UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

          (Mark One)

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

Of the Securities Exchange Act of 1934

For the Quarter Ended March 31, 2004

OR

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

of the Securities Exchange Act of 1934

Commission File Number 001-12217

MISSISSIPPI CHEMICAL CORPORATION

Organized in the State of Mississippi

Tax Identification No. 64-0292638

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

Telephone No. 662+746-4131

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

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

               The number of shares outstanding of each of the issuer's classes of common stock, as of April 30, 2004.

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

INDEX

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) 

ASSETS

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

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Continued)

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

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE YEAR ENDED JUNE 30, 2003

AND THE NINE MONTHS ENDED MARCH 31, 2004

(Unaudited)

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

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

MISSISSIPPI CHEMICAL CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2004

The accompanying consolidated financial statements have been prepared by us without audit, and include Mississippi Chemical Corporation and its subsidiaries. In our opinion, the financial statements reflect all adjustments necessary to present fairly our results of operations for the three-month and nine-month periods ended March 31, 2004 and 2003, our financial position at March 31, 2004 and June 30, 2003, our consolidated statements of shareholders' equity (deficit) for the nine months ended March 31, 2004 and the year ended June 30, 2003, and our cash flows for the nine months ended March 31, 2004 and 2003. In our opinion, these adjustments are of a normal recurring nature which are necessary for a fair presentation of our financial position and results of operations for the interim periods. We have reclassified certain prior-year information to conform with the current year's presentation.

Certain notes and other information have been condensed or omitted in our interim financial statements presented in this quarterly report on Form 10-Q. Therefore, these financial statements should be read in conjunction with our 2003 Annual Report on Form 10-K and our consolidated financial statements and notes thereto included in our June 30, 2003, audited financial statements.

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 revolving credit financing of $32.5 million, which was automatically reduced to $22.5 million on March 2, 2004, immediately following the sale of our Potash Assets (see Note 12). On December 19, 2003, the Court entered a Final Order approving supplemental debtor-in-possession term loan financing of $96.7 million (the "Supplemental DIP Order").

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.

On October 8, 2003, we signed an agreement with Koch Nitrogen Company ("Koch") to sell our interests in Point Lisas Nitrogen Limited ("Point Lisas Nitrogen") for an estimated cash amount of $92.0 million, plus certain assumed liabilities (the "Koch Stalking Horse Agreement"). Subsequently, and in conjunction with the Supplemental DIP Order, we withdrew our motion to sell pursuant to the Koch Stalking Horse Agreement, resulting in the payment of a break-up fee to Koch of approximately $3.8 million (the "Koch Break-Up Fee"). As a result of these events, in December 2003 we recorded our share, approximately $6.4 million, of Point Lisas Nitrogen's earnings for the six-month period ended December 31, 2003. Due to the pending sale, we had not recorded our equity in earnings of approximately $2.4 million for the quarter ended September 30, 2003.

On November 26, 2003, our subsidiaries, Mississippi Potash, Inc. and Eddy Potash, Inc., entered into a stalking horse agreement to sell substantially all of their assets to subsidiaries of Intrepid Mining LLC (the "Intrepid Stalking Horse Agreement"). On March 2, 2004, these assets were sold. As of March 31, 2004, we had received approximately $26.6 million related to the sale and had a receivable of approximately $1.8 million recorded on our books for the remainder of the purchase price.

On April 16, 2004, the Debtors filed a joint plan of reorganization and disclosure statement. The principal objective of this plan will be to restructure the Debtors' obligations to creditors in a manner which will permit us to continue as a viable business organization. If approved by the Bankruptcy Court, the plan provides that our unsecured creditors will own substantially all of our stock, and our current shareholders will have the opportunity to share in our long-term growth. Under the proposed plan, our debt will be substantially reduced. Upon emergence from bankruptcy, our debt will be provided by a combination of existing secured lenders and new lenders. Although we filed a plan of reorganization, there can be no assurance at this time as to whether the plan will be approved by the various classes of creditors and equity holders, or whether it will be confirmed by the Court. Our plan of reorganization could substantially change the amounts and characterization of assets and liabilities discl osed in the accompanying consolidated financial statements.

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 revolving credit facility and supplemental debtor-in-possession term loan, 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.

DEBTOR-IN-POSSESSION CREDIT 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 "Original DIP Lenders") to provide up to $37.5 million in financing (the "Interim Credit Facility"). On August 13, 2003, the 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 proceeds of inventories 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 $32.5 million (the "DIP Credit Facility"). This Facility was reduced to $22.5 million as a result of the sale of our Potash Assets in March 2004. 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 reorganizat ion confirmed by the Court becomes effective, or (c) the date on which the 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 and Mississippi Chemical Holdings, Inc. ("MCHI"), are guarantors. Pursuant to a Final Order entered on December 19, 2003, the Investors (as defined below in the notes under the heading "Supplemental Debtor-in-Possession Term Loan") concluded a tender offer to the Original DIP Lenders on January 23, 2004 (the "DIP Credit Lenders"). The terms of the Pre-Petition Harris Facility and the Supplemental DIP Loan are essentially unchanged by the tender offer.

Maximum Borrowings. The DIP Credit Facility provides for maximum borrowings (the "DIP Commitment"), at any time, up to the lesser of (a) $22.5 million, or (b) a borrowing base equal to the sum of (i) 85% of eligible accounts receivable plus (ii) 65% of eligible inventories, 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 inventories 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 inventories are 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. At March 31, 2004, we had borrowings outstanding in the amount of $8.2 million. We had no outstanding balance under the DIP Credit Facility as of t he date of this filing.

Rates and Fees. The loans under the DIP Credit Facility bear interest at rates equal to the prime commercial rate from time to time in effect plus 4%. Upon entry of the Interim Order, we paid a facility fee of $375,000 to the Original DIP Lenders and an administrative fee of $75,000 (of this amount, $60,000 was refunded to us during the quarter ended September 30, 2003) to Harris Trust and Savings Bank, as "DIP Agent." Upon entry of the Final Order, we paid an additional facility fee of $375,000 to the Original 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 for the DIP Credit Facility, the DIP Credit Lenders have been granted superpriority claim status in the Case that is collateralized by first liens on substantially all of our assets and the assets of the other subsidiaries included in the Case (including all of the proceeds of inventories and accounts receivable and cash collateral). Our use of proceeds of inventories and accounts receivable and all cash collateral generated in the ordinary course of business is limited to the payment of certain expenses and application to the DIP Credit Facility prior to its termination and, following such termination, to the Pre-Petition Harris Facility (defined below in this Note 3 under the heading "Pre-Petition Harris Facility"). All of our subsidiaries that are included in the Case have guaranteed the DIP Credit Facility (the "DIP Guarantors"). As adequate protection for the use of pre-petition cash collateral, the lenders under the Pre-Petit ion Harris Facility have been granted a replacement lien on substantially all of our assets and the assets of the DIP Guarantors, subject only to the lien of the DIP Credit Lenders and certain liens permitted under the DIP Credit Facility.

Covenants. The DIP Credit Facility (a) restricts our ability to incur debt, (b) prior to the sale of our Potash Assets, required us to generate certain minimum levels of EBITDA, as defined in the agreement, (c) limits our expenditures to the types set forth in a budget, subject to permitted deviations, (d) provides for mandatory prepayments and commitment reductions from all or part of the net proceeds of certain liquidity events such as asset dispositions outside the ordinary course of business, (e) permits the voluntary prepayment of loans under the DIP Credit Facility without penalty, (f) required that the obligations under the Pre-Petition Harris Facility be reduced according to a schedule, and (g) contains representations, warranties, other affirmative and negative covenants, and events of default that are customary for debtor-in-possession revolving credit facilities. As of March 31, 2004, and the date of this filing, we were in compliance with all covenants under the DIP Credit Facility.

Asset Dispositions. The DIP Credit Facility requires us to market and dispose of specified assets. The financing order entered by the Court on December 19, 2003, found that the transactions contemplated by the Supplemental DIP Loan (as defined below under the heading "Supplemental Debtor-In-Possession Term Loan") satisfied our disposition requirement with respect to our interests in Point Lisas Nitrogen. The financing order entered by the Court on February 12, 2004, found that the Intrepid Stalking Horse Agreement satisfied our disposition requirement with respect to our potash assets. 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 Harris 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 suc h proceeds shall be applied to the Pre-Petition Harris Facility. In the event of a disposition of the Company's interest in Point Lisas Nitrogen, all net cash proceeds must be applied first to the Pre-Petition Harris Facility and then to the DIP Credit Facility.

SUPPLEMENTAL DEBTOR-IN-POSSESSION TERM LOAN

On December 19, 2003, the Court entered a Final Order approving our entering into the Supplemental Post-Petition Credit Agreement, dated as of December 15, 2003, with certain funds or affiliates managed or advised by Delaware Street Capital, L.P. and DDJ Capital Management LLC (together with their participants and assigns, the "Investors"), pursuant to which the Investors made a $96.7 million term loan to us on December 30, 2003 (the "Supplemental DIP Loan"). The proceeds of the Supplemental DIP Loan were used to reduce the principal amount of the Pre-Petition Harris Facility by $90.0 million and to pay certain transaction-related fees and expenses of $6.7 million. The Supplemental DIP Loan matures on the earlier of (a) October 31, 2004, (b) the effective date of a plan of reorganization in our Case, (c) the conversion of our Case to a Chapter 7 case, or (d) the dismissal or appointment of a trustee in any of our Chapter 11 cases. At March 31, 2004, we had borrowings outstanding under the Supplemental DIP Loan in the amount of $98.7 million which included $2.0 million of accrued payment-in-kind interest.

In addition, the Investors agreed to tender for the approximately $68.4 million remaining secured debt under the Pre-Petition Harris Facility and the obligations under the DIP Credit Facility, at par plus accrued interest (excluding default interest). The tender was conditioned upon acceptance by at least 51 percent in number of the lenders representing not less than 66-2/3 percent of the outstanding principal amount under these facilities. More than 51 percent in number of the Pre-Petition Lenders and the Original DIP Lenders tendered, respectively, 93 percent and 85 percent of the Pre-Petition Harris Facility and the DIP Credit Facility. The tender closed on January 23, 2004. As a result, the Investors hold substantially all of our secured debt.

As a result of the Supplemental DIP Loan, we withdrew our motion to sell under the Koch Stalking Horse Agreement, and the Court entered a Final Order terminating such sale process. Accordingly, we paid the Koch Break-Up Fee (see Note 2) from the proceeds of the Supplemental DIP Loan.

Rates and Fees. The Supplemental DIP Loan bears cash interest, payable monthly, at rates equal to the prime commercial rate from time to time in effect plus 4% and accrues additional payment-in-kind interest monthly at the rate of 8% per annum for the first six months and 9% per annum thereafter. In connection with the signing and closing of the Supplemental DIP Loan, we paid aggregate commitment fees of approximately $2.4 million to the Investors. The Investors are also entitled to a Cash Out Commitment Fee of approximately $1.4 million upon the termination of the Supplemental DIP Loan. In addition, the Investors will be entitled to a Lost Opportunity Commitment Fee of approximately $2.9 million payable on termination of the Supplemental DIP Loan if our plan of reorganization is not approved by the Investors.

Guarantees and Collateral Security. The Supplemental DIP Loan is guaranteed by (a) all of our direct and indirect wholly owned domestic subsidiaries (the "Domestic Subsidiaries," and together with us, the "Supplemental Loan Parties") and (b) MCHI. MCHI is the indirect holder of our fifty percent equity interest in Point Lisas Nitrogen.

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

Covenants. The Supplemental DIP Loan has covenants substantially the same as the DIP Credit Facility including (a) restrictions on our ability to incur debt, (b) required us to generate the same minimum levels of EBITDA required by the DIP Credit Facility, (c) limits on our expenditures to the types set forth in a budget, subject to permitted deviations, (d) limits on the amount of capital expenditures to the same amounts permitted by the DIP Credit Facility, (e) mandatory prepayments from all or part of the net proceeds of certain liquidity events (such as asset dispositions outside the ordinary course of business), and (f) other affirmative and negative covenants typical for this type of loan. As of March 31, 2004, and the date of this filing, we were in compliance with all covenants under the Supplemental DIP Loan.

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 Harris Facility bears interest at rates related to the Prime Rate. As of March 31, 2004, our weighted average interest rate was 9.5% (which includes the default rate) and we had borrowings outstanding in the amount of $52.3 million. The bankruptcy filing was an event of default under the Pre-Petition Harris Facility and, as a result, we can no longer borrow under this Facility. As adequate protection for the use of the Pre-Petition Lenders' cash collateral, we are required to pay interest on the Pre-Petition Harris Facility. Interest is paid monthly in arrears at the non-default rate (Prime Rate + 5% on the first $105 million until this debt is reduced to $52.5 million, at which point such rate is Prime Rate + 3%). An additional 2% of default rate interest accrues until payoff of the Pre-Petition Harris Facility. Sin ce the Pre-Petition Harris Facility is a secured facility, it has not been classified as a liability subject to compromise on our consolidated balance sheets.

THE INDUSTRIAL REVENUE BONDS

In August 1997, we issued $14.5 million in industrial revenue bonds, a portion of which were tax-exempt, to finance the development of our east 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 issued on April 1, 1998, mature on March 1, 2022, and carry a 5.8% fixed rate. 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 1998 IRBs are the obligation of our subsidiary, Mississippi Phosphates Corporation, but are guaranteed by Mississippi Chemical Corporation. The bankruptcy filing was an event of default under the industrial revenue bonds. At March 31, 2004 and June 30, 2003, the industrial revenue bon ds are reflected as a component of liabilities subject to compromise on our consolidated balance sheets. Under our proposed plan of reorganization filed on April 16, 2004, these industrial revenue bonds would be converted to equity.

THE SENIOR NOTES

On November 15, 1997, we issued $200.0 million of 7.25% Senior Notes (the "Senior Notes") due November 15, 2017, pursuant to a shelf registration statement filed with the Securities and Exchange Commission. Semi-annual interest payments of approximately $7.3 million are due on each May 15 and November 15. The holders may elect to have the Senior Notes repaid on November 15, 2007. 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 have not made the semi-annual interest payments and are in default under the Senior Notes. At March 31, 2004 and 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 sheets. Under our proposed plan of reorganization filed April 16, 2004, the Senior Notes would be converted to equity.

As a result of our Chapter 11 filing, substantially all of our unsecured pre-petition indebtedness is subject to compromise. Generally, actions to enforce or otherwise effect payment of pre-Chapter 11 liabilities are stayed. These claims are reflected in the March 31, 2004 and June 30, 2003 consolidated balance sheets as liabilities subject to compromise. Pre-petition claims secured by our assets are also stayed, although the holders of such claims have the right to move the Court for relief from the stay. Pre-petition secured claims (primarily representing amounts borrowed under the Pre-Petition Harris Facility) are secured by substantially all of our accounts receivable, inventories, and property, plant and equipment. These secured claims are reflected as long-term debt due within one year on our consolidated balance sheets. Although pre-petition claims are generally stayed as part of the first day orders and subsequent motions granted by the Court, the Court approved our motions to pay certain pr e-petition obligations essential for the ongoing operation of our business. We have been paying and intend to continue to pay all undisputed post-petition claims of all vendors and suppliers in the ordinary course of business.

As of March 31, 2004 and June 30, 2003, we had liabilities subject to compromise of approximately $233.2 million and $249.1 million, respectively, which included the following;

Below are condensed consolidated financial statements for the Company.

CONDENSED CONSOLIDATED BALANCE SHEET

March 31, 2004

Below are condensed consolidated financial statements for the Company.

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2003

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the three months ended March 31, 2004

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the nine months ended March 31, 2004

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the nine months ended March 31, 2004

Ammonia Assets. In February 2003, we announced closure plans for one of our ammonia plants located in Donaldsonville, Louisiana. This closure was the result of unfavorable natural gas prices and market conditions. We decided to idle this ammonia plant indefinitely because we did not expect it to contribute to future operations. The long-lived assets associated with this ammonia plant had a book value of approximately $70.3 million. We tested this asset for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and recorded a pre-tax impairment charge totaling $58.6 million at March 31, 2003. This amount has been reflected in the consolidated statement of operations as impairment of long-lived assets.

Due to customer demand and improved market conditions in December 2003, we restarted an ammonia plant previously idled and produced through the first week in April 2004. On March 25, 2004, we announced the permanent closure for one ammonia plant and our intent to indefinitely idle our second ammonia plant. Both ammonia plants are located at our facility in Donaldsonville, Louisiana. Negative operating performance caused by persistently high natural gas prices was the major contributing factor for our decision. We tested these assets for impairment at March 31, 2004, as required by SFAS No. 144 and recorded a pre-tax impairment charge of approximately $21.3 million. This impairment charge is reflected as a component of reorganization expense in the consolidated statement of operations.

Melamine/Urea Assets. In December 2002, we announced plans to close our urea facility located in Donaldsonville, Louisiana. This closure was also the result of unfavorable natural gas prices and market conditions. We evaluated the utility of these long-lived assets and initially concluded that the prilling section of the urea plant was not expected to contribute to ongoing operations and production would cease. We tested the assets associated with the urea prilling section for impairment in accordance with SFAS No. 144 and recorded a pre-tax impairment charge totaling $12.2 million at December 31, 2002. This amount has been included as loss from discontinued operations in the consolidated statement of operations.

In November 2003, we restarted the urea prilling section, previously shut down, at reduced rates to satisfy customer demand. On March 25, 2004, we announced the permanent closure of our melamine and urea operations, including the prilling section at our Donaldsonville, Louisiana, facility because we decided to exit this business operation completely. We have formally initiated efforts to locate a buyer for these assets. In accordance with SFAS No. 144, these assets have been reflected as discontinued operations at March 31, 2004, and prior reporting periods have also been reclassified. We have recorded a pre-tax impairment charge for the melamine/urea assets totaling $9.4 million for the three-month and nine-month periods ended March 31, 2004. We ceased production at this facility during the first week in April 2004.

Potash Assets. During our first quarter of fiscal 2004, our board of directors authorized our management to actively market for sale the long-lived assets of Mississippi Potash, Inc. and its subsidiary (the "Potash Assets"). Accordingly, at September 30, 2003, the Potash Assets were classified as assets held for sale, and all related depreciation expense ceased. As required by SFAS No. 144, we tested the Potash Assets for impairment at September 30, 2003. This test resulted in a pre-tax impairment charge of approximately $34.0 million, which is reflected as a component of discontinued operations in the consolidated statement of operations.

Impairment of long-lived assets summary:

Significant judgments and estimates were used in performing the impairment tests in accordance with SFAS No. 144.

The number of weighted average common shares outstanding, net of treasury shares, used in our diluted loss per share computations for the three months ended March 31, 2004 and 2003 were 24,261,000 and 26,208,000, respectively. The number of weighted average common shares outstanding, net of treasury shares, used in our diluted loss per share computations for the nine months ended March 31, 2004 and 2003, were 24,735,000 and 26,184,000, respectively. Options outstanding at March 31, 2004 and 2003, were not included in our computations of diluted loss per share as a result of incurring a net loss in each of the three-month and nine-month periods, which renders the options anti-dilutive. Weighted average common shares outstanding were lower during the current year periods primarily as a result of abandonments of shares to us by shareholders.

Our reportable operating segments, nitrogen and phosphate, are strategic business units that offer different products. They are managed separately because each business unit requires different technology and marketing strategies. Our nitrogen segment produces ammonia, ammonium nitrate, nitrogen solutions and nitric acid. We distribute these products to fertilizer dealers, distributors, and industrial users. Our phosphate segment produces diammonium phosphate fertilizer (commonly referred to as "DAP"). Approximately 30% of our DAP is marketed to agricultural users in international markets through a separate export association. Prior to December 2003, we had a potash segment that mined and produced agricultural and industrial potash products that were sold to farmers, fertilizer dealers, distributors, and industrial accounts, primarily for use in the southern and western regions of the United States, and into export markets. On December 1, 2003, we announced our wholly owned subsidiaries in our potas h segment had signed a definitive agreement to sell substantially all of their potash assets. As a result of this agreement, our potash operations have been sold and are reflected as discontinued operations. Prior to March 2004, we had a melamine segment that produced melamine crystal, which is a raw material for manufacturers in the construction/remodeling and automotive industries. Our production of melamine began in June 2003. On March 25, 2004, we announced the permanent closure of our melamine operation and our intent to sell this facility. As a result, our melamine operation has been reflected as discontinued operations and the related assets and liabilities reflected as assets and liabilities from discontinued operations in the accompanying consolidated financial statements.

Below is our segment information for the three-month and nine-month periods ended March 31, 2004 and 2003. The Other caption includes corporate allocations, capital expenditures and depreciation, depletion and amortization for our potash and melamine operations as well as other corporate activities and consolidating eliminations.

Comprehensive loss is the total of net loss and all other non-owner changes in equity. The components of comprehensive loss that relate to us are net loss, unrealized gains or losses on our natural gas derivative transactions, and pension liability adjustments. These derivative transactions may consist of futures contracts, options, swaps, or similar derivative financial instruments related to the price of natural gas. In accordance with the provisions of SFAS No. 130, "Reporting Comprehensive Income," these are presented in the Consolidated Statements of Shareholders' (Deficit) Equity. The changes in the components of accumulated other comprehensive loss during the nine months ended March 31, 2004 and 2003, are included below.

Costs directly related to our reorganization under Chapter 11 of the Bankruptcy Code are reflected as reorganization expense in our consolidated statements of operations. Reorganization expense for the nine-month period ended March 31, 2004, was approximately $36.3 million and included an impairment loss of approximately $21.3 million related to our ammonia plants located in Donaldsonville, Louisiana (see Note 5), professional fees, severance and employee retention expenses, and the Koch Break-Up Fee (see Note 2).

For the nine-month period ended March 31, 2004, our income tax expense from continuing operations was $21.6 million, as compared to an income tax benefit of $18.7 million for the nine-month period ended March 31, 2003. The income tax expense was primarily the result of the establishment of a valuation allowance for the deferred tax asset related to federal net operating loss carryforwards that may expire unutilized, in addition to U.S. tax expense on cumulative foreign earnings triggered by the guarantee by one of our foreign subsidiaries of our debt. The income tax benefit for the prior year was primarily the result of our net loss from continued operations.

Our income tax benefit from discontinued operations for the nine-month period ended March 31, 2004, was $26.9 million, as compared to $9.3 million for the nine-month period ended March 31, 2003. The income tax benefit for the nine-month period ended March 31, 2004, was primarily the result of our net loss on discontinued operations.

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 March 31, 2004, we had recorded deferred tax assets arising from federal and state net operating loss carryforwards amounting to approximately $58.2 million and approximately $20.8 million, respectively. We estimate that certain deferred tax assets, primarily those arising from federal net operating loss carryforwards and certain state net operating loss carryforwards, may not be realized. Therefore, we have recorded federal and state valuation allowances amounting to $25.1 million and $17.2 million for the nine-month period ended March 31, 2004, respectively.

Our wholly owned subsidiary, MCHI, has provided a guarantee of our debt. MCHI indirectly owns our 50% joint venture interest in Point Lisas Nitrogen. 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 March 31, 2004, these cumulative earnings approximated $51.6 million. No U.S. taxes are currently payable on these earnings due to significant book and tax accounting differences, primarily with respect to depreciation. We have recorded non-current deferred tax liabilities on these earnings of approximately $19.6 million. While the guarantee remains in place, we expect to record U.S. tax expenses on future earnings from MCHI and Point Lisas Nitrogen.

In addition to the U.S. tax expense resulting from the MCHI guarantee, we are providing tax benefits based on an estimated annual effective tax rate of approximately 5.4%. This rate reflects approximately $8.0 million of nondeductible reorganization expenses as well as our anticipation of establishing valuation allowances for federal net operating loss carryforwards that may expire unutilized and all deferred state tax assets generated during the year.

Our 50-50 joint venture, Point Lisas Nitrogen, owns and operates a 2,040 short-ton-per-day anhydrous ammonia plant located near Point Lisas, The Republic of Trinidad and Tobago. Point Lisas Nitrogen's financial statements are summarized as follows:

Summarized balance sheets information: