)

289 

(257)

Recognized loss

528 

193 

-     

Curtailment/settlement  expense

    7,817 

      586 

       -     

Net periodic  pension expense

$ 8,381 

$ 3,662 

$ 1,703 

               Expectedbenefit payments over the next ten years are as follows:

Year

Amount

2005

$  7,015

2006

$  7,182

2007

$  7,117

2008

$  7,037

2009

$  6,966

2010-2014

$33,689

               Theassumptions used in the calculation of the Company's benefit obligations as ofthe measurement dates are as follows:

2004

2003

Discount rate

6.0%

6.5%

Average increase  in compensation levels

N/A

3.0%

Expected long-term  rate of return on assets

8.5%

8.5%

               TheCompany also has a contributory thrift plan covering substantially all regularfull-time employees who have elected to participate in the plans.  Under theplans, the Company matches 50% of each employee's contributions to the plan upto a maximum of 3% of the employee's base compensation.  Company contributionstotaled approximately $879,000 in fiscal 2004, $1,204,000 in fiscal 2003 and$1,376,000 in fiscal 2002.

               AtJune 30, 2004 and 2003, the Company had recorded post-retirementbenefit obligations of $879,000 and $1,139,000, respectively, in addition toretirement plans.

**NOTE23 - LEASE COMMITMENTS**

               TheCompany has commitments under operating leases for equipment and storagewarehouses.  The following is a schedule of the future minimum rental paymentsrequired as of June 30, 2004, under operating leaseshaving noncancellable lease terms in excess of one year as of the respectivelease's inception:

Amount

Years  Ending June 30

(Dollars  in thousands)

2005

$ 2,034

2006

980

2007

287

2008

      142
   
$ 3,443
****
**NOTE23 - LEASE COMMITMENTS (Continued)**

               Rentalexpense for all operating leases was $3,552,000 for fiscal 2004, $4,349,000 forfiscal 2003 and $4,495,000 for fiscal 2002.

**NOTE24 - COMMITMENTS AND CONTINGENCIES**

              TheCompany, in the ordinary course of its business, is the subject of, or a partyto, various pending or threatened legal actions.  The Company believes that anyultimate liability arising from these actions will not have a significantimpact on the financial position or the future earnings of the Company.

               Priorto July 1, 2002, the Company guaranteedloans taken by officers of the Company to borrow money solely to purchasetarget levels of stock in the Company.  The total amount outstanding on theseloans at June 30, 2004 was approximately$80,000.  No loans were made subsequent to July 1, 2002.

**NOTE 25 - RAW MATERIALCONTRACTS**

               MississippiPhosphates Corporation ("MPC"), a wholly owned subsidiary of the Company, hascontracted with Office Cherifien des Phosphates ("OCP"), the nationalphosphate rock supplier of Morroco, to import MPC's full requirement ofphosphate rock through June 30, 2016.  The phosphate rocksupply and related purchase price is determined annually based on the estimatedphosphate rock costs incurred by certain domestic phosphate producers and theoperating performance of MPC.

**NOTE26 - SUPPLEMENTAL CASH FLOW INFORMATION**

               Theincrease (decrease) in cash and cash equivalents due to the changes inoperating assets and liabilities consisted of the following:

Years  Ended June 30

2004

2003

2002

(Dollars  in thousands)

Receivables

$ 15,473  

$ (9,898)

$ (9,459)

Inventories

10,520  

(2,196)

21,775 

Prepaid expenses  and other current assets

(9,763)

(3,923)

6,527 

Accounts payable

(7,260)

12,829 

(2,219)

Accrued  liabilities

    11,016 

  (6,496)

         332 
                  
$  19,986 

$ (9,684)

$ 16,956 

               Duringfiscal 2004, 2003 and 2002, the Company received net income tax refunds of$31,000, $15,031,000 and $27,970,000.  Payments of interest, net of amountscapitalized, were $11,837,000 in fiscal 2004, $18,349,000 in fiscal 2003 and$24,111,000 in fiscal 2002.
****
**NOTE 27 - VALUATION ANDQUALIFYING ACCOUNTS**

               Detailsregarding the Company's valuation and qualifying accounts as of June 30 are asfollows:

Allowance  for  Doubtful Accounts

Deferred  Tax  Valuation

Asset  Impairment  Valuation

Balance, June 30,   2002

$  2,160 
   
$        349 

$        -      

     Charged  to cost and expenses

634 
   
5,621 

-      

     Charged  to stockholders' equity

-     
   
936 

-      

     Other  additions (deductions)

     (955)
   
          -      

 

          -      
   
Balance, June 30,   2003

1,839 
   
6,906 

-      

     Charged  to cost and expenses

310 
   
47,598 

82,277 

     Charged  to stockholders' equity

-     
   
(105)

-      

     Other  additions (deductions) (1)

(7)
   
-      

(34,022)

     Balance  transferred to discontinued operations

     (884)
   
          -      

 

          -      
                  
Balance, June 30,   2004

$  1,258 
   
$   54,399 

 

$   48,255 

(1)     Infiscal 2004, long-lived asset valuation balances related to the Company'sPotash Assets are shown as a reduction as these assets were s sold in fiscal2004.

**NOTE 28 - GUARANTORSUBSIDIARIES**

               Paymentobligations under the Company's 7.25% Senior Notes, due November 15, 2017,issued pursuant to that certain indenture, dated as of November 25, 1997, arefully and unconditionally guaranteed on a joint and several basis byMississippi Nitrogen, Inc., and MissChem Nitrogen, L.L.C. (the "GuarantorSubsidiaries"), the Company's wholly owned direct subsidiary and whollyowned indirect subsidiary, respectively.  Condensed consolidating financialinformation regarding the parent company, Guarantor Subsidiaries andnon-guarantor subsidiaries for June 30, 2004,2003 and 2002 is presented below for purposes of complying with the reportingrequirements of the Guarantor Subsidiaries. 
****
**NOTE28 - GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS**

Year  Ended June 30, 2004

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Revenues:

     Net  sales

$         -      

$ 195,735 

$ 284,348 

$(179,633)

$ 300,450 

     Other

           -      

       4,570 

         -        

          -       

        4,570 

-      

200,305 

284,348 

(179,633)

305,020 

Operating  expenses:

     Cost  of products sold

-      

189,821 

238,607 

(179,253)

249,175 

     Selling,  general and administrative

1,191 

5,866 

14,051 

-      

21,108 

     Impairment  of long-lived assets

-      

-      

-      

-      

-     

     Other

           -      

        5,088 

       1,619 

          -      

       6,707 

        1,191  

    200,775 

   254,277 

  (179,253)

   276,990 

Operating (loss)  income

(1,191)

(470)

30,071 

(380)

28,030 

Other (expense)  income:

     Interest,  net

(20,013)

(101)

(17)

-      

(20,131)

     Settlement  of litigation

-      

-      

-      

-      

-     

     Other

     (94,223)

      (1,818)

       1,419 

      98,064 

       3,442 

(Loss) income from  continuing     operations before reorganization     expense and income taxes

  (115,427)

  (2,389)

  31,473 

  97,684 

  11,341 

Reorganization  expense

       22,553 

          602  

     22,040 

          -       

    45,195 
                  
(Loss) income from  continuing     operations before income taxes

  (137,980)

  (2,991)

  9,433 

  97,684 

  (33,854)

Income tax  (benefit) expense

           (986)

     14,898 

     (7,966)

      28,531 

     34,477 

(Loss) income from  continuing

   operations

(136,994)

(17,889)

17,399 

69,153 

(68,331)

Loss on  discontinued operations

            -      

           -      

   (68,663)

           -      

    (68,663)

Net loss

$ (136,994)

$  (17,889)

$ (51,264)

$    69,153 

$(136,994)
****
**NOTE28 - GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS**

Year  Ended June 30, 2003

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Revenues:

     Net  sales

$        -      

$ 150,321 

$  240,167 

$ (152,569)

$  237,919 

     Other

          -      

       2,022 

           -       

           -      

        2,022 

-      

152,343 

240,167 

(152,569)

239,941 

Operating  expenses:

     Cost  of products sold

-      

155,609 

212,774 

(152,913)

215,470 

     Selling,  general and administrative

545 

6,566 

19,372 

-      

26,483 

     Impairment  of long-lived assets

-      

-      

62,912 

-      

62,912 

     Other

          -      

      5,793 

        6,898 

           -      

      12,691 

          545 

  167,968 

   301,956 

   (152,913)

    317,556 

Operating loss

(545)

(15,625)

(61,789)

344 

(77,615)

Other (expense)  income:

     Interest,  net

(16,293)

(4,543)

1,357 

-      

(19,479)

     Settlement  of litigation

-      

-      

3,581 

-      

3,581 

     Other

    (71,739)

   (31,246)

          156 

    104,410 

        1,581 

Loss from  continuing operations     before reorganization expense     and income taxes

  (88,577)

  (51,414)

  (56,695)

  104,754 

  (91,932)

Reorganization  expense

       3,456 

         -      

          -      

          -      

        3,456 
                  
Loss from  continuing operations     before income taxes

  (92,033)

  (51,414)

  (56,695)

  104,754 

  (95,388)

Income tax expense  (benefit)

     13,820 

      4,066 

    (34,370)

      1,344 

    (15,140)

Loss from  continuing operations

 (105,853)

  (55,480)

    (22,325)

103,410 

    (80,248)

Loss from  discontinued operations

          -      

         -      

    (25,605)

        -       

    (25,605)
                  
Net loss

$(105,853)

$ (55,480)

$  (47,930)

$103,410 

$(105,853)

**NOTE28 - GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS**

Year  Ended June 30, 2002

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Revenues:

     Net  sales

$       -      

$  135,482 

$  210,837 

$ (138,464)

$  207,855 

Operating expenses:

     Cost  of products sold

-      

152,411 

190,760 

(138,213)

204,958 

     Selling,  general and administrative

(822)

5,071 

20,218 

-      

24,467 

     Loss  on goodwill impairment

-      

-      

101,263 

-      

101,263 

     Other

        -      

      8,385 

      4,024 

         -      

    12,409 

         (822)

   165,867 

   316,265 

  (138,213)         

  343,097 

Operating income  (loss)

822 

(30,385)

(105,428)

(251)

(135,242)

Other (expense)  income:

     Interest,  net

(21,507)

(10,110)

4,498 

8,951 

(18,168)

     Settlement  of litigation

15,363 

-      

-      

-      

15,363 

     Other

  (106,046)

    (89,214)

       3,307 

   197,967 

        6,014 

Loss from  continuing operations     before income taxes

  (111,368)

  (129,709)

  (97,623)

  206,667 

  (132,033)

Income tax expense  (benefit)

        9,828 

   (10,722)

     (11,927)

      (3,591)

   (16,412)

Loss from  continuing operations

(121,196)

(118,987)

(85,696)

210,258 

(115,621)

Loss from  discontinued operations

          -      

          -      

      (5,575)

          -      

     (5,575)

Net loss

$(121,196)

$(118,987)

$  (91,271)

$ 210,258 

$(121,196)

**NOTE28 ‐ GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSED CONSOLIDATING BALANCE SHEET**

June 30, 2004

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Assets

Current assets:

     Cash  and cash equivalents

$  22,389 

$            1 

$            17 

$         -      

$   22,407 

     Receivables,  net

76,273 

-      

31,264 

(79,612)

27,925 

     Inventories

-      

25,013 

6,728 

(244)

31,497 

     Prepaid  expenses and other

          current  assets

6,228 

3,948 

2,926 

(221)

12,881 

     Assets  of discontinued operations

        -      

          -      

      34,344 

           -      

    34,344 

     Total  current assets

104,890 

28,962 

75,279 

(80,077)

129,054 

Investments in  affiliates

93,163 

64,656 

119,368 

(144,068)

133,119 

Other assets

133,082 

-      

132,555 

(259,200)

6,437 

Property, plant  and equipment, net

      2,175 

   108,215 

       8,636 

          -      

  119,026 

            Total  assets

$ 333,310 

$ 201,833 

$ 335,838 

$(483,345)

$387,636 

Liabilities and  Shareholders' (Deficit) Equity

Current  liabilities:

     Debt  due within one year

$ 151,533 

$        -      

$        -      

$        -      

$151,533 

     Accounts  payable

21,925 

19,909 

38,986 

(64,418)

16,402 

     Accrued  liabilities and other  

5,879 

2,780 

837 

785 

10,281 

     Liabilities  of discontinued operations

          -      

          -      

     14,347 

          -      

    14,347 

     Total  current liabilities

179,337 

22,689 

54,170 

(63,633)

192,563 

Other long-term  liabilities and     deferred credits

  24,372 

  37,860 

  119,356 

  (139,431)

  42,157 

Liabilities  subject to compromise

208,584 

66,665 

198,233 

(241,583)

231,899 

Shareholders'  (deficit) 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

(346,041)

(250,097)

(430,479)

680,576 

(346,041)

     Accumulated  other comprehensive loss

(10,811)

-      

-      

-      

(10,811)

     Treasury  stock, at cost

   (28,474)

            -      

          -      

          -      

   (28,474)

     Total  shareholders' (deficit) equity

   (78,983)

     74,619  

   (35,921)

    (38,698)

   (78,983)

     Total  liabilities and shareholders'          (deficit) equity

  $ 333,310 

  $ 201,833  

  $ 335,838 

  $(483,345)

  $387,636 

** **
****
**NOTE28 ‐ GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSED CONSOLIDATING BALANCE SHEET**

June 30, 2003

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Assets

Current assets:

     Cash  and cash equivalents

$    6,073 

$          1 

$          28 

$         -      

$    6,102 

     Receivables,  net

39,204 

-      

72,215 

(55,044)

56,375 

     Inventories

-      

17,449 

48,700 

137 

66,286 

     Prepaid  expenses and other            current assets

        4,095 

       1,091 

        3,925 

           (960)

       8,151 

     Total  current assets

49,372 

18,541 

124,868 

(55,867)

136,914 

Investments in  affiliates

187,749 

68,312 

97,579 

(242,131)

111,509 

Other assets

228,011 

-      

16,638 

(234,344)

10,305 

Property, plant  and equipment, net

      4,841 

 120,064 

   164,457 

          -      

  289,362 

            Total  assets

$469,973 

$206,917 

$403,542 

$(532,342)   

$548,090 

Liabilities and  Shareholders' Equity

Current  liabilities:

     Long-term  debt due within          one year

  $158,423 

  $       -      

  $       -      

  $       -      

  $158,423 

     Accounts  payable

17,181 

25,567 

56,357 

(83,369)

15,736 

     Accrued  liabilities and other  

           22 

      1,042 

      3,577 

            (8)

      4,633 

     Total  current liabilities

175,626 

26,609 

59,934 

(83,377)

178,792 

Other long-term  liabilities and     deferred credits

  26,213 

  15,751 

  99,185 

  (77,759)

  63,390 

Liabilities  subject to compromise

211,358 

72,050 

207,308 

(241,584)

249,132 

Shareholders'  equity:

     Common  stock

280 

1 

58,940 

(58,941)

280 

     Additional  paid-in capital

306,063 

324,715 

335,617 

(660,332)

306,063 

     Accumulated  deficit

(209,047)

(232,209)

(357,442)

589,651 

(209,047)

     Accumulated  other comprehensive           loss

  (12,046)

  -      

  -      

  -      

  (12,046)

     Treasury  stock, at cost

   (28,474)

         -      

         -      

         -      

    (28,474)

     Total  shareholders' equity

     56,776 

    92,507 

    37,115 

 (129,622)

     56,776 

     Total  liabilities and shareholders'          equity

  $469,973 

  $206,917 

  $403,542 

  $(532,342)

  $548,090 

**NOTE28 ‐ GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS**

Year  Ended June 30, 2004

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Cash flows from  operating activities:

     Net  loss

$(136,994)

$  (17,889)

$  (51,264)

$   69,153 

$(136,994)

     Reconciliation  of net loss to net cash          (used in) provided by  operating          activities:

             Net  change in operating assets                   and  liabilities

  (33,370)

  (19,757)

  30,278 

  42,835 

  19,986 

             Loss  on impairment and sale of                   discontinued  operations

  -      

  -      

  122,583 

  -      

  122,583 

             Depreciation,  depletion and                   amortization

  6,479 

  12,664 

  8,124 

  -      

  27,267 

             Change  in deferred loss on                   hedging  activities, net of tax

  (744)

  -      

  -      

  -      

  (744)

             Equity  in earnings in                   unconsolidated  affiliates

  94,227 

  1,775 

  (21,808)

  (98,064)

  (23,870)

             Deferred  income taxes and other

     (8,792)

     16,055 

           639 

   (13,924)

     (6,022)

Net cash (used in)  provided by operating     activities

    (79,194)

     (7,152)

      88,552 

           -      

      2,206 

Cash flows from  investing activities:

     Purchases  of property, plant and          equipment

  12 

  (925)

  (5,648)

  -      

  (6,561)

     Proceeds  from sale of assets

36 

20 

29,271 

-      

29,327 

     Other

          -      

       1,881 

             19 

          -      

      1,900 

Net cash provided  by investing activities

            48 

          976 

      23,642 

          -      

    24,666 

Cash flows from  financing activities:

     Net  change in affiliate notes

106,029 

6,176 

(112,205)

-      

-      

     Debt  payments

(240,500)

-      

-      

-      

(240,500)

     Debt  proceeds

233,610 

-      

-      

-      

233,610 

     Financing  fees

      (3,677)

          -      

           -      

          -      

     (3,677)

Net cash provided  by (used in) financing     activities

        95,462 

         6,176 

    (112,205)

            -      

     (10,567)

Net increase  (decrease) in cash and cash     equivalents

  16,316 

  -      

  (11)

  -      

  16,305 

Cash and cash equivalents  -     beginning of year

         6,073 

                1 

                28 

            -      

         6,102 

Cash and cash  equivalents - end of year

$   22,389 

$            1 

$            17 

$        -      

$   22,407 

** **
****
**NOTE28 ‐ GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS**

Year  Ended June 30, 2003

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Cash flows from  operating activities:

     Net  loss

$(105,853)

$ (55,480)

$ (47,930)

$ 103,410 

$(105,853)

     Reconciliation  of net loss to net cash          (used in) provided by  operating          activities:

             Net  change in operating assets                   and  liabilities

  (26,794)

  29,715 

  18,433 

  (31,038)

  (9,684)

             Impairment  of long-lived assets

-      

-      

75,118 

-      

75,118 

             Depreciation,  depletion and                   amortization

  5,558 

  12,881 

  20,793 

  -      

  39,232 

             Change  in deferred loss on                   hedging  activities, net of tax

  (2,747)

  -      

  -      

  -      

  (2,747)

             Equity  in earnings in                   unconsolidated  affiliates

  71,554 

  31,331 

  (5,616)

  (104,410)

  (7,141)

             Refund  of federal taxes pursuant to                   the  Job Creation and Workforce                   Assistance  Act of 2002

  14,878 

  -      

  -      

  -      

  14,878 

             Deferred  income taxes and other

     10,562 

  (14,410)

  (66,891)

    32,038 

   (38,701)

Net cash (used in)  provided by operating     activities

     (32,842)

        4,037 

      (6,093)

          -      

     (34,898)

Cash flows from  investing activities:

     Purchases  of property, plant and          equipment

  (489)

  (6,186)

  (8,191)

  -      

  (14,866)

     Proceeds  from sale of assets

3,234 

7 

142 

-      

3,383 

     Other

         268 

      1,955 

          20 

        -      

      2,243 

Net cash provided  by (used in) investing     activities

       3,013 

      (4,224)

      (8,029)

          -      

      (9,240)

Cash flows from  financing activities:

     Net  change in affiliate notes

(14,269)

172 

14,097 

-      

-      

     Debt  payments

(237,434)

-      

-      

-      

(237,434)

     Debt  proceeds

   285,685 

        -      

        -      

        -      

   285,685 

Net cash provided  by financing     activities

      33,982 

          172 

     14,097 

         -      

       48,251 

Net increase  (decrease) in cash and cash     equivalents

  4,153 

  (15)

  (25)

  -      

  4,113 

Cash and cash  equivalents -     beginning of year

        1,920 

            16 

             53 

          -      

        1,989 

Cash and cash  equivalents - end of year

$    6,073 

$          1 

$         28 

$     -       

$    6,102 

**NOTE28 ‐ GUARANTOR SUBSIDIARIES (Continued)**

**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS**

Year  Ended June 30, 2002

  (Dollars in thousands)

Parent  Company

Guarantor  Subsidiaries

Non-Guarantor  Subsidiaries

  Eliminations

  Consolidated

Cash flows from  operating activities:

     Net  loss  

$ (121,196)

$ (118,987)

$  (91,271)

$  210,258 

$ (121,196)

     Reconciliation  of net loss to net cash          (used in) provided by  operating          activities:

             Net  change in operating assets                   and liabilities

  (37,592)

  1,290 

  54,362 

  (1,104)

  16,956 

             Loss  on goodwill impairment

-      

-      

101,263 

-      

101,263 

             Depreciation,  depletion and                   amortization

  4,563 

  12,631 

  27,549 

  -      

  44,743 

             Change  in deferred loss on                   hedging  activities, net of tax

  4,780 

  -      

  -      

  -      

  4,780 

             Equity  in earnings in                   unconsolidated  affiliates

  115,065 

  91,132 

  (11,994)

  (206,972)

  (12,769)

             Deferred  income taxes and other

   27,977 

   (3,760)

    (2,112)

     (2,182)

   19,923 

Net cash (used in)  provided by operating     activities

      (6,403)

    (17,694)

      77,797 

         -          

     53,700 

Cash flows from  investing activities:

     Purchases  of property, plant and          equipment

  (182)

  (2,474)

  (9,745)

  -      

  (12,401)

     Proceeds  from sale of assets

62 

3,108 

4,873 

-      

8,043 

     Other

    (1,000)

     1,485 

      2,315     

        -      

    2,800 

Net cash (used in)  provided by investing     activities

      (1,120)

        2,119  

      (2,557)   

         -       

     (1,558)

Cash flows from  financing activities:

     Net  change in affiliate notes

59,665 

15,575 

(75,240)

-     

-      

     Debt  payments

(286,345)

-      

-      

-      

(286,345)

     Debt  proceeds

  224,395 

       -      

       -      

       -      

  224,395 

Net cash (used in)  provided by financing     activities

      (2,285)   

      15,575 

    (75,240   

         -      

     (61,950)   

Net decrease in  cash and cash     equivalents

  (9,808)

  -      

  -      

  -      

  (9,808)

Cash and cash  equivalents -     beginning of year

      11,728 

            16 

             53 

           -      

      11,797 

Cash and cash  equivalents -  end of year

$     1,920 

$         16 

$          53 

$        -      

$     1,989 

**QUARTERLYRESULTS**

               Quarterlyresults are not indicative of results expected for the full fiscal year and canvary significantly from one year to the next primarily due to weather‐relatedshifts in planting schedules and purchase patterns.  We incur substantialexpenditures for fixed costs throughout the year and substantial expendituresfor inventory in advance of the spring planting season.  Quarterly results forfiscal 2004 and 2003 have been restated to reflect discontinued operations ofthe Company (see Note 21).

               Thefollowing tables present our selected unaudited quarterly results of operationsfor fiscal 2004 and 2003.

 

**Year Ending June 30, 2004**

(In thousands,  except per share data)

1st  Q

2nd  Q

3rd  Q

4th  Q

Net sales

$  52,532 

$  88,276 

$  87,248 

$  72,394 

Operating (loss)  income

$(11,298)

$  22,286 

$  12,888 

$    4,154 

Net loss

$(39,415)

$(25,115)

$(27,782)

$(44,682)

Loss per share -  basic and diluted (1)

$    (1.55)

$    (1.03)

$    (1.15)

$    (1.84)

Weighted average  common shares     outstanding - basic and diluted

  25,439 

  24,408 

  24,261 

  24,261 

Dividends paid per  share

$       -     

$       -     

$       -     

$       -     

Common stock price  range

   -  high

$     0.10 

$     0.15 

$     0.65 

$     0.51 

   -  low

$     0.05 

$     0.06 

$     0.12 

$     0.15 

**Year  Ending June 30, 2003**

(In thousands,  except per share data)

1st  Q

2nd  Q

3rd  Q

4th  Q

Net sales

$  43,593  

$   63,983 

$  64,566 

$  65,777  

Operating loss

$(10,369)

$  (1,857)

 $(59,324)

$  (6,065)

Net loss

$(23,505)

$(14,172)

$(48,027)

$(20,149)

Loss per share -  basic and diluted (1)

$     (0.90)

$     (0.54)

$     (1.83)

$     (0.77)

Weighted average  common shares     outstanding - basic and diluted

  26,168 

  26,175 

  26,208 

  26,212 

Dividends paid per  share

$       -     

$        -     

$       -     

$       -      

Common stock price  range

   -  high

$     1.65 

$      0.80 

$     0.40 

$      0.45 

   -  low

$     0.58 

$      0.17 

$     0.08 

$      0.06 

(1)   Quarterly amounts may not add to the annual earnings pershare because of changes in the number of outstanding shares during the year.
****
**ITEM9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING                ANDFINANCIAL DISCLOSURE**

            None.

ITEM 9A.  CONTROLS AND PROCEDURES

**Evaluationof Disclosure Controls and Procedures**

Based on theirevaluation as of the end of the period covered by this Annual Report on Form 10‐K,our Chief Executive Officer and Chief Financial Officer have concluded that ourdisclosure controls and procedures as defined in Rules 13a‐15(e) and15d-15(e) under the Securities Exchange Act of 1934 are effective in alertingthem on a timely basis to material information that is required to be includedin our periodic SEC reports.

**Changes in Internal Controls**

There were nosignificant changes during the fourth fiscal quarter of the fiscal year coveredby this Annual Report on Form 10‐K that have materially affected, or arereasonably likely to materially affect, these controls, including anycorrective actions with regard to significant deficiencies or materialweaknesses.
****
**PARTIII**

**ITEM10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

**Directors**

**Director**

**Age**

**Principal Occupation During Last Five Fiscal  Years**

Reuben V. Anderson

62

Mr. Anderson has been a director of the  Company since 2000.  His term expires at the next annual meeting of  shareholders.  For more than the past five years, he has been a partner in  the law firm of Phelps Dunbar LLP in Jackson, Mississippi.  He is a director of Trustmark  National Bank, BellSouth Corporation, The Kroger Co., and Burlington  Resources Inc.

Coley L. Bailey

53

Mr. Bailey has been a director of the Company  since 1978 and Chairman of the Board since 1988.  His term expires at the  2006 annual meeting of shareholders.  For more than the past five years, he  has been engaged in farming activities in Yalobusha County, Mississippi.

Frank R. Burnside, Jr.

55

Mr. Burnside has been a director of the  Company since 1985. His term expires at the next annual meeting of  shareholders.  For more than the past five years, he has been engaged in  various farm-supply related businesses in Newellton, Louisiana.  He is a director of Newellton Gin Co., Vice  President and Manager of Newellton Elevator Company, Inc., President of Delta  Gin Co., L.L.C., President of Panola Co., Ltd., and Vice President and a  director of Tensas Warehouse.  He is also a director of Tensas State Bank.

W. R. Dyess

65

Mr. Dyess has been a director of the Company  since 1991.  His term expires at the 2005 annual meeting of shareholders.   For more than the past five years, he has served as President of Dyess Farm  Center, Inc., in Bardwell, Texas, and ABC Ag Center,  Inc., in Corsicana, Texas.

Woods E. Eastland

59

Mr. Eastland has been a director of the  Company since 1994. His term expires at the 2006 annual meeting of  shareholders.  Since 1986, he has been President and Chief Executive Officer  of Staple Cotton Cooperative Association (Staplcotn) and its subsidiary  Staple Cotton Discount Corporation (Stapldiscount), a cotton marketing  cooperative and a financing cooperative, respectively, each located in Greenwood, Mississippi.

John Sharp Howie

64

Mr. Howie has been a director of the Company  since 1966 and Vice Chairman of the Board since 1988.  His term expires at  the 2005 annual meeting of shareholders.  For more than the past five years,  he has been engaged in farming activities in Yazoo County, Mississippi.

George Penick

56

Mr. Penick has been a director of the Company  since 1994. His term expires at the next annual meeting of shareholders.  For  more than the past five years, he has been President of the Foundation for  the Mid‐South, a private philanthropic foundation.

W. A. Percy II

64

Mr. Percy has been a director of the Company  since 1997.  He previously served as director of the Company from 1988‐1994.  His term expires at the 2006 annual meeting of shareholders.  For more than  the past five years, Mr. Percy has been engaged in farming activities in Washington County, Mississippi, and other agribusiness  enterprises.  He is currently President and Chief Executive Officer of  Greenville Compress Company, a commercial warehouse and real estate company.   Mr. Percy also serves as a director of Entergy Corporation.

**Executive Officers**

            Executive officers are elected for aone‐year term by the Board of Directors. The Company's executive officersare as follows: 

**Officer**

**Age**

**Office and Employment  During the Last Five Fiscal Years**

Coley L. Bailey

53

Chief Executive Officer since March 1, 2004. Chairman of the  Board since 1988. For more than the past five years, Mr. Bailey has been  engaged in farming activities in Mississippi.

Timothy A. Dawson

50

Senior Vice President and Chief Financial  Officer since April 22,   1999.

Gary C. Elliott

57

Vice President‐Marketing and  Distribution since February   18, 2003;  Director of Nitrogen and Phosphates (1998‐2003).

Joe A. Ewing

53

Vice President‐Human Resources  since April   1, 2003;  Vice President‐Marketing and Distribution (1999‐2003).

John M. Flynt

36

General Counsel & Corporate Secretary  since January   1, 2004;  Associate General Counsel (2003); Senior Corporate Counsel (2001-2003);  Corporate Counsel (1998-2001).

Larry W. Holley

56

Senior Vice President and Chief Operating  Officer since December   2, 2003;  Vice President‐Nitrogen Production (2000-2003); President of Point  Lisas Nitrogen Limited in Trinidad (1998‐2000).

Robert E. Jones

57

Senior Vice President‐Corporate  Development since October   1, 1997.

C. E. McCraw

56

Senior Vice President‐Operations since July 12, 1994.

Certain Relationships

            Mr. Bailey is a director of StapleCotton Cooperative Association (Staplcotn) and a member of its compensationcommittee.  Mr. Eastland is President & CEO of Staplcotn.  Mr. Baileyrecuses himself from Staplcotn compensation committee meetings and decisionsregarding Mr. Eastland's compensation.  Mr. Eastland has abstained fromall Company Board votes related to Mr. Bailey's compensation.

            Thereare no family relationships among the directors and executive officers of theCompany.  There are no arrangements or understandings between any executiveofficer and any other person pursuant to which such person became an executiveofficer.

Code of Ethics forSenior Financial Officers

            On August 27, 2004, the Board ofDirectors approved an amendment to the Company's Ethical Conduct Policy, whichapplies to all employees, to include a Code of Ethics for Senior FinancialOfficers that also applies to the Company's Chief Executive Officer, ChiefFinancial Officer, and all other officer‐, director‐, and manager‐levelemployees who have accounting or financial statement preparationresponsibilities.  The Code of Ethics for Senior Financial Officers is designedto promote honest and ethical conduct, proper disclosure of financialinformation in the Company's periodic reports, and compliance with applicablelaws, rules, and regulations.  A copy of the Company's Ethical Conduct Policy,including the Code of Ethics for Senior Financial Officers, is attached as anExhibit to this Annual Report on Form 10-K.
****
**ITEM11.  EXECUTIVE COMPENSATION**

**Compensation**

            The table below sets forth thecompensation paid by the Company to each of the "Named Executive Officers"during fiscal years 2004, 2003, and 2002.

**Summary Compensation Table**

** **

**Annual Compensation**

**Long-Term  Compensation**

**Name and  Principal Position**

**Fiscal  Year**

**Salary(1)($)**

**Bonus(2)($)**

**Other Annual  Compensation(3)($)**

**Securities  Underlying  Options  (#)**

**All Other  Compensation(4)($)**

Coley L. Bailey  Chief Executive Officer

2004  2003  2002

75,000  0  0

0  0  0

0  0  0

4,000  4,000  4,000

44,167  50,000  50,000

Charles O. Dunn  President and  Chief Executive Officer

2004  2003  2002

429,267  516,743  516,743

271,289  0  0

5,584  5,750  5,225

0  38,000  38,000

172,248  0  0

Larry W. Holley  Senior Vice President &  Chief Operating Officer

2004  2003  2002

217,425  186,038  183,384

101,850  0  16,014

6,198  5,580  5,225

0  20,000  20,000

0  0  0

Timothy A. Dawson  Senior Vice President &  Chief Financial Officer

2004  2003  2002

227,358  227,358  227,358

119,364  0  0

6,250  5,750  5,225

0  25,000  25,000

0  0  0

Robert E. Jones  Senior Vice President -   Corporate Development

2004  2003  2002

280,213  280,213  280,213

147,112  0  0

6,250  5,750  5,225

0  30,000  30,000

0  0  0

C. E. McCraw  Senior Vice President -   Operations

2004  2003  2002

280,213  280,213  280,213

147,112  0  0

6,250  5,750  5,225

0  30,000  30,000

0  0  0

                (1)  Mr.Bailey was named Chief Executive Officer on March 1, 2004.  Effective May 1, 2004, Mr. Bailey'sannual salary is $240,000.  Mr. Dunn resigned effective March 1, 2004.

                (2)  The fiscal year 2004bonuses were awarded pursuant to the Company's Key Employee Retention andSeverance Plan approved by the U.S. Bankruptcy Court for the Southern Districtof Mississippi on October 2, 2003.  Mr. Holley's fiscal year 2003 bonuswas related to his service as President of Point Lisas Nitrogen Limited.

                (3)  Amountsrepresent the Company's matching contributions on the employee's salarycontributions under the 401(k) Plan.

                (4)  Directorretainer for Mr. Bailey.  Severance payments to Mr. Dunn.
****
**Stock Options**

            During fiscal year 2004, there wereno stock option grants to Named Executive Officers or any other employees.

**Option Exercises and Holdings**

            The following table sets forthinformation relating to the exercise of options during fiscal 2004 by the NamedExecutive Officers and unexercised options held by the Named Executive Officersas of June 30, 2004:

**Aggregated Option  Exercises in Fiscal Year 2004   Number and Value of Unexercised Vested Options at  June 30, 2004**

****

**Shares  Acquired  on  Exercise**

**Value  Realized**

**Number of Securities  Underlying Unexercised  Vested Options **

**Value of Unexercised  Vested Options**

**Name**

**Exercisable**

**Unexercisable**

**Exercisable**

**Unexercisable**

Coley L. Bailey

0

0

  33,000

0

0

0

Charles O. Dunn

0

0

386,288

0

0

0

Larry W. Holley

0

0

  78,000

0

0

0

Timothy A. Dawson 

0

0

153,225

0

0

0

Robert E. Jones

0

0

213,750

0

0

0

C. E. McCraw

0

0

219,210

0

0

0

**Pension Benefits**

            The following table sets forth theestimated single‐life annual pension annuity benefit provided to eligibleparticipants at age 65 under the Company's defined benefit plan (the "PensionPlan"), based on the specified levels of pay and years of credited service. Benefits under the Pension Plan were frozen as of April 30, 2003, which means that payand service after that date will not be taken into account in determiningbenefits.  Listed benefits are not subject to deductions for social security orother offset amounts.  The Internal Revenue Code prohibits the Company fromproviding full benefits under the Company's Pension Plan to executive officers,including the Named Executives, and certain other employees.

**Pension Plan Table  (in dollars)**

** **

**Years of Service**

**Remuneration**

**15**

**20**

**25**

**30**

**35**

 25,000

 4,688

 6,250

 7,813

  9,375

10,938

 50,000

 9,375

12,500

15,625

18,750

21,875

100,000

22,103

28,390

34,700

40,965

47,793

150,000

37,103

48,390

59,700

70,965

82,793

200,000

52,103

68,390

84,700

100,965

117,793

250,000

52,103

68,390

84,700

100,965

117,793

300,000

52,103

68,390

84,700

100,965

117,793

350,000

52,103

68,390

84,700

100,965

117,793

400,000

52,103

68,390

84,700

100,965

117,793

450,000

52,103

68,390

84,700

100,965

117,793

500,000

52,103

68,390

84,700

100,965

117,793

            Pensionbenefits are based on the average of the participant's five highest consecutiveannual earnings amounts during employment and do not include bonus, overtime orshift differentials.  The table below shows the average earnings (calculated asdescribed above) of, and the number of years of credited service obtained by,the Named Executive Officers as of April 30, 2003.

**Name**

**Average Earnings as of  Plan Freeze Date (04/30/2003)(1)**

**Years of Service**

Coley L. Bailey(2)

$           0

  0

Charles O. Dunn

$501,665

24

Larry W. Holley

$189,994

28

Timothy A. Dawson

$222,308

21

Robert E. Jones

$273,989

28

C. E. McCraw

$273,989

29

           (1) The amounts listed do not reflect the earnings *limits* imposed  by Internal Revenue Code Section 401(a)(17).  Pension benefits for the Named  Executive Officers will not be calculated in the manner provided by the  Pension Plan for all participants, but will be limited by operation of  Internal Revenue Code Section 401(a)(17), absent a change in the law.

          (2) Mr. Bailey is not eligible for  pension benefits because he was not an eligible employee prior to the  Company's freezing pension benefits on April 30, 2003.

**Retention and Severance**

            The Compensation Committee hadpreviously approved amended and restated severance agreements with each of theNamed Executive Officers (excluding Mr. Bailey) that were all dated as ofJuly 29, 1996, in order to secure their commitment to remain employed withthe Company at least through July 31, 2004, and because of theCompensation Committee's determination that their performance, retention andimpartial assistance to the Board in certain events would be enhanced thereby. In light of the Case, the Compensation Committee approved the Key ExecutiveRetention and Severance Plan (the "Retention Plan"), which included differentagreements with the Named Executive Officers (except Mr. Bailey) thatsupersede the earlier severance agreements in their entirety and includeretention bonus payments tied to various milestones in the bankruptcyproceedings.  On October 2, 2003, theCourt approved the agreements *in camera* and placed them underseal.  The new agreements were adapted to a bankruptcy setting with the intentof inducing the Named Executive Officers (except Mr. Bailey) to remainwith the Company throughout the Case. The form of agreement is referenced inthe Exhibit Index attached to this Annual Report on Form 10-K.

            In the event of the termination of aNamed Executive Officer's employment without "cause" (as defined in theagreement) or due to "constructive termination" (as defined in the agreement) *and*if the Named Executive Officer complies with certain covenants set forth in theagreement, the Named Executive Officer will, for a stated period and in lieu ofpayments under the Company's Supplemental Unemployment Benefit Plan, beprovided a continuation of base salary, medical and dental COBRA coverage (or acash equivalent of premiums), other company‐provided insurance coverage(or a cash equivalent of premiums), and a *pro rata* portion of thenext installment of any retention payment thereunder.  The agreements expire onthe earlier of July 1, 2005, theconfirmation of a plan of reorganization or a substantially completedliquidation.  The agreements initially provided that no severance benefits willbe payable if the Named Executive Officer is offered employment by a successoremployer to the Company, by the transferee of all or a substantial part of theCompany's assets, by an acquiror of the Company or by the Company after itsacquisition or merger.

            In connection with Mr. Dunn'sresignation effective March 1, 2004, the Board approved an amendment toMr. Dunn's agreement that would vest Mr. Dunn in the benefits under theRetention Plan.  On February 25, 2004,the Court entered an order authorizing such benefits.

            Mr. Bailey does not participatein the Retention Plan and he does not have a written agreement with theCompany.  However, on April 1, 2004, upon recommendation of the CompensationCommittee the Board approved a severance benefit for Mr. Bailey equal to ninemonths base salary upon the earlier of his termination of employment withoutcause or constructively or the Company's exit from bankruptcy.  Mr. Bailey'sseverance benefit does not include insurance or any other benefits.

            On May 19, 2004, the agreements forMessrs. Dawson, Jones, and McCraw were amended and approved by the Court. Mr. Dawson's agreement was amended to increase the severance benefit fromnine to twelve months, unless Mr. Dawson resigns, in which event he is vestedin nine months severance.  Mr. Jones's and Mr. McCraw's agreementswere amended to increase the severance benefit from nine to twelve monthsshould certain milestones be met by them in connection with the disposition ofthe Company's phosphates business as contemplated by the proposed transactionbetween the Company and Terra.  In addition, the agreements forMessrs. Dawson, Jones, and McCraw were amended to vest them in theremaining retention bonus payments, unless they voluntarily terminate theiremployment, in which event they would be subject to reduced payments in certaincircumstances.

            Inconnection with the Terra transaction, certain Named Executive Officers shallbe eligible for severance benefits. If Mr. Bailey is not made an offer ofemployment with Terra, or does not accept any such offer, he shall receive inlieu of the agreement referenced above a severance benefit equal to fifteenmonths base salary.  If Messrs. Dawson or Holley are not made an offer ofemployment with Terra, or do not accept any such offer, such Named ExecutiveOfficers shall receive in lieu of the agreements referenced above a severancebenefit equal to fifteen months base salary, and twenty-one months medical andother insurance benefits, provided that the insurance benefits cease if theNamed Executive Officer obtains other employment with substantially similarinsurance coverage. Upon the satisfaction of certain post‐closingtransition obligations, Messrs. Bailey, Dawson, and Holley shall alsoreceive a percentage of 125,000 shares of Terra common stock available fordistribution to nine eligible executives, with such percentage allocated on a *prorata* basis to each participant's base salary.

**Compensation Committee Report**

*           Overview*

            The Board has established athree-member Compensation Committee.  Each member of the Compensation Committeemust be an independent, nonemployee director.  As of the date of this AnnualReport on Form 10-K, the members are John Sharp Howie (Chairman), Frank R.Burnside, Jr., and W. A. Percy II.  For fiscal 2004 and 2005, our executivecompensation program has been designed to retain qualified executives byproviding a total compensation package competitive with compensation packagesprovided by comparable organizations in reorganization.  The CompensationCommittee considers the Retention Plan (described above under the heading"Retention and Severance") an integral part of the total compensation packageprovided to its executives.

*Base Salary*

            TheCompensation Committee approved the individual salary levels for the NamedExecutive Officers set forth on the Summary Compensation Table above prior tofiling bankruptcy after (i) reviewing factors such as position andcompensation levels for comparable positions in similar organizations(including companies represented in the Custom Composite Index now shown in thePerformance Graph below under the heading "Executive Compensation - PerformanceGraph"), (ii) conducting subjective individual performance evaluationsthat focused upon key financial criteria, such as earnings per share, return onequity and growth in shareholder value and non-financial performance measures,such as employee, customer and supplier relationships, environmentalcompliance, employee safety, productivity enhancements and managementdevelopment, and (iii) considering the recommendations of the Chief ExecutiveOfficer at the time regarding individual pay treatment for the Named ExecutiveOfficers other than himself.

            Since filingbankruptcy, the Compensation Committee has also considered the need to retainqualified executives during reorganization of the Company.  The Committee'sevaluation of Mr. Bailey was based primarily on his leadership of the Companyin its reorganization pursuant to Chapter 11 of the Bankruptcy Code, aswell as on the criteria mentioned above, his representation of the Companygenerally, and his relationships with our customers, our lenders, the Board,and our employees.  Messrs. Holley and Bailey were the only NamedExecutive Officers to receive salary increases during the last three fiscalyears.  Consistent with Mr. Holley's increased responsibilities and being namedChief Operating Officer of the Company on December 2, 2003, Mr. Holley wasawarded salary increases of 5.79% on April 1, 2003, 10% on October 16, 2003, and 7.78% on December 1, 2003.  For the month ofMarch 2004, Mr. Bailey was paid $15,000.  In light of the considerable time andeffort to manage the Company's reorganization as Chief Executive Officer, inaddition to his duties as Chairman of the Board, the Compensation Committeeincreased Mr. Bailey's salary to $20,000 per month.  Mr. Bailey does notreceive insurance or any other benefits from the Company and no longer receivesan annual retainer or attendance fees as a director.

*            Bonuses*

            Due to theCompany's financial performance and the Case, the Company no longer has a bonusor profit sharing plan for its employees.  During fiscal year 2004, the NamedExecutive Officers and certain other key employees were eligible for retentionbonus payments pursuant to the Retention Plan as described above under theheading "Retention Agreements".  The Compensation Committee approved the termsof the Retention Plan and obtained the consent of the Creditors' Committeeprior to submission of the Retention Plan to the Court for approval.  TheCompensation Committee believes such milestone payments were necessary andreasonable to retain its key employees and successfully reorganize the Company.

*           Executive Deferred Compensation Plan*

            Effective June 27, 2001, the Company terminatedthe Executive Deferred Compensation Plan as a result of the Company'sperformance except with respect to any participant's deferred stock account (asdefined in the plan) created before such termination.  

            TheExecutive Deferred Compensation Plan, which was approved by the Company'sshareholders effective November 11, 1997, wasimplemented to align participants' interests with those of the shareholders byallowing the participants to risk certain compensation otherwise payable tothem for deferred compensation based on future growth in the value of theCompany's common stock.  Prior to the plan's termination, participants couldirrevocably elect, prior to the beginning of a calendar year, to defer for aminimum period of 18 months from the date of the election some or all of anyprofit sharing, bonus payment and/or up to 10% of their salaries that theywould otherwise have received in such calendar year.

            The Companyopened a "deferred stock account" in each participant's name on the Company'sbooks.  This account reflects a number of shares of "deferred stock" in the Companyequal to 150% of the number of shares that could have been purchased by theparticipant with the deferred amount at a purchase price equal to the lesser of(i) the market price as of the July 1 immediately prior to thecalendar year in which the payment in question would otherwise have occurred or(ii) the market price on the date the deferred amount would otherwise havebeen paid.  Market price was defined as the average closing price of theCompany's stock on the New York Stock Exchange for the last 20 trading daysprior to the date in question.  Deferred stock provided no voting rights orother incidents of ownership of stock and constituted merely a bookkeepingentry reflecting an unsecured debt from the Company to the participant.  Eachparticipant's account was credited with dividends (expressed as a number ofdeferred shares) and would have been adjusted to reflect any stock splits,exchanges of stock in connection with a merger, and the like.  Payment, whenmade, was in the form of actual Company common stock, and the number of sharesreceived equaled the number of deferred shares then credited to a participant'sdeferral account; provided, however, the Company reserved the right to makesuch distribution in cash.  Distribution would be made on the date to which theparticipant elected to defer compensation, including any extensions thereof(or, as more particularly described in the plan, earlier if the participantceased to be an employee due to separation of employment, retirement, totaldisability, death or unforeseeable emergency).  The deferred payment was notincluded in a participant's income until distribution of the stock was madefrom the stock deferral account.  The amount taken into income was the *then*market value of the Company's common stock times the number of shares received.

            Because theCompany filed for reorganizationunder theBankruptcy Code on May 15, 2003, each participant with a deferred stockaccount has filed a proof of claim for the value of the number of shares ofdeferred stock in his deferred stock account on the filing date, the value ofeach share having been determined by calculating the average closing price ofthe Company's stock on the OTC Board for the last 20 trading days prior toMay 15, 2003.  These claims are unsecured.

*            StockIncentive Plan*

            EffectiveMay 14, 2003, the Board terminated the Company's Amended and Restated 1994 Stock Incentive Plan (the "Stock Incentive Plan"), which wasapproved by the Company's shareholders effective November 9, 1999, exceptwith respect to options already issued under the plan.  The CompensationCommittee administered the Stock Incentive Plan.  No grants were made under theStock Incentive Plan for fiscal year 2004.  Historically, individual grantswere based primarily on the grantee's level of responsibility and potentialimpact on the Company's consolidated performance.  The exercise priceapplicable to Employee Options could not be less than 100% of the fair marketvalue of the common stock of the Company on the date the Employee Option wasgranted and could not be less than 110% in specified circumstances.  However,the Compensation Committee had the authority to select an exercise pricegreater than 100% or 110% of the fair market value of the common stock of theCompany on the date the stock option was granted.  The exercise price was themarket value for common stock of the Company as of the date of the grant.  TheCommittee determined the fair market value of the common stock of the Companyon the date of the Employee Option grant to be the average of the closingprices of the Company's stock for the last 20 trading days prior to the date ofsuch grant.

*            InternalRevenue Code Section 162(m) Implications for Executive Compensation*

            Section 162(m) of the InternalRevenue Code generally limits the Company's federal income tax deduction forcompensation paid to each of the Named Executive Officers to $1,000,000 peryear.  The Internal Revenue Code provides an exemption from the deduction limitfor certain types of "performance‐based compensation."  The CompensationCommittee's general philosophy has been to obtain shareholder approval ofincentive compensation arrangements for the Named Executive Officers to qualifysuch compensation for the "performance‐based compensation" exemption andto preserve the related federal income tax deduction for compensation for anyNamed Executive Officer that exceeds $1,000,000 in any given year. Specifically, the Stock Incentive Plan, the Officer and Key Employee IncentivePlan and the Executive Deferred Compensation Plan were generally intended toprovide benefits that qualify as "performance‐based compensation" exemptfrom the $1,000,000 deduction limit and were approved by the Company'sshareholders.  However, the Compensation Committee has not adopted a blanketpolicy limiting executive compensation to fully tax‐deductible amounts inevery case, and nondeductible payments could occur, for example, in the eventof a change of control.

            None of theNamed Executive Officers exceeded the $1,000,000 limit for fiscal year 2004. It is not anticipated that any of the Named Executive Officers will exceed suchlimit for fiscal year 2005.

*Performance Graph*
 
**Jun-99**

**Jun-00**

**Jun-01**

**Jun-02**

**Jun-03**

**Jun-04**

**Mississippi Chemical Corp.**

$100 

$50 

$33 

$12 

$1 

$2 

**Custom Composite Index (6  Stocks)**

$100 

$102 

$104 

$119 

$117 

$181 

**S&P Smallcap Index**

$100 

$114 

$127 

$127 

$123 

$166 

** **

**The 6-Stock Custom Composite  Index consists of Agrium Inc., IMC Global Inc., Norsk Hydro AS-ADR, Phosphate  Resource**

**Partners, Potash Corp. of  Saskatchewan and Terra Industries Inc.**
****
**Directors' Compensation**

*            Fees and Expenses*

            During fiscal 2004, all nonemployeedirectors, except  Messrs. Bailey and Howie, received an annualretainer of $20,000 paid monthly.    As Chairman of the Board, Mr. Baileyreceived $44,166.69 of a $50,000 annual retainer paid monthly through February2004.  Since being named Chief Executive Officer of the Company on March 1, 2004, Mr. Bailey nolonger receives a retainer fee.  Mr. Howie, as Vice Chairman of the Board,received an annual retainer of $30,000 paid monthly.  Each director, exceptMessrs. Bailey and Dunn, received a $1,000 attendance fee for each day on whichhe attended a Board and/or Committee meeting in person. Each director, exceptMessrs. Bailey, Dunn, and Eastland, also received a $500 attendance feefor each teleconference Board meeting attended.  Each nonemployee director (exceptMr. Dunn) was reimbursed for travel expenses related to his attendance atBoard and Committee meetings.

*            Nonemployee Directors' Stock Options*

            Pursuant to the Company's 1995 StockOption Plan for Nonemployee Directors, as amended, restated, and approved bythe Company's shareholders effective November 7, 2000, ("Directors' StockPlan") each nonemployee director, except Messrs. Bailey and Howie,received in fiscal 2004 an annual grant of nonqualified stock options("Director Options") to purchase 2,000 shares of the Company's common stock atthe exercise price of $0.10 (the "Exercise Price").  Mr. Bailey, asChairman of the Board, received Director Options to purchase 4,000 shares atthe Exercise Price, and Mr. Howie, as Vice Chairman of the Board, receivedDirector Options to purchase 3,000 shares at the Exercise Price.  The grantdate for all Director Options issued in fiscal 2004 was July 1, 2003 ("Grant Date").  Thefiscal 2004 Director Options become exercisable in 20% increments over a five‐yearperiod of time after the Grant Date.  Under the Directors' Stock Plan, theExercise Price for each fiscal 2004 Director Option was determined bycalculating the average closing prices of the Company's stock on the Over theCounter Bulletin Board ("OTC Board") for the last 20 trading days prior to theGrant Date.

            NonemployeeDirectors' Deferred Compensation Plan

            The Nonemployee Directors' DeferredCompensation Plan, which was approved by the Company's shareholders effectiveNovember 11, 1997, was terminated by the Board of Directors effectiveJuly 31, 2003, except with respect to any participant's deferred stockaccount (as defined in the plan) created prior to such termination.  The planhad required that directors place at least 50% of their annual retainer at riskin exchange for receipt of deferred compensation based on future growth in thevalue of the Company's common stock.  All deferrals under the plan were for aminimum of 18 months, which, as more particularly described in the plan, couldhave been shortened by the director's end of service to the Board ordisability, or a change in control of the Company.  In addition, eachnonemployee director has had the option to place all or part of the other halfof his annual retainer at risk for receipt of deferred compensation based onfuture growth in the value of the Company's common stock.

            We have maintained a "deferred stockaccount" in each nonemployee director's name on our books.  This accountreflects a number of shares of "deferred stock" in the Company equal to 150% ofthe number of shares that could have been purchased with the deferred amount atthe lesser of the market price on the first day of the retainer period(January 1) or the market price as of the July 1 immediately prior tothe retainer period.  Deferred stock credited to a director's account wasphantom stock that provided no voting rights or other incidents of ownership ofstock and constituted merely a bookkeeping entry reflecting an unsecured debtowed by the Company to the nonemployee director.  Each nonemployee director'saccount was credited with dividends (expressed as a number of shares ofdeferred stock) and would have been adjusted to reflect any stock splits,exchanges of stock in connection with a merger, and the like.

            Distributions from each nonemployeedirector's deferred stock account were made, at the election of the director,in the form of common stock of the Company or cash; provided, however, theCompany reserved the right to make such distributions in cash.  Stockdistributions with respect to phantom stock were made on the basis of onephantom stock unit to one share of Company stock.  Cash distributions withrespect to phantom stock were made on the basis of the value of the Company'sstock on the *date of distribution* determined by calculating the averageclosing price of the Company's stock on the New York Stock Exchange for thelast 20 trading days prior to the distribution date.  After the Company's stockwas delisted from the New York Stock Exchange on February 11, 2003, and began trading onthe OTC Board, the OTC Board price for the last 20 trading days prior to thedistribution date was used to value the Company's stock on the date ofdistribution.

            Because the Company filed forreorganization under the BankruptcyCode on May 15, 2003, eachparticipant has filed a proof of claim for the value of the number of shares ofdeferred stock in his deferred stock account on the filing date.  The value ofeach share was determined by calculating the average closing price of theCompany's stock on the OTC Board for the last 20 trading days prior to May 15, 2003.  These claims areunsecured.

**ITEM12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND                   MANAGEMENT**

**EquityCompensation Plan Information**

            Thefollowing table describes the Company's equity compensation plans. The Companyanticipates that all stock options will be terminated in connection with theCompany's Chapter 11 bankruptcy case.

  Plan  Category

**(a)**  Number of Securities to be Issued Upon Exercise of Outstanding Options,  Warrants and Rights

**(b)**  Weighted‐Average Exercise Price of Outstanding Options, Warrants  and Rights

**(c)**  Number of Securities Remaining Available for Future Issuance Under Equity  Compensation Plans (Excluding Securities Reflected in Column (a))

Equity compensation  plans approved by security holders

1,719,863

$12.65

2,076,137

Equity compensation  plans not approved by security holders

N/A

N/A

N/A

Total

1,719,863

$12.65

2,076,137

            Theinformation in column (a) above reflects the aggregate of securities to beissued upon the exercise of stock options under the Mississippi ChemicalCorporation Amended and Restated 1994 Stock Incentive Plan (the "Officer &Employee Option Plan"), and the Mississippi Chemical Corporation Amended andRestated 1995 Stock Option Plan for Nonemployee Directors (the "Director OptionPlan" and collectively with the Officer & Employee Option Plan, the "OptionPlans").

            The Officer & Employee Option Plan had3,400,000 shares of common stock reserved for issuance prior to its terminationand the Director Option Plan has 400,000 shares of common stock reserved forissuance.  Under the Option Plans, if the Company at any time changes thenumber of issued shares of common stock without new consideration to theCompany (such as by stock dividend, stock split, or similar transaction), thetotal number of shares reserved for issuance under the Director Option Plan andthe number of shares covered by each outstanding common stock option shall beadjusted to the number of shares as is equitably required, together with anappropriate adjustment to the exercise price of common stock options, so thatthe aggregate consideration payable to the Company upon exercise of each commonstock option will not be changed.  Without affecting the number of shares ofcommon stock reserved or available under the Director Option Plan, the Boardmay authorize the issuance or assumption of benefits in connection with anymerger, consolidation, acquisition of property or stock, or reorganization uponsuch terms as the Board deems appropriate.  Without affecting the number ofshares reserved or available hereunder, the Board of Directors may authorizethe issuance or assumption of benefits in connection with any merger,consolidation, acquisition of property or stock, or reorganization upon suchterms and conditions as it may deem appropriate.

            Since the Officer & Employee OptionPlan has been terminated, column (c) in the table above reflects onlyshares of common stock available for future issuance under the Director OptionPlan.

**Security Ownership of Certain Beneficial Owners**

            To the best of the Company'sknowledge, no person or group was the beneficial owner of more than fivepercent (5%) of the Company's common shares as of September 15, 2004, based on filingsrequired of such owners by the Securities and Exchange Commission.

**Security Ownership ofManagement**

            The following table shows the numberof shares of the Company's common stock that was beneficially owned by eachdirector and Named Executive Officer as of September 15, 2004, togetherwith the aggregate number of shares owned beneficially by all directors andexecutive officers as a group, in each instance as if the options and deferredstock units among those shares had all been outstanding on September 15,2004.  No director or executive officer listed below beneficially owned morethan 1% of the shares outstanding as of September 15, 2004, except Mr. Baileywho beneficially owned 1.22%.  The sum of the beneficial ownership of alldirectors and executive officers as a group represents approximately 12.65% ofthe shares outstanding as of September 15, 2004.  The Company anticipates that all options anddeferred stock units will be terminated in connection with the Company'sChapter 11 bankruptcy case.

**Nonemployee Directors**

** **

**Amount and Nature  of Beneficial Ownership**

Reuben V. Anderson(1)

119,844

Frank R. Burnside, Jr. (2)

119,586

W. R. Dyess(3)

98,081

Woods E. Eastland(4)

156,848

John Sharp Howie(5)

117,738

George Penick(6)

135,499

W. A. Percy II(7)

133,549

Named Executive Officers

Coley L. Bailey(8)

318,773

Larry W. Holley(9)

97,055

Timothy A. Dawson(10)

162,817

Robert E. Jones(11)

210,017

C. E. McCraw (12)

216,337

All Directors and  Executive Officers as a Group(13)

2,065,799

Beneficialownership is the ownership of stock, either direct or indirect, which includesthe power to vote or the power to dispose of the stock.  Stock which anindividual may acquire by exercising options or by distribution from anemployee benefits plan is beneficially owned under certain circumstances evenif such an exercise or distribution has not taken place.

The figures in the table include sharesof stock that the named individuals own directly.  In addition, these figuresinclude shares that certain named individuals own, or are presumed to own,indirectly as a result of their relationship with another person or entity.

The table reflects deferred stock unitscredited to individual directors under the Nonemployee Directors' DeferredCompensation Plan and to individual executive officers under the ExecutiveDeferred Compensation Plan.  The figures in the table assume that deferredstock units could be converted into common stock and distributed to the namedindividuals within 60 days of September 15, 2004, even though theindividual directors and executive officers have filed proofs of claim with theBankruptcy Court for all remaining deferred stock units and therefore saidunits referenced in the table will not be eligible for conversion anddistribution as contemplated by the referenced plans.

The table also reflects shares subject tononqualified stock options issued to the named individuals pursuant to theDirectors' Stock Plan or the Stock Incentive Plan which could have beenexercised by the named individuals on September 15, 2004, or that will becomeexercisable within 60 days after September 15, 2004.  If exercised asdescribed above, the stock options included in the above table would have novalue since the price of the Company's common stock on that date was less thanthe exercise price on all the options which could have been exercised throughthat date.

For each named individual, a footnoteindicates the number of shares of common stock, deferred stock units, options,and other indirectly held shares included in the total number.  The footnotealso identifies the extent to which each of the named individuals shares votingpower and/or the power to dispose of any of the beneficially owned shares.

(1)  *Mr. Anderson.* Includes 1,000shares of common stock, 112,444 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, and options to purchase 6,400 shares which arecurrently exercisable.

(2)  *Mr. Burnside.* Includes 74,250deferred stock units under the Nonemployee Directors' Deferred CompensationPlan for which a proof of claim has been filed with the Bankruptcy Court,options to purchase 16,500 shares which are currently exercisable, 100 sharesowned by Mr. Burnside's son, Frank Burnside III, and 28,736 shares whichare owned by Newellton Elevator Company, Inc., which is an affiliate ofMr. Burnside's.  Mr. Burnside disclaims beneficial ownership of the 100shares owned by his son. Mr. Burnside shares the power to vote and disposeof the shares owned by Newellton Elevator Company, Inc.

 (3)  *Mr. Dyess.*Includes 671shares of common stock, 64,106 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, options to purchase 16,500 shares which arecurrently exercisable, 14,100 shares which are owned by Dyess Farm Center,Inc., and 2,704 shares which are owned by ABC Ag Center, Inc.   Dyess FarmCenter, Inc., and ABC Ag Center, Inc., are affiliates of Mr. Dyess's.

(4)  *Mr. Eastland.*  Includes 27,729shares of common stock, 112,619 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, and options to purchase 16,500 shares which arecurrently exercisable.

(5)  *Mr. Howie.*  Includes 15,904shares of common stock, 74,553 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, options to purchase 24,000 shares which arecurrently exercisable, 1,903 shares which are owned by Pauline W. Howieand John Sharp Howie DBA Cedar Grove Plantation, and 1,378 shares which areowned by Hillsdale Plantation, an affiliate of Mr. Howie's.

(6)  *Mr. Penick.*  Includes 1,792shares of common stock, 117,207 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, and options to purchase 16,500 shares which arecurrently exercisable.

(7)  *Mr. Percy.*  Includes 4,181shares of common stock, 118,368 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, and options to purchase 11,000 shares which arecurrently exercisable.

(8)  *Mr. Bailey.*  Includes 9,057shares of common stock, 274,716 deferred stock units under the NonemployeeDirectors' Deferred Compensation Plan for which a proof of claim has been filedwith the Bankruptcy Court, options to purchase 33,000 shares which arecurrently exercisable, and 2,000 shares belonging to Joe N. Bailey, Jr.,Family Trust in which Mr. Bailey shares investment power.

(9)  *Mr.Holley.*Includes 3,081 shares of common stock owned individually, 800 shares of commonstock owned jointly with his spouse, 15,174 deferred stock units under theExecutive Deferred Compensation Plan for which a proof of claim has been filedwith the bankruptcy court, and options to purchase 78,000 shares which arecurrently exercisable.

(10)  *Mr. Dawson.* Includes 8,000shares of common stock, 7,967 deferred stock units under the Executive DeferredCompensation Plan for which a proof of claim has been filed with the BankruptcyCourt, and options to purchase 146,850 shares which are currently exercisable.

(11)  *Mr. Jones.*  Includes 16,346shares of common stock, 1,171 deferred stock units under the Executive DeferredCompensation Plan for which a proof of claim has been filed with the BankruptcyCourt, and options to purchase 192,500 shares which are currently exercisable.

(12) *Mr. McCraw.* Includes 15,550shares of common stock, 4,527 deferred stock units under the Executive DeferredCompensation Plan for which a proof of claim has been filed with the BankruptcyCourt, and options to purchase 196,260 shares which are currently exercisable.

(13)  *All Directors & ExecutiveOfficers.*  Includes 26,160 shares of common stock owned by executiveofficers not named in the table and options to purchase 147,970 shares grantedto such officers which are currently exercisable.

**Section 16(a) BeneficialOwnership Reporting Compliance**

            The Securities and Exchange Act of 1934requires all of the Company's executive officers and directors to report anychanges in their ownership of the Company's common stock to the Securities and ExchangeCommission and to us.  Based solely upon a review of these reports andrepresentations from the reporting persons regarding their ownership, webelieve that during fiscal 2004 our executive officers and directors compliedwith all Section 16 filing requirements.

**ITEM13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

            The Securities and Exchange Act of1934 requires the Company to disclose certain business relationships.  Inconnection with the Case, the Company engaged the services of Mr. Anderson'slaw firm, Phelps Dunbar LLP.  The Company selected Phelps Dunbar LLP ("PhelpsDunbar") as its bankruptcy counsel because of the considerable bankruptcyexperience and expertise possessed by members of the firm other thanMr. Anderson.  Mr. Anderson did not participate in the selection ofbankruptcy counsel and does not represent the Company in the Case.  Duringfiscal 2004, the Company paid Phelps Dunbar $744,930.  The fees received werenot material to Phelps Dunbar in relation to its overall revenues, or materialto Mr. Anderson in relation to his compensation from Phelps Dunbar.  TheCompany anticipates that this relationship will continue during fiscal 2005.

            During fiscal 2004, NewelltonElevator Company, Inc., an affiliate of Mr. Burnside, purchasedapproximately $64,451 of fertilizer from the Company in arm's lengthtransactions at market prices.

**ITEM14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

**Overview**

            The members of the Audit Committeeare Woods E. Eastland (Chairman), Frank R. Burnside, Jr., and W. A. PercyII.  On an annual basis, the Audit Committee reviews the adequacy of the AuditCommittee Charter and presents to the Board any changes it believesappropriate.

            The Audit Committee consists ofthree nonemployee directors who are independent as defined by the New YorkStock Exchange.   Due to the Company's bankruptcy, the Board has not made adetermination of whether any member of the Audit Committee is a "financialexpert" as defined under federal law.
****
**Independent Auditors**

            Effective May 14, 2004, the AuditCommittee engaged KPMG LLP ("KPMG") as the Company's independent auditors forfiscal 2004.  The Audit Committee has selected KPMG to conduct quarterlyreviews of the Company's financial statements for fiscal 2005.

**AuditFees**

The aggregate fees paidto KPMG with respect to fiscal years 2004 and 2003 are set forth below:

**Fiscal 2004**

**Fiscal 2003**

Audit Fees  - For the audit of the Company's  annual financial statements and review of financial statements included in  the Company's Quarterly Reports on Form 10‐Q, as well as for services  that are normally provided by an accountant in connection with statutory and  regulatory filings.

  $424,307

  $410,987

Audit‐Related  Fees - For assurance and related services that are traditionally performed by  an independent accountant that are not included in the heading "Audit Fees"  above.

       Employee  Benefit Plan Audits

  $  38,712

  $  10,500

Tax Fees - For professional services for tax  compliance and tax advice

  $  48,610

  $  33,252

All Other Fees - For  professional services performed not reported above.

     Transfer  price study related to the Company's       joint venture interest in Point Lisas Nitrogen  Limited

     Bankruptcy  administration and reporting services

  $   11,000  $           0

  $13,000  $ 25,502

**Total**

**$522,629**

**$493,241**

**           **The Audit Committeeconsiders the provision of nonaudit‐related services to have beencompatible with maintaining the auditor's independence.

            Between meetings of the AuditCommittee, the Chairman of the Audit Committee has the authority to approvenonaudit services, provided that any such approvals must be noticed to theother members of the Audit Committee at the next Committee meeting.  Duringfiscal 2004, none of the nonaudit services described in the table above wereapproved by the *de minimis* exception to our pre‐approval policy.
****
**PART IV**

**ITEM15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON                 FORM 8‐K**

**Documents Filed as a Part of This AnnualReport on Form 10‐K****:**

            *Consolidated Financial Statements*. The consolidated financial statements, together with the report thereon of KPMGLLP appearing in Item 8 of this Annual Report on Form 10‐K, aredescribed below:

IndependentAuditors' Report

ConsolidatedBalance Sheets, June 30, 2004 and2003

ConsolidatedStatements of Operations, Years Ended June 30, 2004, 2003, and 2002

ConsolidatedStatements of Shareholders' (Deficit) Equity, Years Ended June 30, 2004, 2003, and 2002

ConsolidatedStatements of Cash Flows, Years Ended June 30, 2004, 2003, and 2002

Notesto Consolidated Financial Statements

***           ****Consolidated FinancialStatement Schedules*. Financial statement schedules not included in this Annual Report on Form 10‐Khave been omitted because they are not applicable or the required informationis shown in the financial statements or notes thereto.

***           ****Exhibits*.  The exhibits requiredto be filed as part of this Annual Report by Item 601 of Regulation S‐Kare set forth on the Exhibit Index, which follows the signatures, and areeither incorporated in this Annual Report on Form 10‐K by reference tofilings with the SEC or are attached to this Annual Report on Form 10‐K.

**Reports onForm 8‐K**

            During thethree months ended June 30, 2004, thefollowing reports on Form 8‐K were filed. 

**Date  of Event**

**Description of Event**

April 1, 2004

Monthly Operating  Report for the period from February 1 through February 29, 2004.

May 17, 2005

Monthly Operating  Report for the period from March 1 through March 31, 2004.

June 15, 2004

Monthly Operating  Report for the period from April 1 through April 30, 2004.

June 17, 2004

Monthly Operating  Report for the period from May 1 through May 31, 2004.

** **
****
**SIGNATURES**

            Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

                                                                        MISSISSIPPICHEMICAL CORPORATION

                                                                        By:       /s/Coley L. Bailey                                                                                                                     ColeyL. Bailey                                                                                    PrincipalExecutive Officer                                                                        By:       /s/Timothy A. Dawson                                                                                                              TimothyA. Dawson                                                                                    PrincipalFinancial Officer and                                                                                    ChiefAccounting Officer

Date:  September 28, 2004

****
****
            Pursuant tothe requirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.

**Signature**

**Title**

**Date**

/s/ Coley L. Bailey                                        Coley  L. Bailey

Chief Executive  Officer,  Director, Chairman of the Board

September 28, 2004

/s/ John Sharp Howie                                  John  Sharp Howie

Director, Vice Chairman of the Board

September 28, 2004

/s/ Reuben V. Anderson                             Reuben  V. Anderson

Director

September 28, 2004

/s/ Frank R. Burnside,  Jr.                             Frank  R. Burnside, Jr.

Director

September 28, 2004

/s/ W. R. Dyess                                            W. R.  Dyess

Director

September 28, 2004

/s/ Woods E. Eastland                                Woods  E. Eastland

Director

September 28, 2004

/s/ George D. Penick,  Jr.                              George  D. Penick, Jr.

Director

September 28, 2004

/s/ W. A. Percy II                                         W. A.  Percy II

Director

September 28, 2004
****
**EXHIBIT INDEX**

**EXHIBIT  NUMBER**

**DESCRIPTION**

**DESIGNATION**

2.1

Debtors' Joint Plan of Reorganization, dated  April 15, 2004; filed as Exhibit 2.1 to the Company's Current  Report on Form 8‐K, filed April 19, 2004, SEC File  No. 001‐12217, and incorporated herein by reference.

*

2.2

Debtors' First Amended Joint Plan of  Reorganization, dated September 2, 2004; filed as Exhibit 2.1 to  the Company's Current Report on Form 8‐K, filed September 8,  2004, SEC File No. 001‐12217, and incorporated herein by reference,

*

2.3

Disclosure Statement for Debtors' Joint Plan  of Reorganization, dated April 15, 2004; filed as Exhibit 2.2 to  the Company's Current Report on Form 8‐K filed April 19,  2004, SEC File No. 001‐12217, and incorporated herein by  reference.

*

2.4

First Amended Disclosure Statement for  Debtors' First Amended Joint Plan of Reorganization, dated September 10,  2004; filed as Exhibit 2.1 to the Company's Current Report on Form 8‐K,  filed September 14, 2004, SEC File No. 001‐12217, and incorporated  herein by reference 

*

2.5

Asset Purchase Agreement, dated as of  November 26, 2003, among Mississippi Potash, Inc., and Eddy Potash,  Inc., as Debtors‐in-Possession and Sellers, and Intrepid Mining NM LLC  and HB Potash LLC, as Buyers; filed as Exhibit 2.1 to the Company's  Current Report on Form 8‐K filed March 12, 2004, SEC File No.  001‐12217, and incorporated herein by reference.

*

2.6

First Amendment to Asset Purchase Agreement,  Acknowledgment and Waiver, dated as of March 1, 2004, among Mississippi  Potash, Inc., Eddy Potash, Inc., Intrepid Mining NM LLC and HB Potash,  LLC; filed as Exhibit 2.2 to the Company's Current Report on Form 8‐K  filed March 12, 2004, SEC File No. 001‐12217, and incorporated  herein by reference.

*

2.7

Stock Purchase Agreement, dated as of August 6, 2004, among the Company,  MissChem Acquisition Inc. and Terra Industries Inc.,; filed as  Exhibit 99.2 to Terra Industries Inc.'s Current Report on Form 8‐K  filed on August 9,   2004,  SEC File No. 001‐08520, and incorporated herein by reference.

*

3.1

Articles of Incorporation of the Company;  filed as Exhibit 3.1 to the Company's Amendment No. 1 to  Form S‐1 Registration Statement filed August 2, 1994, SEC  File No. 33‐53119, and incorporated herein by reference.

*

3.2

Articles of Amendment to the Articles of  Incorporation of the Company adopted December 12, 2003; filed as  Exhibit 3.2 to the Company's Quarterly Report on Form 10‐Q  for the quarter ended December 31, 2003, SEC File No. 001‐12217,  and incorporated herein by reference.

*

3.3

Bylaws of the Company; filed as Exhibit 3.2 to  the Company's Annual Report on Form 10‐K for the fiscal year ended  June 30, 1997, SEC File No. 001‐12217, and incorporated  herein by reference.

*

4.1

Shareholder Rights Plan; filed as  Exhibit 1 to the Company's Form 8‐A Registration Statement  dated August 15, 1994, SEC File No. 2‐7803, and incorporated  herein by reference.

*

4.2

Indenture dated as of November 25, 1997,  between the Company and Harris Trust and Savings Bank, as Trustee, governing  the Company's 7‐1/4% debt securities due November 15, 2017; filed  as Exhibit 4(a) to the Company's Current Report on Form 8‐K filed  November 25, 1997, SEC File No. 001‐12217, and incorporated  herein by reference.

*

4.3

First Supplemental Indenture dated as of  July 1, 1999, among the Company, Mississippi Nitrogen, Inc., MissChem  Nitrogen, L.L.C., and Harris Trust and Savings Bank, as Trustee,  supplementing the Indenture dated as of November 25, 1997, between the  Company and Harris Trust and Savings Bank, as Trustee, governing the  Company's 7‐1/4% debt securities due November 15, 2017; filed as  Exhibit 4.3 to the Company's Annual Report on Form 10‐K for  the fiscal year ended June 30, 2001, SEC File No. 001‐12217,  and incorporated herein by reference.

*

4.4

Instrument of Resignation, Appointment and  Acceptance dated as of February 18, 2000, among the Company, Harris  Trust and Savings Bank as the Resigning Trustee, and Trustmark National Bank  as the Successor Trustee, under the Indenture dated as of November 25,  1997, between the Company and Harris Trust and Savings Bank, as Trustee,  governing the Company's 7‐1/4% debt securities due November 15,  2017; filed as Exhibit 4.4 to the Company's Annual Report on  Form 10‐K for the fiscal year ended June 30, 2001, SEC File  No. 001‐12217, and incorporated herein by reference. 

*

4.5

Instrument of Resignation, Appointment and  Acceptance dated as of March 21, 2003, among the Company, Trustmark  National Bank as the Resigning Trustee, and BancorpSouth Bank as the  Successor Trustee under the Indenture dated as of November 25, 1997,  governing the Company's 7‐1/4% debt securities due November 15,  2017; filed as Exhibit 4.5 to the Company's Quarterly Report on  Form 10‐Q for the quarter ended March 31, 2003, SEC File No.  001‐12217, and incorporated herein by reference.

*

4.6

Agreement of Resignation, Appointment and  Acceptance dated as of June 24, 2003, among the Company, BancorpSouth  Bank as the Resigning Trustee, and HSBC Bank USA (f/k/a Marine Midland Bank)  as the Successor Trustee under the Indenture dated as of November 15,  1997, governing the Company's 7‐1/4% debt securities due  November 15, 2017; filed as Exhibit 4.6 to the Company's Annual  Report on Form 10‐K for the fiscal year ended June 30, 2003,  SEC File No. 001‐12217, and incorporated herein by reference.

*

4.7

Indenture of Trust dated as of March 1,  1998, between Mississippi Business Finance Corporation and Deposit Guaranty  National Bank, for the issuance of bonds in the aggregate principal amount of  $14.5 million to assist the Company in financing and refinancing the  cost of construction and equipping of solid waste disposal facilities at its  Pascagoula, Mississippi, facility; filed as Exhibit 4.3 to the Company's  Annual Report on Form 10‐K for the fiscal year ended June 30,  1998, SEC File No. 001‐12217, and incorporated herein by reference.

*

10.1

$182,500,000 Term Loan, Revolving Credit,  Guarantee and Security Agreement, dated as of July 1, 2004, among the Company  and the subsidiaries of the Company named therein as guarantors, the lenders  from time to time party thereto, and Citicorp North America, Inc.; filed as  Exhibit 10.1 to the Company's Current Report on Form 8‐K, filed  July 21, 2004, SEC File No. 001‐12217, and incorporated herein by  reference.

*

10.2

First Amendment, dated as of July 30,  2004, to the $182,500,000 Term Loan, Revolving Credit, Guarantee and Security  Agreement; filed as Exhibit 10.1 to the Company's Current Report on  Form 8‐K, filed August 3, 2004, SEC File No. 001‐12217,  and incorporated herein by reference.

*

10.3

Second Amendment, dated as of August 20,  2004, to the $182,500,000 Term Loan, Revolving Credit, Guarantee and Security  Agreement; filed as Exhibit 10.1 to the Company's Current Report on  Form 8‐K, filed August 25, 2004, SEC File No. 001‐12217,  and incorporated herein by reference.

*

10.4

Agreement made and entered into as of  September 15, 1991, between Office Cherifien des Phosphates and the  Company for the sale and purchase of phosphate rock; filed as  Exhibit 10.1 to the Company's Annual Report on Form 10‐K for  the fiscal year ended June 30, 2001, SEC File No. 001‐12217,  and incorporated herein by reference.(1)

*

10.5

Amendment No. 1, effective as of  July 1, 1992, to the Agreement effective as of September 15, 1991,  between Office Cherifien des Phosphates and the Company for the sale and  purchase of phosphate rock; filed as Exhibit 10.2 to the Company's  Annual Report on Form 10‐K for the fiscal year ended June 30,  2001, SEC File No. 001‐12217, and incorporated herein by  reference.(2)

*

10.6

Amendment No. 2, effective as of July 1,  1993, to the Agreement effective as of September 15, 1991, between  Office Cherifien des Phosphates and the Company for the sale and purchase of  phosphate rock; filed as Exhibit 10.11 to the Company's Annual Report on Form  10‐K for the fiscal year ended June 30, 1995, SEC File  No. 000‐20411, and incorporated herein by reference.(3)

*

10.7

Amendment No. 3, effective as of  January 1, 1995, to the Agreement effective as of September 15,  1991, between Office Cherifien des Phosphates and the Company for the sale  and purchase of phosphate rock; filed as Exhibit 10.10 to the Company's  Annual Report on Form 10‐K for the fiscal year ended June 30,  1995, SEC File No. 000‐20411, and incorporated herein by  reference.(4)

*

10.8

Amendment No. 4, effective as of January 1,  1997, to the Agreement effective as of September 15, 1991, between  Office Cherifien des Phosphates and the Company for the sale and purchase of  phosphate rock; filed as Exhibit 10.8 to the Company's Annual Report on  Form 10‐K for the fiscal year ended June 30, 1997, SEC File No.  001‐12217, and incorporated herein by reference.

*

10.9

Amendment No. 5, effective as of  July 1, 2000, to the Agreement effective as of September 15, 1991,  between Office Cherifien des Phosphates and the Company for the sale and  purchase of phosphate rock; filed as Exhibit 10.6 to the Company's  Quarterly Report on Form 10‐Q for the quarter ended March 31,  2001, SEC File No. 001‐12217, and incorporated herein by reference.

*

10.10

Amendment No. 6, effective as of July 1,  2001, to the Agreement effective as of September 15, 1991, between  Office Cherifien des Phosphates and the Company for the sale and purchase of  phosphate rock; filed as Exhibit 10.7 to the Company's Quarterly Report  on Form 10‐Q for the quarter ended September 30, 2001, SEC  File No. 001‐12217, and incorporated herein by reference.

*

10.11

Employee Retention and Severance Programs  approved by the U.S. Bankruptcy Court on October 2, 2003; filed as  Exhibit 10.20 to the Company's Quarterly Report on Form 10‐Q for  the quarter ended December 31, 2003, SEC File No. 001‐12217, and  incorporated herein by reference.

*

10.12

Form of Key Executive Retention and Severance  Agreement applicable to the Named Executive Officers:  Charles O. Dunn, Timothy A.  Dawson, C. E. McCraw, Robert E. Jones, and Larry W. Holley;  filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10‐Q  for the quarter ended December 31, 2003, SEC File No. 001‐12217,  and incorporated herein by reference.

*

10.13

Form of First Amendment to Key Executive  Retention and Severance Agreement applicable to Charles O. Dunn.

+

10.14

Form of First Amendment to Key Executive  Retention and Severance Agreement applicable to Timothy A. Dawson.

+

10.15

Form of First Amendment to Key Executive  Retention and Severance Agreement applicable to Robert E. Jones and C.  E. McCraw.

+

10.16

Mississippi Chemical Corporation Officer and  Key Employee Incentive Plan; filed as Exhibit 10.8 to the Company's  Annual Report on Form 10‐K for the fiscal year ended June 30,  1998, SEC File No. 001‐12217, and incorporated herein by  reference.

*

10.17

Mississippi Chemical Corporation Executive  Deferred Compensation Plan, as amended and restated, effective  January 1, 2000; filed as Exhibit 10.2 to the Company's Quarterly  Report on Form 10‐Q for the quarter ended December 31, 1999,  SEC File No. 001‐12217, and incorporated herein by reference.

*

10.18

Mississippi Chemical Corporation Amended and  Restated 1994 Stock Incentive Plan; filed as Exhibit 10.1 to the Company's  Quarterly Report on Form 10‐Q for the quarter ended  December 31, 1999, SEC File No. 001‐12217, and incorporated  herein by reference.

*

10.19

Mississippi Chemical Corporation Amended and  Restated 1995 Stock Option Plan for Nonemployee Directors; filed as  Exhibit 10.1 to the Company's Quarterly Report on Form 10‐Q  for the quarter ended December 31, 2000, SEC File No. 001‐12217,  and incorporated herein by reference.

*

14.1

Ethical Conduct Policy.

+

21.1

List of subsidiaries of the Company.

+

23.1

Consent of KPMG LLP.

+

23.2

Consent of Ernst & Young.

+

31.1

Certification of Chief Executive  Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 302 of the Sarbanes‐Oxley Act of 2002.

+

31.2

Certification of Chief Financial Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302  of the Sarbanes‐Oxley Act of 2002.

+

32.1

Certification of Chief Executive  Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes‐Oxley Act of 2002.

+

32.2

Certification of Chief Financial Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906  of the Sarbanes‐Oxley Act of 2002.

+

* Incorporated byreference.+ Attached as an exhibit to this Annual Report on Form 10‐K.Footnotes to Exhibit Index:

          (1)  Pursuantto the Securities Exchange Act of 1934, Rule 24b‐2, confidentialbusiness information was deleted from the first, second and third paragraphs ofArticle IV, Article VII, Article VIII, and from the second and thirdparagraphs of Article IX, and an application for confidential treatment wasfiled separately with, and granted by, the SEC. The Agreement in its redactedform was originally filed as Exhibit 10.1 to the Company's Form 8Amendment of its Annual Report on Form 10‐K for the fiscal year endedJune 30, 1991, File No. 2‐7803, and a complete copy was filedseparately with the Secretary of the SEC in connection with our applicationobjecting to disclosure of confidential business information.  Our originalapplication for confidential treatment was granted for a term ending June 30, 2001.  We filed a newApplication Objecting to the Disclosure of Confidential Information and Requestfor Extension of Previously Granted Order for Confidential Treatment.  Therequest was granted on October 17, 2001.

          (2)  AmendmentNo. 1, with confidential business information redacted, was originally filed asExhibit 10.12 to the Company's Annual Report on Form 10‐K.  The redactedinformation was later disclosed; therefore, Amendment No. 1 in itsentirety was filed with the SEC.

          (3)  Pursuantto the Securities Exchange Act of 1934, Rule 24b‐2, confidentialbusiness information was  deleted from paragraphs numbered 5 and 8 of AmendmentNo. 2; from the first paragraph, paragraph numbered 1, paragraphnumbered 2, and paragraph numbered 3 of Schedule 1,Exhibit A; from Schedule 2, Exhibit B; from Schedule 3,Exhibit C, and from Schedule 4, Exhibit D; and an applicationfor confidential treatment was filed separately with, and granted by, the SEC.

          (4)  Pursuantto the Securities Exchange Act of 1934, Rule 24b‐2, confidential businessinformation was  deleted from Schedule 1 to Amendment No. 3,Exhibit B, and an application for confidential treatment was  filedseparately with, and granted by, the SEC. |