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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 $.01
Preferred Stock Purchase Rights

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     Mississippi Chemical Corporation (the "Company") was incorporated in Mississippi on May 23, 1994, and is the successor by merger, effective July 1, 1994, to a business which was incorporated in Mississippi in September 1948 as the first fertilizer cooperative in the United States (the "Cooperative"). The address of the Company's principal executive office is Owen Cooper Administration Building, 3622 Highway 49 East, Yazoo City, Mississippi 39194, and its telephone number is (662) 746-4131. The Company maintains a site on the World Wide Web at www.misschem.com. Information appearing on the Company's website should not be considered a part of this Annual Report on Form 10-K. The term "Company" includes Mississippi Chemical Corporation and its subsidiaries: Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Eddy Potash, Inc.; Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; Triad Nitrogen, L.L.C.; Mississippi Chemical Management Company; Mississippi Chemical Company, L.P.; Melamine Chemicals, Inc.; Mississippi Chemical Holdings, Inc.; MissChem (Barbados) SRL; and MissChem Trinidad Limited; and Mississippi Chemical Corporation's affiliates: Point Lisas Nitrogen Limited (formerly known as "Farmland MissChem Limited"), our 50/50 ammonia production joint venture with Koch Nitrogen Company; FMCL Limited Liability Company, our 50/50 ammonia shipping joint venture with Koch Nitrogen Company; and Houston Ammonia Terminal, L.P., our 50/50 ammonia storage joint venture with Potash Corporation of Saskatchewan. References to the Company's operations prior to July 1, 1994, refer to the Cooperative's operations. Any reference to an industrial customer or user herein includes, but is not limited to, producers who convert products purchased from the Company to other fertilizer products.

     On May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its direct and indirect subsidiaries (collectively, the "Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"), the cases being administered jointly in Joint Case Number 03-02984 WEE ("Case"). As debtors-in-possession, the Debtors are authorized to operate their business but may not engage in transactions outside the ordinary course of business without the approval of the Court. On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request for interim financing, and on October 2, 2003, the Court entered a Final Order approving debtor-in-possession financing with Harris Trust and Savings Bank and a syndicate of six other lenders, as more particularly descr ibed below in Item 7 of this Annual Report on Form 10-K.

     The Company has three reportable operating segments: nitrogen, phosphate and potash. The amounts of revenue, operating profit or loss and identifiable assets attributable to each of our segments are set forth in Item 7 and Item 8 of this Annual Report on Form 10-K. Additional information about each operating segment is set forth below.

          The Company produces nitrogen products at its production facilities in Yazoo City, Mississippi, Donaldsonville, Louisiana, and through its 50/50 joint 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;

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 fertilizer-grade ammonium nitrate, which is sold under the Company's trade name AmtrateÒ ; UAN solution, which is sold under the Company's trade name N-Sol 32Ò ; urea; and nitric acid. Each of the Company's nitrogen products has its own distinct characteristics that produce agronomic preferences among end-users.

          In fiscal 2003, the Company sold approximately 2.1 million tons of nitrogen products to fertilizer dealers and distributors and industrial users located primarily in the southern United States compared to 2.5 million tons in fiscal 2002. Net sales of nitrogen products by the Company in fiscal 2003 were approximately $271.0 million, which represented approximately 61% of consolidated net sales.

          Anhydrous Ammonia. In fiscal 2003, the Company produced approximately 1,012,000 tons of anhydrous ammonia at its Yazoo City and Donaldsonville facilities. The Company is obligated by contract to purchase one-half of the anhydrous ammonia (approximately 350,000 tons per year) produced by Point Lisas Nitrogen at a discount to market, subject to a minimum price. In fiscal 2003, the Company purchased approximately 312,000 tons pursuant to its contract with Point Lisas Nitrogen and approximately 139,000 tons from non-affiliates for resale or upgrade to other fertilizer products. In fiscal 2003, the Company sold approximately 689,000 tons of anhydrous ammonia, approximately 654,000 tons of which were sold as a raw material for industrial users. The Company consumed approximately 814,000 tons of anhydrous ammonia as a raw material to manufacture its other nitrogen products, melamine, and diammonium phosphate.

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

          Ammonium Nitrate. The Company produced approximately 679,000 tons of solid ammonium nitrate fertilizer at its Yazoo City facility in fiscal 2003. During this period, the Company sold approximately 659,000 tons of solid ammonium nitrate fertilizer to fertilizer dealers and distributors and approximately 16,000 tons of ammonium nitrate synthesis to industrial users.

          The Company is the largest manufacturer and marketer of agricultural-grade ammonium nitrate fertilizer in the United States, which is sold under the registered trade name Amtrate®. Ammonium nitrate, which is 34% nitrogen, is produced by reacting anhydrous ammonia and nitric acid. Ammonium nitrate is less subject to volatilization (evaporation) losses than other nitrogen products. Due to its stable nature, ammonium nitrate is the product of choice for such uses as pastures and no-till row crops where fertilizer is spread upon the surface and is subject to volatilization losses. The use of conservation tillage, which reduces soil erosion, is increasing in the United States and should have a positive impact on ammonium nitrate demand.

          UAN Solution. The Company produced approximately 445,000 tons of UAN solution at its Yazoo City facility in fiscal 2003. The Company sold approximately 465,000 tons of UAN solution to fertilizer dealers and distributors in fiscal 2003 under the N-Sol 32Ò trade name. In addition, the Company purchased and resold approximately 10,000 tons of UAN solution in fiscal 2003.

          The N-Sol 32Ò product is a 32% nitrogen product that is made by mixing urea liquor and ammonium nitrate liquor. The N-Sol 32Ò product is used as a direct application product for cotton, corn, grains, and pastures, as well as for use in liquid fertilizer blends. Over the past 20 years, there has been a substantial increase in the use of UAN solution due to the overall growth in the agricultural consumption

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 of nitrogen products in the United States and because UAN solution is being used as a replacement product for ammonia used for direct application to crops.

          Urea. In fiscal 2003, the Company produced approximately 272,000 tons of prilled urea and urea melt at its Donaldsonville facility. During this period, the Company sold approximately 241,000 tons of prilled urea and approximately 29,000 tons of urea synthesis. In addition, the Company purchased and resold approximately 5,000 tons of granular urea in fiscal 2003. Approximately 48% of our urea tons were sold to industrial users and approximately 19% to manufacturers of animal feeds.

          Urea is synthesized by the reaction of ammonia and carbon dioxide. At 46% nitrogen by weight, urea is the most concentrated form of dry nitrogen. Because urea undergoes a complex series of changes within the soil before the nitrogen it contains is ultimately converted into a form that can be used by plants, it is considered a long-lasting form of nitrogen. As a fertilizer product, urea is acceptable as both a direct-application material and as an ingredient in fertilizer blends.

          Nitric Acid. In fiscal 2003, the Company produced approximately 739,000 tons of nitric acid at its Yazoo City facility. The Company uses substantially all of its nitric acid as a raw material for the production of ammonium nitrate and UAN solutions. In fiscal 2003, the Company sold approximately 28,000 tons of nitric acid to industrial users.

          Nitric acid is made by oxidizing ammonia with air. Nitric acid is used by industrial customers to produce end products such as nylon fibers, polyurethane foams, rubber chemicals and specialty fibers. The Yazoo City facility has the largest single site capacity for nitric acid in the United States.

          Yazoo City, Mississippi. The Yazoo City facility is a closely integrated, multiplant production complex located on approximately 2,240 acres, with approximately 60 acres of such land subject to a long-term lease with Yazoo County, Mississippi. The complex includes two anhydrous ammonia plants, five nitric acid plants, an ammonium nitrate plant, two urea plants, and a UAN solution plant. The Company's corporate headquarters, which has approximately 65,000 square feet of office space, is located adjacent to the Yazoo City plant.

          The Company's annual anhydrous ammonia production capacity at the Yazoo City facility is approximately 669,000 tons, and its annual solid ammonium nitrate production capacity is approximately 773,000 tons. Ammonium nitrate production capacity is lower than the prior year due to an increase in the prill Size Guide Number ("SNG") to 220 SGN from 200 SGN, which is a component used in the calculation of production capacities. During fiscal 2003, the operating rates for ammonia and ammonium nitrate at the Yazoo City facility were approximately 68% and 88%, respectively. The Yazoo City facility also has annual nitric acid production capacity of approximately 1,055,000 tons, annual UAN solution production capacity of approximately 588,000 tons, and annual urea synthesis production capacity of approximately 197,000 tons. During fiscal 2003, the operating rate for UAN solution at the Yazoo City facility was approximatel y 74%. The plant has storage facilities for anhydrous ammonia (36,000 tons), ammonium nitrate (51,700 tons), nitric acid (4,300 tons), and UAN solution (48,000 tons).

          The Yazoo City facility includes a 20.5 megawatt cogeneration facility that produces savings by the simultaneous generation of electricity and steam. Adequate backup electricity and water supply are available. The Yazoo City plant and the port facility have direct access to barge, rail, and

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 truck transportation and the Yazoo City plant is strategically located for the purchase of competitively priced natural gas.

          Donaldsonville, Louisiana. The Donaldsonville facility is a closely integrated, multiplant nitrogen complex located on approximately 766 acres fronting the Mississippi River at Donaldsonville, Louisiana. The facility includes two anhydrous ammonia plants with a combined annual production capacity of approximately 1,004,000 tons and a urea plant with an annual urea synthesis production capacity of approximately 578,000 tons and an annual prilled urea capacity of approximately 396,000 tons. In February 2003, both the urea prilling operation and the ammonia No. 2 plant, which has a capacity of 534,000 tons, were indefinitely idled due to market conditions. During fiscal 2003, the operating rates for ammonia and prilled urea at the Donaldsonville facility were approximately 53% and 49%, respectively. The plant has storage facilities for anhydrous ammonia (60,000 tons) and urea (40,000 tons).

          In April 2003, we purchased of all of the common stock of Melamine Chemicals, Inc. ("MCI"), that owns a melamine crystal production facility located within our Donaldsonville, Louisiana, complex. The terms of the transaction were not material to either party. Melamine crystal is a raw material for manufacturers in the construction/remodeling and automotive industries. MCI owns two production units with the combined capacity to produce approximately 115 million pounds of melamine a year. Initially, we intend to operate only one facility that will produce approximately 80 million pounds of melamine a year.

          The Donaldsonville facility has ready access to rail, truck, and ammonia pipeline transportation. The plant is also equipped with a deep-water port facility on the Mississippi River, allowing access to economical oceangoing vessel and barge transportation for its urea and ammonia products. The facility has adequate supplies of electricity and water and is well-positioned for the purchase of competitively priced natural gas.

          Point Lisas, Trinidad. The Point Lisas Nitrogen facility has an annual production capacity attributable to the Company's 50% interest of approximately 350,000 tons. In fiscal 2003, the Company purchased approximately 312,000 tons of ammonia from the Point Lisas Nitrogen facility. This ammonia was used as a raw material for upgrading into finished fertilizer products at the Company's existing facilities and to meet the Company's contractual commitments to certain industrial customers.

          The Company sells its nitrogen products to fertilizer dealers and distributors as well as industrial users located primarily in the southern region of the United States where its facilities are located. In fiscal 2003, approximately 39% of the Company's nitrogen tons sold were to industrial users, which represents approximately 50% of nitrogen net sales. Although the Company has traditionally sold the majority of its nitrogen products through the agricultural fertilizer distribution chain, the Company continues to focus its efforts on increasing the percentage of nitrogen product sold to industrial users in order to reduce the Company's exposure to the seasonal and cyclical nature of the agricultural fertilizer markets. However, during fiscal 2003, industrial sales tons were down 11% compared to fiscal 2002 due to the idling or closure of plants in our primary trade area as a result of the general downturn in the U.S. econ omy.

          In the agricultural fertilizer distribution chain, distributors operate as wholesalers supplying dealers who, in turn, sell directly to farmers. Larger customers (distributors and large multi-location dealers) arrange for distribution, storage, and financing of nitrogen products. The majority of the Company's agricultural sales are made to distributors and large dealers in the Company's primary

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trade area, while almost all industrial sales are made directly to the end user. The ten states 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 nitrogen products by barge, rail, pipeline, truck and oceangoing vessels. To serve our customers, place our nitrogen products in strategically located, high-consumption areas, and enhance our distribution capabilities, we enter into a variety of contractual 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 in FMCL Limited Liability Company, a joint venture with Koch Nitrogen Company that provides transportation of ammonia from the Point Lisas Nitrogen facility in Trinidad to the United States and other world markets. FMCL has executed one long-term time charter agreement for oceangoing vessels with a European ship owner. The agreement establishes a fixed charter rate for the vessel during the entire time that the agreement is in effect. The Company believes that the time charter agr eement provides a hedge against unfavorable fluctuations in shipping rates and will be a cost-effective method of transporting its Trinidad product.

          Natural Gas. Natural gas is the primary raw material used by the Company in the manufacture of nitrogen products. Natural gas is used both as a chemical feedstock and as a fuel to produce anhydrous ammonia, which is upgraded into other nitrogen products. During fiscal 2003, natural gas prices increased significantly relative to fiscal 2002 with NYMEX monthly settlements averaging approximately $4.79 per MMBtu in fiscal 2003 versus approximately $2.76 per MMBtu in fiscal 2002. This resulted in natural gas representing approximately 84% of the Company's cost of producing ammonia. Because there are no commercially feasible alternatives for natural gas in the production of ammonia, the economic success of the Company's nitrogen business depends upon the availability of reasonably priced natural gas relative to the prevailing market price for nitrogen products.

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

          Natural gas requirements for the Yazoo City facility are approximately 54,000 MMBtu's per day. During normal operation, the Company purchases natural gas for the Yazoo City facility via market-sensitive pricing from two natural gas marketers, Interconn Resources, Inc. ("Interconn") and Cinergy Marketing and Trading, LP ("Cinergy") and directly from a producer, Pursue Energy Corporation ("Pursue"). Delivery of gas purchased from Interconn and Cinergy is effected through the Yazoo City facility's direct connections to the interstate pipeline systems operated by Southern Natural Gas Company and Texas Eastern Transmission Corporation, respectively. Purchases from Pursue's reserves located in Rankin County, Mississippi, are delivered via a natural gas pipeline owned by CenterPoint Energy Entex ("Entex"), which connects Pursue's processing plant with the Company's Yazoo City plant. The Entex pipeli ne also provides direct access to the Gulf South interstate pipeline system as well as an intrastate pipeline system owned by Crosstex Energy, L.P. Connection to these two pipeline systems provide additional flexibility of supply to the Yazoo City plant.

          Natural gas requirements for the Donaldsonville facility are approximately 53,000 MMBtu's per day under its current configuration. The Donaldsonville facility is located in one of the primary natural gas producing regions of the United States. The facility is currently connected to five intrastate pipeline systems and benefits from competition among the many suppliers that have transport

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capabilities on the intrastate lines. The Donaldsonville facility's current natural gas requirements are being served via purchases from two marketers, Bridgeline Gas Marketing LLC and Cypress Gas Marketing, LLC via market-sensitive pricing with delivery effected through the pipeline systems of Bridgeline Holdings, L.P., and Cypress Gas Pipeline, LLC, respectively.

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

          Gas prices can be influenced significantly by short-term factors such as weather, storage levels, gas transportation interruptions, and competing fuel prices. In the past, the Company has used derivative transactions such as natural gas futures contracts, swaps, options, or similar derivative instruments related to the price of natural gas to manage its natural gas price risk.

          Ammonia. Ammonia is a necessary raw material for production of the Company's other nitrogen products. The Company supplied the majority of its ammonia requirements in fiscal 2003. Third-party ammonia purchases by the Company from outside suppliers in fiscal 2003 for resale and production of its other nitrogen products totaled approximately 117,000 tons, which is a substantial increase from the approximately 44,300 tons purchased from third-parties in fiscal 2002. This increase is attributable to the fact that our ammonia plants operated at higher rates than during fiscal 2002, which experienced lower operating rates due to the unfavorable relationship between natural gas prices and nitrogen product prices. The Company anticipates that it will be able to supply substantially all of its ammonia requirements in fiscal 2004 from the Company's ammonia plants at the Yazoo City facility, the Donaldsonville facility, an d the Trinidad facility, or from third-party purchases. Natural gas prices will continue to play a major role in determining how we operate our plants as we seek to match production to market conditions.

          The Company produces diammonium phosphate fertilizer ("DAP") at its facility in Pascagoula, Mississippi. In fiscal 2003, the Company produced approximately 697,000 tons of DAP and sold approximately 712,000 tons. Net sales of DAP by the Company in fiscal 2003 were approximately $102.3 million, which represented approximately 23% of consolidated net sales.

          DAP is the most common form of phosphate fertilizer. DAP is produced by reacting phosphate rock with sulfuric acid to produce phosphoric acid, which is then combined with ammonia. DAP contains 18% nitrogen and 46% phosphate (P205) by weight. DAP is an important fertilizer product both for direct application and for use in blended fertilizers applied to all major types of row crops.

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          The Company's phosphate production complex in Pascagoula, Mississippi, is located on approximately 2,100 acres. The Pascagoula facility is a closely integrated, multiplant phosphatic fertilizer complex where the primary facilities are two phosphoric acid plants, two sulfuric acid plants, and a DAP granulation plant. The phosphoric acid plants have an annual production capacity of approximately 415,000 tons, the two sulfuric acid plants have a combined annual production capacity of approximately 1,031,000 tons, and the DAP granulation plant has an annual production capacity of approximately 868,000 tons. During fiscal 2003, the operating rate for DAP at the Pascagoula facility was approximately 80%. The plant has storage facilities for finished product (80,000 tons), as well as for the primary raw materials: phosphate rock (100,000 tons), sulfur (10,000 tons), and ammonia (25,000 tons). For information regard ing the Company's phosphogypsum disposal facilities, see "Certain Business Factors - Compliance With Environmental Regulations" below in this Item 1.

          The plant site fronts a deep-water channel that provides direct access to the Gulf of Mexico. The complex contains docks and off-loading facilities for receiving shipload quantities of phosphate rock, sulfur, and ammonia and for out-loading DAP and monoammonium phosphate (MAP).

          Almost all of our DAP sales are for agricultural use. Since October 1, 1997, all of the Company's export sales of DAP have been made through Phosphate Chemicals Export Association, Inc., a Webb-Pomerene corporation known as PhosChem, and all domestic sales of DAP have been made through the Company's internal sales staff. In fiscal 2003, DAP sales to PhosChem represented approximately 12% of our consolidated net sales and approximately 52% of total DAP sales by the Company, which exports went primarily to China. China received approximately 51% of the total DAP tonnage sold by the Company in fiscal 2003. Most domestic sales are made in barge-lot quantities to major fertilizer distributors and dealers located on the Mississippi River system. The vast majority of the Company's DAP is transported by ship and barge, although truck and rail access is also available.

          Phosphate Rock. Phosphate rock is one of the primary raw materials used in the manufacture of DAP. The Pascagoula facility's requirements for phosphate rock are approximately 1.4 million tons per year. Since 1991, the Company has purchased all of its phosphate rock for the Pascagoula facility pursuant to a long-term requirements contract with Office Cherifien des Phosphates ("OCP"), the national phosphate company of Morocco. OCP is the world's largest producer and exporter of phosphate rock and upgraded phosphates. The term of the OCP contract expires June 30, 2016. The contract price for phosphate rock is based on phosphate rock costs incurred by certain domestic competitors of the Company and on the operating performance of the Company's phosphate operations. Under this formula, the Company realizes favorable phosphate rock prices and is afforded significant protection during periods when market conditions are depressed. Conversely, in favorable markets, when the Company's DAP operations are profitable, the contract price of phosphate rock will escalate based on the profitability of its DAP operations. Pursuant to this contract, the Company and OCP are required to negotiate further adjustments as needed to maintain the viability and economic competitiveness of the Pascagoula plant. The strategic alliance with OCP has functioned effectively since inception, and the Company considers its relations with OCP to be very good.

          Sulfur. Sulfur is used in the manufacture of sulfuric acid at the Pascagoula plant. Historically, sulfur has been in adequate supply and available on the open market in quantities sufficient to satisfy the Company's requirements, which are approximately 350,000 tons per year. However, supplies are currently limited, resulting in increased raw materials costs. The location of the Company's

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plant at Pascagoula, Mississippi, near major oil and gas fields that supply substantial amounts of sulfur, provides the Company with a strategic advantage in the purchase of sulfur over its Florida competitors.

          Ammonia. Ammonia is a necessary raw material for production of DAP. Of the approximately 158,000 tons of ammonia consumed as a raw material, third-party ammonia purchases by the Company from outside suppliers in fiscal 2003 for use as a raw material in the production of DAP were only approximately 21,000 tons. The Company anticipates that it will be able to supply all of its ammonia requirements for DAP production in fiscal 2004 from the Company's ammonia plants at the Donaldsonville facility and the Trinidad facility, as well as through third-party purchases.

          The Company produces potash at two mines and related facilities near Carlsbad, New Mexico, which are referred to by the Company as the "East Facility" and the "West Facility." The Company also operates a granular compaction plant near the East and West Facilities which is referred to as the "North Facility." In fiscal 2003, the Company produced approximately 872,000 tons of potash and sold approximately 810,000 tons, primarily in granular form. Net sales of potash products by the Company in fiscal 2003 were approximately $69.5 million, which represented approximately 16% of consolidated net sales.

          The Company's potash is mined from subterranean salt deposits containing a mixture of potassium chloride and sodium chloride. The Carlsbad, New Mexico, potash deposits are located from 800 to 1,200 feet below the surface. Potash is produced in a refining process by which the potassium chloride is separated from the sodium chloride.

          Potash is an important fertilizer product for both direct application and for use in blended fertilizers applied to all types of crops. In addition, certain forms of potash can be used as a raw material in the production of industrial products such as potassium hydroxide and potassium nitrate.

          The West Facility, which consists of a potash mine and refinery, has an annual production capacity of approximately 538,000 tons of red potash. The West Facility is located on approximately 1,046 acres that are subject to long-term federal leases. All of the refined product produced at the West Facility is transported to the North Facility compaction plant where the vast majority is converted to granular form and is sold to agricultural fertilizer dealers and distributors. A small portion of the production from the West Facility is sold directly as a standard grade product. The North Facility has an annual granulation capacity of approximately 550,000 tons and is located on approximately 1,387 acres, with approximately 1,027 acres of such land subject to long-term federal potassium leases. Located contiguous to the North Facility are storage (160,000-ton capacity) and shipping facilities from which the finished product is transported by rail and truck to agricultural customers in both the domestic and export markets. During fiscal 2003, the combined operating rate for the West Facility and the North facility was approximately 88%.

          The East Facility, which has an annual production capacity of approximately 560,000 tons of white potash (currently 409,000 tons due to reduced operations on a 10/4 schedule), consists of a potash mine, refinery, and compaction plant. During fiscal 2003, the operating rate for the East Facility was approximately 97% based on a 10/4 schedule. All of the refined product produced at the East Facility is a higher-purity white potash in standard form. Approximately 44% of the East Facility production can be converted to a granular form at the on-site compaction plant and sold as an agricultural

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fertilizer. The remaining product is sold to agricultural and industrial users in its original standard form. The East Facility is located on approximately 1,609 acres, with approximately 1,289 acres of such land subject to long-term federal and state potassium leases. The East Facility also has storage (160,000-ton capacity) and shipping facilities suitable for the distribution of product by rail and truck to the Company's agricultural and industrial customers. During fiscal 2001, the East Facility began mining toward the West Facility, and we anticipate connecting these two facilities by the end of fiscal 2004, which we expect to provide improved ore grades, operational flexibility, and economies of scale.

          On December 3, 1997, the Company suspended plant operations at its Eddy Potash, Inc., mine and refinery because the depletion of the higher-grade ore zone rendered the continued operation of conventional mining methods at Eddy Potash uneconomical. The Company continues to evaluate alternative mining methods for the Eddy Potash reserves.

          The Company's potash reserves are controlled under long-term federal and state potassium leases on approximately 100,000 surface acres, which consist of approximately 220,000 subsurface acres due to the naturally occurring overlap of ore zones in the Carlsbad potash basin. The estimates of potash ore reserves provided below were calculated using the latest bore-hole data and sophisticated modeling programs, which were completed in September 2000 and adjusted for the actual mined tons through June 2003.

          The Company's proven and probable reserves at the West Facility are estimated to be 344 million tons (the "West Facility Reserves") with an average grade of 15.6% K2O. The Company estimates that it can mine 314 million tons of the West Facility Reserves at an average grade of 14.8% K2O using current mining technology. The Company's proven and probable reserves at the North Facility are estimated to be 95 million tons (the "North Facility Reserves") with an average grade of 14.5% K2O. The Company estimates that it can mine 79 million tons of the North Facility Reserves at an average grade of 14.5% K2O using current mining technology. The Company's proven and probable reserves at the East Facility are estimated to be 128 million tons (the "East Facility Reserves") with an average grade of 14.9% K2O. The Company estimates that it can mine 108 million tons of the East Facility Reserves at an average grade of 14.4% K2O u sing current mining technology.

          The Company's total proven and probable reserves (the "Total Reserves") are estimated to be 567 million tons with an average grade of 15.2% K2O. The Company estimates that it can mine 501 million tons of the Total Reserves at an average grade of 14.7% K2O (the "Mineable Reserves") using current mining technology and that the Mineable Reserves will yield 98 million tons of muriate of potash ("KCL") available for sale to customers. Eddy Potash's reserves are excluded since these estimates include only the reserves which can be economically recovered by conventional mining techniques. At current production rates and with current mining technology, the Company's Mineable Reserves have a remaining life of several decades.

          In 1995, the Company and all other potash facilities operating in the Carlsbad area signed a memorandum of understanding ("MOU") with the U.S. Department of the Interior, Bureau of Land Management ("BLM"). In this MOU, the Company agreed to develop plans for closing those surface lands disturbed by potash mining operations at its facilities when those facilities reached the end of their useful lives. The MOU also required provision of financial assurance for executing these plans. Closure plans for the Company's facilities have been prepared and approved by the BLM. As of the date of this filing, the Company was still negotiating the terms of a financial assurance arrangement with the BLM. For more information regarding our estimates of closure costs and related accruals, see "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Closure Costs" in this Annual Report on Form 10-K.

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          The majority of the Company's agricultural potash sales are in domestic markets in the states west of the Mississippi River where it enjoys freight cost advantages over Canadian and overseas potash producers in certain areas of its market territory. In order to increase profit margins, domestic sales are targeted for locations along the freight route of the Burlington Northern Santa Fe Railroad. Domestic potash marketing is coordinated from a sales office located in Arlington, Texas. The Company enters into a variety of contractual relationships with customers engaged in the distribution of potash to fertilizer, industrial, and animal feed markets throughout the western half of the United States and Mexico. These contracts place the Company's potash products in strategically located, high-consumption areas, and enhance our distribution capabilities.

          Fiscal 2003 industrial potash sales represented approximately 12% of potash tons sold and approximately 15% of potash net sales. Approximately 17% of the Company's fiscal 2003 potash tons sold were to international markets, which represented approximately 16% of potash net sales. The Company's potash export sales are made through Potash Corporation of Saskatchewan Sales Limited. The fiscal 2003 export sales were to Barbados, Belize, Brazil, Colombia, Dominican Republic, Japan, Martinique, and Mexico. Potash for export is transported by rail to Mexico and to terminal facilities on the Texas Gulf Coast, where it is loaded onto oceangoing vessels for shipment.

     With virtually all of our nitrogen net sales and approximately 86% of our consolidated net sales in fiscal 2003 derived from domestic markets, the Company'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 affect domestic fertilizer demand and pricing. These factors include, but are not limited to, futures prices for crops that require significant fertilizer application, U.S. planted acreage, government agricultural policies, fertilizer application rates and product selection, projected grain stocks, crop failure, weather, changing or unpredictable crop choices by farmers and changes in agricultural production methods. Since fertilizers, particularly anhydrous ammonia and urea, are also used for industrial applications, industrial markets and the general economy can also affect product demand and prices, as reflected by the decrease in industrial tons sold in fiscal 2003.

     International market conditions also significantly influence the Company's operating results. The market for fertilizers is influenced by such factors as the availability of inexpensive natural gas in foreign countries, the relative value of the U.S. dollar and its impact upon the cost of importing or exporting fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries, and other regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and investment. The Company is also subject to general risks of doing business abroad, including risks associated with economic or political instability.

     Fertilizer prices can be extremely volatile, with significant price changes from one growing season to the next. Fertilizers are global commodities and can be subject to intense price competition from domestic and foreign sources. No assurance can be given that average realized prices paid for the Company's fertilizer products will be at any given level.

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     Natural gas is the primary raw material used in the manufacture of nitrogen products. Natural gas is used as both a chemical feedstock and a fuel to produce anhydrous ammonia, which is then used in the production of all other nitrogen products. Anhydrous ammonia is also a raw material in the production of DAP. Accordingly, the Company's profitability is dependent upon the price and availability of natural gas. A significant increase in the price of natural gas without a corresponding increase in the price of the Company's nitrogen products, or an extended interruption in the supply of natural gas to our production facilities, will have a material adverse effect on our results of operations and financial condition.

     Sales of the Company's fertilizer products to agricultural customers are typically seasonal in nature and usually result in the Company's generating a greater amount of net sales and operating income in the Spring (the Company's third and fourth fiscal quarters). However, quarterly results can vary significantly from one year to the next due primarily to weather-related shifts in planting schedules and purchase patterns, as well as the relationship between natural gas and nitrogen product prices. In addition, the seasonal nature of our business requires us to incur appreciable expenditures for fixed costs throughout the year and for inventory in advance of the spring planting season. The Company plans to increase the percentage of its net sales to industrial customers whose purchases are more evenly spread over the Company's fiscal year. Approximately 26% of the Company's tons sold for fiscal year 2003 were attributable to industrial sales, which represent s approximately 33% of consolidated net sales. The Company anticipates that the percentage of net sales to industrial customers will increase over the next several fiscal years.

     Since fertilizers are global commodities available from numerous sources, fertilizer suppliers compete primarily on the basis of delivered price. Other competitive factors include product quality, customer service, plant efficiency, and availability of product. As a result, markets for our products are highly competitive. The Company competes with a broad range of domestic and international producers, including farmer cooperatives, subsidiaries of larger companies, integrated energy companies, and independent fertilizer companies. Many of the Company's competitors have larger financial resources and sales than the Company. Foreign competitors often have access to cheaper raw materials or are owned or subsidized by their governments and, as a result, may have cost advantages over domestic companies. Additionally, foreign competitors are frequently motivated by non-market factors such as the need for hard currency.

     Competition is based largely on the delivered price of nitrogen products, therefore, maintaining low production costs is critical to competitiveness. Natural gas comprises a significant portion of the raw materials cost of the Company's nitrogen products. Thus, competitive natural gas purchasing is essential to maintaining the Company's cost competitiveness. This is especially true considering that certain of the Company's foreign competitors can purchase natural gas at a lower price than the price typically paid by the Company. Our results of operations in fiscal 2003, continued to be adversely affected by imported product made with low-cost natural gas. Also important to maintaining competitiveness is efficient use of natural gas because of the energy-intensive nature of the nitrogen business. Therefore, cost-competitive production facilities that allow flexible upgrading of ammonia to other finished

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products are critical to a low-cost competitive position. In the highly fragmented nitrogen market, product quality and customer service also can be sources of product differentiation.

     The Company customarily sells a majority of its DAP through PhosChem to international markets. The U.S. phosphate industry is concentrated, and the Company is smaller than most of its competitors in terms of resources and sales. Most of the Company's principal competitors have captive sources of some or all of the raw materials needed to manufacture DAP, which may provide them with cost advantages. The Company's long-term phosphate rock contract with OCP has a flexible pricing mechanism that is a key element to the Company's ability to compete.

     Most potash consumed in the United States is provided by large Canadian producers who have economies of scale and lower variable costs than their U.S. counterparts. The dominant competitors in this industry are Potash Corporation of Saskatchewan and IMC Global, Inc. Our subsidiary, Mississippi Potash, Inc., and IMC Global, Inc., own approximately 81% of U.S. potash production capacity, substantially all of which is located in the Carlsbad, New Mexico, area. While the Carlsbad producers have higher mining costs and lower average ore grades than the Canadian producers, this disadvantage may be offset by logistical and freight advantages in certain markets in the southwestern United States and the lower United States Corn Belt.

     The Company's operations are subject to federal, state, and local laws and regulations pertaining to the environment, among which are the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, and various other federal and state statutes. The Company's facilities require operating permits that are subject to review by governmental agencies.

     Capital expenditures related to environmental obligations for the past three fiscal years were approximately as follows: 2003 - $725,000; 2002 - $3.6 million; and 2001 - $270,000. Fiscal 2003 environmental capital expenditures were primarily attributable to costs at our Pascagoula facility for the completion of a water treatment facility, the ongoing closure of the West phosphogypsum disposal facility (the "West Disposal Facility") and the installation of an acid spill neutralization unit. Projected environmental capital expenditures are approximately $2.64 million for fiscal year 2004 and approximately $1.04 million for fiscal year 2005, including $2.18 million and $190,000, respectively, for the West Disposal Facility closure. Also, in fiscal year 2005, we project $350,000 in capital expenditures at our Donaldsonville, Louisiana, facility to comply with new federal emissions control rules for the Baton Rouge Ozone Nonattainment Area. As of June&nbs p;30, 2003, the Company has accrued approximately $8.7 million in costs for the multiyear closure of the West Disposal Facility. We do not anticipate accruing additional costs relating to the closure of the West Disposal Facility. Regulatory officials have approved the Company's engineering plan for closure of the West Disposal Facility and have issued a compliance order with respect to our plan. On March 29, 2002, our Pascagoula facility opened a new phosphogypsum disposal facility, and we expect to accrue closure costs over a 22-year period. For more information regarding our estimates of closure costs and related accruals, see "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Closure Costs" in this Annual Report on Form 10-K.

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

     The amount of revenue attributable to the Company's sales to foreign and domestic markets over the last three fiscal years and the carrying value of the Company's foreign and domestic assets over the last three fiscal years is set forth in Item 8 of this Annual Report on Form 10-K under the caption "Note 11 - Segment Information" contained in the "Notes to Consolidated Financial Statements."

     Executive officers are elected for a one-year term by the Board of Directors. The Company's executive officers are as follows:

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     As of October 1, 2003, the Company employed approximately 1,124 persons throughout all of its locations, none of whom are represented by unions.

     Information regarding the location and general character of the Company's plants and mines is included in this Annual Report on Form 10-K in Part I, Item 1 "Business," under the headings "Production and Properties" and "Marketing and Distribution" for each operating segment.

     Information required by this Item regarding the Company's bankruptcy filing is included in this Annual Report on Form 10-K in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Petition for Relief Under Chapter 11 of the United States Bankruptcy Code."

     None.

     Our common stock is traded "over-the-counter" on the OTC Bulletin Board under the symbol "MSPIQ". The high and low sales prices as reported by the New York Stock Exchange and the OTC Bulletin Board for each quarter of fiscal 2003 and 2002 required by this Item 5 appear in the quarterly results tables under the heading "Quarterly Results" in Item 8 of this Annual Report on Form 10-K.

     As of October 1, 2003, the record number of holders of our common stock was 12,250.

     Historically, we paid a quarterly cash dividend as shown in the quarterly results tables under the heading "Quarterly Results" in Item 8 of this Annual Report on Form 10-K. Due to our performance, the Board discontinued the payment of cash dividends with the first quarter of fiscal 2001. The DIP Credit Facility does not permit the payment of a cash dividend.

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               Our operations are organized into three strategic business units: nitrogen, phosphate and potash. Our nitrogen business unit produces nitrogen products for distribution to fertilizer dealers and distributors and industrial users located primarily in the southern region of the United States. Our phosphate business unit produces diammonium phosphate fertilizer (commonly referred to as "DAP") and exports approximately half of its production through Phosphate Chemicals Export Association, Inc., a Webb-Pomerene corporation known as "PhosChem." Our potash business unit mines and produces agricultural and industrial potash products for sale to farmers, fertilizer dealers and distributors, and industrial users for use primarily in the southern and western regions of the United States. Our products and primary raw materials (particularly natural gas) are commodities, prices for which can be very volatile. These commodities' prices and the global supply/demand balance for our products do not necessarily change in relation to one another and may impact our performance in different ways.

               The trading of our common stock commenced on the Over the Counter Bulletin Board on February 10, 2003. Our current trading symbol is MSPIQ. As of October 1, 2003, our shareholders of record numbered 12,250.

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               On May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its direct and indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"). The cases are being administered jointly in Joint Case Number 03-02984 WEE, collectively ("Case"). As debtors-in-possession, the Debtors are authorized to operate their business but may not engage in transactions outside the ordinary course of business without the approval of the Court. On May 16, 2003, the Court rendered an Interim Order approving the Debtors' request for interim financing, and on October 2, 2003, the Court entered a Final Order approving debtor-in-possession financing with Harris Trust and Savings Bank and a syndicate of six other lenders.

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

     On June 6, 2003, the Court appointed the Official Committee of Unsecured Creditors to represent the interests of the unsecured creditors. This committee will monitor our financial condition and restructuring activities. We are required to reimburse certain fees and expenses of the committee, including fees for attorneys and other professionals to the extent allowed by the Court.

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

               Pursuant to the provisions of the Bankruptcy Code, the Debtors are currently developing a plan of reorganization. The principal objective of the plan of reorganization will be to restructure the Debtors' obligations to creditors in a manner which will permit us to continue as a viable business organization. The Bankruptcy Code allows the Debtors the exclusive right to file a plan of reorganization during the first 120 days from the Petition Date, or such time as the Court orders. In October 2003, the Court extended the Debtors' exclusivity period to file a plan of reorganization until December 11, 2003, or until such time the Court issues its final ruling. Although we expect to file a plan of reorganization, there can be no assurance at this time as to whether or when a plan of reorganization will be proposed by the Debtors, how liabilities and equity interests will be treated in the plan, w hether the plan will be approved by the various classes of creditors and equity holders, or whether it will be approved or confirmed by the Court. If the exclusivity period were to be terminated without confirmation of a plan of reorganization, other interested parties, such as creditors, would have the right to propose alternative plans of reorganization. Our plan of reorganization could substantially change the amounts and characterization of liabilities disclosed in the accompanying consolidated financial statements.

               On October 8, 2003, we signed an agreement with Koch Nitrogen Company ("Koch") to sell our interest in Point Lisas Nitrogen for an estimated cash amount of $92.0 million (the "Stalking Horse Agreement"). On October 10, 2003, we filed motions with the Court seeking to approve the Stalking Horse Agreement and the auction and bid procedures for an auction of our Point Lisas Nitrogen interests to be sold in December 2003. If Koch is not the successful bidder at the auction, Koch will be entitled to an estimated break-up fee of approximately $3.8 million.

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               Our ability to continue as a going concern is dependent upon, but not limited to, the development and confirmation of a plan of reorganization, continued access to adequate sources of capital, continued compliance with debt covenants under the debtor-in-possession credit facility, the ability to sustain positive cash flows sufficient to fund operations and repay debt, and retention of key suppliers, customers and employees. No assurance can be given that we will be successful in reorganizing our affairs through the Chapter 11 bankruptcy proceedings. Because of the ongoing nature of the reorganization process, the outcome of which is not determinable until a plan of reorganization is confirmed and implemented, the accompanying consolidated financial statements do not include any adjustments that might result from the resolution of these uncertainties.

               Overview. Management's discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in Item 8 of this Annual Report on Form 10-K. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The accompanying consolidated financial statements have been prepared on a going concern basis. The suitability of using a going concern basis is dependent upon, but not limited to, the development and confirmation of a plan of reorganization, continued access to adequate sources of capital, continued compliance with debt covenants under the debtor-in-possession credit facility, the ability to sustain cash flows sufficient to fund operations and repay debt, and retention of key suppliers, customers and employees.

               We have identified below the accounting policies that involve those estimates and assumptions that we believe are critical to an understanding of our financial statements. Our management has discussed the development and selection of each critical accounting estimate with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed the related disclosures in this Item 7. Since application of these accounting policies involves the exercise of judgment and use of estimates, actual results could differ from those estimates.

               Adoption of AICPA Statement of Position 90-7. As a result of filing petitions under Chapter 11 of the Bankruptcy Code, our consolidated financial statements have been prepared in accordance with AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP-90-7 does not change the application of accounting principles generally accepted in the United States of America in the preparation of financial statements. However, it does require that the financial statements for the periods included and subsequent to filing a Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

          SOP 90-7 requires (a) that pre-petition liabilities that are subject to compromise be segregated in the consolidated balance sheets as liabilities subject to compromise, and (b) that revenues, expenses, realized gains and losses, and provisions for losses resulting from the reorganization of the Company be reported separately as reorganization expense in the consolidated statement of operations.

               Hedging Activities. Management estimates its natural gas requirements based on the relationship between nitrogen product prices and the cost of natural gas. We enter into derivative transactions to protect future production costs against price fluctuations of natural gas, which is the primary raw material in the production of our nitrogen products. These derivative transactions may consist of futures contracts, options, swaps or similar derivative instruments related to the price of natural gas. Gains and losses on the derivative transactions that are designated and effective as cash flow hedges are deferred and, at the time the related finished product inventory is sold are recognized as an increase or decrease in the purchase cost of

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the related natural gas. We account for these transactions as cash flow hedges in accordance with Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." Accordingly, we record the fair value of these instruments on our consolidated balance sheet as a component of shareholders' equity under the heading "Accumulated Other Comprehensive Income (Loss)". At certain times, we determine that it is not economical to operate our nitrogen production facilities because of an unfavorable relationship between nitrogen product prices and the cost of natural gas. When this occurs, the quantity of natural gas we purchase may be less than the quantity we have hedged, and therefore, we "undesignate" the difference and recognize the ineffective portion immediately in our consolidated statement of operations.

               Material changes to our results of operations could occur if our hedging instruments are not highly effective in offsetting cash flows attributable to the hedged risks. We calculate the fair value of our derivative instruments using quoted market prices on the New York Mercantile Exchange ("NYMEX") or valuations determined by our counterparties. Because of delays relating to the Case, we were unable to hedge natural gas from May 16, 2003 through September 28, 2003. Under the Interim Order approving hedging activities, we may only hedge natural gas for the months of November and December 2003, and are subject to certain volume restrictions. We intend to seek further Court approval to conduct hedging activities.

               During fiscal 2003, natural gas hedging activities resulted in an average cost decrease of approximately $0.52 per MMBtu on volumes hedged of 33.5 million MMBtu's. During fiscal 2002, natural gas hedging activities resulted in an average cost increase of approximately $0.39 per MMBtu on volumes hedged of 39.4 million. During fiscal 2001, natural gas hedging activities resulted in an average cost decrease of approximately $0.73 per MMBtu on volumes hedged of 35.2 million. At June 30, 2003, we had no open natural gas derivative contracts. As of the same date, we had unrecognized gains of $210,000 on closed natural gas derivative contracts related to our hedging activities that were recorded as a component of other comprehensive (loss) income in our consolidated balance sheet.

               Asset Retirement Obligations. We estimate closure costs for our Pascagoula, Mississippi, facilities and our potash mining facilities located in Carlsbad, New Mexico. These closure costs are recognized over the estimated life of the related facilities and have been recorded as a component of cost of products sold in our consolidated statements of income. Total accrued closure costs at June 30, 2003 and 2002 were $11.3 million and $11.1 million, respectively.

               As of June 30, 2003, estimated closure costs of approximately $2.0 million for our West phosphogypsum disposal facility in Pascagoula have been recorded as a component of other long-term liabilities, and $2.8 million have been recorded as accrued liabilities. We are currently in the process of closing this facility after discontinuing its use during the second quarter of fiscal 2003. Currently, the East phosphogypsum disposal facility, completed in 1998 and placed into operation during the fourth quarter of fiscal 2002, is in full operation. At June 30, 2003, we had recorded closure costs of $4.0 million related to this facility.

               As of June 30, 2003, estimated closure costs of approximately $2.4 million have been accrued to close our potash mining facilities. Of this amount, approximately $2.3 million, which we believe is the full closure cost, has been accrued for the Eddy Potash, Inc. ("Eddy Potash") facility. Our potash facilities in current operation have estimated useful lives spanning several decades. Our current estimates of closure costs for these facilities are not currently material to our operations. We will continue to evaluate such estimates and make adjustments accordingly.

               Effective July 1, 2002, we adopted SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible

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long-lived assets and the associated asset retirement costs. The assets recorded will be depreciated over the useful lives of the assets to be retired. The liabilities will be accreted based on the effective interest method and the useful lives of the related facilities. As required by SFAS No. 143, we will make periodic assessments of the reasonableness of closure cost estimates for each of our facilities and make adjustments as needed. The resulting adjustments in our consolidated balance sheet will increase or decrease the amounts expensed in future periods.

               Significant management judgments and estimates are made when estimating these costs. If our judgments and estimates prove to be inadequate, our financial results could be materially adversely impacted in future periods.

               Deferred Taxes. Deferred income taxes are estimated based upon temporary differences between the income and losses that we report in our financial statements and our taxable income and losses as determined under applicable tax laws. In making such estimates, we use existing tax rates and laws and our expectations of future earnings. Our composite statutory tax rate is estimated to be approximately 38%.

               We are required to evaluate the likelihood of our ability to generate sufficient future taxable income that will enable us to realize the value of our deferred tax assets. If we, in our judgment, are not more likely than not to realize any deferred tax assets, then we record valuation allowances against the deferred tax assets. As of June 30, 2003, we had recorded deferred tax assets arising from federal and state net operating loss carryovers amounting to approximately $33.7 million and approximately $14.6 million, respectively. We estimate that certain deferred tax assets, principally those arising from certain state net operating loss carryforwards, will not be realized. Therefore, we have recorded valuation allowances against these assets totaling $9.2 million as of June 30, 2003.

               As part of the Pre-Petition Facility (as defined below under the heading Liquidity and Capital Resources - Financing Activities - The Pre-Petition Harris Facility), a guarantee of the debt was provided by our wholly owned subsidiary, Mississippi Chemical Holdings, Inc. ("MCHI"), which indirectly owns our 50% joint venture interest in Point Lisas Nitrogen Limited, formerly known as Farmland MissChem Limited, ("Point Lisas Nitrogen") the operator of an anhydrous ammonia facility in Point Lisas, Trinidad. Under U.S. tax laws, this guarantee resulted in a deemed non-cash distribution to us of earnings from MCHI (and effectively our portion of the earnings from Point Lisas Nitrogen). As of June 30, 2003, these cumulative earnings approximated $38.6 million. No U.S. taxes are currently payable on these earnings due to significant book and tax accounting differences, primarily with respect to depreciati on. We have recorded non-current deferred tax liabilities on these earnings of approximately $14.5 million. While the guarantee remains in place, we anticipate recording U.S. taxes on future earnings from MCHI and Point Lisas Nitrogen.

               We use significant management judgments and estimates when estimating deferred taxes. If our judgments and estimates prove to be inadequate, or if certain tax rates and laws should change, our financial results could be materially adversely impacted in future periods.

               Impairment of Long-Lived Assets. We evaluate the recoverability of certain long-lived assets whenever events or changes in circumstances indicate that an asset's carrying amount may not be recoverable, as required by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." These evaluations utilize various estimates and judgments. The recoverability of these assets is highly dependent upon the accuracy of various underlying assumptions, such as future product prices and natural gas costs. The impairment of an asset is measured by the amount the carrying value of the asset exceeds its fair value. The resulting amount of impairment is recorded as a component of results of operations.

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              At June 30, 2003, we evaluated the recoverability of our long-lived assets and determined that certain of those assets were impaired. We recognized an impairment charge totaling $4.2 million relating to our remaining ammonia production assets located in Donaldsonville, Louisiana. We had previously recognized impairment charges totaling $70.9 million during fiscal 2003 relating to our Donaldsonville, Louisiana, nitrogen production facility, which included our second ammonia plant and the urea prilling section.

               During fiscal 2002 and 2001, we assessed the recoverability of the tangible and intangible long-lived assets related to our nitrogen operations pursuant to SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of." We projected the undiscounted future cash flows for these operations to test recoverability and determined that, in certain cases, such cash flows were less than the value of such assets on the consolidated balance sheet, indicating that impairment was likely. Our cash flow projections were based on a third party appraisal of our long-lived assets and included additional third party and internally developed forecasts of future nitrogen prices and natural gas costs. We determined that we had a permanent impairment in the value of goodwill related to our Donaldsonville, Louisiana, nitrogen production assets acquired in December 1996. Accord ingly, a non-cash charge for goodwill impairment of $101.3 million was recorded in the fourth quarter of fiscal 2002. We had made a similar non-cash charge of $58.4 million in the fourth quarter of fiscal 2001. Estimates of such future cash flows are subject to significant uncertainties and assumptions. Accordingly, actual results could vary significantly from such estimates.

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

               Exit Costs and Disposal Activities. SFAS No. 146, "Accounting for Costs Associated with Exit and Disposal Activities," issued in July 2002, revised the accounting for activities relating to exiting or disposing of businesses or assets under EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity." For most exit and disposal activities initiated after December 31, 2002, costs may no longer be recorded as a one-time charge when a formal commitment is made to a plan to exit an activity or dispose of long-lived assets. Instead, companies will record exit and disposal costs when they are incurred and can be measured at fair value, and will subsequently adjust the recorded liability for changes in estimated cash flows.

               As encouraged by the FASB, we elected to adopt SFAS No. 146 early. On December 19, 2002, approximately 40 employees were provided a 60-day notice that operations would cease at our urea facility located in Donaldsonville, Louisiana. On February 26, 2003, approximately 24 employees were terminated in light of the change in our anhydrous ammonia production at our Donaldsonville, Louisiana, facility. At June 30, 2003, we had accrued severance costs of $468,000 related to this change in operations of the prilled urea assets and the No. 2 anhydrous ammonia plant. These amounts are reflected as a component of liabilities subject to compromise on our consolidated balance sheet and were accrued in accordance with SFAS No. 146.

               Inventory Valuation. The value of our finished product inventories is stated at the lower of cost or market. Cost has been determined under a moving average cost method. Under certain market conditions, we make certain estimates and judgments regarding the valuation of our inventory based on management's evaluation of the price at which we can sell our products. The price and demand for our products is very volatile. A decline in price could result in a lower of cost or market adjustment.

               Investment in Affiliates. The Company's investment in affiliates primarily consists of an investment in Point Lisas Nitrogen, FMCL Limited Liability Company, and a 50% interest in an ammonia storage terminal in Pasadena, Texas. The Company accounts for its investments in affiliates under the

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equity method of accounting. Accordingly, the Company records its proportionate share of the joint venture's earnings in Point Lisas Nitrogen as a component of cost of sales. Our proportionate share of earnings for all other investments are recorded as a component of other income. Periodically, the Company assesses the carrying value of its investment in affiliates. The Company will record a loss on its investment in affiliates at that point in time management concludes that a decline in the fair value of the investment is other than temporary. During 2003 and 2002, no such losses have been recorded on its investment in affiliates.

               For the 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 $121.2 million (or $4.64 per diluted share) for the year ended June 30, 2002. The non-cash impairment charges of $75.1 million for the fiscal year ended June 30, 2003, related to a write-down of long-lived assets associated with our ammonia plants and the prilling section of our urea plant in Donaldsonville, Louisiana. These plants were determined to be impaired and will not contribute substantially to our future ongoing operations. The non-cash impairment charge of $101.3 million for the fiscal year ended June 30, 2002, resulted from a write-down of all remaining goodwill recorded in connection with the December 1996 acquisition of our Donaldsonville, Louisiana, nitrogen production assets.

               Net sales decreased to $444.3 million in fiscal 2003 from $451.3 million in fiscal 2002. We incurred an operating loss of $35.0 million in fiscal 2003 before a non-cash impairment charge of $75.1 million, compared to an operating loss of $32.0 million in fiscal 2002 before a non-cash impairment charge of $101.3 million.

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

               Overview.  For fiscal 2003, our net sales decreased 2% to $444.3 million, from $451.3 million for fiscal 2002. This decrease was primarily the result of lower sales volumes for all of our products. These decreases were partially offset by higher sales prices for our nitrogen and DAP products.

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               Summaries of our net sales results by business unit are set forth below:

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               Nitrogen.  Our nitrogen sales increased 3% as a result of higher sales prices. The average selling price for ammonia, ammonium nitrate, urea and nitrogen solutions increased 40%, 10%, 3% 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 products in the U.S. continued to be impacted by high natural gas prices, resulting in production curtailments at various points during the fiscal year. In late June 2003, we shut down significant portions of our Yazoo City facility in an effort to manage inventory levels in response to high natural gas cost and as a result of a poor spring demand. This allowed the Company to conserve cash flow during the negotiation of its debtor-in-possession credit facility with a group of lenders. The Yazoo City facility re turned to production in late September 2003.

               Substantially all of our ammonia sales are to industrial customers. Our ammonia sales volumes decreased 7% because of lower demand from industrial customers affected by a slowdown in economies worldwide, resulting in industrial customer production curtailments and, in some instances, plant closures. Our average ammonia sales price increased 40% as downtime at production points in certain foreign 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 response to high natural gas prices.

               Ammonium nitrate sales prices increased 10%, while sales volumes decreased 13%. The decrease in sales volume was due primarily to poor weather during the fourth quarter 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 for fall/winter wheat plantings and strong pasture applications. Unfavorable weather during the fourth quarter significantly reduced demand, resulting in approximately 155,000 fewer tons sold in the fourth quarter compared to the same prior-year period. Prices were higher due to a reduction in supply at the beginning of the spring planting season as a result of production curtailments in the U.S. during February and March 2003. Those curtailments were caused by a substantial natural gas price increase.

               Urea sales prices increased 3%, and sales volumes decreased 40%. The price increase resulted from the tightened supply/demand balance, while the sales volume decrease was caused by the closure of the prilling section of our urea plant at Donaldsonville, Louisiana, in January 2003.

               Nitrogen solutions sales prices increased 17%, while sales volumes remained steady as the result of market concerns over the anti-dumping petition filed by the Nitrogen 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, this action reduced the volume of unfairly traded imports. Prices were positively affected by production curtailments as U.S. producers reduced production during February and March 2003 in response to a natural gas price spike.

               Phosphate.  Our DAP sales decreased 7% as the result of an 18% decrease in sales volume, partially offset by a 13% increase in sales prices. The rise in sales prices resulted from a tightened supply/demand balance because of lower global production rates and increased demand by China. Our sales volume decreased compared to fiscal 2002 because of reduced production in fiscal 2003 due to mechanical problems and limited availability of raw materials, primarily sulfur and sulfuric acid.

               Potash.  Our potash sales decreased 10% as a result of an 11% decrease in sales volumes partially offset by a 1% increase in sales prices. The decrease in sales volume resulted from a decision to forego lower priced export and domestic sales, lower industrial demand and lower than anticipated domestic agricultural demand in the spring season. As a result of the weak demand, inventory levels became very high by June 2003. In an effort to manage cash flow from operations, we shut down the potash mines in late June 2003, until we could reduce our inventory levels. The West potash mine was restarted in late July 2003 and the East potash mine was restarted in early October 2003.

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               In fiscal 2003, other revenues totaled $2.0 million related to our DiNitrogen Tetroxide (N₂0₄) contract with the U.S. Government ("Government"). In February 2003, we completed the construction of our N₂0₄ production plant at our Yazoo City, Mississippi facility. We received approximately $3.0 million from the Government during our third fiscal quarter as a reimbursement for constructing the N₂0₄ plant. This payment represents deferred revenue and will be recognized systematically over five years, the term of the contract. In addition to the deferred revenue, we are reimbursed by the Government for other out-of-pocket costs associated with the production of N₂0₄. These amounts have been included and classified as other revenues for fiscal year ended June 30, 2003.

               Overview.  Our cost of products sold decreased in fiscal 2003 to $432.3 million, from $437.5 million in fiscal 2002. As a percentage of net sales, cost of products sold was 97% for both fiscal 2003 and 2002. Higher costs per ton for all product groups were offset by higher sales prices for all product groups. Our company-wide average natural gas price increased 34% during fiscal 2003.

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

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

               Phosphate.  Our DAP costs per ton increased 29% in fiscal 2003. This increase was primarily the result of lower production rates and higher raw material costs, primarily for ammonia, sulfur and sulfuric acid. Sulfur and sulfuric acid were both in short supply in the market. In addition, significant rainfall during the current fiscal year increased our water treatment costs of the gypsum disposal facilities.

               Potash.  Our potash costs per ton increased 1% in fiscal 2003. This increase was primarily the result of higher natural gas costs partially offset by lower per-ton costs for electricity and supplies.

               Our selling, general and administrative expenses increased to $31.9 million in fiscal 2003, from $28.5 million in fiscal 2002. This increase was primarily the result of increases in severance and early retirement expenses, property insurance costs, start-up costs for our melamine production facility and professional financial consulting expenses. These increases were partially offset by the absence of goodwill amortization costs in fiscal 2003. As a percentage of net sales, selling, general and administrative expenses increased to 7% in fiscal 2003 from 6% in fiscal 2002.

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               During fiscal 2003, we recognized impairment charges relating to our long-lived assets located in Donaldsonville, Louisiana, totaling $75.1 million. In December 2002, we announced the closure of our prilled urea facility, and in February 2003, we announced the closure of one of our two anhydrous ammonia plants. Both closures were the result of continued negative operating performance caused by unfavorable natural gas prices and market conditions. The impairment charges relating to these assets totaled $70.9 million. At June 30, 2003, because of continued volatility of natural gas prices, we assessed the recoverability of all of our long-lived assets for impairment. This assessment resulted in an additional impairment charge totaling $4.2 million related to our long-lived assets located in Donaldsonville, Louisiana.

               We incurred similar impairment charges totaling $101.3 million for fiscal 2002 relating to goodwill for our Donaldsonville, Louisiana, nitrogen production facility.

               Our other operating expenses were $17.1 million in fiscal 2003, and $17.2 million in fiscal 2002. Portions of our ammonia, ammonium nitrate, urea and nitric acid production capacities were idled for various periods during fiscal 2003 and 2002, primarily due to the unfavorable relationship between product prices and natural gas prices. In addition, our potash mining operation was idled on June 20, 2003, to conserve cash and reduce inventory levels.

               Our net interest expense increased to $29.1 million in fiscal 2003, from $27.9 million in fiscal 2002. This increase was primarily the result of higher average interest rates and increased costs associated with our Pre-Petition Harris Facility, partially offset by lower average debt balances. After the Petition Date, we ceased accruing interest on the unsecured debt balances of the Senior Notes and the Industrial Revenue Bonds (each as more particularly described below under the heading "Liquidity and Capital Resources - Financing Activities").

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

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

               Other income decreased to $1.5 million in fiscal 2003, from $6.7 million in fiscal 2002. During fiscal 2002, we had gains of approximately $5.1 million related to the sale of non-core assets.

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               Costs directly related to our reorganization under Chapter 11 of the Bankruptcy Code are 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 legal and professional fees.

               Our income tax benefit increased to $31.8 million in fiscal 2003 from $17.9 million in fiscal 2002. These income tax benefits are primarily the result of our net losses, partially offset by U.S. tax expense on cumulative foreign earnings in fiscal 2003 (as more particularly described above under the heading "Critical Accounting Policies - Deferred Taxes"). Our estimated annual effective rate increased to 23.0% in fiscal 2003 from 12.9% in fiscal 2002.

               For the fiscal year ended June 30, 2002, we incurred a net loss of $19.9 million (or $0.76 per diluted share) before a non-cash impairment charge of $101.3 million, and incurred a net loss of $121.2 million (or $4.64 per diluted share) after the non-cash impairment charge. This compares to a net loss of $36.9 million (or $1.41 per diluted share) before a non-cash impairment charge of $58.4 million, and a net loss of $95.2 million (or $3.64 per diluted share) after the non-cash impairment charge for the fiscal year ended June 30, 2001. The non-cash impairment charges for the fiscal years ended June 30, 2002 and 2001, related to a write-down of goodwill associated with the December 1996 acquisition of our Donaldsonville, Louisiana, nitrogen production assets.

               Net sales decreased to $451.3 million in fiscal 2002 from $540.4 million in fiscal 2001. We incurred an operating loss of $32.0 million in fiscal 2002 before a non-cash impairment charge of $101.3 million, compared to an operating loss of $46.8 million in fiscal 2001 before a non-cash impairment charge of $58.4 million.

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

               Overview.  For fiscal 2002, our net sales decreased 16% to $451.3 million, from $540.4 million for fiscal 2001. This decrease was primarily the result of lower average sales prices for all product groups and lower sales volumes for some nitrogen products, primarily industrial sales of ammonia. These decreases were partially offset by higher sales volumes for our DAP and potash products.

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              Summaries of our net sales results by business unit are set forth below:

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               Nitrogen.  Our nitrogen sales decreased 29% as a result of lower sales prices. The average selling price for ammonia, ammonium nitrate, urea and nitrogen solutions decreased 32%, 19%, 26% and 29%, respectively. An oversupply of nitrogen products in the U.S. market caused by high carryover of inventory from the previous year and decreased demand for ammonia adversely affected sales prices. In addition, while domestic production did not return to historical levels, it did increase from 2001 levels for all products except nitrogen solutions. During fiscal 2001, nitrogen product prices spiked due to capacity shutdowns by domestic producers amid industry-wide cost pressure caused by record high natural gas prices during the winter of 2000-2001.

               Substantially all of our ammonia sales are to industrial customers. Our ammonia sales volumes decreased 17% because of lower demand from industrial customers due to a slowdown in economies worldwide, which caused industrial customer production curtailments and, in some instances, plant closures. In addition, sales prices were negatively affected by anticipation of new offshore production coming on-line in Trinidad.

               Ammonium nitrate sales prices decreased 19% as discussed above, while sales volumes increased 30%. The increase in sales volumes was primarily due to recaptured market share from imports and favorable crop conditions. Sales volumes during fiscal 2001 were low due to lost market share, significant volumes of imported ammonium nitrate, including substantial quantities of what the U.S. Government determined were unfairly traded imports, and weak fertilizer demand during the spring planting season caused by wet weather.

               Urea sales prices decreased 26%, and sales volumes decreased 7%. Sales prices decreased as a result of excess industry inventories carried over from spring 2001 and increased production. Sales volumes decreased as a result of decreased granular urea sales due to the transfer of our granular urea facility back to its prior owner during fiscal 2002, as well as decreased urea melt sales caused by Melamine Chemicals, Inc.'s closure of its plant in Donaldsonville, Louisiana. The decrease in sales volumes was partially offset by increased production and sales of prilled urea.

               Nitrogen solutions sales prices decreased 29%, while sales volumes increased 5%. Sales prices decreased primarily as a result of a continuation of large volumes of unfairly traded imported product during the first nine months of fiscal 2002, and industry-wide inventory overhang from the previous year.

               Phosphate.  Our DAP sales increased 16% as a result of a 21% increase in sales volume partially offset by a 5% decrease in sales prices. While average sales prices were down during fiscal 2002 as compared to fiscal 2001, world market conditions improved in the last part of fiscal 2002. Increased demand from China during the first half of calendar 2002 tightened the supply/demand balance, and increased sales prices during the latter part of fiscal 2002.

               Potash.  Our potash sales increased 4% as a result of a 12% increase in sales volumes partially offset by an 8% decrease in sales prices. The decrease in sales prices partially resulted from an increase in export sales, which typically have lower net sales prices than domestic sales. Lower industrial sales during fiscal 2002, as a result of poor economic conditions, also contributed to lower sales prices because industrial sales are typically for higher priced products. The increase in sales volumes resulted from an increase in both export and domestic sales during fiscal 2002.

               Overview.  Our cost of products sold decreased to $437.5 million from $534.2 million. As a percentage of net sales, cost of products sold decreased to 97% from 99%, primarily as a result of lower costs per ton for all product groups partially offset by lower sales prices for all product groups. Our company-wide average natural gas price increased 33% during fiscal 2002.

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               Nitrogen.  Our nitrogen costs per ton decreased 28% primarily as a result of lower natural gas costs at our domestic production facilities. The average price of natural gas, net of futures gains and losses, at our domestic nitrogen production facilities decreased approximately 32% to $3.05 per MMBtu. In addition, we had lower costs related to third-party purchases of ammonia and lower maintenance and labor costs which resulted from maintenance shutdowns at our Yazoo City, Mississippi, and Donaldsonville, Louisiana, facilities during fiscal 2001. During fiscal 2002, we also had higher equity earnings at our joint venture ammonia plant in Trinidad, Point Lisas Nitrogen, that contributed to the decrease in our nitrogen costs per ton. These equity earnings are reflected in our consolidated statements of income as a reduction in cost of products sold.

               Our portion of the earnings from Point Lisas Nitrogen was $12.0 million for fiscal 2002, compared to $7.2 million for fiscal 2001. During fiscal 2002, Point Lisas Nitrogen incurred lower natural gas costs because its gas contract ties the price of natural gas to the market price of ammonia, which decreased during fiscal 2002. Additionally, Point Lisas Nitrogen sales prices during fiscal 2002 were above prevailing market prices as a result of its product offtake agreements with us and our then joint venturer, Farmland Industries, Inc. The agreements required Point Lisas Nitrogen to make sales to us at prices at a discount to the prevailing market, subject to a minimum price. During fiscal 2002, all Point Lisas Nitrogen sales to us were at the minimum price.

               Phosphate.  Our DAP costs per ton decreased 19% in fiscal 2002. This decrease was primarily the result of lower raw material costs for ammonia and sulfur.

               Potash.  Our potash costs per ton decreased 5% in fiscal 2002. This decrease was primarily the result of lower natural gas costs.

               Our selling, general and administrative expenses decreased to $28.5 million in fiscal 2002, from $31.4 million in fiscal 2001. This decrease was primarily the result of reduced goodwill amortization during fiscal 2002. In addition, fiscal 2001 included approximately $1.0 million in costs related to benefits paid under an early retirement program and severance costs related to a reduction in force. As a percentage of net sales, selling, general and administrative expenses were 6% for fiscal 2002 and fiscal 2001.

               Due to continued operating losses, primarily caused by low product prices and increased natural gas costs, we assessed the recoverability of our tangible and intangible long-lived assets related to our nitrogen operations pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," prior to its amendment discussed above. We projected the undiscounted future cash flows for these operations to test recoverability and determined that, in certain cases, they were less than the value of such assets on the consolidated balance sheet, indicating that impairment was likely. The impairment of an asset is measured by the amount the carrying value of the asset exceeds its fair value. Our cash flow projections were based on a third party appraisal of our long-lived assets and included additional third party and internally developed forecasts of fu ture nitrogen prices and natural gas costs. We determined that we had a permanent impairment in the value of goodwill related to our Donaldsonville, Louisiana, nitrogen production assets acquired in December 1996. Accordingly, a non-cash provision for goodwill impairment of $101.3 million was recorded in our fourth quarter of fiscal 2002. We made a similar non-cash charge of $58.4 million in our fourth quarter of fiscal 2001. Estimates of such future cash flows are subject to significant uncertainties and assumptions. Accordingly, actual results could vary significantly from such estimates. We had no goodwill recorded on our books as of June 30, 2002.

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               The impairment analysis was prepared on a going concern basis, and the Company's carrying value for its long-lived assets was presumed to be recoverable through future cash flows. If the Company does not continue as a going concern, further impairment charges may be necessary.

               Our other operating expenses decreased to $17.2 million in fiscal 2002 from $21.5 million in fiscal 2001. This decrease was primarily due to reduced idle plant costs at our nitrogen facilities as a result of our nitrogen plants operating at higher rates. Portions of our ammonia, urea and nitric acid production capacities were idled for various periods during 2002 and 2001, primarily due to the unfavorable relationship between product prices and natural gas costs.

               Our net interest expense decreased to $27.9 million in fiscal 2002 from $28.7 million in fiscal 2001. This decrease was primarily the result of lower average interest rates under our Pre-Petition Harris Facility (as defined below under the heading Liquidity and Capital Resources - Financing Activities - The Pre-Petition Harris Facility), partially offset by higher average debt balances and costs and lender fees associated with amending our Pre-Petition Harris Facility.

               During fiscal 2002, we settled the defamation action we filed against Terra in August 1995. We received $11.0 million from Terra's liability insurance carrier. Also in fiscal 2002, we received $4.4 million in net proceeds from the conclusion of litigation related to defective equipment purchased at our Yazoo City, Mississippi, nitrogen production facility. The problems with this equipment occurred during periods prior to fiscal 2002.

               Other income decreased to $6.7 million in fiscal 2002 from $9.0 million in fiscal 2001. During both fiscal 2002 and 2001, other income included gains on the sale of non-core assets of $5.1 million and $6.7 million, respectively.

               Our income tax benefit decreased to $17.9 million in fiscal 2002 from $29.6 million in fiscal 2001. These income tax benefits were primarily the result of our net losses. For fiscal 2002 and prior, we did not provide for taxes on our permanently reinvested foreign earnings from our investment in Point Lisas Nitrogen. In addition, we did not provide for tax benefits on our non-deductible goodwill amortization or losses on non-deductible goodwill impairment. Our estimated annual effective tax rate decreased to 12.9% in fiscal 2002 from 23.7% in fiscal 2001.

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               On October 2, 2003, the Court entered the Final Order authorizing us to borrow up to $32.5 million under the debtor-in-possession financing facility generally described below in this section under the heading "Financing Activities - Debtor-in-Possession Financing Facility," and more particularly described in the Post-Petition Credit Agreement filed as an exhibit to our Form 10-Q for the quarter ended March 31, 2003.

               At June 30, 2003, we had cash and cash equivalents of $6.1 million, compared to $2.0 million at June 30, 2002, an increase of approximately $4.1 million. At June 30, 2002, our cash and cash equivalents had decreased to $2.0 million from $11.8 million at June 30, 2001, a decrease of $9.8 million.

               Our net cash used in operating activities was $34.9 million in fiscal 2003. Such cash included a $14.9 million refund of federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002. Our net cash provided by operating activities was $53.7 million in fiscal 2002 and included a $26.4 million refund of federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002, and an $11.0 million settlement related to the defamation action we filed against Terra International, Inc. in August 1995. We had net cash used in operating activities of $48.2 million in fiscal 2001.

               Our net cash used in investing activities was $9.2 million in fiscal 2003 and included $14.9 million in capital expenditures for normal improvements and modifications to our facilities necessary for safe and efficient operations. These expenditures were partially offset by $3.4 million in proceeds from the sale of non-core assets and $2.2 million in dividends from two of our 50% joint ventures. Net cash used by investing activities was $1.6 million in fiscal 2002 and included $12.4 million in capital expenditures that were for normal improvements and modifications to our facilities that were necessary for safe and efficient operations. These expenditures were partially offset by $8.0 million in proceeds from the sale of non-core assets and $2.8 million primarily from the collection of a note for the sale of non-core real estate and dividends from one of our 50% joint venturers. Our net cash provid ed by investing activities was $2.7 million for fiscal 2001 and included $16.8 million in proceeds from the sale of non-core assets and $1.3 million in dividends from one of our 50% joint venturers. These proceeds were partially offset by $15.4 million in capital expenditures that were for normal improvements and modifications to our facilities.

               Net cash provided by financing activities was $48.3 million in fiscal 2003, which reflected the excess of borrowings over debt payments. Our borrowings were slightly reduced by the receipt of $14.9 million from a refund of previously paid federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002. Our net cash used in financing activities was $62.0 million in fiscal 2002, indicating that we repaid more money than we borrowed. Contributing to our debt reduction was an $11.0 million cash settlement from the Terra lawsuit, plus the receipt of $26.4 million from a refund of previously paid federal taxes pursuant to the Job Creation and Workforce Assistance Act of 2002. During fiscal 2001, amounts provided by financing activities included $55.9 million in net proceeds from borrowings, partially offset by $784,000 paid in cash dividends.

               Debtor-in-Possession Financing Facility. On May 16, 2003, the Court entered an Interim Order approving our request, on an interim basis, for a debtor-in-possession financing facility with Harris Trust and Savings Bank and a syndicate of six other lenders (the "DIP Lenders") to provide up to $37.5 million in financing (the "Interim Credit Facility"). As of the date of this filing, the DIP Lenders are also lenders under the Pre-Petition Harris Facility (the "Pre-Petition Lenders"). On August 13, 2003, the

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Court denied our request for a Final Order with regard to the Interim Credit Facility, but granted us authority to use our cash collateral (i.e., cash and receivables) for ordinary course operations through October 3, 2003. However, on October 2, 2003, the Court entered a Final Order that approved certain amendments to the Interim Credit Facility and permits borrowings of up to $32.5 million (the "DIP Credit Facility"). The DIP Credit Facility is a revolving credit facility that terminates upon the earlier to occur of (a) June 30, 2004, (b) the date that a plan of reorganization confirmed by the Court becomes effective, or (c) the date on which the DIP Lenders terminate the DIP Credit Facility in connection with an event of default thereunder. Mississippi Chemical Corporation is the borrower under the DIP Credit Facility and its subsidiaries who are Debtors are guarantors.

               Maximum Borrowings. The DIP Credit Facility provides for maximum borrowings (the "DIP Commitment"), at any time, up to the lesser of (a) $32.5 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) a scheduled excess collateral availability requirement, minus (iv) an amount equal to twice the amount of all the then accrued and unpaid charges owed to warehousemen and other third parties having inventory in their possession that have not executed and delivered to the lenders a warehouseman's waiver, minus (v) an amount equal to six months' rent for all leased facilities where inventory is kept for which the landlord has not executed and delivered to the lenders a landlord's waiver. The DIP Commitment is subject to certain mandatory reductions described below under the heading "Covenants."

               Rates and Fees. The DIP Credit Facility bears interest at rates equal to the prime commercial rate from time to time in effect plus 4%. Upon entry of the Interim Order, we paid a facility fee of $375,000 to the DIP Lenders and an administrative fee of $75,000 (of this amount, $60,000 was refunded to us subsequent to June 30, 2003) to Harris Trust and Savings Bank, as "DIP Agent." Upon entry of the Final Order, we paid an additional fee of $375,000 to the DIP Lenders and an additional administrative fee of $75,000 to the DIP Agent. The DIP Credit Facility also has a commitment fee equal to 0.5% per annum of the average daily unused amount of the DIP Commitment.

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

               Covenants. The DIP Credit Facility (a) restricts our ability to incur debt, (b) requires us to generate certain minimum levels of EBITDA as detailed below in this paragraph for so long as the amount of obligations under the Pre-Petition Harris Facility exceeds $67.5 million, (c) limits our expenditures to the types set forth in a budget, subject to permitted deviations, (d) limits the amount of capital expenditures as detailed below in this paragraph, (e) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events (such as asset dispositions outside the ordinary course of business) as detailed below in this paragraph, (f) permits the voluntary prepayment of the DIP Credit Facility without penalty, (g) requires that the obligations under the Pre-Petition Harris Facility be reduced according to a schedule, and (h) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for debtor-in-possession revolving credit facilities. The minimum cumulative EBITDA requirements are as follows:

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Our cumulative capital expenditures are limited as follows:

We must maintain an excess collateral availability amount under our borrowing base according to the following schedule:

Other than any disposition of our interest in Point Lisas Nitrogen, all net cash proceeds of asset dispositions outside the ordinary course in excess of $1.0 million shall be applied to the Pre-Petition Facility and the DIP Credit Facility on an equal basis, provided that if the obligations under the DIP Credit Facility are otherwise satisfied as described in the DIP Credit Facility, the balance of any such proceeds shall be applied to the Pre-Petition Credit Facility. As a result of any such sale, the DIP Commitment shall be automatically and permanently reduced by the amount of each such payment with a corresponding reduction in the DIP Commitment of each DIP Lender. In the event of a disposition of our interest in Point Lisas Nitrogen, all net cash proceeds must be applied to the Pre-Petition Facility.

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               Standstill Agreement. In connection with entering into the DIP Credit Facility, we entered into an agreement with the Pre-Petition Lenders pursuant to which such lenders agreed not to take any action to enforce their rights under the MCHI guaranty, given in connection with the Pre-Petition Facility. Upon the termination of the DIP Credit Facility or in the case of certain defaults, the Pre-Petition Lenders may enforce the MCHI guaranty. In the event that MCHI receives proceeds from a refinancing or disposition event with respect to Point Lisas Nitrogen, MCHI has agreed to apply such proceeds to the Pre-Petition Facility.

               The Pre-Petition Harris Facility

               As of the Petition Date, we had a secured revolving credit facility with Harris Trust and Savings Bank and a syndicate of twelve other lenders totaling $158.4 million (the "Pre-Petition Facility"). The Pre-Petition Facility bears interest at rates related to the Prime Rate, the London Interbank Offered Rate or Federal Funds Rate. As of June 30, 2003, our weighted average interest rate was 9.65% and we had borrowings outstanding in the amount of $158.4 million and letters of credit outstanding in the amount of $790,000. The bankruptcy filing was an event of default under the Pre-Petition Facility and, as a result, we can no longer borrow under the Pre-Petition Facility. Since the Pre-Petition Facility is a secured facility, it has not been classified as a liability subject to compromise on our consolidated balance sheet.

               In August 1997, we issued $14.5 million in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of our new phosphogypsum disposal facility at our Pascagoula, Mississippi, DAP manufacturing plant. On April 1, 1998, we issued $14.5 million in tax-exempt industrial revenue bonds (the "1998 IRBs"), the proceeds of which were used to redeem the initial industrial revenue bonds issued in August 1997. The 1998 IRBs mature on March 1, 2022, and carry a 5.8% fixed rate of interest. 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 time after February 28, 2010, through the maturity date. The bonds are the obligation of our subsidiary, Mississippi Phosphates Corporation, but are guaranteed by Mississippi Chemical Corporation. The bankruptcy filing was an e vent of default under the industrial revenue bonds. At June 30, 2003, the industrial revenue bonds are reflected as a component of liabilities subject to compromise on our consolidated balance sheet.

               The Senior Notes

               On November 25, 1997, we issued $200.0 million of 7.25% Senior Notes (the "Senior Notes") due November 15, 2017, pursuant to a shelf registration statement filed with the Securities and Exchange Commission. The holders may elect to have the Senior Notes repaid on November 15, 2007. The Senior Notes do not contain any financial covenants, but do contain certain cross-default provisions with the Pre-Petition Harris Facility. As a result of our bankruptcy filing, 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, 2003, the Senior Notes, net of unamortized discounts of $239,000, are reflected as a component of liabilities subject to compromise on our consolidated balance sheet.

               On January 9, 2003, Trustmark National Bank, the Trustee under the Indenture governing the Senior Notes, delivered a notice of resignation to us. On March 21, 2003, BancorpSouth Bank, a national banking association, became the Trustee under the Indenture. As of June 24, 2003, BancorpSouth Bank resigned as Trustee under the Indenture; and as of the same date, HSBC Bank USA, a banking corporation and trust company duly organized and existing under the laws of the State of New York, became the Trustee under the Indenture.

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               Our 50-50 joint venture, Point Lisas Nitrogen, formerly known as Farmland MissChem Limited, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant near Point Lisas, The Republic of Trinidad and Tobago. Point Lisas Nitrogen's loan with Export Import Bank of the United States ("Ex-Im Bank") is a non-recourse loan and is not guaranteed by the joint venture partners. In the event of default, Ex-Im Bank could demand immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen.

               On May 31, 2002, our former joint venture partner at Point Lisas Nitrogen, Farmland Industries, Inc. ("FII"), filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court, Western District of Missouri. This filing and FII's default under its offtake agreement with Point Lisas Nitrogen were events of default under Point Lisas Nitrogen's loan agreement with Ex-Im Bank. Accordingly, Ex-Im Bank could have demanded immediate payment of all or any 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 liability on Point Lisas Nitrogen's balance sheet. FII continued to purchase and pay for ammonia shipped under the offtake agreement after its bankruptcy filing. In May 2003, FII cured its default under its offtake agreement with Point Lisas Nitrogen in the amount of approximately $5.0 million and sold its interest in Point Lisas Nitrogen to Koch.

               As a result of our filing bankruptcy, we are in default under our ammonia offtake agreement with Point Lisas Nitrogen. The bankruptcy filing also resulted in a default on Point Lisas Nitrogen's loan with Ex-Im Bank. Because of this default, the total loan obligation to Ex-Im Bank continues to be classified as a current liability on Point Lisas Nitrogen's balance sheet. At June 30, 2003, we were in arrears to Point Lisas Nitrogen under the ammonia offtake agreement in the amount of approximately $2.6 million. As a consequence, we have been paying market prices for ammonia since the Petition Date through September 30, 2003, and have not been able to recover amounts paid in previous years that were in excess of prevailing market prices. As a result of entering into the Stalking Horse Agreement (as defined below), and upon satisfaction of other conditions, Koch and Ex-Im Bank have agreed to perm it us to recover amounts paid in previous years that were in excess of prevailing market prices on purchases after October 1, 2003. As of the date of this filing, Ex-Im Bank has not demanded payment of the debt. Point Lisas Nitrogen is continuing to repay the loan obligation with Ex-Im Bank based on the original repayment schedule.

               On October 8, 2003, we signed an agreement with Koch to sell our interest in Point Lisas Nitrogen for an estimated cash amount of $92.0 million (the "Stalking Horse Agreement"). On October 10, 2003, we filed motions with the Court seeking to approve the Stalking Horse Agreement and the auction and bid procedures for an auction of our Point Lisas Nitrogen interests to be sold in December 2003. If Koch is not the successful bidder at the auction, Koch will be entitled to an estimated break-up fee of approximately $3.8 million.

               Based on natural gas and product market prices as of the date of this filing, and our current gas hedge positions, we believe that our existing cash, cash generated from operations, and cash available under the DIP Credit Facility should be sufficient to satisfy our financing requirements for operations and capital projects through fiscal 2004. Natural gas prices remain volatile, and if they increase without corresponding increases in the market prices for our products, our natural gas costs will have a material adverse impact on our liquidity and results of operations. We estimate our capital expenditure requirements for fiscal 2004 to be approximately $12.0 million, which includes normal improvements and modifications to our facilities necessary for safe and efficient operations. Our ability to continue as a going concern is dependent upon,

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but not limited to, the development and confirmation of a plan of reorganization, continued access to adequate sources of capital, compliance with the covenants under the DIP Credit Facility, the ability to sustain cash flows sufficient to fund operations and repay debt, and retention of key suppliers, customers and employees. No assurance can be given that we will be successful in reorganizing our affairs and successfully emerging from the bankruptcy proceedings.

               The spring season of fiscal 2003 was disappointing. Fiscal 2003 began with several positive factors, including the anticipation of U.S. farmers planting increased acreage over the spring of 2002. Nitrogen product inventories at the producer level were minimal and grain prices had shown improvement. This outlook held through the first nine months of the 2003 fiscal year. During the last quarter of the fiscal year, however, unfavorable weather greatly reduced fertilizer application and planted acreage. As we move into the fall and winter of fiscal 2004, volatility in U.S. natural gas prices has resulted in lower U.S. production rates during the summer months. This has resulted in a tighter supply/demand balance going into the fall causing nitrogen prices to remain at high levels compared to historical averages. Notwithstanding these negative developments, the fiscal 2003 decrease in actual planted a cres, compared to planned acres, should cause the ratio of ending grain stocks to use, both inside and outside the United States, to remain favorable. Weather, oil prices and the U.S. economic recovery are among the most important fundamental factors in determining demand for natural gas. To maximize results in the current environment, we continue to determine operating levels for our plants based on our commitments to customers and the relationship between nitrogen product prices and natural gas prices.

               Approximately half of our DAP is sold into export markets by PhosChem. We anticipate 2004 DAP fundamentals to remain similar to those in the 2003 fiscal year. China's imports may be slightly higher in 2004 compared to 2003; however, if a recent proposal to limit cadmium levels is enacted, fertilizer imports into China could be reduced since DAP contains high levels of cadmium.

               The success of our potash segment will depend on the continued improvement of ore grades mined, improvement in production costs and increases of low potash sales prices.

               Other variables can affect our results of operations as stated elsewhere in our discussions under the headings titled "Results of Operations" and "Forward-Looking Statements," as well as under the heading "Certain Business Factors" and elsewhere in this Annual Report on Form 10-K.

               Except for the historical statements and discussion contained herein, statements set forth in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, forward-looking statements can be identified by the use of terms such as "may," "will," "expects," "believes," "plans," "anticipates," "estimates," "potential," or "continue," the negatives of such words, or other comparable language. Since these forward-looking statements rely on a number of assumptions concerning future events, risks and uncertainties that are beyond our ability to control or predict, readers are cautioned that actual results may differ materially from such forward-looking statements. Future events, risks and uncertainties that could cause a material difference in such results include, but are not limited to, (i ) our ability to operate pursuant to the terms of the DIP Credit Facility, (ii) operating constraints, costs and uncertainties associated with the Case, (iii) our ability to develop, prosecute, confirm and consummate a plan of reorganization, (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 of fertilizer products, (vii) high natural

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gas prices and the volatility of the natural gas market, (viii) a variety of conditions in the agricultural industry such as grain prices, planted acreage, projected grain stock, U.S. government policies, weather, and changes in agricultural production methods, (ix) possible unscheduled plant outages and other operating difficulties, (x) price competition and capacity expansions and reductions from both domestic and international competitors, (xi) foreign government agricultural policies, in particular, the policies of the governments of India and China regarding fertilizer imports, (xii) the relative unpredictability of international and local economic conditions, (xiii) the relative value of the U.S. dollar, (xiv) regulations regarding the environment and the sale and transportation of fertilizer products, (xv) oil costs and the impact of war in the Middle East or elsewhere, (xvi) the continuing efficacy of unfair trade remedies and the outcome of pending unfair trade (antidumping) cases, and (xvii) other important factors affecting us and the fertilizer industry generally as detailed in Item 1 under the heading "Certain Business Factors" and elsewhere in this Annual Report on Form 10-K.

               Overview. We are exposed to changes in natural gas prices and interest rates. For more information about how we manage specific risk exposures, see Critical Accounting Policies - Hedging Activities in Item 7 of this Annual Report on Form 10-K, and Note 8 - Credit Agreements and Long-Term Debt and Note 17 - Hedging Activities, in our Notes to Consolidated Financial Statements appearing in Item 8 of this Annual Report on Form 10-K.

               Natural Gas. To manage our natural gas price risks, we enter into derivative transactions as the opportunity arises. These derivative transactions may consist of futures contracts, options, swaps, or similar derivative instruments that mature at various dates. We do not hold or issue derivative financial instruments for trading purposes. We maintain formal policies with respect to entering into and monitoring derivative transactions. Our derivative transactions are intended to hedge our future natural gas costs. The volume of natural gas hedged varies from time to time based on management's judgment of market conditions, particularly natural gas prices and nitrogen product prices. At June 30, 2003, we had no open natural gas derivative instruments. Because of delays relating to the Case, we were unable to hedge natural gas from May 16, 2003 through September 28, 2003. Unde r the Interim Order approving hedging activities, we may only hedge natural gas for the months of November and December 2003, and are subject to certain volume restrictions. We intend to seek further Court approval to conduct hedging activities.

               Interest Rates. The table below provides information, as of June 30, about our financial instruments sensitive to changes in interest rates.

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               On May 15, 2003 (the "Petition Date"), Mississippi Chemical Corporation and nine of its direct and indirect subsidiaries, Mississippi Nitrogen, Inc.; MissChem Nitrogen, L.L.C.; Mississippi Chemical Company, L.P.; Mississippi Chemical Management Company; Mississippi Phosphates Corporation; Mississippi Potash, Inc.; Eddy Potash, Inc.; Triad Nitrogen, L.L.C.; and Melamine Chemicals, Inc. (collectively, the "Company" or the "Debtors"), filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of Mississippi, Jackson, Mississippi (the "Court"). The cases are being administered jointly in Joint Case Number 03-02984 WEE, (collectively the "Case"). The Company will continue to operate its businesses as debtors-in-possession, permitting the Company to operate its businesses, but not to engage in transactions outside the ordinary course of business without the approval of the Court. On May 16, 2003, the Court rendered an Interim Order approving the Company's request for interim financing, and on October 2, 2003, the Court entered a Final Order approving the Company's debtor-in-possession financing with Harris Trust and Savings Bank and a syndicate of six other lenders (Note 8).

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

               On June 6, 2003, the Court appointed the Official Committee of Unsecured Creditors to represent the interests of the unsecured creditors. This committee will monitor the Company's financial condition and restructuring activities. The Company is required to reimburse certain fees and expenses of the committee, including fees for attorneys and other professionals to the extent allowed by the Court.

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

               Pursuant to the provisions of the Bankruptcy Code, the Company is currently developing a plan of reorganization. The principal objective of the plan of reorganization will be to restructure the Company's obligations to creditors in a manner that will permit the Company to continue as a viable business organization. The Bankruptcy Code allows the Company the exclusive right to file a plan of reorganization during the first 120 days from the Petition Date, or such other time as the Court orders. In October 2003, the Court extended the Company's exclusivity period to file a plan of reorganization until December 11, 2003, or until such time the Court issues its final ruling. Although the Company expects to file a plan of reorganization, there can be no assurance at this time as to whether or when a plan of reorganization will be proposed, how liabilities and equity interests will be treated in t he plan, whether the plan will be approved by the various classes of creditors and equity holders, or whether it will be approved or confirmed by the Court. If the exclusivity period were to be terminated, other interested parties, such as creditors, would have the right to propose alternative plans of reorganization. The Company's plan of reorganization could substantially change the amounts and characterization of liabilities disclosed in the accompanying consolidated financial statements.

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     As a result of the May 15, 2003 filing of petitions under Chapter 11 of the Bankruptcy Code, the Company's consolidated financial statements have been prepared in accordance with AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" and accounting principles generally accepted in the United States of America applicable to a going concern which, unless otherwise noted, assumes the realization of assets and the payment of liabilities in the ordinary course of business. See Note 2, "Summary of Significant Accounting Policies - Bankruptcy Proceedings" for additional information regarding SOP 90-7.

               Given the uncertainties inherent in Chapter 11 bankruptcy proceedings, language expressing substantial doubt about the ability of the Company to continue as a going concern appears in the independent auditors' report covering these consolidated financial statements. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. All material intercompany transactions and balances have been eliminated (see Note 1).

               The Company produces and supplies a full product line of chemicals, including nitrogen, phosphate and potash, which are used primarily as fertilizers and for a broad range of industrial applications. 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 at its production facilities in Yazoo City, Mississippi, and Donaldsonville, Louisiana, and produces ammonia at its 50-50 joint venture in The Republic of Trinidad and Tobago. The Company distributes its nitrogen products to agricultural and industrial users primarily in the southern region of the United States. The Company produces diammonium phosphate ("DAP") at its facility in Pascagoula, Mississippi, and exports approximately half of its production through the Phosphate Chemicals Export Association, Inc. ("PhosChem"). The Company's mines and related facilities near Carlsbad, New Mexico, produce the Company's potash products. The majority of the Company's agricultural potash sales are in domestic markets in the southern and western regions of the United States. In addition, the Company produces several grades of potash that are purchased as a raw material by industrial users.

               During fiscal 2003, the Company purchased a melamine crystal production facility. The production of melamine did not begin until late June and, therefore, did not contribute to the Company's operations during fiscal 2003. This will become a new operating segment for the Company in fiscal 2004.

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               The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

               Inventories are stated at the lower of cost or market. Cost has been determined under a moving average cost method.

               The Company's investments in affiliates primarily consist of an investment in a 50-50 ammonia production joint venture, Point Lisas Nitrogen Limited ("Point Lisas Nitrogen"), formerly Farmland MissChem Limited, with Koch Nitrogen Company (Note 4). The Company has a separate 50-50 joint venture with Koch Nitrogen Company that is responsible for the transportation of the ammonia produced at Point Lisas Nitrogen. In addition, the Company also has a 50% interest in an ammonia storage terminal in Pasadena, Texas.

               Property, plant and equipment are stated at cost, less accumulated depreciation, depletion and amortization. Expenditures for major improvements are capitalized; expenditures for normal maintenance and repairs are charged to expense as incurred. Upon the sale or retirement of properties, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is recognized in income. Depreciation of the Company's land improvements is based on the units-of-production method. The Company uses primarily the declining-balance method of depreciation for assets purchased through June 30, 1995. Effective July 1, 1995, the Company changed its method of depreciating newly acquired long-lived assets from the declining-balance method to the straight-line method. Depletion of mineral properties is provided using the units-of-production method over the estimated life of the reserves. Depreciation of property, plant and equipment is provided over the estimated useful lives of the related assets as follows:

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

               Interest costs attributable to major construction projects under development are capitalized in the appropriate property account and amortized over the life of the related asset.

               The Company maintains replacement parts at its production facilities in order to minimize downtime in the event of a part failure. Substantially all parts that exceed a minimum value and are repairable are capitalized as property, plant and equipment and are depreciated over their estimated useful lives. Parts that do not exceed the minimum value or are not repairable are maintained as replacement parts and are included as inventory in the Company's current assets. These replacement parts are charged to cost of products sold as they are installed in the facility.

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 Impairment of Long-Lived Assets

               In 2003, as prescribed in Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company uses the undiscounted cash flow approach to assess the recoverability of long-lived assets related to its nitrogen, phosphate and potash operations. This evaluation is made whenever events or changes in circumstances indicate the carrying amount of long-lived assets may not be recoverable. Estimated cash flows are determined by disaggregating the Company's business segments to the lowest organizational level for which meaningful and identifiable cash flows can be determined. An asset is considered impaired if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. The impairment of an asset is measured by the amount the carrying value of the asset exceeds its fair value. In those insta nces, the amount impaired is recorded as a component of the Company's results of operations (see Note 7).

              In 2002 and 2001, as prescribed in Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived assets and for Long-Lived Assets to be Disposed of," the Company used the undiscounted cash flow approach to assess the recoverability of long-lived assets related to its nitrogen, phosphate and potash operations. This evaluation was made whenever events or changes in circumstances indicated the carrying amount of long-lived assets may not be recoverable. Estimated cash flows were determined by disaggregating the Company's business segments to the lowest organizational level for which meaningful identifiable cash flows could be determined. An asset was considered impaired if the sum of the expected undiscounted future cash flows was less than the carrying amount of the asset. The impairment of an asset was measured by the amount the carrying value of the asset exceede d its fair value. In those instances, the amount impaired was recorded as a component of the Company's results of operations.

               The Company recognizes its obligations to retire certain tangible long-lived assets over the estimated useful lives of those related assets in accordance with SFAS No. 143, "Accounting for Asset Retirement Obligations." The amounts recorded are a component of operating expenses in the Company's consolidated statements of operations (see Note 9).

               Revenue is recognized by the Company upon the transfer of title to the customer, which is generally at the time product is shipped.

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               The Company enters into derivative transactions to protect future production costs against price fluctuations of natural gas, which is the primary raw material in nitrogen production. These derivative transactions may consist of futures contracts, options, swaps, or similar derivative financial instruments related to the price of natural gas. Gains and losses on the derivative transactions that are designated and effective as hedges are deferred and, at the time the related inventory is sold, are recognized as an increase or decrease in the purchase cost of the related natural gas. The Company accounts for its hedges in accordance with Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." The fair value of these instruments is recorded on the consolidated balance sheets as an asset or liability as applicable, with a corresponding amount, tax effected, reflected as a component of shareholders' equity under the heading "Accumulated Other Comprehensive Income (Loss)." At certain times, the Company determines that its nitrogen production facilities are not economical because of the unfavorable relationship between nitrogen product prices and the price of natural gas. When this occurs, the quantity of natural gas the Company purchases may be less than the quantity hedged, and therefore, the Company undesignates the difference and recognizes the ineffective portion immediately in its consolidated statements of operations. Due to certain matters relating to the Case, the Company was unable to hedge natural gas from May 16, 2003 through September 28, 2003. Under the Interim Order approving hedging activities, the Company may only hedge natural gas for the months of November and December 2003, and is subject to certain volume re strictions. The Company intends to seek further Court approval to conduct hedging activities.

               SFAS No. 107, "Disclosure About Fair Value of Financial Instruments," requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statements of financial position, for which it is practicable to estimate fair value. SFAS No. 107 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. If estimating fair value is not practicable, SFAS No. 107 requires disclosure of descriptive information pertinent to estimating the value of a financial instrument. The carrying amount of the Company's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value of these financial instruments at June 30, 2003 and 2002 due to their short-term nature. The carrying amount of the Company' s revolving credit facilities carried variable interest rates and, therefore, the carrying amounts approximate fair value. The estimated fair value of the Company's long-term debt is determined using applicable trading price information and effective yield information on similar debt instruments as quoted by independent sources (see Note 8).

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               Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

               As a result of filing petitions under Chapter 11 of the Bankruptcy Code, the Company's consolidated financial statements have been prepared in accordance with AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP 90-7 does not change the application of accounting principles generally accepted in the United States of America in the preparation of financial statements. However, it does require that the financial statements for the periods including and subsequent to filing the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

               SOP 90-7 requires (a) that pre-petition liabilities that are subject to compromise be segregated in the consolidated balance sheets as liabilities subject to compromise, and (b) that revenues, expenses, realized gains and losses, and provisions for losses resulting from the reorganization of the Company be reported separately as reorganization expense in the consolidated statement of operations. As a result of the reorganization proceedings under Chapter 11, the Company may be required to take actions which may cause assets to be realized or liabilities to be liquidated, for amounts other than those reflected in the consolidated financial statements.

               The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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               In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantors, Including Indirect Guarantors of Indebtedness of Others." This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company adopted and applied the provisions of this interpretation, resulting in no material effect, in its consolidated financial statements at June 30, 2003.

               In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," addresses consolidation by business enterprises of variable interest entities in which the equity investors do not have a majority voting interest and/or do not have sufficient equity at risk for the entity to finance its operations without additional subordinated financial support from other parties. The Company is required to adopt and apply the provisions of this interpretation during its first quarter of fiscal 2004. The Company does not anticipate the adoption to have a material effect on its consolidated financial statements.

               In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging." This amendment clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financial component, and amends the definition of an underlying to conform it to language used in FASB Interpretation No. 45. These changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. The Company is required to adopt and apply the provisions of this statement on July 1, 2003. Th e Company does not expect the adoption of SFAS No. 149 to have a material effect on its consolidated financial statements.

               In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that any financial instrument that is within the scope of this statement be classified as a liability. The Company is required to adopt and apply the provisions of this statement to financial instruments entered into or modified after May 31, 2003, and otherwise this statement is effective on July 1, 2003. The Company does not expect the adoption of SFAS No. 150 to have a material effect on its consolidated financial statements.

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               Inventories consisted of the following:

               The Company's 50-50 joint venture, Point Lisas Nitrogen, formerly known as Farmland MissChem Limited, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant located near Point Lisas, The Republic of Trinidad and Tobago. The plant was placed in service in late July 1998. The Company has a contractual obligation to purchase one-half of the ammonia, approximately 350,000 short tons per year, produced by Point Lisas Nitrogen. The Company uses its portion of the production from the joint venture as a raw material for upgrading into finished fertilizer products at its existing facilities and for sales into domestic markets. The Company is accounting for its investment in Point Lisas Nitrogen using the equity method. These equity earnings are reflected in the Company's consolidated statements of operations as a reduction in cost of products sold. At June 30, 2003, the Company's investme nt in Point Lisas Nitrogen was $104,355,000 and included $5,441,000 of capitalized interest. At June 30, 2002, the Company's investment in Point Lisas Nitrogen was $99,114,000 and included $5,802,000 of capitalized interest. Capitalized interest is being amortized over a 20-year period and represents a basis difference in the Company's investment reflected in its consolidated financial statements and its 50% equity reflected in Point Lisas Nitrogen's financial statements.

               Point Lisas Nitrogen's loan with Export-Import Bank of the United States ("Ex-Im Bank") is a non-recourse loan and is not guaranteed by the joint venture partners. In the event of default, Ex-Im Bank may demand immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen. On May 31, 2002, the Company's former joint venturer at Point Lisas Nitrogen, Farmland Industries, Inc. "(FII"), filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court, Western District of Missouri. This filing and FII's default under its offtake agreement with Point Lisas Nitrogen were events of default under Point Lisas Nitrogen's loan agreement with Ex-Im Bank. Accordingly, Ex-Im Bank could have demanded immediate payment of all or any portion of the principal amount of its loan with Point Lisas Nitrogen. Be cause of this default, at June 30, 2002, the total loan obligation to Ex-Im Bank was reclassified as a current liability on Point Lisas Nitrogen's balance sheet. FII continued to purchase and pay for ammonia shipped under the offtake agreement after its bankruptcy filing. In May 2003, FII cured its default under its offtake agreement with Point Lisas Nitrogen in the amount of approximately $5,000,000 and sold its interest in Point Lisas Nitrogen to Koch Nitrogen Company ("Koch").

               As a result of the Company's filing bankruptcy, it is in default under its ammonia offtake agreement with Point Lisas Nitrogen. The bankruptcy filing also resulted in a default on Point Lisas Nitrogen's loan with Ex-Im Bank. Because of this default, the total loan obligation to Ex-Im Bank continues to be classified as a current liability on Point Lisas Nitrogen's balance sheet. At June 30, 2003, the Company was in arrears to Point Lisas Nitrogen under the ammonia offtake agreement in the amount of $2,622,000. As a consequence, the Company has been paying market prices for ammonia since the

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NOTE 4 - INVESTMENT IN POINT LISAS NITROGEN LIMITED Continued):

Petition Date through September 30, 2003, and has not been able to recover amounts paid in previous years that were in excess of prevailing market prices. As a result of entering into the Stalking Horse Agreement (as defined below), and upon satisfaction of other conditions, Koch and Ex-Im Bank have agreed to permit the Company to recover amounts paid in previous years that were in excess of prevailing market prices on purchases after October 1, 2003. As of the date of this filing, Ex-Im Bank has not demanded immediate payment of the debt. Point Lisas Nitrogen is continuing to repay the loan obligation with Ex-Im Bank based on the original repayment schedule.

               Point Lisas Nitrogen's financial position as of June 30, 2003 and 2002, and its results of operations for the fiscal years ended June 30, 2003, 2002 and 2001, are summarized below:

               Summarized Balance Sheet Information:

               Summarized Statement of Operations Information:

               During fiscal 2001, Point Lisas Nitrogen changed its accounting policy relating to future major maintenance expenditures on its plant. In the past, these expenditures were accrued, but will now be expensed as incurred.

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               Property, plant and equipment consisted of the following:

               During fiscal 2003, the Company purchased all of the common stock of Melamine Chemicals, Inc. ("MCI"), that owns a melamine crystal production facility located within the Company's Donaldsonville, Louisiana, complex. The terms of the transaction were not material. Melamine crystal is a raw material for manufacturers in the construction/remodeling and automotive industries. MCI owns two production units with the combined capacity to produce approximately 115 million pounds of melamine a year. The Company intends to initially operate only one facility that will produce approximately 80 million pounds of melamine a year. Prior to the acquisition, MCI's facility had been idled since January 2002 when MCI's former owner announced its intention to sell MCI. The production of melamine did not begin until late June and, therefore, did not contribute to the Company's operations during fiscal 2003. This wil l become a new operating segment for the Company in fiscal 2004.

               On December 19, 2002, the Company announced plans to close its prilled urea facility located in Donaldsonville, Louisiana, and on February 26, 2003, announced plans to close its No. 2 anhydrous ammonia plant, also located in Donaldsonville, Louisiana (the "No. 2 AA Plant"). Both closures were due to continued negative operating results from unfavorable natural gas prices and market conditions. While the Company continued to evaluate alternative uses for these assets, it concluded, at that time, that the long-lived assets associated with the prilling section of the urea plant and the assets associated with the No. 2 AA Plant would be idled indefinitely. These assets were determined to be impaired assets that would not contribute substantially to its ongoing operations. The book value of the impaired prilled urea assets was approximately $12,206,000 as of December 31, 2002. This amoun t has been written off and recorded as a component of operating expenses. Approximately 40 employees were terminated as a result of this shutdown. The long-lived assets associated with the No. 2 AA Plant had a book value of approximately $68,000,000 as of February 28, 2003. This amount has been written down to an estimated salvage value and the impairment of $58,683,000 has been recorded as a component of operating expenses. Production from the No. 2 AA Plant has been down since early January 2003. Approximately 24 employees were terminated as a result of this change in production. At June 30, 2003, the Company had accrued severance costs of $468,000 resulting from the termination of employees related to the shutdown of the prilled urea assets and the No. 2 AA plant. These amounts are reflected as a component of liabilities subject to compromise on the Company's consolidated balance sheet and were accrued in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activi ties."

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NOTE 7 - IMPAIRMENT OF LONG-LIVED ASSETS (Continued):

              At June 30, 2003, the Company evaluated its long-lived assets for impairment. Based upon this evaluation, an additional impairment charge totaling $4,229,000 was made related to our remaining ammonia assets located in Donaldsonville, Louisiana.

               On May 16, 2003, the Court entered an Interim Order approving the Company's request, on an interim basis, for a debtor-in-possession financing facility with Harris Trust and Savings Bank and a syndicate of six other lenders (the "DIP Lenders") to provide up to $37,500,000 in financing (the "Interim Credit Facility"). The DIP Lenders are also lenders under the Pre-Petition Harris Facility (the "Pre-Petition Lenders"). On August 13, 2003, the Court denied the Company's request for a Final Order with regard to the Interim Credit Facility, but granted it authority to use its cash collateral (i.e., cash and receivables) for ordinary course operations through October 3, 2003. On October 2, 2003, the Court approved certain amendments to the Interim Credit Facility to permit borrowings up to $32,500,000 (the "DIP Credit Facility"). The DIP Credit Facility is a revolving credit that terminates upon the earlier to occur of (a) June 30, 2004, (b) the date that a plan of reorganization confirmed by the Court becomes effective, or (c) the date on which the DIP Lenders terminate the DIP Credit Facility in connection with an event of default thereunder. Mississippi Chemical Corporation is the borrower under the DIP Credit Facility and its subsidiaries who are Debtors are guarantors.

               Maximum Borrowings. The DIP Credit Facility provides for maximum borrowings (the "DIP Commitment"), at any time, up to the lesser of (a) $32,500,000, or (b) a borrowing base equal to the sum of (i) 85% of the eligible accounts receivable plus (ii) 65% of eligible inventory, minus (iii) a scheduled excess collateral availability requirement, minus (iv) an amount equal to twice the amount of all the then accrued and unpaid charges owed to warehousemen and other third parties having inventory in their possession that have not executed and delivered to the lenders a warehouseman's waiver, minus (v) an amount equal to six months' rent for all leased facilities where inventory is kept for which the landlord has not executed and delivered to the lenders a landlord's waiver. The DIP Commitments are subject to certain mandatory reductions described below.

               Rates and Fees. The loans under the DIP Credit Facility bear interest at rates equal to the prime commercial rate from time to time in effect plus 4%. Upon entry of the Interim Order, the Company paid a facility fee of $375,000 to the 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 Harris Trust and Savings Bank, as "DIP Agent." Upon entry of the Final Order, the Company paid an additional facility fee of $375,000 to the DIP Lenders and an additional administrative fee of $75,000 to the DIP Agent. The DIP Credit Facility also has a commitment fee equal to 0.5% per annum of the average daily unused amount of the DIP Commitment.

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