Good day ladies and gentlemen and welcome to the Fourth Quarter 2008 CF Industry Results Conference Call. My name is Katie, and I will be your coordinator for today. (Operator Instructions). I'd like to now turn the call over to your host for today, Mr. Charles Nekvasil, Director of Investor and Public Relations. Sir, you may begin.

Thank you Good morning and thank you for joining us on this conference call for CF Industries Holdings, Inc. I'm Chuck Nekvasil, Director of Public and Investor Relations. And with me are Steve Wilson, our Chairman and Chief Executive Officer; Tony Nocchiero, our Senior Vice President and Chief Financial Officer. Yesterday afternoon, CF Industries Holdings, Inc. reported its fourth quarter and 2008 results. The purpose of today's conference call is to discuss the record financial performance we achieved for the fourth quarter and for the full year of 2008 as well as our outlook for the upcoming season. We will not become a ding on our proposal to acquire Terra Industries. So, please focus your questions accordingly. As you read our news release posted on the Investor Relations section of our website at www.cfindustries.com, and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of Federal Securities laws. All statements in the release and oral statements in this call or other discussions, other than those relating to historical information or current condition are considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the Safe Harbor statement included in the news release. Please consider all forward-looking statements in light of those and other risks and uncertainties and do not place undue reliance on any forward-looking statements. Now let me introduce Steve Wilson, our Chairman and Chief Executive Officer.

Thanks Chuck and thank you all for joining us this morning. Yesterday afternoon, CF Industries reported record fourth quarter and 2008 earnings driven by our third consecutive $1 billion sales quarter. For the fourth quarter, net earnings totaled $190.1 million or $3.59 per diluted share, well above the $135.4 million or $2.38 per share that we reported for 2007's fourth quarter. For the year, net earnings totaled $684.6 million or $12.15 per diluted share. Again, significantly higher than the $372.7 million or $6.57 per share that we reported for 2007. Results for both the quarter and the year include the effects of the mark-to-market adjustments on our natural gas swaps and inventory write downs detailed in the news release. I'm proud of this performance and of the employees at CF industries, who achieved it. Despite the fourth quarter's challenging environment, our 2008 sales and net earnings, which levels a few, if any of us, would have considered achievable not that long ago. Looking at the forces that drove fourth quarter performance in North American fertilizer industry, the weather to the second application season in a row refused to cooperate. Weather delayed spring planning met a late fall harvest throughout much of the corn bell. And while we eventually got off to a pretty good start on the fall ammonia volume, the shortened season simply didn't allow farmers to complete all anticipated field work before Mother Nature brought things to a halt. Beyond that, uncertainly over 2009 crop economics as well as a wide spread expectation in fertilizer prices will be lower comes spring time further dampened demand. Looking beyond North America, demand was negatively affected by credit availability, concerns over crop economic, and delayed purchasing by India and some other major international fertilizer purchases. Reduced demands produced an inventory built through the supply chain, significantly depressing prices by year-end. On positive has been the industry's response to today's marketplace. Unlike the situation in some past downturns, fertilizer producers around the world, including CF Industries, reacted quickly and brought production down to levels appropriate to demand. As I suggested in the news release, the first production cuts came in Europe and other market (ph). For the most part, North American producers remained cash positive even as fertilizer prices declined significantly. That certainly supports the new paradigm for nitrogen I discussed at our Investor Day last November. North American capacity is increasingly competitive in serving North American customers. And the change in global natural gas dynamic suggest to me that this improved competitiveness is sustainable. So we are proud of our record quarter and a record year. And we are optimistic that after the current adjustment phase, the demand for agricultural commodities and the fertilizer needed to grow them will resume their long term growth. More on that later when I discuss the outlook for spring. Now let me introduce Tony Nocchiero, our Chief Financial Officer.

Thanks Steve, and good morning everyone. CF Industries' record fourth quarter net earnings were up 40% from net earnings in last year's fourth quarter. For the year, our record net earnings were up 84% from 2007. For the quarter and the year, strong pricing more than offset volume declines in both nitrogen and phosphate. I'll highlight some quarter-on-quarter comparisons for you. You'll find year-on-year detail in our news release. Net sales increased by 26% to nearly $1.1 billion, up from $853 million in last year's fourth quarter. Volume totaled 1.9 million tons, down 23% from 2.5 million tons last year. As Steve pointed out, we got off to a late start on the fall nitrogen season and adverse weather conditions limited farmers' ability to complete field work. Nitrogen segment volume was 1.5 million tons, down 23% from 1.9 million tons in last year's fourth quarter. Phosphate segment volume was 404,000 tons, also down 23% from 526,000 tons last year. Phosphate volume in domestic markets fell by almost 50% from last year's fourth quarter. But we were able to offset a substantial part of that decline through a 70% increase in phosphate exports from fourth quarter 2007 levels. We have begun importing potash in order offer our customers the convenience of sourcing all three nutrients from one distribution facility. There were no potash revenues in the fourth quarter, but going forward results will be included in phosphate business segment with details broken out. We sold 75% of our nitrogen under our forward pricing program in the fourth quarter compared to 80% last year. In phosphate, we sold 51% of our volume under the FPP compared to 39% in last years fourth quarter. Keep in mind that under the FPP, we don't recognize sales until the customer takes delivery of the product.…

Thanks Tony. Going into the spring of 2009, there are certainly some unanswered questions in the agricultural and fertilizer markets. These include: how much inventory remains in the fertilizer supply chain and how long will it take to work through it. When will farmers and dealers find a middle ground on pricing, breaking the impact some people see today. When will farmers make their crop mixed decisions and what will those decisions be. And when will major international buyers reenter the market in a big way. These are all important questions. But from our perspective, they relate more to the timing of demand, not the ultimate level of demand. The underlying demand for grain and the fertilizer to growth remains strong. Two consecutive seasons of lousy weather in North America, crop and fertilizer price volatility and any number of other factors have temporarily slowed agricultural markets. But because of continued growth in global population and improving diets in developing nations such as China and India, we see today's situation as a temporary pause in the fundamentally strong long-term growth story. Recent input cost reductions in North America for natural gas and nitrogen and sulfur and ammonia and phosphate further strengthen our competitiveness. Responding to the down turn in demand, CF Industries entered 2009 operating at approximately 75% of capacity in nitrogen and 40% of capacity in phosphate. Industry wide, the pattern of the capacity cut backs in nitrogen while initially centered in regions such as Eastern Europe, confirms our views that North American capacity is increasingly competitive in serving North American customers. Once we overcome near term challenges, this industry is well positioned to meet future growth and demand. Looking ahead to the spring, we project the U.S. farmers will plan approximately 86 million acres of corn and assuming the…

(Operator Instructions).

We have some noise in the background, Katie. Hello? Hello, Katie?

Your first question comes from the line of Steve Bryne from Merrill Lynch. Please proceed. Steve Byrne - Merrill Lynch & Company: Hi, thanks. Tony, can you help me understand why you had a mark-to-market gain in the natural gas derivative?

Yeah. I mean, it relates to where we were on our overall swap program as a function of our forward sales program. Steve Byrne - Merrill Lynch & Company: But at the end the calendar year, wouldn't the forward strip have been at level below, where you locked in gas?

I'm sorry. Yeah, you've got to look at the... remember, you have to look at the inventory balances, and what it was, was a positive change in two loss positions. Steve Byrne - Merrill Lynch & Company: Okay.

It's a difference between two loss positions and on the balance sheet and the loss decrease, so it was a gain. Steve Byrne - Merrill Lynch & Company: Okay. And then regarding the write down on the potash, it would suggest that your write down here is roughly $160 a tone. Does that suggest that given where corn bell potash prices are now that you secured that those imports of potash last summer, somewhere near the $1000 a ton price?

No, Steve, we prefer not to give you the specific prices. But we have marked them down to what we view to be the market price at which we'll move the product. Steve Byrne - Merrill Lynch & Company: Okay.

And we did buy the product in the fall. Steve Byrne - Merrill Lynch & Company: Okay.

But the acquisition costs be won't that high. Steve Byrne - Merrill Lynch & Company: Okay. And then just at your forward pricing program that you had at the end of when you reported third quarter results versus where they are now and how much gas you have locked in at the end of the year. It looks like your order activity really slowed to a crawl in November and December and may have picked up in January. Is that a fair characterization?

Well, it's certainly slowed to crawl near the end of the year as we saw the free falling prices. Customers were exhibiting rational behavior, they were waiting to see what's going to happen when things will get to the bottom. And when things get to the bottom, our customers perceive that the bottom is nearby then they become interested in committing. Steve Byrne - Merrill Lynch & Company: And have you seen a pickup in order activity during January?

Well, I just say that you have seen as an industry observer increases in prices and price increases usually indicate increases in demand. Steve Byrne - Merrill Lynch & Company: But it looks like, what you had locked up in terms of natural gas at the end of the year was very modest. Looks like six week for the gas versus how much you have in your FPP program as of couple of days ago is a little more robust in that. So does that suggest you took more orders? Your order activity picked up too, not just pricing, but...

We are pretty closely matched in our gas positions and our forward order book. Steve Byrne - Merrill Lynch & Company: Right.

I think that's a relatively direct answer to your question. We intend to be matched on an ongoing basis unless we see a particular bargain available to us. Steve Byrne - Merrill Lynch & Company: Okay, and then...

And also we can hedge our positions either by matching inventory that we might have acquired in the open market or by gas. Steve Byrne - Merrill Lynch & Company: Okay. And then just the last one for you, Steve, the debt price fell during December to below breakeven economics for the marginal producer. Do you view CF as a sufficient scale and size to influence the market in away that it doesn't make sense to sell below those prices? Or do you view that as a favorable margin and opportunity and continue to sell?

I don't think I am going to respond to the scale question. What I will say is that we've track our economics on an ongoing basis. And we attempt to sell certainly at a positive cash margin all the time. And as conditions improve, we look to get above of accounting breakeven. So we're driven totally by economics and we always have to. Steve Byrne - Merrill Lynch & Company: Thank you.

Thanks Steve.

Your next question comes from the line of Michael Piken from Cleveland Research. Please proceed.

Hey guys.

Good morning Mike.

Good morning. Couple of questions for you. First of all, you talked about kind of running your plants at that sort of lower operational rate, 75% in nitrogen, 40% phosphate. Can you talk about what that might do in terms of your fixed costs and if you could provide any quantification, that would be great.

Well, as we... reduced rates, we do have issues with respect to fixed costs. And Tony, if you have...

Yeah, I can tell you what the impact would have been in the fourth quarter. I'm sorry, I can tell you what the impact would have been on the fourth quarter. It was relatively minor for fourth quarter results. It's about $1 million pre-tax for nitrogen, and about $5 million pre tax for phosphate.

Okay. So it would be safe to say that going forward given that we're at these lower operating rates that number should ratchet up in the first quarter.

I don't know whether that's the case or not.

We actually don't know what our operating rates will be throughout the quarter. We are only in the middle of the quarter.

Okay, fair enough. And then just the kind of taking a look at your phosphate results and based on kind of the numbers that you reported in phosphate, it would seem to imply that you still got a fair amount of higher cost sulfur and ammonia inputs that are still kind of flowing through. Can you talk about kind of where you are with respect to kind of working through particularly those higher cost sulfur inputs and one we might expect to see the full benefit of some of the lower input costs?

Sure, the sulfur market works in a way, where we don't recognize changes in sulfur prices immediately. They are kind of blended in over a period of a couple of months. So, it will be two, three months before the sulfur... the current sulfur market gets fully affected and gets fully reflected in our cost structure.

Okay, perfect. And then last question is with respect to kind of your outlook for corn acres and for the spring, some of the recent survey work we've done is the farmers have sort of indicated if crop prices remain at today's level, we might see a bit of a decrease in corn acres. And are you basing an 86 million on kind of, if talking to farmers or are you expecting kind of a rally in grain prices or if you can just give us a little bit more clarity? And if in fact, corn acres do come in below what type of impact do you think that would have on domestic nitrogen consumption? Thanks.

Well, we look at crop model, farmer economics. And looking at a model... even using a model with $3.90 corn, it looks like the crop to plant is corn over beans. Today, we see the futures price for December corn is around 420 that adds a little upward nudge to those economics assuming that price holds. In addition, we add a lot... we think we had a lot of farmers last year on the margin, who plants bean rather than corn and it's likely that they are going to have to rotate back to corn. So that's... we think it's economically and agronomically favorable to plant corn. Now, a lot of things can happen. They can make 86 million unachievable, not the least of which is weather. We do believe from an overall standpoint, there is pent-up demand for nitrogen, because all the nitrogen that would normally have been put down in the fall was not put down. And so, there are some... is probably a sizable amount of acreage that will need nitrogen absolutely. They didn't get any in the fall. So, we think it will be a good to very good nitrogen year, weather permitting.

Okay, thank you.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Please proceed.

Thank you. Good afternoon... good morning, I guess.

Good morning, Vincent.

Steve, in your... in some of your closing comments, you raised a lot of to the key questions in terms of how 2009 is going to progress. As it relates channel inventory, farmer sentiment application rates and so forth. But as we go into the spring season, can you give us a sense of the timing of what you think we need to see in... when do we need the channel to empty out in order to have a normal spring season? And when would you begin to be concerned that does not take place?

Well, it varies product by product, and I'll start with the easiest one, which is ammonia. Our system is full that won't surprise anyone, because we had a shortened season in the fall. We are ready to go, but no ammonia moves out of our level in the supply chain until the farmers are ready to plant. So, ammonia movement, you'll be able to tell based upon weather patterns we hope it comes soon in the South and moves to the North. That's the ideal pattern. Ammonia is very easy to watch, but it's also late starting. The other products, we believe that are... yes, there is inventory in the pipeline on UAN and urea. But there is probably not enough in the system to fulfill demand. And so, there is incremental product that has to come in. Some of that has to come in from overseas. There, again you have to look at planning, patterns, and... but it's all got to be anecdotal, because it's filling through the supply chain, and it's really not good data on what happens below the distributor level in our industry. In terms of phosphate, it's no secrete. There is an awful lot of phosphates sitting around, and there was product being stored every place it could be stored to the extent that anybody has visibility into rail and barge storage activity that would be an indicator when that starts getting moved out then products must be moving down the farm level.

Okay, but if I could just follow up on that what... in terms of obviously the bottleneck between the retailer and the farmer is on price. When does that bottleneck need to clear by in order to complete this kind of schedule that you laid out? Is there a kind of a point no return, where we serve raw nutrition here?

Well, there is no magic date, because you've got different planning calendars going on in different parts of the country and different crops. I think if you look at the way the industry operates, you will get to a point of time, when if the supply chain starts moving, it is too late to get imported product in. And we made references to logistical challenges and so forth and that's the part of the basis for that observation. Unfortunately in this industry, there is not good data for a lot of the stuff. And in our own planning process, we just try to keep in real close contact with our customers and make sure that our inventory positioning and our production scheduling is in tune with what they see happening. And that is a day by day... almost hour by hour kind of activity as we move into the spring.

And so just building on that, and that's ultimately how you will determine your production rates as well then?

Right.

Okay, thank you. I'll leave it there.

Okay.

Your next question comes from the line of Bob Goldberg from Scopus Asset Management. Please proceed.

Hi, Bob.

Good morning guys. Couple of questions for you. I was wondering if you could talk a little bit about the import activity, where lack there you are seeing in the nitrogen products and weather again maybe talk a little bit more about the logistics of getting nitrogen to the customer in the spring season if there is insufficient in productivity.

Well, first of all, as I think you know, Bob, we do some importing ourselves. And our location at Donaldsonville is very conducive to for us participating in that market. So for example, when we saw the rapid drop in ammonia prices, we elected to bring some ammonia in, because we thought it was a good deal for our customers. Going forward, we can supplement our own production, and some cases substitute for production. Ammonia... by moving ammonia into the corn bell is a complex activity, it's an activity that we think we do pretty well in our 19 terminals. Bringing in additional product at the last minute is depends on, I guess the definition of the last minute. We have ability to re-inject product into our system, but you've got production scheduling to do, and we cold bring in some additional shifts for example. If the demand was there and get it to the market in time that we have sufficient notice. If you don't have a distribution system, you can't do that. In terms of urea with a lot of capacity shutdown in reaction to the drop on prices, some of that is come back on. We don't think all of it is back on. And so in order to get a lot more urea here, productions decisions are going have to be made relatively soon in order to meet our demand for the spring assuming that it materializes. That is a... it's an easier thing to do logistically once it's here. But if the production pipeline goes all the way back to the Middle East, then plans have to be made pretty far in advance in order to do that. Phosphate, of course, phosphate is here in North America, so easier to move and there is plenty of inventory.

Okay. And then one other question. I know it's not your policy to speculate on natural gas, and hedge without... or take position from natural gas without having the forward purchasing business. But natural gas is pulling about $1.50 since the end of the year or at least from a spot basis in North America. Obviously, your pricings are depressed in part, because industrial demand and agricultural demand has dried early in 2009. I am just wondering if you are looking at all to take advantage of natural gas prices, which are well below recent levels or if you're going to continue the policy of matching natural gas purchases with poor purchases or sales efficiency?

Bob, I believe we have said periodically in our two and half year public company history that we do watch the natural gas market, and we would take positions in natural gas if we felt it attractive. We haven't talked much about it, because when gas is selling for 8, 9, 10 box and MMBtu (ph), it doesn't really seem attractive to take the kind of risk associated with that. When prices get down into the range that they are in right now, we kind of crack up our analysis, we consider taking positions. And when we become comfortable, we will take positions. We haven't taken any significant gas positions outside of our FPP to this point. But we are considering it.

Okay. Thanks very much.

(Operator Instructions). Your next question comes from the line of Charlie Rentschler from Wall Street Access. Please proceed.

Good morning. I wondered if you could talk about your capital expenditure plans for '09 versus '08, and maybe share with us what one or two of the bigger items are, please.

Sure. Go ahead, Tony.

Sure, Charlie. We're projecting we're going to spend somewhere between 2 and $300 million on CapEx. A lot of that is related to spending programs for improvements, energy improvement projects, additional control systems, expansion of our gyp stack, bringing the new drag line, bringing that up operating and all projects, which we've talked about in the past and continued spending is ramping up on those. In addition to that, we have the usual number of sustaining and EHNS-related (ph) projects and turnaround capital spending that we'll be doing over that period. So as basically, the mix of the spending that will be a bit higher. As I said, some of those major quick payout projects related to energy improvements that we talked about in the past are ramping up, and will increase the level of capital spending in 2009.

Okay. So, let's see. But that's significantly higher.

Charlie, you're kind of weak. We are having a hard time hearing you.

The 2 to 300 million represents quite hike over the last year; does it not?

Yeah, it's a bit of an increase over last year. It's been a steady ramp up. But again, these are all projects that we've been talking about in the past. So, most of the spending that I've talked about relates to continued development of those existing projects.

Okay.

As I said, many of them are a high payout... quick payout improvement projects related to our nitrogen operations.

Right.

And we have the continuing program in phosphate to increase our sulfuric acid production capability. Again, all of these kinds of projects, where we squeeze out marginal production; our incremental production are quite attractive economically.

But your release said you spent 74 million last year in CapEx, right? So this is almost a tripling?

No, the total spending last year was $140 million.

140, I was looking at the wrong number.

Yeah.

Okay. But it's still a significant increase.

That's right, Charlie. It is going up in that numbers. As I said, most of the spending in 2009 relates to continued development of almost the projects that we discussed over the last year.

Okay. And then my follow-up question: Steve, you talked about North American nitrogen industry becoming increasingly competitive. And I guess, I pretty well understand what you mean by that. But can you flush that out a little bit for us.

Sure. The best example has been highly public event that happens over the last month. And that's the Russian discussion, if you will, with the Ukrainian about gas prices. Toady, the Ukrainians are paying about $9 an MMBtu. If they're running any production, I don't think it's very much. It's probably going to difficult for them to come back online with that kind of gas cost. And at $40 oil, even if oil stays in the $40 range, they're going to be dealing with much higher gas costs than they've had in the past. When you add on top of that the relatively inefficient assets are operating and the transportation costs required today's that's relatively modest. But I think the days of high price costs are not going forever. It is difficult for them to get product to our marketplace. In addition, we add just frankly and unbelievable supply response in the natural gas industry in the U.S. There is gas found in shale oil was developed very quickly. The technology has been perfected; the supply is there. And obviously today's gas costs are a function of that increased supply and the reduced demand caused by the general economic situation that we're in. So, we've actually been pleasantly surprised that we've had several that have all moved in same direction to reinforce the point that we are much more cost effective supplier in the North American market than we were four or five years ago.

Very good, thank you.

Thanks Charlie.

At this time, I'm sure you have no further questions. I'd like to now turn the call back over to Mr. Nekvasil for closing remarks.

Well, thank you Katie. If there are no other questions, then we've taken all the questions in the queue and we will conclude our call. Thank you for your continued interest in CF Industries. We look forward to talking with you including next week when Tony Nocchiero and I will be at Morgan Stanley's Basic Materials Conference in New York City, Thank you so very much for joining us today.

Ladies and gentlemen, thank you for your participation in today's conference call. You may now disconnect; have a wonderful day.