Listed: TSX, NYSE Symbol: POT SASKATOON, SK, Jan. 25
/PRNewswire-FirstCall/ -- Record potash volumes, supported by
strong sales in phosphate and nitrogen, lifted Potash Corporation
of Saskatchewan Inc. (PotashCorp) to the best quarter in company
history, with fourth-quarter earnings of $1.74 per share(1) ($186.0
million), a 59-percent increase over the $1.09 ($117.1 million)
earned in the same period last year. This raised our 2006 earnings
to an all-time high of $5.95 per share ($631.8 million) from $4.89
per share ($542.9 million) in 2005, our third straight year of
record earnings. PotashCorp's fourth-quarter performance was
enhanced by a weaker Canadian dollar, which resulted in a non-cash
translation gain of $0.09 per share. In addition, we realized tax
refund and related interest benefits of $0.15 per share for the
quarter. These were partially offset by higher stock price
appreciation-related incentive plan accruals of $0.07 per share.
Record fourth-quarter gross margin of $299.3 million improved on
the $242.2 million in the same period last year, due primarily to
record fourth- quarter potash shipments in both North American and
offshore markets. We achieved total 2006 gross margin of $1.0
billion, down only slightly from $1.1 billion in 2005 even though
potash shipments to major offshore markets were severely
constrained by extended price negotiations for the first seven
months of 2006. Fourth-quarter cash flow prior to working capital
changes(2) grew to $265.6 million, up 37 percent from $193.2
million in the same period last year, and raised the 2006 total to
a record $940.8 million, compared to $860.3 million in 2005. Strong
operating results were augmented by solid contributions from our
investments in Arab Potash Company Ltd. (APC) in Jordan and
Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile, which
together generated $15.4 million of other income during the
quarter. These companies, along with our investments in Israel
Chemicals Ltd. (ICL) in Israel and Sinofert Holdings Limited
(Sinofert) in China, contributed $75.5 million for the full year, a
23-percent increase over 2005. The total market value of these
publicly traded companies now equates to over $26 per PotashCorp
share and exceeds their book value by more than $1.7 billion, or
156 percent. "Our fourth-quarter performance demonstrated that
patience and perseverance are rewarded," said PotashCorp President
and Chief Executive Officer Bill Doyle. "By committing to and
executing long-term strategies designed to deliver growth with
reduced volatility, we put ourselves in position to utilize our
assets when they are most valuable and climbed to new heights with
all three nutrients as the year closed." Market Conditions Market
fundamentals for potash, nitrogen and phosphate fertilizers have
improved. Rising global demand for crops needed for food, animal
feed and biofuels and a record-low wheat and coarse grain
stocks-to-use ratio are driving growth in the agricultural sector
and, with it, sales of all three nutrients. Strong potash shipments
to major offshore customers continued as many countries began the
lengthy process of refilling the pipeline depleted during
negotiations in 2006. North American potash inventories were 7
percent below the five-year average by the end of the quarter.
Despite a slow start to the fall fertilizer season in North
America, demand for solid phosphate fertilizers, as well as ammonia
and urea, was high in the western corn belt and central plains
regions of the United States during the fourth quarter. As a
result, North American inventories for solid fertilizers were
tight, with DAP, MAP and urea being 33 percent, 35 percent and 29
percent below the five-year averages, respectively. These tight
fundamentals pushed urea prices to record levels, even as US
natural gas prices moderated, and phosphate prices began to rise.
Potash Potash gross margin of $183.9 million - a fourth-quarter
record and the second-best quarter in company history - was 31
percent above the $140.3 million in the same period last year.
Total potash gross margin for the year reached $561.1 million,
PotashCorp's second-highest, falling short of the $707.4 million of
2005 due to the extended offshore price negotiations. Gross margin
as a percentage of net sales rebounded to 57 percent during the
quarter, up from 53 percent in the two trailing quarters and 47
percent in the first quarter. Compared to the trailing quarter, our
fourth-quarter realized prices for offshore and North American
sales were up 6 percent and 3 percent, respectively. This was
helped by increased volumes flowing to China through Canpotex
Limited (Canpotex), the offshore marketing company for Saskatchewan
potash producers, at the higher 2006 price, while our North
American price increase announced for October 1, 2006 began to be
realized in November. PotashCorp's total potash sales volumes
reached a fourth-quarter record of 2.2 million tonnes. Offshore
volumes grew to 1.3 million tonnes from 1.1 million tonnes quarter
over quarter, raising offshore volumes for 2006 to 4.4 million
tonnes, 12 percent below 2005. Canpotex - to which PotashCorp is
the largest supplier, providing 55.8 percent of Canpotex supply -
shipped 2.0 million tonnes during the fourth quarter, up from 1.8
million tonnes in the same quarter last year as
quarter-over-quarter shipments to China and India rose 41 percent
and 4 percent, respectively. For the year, Canpotex shipments to
China and India totaled 2.0 million tonnes, down 40 percent from
2005, while Indonesia, Malaysia, Philippines, Taiwan, Thailand and
Vietnam together took 1.9 million tonnes, an increase of 16
percent. Brazil, our largest offshore customer in 2006, took 30
percent more potash quarter over quarter although, at approximately
1.0 million tonnes, its annual volumes from Canpotex were down 4
percent. In North America, strong fall application and some dealer
restocking drove up quarter-over-quarter volumes by 58 percent to
0.85 million tonnes. For the year, North American volumes declined
11 percent to 2.8 million tonnes. In total, we sold 7.2 million
tonnes of potash in 2006, compared to 8.2 million tonnes in 2005.
In response to increased demand in the latter part of the year,
PotashCorp produced a record 2.4 million tonnes during the fourth
quarter, raising 2006 production to 7.0 million tonnes, down from
8.8 million tonnes in 2005. In keeping with our strategy of
matching production to market demand, we took 66 shutdown weeks
during 2006, including 63 weeks during the first three quarters,
which increased our cost of goods sold. Compared to the fourth
quarter of last year, potash production costs were higher due to
the strengthening of the average Canadian dollar exchange rate and
rising prices for petroleum-based supplies and repair services,
offset by lower natural gas costs. For the quarter, provincial
mining and other taxes rose to 14 percent of gross margin, up from
8 percent in the third quarter as a result of higher volumes and
prices. Nitrogen Nitrogen gross margin of $82.1 million was a
fourth-quarter record and the third highest in our history, 10
percent greater than the $74.3 million in gross margin in the same
quarter of 2005. For the year, nitrogen gross margin of $315.6
million almost matched the record $318.7 million of 2005, as
excellent market conditions continued. Our Trinidad operation,
which enjoys lower-cost, long-term natural gas contracts,
contributed $48.1 million of gross margin for the quarter and
$182.5 million for the year, representing 59 percent and 58 percent
of segment gross margin on a quarterly and annual basis,
respectively. US nitrogen operations generated $16.4 million in
gross margin in the quarter and $59.6 million for the year. Our
natural gas hedging program resulted in a $17.6-million gain for
the quarter, raising the total 2006 hedging gain to $73.5 million.
Realized prices for ammonia and urea declined 20 percent and 17
percent, respectively, from the peaks reached in the fourth quarter
of 2005 when the aftermath of Hurricane Katrina was still affecting
natural gas and, therefore, nitrogen pricing. For the year, ammonia
prices were flat, while urea prices were down 5 percent.
Fourth-quarter nitrogen production was up 8 percent following the
first- half completion of debottlenecking projects in Trinidad,
enabling a 10-percent increase in ammonia sales volumes in the
quarter. Industrial volumes were up 8 percent from last year's
fourth quarter and represented 68 percent of total nitrogen sales,
while fertilizer tonnes were down 13 percent from the same quarter
of 2005. Urea volumes were up 9 percent quarter over quarter
because of strong industrial sales, but were down 9 percent for the
year due to lower fertilizer demand and downtime at our Lima, OH
nitrogen facility. Our record fourth-quarter results were achieved
as our US gas costs, excluding our hedge, dropped 47 percent
quarter over quarter to $6.84 per MMBtu. With the hedge and
Trinidad, our total average gas cost was $3.70 per MMBtu for the
quarter and $3.83 per MMBtu for the year, 36 percent and 14 percent
lower than our fourth-quarter and annual gas costs, respectively,
in 2005. Phosphate Phosphate gross margin grew to $33.3 million
from $27.6 million in the fourth quarter of 2005, achieving a level
it had previously reached only once since 1999. Specialty products
remained the foundation of our phosphate business, with industrial
products contributing $8.3 million in gross margin and feed
supplements $13.8 million. Liquid fertilizers again performed well,
generating $12.3 million in the quarter. The segment was negatively
impacted by $7.5 million of environmental accruals, mainly related
to Geismar water treatment and White Springs mine reclamation
costs. For the year, phosphate gross margin increased 27 percent to
$125.3 million. Feed prices rose 12 percent quarter over quarter,
while industrial and liquid prices were up slightly. Stronger
competitive pressures resulted in fourth-quarter prices for solid
phosphate fertilizers falling 5 percent from the same period last
year. On a year-over-year basis, feed and industrial prices were up
19 percent and 6 percent, respectively, due to a tighter
supply/demand balance. Liquid and solid fertilizer prices were 6
percent and 5 percent higher, respectively, and were primarily
influenced by input costs. Feed phosphate volumes were down 6
percent quarter over quarter and 9 percent year over year as we
produced less due to higher competitive pressures in North America.
Liquid fertilizer volumes were up 28 percent from last year's
fourth quarter and 9 percent for the year driven by strong offshore
sales, mainly to India. Solid fertilizer volumes were up 26 percent
over the same quarter last year, with North American sales growing
by 7 percent and offshore sales by 61 percent. Financial PotashCorp
benefited from $17.4 million in additional refunds of income tax
and related interest in the fourth quarter due to the Canadian
appeal court decision in the case of a uranium producer. Of this
total, $11.7 million of tax refund reduced our recorded income tax
rate for the quarter to approximately 25 percent. For the year,
cash tax and interest refunds of $34.1 million and $9.8 million,
respectively, plus a $44.8-million reduction in our future tax
liability due to lower federal and provincial corporate income tax
rates, reduced our consolidated recorded income tax rate to 20
percent. The weakening of the Canadian dollar from the $1.1153
quarter-opening spot rate to $1.1653 at the close resulted in a
foreign-currency gain of $13.6 million, which was primarily
non-cash. Selling and administrative expenses for the quarter were
$15.3 million higher than in the same quarter last year, due
primarily to higher incentive plan accruals as a result of the
substantial upward movement in share price quarter over quarter. We
spent $123.7 million in the quarter for capital expenditures on
property, plant and equipment, half of it for continuing work to
bring back idled potash capacity at Allan and Lanigan. Total
capital expenditures for 2006 were $508.6 million including
capitalized interest, exceeding the $382.7 million in 2005, with
roughly half related to potash projects along with expenditures to
increase capacity at our Trinidad and Aurora facilities. We
invested an additional $235 million in the quarter to increase our
equity investment in SQM from 25 percent to approximately 32
percent. As well, in November we issued $500 million in 30-year
notes in the United States, primarily to fund the maturation of our
$400 million notes in June 2007. Outlook Tight global grain
inventories that in the past were typically associated with
short-term supply shocks are now a product of a long-term expansion
in demand. Rising populations and economic growth in Asia and Latin
America have created a significant and lasting need for crop
commodities to feed people and animals. In addition, the increasing
production of biofuels requires large volumes of a number of key
crops. We believe this is underpinning rapidly rising prices for
crop commodities and creating an optimistic outlook for the world's
farming community. The US Department of Agriculture has reduced
2006 corn production estimates by over 5 percent since the
beginning of the corn crop year, while US ethanol production is
expected to consume over 3 billion bushels by 2008. As a result,
prices have risen dramatically and 2007 plantings of corn, which
uses more fertilizer than any other US crop, are expected to
increase by 8-10 million acres over 2006. Near-record wheat prices
have also boosted the area planted to winter wheat. The net effect
is expected to be a substantial reduction in the US soybean acreage
and elevated soybean prices. These factors, along with the need to
replenish soil nutrients after two consecutive years of reduced
application rates because of high input costs and low crop prices,
could drive up US demand for all nutrients this fertilizer year. We
believe a return to normal application levels, adjusted for the
anticipated increase in corn acreage, could see US nitrogen demand
grow by 10-15 percent over the previous fertilizer year, while
potash and phosphate demand could rise between 20 percent and 25
percent. Offshore markets such as China, India and several
Southeast Asian countries are recognizing the growing likelihood
that they will require increased imports of grains and oilseeds to
satisfy their food and fuel needs at a time of record commodity
prices. This should motivate them to maximize internal crop
production by increasing fertilizer purchases. This is especially
true of potash, which historically has been significantly under-
applied. Industry consultants expect global potash demand to grow
by 10 percent in 2007. This forecast does not include a strong
rebound in Brazil, which becomes more likely as soybean prices
rise. Increased consumption combined with the loss of a Russian
competitor's mine due to flooding in October 2006 is putting
pressure on supply/demand fundamentals, which could reach their
tightest point by mid-2007. This is leading to higher potash
prices. Our $11-per-tonne increase in North America was implemented
on January 1, 2007. Canpotex has announced a $25-per-tonne increase
for Brazil effective February 1 and a $10 increase in Southeast
Asian markets in early 2007. These same conditions are expected to
create significant growth in world nitrogen demand in 2007,
particularly in the US, China and India. Rising global natural gas
prices are underpinning higher nitrogen prices and, combined with
elevated ocean transportation costs, should continue to reduce
competitive pressures in North America. In addition, substantially
higher capital costs to build new supply in low-cost gas regions
are causing the delay or cancellation of announced greenfield
nitrogen projects, improving the longer-term nitrogen outlook.
These factors have created a disconnect between US gas costs and
nitrogen prices that increases our margin potential. For 2007, we
anticipate nitrogen gross margin will be similar to that achieved
in 2006. Our total North American 10-year natural gas hedge
position is currently valued at $140 million. At current gas
prices, we expect to recognize roughly $50 million of hedging gains
through 2007 as product related to the natural gas being hedged is
sold. Steady demand in liquids, industrial and feed products should
drive phosphate in 2007. Low solid fertilizer inventories have
created a positive pricing environment as we enter the expected
strong US spring fertilizer season. The rising demand for all three
nutrients is bringing logistics to the forefront in North America,
as the distribution system will be challenged and customers cannot
rely on just-in-time delivery. With the US rail industry starting
to raise rates, transportation is becoming more expensive.
PotashCorp's 2007 current planned capital expenditures should
approximate $400 million, of which $175 million will relate to
sustaining capital. Significant funds continue to be spent on
bringing back idled capacity at Lanigan, while work on compaction
capacity is expected to wrap up at Allan in the first quarter.
Depreciation and amortization expense is expected to be about 9
percent higher than 2006 levels, due to our newly completed capital
projects at Allan, Trinidad and our purified acid plant at Aurora.
Our consolidated effective marginal tax rate is expected to be 30
percent in 2007, with the current/future split expected to be 75/25
subject to sources of income. Provincial mining and other taxes are
forecast to approximate 17 percent of total potash gross margin in
the year. Other income and total selling and administrative
expenses are forecast to remain consistent with 2006 levels. In
this environment, PotashCorp is expecting first-quarter net income
per share to be in the range of $1.50-$2.00, based on a $1.14
Canadian dollar. Net income for the full year is expected to be in
the range of $6.25-$7.25 per share. In the current trading range of
the Canadian dollar relative to the US dollar, each one-cent change
in the Canadian dollar typically impacts our foreign-exchange line
by approximately $3.0 million, or $0.02 per share on an after-tax
basis, which is primarily a non-cash item. Conclusion "The outlook
for PotashCorp over the next few years is very exciting," said
Doyle. "The fertilizer demand growth we see today should escalate
along with the long-term global need for more food, fuel and fiber.
This will allow our company to draw upon the full depth of our
resources and deliver even greater value for our shareholders."
Notes: ------ 1. All references to per-share amounts pertain to
diluted net income per share. 2. See reconciliation and description
of non-GAAP measures in the attached section titled "Selected
Non-GAAP Measures and Reconciliations." Potash Corporation of
Saskatchewan Inc. is the world's largest fertilizer enterprise
producing the three primary plant nutrients and a leading supplier
to three distinct market categories: agriculture, with the largest
capacity in the world in potash, third largest in phosphate and
fourth largest in nitrogen; animal nutrition, with the world's
largest capacity in phosphate feed ingredients; and industrial
chemicals, as the largest global producer of industrial nitrogen
products and one of only three North American suppliers of
industrial phosphates. This release contains forward-looking
statements. These statements are based on certain factors and
assumptions as set forth in this release, including foreign
exchange rates, expected growth, results of operations, performance
and business prospects and opportunities. While the company
considers these factors and assumptions to be reasonable, based on
information currently available, they may prove to be incorrect. A
number of factors could cause actual results to differ materially
from those in the forward-looking statements, including, but not
limited to: fluctuations in supply and demand in fertilizer,
sulfur, transportation and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks
associated with natural gas and other hedging activities; changes
in capital markets; changes in currency and exchange rates;
unexpected geological or environmental conditions; and government
policy changes. Additional risks and uncertainties can be found in
our 2005 annual report to shareholders and in filings with the U.S.
Securities and Exchange Commission and Canadian provincial
securities commissions. Forward-looking statements are given only
as at the date of this release and the company disclaims any
obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
In the case of guidance, should subsequent events show that the
forward-looking statements released herein may be materially off-
target, the company will evaluate whether to issue and, if
appropriate following such review, issue a news release updating
guidance or explaining reasons for the difference.
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PotashCorp will host a conference call on Thursday, January 25,
2007, at 1:00 p.m. Eastern Time. To join the call, dial (416)
640-1907 at least 10 minutes prior to the start time. Use
reservation ID No. 21213524. Alternatively, visit
http://www.potashcorp.com/ for a live webcast of the conference
call in a listen-only mode. This news release is also available at
this same website.
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Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Financial Position (in millions of US dollars except
share amounts) (unaudited) December 31, December 31, 2006 2005
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Assets Current assets Cash and cash equivalents $ 325.7 $ 93.9
Accounts receivable 442.3 453.3 Inventories 501.3 522.5 Prepaid
expenses and other current assets 40.9 41.1
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1,310.2 1,110.8 Property, plant and equipment 3,525.8 3,262.8 Other
assets (Note 2) 1,254.7 852.8 Intangible assets 29.3 34.5 Goodwill
97.0 97.0
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$ 6,217.0 $ 5,357.9
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Liabilities Current liabilities Short-term debt $ 157.9 $ 252.2
Accounts payable and accrued charges 545.2 842.7 Current portion of
long-term debt 400.4 1.2
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1,103.5 1,096.1 Long-term debt (Note 3) 1,357.1 1,257.6 Future
income tax liability 632.1 543.3 Accrued pension and other
post-retirement benefits 219.6 213.9 Accrued environmental costs
and asset retirement obligations 110.3 97.3 Other non-current
liabilities and deferred credits 14.1 17.2
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3,436.7 3,225.4
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Shareholders' Equity Share capital 1,431.6 1,379.3 Unlimited
authorization of common shares without par value; issued and
outstanding 104,801,049 and 103,593,792 at December 31, 2006 and
December 31, 2005, respectively Contributed surplus 62.3 36.3
Retained earnings 1,286.4 716.9
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2,780.3 2,132.5
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$ 6,217.0 $ 5,357.9
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Operations and Retained Earnings (in millions of US
dollars except per-share amounts) (unaudited) Three Months Ended
Twelve Months Ended December 31 December 31 2006 2005 2006 2005
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Sales (Note 6) $ 1,022.9 $ 930.5 $ 3,766.7 $ 3,847.2 Less: Freight
73.0 55.2 255.8 249.7 Transportation and distribution 29.5 31.1
134.1 121.9 Cost of goods sold 621.1 602.0 2,374.8 2,350.6
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Gross Margin 299.3 242.2 1,002.0 1,125.0
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Selling and administrative 43.8 28.5 158.4 144.5 Provincial mining
and other taxes 25.3 25.8 66.5 137.2 Foreign exchange (gain) loss
(13.6) 0.1 (4.4) 12.5 Other income (Note 9) (21.7) (7.5) (94.0)
(61.8)
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33.8 46.9 126.5 232.4
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Operating Income 265.5 195.3 875.5 892.6 Interest Expense 16.5 20.6
85.6 82.3
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Income Before Income Taxes 249.0 174.7 789.9 810.3 Income Taxes
(Note 4) 63.0 57.6 158.1 267.4
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Net Income $ 186.0 $ 117.1 631.8 542.9 ----------------------
---------------------- Retained Earnings, Beginning of Year 716.9
701.5 Repurchase of Common Shares - (462.5) Dividends (62.3) (65.0)
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Retained Earnings, End of Year $ 1,286.4 $ 716.9
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Net Income Per Share (Note 5) Basic $ 1.78 $ 1.11 $ 6.08 $ 5.00
Diluted $ 1.74 $ 1.09 $ 5.95 $ 4.89
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Dividends Per Share $ 0.15 $ 0.15 $ 0.60 $ 0.60
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Cash Flow (in millions of US dollars) (unaudited)
Three Months Ended Twelve Months Ended December 31 December 31 2006
2005 2006 2005
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Operating Activities Net income $ 186.0 $ 117.1 $ 631.8 $ 542.9
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Adjustments to reconcile net income to cash provided by operating
activities Depreciation and amortization 61.0 61.4 242.4 242.4
Stock-based compensation 2.7 1.8 29.5 27.5 (Gain) loss on disposal
of long-term assets (4.7) 6.1 (8.6) 11.8 Provision for plant
shutdowns - phosphate segment - - 6.3 - Foreign exchange on future
income tax (11.6) (1.1) 0.5 8.9 Provision for future income tax
46.1 19.1 50.0 40.1 Undistributed earnings of equity investees
(15.4) (8.8) (24.5) (33.5) Other long-term liabilities 1.5 (2.4)
13.4 20.2
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Subtotal of adjustments 79.6 76.1 309.0 317.4
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Changes in non-cash operating working capital Accounts receivable
12.1 (36.8) 11.0 (107.6) Inventories (7.9) (86.0) 13.9 (119.9)
Prepaid expenses and other current assets 23.5 8.4 0.2 (5.8)
Accounts payable and accrued charges 49.9 11.8 (269.1) 238.1
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Subtotal of changes in non-cash operating working capital 77.6
(102.6) (244.0) 4.8
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Cash provided by operating activities 343.2 90.6 696.8 865.1
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Investing Activities Additions to property, plant and equipment
(123.7) (136.3) (508.6) (382.7) Purchase of long-term investments
(222.5) - (352.5) (190.9) Proceeds from disposal of property, plant
and equipment and long-term investments 12.0 1.3 22.0 12.4 Other
assets and intangible assets (2.9) (1.8) (0.6) 5.9
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Cash used in investing activities (337.1) (136.8) (839.7) (555.3)
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Cash before financing activities 6.1 (46.2) (142.9) 309.8
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Financing Activities Proceeds from (repayment of) long-term debt
obligations 495.9 (9.2) 494.9 (10.1) Issue costs of long-term debt
obligations (12.3) - (12.3) - (Repayment of) proceeds from
short-term debt obligations (372.1) 157.5 (94.3) 158.7 Dividends
(15.2) (16.0) (60.9) (65.4) Repurchase of common shares - (321.0) -
(851.9) Issuance of common shares 31.9 0.8 47.3 93.9
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Cash provided by (used in) financing activities 128.2 (187.9) 374.7
(674.8)
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Increase (Decrease) in Cash and Cash Equivalents 134.3 (234.1)
231.8 (365.0) Cash and Cash Equivalents, Beginning of Period 191.4
328.0 93.9 458.9
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Cash and Cash Equivalents, End of Period $ 325.7 $ 93.9 $ 325.7 $
93.9
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Supplemental cash flow disclosure Interest paid $ 32.3 $ 31.5 $
106.8 $ 86.3 Income taxes (recovered) paid $ (16.4) $ 15.2 $ 226.8
$ 141.6
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Notes to the Condensed
Consolidated Financial Statements For the Three and Twelve Months
Ended December 31, 2006 (in millions of US dollars except share and
per-share amounts) (unaudited) 1. Significant Accounting Policies
With its subsidiaries, Potash Corporation of Saskatchewan Inc.
("PCS") - together known as "PotashCorp" or "the company" except to
the extent the context otherwise requires - forms an integrated
fertilizer and related industrial and feed products company. The
company's accounting policies are in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). The
accounting policies used in preparing these condensed consolidated
financial statements are consistent with those used in the
preparation of the 2005 annual consolidated financial statements,
except as described below. These condensed consolidated financial
statements include the accounts of PCS and its subsidiaries;
however, they do not include all disclosures normally provided in
annual consolidated financial statements and should be read in
conjunction with the 2005 annual consolidated financial statements.
In management's opinion, the unaudited financial statements include
all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly such information. Implicit Variable
Interests In January 2006, the company adopted Emerging Issues
Committee Abstract No. 157, "Implicit Variable Interests Under
AcG-15" ("EIC-157"). This EIC addresses whether a company has an
implicit variable interest in a variable interest entity ("VIE") or
potential VIE when specific conditions exist. An implicit variable
interest acts the same as an explicit variable interest except that
it involves the absorbing and/or receiving of variability
indirectly from the entity (rather than directly). The
identification of an implicit variable interest is a matter of
judgment that depends on the relevant facts and circumstances. The
implementation of EIC-157 did not have a material impact on the
company's consolidated financial statements. Conditional Asset
Retirement Obligations In April 2006, the company adopted Emerging
Issues Committee Abstract No. 159, "Conditional Asset Retirement
Obligations" ("EIC-159"). This EIC clarifies the accounting
treatment for a legal obligation to perform an asset retirement
activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the
control of the entity. Under this EIC, an entity is required to
recognize a liability for the fair value of a conditional asset
retirement obligation if the fair value of the liability can be
reasonably estimated. The implementation of this EIC did not have a
material impact on the company's consolidated financial statements.
2. Other Assets In February 2006, the company acquired an
additional 10.01-percent interest in the ordinary shares of
Sinofert Holdings Limited ("Sinofert") for $126.3. The purchase
price was financed by short-term debt. The additional investment
increased the company's interest in Sinofert to 20 percent. In
April 2006, the company purchased an additional 220,100 shares of
Arab Potash Company Ltd. ("APC") for $3.7. The company's ownership
interest in APC remains at approximately 28 percent. In October and
December 2006, the company acquired an additional 17,450,015 Class
B shares of Sociedad Quimica y Minera de Chile S.A. ("SQM") for
$235.0. The additional investment increased the company's interest
in SQM to approximately 32 percent. 3. Long-term Debt On November
29, 2006, the company issued 30-year notes payable under US shelf
registration statements in the principal amount of $500.0, bearing
interest at a rate of 5.875%. 4. Income Taxes The company's
consolidated recorded income tax rate for the three months ended
December 31, 2006 was approximately 25 percent (2005 - 33 percent)
and for the twelve months ended December 31, 2006 was approximately
20 percent (2005 - 33 percent). The reduction in the consolidated
recorded income tax rates was due to the following: - During the
three months ended June 30, 2006, the company reduced its
consolidated effective income tax rate from 33 percent to 30
percent for the 2006 year. The impact of this change on prior
periods, as applicable, was reflected during that quarter. The
change was primarily attributable to two factors. First, during the
three months ended June 30, 2006, the Province of Saskatchewan
enacted changes to the corporation income tax. The corporate income
tax rate will be reduced from 17 percent to 12 percent over the
next three years, with a 3 percentage point reduction (to 14
percent) effective July 1, 2006 and further 1 percentage point
reductions on July 1, 2007 and July 1, 2008. The impact of this
change on the company's future income tax liability was recognized
during the second quarter of 2006. Second, during the three months
ended June 30, 2006, the company revised its estimated allocation
of annual income before income taxes by jurisdiction. - During the
three months ended June 30, 2006, the Government of Canada enacted
changes to the federal corporation income tax and the corporate
surtax. The federal corporate income tax rate will be reduced from
21 percent to 19 percent over the next four years, with a 0.5
percentage point reduction effective January 1, 2008 and January 1,
2009, and a further 1 percentage point reduction on January 1,
2010. The federal corporate surtax will be reduced from 1.12
percent to nil in 2008. The impact of this change on the company's
future income tax liability was recognized during the second
quarter of 2006. - Income tax refunds totaling $34.1 were recorded
relating to a recent Canadian appeal court decision (pertaining to
a uranium producer) which affirmed the deductibility of the
Saskatchewan capital tax resource surcharge. Refunds of $12.3 were
recognized during the three months ended March 31, 2006, a refund
of $3.5 was recognized during the three months ended June 30, 2006,
a refund of $6.6 was recognized during the three months ended
September 30, 2006, and refunds of $11.7 were recognized during the
three months ended December 31, 2006 (refunds were for taxation
years 1999 through 2005). 5. Net Income Per Share Basic net income
per share for the quarter is calculated on the weighted average
shares issued and outstanding for the three months ended December
31, 2006 of 104,490,000 (2005 - 105,438,000). Basic net income per
share for the year to date is calculated on the weighted average
shares issued and outstanding for the year ended December 31, 2006
of 103,960,000 (2005 - 108,568,000). Diluted net income per share
is calculated based on the weighted average number of shares issued
and outstanding during the period. The denominator is: (i)
increased by the total of the additional common shares that would
have been issued assuming exercise of all stock options with
exercise prices at or below the average market price for the
period; and (ii) decreased by the number of shares that the company
could have repurchased if it had used the assumed proceeds from the
exercise of stock options to repurchase them on the open market at
the average share price for the period. The weighted average number
of shares outstanding for the diluted net income per share
calculation for the three months ended December 31, 2006 was
107,028,000 (2005 - 107,601,000) and for the year ended December
31, 2006 was 106,230,000 (2005 - 111,078,000). 6. Segment
Information The company has three reportable business segments:
potash, nitrogen and phosphate. These business segments are
differentiated by the chemical nutrient contained in the product
that each produces. Inter-segment sales are made under terms that
approximate market value. The accounting policies of the segments
are the same as those described in Note 1. Three Months Ended
December 31, 2006
-------------------------------------------------------------------------
Consol- Potash Nitrogen Phosphate All Others idated
-------------------------------------------------------------------------
Sales $ 371.0 $ 317.2 $ 334.7 $ - $ 1,022.9 Freight 39.1 8.7 25.2 -
73.0 Transportation and distribution 9.9 11.9 7.7 - 29.5 Net sales
- third party 322.0 296.6 301.8 - Cost of goods sold 138.1 214.5
268.5 - 621.1 Gross margin 183.9 82.1 33.3 - 299.3 Depreciation and
amortization 15.1 19.8 24.1 2.0 61.0 Inter-segment sales 0.7 26.6
1.7 - - Three Months Ended December 31, 2005
-------------------------------------------------------------------------
Consol- Potash Nitrogen Phosphate All Others idated
-------------------------------------------------------------------------
Sales $ 274.0 $ 366.9 $ 289.6 $ - $ 930.5 Freight 24.4 10.9 19.9 -
55.2 Transportation and distribution 7.4 13.0 10.7 - 31.1 Net sales
- third party 242.2 343.0 259.0 - Cost of goods sold 101.9 268.7
231.4 - 602.0 Gross margin 140.3 74.3 27.6 - 242.2 Depreciation and
amortization 13.5 19.5 25.5 2.9 61.4 Inter-segment sales 0.9 26.0
2.6 - - Twelve Months Ended December 31, 2006
-------------------------------------------------------------------------
Consol- Potash Nitrogen Phosphate All Others idated
-------------------------------------------------------------------------
Sales $ 1,227.5 $ 1,284.1 $ 1,255.1 $ - $ 3,766.7 Freight 130.5
36.8 88.5 - 255.8 Transportation and distribution 38.8 52.2 43.1 -
134.1 Net sales - third party 1,058.2 1,195.1 1,123.5 - Cost of
goods sold 497.1 879.5 998.2 - 2,374.8 Gross margin 561.1 315.6
125.3 - 1,002.0 Depreciation and amortization 58.3 77.6 94.6 11.9
242.4 Inter-segment sales 5.7 112.4 7.2 - - Twelve Months Ended
December 31, 2005
-------------------------------------------------------------------------
Consol- Potash Nitrogen Phosphate All Others idated
-------------------------------------------------------------------------
Sales $ 1,341.1 $ 1,368.8 $ 1,137.3 $ - $ 3,847.2 Freight 129.7
39.9 80.1 - 249.7 Transportation and distribution 34.5 49.5 37.9 -
121.9 Net sales - third party 1,176.9 1,279.4 1,019.3 - Cost of
goods sold 469.5 960.7 920.4 - 2,350.6 Gross margin 707.4 318.7
98.9 - 1,125.0 Depreciation and amortization 64.5 72.0 95.6 10.3
242.4 Inter-segment sales 5.8 100.7 14.0 - - Provision for Plant
Shutdowns - Phosphate Segment In July 2006, the company
indefinitely suspended production of superphosphoric acid and
ammonium polyphosphate products at its Geismar, Louisiana location
due to higher input costs and lower product margins for those
products at that location, compared to the company's other
facilities. No employee positions were terminated. The plants have
not been re-started since that time and company management has
determined that there are no immediate intentions of re-starting
the plants. In connection with the shutdowns, management determined
that the carrying amounts of the long-lived assets related to the
production facilities were not fully recoverable, and an impairment
loss of $6.3, equal to the amount by which the carrying amount of
the asset groups exceeded their respective fair values, was
recognized. Fair values were determined based on an estimate of
future cash flows resulting from the use of the assets and their
eventual disposition. All of the impairment charge related to
property, plant and equipment and is included in cost of goods
sold. 7. Stock-Based Compensation On May 4, 2006, the company's
shareholders approved the 2006 Performance Option Plan under which
the company may, after February 27, 2006 and before January 1,
2007, issue options to acquire up to 1,400,000 common shares. Under
the plan, the exercise price is the quoted market closing price of
the company's common shares on the last trading day immediately
preceding the date of grant, and an option's maximum term is 10
years. In general, options will vest, if at all, according to a
schedule based on the three-year average excess of the company's
consolidated cash flow return on investment over weighted average
cost of capital. As of December 31, 2006, options to purchase a
total of 894,900 common shares have been granted under the plan.
The weighted average fair value of options granted was $38.53 per
share, estimated as of the date of grant using the
Black-Scholes-Merton option-pricing model with the following
weighted average assumptions: Expected dividend $0.60 Expected
volatility 30% Risk-free interest rate 4.90% Expected life of
options 6.5 years 8. Pension and Other Post-Retirement Expenses
Defined Benefit Pension Plans Three Months Ended Twelve Months
Ended December 31 December 31
-------------------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Service cost $ 3.4 $ 3.4 $ 14.2 $ 13.8 Interest cost 8.2 7.7 33.5
31.1 Expected return on plan assets (9.3) (9.1) (38.2) (37.0)
Change in valuation allowance 2.0 2.4 2.0 2.4 Net amortization 2.6
2.4 11.2 7.3
-------------------------------------------------------------------------
Net expense $ 6.9 $ 6.8 $ 22.7 $ 17.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other Post-Retirement Plans Three Months Ended Twelve Months Ended
December 31 December 31
-------------------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Service cost $ 1.2 $ 1.5 $ 4.7 $ 5.7 Interest cost 3.1 3.4 12.4
13.3 Net amortization (0.1) 0.3 (0.4) 1.5
-------------------------------------------------------------------------
Net expense $ 4.2 $ 5.2 $ 16.7 $ 20.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended December 31, 2006, the company
contributed $5.2 to its defined benefit pension plans, $2.9 to its
defined contribution pension plans and $2.1 to its other
post-retirement plans. Contributions for the twelve months ended
December 31, 2006 were $24.9 to defined benefit pension plans,
$15.0 to defined contribution pension plans and $8.8 to other
post-retirement plans. 9. Other Income Three Months Ended Twelve
Months Ended December 31 December 31
-------------------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Share of earnings of equity investees $ 15.4 $ 8.8 $ 54.4 $ 52.1
Dividend income - - 21.1 9.2 Other 6.3 (1.3) 18.5 0.5
-------------------------------------------------------------------------
$ 21.7 $ 7.5 $ 94.0 $ 61.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
10. Comparative Figures Certain of the prior periods' figures have
been reclassified to conform with the current periods'
presentation. Potash Corporation of Saskatchewan Inc. Selected
Operating and Revenue Data (unaudited) Three Months Ended Twelve
Months Ended December 31 December 31 2006 2005 2006 2005
-------------------------------------------------------------------------
Potash Operating Data Production (KCl Tonnes - thousands) 2,392
2,358 7,018 8,816 Shutdown weeks 3.0 6.1 65.9 24.0 Sales (tonnes -
thousands) North America 846 536 2,785 3,144 Offshore 1,318 1,116
4,411 5,020
-------------------------------------------------------------------------
2,164 1,652 7,196 8,164
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Net Sales (US $ millions) Sales $371.0 $274.0 $1,227.5
$1,341.1 Less: Freight 39.1 24.4 130.5 129.7 Transportation and
distribution 9.9 7.4 38.8 34.5
-------------------------------------------------------------------------
Net Sales $322.0 $242.2 $1,058.2 $1,176.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
North America $140.6 $90.4 $470.5 $495.6 Offshore 177.4 147.6 576.0
668.3
-------------------------------------------------------------------------
Potash Subtotal 318.0 238.0 1,046.5 1,163.9 Miscellaneous products
4.0 4.2 11.7 13.0
-------------------------------------------------------------------------
$322.0 $242.2 $1,058.2 $1,176.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Average Price per MT North America $166.26 $168.75 $168.95
$157.64 Offshore $134.52 $132.20 $130.56 $133.13
-------------------------------------------------------------------------
$146.92 $144.06 $145.42 $142.56
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Twelve Months Ended
December 31 December 31 2006 2005 2006 2005
-------------------------------------------------------------------------
Nitrogen Operating Data Production (N Tonnes - thousands) 709 654
2,579 2,600 Average Natural Gas Cost per MMBtu $3.70 $5.81 $3.83
$4.46 Sales (tonnes - thousands) Manufactured Product Ammonia 451
409 1,695 1,672 Urea 300 275 1,199 1,321 Nitrogen solutions/Nitric
acid/Ammonium nitrate 428 480 1,781 1,850
-------------------------------------------------------------------------
Manufactured Product 1,179 1,164 4,675 4,843 Purchased Product 56
63 145 377
-------------------------------------------------------------------------
1,235 1,227 4,820 5,220
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer sales tonnes 391 447 1,524 1,978 Industrial/Feed sales
tonnes 844 780 3,296 3,242
-------------------------------------------------------------------------
1,235 1,227 4,820 5,220
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Net Sales (US $ millions) Sales $317.2 $366.9 $1,284.1
$1,368.8 Less: Freight 8.7 10.9 36.8 39.9 Transportation and
distribution 11.9 13.0 52.2 49.5
-------------------------------------------------------------------------
Net Sales $296.6 $343.0 $1,195.1 $1,279.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product Ammonia $129.9 $146.9 $499.7 $490.0 Urea 78.1
85.9 317.8 369.5 Nitrogen solutions/Nitric acid/Ammonium nitrate
65.4 80.2 305.4 284.2 Miscellaneous 7.0 6.5 28.5 25.8
-------------------------------------------------------------------------
Net Sales Manufactured Product 280.4 319.5 1,151.4 1,169.5 Net
Sales Purchased Product 16.2 23.5 43.7 109.9
-------------------------------------------------------------------------
$296.6 $343.0 $1,195.1 $1,279.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer net sales $91.9 $126.3 $367.0 $505.3 Industrial/Feed net
sales 204.7 216.7 828.1 774.1
-------------------------------------------------------------------------
$296.6 $343.0 $1,195.1 $1,279.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Average Price per MT Ammonia $288.14 $359.14 $294.84
$293.05 Urea $260.14 $312.78 $264.97 $279.63 Nitrogen
solutions/Nitric acid/Ammonium nitrate $152.87 $167.27 $171.45
$153.67
-------------------------------------------------------------------------
Manufactured Product $237.86 $274.70 $246.26 $241.49 Purchased
Product $291.22 $370.30 $301.92 $291.28
-------------------------------------------------------------------------
$240.26 $279.64 $247.93 $245.09
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer average price per MT $235.10 $282.98 $240.78 $255.42
Industrial/Feed average price per MT $242.65 $277.74 $251.24
$238.78
-------------------------------------------------------------------------
$240.26 $279.64 $247.93 $245.09
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Twelve Months Ended
December 31 December 31 2006 2005 2006 2005
-------------------------------------------------------------------------
Phosphate Operating Data Production (P2O5 Tonnes - thousands) 528
460 2,021 2,012 P2O5 Operating Rate 93% 74% 89% 81% Sales (tonnes -
thousands) Fertilizer - Liquid phosphates 313 244 1,017 931
Fertilizer - Solid phosphates 444 353 1,634 1,516 Feed 196 209 780
860 Industrial 162 159 647 664
-------------------------------------------------------------------------
1,115 965 4,078 3,971
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Net Sales (US $ millions) Sales $334.7 $289.6 $1,255.1
$1,137.3 Less: Freight 25.2 19.9 88.5 80.1 Transportation and
distribution 7.7 10.7 43.1 37.9
-------------------------------------------------------------------------
Net Sales $301.8 $259.0 $1,123.5 $1,019.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer - Liquid phosphates $75.0 $57.2 $240.6 $208.2 Fertilizer
- Solid phosphates 103.5 86.4 391.6 346.7 Feed 60.2 57.4 239.2
221.0 Industrial 59.6 56.1 239.7 231.2 Miscellaneous 3.5 1.9 12.4
12.2
-------------------------------------------------------------------------
$301.8 $259.0 $1,123.5 $1,019.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Average Price per MT Fertilizer - Liquid phosphates
$239.58 $234.82 $236.53 $223.68 Fertilizer - Solid phosphates
$233.24 $244.64 $239.64 $228.60 Feed $307.75 $274.38 $306.69
$256.96 Industrial $367.42 $351.95 $370.42 $348.12
-------------------------------------------------------------------------
$270.80 $268.32 $275.48 $256.66
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exchange Rate (Cdn$/US$) 2006 2005
-------------------------------------------------------------------------
December 31 1.1653 1.1659 Fourth-quarter average conversion rate
1.1270 1.1788 Potash Corporation of Saskatchewan Inc. Selected
Non-GAAP Financial Measures and Reconciliations (in millions of US
dollars) (unaudited) The following information is included for
convenience only. Generally, a non-GAAP financial measure is a
numerical measure of a company's performance, financial position or
cash flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable
measure calculated and presented in accordance with generally
accepted accounting principles ("GAAP"). EBITDA, cash flow prior to
working capital changes and free cash flow are not measures of
financial performance (nor do they have standardized meanings)
under either Canadian GAAP or US GAAP. In evaluating these
measures, investors should consider that the methodology applied in
calculating such measures may differ among companies and analysts.
The company uses both GAAP and certain non-GAAP measures to assess
performance. The company's management believes these non-GAAP
measures provide useful supplemental information to investors in
order that they may evaluate PotashCorp's financial performance
using the same measures as management. PotashCorp's management
believes that, as a result, the investor is afforded greater
transparency in assessing the financial performance of the company.
These non-GAAP financial measures should not be considered as a
substitute for, nor superior to, measures of financial performance
prepared in accordance with GAAP. A. EBITDA ------ Set forth below
is a reconciliation of "EBITDA" to net income, the most directly
comparable financial measure calculated and presented in accordance
with Canadian GAAP. Three Months Ended Twelve Months Ended December
31 December 31
-------------------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Net income $ 186.0 $ 117.1 $ 631.8 $ 542.9 Income taxes 63.0 57.6
158.1 267.4 Interest expense 16.5 20.6 85.6 82.3 Depreciation and
amortization 61.0 61.4 242.4 242.4
-------------------------------------------------------------------------
EBITDA $ 326.5 $ 256.7 $ 1,117.9 $ 1,135.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDA is calculated as earnings before interest, income taxes,
depreciation and amortization. PotashCorp uses EBITDA as a
supplemental financial measure of its operational performance.
Management believes EBITDA to be an important measure as it
excludes the effects of items which primarily reflect the impact of
long-term investment decisions, rather than the performance of the
company's day-to-day operations. As compared to net income
according to GAAP, this measure is limited in that it does not
reflect the periodic costs of certain capitalized tangible and
intangible assets used in generating revenues in the company's
business. Management evaluates such items through other financial
measures such as capital expenditures and cash flow provided by
operating activities. The company believes that this measurement is
useful to measure a company's ability to service debt and to meet
other payment obligations or as a valuation measurement. Potash
Corporation of Saskatchewan Inc. Selected Non-GAAP Financial
Measures and Reconciliations (in millions of US dollars)
(unaudited) B. CASH FLOW --------- Set forth below is a
reconciliation of "cash flow prior to working capital changes" and
"free cash flow" to cash provided by operating activities, the most
directly comparable financial measure calculated and presented in
accordance with Canadian GAAP. Three Months Ended Twelve Months
Ended December 31 December 31
-------------------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Cash flow prior to working capital changes(1) $ 265.6 $ 193.2 $
940.8 $ 860.3
-------------------------------------------------------------------------
Changes in non-cash operating working capital Accounts receivable
12.1 (36.8) 11.0 (107.6) Inventories (7.9) (86.0) 13.9 (119.9)
Prepaid expenses and other current assets 23.5 8.4 0.2 (5.8)
Accounts payable and accrued charges 49.9 11.8 (269.1) 238.1
-------------------------------------------------------------------------
Changes in non-cash operating working capital 77.6 (102.6) (244.0)
4.8
-------------------------------------------------------------------------
Cash provided by operating activities $ 343.2 $ 90.6 $ 696.8 $
865.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Free cash flow(2) $ (83.5) $ 55.1 $ 79.1 $ 292.6 Additions to
property, plant and equipment 123.7 136.3 508.6 382.7 Purchase of
long-term investments 222.5 - 352.5 190.9 Other assets and
intangible assets 2.9 1.8 0.6 (5.9) Changes in non-cash operating
working capital 77.6 (102.6) (244.0) 4.8
-------------------------------------------------------------------------
Cash provided by operating activities $ 343.2 $ 90.6 $ 696.8 $
865.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The company uses cash flow prior to working capital changes as
a supplemental financial measure in its evaluation of liquidity.
Management believes that adjusting principally for the swings in
non-cash working capital items due to seasonality assists
management in making long-term liquidity assessments. The company
also believes that this measurement is useful as a measure of
liquidity or as a valuation measurement. (2) The company uses free
cash flow as a supplemental financial measure in its evaluation of
liquidity and financial strength. Management believes that
adjusting principally for the swings in non-cash operating working
capital items due to seasonality, additions to property, plant and
equipment, purchases of long-term investments, and changes to other
assets assists management in the long-term assessment of liquidity
and financial strength. The company also believes that this
measurement is useful as an indicator of the company's ability to
service its debt, meet other payment obligations and make strategic
investments. Readers should be aware that free cash flow does not
represent residual cash flow available for discretionary
expenditures. Certain of the prior periods' figures have been
reclassified to conform with the current periods' presentation.
DATASOURCE: Potash Corporation of Saskatchewan Inc. CONTACT: Tim
Herrod, Manager, Investor Relations, Phone: (306) 933-8543, Fax:
(306) 933-8844, E-mail: , Web Site: http://www.potashcorp.com/
Copyright