Listed: TSX, NYSE Symbol: POT SASKATOON, SK, Oct. 25
/PRNewswire-FirstCall/ -- Potash Corporation of Saskatchewan Inc.
(PotashCorp) today announced record third-quarter earnings of $0.75
per share(1) ($243.1 million), a 63-percent increase over the $0.46
per share ($145.2 million) earned in the same period last year.
These earnings were the second-highest quarterly total in
PotashCorp history. They would have exceeded the record earnings of
this year's second quarter if not for the net negative impacts of a
strengthening Canadian dollar ($0.07 per share, primarily non-cash)
and an increase in the company's consolidated income tax rate
($0.10 per share) - which may revert to the previous rate over
future quarters. Year-to-date earnings reached $726.8 million
($2.25 per share), a 63-percent increase over the first nine months
of last year and higher than the full-year 2006 total of $631.8
million, supporting a fourth consecutive year of record earnings.
This reflects the continuing long-term growth of global fertilizer
markets and our ability to deliver on strategies set years ago. We
are now benefiting from rapidly growing economies in the developing
world which increases the demand for crops used in food, animal
feed, fiber and fuel. Gross margin of $475.1 million was also a
third-quarter record, up from $245.8 million in the same period
last year. Year-to-date gross margin of $1.3 billion already
exceeds our previous full-year record of $1.1 billion set in 2005.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) of $475.7 million(2) were 67 percent higher than the
$285.4 million of last year's third quarter and raised our
year-to-date total to $1.4 billion, surpassing the previous
full-year record of $1.1 billion. Offshore investments in Arab
Potash Company Ltd. (APC) in Jordan, Israel Chemicals Ltd. (ICL) in
Israel and Sociedad Quimica y Minera de Chile (SQM) in Chile
accounted for $24.2 million in other income during the quarter. The
year-to-date contribution of these investments, and our investment
in Sinofert Holdings Limited (Sinofert) in China, increased from
$60.1 million in 2006 to $105.7 million this year, further
demonstrating our favorable global exposure to potash. The total
market value of our investments in these publicly-traded companies
is now $4.9 billion and equates to $15 per PotashCorp share. "Many
regions of the world are enjoying unprecedented wealth creation and
their people are developing an appetite for more nutritious food,"
said PotashCorp President and CEO Bill Doyle. "These fundamental
changes are driving significant growth in demand for the nutrients
needed to produce grain and meat. With tight global supply,
especially in potash, we are capturing greater value for our
products and delivering record performance for our shareholders."
Market Conditions The combination of rising global population,
higher incomes and increased protein consumption in many countries
continues to propel strong demand for agricultural commodities,
pushing prices for many key crops to record levels. Against this
backdrop, the world's stocks-to-use ratio for wheat and coarse
grains declined in the quarter to 14.6 percent, the lowest level
ever recorded by the United States Department of Agriculture
(USDA). Together, these conditions provide farmers in all regions
with the foundation for vastly improved profitability. They are
therefore motivated to increase plantings and invest in fertilizer
to maximize yields, continuing the strong demand for nitrogen,
phosphate and potash. With good growing conditions in the summer
and excellent fall weather in the United States, the USDA predicted
that the corn crop currently being harvested will be a record. That
crop removed significant levels of nutrients from the soil,
necessitating increased fertilization for future production. US
dealer inventories for all three nutrients were depleted during the
second quarter and many customers began restocking in the third
quarter, if and where product was available. North American
producer inventories remained thin at the end of the quarter. More
acreage has already been dedicated to winter wheat plantings,
strongly kicking off the US fall fertilizer season. Offshore demand
remained strong for all three nutrients, especially potash. This
has taken reported potash producer inventories to historically low
levels and contributed to further offshore spot-market price
increases during the quarter. Farmers outside of North America are
working to correct decades of under-application of potash, and
while this will take many more years to accomplish, potash is vital
to improving crop quality and gives plants the capability to better
utilize nitrogen and phosphate. Potash Potash gross margin rose to
$221.3 million from $153.6 million in the same period last year and
was the second highest quarterly total in our history. The
improvement is largely a reflection of higher prices, although
total volumes increased slightly over third-quarter 2006 levels
when China and India were purchasing heavily to catch up on
shortfalls caused by extended price negotiations. Year-to-date
potash gross margin climbed to $655.9 million, up from $377.2
million in the first nine months of last year and approaching our
full-year record potash gross margin of $707.4 million in 2005.
North American realized prices contributed to this result,
improving by 20 percent ($33 per tonne) quarter over quarter. While
record ocean freights have been a problem for our business,
offshore realized prices increased 31 percent ($39 per tonne) from
last year's third quarter and 17 percent ($24 per tonne) from the
trailing quarter. For the first time this year, prices in most
markets are finally exceeding increases in ocean freight costs.
This can be seen in higher spot-market prices paid by Brazil and
Southeast Asia. However, in India, ocean freight costs have eaten
most of the $50-per-tonne price improvement negotiated there
earlier in the year. Year-to-date, higher ocean freight rates had a
negative impact of about $13 per tonne on all delivered (CFR)
sales, as Canpotex Limited (Canpotex), the offshore marketing
company for Saskatchewan producers, sells approximately 60 percent
of its volumes on a CFR basis. However, Canpotex has locked in
about 40 percent of its CFR shipments under long-term freight
agreements, which, compared to shipping entirely at spot rates, is
expected to save it more than $70 million in ocean freight costs in
2007. Exceptionally tight potash market conditions led to products
being sold on an allocation basis to all customers for much of the
quarter. Total volumes of 2.2 million tonnes were up 3 percent from
last year's third quarter and year-to-date volumes were 42 percent
ahead of 2006 totals. Our offshore sales for the third quarter
reached 1.4 million tonnes, a 2-percent increase quarter over
quarter. Year-to-date offshore sales totaled 4.5 million tonnes, 45
percent higher than in the same period last year. Canpotex shipped
2.3 million tonnes in the quarter, including over 600,000 tonnes to
China - a 28-percent increase over the same quarter in 2006 - and
almost 530,000 tonnes to other Southeast Asian countries, a
16-percent jump. Its shipments to Brazil (almost 550,000 tonnes)
declined 15 percent, largely because of delays in moving product
through that country's congested port system and tight supply
conditions. Canpotex shipped 7.0 million tonnes by the end of the
third quarter in 2007 - more than was shipped in all of 2006 - as
all major markets have increased consumption. In North America,
potash sales volumes of approximately 710,000 tonnes were up 5
percent from the third quarter of 2006, while year-to-date volumes
of 2.7 million tonnes represented a 37-percent increase. Even with
production 27 percent higher than in the third quarter of 2006, our
quarter-end potash inventories were 41 percent below the levels at
the same time last year and 44 percent lower than at the end of the
second quarter of 2007. Our cost of goods sold was negatively
affected by the strength of the Canadian dollar, which added almost
$4 per tonne, while continuing higher brine inflow costs at New
Brunswick and Esterhazy had an impact of $11 per tonne on all
tonnes sold. Nitrogen Third-quarter nitrogen gross margin of $123.9
million was almost double the $62.4 million in the same period last
year and raised our year-to-date total to $399.4 million,
surpassing the record full-year gross margin of $318.7 million set
in 2005. In Trinidad, where we have long-term, lower-cost gas
contracts, we generated $67.7 million in gross margin in the
quarter. Our North American facilities continued to perform well,
contributing $46.2 million, while our natural gas hedging program
added $10.0 million. Realized prices for ammonia and urea were up
11 percent and 37 percent, respectively, compared to the third
quarter of 2006, while prices for nitrogen solutions jumped 51
percent quarter over quarter. Although nitrogen prices have
historically decreased after the second quarter because of a
seasonal decline in natural gas costs and sales volumes, strong
demand limited the size and duration of the pricing decline from
the second quarter of 2007. Total nitrogen volumes rose 18 percent
from last year's third quarter to 1.5 million tonnes, with
fertilizer shipments increasing by 22 percent and industrial
volumes up 16 percent. Our ammonia sales volumes rose 20 percent
quarter over quarter as we had greater production available this
year from our Lima facility and the 2006 debottlenecking projects
in Trinidad. Urea volumes were up 23 percent from the third quarter
of 2006 in large part because Lima operated for the entire quarter.
Nitrogen solutions were up 32 percent due to opportunistic
production of UAN at Geismar. Our total average natural gas cost
for the quarter, which includes the benefit of our hedge and our
lower-cost Trinidad gas contracts, was $3.94 per MMBtu, 13 percent
higher than the same quarter last year but 11 percent lower than in
the second quarter. Phosphate Higher prices and continuing strong
demand resulted in record phosphate gross margin of $129.9 million
for the quarter, compared to $29.8 million in the year-earlier
period. This raised our year-to-date phosphate gross margin to
$290.9 million, surpassing our full-year phosphate gross margin
record of $228.5 million set in 1998. Solid fertilizers generated
$65.1 million in gross margin during the quarter, while liquid
fertilizers added $28.5 million, industrial products $15.7 million
and feed $17.8 million. Strong global agricultural demand pushed up
realized prices for solid fertilizers by 70 percent compared to the
third quarter last year. Many producers allocated more of their
phosphoric acid to solid fertilizer production, tightening supply
of other phosphate products. Liquid fertilizer realized prices were
up 39 percent from last year's third quarter. Additionally,
netbacks on feed phosphate supplements increased by 18 percent
quarter over quarter as we focused on more profitable North
American markets, with monocal and dical rising by more than $50
per tonne and DFP, a poultry feed supplement, by $20 per tonne.
Industrial product pricing, which is generally set under
longer-term contracts, rose 5 percent. Our focus in solid
fertilizers also shifted closer to home, where we realized higher
prices during the quarter. As a result, North American solid
fertilizer volumes increased 38 percent from last year's third
quarter, while offshore volumes fell 32 percent. Liquid fertilizer
volumes remained strong and were up 9 percent quarter over quarter.
Feed volumes declined 17 percent from last year's third quarter, as
we sold considerably less into lower-margin offshore markets, while
industrial tonnes increased 17 percent quarter over quarter, due
primarily to the availability of more tonnes from our new purified
acid plant at Aurora. Rising costs for sulfur negatively impacted
phosphate gross margin in the quarter. Reduced oil refinery
production and high demand from the phosphate industry tightened
global sulfur supply and raised these costs by 8 percent compared
to last year's third quarter and 29 percent from the trailing
quarter. Financial The Canadian dollar strengthened substantially
against the US dollar during the quarter, starting at $1.0634 and
closing at $0.9963. This contributed to a $25.9-million foreign
exchange loss, which is mainly the result of revaluing the Canadian
dollar future income tax liability associated with our Canadian
potash assets to the spot rate at each period end. This loss is
primarily non-cash. Stronger than anticipated earnings,
particularly from our nitrogen and phosphate operations, resulted
in an increase in our consolidated effective income tax rate. It
rose to 33 percent from the previous effective rate of 30 percent,
resulting in a $33.3-million increase in income tax expense in the
quarter, of which $20.5 million represented the cumulative effect
of the rate increase applied to the previous two quarters. The
strengthening Canadian dollar also increased our future tax
provision related to certain Canadian liabilities, and was a
further factor in this rate adjustment. There is a possibility that
a favorable income tax decision related to prior years' deductions
could occur in the fourth quarter, allowing the consolidated
reported income tax rate to revert back to 30 percent for the 2007
year; however, there is no certainty to either the amount or timing
of such a determination. On a preliminary basis, subject to further
year-end guidance, we expect our consolidated effective income tax
rate for 2008 to approximate 30 percent, based largely on a
scheduled 2.5-percent reduction in Canadian corporate income tax
rates. Our third-quarter and year-to-date selling and
administrative expenses were substantially higher than in the same
periods last year, due primarily to higher medium-term incentive
plan accruals and revaluation of deferred share units that were
directly impacted by the significant upward movement in our share
price. Capital expenditures on property, plant and equipment
totaled $145.1 million in the quarter. Approximately two-thirds of
this was spent in the potash segment, primarily on continuing
debottlenecking and expansion projects at our Lanigan, Allan,
Patience Lake, Cory and New Brunswick facilities. Outlook
Demand-driven growth of the fertilizer industry is expected to
continue, as strong economies in Asia and Latin America are
creating a desire for more and better food. In addition, the
biofuel industry requires more grains and oilseeds as nations
explore options for renewable, home-grown energy. As the supply of
many key crops tightens and demand continues to grow, prices are
rising and farmers are working to increase production. Even with a
pause in the growth of the US ethanol industry to address
logistical and infrastructure issues, biofuel production is
expected to consume about one billion additional bushels of corn in
2008. For this reason, and because global demand for US corn has
boosted exports to an all-time high, there are concerns about the
longer-term supply of grains. It is more than just a North American
issue, as global production of wheat and coarse grains is expected
to fall short of consumption for the eighth time in nine years,
largely due to population growth and the wealth effect on food
consumption. The land per capita available for agriculture is
shrinking as a result of population growth and infrastructure
expansion. Over the long term, crop yields must increase to meet
the demand for grains, which creates a favorable environment for
potash, phosphate and nitrogen used to protect soil fertility and
raise productivity. Supply of all three nutrients is expected to
remain tight and allocations, particularly in potash, are now the
norm. In the United States, dealers are purchasing nutrients in
preparation for an expected strong fall season. An October 1 potash
price increase of $22 per tonne is now in effect and a further $33
per tonne increase has been announced for December 1, 2007. In
offshore markets, potash customers are preparing for another strong
fertilizer season. In Brazil, higher soybean acreage is predicted
for the spring season, with strong fertilizer demand through 2008.
With extremely tight global potash markets and record high ocean
freight rates, Canpotex announced in September a new delivered
price of $360 per tonne for Southeast Asia, which took effect
immediately and brought year-to-date increases there to $155 per
tonne. Additionally, a $50-per-tonne hike in Brazil was announced
to take effect December 1, 2007, raising the price to $355 per
tonne, up $175 per tonne in 2007. These price increases will widen
the gap between spot-market prices and the 2007 contract price with
China to more than $100 per tonne, a measure of the substantial
change in the potash industry over the past several months.
Although China buys mainly lower-cost standard grade potash and has
historically received a discount for being the largest volume
buyer, the changed fundamentals in the potash industry are expected
to close this gap considerably. As global demand for potash grows,
the prospect of greenfield projects continues to be discussed, but
no one has committed to undertaking such a long-term project. The
cost to develop a conventional underground 2-million-tonne
greenfield mine and related mill - if constructed on a viable
deposit - is estimated at more than $2.2 billion, excluding
infrastructure outside the plant gates, with costs and lead times
for construction inputs and new equipment continuing to rise. Such
an investment would not generate positive cash flow for five to
seven years. Given an expected potash consumption growth rate of
3-4 percent annually, roughly equivalent to one new greenfield mine
per year, we believe long-term potash industry fundamentals are
very positive. Through debottlenecking and expansion projects at
existing facilities, PotashCorp is currently developing
approximately 6 million additional tonnes of production to come on
line incrementally over the next several years, providing
additional gross margin leverage based on expected higher volumes
and prices. We believe that the significant strengthening of the
Canadian dollar against its US counterpart is now largely behind
us, which should reduce its impact on earnings in future quarters.
Similarly, we expect that the massive ocean freight rate increases
seen through 2007 will moderate going forward, with a large slate
of new vessels scheduled to hit the market beginning in 2008 and
reduced port congestion due to increased worldwide investment in
port infrastructure and development. Regardless, we expect demand
for potash should be sufficient to allow prices to overcome both
rising ocean freight costs and any further strengthening of the
Canadian dollar. In nitrogen, strong demand for industrial and
agricultural products is continuing, along with higher global costs
for natural gas and transportation. This is expected to increase
the delivered cost of ammonia and support US prices through 2007
and well into 2008. In urea, increased production in low-cost gas
regions is being offset by higher demand in all key agricultural
regions, particularly in the US and India. Strong agricultural
fundamentals are expected to keep urea markets tight and support
current favorable pricing conditions. The strong agricultural
market, increasingly valuable phosphate rock reserves, and higher
prices for rock, phosphoric acid and sulfur are expected to support
strong phosphate prices for the foreseeable future. Looking ahead
through the end of 2007, we now expect our capital expenditures for
the year to be approximately $600 million, including capitalized
interest. Most of the opportunity capital will have been invested
in our continuing potash projects in Saskatchewan and New
Brunswick, and on completing the silicon tetrafluoride plants at
our Aurora phosphate facility. Our guidance for 2007 remains in the
range of $3.00-$3.25 per diluted share, based on a $1.00 Canadian
dollar. In the current trading range of the Canadian dollar
relative to the US dollar, each one-cent change in the Canadian
dollar will typically have an impact of approximately $5.0 million
on the foreign-exchange line, or $0.01 per share on an after-tax
basis, although this is primarily a non-cash item. Conclusion
"While we faced a number of challenges in the third quarter,
including record ocean freights and a stronger Canadian dollar, we
see increasing margins as we go forward," said Doyle. "Our growth
in potash this year will be largely volume related, but 2008 should
be a strong margin year. With potash in tight supply, price
increases seem all but certain, and these increases will now flow
through to the bottom line. The execution of our strategy will be
focused on delivering value to our customers who rely on our
products and a proper return to our investors who have loyally
supported our company." 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 the world's largest
capacity for production of purified industrial phosphoric acid.
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, business prospects and opportunities,
and effective income tax rates. 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 and corresponding effects on the company's investments;
changes in currency and exchange rates; unexpected geological or
environmental conditions; government policy changes; and earnings,
exchange rates and the decisions of taxing authorities, all of
which could affect our effective tax rates. Additional risks and
uncertainties can be found in our 2006 financial review annual
report 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, October 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 # 21213531. 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. Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Financial Position (in
millions of US dollars except share amounts) (unaudited) September
30, December 31, 2007 2006
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Assets Current assets Cash and cash equivalents $ 442.5 $ 325.7
Other short-term investments (Note 2) 112.5 - Accounts receivable
581.3 442.3 Inventories 433.3 501.3 Prepaid expenses and other
current assets 39.9 40.9 Current portion of derivative instrument
assets 41.4 -
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1,650.9 1,310.2 Derivative instrument assets 73.5 - Property, plant
and equipment 3,722.9 3,525.8 Investments (Note 3) 2,926.1 1,148.9
Other assets 128.1 105.8 Intangible assets 25.8 29.3 Goodwill 97.0
97.0
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$ 8,624.3 $ 6,217.0
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Liabilities Current liabilities Short-term debt $ 92.1 $ 157.9
Accounts payable and accrued charges 681.1 545.2 Current portion of
long-term debt 0.2 400.4
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773.4 1,103.5 Long-term debt (Note 4) 1,337.9 1,357.1 Future income
tax liability 1,019.4 632.1 Accrued pension and other
post-retirement benefits 237.4 219.6 Accrued environmental costs
and asset retirement obligations 122.2 110.3 Other non-current
liabilities and deferred credits 3.5 14.1
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3,493.8 3,436.7
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Shareholders' Equity Share capital 1,456.2 1,431.6 Unlimited
authorization of common shares without par value; issued and
outstanding 316,114,911 and 314,403,147 at September 30, 2007 and
December 31, 2006, respectively Contributed surplus 95.1 62.3
Accumulated other comprehensive income (Note 6) 1,644.8 - Retained
earnings 1,934.4 1,286.4
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5,130.5 2,780.3
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$ 8,624.3 $ 6,217.0
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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
Nine Months Ended September 30 September 30 2007 2006 2007 2006
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Sales (Note 9) $ 1,295.0 $ 953.5 $ 3,802.8 $ 2,743.8 Less: Freight
80.6 65.6 254.8 182.8 Transportation and distribution 31.0 37.6
94.6 104.6 Cost of goods sold 708.3 604.5 2,107.2 1,753.7
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Gross Margin 475.1 245.8 1,346.2 702.7
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Selling and administrative 43.9 35.9 158.0 114.6 Provincial mining
and other taxes 28.2 12.5 95.3 41.2 Foreign exchange loss (gain)
25.9 (4.7) 67.4 9.2 Other income (Note 12) (29.1) (21.1) (111.3)
(72.3)
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68.9 22.6 209.4 92.7
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Operating Income 406.2 223.2 1,136.8 610.0 Interest Expense 12.7
25.2 59.0 69.1
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Income Before Income Taxes 393.5 198.0 1,077.8 540.9 Income Taxes
(Note 7) 150.4 52.8 351.0 95.1
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Net Income $ 243.1 $ 145.2 726.8 445.8 ----------------------
---------------------- Retained Earnings, Beginning of Period
1,286.4 716.9 Change in Accounting Policy (Note 1) 0.2 - Dividends
(79.0) (46.5)
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Retained Earnings, End of Period $ 1,934.4 $ 1,116.2
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Net Income Per Share (Note 8) Basic $ 0.77 $ 0.47 $ 2.30 $ 1.43
Diluted $ 0.75 $ 0.46 $ 2.25 $ 1.40
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Dividends Per Share $ 0.10 $ 0.05 $ 0.25 $ 0.15
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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 Nine Months Ended September 30 September 30 2007
2006 2007 2006
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Operating Activities Net income $ 243.1 $ 145.2 $ 726.8 $ 445.8
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Adjustments to reconcile net income to cash provided by operating
activities Depreciation and amortization 69.5 62.2 216.3 181.4
Stock-based compensation 4.2 2.8 34.7 26.8 Loss (gain) on disposal
of property, plant and equipment and long-term investments 0.2
(4.2) 5.6 (3.9) Provision for plant shutdowns - phosphate segment -
6.3 - 6.3 Foreign exchange on future income tax 21.4 - 47.5 12.1
Provision for future income tax 52.6 17.8 119.8 3.9 Undistributed
earnings of equity investees (15.7) (10.6) (17.6) (9.1) Unrealized
gain on derivative instruments (13.0) - (18.4) - Other long-term
liabilities (25.6) 9.3 (21.3) 11.9
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Subtotal of adjustments 93.6 83.6 366.6 229.4
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Changes in non-cash operating working capital Accounts receivable
(100.2) (52.6) (139.9) (1.1) Inventories 35.5 23.3 51.6 21.8
Prepaid expenses and other current assets 0.8 10.4 1.3 (23.3)
Accounts payable and accrued charges 38.8 15.0 150.9 (319.0)
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Subtotal of changes in non-cash operating working capital (25.1)
(3.9) 63.9 (321.6)
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Cash provided by operating activities 311.6 224.9 1,157.3 353.6
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Investing Activities Additions to property, plant and equipment
(145.1) (133.8) (381.6) (384.9) Purchase of long-term investments
(21.0) - (30.7) (130.0) Purchase of other short-term investments
(132.5) - (132.5) - Proceeds from disposal of property, plant and
equipment and long-term investments 2.9 7.8 4.2 10.0 Other assets
and intangible assets (0.9) (0.7) 9.8 2.3
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Cash used in investing activities (296.6) (126.7) (530.8) (502.6)
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Cash before financing activities 15.0 98.2 626.5 (149.0)
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Financing Activities Repayment and issue costs of long-term debt
obligations - (0.3) (403.6) (1.0) Proceeds from (repayment of)
short-term debt obligations 5.5 (26.5) (65.8) 277.8 Dividends
(31.3) (15.2) (62.6) (45.7) Issuance of common shares 3.6 5.5 22.3
15.4
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Cash (used in) provided by financing activities (22.2) (36.5)
(509.7) 246.5
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(Decrease) Increase in Cash and Cash Equivalents (7.2) 61.7 116.8
97.5 Cash and Cash Equivalents, Beginning of Period 449.7 129.7
325.7 93.9
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Cash and Cash Equivalents, End of Period $ 442.5 $ 191.4 $ 442.5 $
191.4
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Cash and cash equivalents comprised of: Cash $ 11.3 $ 25.7 $ 11.3 $
25.7 Short-term investments 431.2 165.7 431.2 165.7
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$ 442.5 $ 191.4 $ 442.5 $ 191.4
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Supplemental cash flow disclosure Interest paid $ 15.7 $ 24.4 $
71.5 $ 74.5 Income taxes paid $ 59.1 $ 18.7 $ 128.2 $ 243.2
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statement of Comprehensive Income (in millions of US dollars)
(unaudited) ` Three Months Ended September 30, 2007 Before Net of
Income Income Income Taxes Taxes Taxes
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Net income $ 393.5 $ 150.4 $ 243.1
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Other comprehensive income Net increase in unrealized gains on
available-for-sale securities(1) 281.5 23.4 258.1 Net losses on
derivatives designated as cash flow hedges(2) (17.0) (4.7) (12.3)
Reclassification to income of gains on cash flow hedges(2) (8.5)
(3.7) (4.8) Unrealized foreign exchange gains on translation of
self-sustaining foreign operations 1.0 - 1.0
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Other comprehensive income 257.0 15.0 242.0
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Comprehensive income $ 650.5 $ 165.4 $ 485.1
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Nine Months Ended September 30, 2007 Before Net of Income Income
Income Taxes Taxes Taxes
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Net income $ 1,077.8 $ 351.0 $ 726.8
-------------------------------------------------------------------------
Other comprehensive income Net increase in unrealized gains on
available-for-sale securities(1) 844.7 57.4 787.3 Net gains on
derivatives designated as cash flow hedges(2) 13.9 4.6 9.3
Reclassification to income of gains on cash flow hedges(2) (39.8)
(13.1) (26.7) Unrealized foreign exchange gains on translation of
self-sustaining foreign operations 5.9 - 5.9
-------------------------------------------------------------------------
Other comprehensive income 824.7 48.9 775.8
-------------------------------------------------------------------------
Comprehensive income $ 1,902.5 $ 399.9 $ 1,502.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Available-for-sale securities are comprised of shares in Israel
Chemicals Ltd., Sinofert Holdings Limited and other short-term
investments (2) Natural gas derivative instruments
-------------------------------------------------------------------------
(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Notes to the Condensed
Consolidated Financial Statements For the Three and Nine Months
Ended September 30, 2007 (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 interim
condensed consolidated financial statements are consistent with
those used in the preparation of the 2006 annual consolidated
financial statements, except as described below. These interim
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 2006 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. Interim results are not necessarily indicative of
the results expected for the fiscal year. Comprehensive Income,
Equity, Financial Instruments and Hedges Effective January 1, 2007,
the company adopted Canadian Institute of Chartered Accountants
("CICA") Section 1530, "Comprehensive Income", Section 3251,
"Equity", Section 3855, "Financial Instruments - Recognition and
Measurement" and Section 3865, "Hedges". These pronouncements
increase harmonization with US GAAP. Under the standards: -
Financial assets are classified as loans and receivables, held-to-
maturity, held-for-trading or available-for-sale. Loans and
receivables include all loans and receivables except debt
securities and are accounted for at amortized cost.
Held-to-maturity classification is restricted to fixed maturity
instruments that the company intends and is able to hold to
maturity and are accounted for at amortized cost. Held- for-trading
instruments include all derivative financial instruments not
included in a hedging relationship and any designated instruments
and are recorded at fair value with realized and unrealized gains
and losses reported in net income. The remaining financial assets
are classified as available-for-sale. These are recorded at fair
value with unrealized gains and losses reported in a new category
of the Consolidated Statement of Financial Position under
shareholders' equity called accumulated other comprehensive income
("AOCI"); - Financial liabilities are classified as either
held-for-trading or other. Held-for-trading instruments are
recorded at fair value with realized and unrealized gains and
losses reported in net income. Other instruments are accounted for
at amortized cost with gains and losses reported in net income in
the period that the liability is derecognized; and - Derivative
instruments ("derivatives") are classified as held-for- trading
unless designated as hedging instruments. All derivatives are
recorded at fair value on the Consolidated Statement of Financial
Position. For derivatives that hedge the changes in fair value of
an asset or liability, changes in the derivatives' fair value are
reported in net income and are substantially offset by changes in
the fair value of the hedged asset or liability attributable to the
risk being hedged. For derivatives that hedge variability in cash
flows, the effective portion of the changes in the derivatives'
fair value are initially recognized in other comprehensive income
("OCI") and the ineffective portion is recorded in net income.
Amounts temporarily recorded in AOCI will subsequently be
reclassified to net income in the periods when net income is
affected by the variability in the cash flows of the hedged item.
These standards have been applied prospectively; accordingly
comparative amounts for prior periods have not been restated. The
adoption of these standards resulted in the following adjustments
as of January 1, 2007 in accordance with the transition provisions:
(1) Available-for-sale securities - The company's investments in
Israel Chemicals Ltd. ("ICL") and Sinofert Holdings Limited
("Sinofert") have been classified as available-for-sale and
recorded at fair value in the Consolidated Statement of Financial
Position, resulting in an increase in investments of $887.8, an
increase to AOCI of $789.6 and an increase in future income tax
liability of $98.2; (2) Deferred debt costs - Bond issue costs were
reclassified from other assets to long-term debt and deferred swap
gains were reclassified from other non-current liabilities to
long-term debt, resulting in a reduction in other assets of $23.9,
a reduction in other non-current liabilities of $6.6 and a
reduction in long-term debt of $17.3; (3) Natural gas derivatives -
The company employs futures, swaps and option agreements to
establish the cost of a portion of its natural gas requirements.
These derivative instruments generally qualify for hedge
accounting. Derivative instruments were recorded on the
Consolidated Statement of Financial Position at fair value
resulting in an increase in current portion of derivative
instrument assets of $50.9, an increase in derivative instrument
assets (non-current asset) of $69.4, an increase in future income
tax liability of $45.6 and an increase in AOCI of $74.7; - Hedge
ineffectiveness on these derivative instruments was recorded as a
cumulative effect adjustment to opening retained earnings, net of
tax, resulting in an increase in retained earnings of $0.2 and a
decrease in AOCI of $0.2; and - Deferred realized hedging gains
were reclassified from inventory to AOCI resulting in an increase
in inventory of $8.0, an increase in future income tax liability of
$3.1 and an increase in AOCI of $4.9. Stripping Costs Incurred in
the Production Phase of a Mining Operation In March 2006, the
Emerging Issues Committee issued Abstract # 160, "Stripping Costs
Incurred in the Production Phase of a Mining Operation"
("EIC-160"). EIC-160 discusses the treatment of costs associated
with the activity of removing overburden and other mine waste
minerals in the production phase of a mining operation. It
concludes that such stripping costs should be accounted for
according to the benefit received by the entity and recorded as
either a component of inventory or a betterment to the mineral
property, depending on the benefit received. The implementation of
EIC-160, effective January 1, 2007, resulted in a decrease in
inventory of $21.1, a decrease in other assets of $7.4 and an
increase in property, plant and equipment of $28.5. 2. Other
Short-term Investments Other short-term investments consist of
auction rate securities carried at $112.5 (face value $132.5) as of
September 30, 2007, that have been classified as
available-for-sale. In prior periods, auction rate securities were
included with cash and cash equivalents. The company has not
reclassified prior periods as the adjustments are not considered
material. 3. Investments During July 2007, the company's ownership
interest in Sinofert was diluted from 20 percent to approximately
19 percent due to issuance of shares of Sinofert. Also during July
2007, the company purchased an additional 1,011,062 shares of
Sociedad Quimica y Minera de Chile S.A. ("SQM") for cash
consideration of $16.8. The company's ownership interest in SQM
remains at approximately 32 percent. 4. Long-term Debt In February
2007, the company entered into a back-to-back loan arrangement
involving certain financial assets and financial liabilities. The
company has presented $195.0 of financial assets and financial
liabilities on a net basis because a legal right to set-off exists,
and it intends to settle with the same party on a net basis. The
company incurred $3.2 of debt issue costs as a result of this
arrangement which were included as a reduction to long-term debt
and are being amortized using the effective interest rate method
over the term of the related liability. In June 2007, the company
repaid 10-year notes issued under one of the company's shelf
registration statements in the principal amount of $400.0. The
stated interest rate on the notes was 7.125%. 5. Share Capital On
May 2, 2007, the Board of Directors of PCS approved a split of the
company's outstanding common shares on a three-for-one basis. The
stock split was effected in the form of a stock dividend of two
additional common shares for each share owned by shareholders of
record at the close of business on May 22, 2007. All equity-based
benefit plans have been adjusted to reflect the stock split. All
share and per-share data have been adjusted to reflect the stock
split effective with second-quarter 2007 reporting. Information on
an adjusted basis, showing the impact of this split for the first
quarter of 2007, and by quarter and total year for 2006 and 2005
follows. Comparative results for the second and third quarters of
2007 are also included. Quarterly Data First Second Third Fourth
Year (Post Split Basis) Quarter Quarter Quarter Quarter
-------------------------------------------------------------------------
Basic net income per share 2007 $ 0.63 $ 0.91 $ 0.77 2006 $ 0.40 $
0.56 $ 0.47 $ 0.59 $ 2.03 2005 $ 0.39 $ 0.50 $ 0.40 $ 0.37 $ 1.67
Diluted net income per share 2007 $ 0.62 $ 0.88 $ 0.75 2006 $ 0.40
$ 0.55 $ 0.46 $ 0.58 $ 1.98 2005 $ 0.38 $ 0.49 $ 0.39 $ 0.36 $ 1.63
Net income per share for each quarter has been computed based on
the weighted average number of shares issued and outstanding during
the respective quarter; therefore, quarterly amounts may not add to
the annual total. 6. Accumulated Other Comprehensive Income The
balances related to each component of accumulated other
comprehensive income, net of related income taxes, are as follows:
September 30, 2007
-------------------------------------------------------------------------
Net unrealized holding gains on available-for-sale securities $
1,576.9 Net unrealized gains on derivatives designated as cash flow
hedges 62.0 Unrealized foreign exchange gains on translation of
self-sustaining foreign operations 5.9
-------------------------------------------------------------------------
Accumulated other comprehensive income $ 1,644.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7. Income Taxes The company's consolidated reported income tax rate
for the three months ended September 30, 2007 was approximately 38
percent (2006 - 27 percent) and for the nine months ended September
30, 2007 was approximately 33 percent (2006 - 18 percent). For the
three and nine months ended September 30, 2007, the consolidated
effective income tax rate was 33 percent (2006 - 30 percent). Items
to note include the following: - A scheduled 2-percentage point
reduction in the Canadian federal income tax rate applicable to
resource companies, effective at the beginning of 2007, was more
than offset by a higher percentage of consolidated income earned in
higher-tax jurisdictions during the three and nine months ended
September 30, 2007, compared to the same periods in 2006. As a
result of the increasing proportion of consolidated income earned
in higher-tax jurisdictions, during the third quarter of 2007, it
was determined that the consolidated effective rate for the year
had increased from 30 percent to 33 percent. The reported income
tax rate for the third quarter of 2007 is higher than the effective
rate as the impact of this change on prior periods, as applicable,
was reflected during the quarter. - During the second quarter of
2007, the Government of Canada enacted a reduction of the federal
corporate income tax rate to 18.5 percent by 2011. This reduction
was in addition to changes enacted by the Government of Canada in
the second quarter of 2006 to reduce the federal corporate income
tax rate from 23 percent in 2006 to 19 percent by 2010 and reduce
the federal corporate surtax from 1.12 percent to nil in 2008.
These changes reduced the company's future income tax liability by
$4.7 in the second quarter of 2007 and $22.9 in the second quarter
of 2006. - In addition to the federal changes noted above, the
Province of Saskatchewan enacted changes to the corporate income
tax during the quarter ended June 30, 2006, reducing the rate from
17 percent to 12 percent by 2009. These changes resulted in a $21.9
reduction in the company's future income tax liability in the
second quarter of 2006. - Income tax refunds totaling $22.4 for the
1999 and 2001-2004 taxation years were recorded during the nine
months ended September 30, 2006, $6.6 of which was recognized
during the third quarter of 2006. The refunds related to a Canadian
appeal court decision (pertaining to a uranium producer) which
affirmed the deductibility of the Saskatchewan capital tax resource
surcharge. 8. 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 September 30, 2007 of
315,962,000 (2006 - 311,721,000). Basic net income per share for
the nine months ended September 30, 2007 is calculated based on the
weighted average shares issued and outstanding of 315,444,000 (2006
- 311,344,000). Diluted net income per share is calculated based on
the weighted average number of shares issued and outstanding during
the period. The denominator is: (1) 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 (2) 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 September 30, 2007 was 324,741,000 (2006 - 318,134,000) and
for the nine months ended September 30, 2007 was 323,580,000 (2006
- 317,801,000). 9. 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 September 30, 2007
-------------------------------------------------------------------------
All Consoli- Potash Nitrogen Phosphate Others dated
-------------------------------------------------------------------------
Sales $ 427.4 $ 436.0 $ 431.6 $ - $ 1,295.0 Freight 38.3 15.4 26.9
- 80.6 Transportation and distribution 8.7 12.9 9.4 - 31.0 Net
sales - third party 380.4 407.7 395.3 - Cost of goods sold 159.1
283.8 265.4 - 708.3 Gross margin 221.3 123.9 129.9 - 475.1
Depreciation and amortization 15.5 22.2 29.3 2.5 69.5 Inter-segment
sales - 25.0 - - - Three Months Ended September 30, 2006
-------------------------------------------------------------------------
All Consoli- Potash Nitrogen Phosphate Others dated
-------------------------------------------------------------------------
Sales $ 334.3 $ 292.6 $ 326.6 $ - $ 953.5 Freight 33.6 9.4 22.6 -
65.6 Transportation and distribution 10.5 13.4 13.7 - 37.6 Net
sales - third party 290.2 269.8 290.3 - Cost of goods sold 136.6
207.4 260.5 - 604.5 Gross margin 153.6 62.4 29.8 - 245.8
Depreciation and amortization 16.4 19.5 23.3 3.0 62.2 Inter-segment
sales 0.2 25.4 0.9 - - Nine Months Ended September 30, 2007
-------------------------------------------------------------------------
All Consoli- Potash Nitrogen Phosphate Others dated
-------------------------------------------------------------------------
Sales $ 1,318.1 $ 1,336.8 $ 1,147.9 $ - $ 3,802.8 Freight 135.0
40.0 79.8 - 254.8 Transportation and distribution 30.9 39.1 24.6 -
94.6 Net sales - third party 1,152.2 1,257.7 1,043.5 - Cost of
goods sold 496.3 858.3 752.6 - 2,107.2 Gross margin 655.9 399.4
290.9 - 1,346.2 Depreciation and amortization 54.4 65.5 88.6 7.8
216.3 Inter-segment sales - 84.1 1.9 - - Nine Months Ended
September 30, 2006
-------------------------------------------------------------------------
All Consoli- Potash Nitrogen Phosphate Others dated
-------------------------------------------------------------------------
Sales $ 856.5 $ 966.9 $ 920.4 $ - $ 2,743.8 Freight 91.4 28.1 63.3
- 182.8 Transportation and distribution 28.9 40.3 35.4 - 104.6 Net
sales - third party 736.2 898.5 821.7 - Cost of goods sold 359.0
665.0 729.7 - 1,753.7 Gross margin 377.2 233.5 92.0 - 702.7
Depreciation and amortization 43.2 57.8 70.5 9.9 181.4
Inter-segment sales 5.0 85.8 5.5 - - 10. Stock-Based Compensation
On May 3, 2007, the company's shareholders approved the 2007
Performance Option Plan under which the company may, after February
20, 2007 and before January 1, 2008, issue options to acquire up to
3,000,000 common shares. Under the plan, the exercise price shall
not be less than 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
September 30, 2007, options to purchase a total of 1,730,550 common
shares have been granted under the plan. The weighted average fair
value of options granted was $22.68 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
$0.40 Expected volatility 29% Risk-free interest rate 4.48%
Expected life of options 6.4 years 11. Pension and Other
Post-Retirement Expenses Defined Benefit Pension Plans Three Months
Ended Nine Months Ended September 30 September 30 2007 2006 2007
2006
-------------------------------------------------------------------------
Service cost $ 3.9 $ 3.6 $ 11.5 $ 10.8 Interest cost 9.1 8.5 27.3
25.3 Expected return on plan assets (10.7) (9.7) (32.1) (28.9) Net
amortization and change in valuation allowance 3.2 3.5 9.6 10.4
-------------------------------------------------------------------------
Net expense $ 5.5 $ 5.9 $ 16.3 $ 17.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other Post-Retirement Plans Three Months Ended Nine Months Ended
September 30 September 30 2007 2006 2007 2006
-------------------------------------------------------------------------
Service cost $ 1.5 $ 1.1 $ 4.4 $ 3.5 Interest cost 3.6 3.2 10.6 9.3
Net amortization 0.1 (0.1) 0.4 (0.3)
-------------------------------------------------------------------------
Net expense $ 5.2 $ 4.2 $ 15.4 $ 12.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended September 30, 2007, the company
contributed $39.4 to its defined benefit pension plans, $0.4 to its
defined contribution pension plans and $2.0 to its other
post-retirement plans. Contributions for the nine months ended
September 30, 2007 were $56.2 to its defined benefit pension plans,
$13.2 to its defined contribution pension plans and $6.2 to its
other post-retirement plans. Total contributions to these plans are
expected to approximate $124.3 for the year ended December 31,
2007. 12. Other Income Three Months Ended Nine Months Ended
September 30 September 30 2007 2006 2007 2006
-------------------------------------------------------------------------
Share of earnings of equity investees $ 15.4 $ 10.6 $ 58.2 $ 39.0
Dividend income 8.8 9.0 47.5 21.1 Other 4.9 1.5 5.6 12.2
-------------------------------------------------------------------------
$ 29.1 $ 21.1 $ 111.3 $ 72.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
13. 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 Nine
Months Ended September 30 September 30 2007 2006 2007 2006
-------------------------------------------------------------------------
Potash Operating Data Production (KCl Tonnes - thousands) 1,824
1,437 6,618 4,626 Shutdown weeks 8.2 12.5 17.6 62.9 Sales (tonnes -
thousands) Manufactured Product North America 710 673 2,653 1,939
Offshore 1,442 1,410 4,477 3,093
-------------------------------------------------------------------------
Manufactured Product 2,152 2,083 7,130 5,032
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Net Sales (US $ millions) Sales $427.4 $334.3 $1,318.1
$856.5 Less: Freight 38.3 33.6 135.0 91.4 Transportation and
distribution 8.7 10.5 30.9 28.9
-------------------------------------------------------------------------
Net Sales $380.4 $290.2 $1,152.2 $736.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product North America $138.4 $108.8 $482.0 $329.9
Offshore 239.7 179.4 661.8 398.6 Other miscellaneous and purchased
product 2.3 2.0 8.4 7.7
-------------------------------------------------------------------------
Net Sales $380.4 $290.2 $1,152.2 $736.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Average Price per MT North America $194.82 $161.89 $181.63
$170.13 Offshore $166.20 $127.22 $147.82 $128.88
-------------------------------------------------------------------------
Manufactured Product $175.64 $138.42 $160.40 $144.77
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Nine Months Ended
September 30 September 30 2007 2006 2007 2006
-------------------------------------------------------------------------
Nitrogen Operating Data Production (N Tonnes - thousands) 759 689
2,283 1,870 Average Natural Gas Cost per MMBtu $3.94 $3.50 $4.26
$3.92 Sales (tonnes - thousands) Manufactured Product Ammonia 526
438 1,622 1,244 Urea 356 290 1,008 899 Nitrogen solutions/Nitric
acid/Ammonium nitrate 569 503 1,693 1,354
-------------------------------------------------------------------------
Manufactured Product 1,451 1,231 4,323 3,497
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer sales tonnes 482 396 1,533 1,109 Industrial/Feed sales
tonnes 969 835 2,790 2,388
-------------------------------------------------------------------------
1,451 1,231 4,323 3,497
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Net Sales (US $ millions) Sales $436.0 $292.6 $1,336.8
$966.9 Less: Freight 15.4 9.4 40.0 28.1 Transportation and
distribution 12.9 13.4 39.1 40.3
-------------------------------------------------------------------------
Net Sales $407.7 $269.8 $1,257.7 $898.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product Ammonia $148.3 $111.1 $504.4 $369.8 Urea 119.1
70.8 344.9 239.7 Nitrogen solutions/Nitric acid/Ammonium nitrate
105.1 75.1 323.9 240.0 Other miscellaneous and purchased product
35.2 12.8 84.5 49.0
-------------------------------------------------------------------------
Net Sales $407.7 $269.8 $1,257.7 $898.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer net sales $151.6 $81.1 $475.6 $275.1 Industrial/Feed net
sales 256.1 188.7 782.1 623.4
-------------------------------------------------------------------------
$407.7 $269.8 $1,257.7 $898.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Average Price per MT Ammonia $282.14 $253.58 $310.96
$297.26 Urea $334.39 $244.35 $342.36 $266.58 Nitrogen
solutions/Nitric acid/Ammonium nitrate $184.79 $149.41 $191.28
$177.31
-------------------------------------------------------------------------
Manufactured Product $256.82 $208.85 $271.40 $242.94
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer average price per MT $314.59 $204.98 $310.29 $248.04
Industrial/Feed average price per MT $264.43 $225.90 $280.31
$261.10
-------------------------------------------------------------------------
$281.10 $219.18 $290.94 $256.96
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Nine Months Ended
September 30 September 30 2007 2006 2007 2006
-------------------------------------------------------------------------
Phosphate Operating Data Production (P2O5 Tonnes - thousands) 540
509 1,548 1,493 P2O5 Operating Rate 95% 90% 90% 88% Sales (tonnes -
thousands) Manufactured Product Fertilizer - Liquid phosphates 252
232 687 620 Fertilizer - Solid phosphates 416 428 1,193 1,190 Feed
185 222 596 583 Industrial 183 156 541 485
-------------------------------------------------------------------------
Manufactured Product 1,036 1,038 3,017 2,878
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Net Sales (US $ millions) Sales $431.6 $326.6 $1,147.9
$920.4 Less: Freight 26.9 22.6 79.8 63.3 Transportation and
distribution 9.4 13.7 24.6 35.4
-------------------------------------------------------------------------
Net Sales $395.3 $290.3 $1,043.5 $821.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product Fertilizer - Liquid phosphates $79.2 $52.5
$189.0 $139.0 Fertilizer - Solid phosphates 167.0 101.2 424.5 288.1
Feed 65.1 66.5 191.2 178.4 Industrial 71.4 58.2 203.3 180.1 Other
miscellaneous and purchased product 12.6 11.9 35.5 36.1
-------------------------------------------------------------------------
Net Sales $395.3 $290.3 $1,043.5 $821.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Average Price per MT Fertilizer - Liquid phosphates
$315.35 $226.34 $275.28 $224.27 Fertilizer - Solid phosphates
$400.78 $235.90 $355.80 $242.03 Feed $351.40 $298.99 $320.48
$306.27 Industrial $391.78 $374.46 $375.98 $371.30
-------------------------------------------------------------------------
Manufactured Product $369.63 $268.02 $334.11 $272.99
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exchange Rate (Cdn$/US$) 2007 2006
-------------------------------------------------------------------------
December 31 1.1653 September 30 0.9963 1.1153 Third-quarter average
conversion rate 1.0579 1.1204 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 Nine Months Ended September 30 September 30 2007
2006 2007 2006
-------------------------------------------------------------------------
Net income $ 243.1 $ 145.2 $ 726.8 $ 445.8 Income taxes 150.4 52.8
351.0 95.1 Interest expense 12.7 25.2 59.0 69.1 Depreciation and
amortization 69.5 62.2 216.3 181.4
-------------------------------------------------------------------------
EBITDA $ 475.7 $ 285.4 $ 1,353.1 $ 791.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 Nine Months Ended
September 30 September 30 2007 2006 2007 2006
-------------------------------------------------------------------------
Cash flow prior to working capital changes(1) $ 336.7 $ 228.8 $
1,093.4 $ 675.2
-------------------------------------------------------------------------
Changes in non-cash operating working capital Accounts receivable
(100.2) (52.6) (139.9) (1.1) Inventories 35.5 23.3 51.6 21.8
Prepaid expenses and other current assets 0.8 10.4 1.3 (23.3)
Accounts payable and accrued charges 38.8 15.0 150.9 (319.0)
-------------------------------------------------------------------------
Changes in non-cash operating working capital (25.1) (3.9) 63.9
(321.6)
-------------------------------------------------------------------------
Cash provided by operating activities $ 311.6 $ 224.9 $ 1,157.3 $
353.6
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Free cash flow(2) $ 169.7 $ 94.3 $ 690.9 $ 162.6 Additions to
property, plant and equipment 145.1 133.8 381.6 384.9 Purchase of
long-term investments 21.0 - 30.7 130.0 Other assets and intangible
assets 0.9 0.7 (9.8) (2.3) Changes in non-cash operating working
capital (25.1) (3.9) 63.9 (321.6)
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Cash provided by operating activities $ 311.6 $ 224.9 $ 1,157.3 $
353.6
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(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:
Investors: Denita Stann, Director, Investor Relations, Phone: (847)
849-4277, Fax: (847) 849-4691, Email: ; Media: Rhonda Speiss,
Manager, Public Relations, Phone: (306) 933-8544, Fax: (306)
933-8844, ; Web Site: http://www.potashcorp.com/
Copyright