8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): April 27, 2006

TERRA INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of incorporation) 1-8520
(Commission File Number) 52-1145429
(IRS Employer Identification No.)

Terra Centre
600 Fourth Street, P.O. Box 6000
Sioux City, Iowa 51102-6000
(712) 277-1340
(Address of Principal Executive Offices, including Zip Code)

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Press Release

Press Release

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

          On April 27, 2006 Terra Industries Inc. issued a press release setting forth Terra Industries Inc.’s first quarter 2006 earnings. A copy of the press release is furnished herewith as Exhibit 99.1.

ITEM 8.01 OTHER EVENTS.

          On April 27, 2006 Terra Industries Inc. issued a press release announcing that its board of directors approved a stock buyback program under which Terra could repurchase up to 10 percent of its outstanding common stock. A copy of the press release is furnished herewith as Exhibit 99.2.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

     (c)    Exhibits

99.1	Press Release issued April 27, 2006 reporting first quarter results.
99.2	Press Release issued April 27, 2006 announcing a stock buyback program.

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TERRA INDUSTRIES INC.
	/s/ Mark A. Kalafut
	Mark A. Kalafut
	Vice President, General Counsel and
	Corporate Secretary
Date: April 27, 2006

EX-99.1

	Exhibit 99.1	Terra Industries Inc.
		600 Fourth Street
		P.O. Box 6000
		Sioux City, IA 51102-6000
		Telephone: (712) 277-1340
		Fax: (712) 277-7383
		www.terraindustries.com

NEWS

For immediate release	Contact: Joe A. Ewing
	(712) 277-7305 jewing@terraindustries.com

Terra Industries Inc. reports first quarter results

S U M M A R Y

Q1/06 vs. Q1/05 results:

• Ammonia and nitrogen solutions selling prices up 34 and 15%.

• Ammonia, nitrogen solutions and ammonium nitrate sales volumes down.

• North American and U.K. natural gas unit costs up 49 and 42%.

• Income from operations down $59 million.

Second quarter expectations:

• Financial results will depend primarily on nitrogen product sales volumes and natural gas costs.

• Terra will manage production to meet expected demand and minimize the inventories carried to the 2006 second half.

• Late, active spring application season.

Sioux City, Iowa (April 27, 2006)—Terra Industries Inc. (NYSE: TRA) announced today a net loss to common shares of $25.3 million, or $.27 per common share, on revenues of $398.9 million for the quarter ended March 31, 2006. Net income available to common shareholders for the 2005 first quarter was $3.2 million, or $.03 per share, on revenues of $450.0 million.

Analysis of results

Terra reported an operating loss of $28.2 million for the 2006 first quarter, compared to operating income of $30.8 million in the 2005 first quarter. The loss was due to higher natural gas costs, higher costs for purchased product, curtailed production rates and lower sales volumes, partially offset by higher nitrogen products selling prices.

Terra realized average selling prices for ammonia, nitrogen solutions, ammonium nitrate and urea that were 34, 15, 19 and 24 percent higher, respectively, than in the 2005 first quarter. Higher nitrogen prices contributed about $56 million to 2006 first quarter results, net of cost increases to resale nitrogen products.

The 2006 first quarter cost of Terra’s natural gas supplies increased approximately 47 percent, or $67 million, from the 2005 first quarter. Terra’s natural gas forward purchase contracts increased 2006 first quarter costs by $28 million for realized losses on forward positions, most of which were entered into in the 2005 fourth quarter for fixed price sales commitments, and by $6 million for unrealized losses on open March 31, 2006 positions.

During the 2006 first quarter, Terra’s manufacturing plants operated at less than 65 percent of capacity in response to slow demand and high natural gas costs. Much of the curtailed production was replaced with purchased product from other suppliers at a cost approximately $31 million higher than 2005 first quarter production costs.

First quarter 2006 sales volumes for ammonia, nitrogen solutions, ammonium nitrate and urea were 19, 35, 45 and 19 percent lower, respectively, than those of the 2005 first quarter. The lower sales volumes were caused by growers’ deferral of nitrogen fertilizer purchases because of high energy costs and indecision over what crops to plant, and Terra customers’ hesitancy to stock high cost nitrogen fertilizers not covered by grower purchase commitments.

Lower 2006 sales volumes reduced operating income an estimated $11 million from 2005.

Forward natural gas

Terra’s forward purchase contracts and related basis swaps at March 31, 2006, fixed prices for about 10 percent of its next 12 months’ natural gas needs at about $2.6 million above the published forward market prices at that date.

CEO’s remarks

“The 2006 first quarter was more difficult and less active than expected,” said Terra President and CEO Michael Bennett. “Performance was negatively affected by exorbitant United Kingdom and high North American natural gas costs, and sluggish product demand due to dry weather and uncertainty about near-term nitrogen products prices.”

Bennett continued, “We are well positioned for a more vigorous second quarter as we have maintained our inventories at manageable levels and have kept our forward natural gas positions low. Natural gas markets appear to be fundamentally in much better balance than at the beginning of the year and, for the first time since last year’s third quarter, all of our plants are running. In addition, grain prices have improved and weather patterns over the past six weeks have generally improved soil conditions. We are well positioned to serve our customers in what we expect to be a busy and extended application season.”

Conference call details

Terra management will conduct a conference call to discuss these first quarter results on April 27, 2006, beginning at 3:00 ET. A live webcast of the conference call will be available from Terra’s website at www.terraindustries.com, and will be archived for playback for three months.

About Terra

Terra Industries Inc., with 2005 revenues of $1.9 billion, is a leading international producer of nitrogen products.

Forward-looking statements

This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.’s most recent report on Form 10-K and Terra Industries Inc.’s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

# # #

Note: Terra Industries’ news announcements are also available on its website, www.terraindustries.com.

(Tables follow.)

Terra Industries Inc.
Summarized Results of Operations
(unaudited)

	Three Months Ended
	March 31,
(in thousands except per-unit amounts)	2006			2005
Revenues
Nitrogen products	$	396,371		$	439,322
Methanol		1,373			10,087
Other		1,176			603
		398,920			450,012
Costs and expenses:
Cost of sales		423,517			413,743
Equity in earnings of unconsolidated affiliates		(8,141	)		(5,007	)
Selling, general and administrative		11,710			10,453
		427,086			419,189
Income (loss) from operations		(28,166	)		30,823
Interest income		1,584			1,754
Interest expense		(11,772	)		(15,853	)
Loss on early retirement of debt		—			(10,804	)
Gain on revaluation of warrants		—			4,900
Income (loss) before taxes and minority interest		(38,354	)		10,820
Income tax benefit (provision)		13,766			(2,185	)
Minority interest		597			(4,204	)
Net income (loss)		(23,991	)		4,431
Preferred stock dividends		(1,275	)		(1,275	)
Income (loss) available to common shareholders	$	(25,266	)	$	3,156
Income (Loss) per common share
Basic	$	(0.27	)	$	0.03
Diluted	$	(0.27	)	$	0.03
Basic and diluted weighted average shares outstanding:
Basic		93,870			91,357
Diluted		93,870			92,217

Because of the seasonal nature and effects of weather-related conditions in several of Terra’s marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.

Terra Industries Inc.
Summarized Financial Position
(in thousands)
(unaudited)

	March 31,
	2006		2005
Assets
Cash and short-term investments	$	92,011	$	205,001
Accounts receivable		133,264		157,680
Inventories		209,455		138,736
Other current assets		26,744		53,250
Total current assets		461,474		554,667
Property, plant and equipment, net		728,475		779,402
Deferred plant turnaround costs		29,995		36,282
Equity investments		172,702		222,453
Other assets		34,964		44,641
Total assets	$	1,427,610	$	1,637,445
Liabilities and Stockholders’ Equity
Debt due within one year	$	12	$	151
Customer prepayments		58,372		114,155
Other current liabilities		147,350		179,409
Total current liabilities		205,734		293,715
Long-term debt and capital lease obligations		331,300		394,490
Deferred income taxes		51,075		65,903
Other liabilities		160,229		163,606
Minority interest		91,662		93,403
Total liabilities and minority interest		840,000		1,011,117
Preferred shares		115,800		133,069
Stockholders’ equity		471,810		493,259
Total liabilities and stockholders’ equity	$	1,427,610	$	1,637,445

Terra Industries Inc.
Summarized Cash Flows
(in thousands)
(unaudited)

	Three Months Ended
	March 31,
	2006			2005
Net income (loss)	$	(23,991	)	$	4,431
Non-cash charges and credits:
Depreciation and amortization		26,282			29,176
Deferred income taxes		(13,766	)		7,077
Equity in undistributed earnings		8,140			(5,007	)
Loss on early retirement of debt		—			9,418
Non-cash loss on derivatives		5,861			—
Other		190			852
Change in current assets and liabilities
Accounts receivable		73,752			(8,163	)
Inventories		(17,350	)		9,637
Accounts payable and customer prepayments		(43,278	)		(63,587	)
Other assets and liabilities, net		6,543			54,691
Net cash flows from operating activities		22,383			38,525
Purchase of property, plant and equipment		(12,379	)		(6,420	)
Plant turnaround costs		(11,467	)		(7,032	)
Distributions received from unconsolidated affiliates		1,594			—
Debt repayments		(26	)		(50,042	)
Distributions to minority interests		—			(2,998	)
Stock issuance		—			102
Other		5,540			(932	)
Increase (decrease) in cash and short-term investments		5,645			(28,797	)
Cash and short-term investments at beginning of period		86,366			233,798
Cash and short-term investments at end of period	$	92,011		$	205,001

Terra Industries Inc.
Summarized Information
(in thousands, except unit prices and costs)

Volumes and prices

	Three months ended March 31,
	2006						2005
	Sales				Average		Sales				Average
	Volumes				Unit		Volumes				Unit
	(000s)				Price1		(000s)				Price1
Ammonia (tons)		400			$	363		491			$	271
Nitrogen solutions (tons)		705				157		1,088				136
Urea (tons)		38				297		47				239
Ammonium nitrate (tons)		224				225		405				189
Methanol (gallons)		185				0.64		7,264				0.83
Natural gas costs2
North America			$	9.68					$	6.49
United Kingdom			$	8.85					$	6.25

1	After deducting outbound freight costs.
2	Per MMBtu. Includes all transportation and other logistical costs and gains or losses on natural gas financial derivatives.

Because of the seasonal nature and effects of weather-related conditions in several of its marketing areas, results of operations for any single reporting period should not be considered indicative of results for a full year.

EX-99.2

	Exhibit 99.2	Terra Industries Inc. 600 Fourth Street
		P.O. Box 6000
		Sioux City, IA 51102-6000
		Telephone: (712) 277-1340
		Fax: (712) 277-7383
		www.terraindustries.com

NEWS

For immediate release	Contact: Joe A. Ewing
	(712) 277-7305
	jewing@terraindustries.com

Terra Industries Inc. announces program to
buy back 10% of its common stock

Sioux City, Iowa (April 27, 2006)— Terra Industries Inc. (NYSE: TRA) announced today that its board of directors approved a stock buyback program under which Terra could repurchase up to 10 percent of its outstanding common stock. Terra has approximately 95 million shares outstanding; consequently, the buyback would represent a maximum reduction in Terra’s outstanding shares of 9.5 million common shares.

The stock buyback program will be conducted on the open market, in private transactions or otherwise at such times prior to June 30, 2008, and at such prices, as determined appropriate by Terra and in accordance with applicable legal and regulatory requirements. Purchases may be commenced or suspended at any time without notice.

Michael L. Bennett, Terra’s President and CEO said, “While our first quarter results were disappointing, we expect a more vigorous second quarter. Our board of directors decided to put in place this stock buyback program based on our March 31, 2006, consolidated cash balances of $92 million and an expectation that future cash flows will accommodate the buyback as well as other initiatives, including expansions to our Trinidad production capacities. We are comfortable with the company’s current debt levels and, at some future date, expect to refinance that debt at lower rates and acceptable costs.

“Based on the value of Terra’s shares relative to other industry assets, we believe a stock buyback will be a good investment for our stockholders. We plan to execute the stock buyback program in a manner that provides the maximum value to all Terra stockholders.”

About Terra

Terra Industries Inc., with 2005 revenues of $1.9 billion, is a leading international producer of nitrogen products.

Forward-looking statements

This news release may contain forward-looking statements, which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about Terra Industries Inc.’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those

projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements is set forth in Terra Industries Inc.’s most recent report on Form 10-K and Terra Industries Inc.’s other documents on file with the Securities and Exchange Commission. Terra Industries Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

# # #

Note: Terra Industries’ news announcements are also available on its website, www.terraindustries.com.