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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-10351
POTASH CORPORATION OF SASKATCHEWAN INC.
(Exact Name of Registrant as Specified in Its Charter)
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SASKATCHEWAN, CANADA N/A
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
122 - 1ST AVENUE SOUTH SASKATOON, SASKATCHEWAN S7K 7G3
(Address of Principal Executive Offices) (Zip Code)
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306-933-8500
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Shares No Par Value New York Stock Exchange
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Securities registered pursuant to section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
None
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TABLE OF CONTENTS
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PAGE
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PART II Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. II-2
PART IV Item 8. Financial Statements and Supplementary Data........................ F-1
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II-1
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PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All figures stated herein are expressed in US funds consistent with the
change in reporting currency as described in Note 3 of the consolidated
financial statements. In 1995, the Company's Consolidated Statement of Income
and Retained Earnings was reformatted to better reflect the nature of the
Company's business. In particular, net sales revenue is now being reported as
opposed to sales revenue, so that not only is the reported revenue net of
discounts and recoverable freight expense but it is also net of the
transportation and distribution costs necessary for the delivery of the products
to the Company's customers. Certain of the prior years' figures have been
reclassified to conform with the current year's presentation.
Net sales and net income for 1995 improved 123 percent and 75 percent,
respectively. Net income for 1995 was $159.5 million (1994 -- $91.2 million) on
net sales of $906.9 million (1994 -- $406.9 million), or $3.68 per share (1994
- -- $2.12 per share). For 1995, gross margin and operating income were $309.5
million and $224.2 million, respectively, compared to a gross margin of $155.8
million and an operating income of $98.5 million for 1994 (increases of 99
percent and 128 percent respectively).
The $500.0 million increase in net sales is comprised as follows:
<TABLE>
<CAPTION>
($ MILLIONS)
<S> <C>
POTASH................................................... $ 57.9
PHOSPHATES
Phosphate Rock......................................... 5.0
Phosphate Fertilizer................................... 257.5
Non-fertilizer Products................................ 149.6
AMMONIA.................................................. 23.0
FLORIDA FAVORITE FERTILIZER (FFF)........................ 7.0
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Total Increase in Sales Revenue.......................... $500.0
======
</TABLE>
The increase in net income of $68.3 million is attributable to: the
acquisitions of all of the outstanding shares of PCS Phosphate Company, Inc.
("PCS Phosphate", formerly Texasgulf Inc.) on April 10, 1995 and of White
Springs Agricultural Chemicals, Inc. ("White Springs") on October 31, 1995,
which together contributed $435.1 million in additional net sales revenue; an
additional $57.9 million in potash revenue due to a 10 percent increase in
potash unit prices and a 5 percent increase in potash sales tonnes (1995 --
5,847,910 tonnes; 1994 -- 5,568,947 tonnes); 17 fewer mineweeks of shutdown in
the potash operations (the number of mineweeks of shutdown is at the discretion
of management); and a 6 percent lower potash cost of goods sold on a per unit
basis. Interest expense increased by $38.0 million as a result of debt financing
of $878.8 million to purchase PCS Phosphate and White Springs.
On April 10, 1995, the Company acquired PCS Phosphate from Elf Aquitaine,
Inc. and Williams Acquisition Holding Company, Inc. for an aggregate purchase
price of $819.5 million. PCS Phosphate manufactures and sells solid and liquid
phosphate fertilizers, animal feed supplements and purified phosphoric acid
which is used in food products and industrial processes. Its production facility
in Aurora, North Carolina is the largest vertically integrated phosphate mine
and processing plant in the world. Other assets of PCS Phosphate include:
phosphate feed plants in four states; two industrial phosphoric acid plants
owned 50 percent in a joint venture carrying on business as Albright & Wilson
Company; a solution potash and salt mine in Moab, Utah; an undivided 50 percent
interest in an ammonia storage terminal in Savannah, Georgia; and PCS
Phosphate's product distribution infrastructure.
On October 31, 1995, the Company acquired White Springs from Occidental
Chemical Corporation, a wholly-owned subsidiary of Occidental Petroleum
Corporation, for an aggregate purchase price of $286.5 million (subject to
adjustment for working capital). White Springs' primary assets are a phosphate
production complex in northern Florida consisting of two mine and chemical plant
complexes, Swift Creek and Suwannee River, and a bulk terminal facility in
Jacksonville, Florida. Other assets of White Springs include an animal feed
plant in Davenport, Iowa and two more at the Suwannee River facility, an ammonia
storage terminal in
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Houston, Texas and the remaining undivided 50 percent interest in the ammonia
storage terminal in Savannah, Georgia owned with PCS Phosphate.
1995 VERSUS 1994
OVERALL REVENUE
Net sales revenue for 1995 was $906.9 million, an increase of $500.0
million or 123 percent over 1994. Potash, phosphate, FFF fertilizer, and ammonia
revenue for 1995 were $421.0 million, $412.1 million, $50.8 million, and $23.0
million, respectively.
POTASH REVENUE
Potash net sales revenue for 1995 increased by $57.9 million (1995 --
$421.0 million; 1994 -- $363.1 million) or 16 percent as compared to 1994. The
Company sold 5.848 million tonnes of potash in 1995, compared to 5.569 million
tonnes in 1994, an increase of .279 million tonnes or 5 percent.
North American and offshore potash sales volumes rose 6 percent and 4
percent, respectively. Potash selling prices in the North American and offshore
markets increased by 7 percent and 13 percent, respectively. The overall
increase in potash volumes of 5 percent resulted in a $12.2 million increase in
potash sales revenue, while a 10 percent increase in overall potash prices
resulted in a $45.7 million improvement in potash sales revenue.
An improvement of 6 percent in North American potash sales volumes and a 7
percent increase in overall domestic selling price resulted in a $17.0 million
increase in North American revenue. Potash sales volumes increased .132 million
tonnes (1995 -- 2.273 million tonnes; 1994 -- 2.141 million tonnes). In 1995,
North American sales revenue from potash operations represented 35 percent of
the net potash sales of the Company.
The modest increase in North American sales volumes can be attributed to a
strong spring pre-season and a favorable fall season. A strong, pre-season fill
in the spring was offset as wet weather shortened the season. The fall season
benefited from optimism in the farm community with respect to the prospects for
1996.
In the offshore market, the Company sold 3.575 million tonnes (1994 --
3.427 million tonnes), an improvement of 4 percent. Of the 3.575 million tonnes,
3.029 million tonnes were sold through Canpotex and the remaining .546 million
tonnes were produced by PCS New Brunswick and sold and delivered to offshore
markets, such as Brazil and Europe, by PCS Sales. In 1995, offshore sales
revenue from potash operations represented 65 percent of the net potash sales of
the Company.
Offshore tonnage and prices were up over the previous year primarily
because sales to China reached record levels. However, PCS's share of supply to
Canpotex fell to 59 percent in 1995 from 61 percent in 1994 because its special
entitlement under the 1990 Saskterra purchase agreement expired July 1, 1995. In
subsequent years, the PCS share will be based on its share of Saskatchewan
capacity, currently 57.5 percent.
Canpotex sales of 5.16 million tonnes established a new record in 1995 with
1.991 million tonnes sold to China. Net selling prices were up 11 percent in
1995 over 1994 through Canpotex, with a 7 percent increase in tonnage. On the
other hand, New Brunswick offshore prices were up 24 percent but tonnage was
down 10 percent with the decrease experienced mostly in Europe. The overall
result for 1995 was a 19 percent increase in revenue earned from Canpotex and an
11 percent increase in revenue earned from PCS New Brunswick.
PHOSPHATE REVENUE
Phosphate net sales revenue for the period April 10 to December 31 was
$412.1 million. The distribution of this revenue was as follows: phosphate
fertilizer $257.5 million (62 percent); non-fertilizer products (animal feed and
industrial products) -- $149.6 million (36 percent); and phosphate rock -- $5.0
million (2 percent).
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Net sales revenue from liquid and solid fertilizers was $257.5 million with
sales volumes of 1.399 million tonnes. Solid phosphate fertilizer (substantially
all DAP) accounted for 59 percent or $151.2 million of the total. Offshore sales
of DAP accounted for 54 percent of the solid fertilizer net sales revenue while
liquid fertilizers had a 56 percent share of net sales in the North American
market. The average net sales price for these fertilizers continued to improve
throughout the year as increases in DAP prices more than compensated for certain
decreases in liquid fertilizer prices in North America.
Net sales from animal feed and industrial products were $149.6 million with
sales volumes of .596 million tonnes. Feed sales tonnage was .428 million tonnes
with 13 percent sold offshore, while the remaining .168 million tonnes were
industrial products sold to North American customers. Feed and industrial
product prices were flat in comparison to 1994.
Net sales revenue from phosphate rock was $5.0 million with sales volumes
of .211 million tonnes. The average net sales price improved throughout the
year.
North American phosphate revenue accounted for $269.0 million (65 percent)
of the total phosphate revenue of $412.1 million. In 1995, approximately 65
percent of the volumes of phosphate rock and phosphate product sales was made on
the spot market with the balance made generally under annual contracts. Of the
Company's North American phosphate revenue, 48 percent was earned from phosphate
fertilizer products which represented 60 percent of the Company's North American
sales volumes.
PhosChem, a phosphate export association established under U.S. law, is the
principal vehicle through which the Company executes offshore marketing and
sales for its phosphate fertilizers. Offshore sales accounted for 35 percent of
total phosphate product revenue in 1995 and 46 percent of volumes. Of the
offshore tonnage, 95 percent was sold as phosphate fertilizer products while 93
percent of offshore revenue was earned from phosphate fertilizer.
AMMONIA REVENUE
Ammonia sales from White Springs contributed $23.0 million to sales revenue
with sales volumes of .115 million tonnes.
COST OF GOODS SOLD
In 1995, the Company produced 6.071 million potassium chloride (KCl)
tonnes, compared to 5.298 million tonnes in 1994, an increase of .773 million
tonnes (15 percent).
In 1995, the Company produced 1.008 million phosphoric acid (P(2)O(5))
tonnes from the two phosphate operations since their acquisition.
In 1995, potash unit cost of sales decreased by 6 percent compared to the
previous year due to reduced shutdown time. There were 17 fewer mineweeks of
shutdown in 1995 than in 1994 (the number of mineweeks of shutdown is at the
discretion of management).
Depreciation and amortization expense for 1995 was $71.0 million compared
to $39.3 million in 1994, an increase of 81 percent. The $31.7 million increase
is a result of higher potash sales volumes and the depreciation resulting from
the phosphate acquisitions for the partial year they were owned by the Company.
SELLING AND ADMINISTRATIVE
In 1995, selling and administrative expenses were $57.0 million as compared
to $35.4 million in 1994, an increase of $21.6 million. The increase is
attributable to the acquisitions of PCS Phosphate and White Springs and to
general increases in supplies, compensation and benefits.
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PROVINCIAL MINING AND OTHER TAXES
Saskatchewan's potash production tax is comprised of a base tax per tonne
of product sold and an additional tax based on mine-by-mine profits. The New
Brunswick division and the Saskatchewan divisions pay a provincial crown
royalty, which is accounted for under cost of goods sold.
Higher potash sales volume from the Saskatchewan mines and increased
profitability at certain of the mines increased the taxes paid to the provincial
government. In 1995, Saskatchewan provincial mining and other taxes were $43.4
million as compared to $32.4 million in 1994, an increase of 34 percent. Potash
production tax for 1995 was $29.6 million compared to $20.6 million in 1994, an
increase of 43 percent. The increase is explained in part by the Rocanville mine
having been joined by the Allan mine in incurring the profits tax, and in part
by overall increased sales. Saskatchewan capital tax was $13.8 million in 1995
compared to $11.7 million in the prior year, an increase of 18 percent.
INTEREST EXPENSE
In 1995, interest expense was $41.8 million compared to $3.8 million in
1994, an increase of $38.0 million. The purchase of PCS Phosphate was funded
through two credit facilities obtained April 10, 1995 and provided by a
syndicate of chartered banks. The credit facilities which originally aggregated
to $760.0 million were increased by $280.0 million on October 26, 1995. In
November 1995 the long-term debt was reduced by the net proceeds of $161.2
million from the November 10, 1995 common share offering. The rate of interest
is LIBOR, an international rate of interest, plus 5/8 of one percent. In 1995,
the average interest rate was approximately 6.7 percent.
Interest expense in 1994 and 1993 relates primarily to interest on
short-term borrowings under the Company's commercial paper program which were
used to retire capital leases and acquisition of Potash Company of America
assets. The weighted average short-term debt outstanding in 1994 and 1993 was
$18.2 million and $17.1 million respectively. The weighted average interest rate
in 1994 was 4.0 percent and in 1993 3.8 percent.
INCOME TAXES
Income taxes in 1995 were $22.9 million, compared to $3.5 million in 1994,
an increase of $19.4 million. The increase is largely attributable to US
withholding taxes and deferred income taxes relating to the Company's recently
acquired phosphate operations.
PCS and certain subsidiaries are subject to federal and provincial income
taxes in Canada. By virtue of deductions with respect to non-capital losses
carried forward, capital cost allowance, Canadian development expense, earned
depletion allowance, and resource allowance, such taxes have not yet been
payable by PCS. However, the Company is subject to the Large Corporations Tax.
At December 31, 1995, the Canadian tax pools plus the non-capital losses carried
forward exceed the book value of PCS's depreciable assets by approximately $100
million. PCS will begin to book a deferred tax provision, at an effective rate
of 30 to 35 percent of income before income taxes, once the tax pools plus the
non-capital losses carried forward are less than the book value of the assets.
This rate assumes that primarily all Canadian profits for income tax purposes
are resource profits eligible for the resource allowance and that an earned
depletion claim of 25 percent on resource profits is available to the Company.
Assuming the status quo, the Company is unlikely to begin to record a Canadian
deferred income tax provision until 1997 and is unlikely to pay regular Canadian
income taxes until near the end of the decade.
The subsidiaries of the Company which operate in the United States are
subject to US federal and state income taxes. By virtue of certain income tax
deductions available, these subsidiaries are not currently subject to regular
cash income taxes. However, they are subject to the alternative minimum tax,
which may be carried forward indefinitely to be applied against regular income
tax liability. In addition, the Company is subject to the United States
withholding tax on certain payments received from its US subsidiaries. The tax
rate for 1995 was approximately 24 percent of taxable income, of which 6 percent
represented deferred income taxes, and 18 percent represented cash taxes.
Assuming the status quo, the Company will continue to record a US tax
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provision of 25 to 30 percent for several more years, of which approximately 20
percent will be a deferred tax component, and the remaining 5 to 10 percent is
cash taxes.
1994 VERSUS 1993
REVENUE
Net sales revenue was $406.9 million in 1994, up $156.9 million or 63
percent over 1993. On a consolidated basis, in 1994, the Company sold 5.568
million tonnes of potash, compared to 3.795 million tonnes in 1993. This amounts
to an increase of 47 percent.
Offshore and North American sales volumes rose 78 percent and 15 percent,
respectively. The 47 percent increase in potash sales volumes resulted in a
$110.5 million increase in potash sales revenue, while a 14 percent increase in
overall potash prices resulted in a $46.4 million improvement in potash sales
revenue.
North America
An improvement of 15 percent in North American consolidated potash sales
volumes and an 11 percent increase in overall domestic selling price resulted in
a $30.4 million increase in North American revenue. North American sales from
PCS New Brunswick contributed $9.6 million of the total increase.
In 1994, the Company sold 2.141 million tonnes of potash, an increase of
.272 million tonnes over 1993. The Company sold 1.995 million tonnes from its
Saskatchewan mines (1993 -- 1.845 million tonnes). The remaining .146 million
tonnes were sold from PCS New Brunswick (1993 -- .024 million tonnes for a
three-month period).
A good pre-season fill and good weather conditions got the anticipated
strong spring season off to a good start in 1994. With near-perfect weather,
North American farmers grew record-breaking quantities of corn and soybeans and
the Company had a good third quarter fill program as farmers replaced soil
nutrients.
Prices improved on a year-over-year basis but many of the gains made in the
spring were lost as market forces put pressure on potash prices.
Offshore
In 1994, the Company sold 3.427 million tonnes (1993 -- 1.926 million
tonnes). Included in the 1994 sales volumes are 2.821 million tonnes (1993 --
1.879 million tonnes) sold to the offshore market through Canpotex and .606
million tonnes (1993 -- .047 million tonnes) from PCS New Brunswick, delivered
to offshore markets such as Brazil and Europe by PCS Sales.
Consumption was up in offshore markets and Canpotex sold a record 4.725
million tonnes, with PCS supplying the major portion. The increase in offshore
volumes of 78 percent, along with an increase in price of 17 percent, resulted
in a 108 percent increase in offshore revenue.
The increase in offshore sales volumes is a result of an increase in
international demand for potash in developing countries, led by China, India and
Brazil. In total, Canpotex sold a record 1.57 million tonnes to China in 1994,
with PCS providing 61 percent of the total. In addition to record sales to
China, Canpotex sold record tonnage to Malaysia, Thailand, New Zealand and
Argentina.
The increased demand and tight supply situation led to a more favourable
environment and higher prices. In the offshore market, contract prices were flat
in the first half of 1994, but strengthening spot market prices resulting from
increased volumes and a record purchase of tonnage by China in April led to a
$4.50 per tonne increase in negotiated prices. Prices also rose in European and
Latin American markets.
Florida Favorite Fertilizer
Florida Favorite Fertilizer sold .333 million tonnes of fertilizer in 1994,
compared to .326 million tonnes in 1993, representing a 2 percent increase. The
increase in fertilizer tonnes resulted in a $0.9 million increase
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in fertilizer revenue. In 1994, an increase of 12 percent in the selling price
resulted in an increase of $5.4 million in fertilizer revenue.
COST OF GOODS SOLD
In 1994, PCS produced 5.298 million tonnes of KCl, compared to 1993's 3.902
million tonnes. The increase in tonnes produced was the result of a full year's
production at New Brunswick and Patience Lake divisions compared to three months
in 1993, combined with reduced shutdown time at the Company's other mine sites.
In 1994, operating costs on a percentage basis increased by 2 percent over
the previous year due to the net effect of the extra tonnage sold and the higher
percentage of PCS New Brunswick tonnage included in the total tonnes sold.
Depreciation and amortization expenses for 1994 were $39.3 million,
compared to $29.9 million in 1993, an increase of 31 percent. The $9.4 million
increase is a result of higher sales volumes, as depreciation at all PCS mines
is calculated on a unit of production basis.
SELLING AND ADMINISTRATIVE
In 1994, selling and administrative expenses were $35.4 million, as
compared to $30.0 million in 1993, an 18 percent increase. The $5.4 million
increase is the result of increased legal costs resulting from the defence of
anti-trust allegations and a general increase in supplies, compensation and
benefits.
PROVINCIAL MINING AND OTHER TAXES
In 1994, Saskatchewan provincial mining and other taxes were $32.4 million
as compared to $17.8 million in 1993, an 82 percent increase. Potash production
tax for 1994 was $20.6 million compared to $10.0 million in 1993, an increase of
106 percent. Saskatchewan capital tax was $11.7 million in 1994 compared to $7.8
million a year previously, an increase of 50 percent. Higher sales tonnage from
the Saskatchewan mines and increased profitability increased the taxes paid to
the Saskatchewan provincial government.
Saskatchewan's potash production tax is comprised of a base tax per tonne
of product sold and an additional tax based on profits. In 1994, only PCS
Rocanville incurred the provincial profits tax. New Brunswick and Saskatchewan
divisions pay a provincial crown royalty which is accounted for under cost of
goods sold.
OTHER INCOME
Other income was down $16.7 million as 1993 included $19.4 million in
insurance proceeds from the Esterhazy brine inflow settlement.
INTEREST EXPENSE
In 1994, the Company benefited from lower interest expense which decreased
by $4.9 million or 57 percent. Short-term debt of $67.9 million was retired in
July 1994 and a capital lease of $17.5 million was paid off in December 1994.
INCOME TAXES
Income taxes of $3.5 million for 1994 approximated those for 1993. Large
Corporation Tax expense for 1994 approximated the 1993 expenditure of $1.9
million. Corporate income taxes for 1994 for one of the Company's subsidiaries
were $1.6 million compared to $1.7 million for 1993.
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ANALYSIS OF FINANCIAL CONDITION AND CASH FLOW
Below is a table summarizing the Company's financial ratios, as computed
from its financial statements:
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YEAR ENDED DECEMBER 31
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1995 1994 % CHANGE
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Quick Ratio............................. .72 1.48 -51.4
Current Ratio........................... 1.37 2.68 -48.9
Shareholders' Equity to Total Assets.... .48 .94 -48.9
Return on Shareholders' Equity.......... 13% 9% 44.4
Book Value per Share.................... $27.33 $22.43 21.8
Asset Turnover.......................... .35 .40 -12.5
Return on Investment.................... 7.79% 9.24% -15.7
Long-term Debt to Equity................ 1:1.41 1:377 -99.6
</TABLE>
Cash provided by operating activities for 1995 was $233.5 million (1994
- --$150.7 million). The increase in cash from operating activities of $82.8
million is largely attributable to additional net income of $68.3 million and
depreciation of $31.6 million. This was partially offset by a net decrease of
$24.3 million in non-cash operating working capital. Cash used in investing
activities for 1995 was $1,153.2 million, an increase of $1,138.2 million when
compared to 1994. The net cash outlay of $812.2 million for the acquisition of
Texasgulf and $291.5 million for White Springs accounted for most of the
increase. Capital for sustaining operations increased by $22.8 million because
of the acquisition of the two phosphate operations. Cash provided by financing
activities in 1995 was $943.6 million. Proceeds from long-term obligations and
share issuance were $825.5 million and $163.9 million, respectively. The Company
paid dividends totalling $45.8 million. In 1994, the Company repaid $88.5
million in short-term and long-term obligations and paid $33.0 million in
dividends.
The debt financed acquisitions in 1995 resulted in a much different set of
liquidity ratios for the year but fundamentals of the Company remain healthy.
Working capital increased in 1995 by $32.8 million and cash flow from operations
by $82.8 million. Although quick and current ratios have been approximately
halved, the cash generation ability of the Company has been enhanced by the two
phosphate operations as well as an improving potash business. The debt to
capital ratio is at 42 percent and interest coverage 5.4 times. The net debt to
market capitalization at year-end is 26 percent. It is important to note that
these ratios will be more reflective of the true substance of the business once
a full year's activity from the newly-acquired phosphate operations has been
recorded.
The Company's debt financing of the phosphate acquisitions in 1995 totalled
$1.04 billion but has since been reduced to $827.4 million after applying the
net proceeds of $161.2 million from an equity offering, and scheduled payments.
The loan consisted of two facilities with the first in the amount of $480
million having payment terms on a semi-annual basis ending June 30, 2000. The
second facility of $560 million also has payments on a semi-annual basis and a
final payment on December 28, 2000, but has smaller payments during the term and
a balloon payment at the end of the term. Both facilities are currently subject
to the same rate of interest, which is LIBOR-based. Certain covenants within the
loan agreement ensure that surplus cash is applied against the first facility
thereby reducing semi-annual instalments in inverse order of maturity, until the
first facility has been paid in full.
The cash flow is projected to be positive in the future. Free cash, after
operational and sustaining capital expenditures, is expected to allow for the
reduction of the term facility.
A Commercial Paper program, with an authorized limit of $73.2 million is in
place to meet short-term (less than 365 days) needs. PCS could also draw down on
a line of credit of $95.2 million with PCS's main bank.
Liquidity will be tight during the initial stages of the acquisitions, but
projected cash flows are expected to alleviate this within several months. In
the near future, PCS is not anticipating either a significant downturn in
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sales or an extension of normal terms. Debt levels should be reduced
sufficiently in the short term to allow for financing flexibility within the
Company's current facilities, if the need arises.
OTHER MATTERS -- ENVIRONMENTAL
The Company is subject to various environmental laws and regulations
especially as they apply to operations in North Carolina, Florida and Utah, but
more broadly throughout the United States and Canada. Expenditures relating to
these environmental efforts are perceived to be part of the normal course of
business. Future laws and regulations or changes to existing laws and their
impact cannot be predicted.
Capital expenditures in 1995 totalled $6.6 million in the environmental
area while $37.2 million was incurred as environmental operating expense.
Expenditures in 1996 are expected to be of a similar magnitude.
OUTLOOK
The statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, including those in this "Outlook" section
relating to the period after 1995, are forward-looking statements subject to
uncertainties.
The Company's financial performance continues to be affected by price,
worldwide state of supply and demand for potash and phosphate products,
application rates, government assistance programs, weather conditions, exchange
rates and agricultural and trade policies of producing and consuming nations
which, among other things, are influenced by domestic political conditions. The
Company has the benefit of a degree of diversification that it did not have in
the past, given its animal feed and industrial acid business, in addition to its
fertilizer business.
Exchange rate fluctuations will have a much smaller impact on the net
income of the Company, since the reporting currency is now US dollars.
Substantially all of its sales and approximately 65 percent of its expenses are
denominated in US dollars and therefore there is considerably less exposure to
exchange rate fluctuations than in the past. This is expected to be even less of
an issue in 1996, when phosphate operations will reflect a full year's activity.
All things being equal, an increase in the Canadian dollar relative to the US
dollar would have a negative impact on net income since approximately 35 percent
of the Company's expenses in 1995 were incurred in Canadian dollars. The average
exchange rate of the Canadian dollar compared to the US dollar for 1995 was
$0.7286, compared to $0.7322 in 1994 or a $0.0036 change.
North American potash and phosphate demand in fertilizer is generally
considered mature but is expected to fluctuate slightly from year to year, as a
function of acres planted and application rates, which in turn are influenced by
crop prices and weather conditions.
The Company expects its North American potash sales volumes in 1996 to be
stronger given reports that: no set asides are expected this spring (resulting
in the planting of over 9 million more acres of corn and 5 million more acres of
wheat); reported low world grain stocks (at just 13 percent of consumption);
corn futures poised to challenge the historic high of $4 per bushel set in
October 1974; and sustained optimism in the farm communities. For similar
reasons, phosphate sales volumes into the North American market are expected to
be slightly higher in 1996, especially in the DAP market.
PCS expects pricing of potash will see a slight firming for the North
American market as compared to 1995, while offshore prices are expected to
continue to increase. Pricing for agricultural phosphates is expected to be up
in 1996 versus 1995 and the pricing of feed and industrial products is expected
to be marginally higher than in 1995.
Continued good levels of demand in China, India and Brazil are expected to
keep the offshore market tight and price levels firm.
The Company's international business is affected by competition from other
world producers and is also influenced by the existence of government subsidies.
In potash, given PCS's excess capacity, there is greater opportunity in the
growing offshore markets for PCS than for its competitors.
II-9
<PAGE> 11
White Springs' surplus production of sulphuric acid is expected to be used
at Aurora, thereby placing less reliance on outside suppliers for sulphuric acid
inputs. Similarly, other opportunities for synergies will be explored in the
production of feed products.
Mining costs are not expected to increase at a rate greater than the
anticipated rate of inflation. Natural gas costs are expected to be reduced by
approximately 15 percent in the Saskatchewan operations based on existing
contracts for 1996. Input costs for phosphate processing are expected to be up
in 1996 for sulphur by 7 to 9 percent, but ammonia costs are expected to
increase only marginally over 1995.
Capital expenditures in 1996 will exceed those in 1995, primarily due to a
full year of phosphate ownership and operation. Plans for such expenditures are
limited to sustaining capital. Given the low rates of inflation in Canada (1.7
percent) and the United States (2.5 percent) during 1995, future decisions for
capital purchases or otherwise are not expected to be influenced by this factor.
The narrative included under this Management's Discussion and Analysis of
Financial Condition and Results of Operations, has been prepared with reference
to the financial statements reported under Canadian Generally Accepted
Accounting Principles (GAAP). Under Canadian GAAP, dollar figures reported for
years prior to the year the Company elected to report in US funds (1995) have
been converted at the rate of 1.4028. This rate is the month-end rate at
December 31, 1994 and is prescribed for use under the Translation of Convenience
Method. For purposes of reporting this section under US GAAP, revenue and
expenditures denominated in US dollars would have to be multiplied by the
exchange rate used under the Translation of Convenience Method (1.4028) and then
divided by 1.3730 and 1.2885 for each of the years 1994 and 1993, respectively,
to arrive at the revenue and expenditures as they would have been reported
historically under US GAAP. For the statements of Financial Position, the
year-end rate would be used for conversion. See the Consolidated financial
statements, Note 27 reconciling the consolidated financial statements to US GAAP
and the supplemental schedules applying US GAAP.
II-10
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
POTASH CORPORATION OF SASKATCHEWAN INC.
INDEX TO FINANCIAL STATEMENTS
PART I -- FINANCIAL INFORMATION
<TABLE>
<S> <C>
Auditors' Report..................................................................... F-2
Consolidated Statements of Financial Position -- December 31, 1995................... F-3
Consolidated Statement of Income and Retained Earnings for the
Years Ended December 31, 1995...................................................... F-4
Consolidated Statement of Cash Flow for the Years Ended December 31, 1995............ F-5
Notes to Consolidated Financial Statements........................................... F-6
Supplemental Schedule of Consolidated Financial Position as at December 31........... F-27
Supplemental Schedule of Consolidated Income and Retained Earnings for the
Years Ended December 31............................................................ F-28
Supplemental Schedule of Consolidated Cash Flow for the Years Ended December 31...... F-29
</TABLE>
F-1
<PAGE> 13
AUDITORS' REPORT
To the Shareholders of
POTASH CORPORATION OF SASKATCHEWAN INC.
We have audited the consolidated statements of finanial position of Potash
Corporation of Saskatchewan Inc. as at December 31, 1995 and 1994 and the
consolidated statements of income and retained earnings and of cash flow for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at December 31,
1995 and 1994, and the results of its operations and the changes in its
financial position for each of the three years in the period ended December 31,
1995 in accordance with Canadian generally accepted accounting principles.
February 12, 1996, except as to DELOITTE & TOUCHE
Note 28, which is as of Chartered Accountants
December 11, 1996
F-2
<PAGE> 14
POTASH CORPORATION OF SASKATCHEWAN INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT DECEMBER 31
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................................... $ 40,497 $ 16,576
Accounts receivable (Note 6)...................................... 223,377 74,103
Inventories (Note 7).............................................. 221,911 60,847
Prepaid expenses (Note 8)......................................... 12,041 13,187
Other current assets.............................................. 3,315 --
---------- ----------
501,141 164,713
Property, plant and equipment (Note 9).............................. 2,032,339 853,688
Other assets (Note 10).............................................. 48,337 9,365
---------- ----------
$2,581,817 $1,027,766
========== ==========
LIABILITIES
Current Liabilities
Accounts payable and accrued charges (Note 12).................... $ 199,222 $ 60,877
Current portion of long-term debt (Note 13)....................... 164,971 --
Current obligations under capital leases (Note 14)................ 870 555
---------- ----------
365,063 61,432
Long-term debt (Note 13)............................................ 711,585 --
Obligations under capital leases (Note 14).......................... 2,913 2,000
Deferred income tax liability (Note 21)............................. 4,743 --
Accrued post-retirement/post-employment benefits (Note 15).......... 89,570 --
Accrued reclamation costs (Note 16)................................. 151,531 --
Other non-current liabilities and deferred credits.................. 14,537 --
---------- ----------
1,339,942 63,432
---------- ----------
SHAREHOLDERS' EQUITY
Share Capital (Note 17)............................................. 627,700 463,811
Unlimited authorization of common shares; issued and outstanding
45,439,667 and 42,988,238 shares in 1995 and 1994, respectively
Contributed Surplus................................................. 336,486 336,486
Retained Earnings................................................... 277,689 164,037
---------- ----------
1,241,875 964,334
---------- ----------
$2,581,817 $1,027,766
========== ==========
</TABLE>
F-3
<PAGE> 15
POTASH CORPORATION OF SASKATCHEWAN INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net sales (Note 18)..................................... $ 906,897 $ 406,904 $ 249,960
Cost of goods sold...................................... 597,355 251,098 172,466
--------- --------- ---------
GROSS MARGIN............................................ 309,542 155,806 77,494
--------- --------- ---------
Research and development................................ 1,553 1,534 1,588
Selling and administrative expenses..................... 56,985 35,441 29,958
Provincial mining and other taxes (Note 19)............. 43,388 32,352 17,795
Insurance proceeds...................................... -- -- (19,400)
Other income............................................ (16,633) (11,996) (9,316)
--------- --------- ---------
85,293 57,331 20,625
--------- --------- ---------
OPERATING INCOME........................................ 224,249 98,475 56,869
INTEREST EXPENSE (NOTE 20).............................. 41,817 3,772 8,686
--------- --------- ---------
INCOME BEFORE INCOME TAXES.............................. 182,432 94,703 48,183
INCOME TAXES (NOTE 21).................................. 22,946 3,484 3,486
--------- --------- ---------
NET INCOME.............................................. 159,486 91,219 44,697
RETAINED EARNINGS, BEGINNING OF YEAR.................... 164,037 105,868 82,096
DIVIDENDS............................................... (45,834) (33,050) (20,925)
--------- --------- ---------
RETAINED EARNINGS, END OF YEAR.......................... $ 277,689 $ 164,037 $ 105,868
========= ========= =========
NET INCOME PER SHARE (NOTE 22).......................... $ 3.68 $ 2.12 $ 1.13
========= ========= =========
DIVIDENDS PER SHARE..................................... $ 1.06 $ 0.77 $ 0.53
========= ========= =========
</TABLE>
F-4
<PAGE> 16
POTASH CORPORATION OF SASKATCHEWAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Working capital from operations
Net income............................................. $ 159,486 $ 91,219 $ 44,697
Depreciation and amortization.......................... 70,953 39,326 29,927
Loss on disposal of fixed assets....................... 726 340 144
Provision for deferred income tax...................... 4,743 -- --
Provision for post-retirement/post-employment
benefits............................................ 2,052 -- --
---------- --------- ---------
237,960 130,885 74,768
Changes in non-cash operating working capital
Accounts receivable.................................... (48,831) (14,356) 6,261
Inventories............................................ 9,297 14,562 (21,855)
Prepaid expenses....................................... 2,521 468 (282)
Other current assets................................... 1,778 -- --
Accounts payable and accrued charges................... 26,581 19,146 3,403
Accrued reclamation costs................................ 5,214 -- --
Other non-current liabilities and deferred credits....... (1,037) -- --
---------- --------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES.................... 233,483 150,705 49,773
---------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment
Acquisition of Texasgulf Inc. (Note 4)................. (812,226) -- --
Acquisition of White Springs Agricultural Chemicals,
Inc. (Note 5)....................................... (291,540) -- --
Acquisition of Potash Company of America............... -- -- (111,727)
Sustaining operations.................................. (39,596) (16,751) (15,796)
Proceeds on disposal of fixed assets..................... 503 2,039 229
Additions to other assets................................ (10,298) (329) (2,563)
---------- --------- ---------
CASH USED IN INVESTING ACTIVITIES........................ (1,153,157) (15,041) (129,857)
---------- --------- ---------
CASH (DEFICIENCY) BEFORE FINANCING ACTIVITIES............ (919,674) 135,664 (80,084)
---------- --------- ---------
FINANCING ACTIVITIES
Proceeds from (repayment of) long-term obligations....... 825,540 (20,633) (31,342)
Repayment of (proceeds from) short-term debt............. -- (67,851) 55,121
Dividends................................................ (45,834) (33,050) (20,925)
Issuance of shares....................................... 163,889 2,446 70,487
---------- --------- ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......... 943,595 (119,088) 73,341
---------- --------- ---------
INCREASE (DECREASE) IN CASH.............................. 23,921 16,576 (6,743)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............. 16,576 -- 6,743
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR................... $ 40,497 $ 16,576 $ --
========== ========= =========
Supplemental cash flow disclosure
Interest paid.......................................... $ 38,836 $ 4,054 $ 9,387
Income taxes paid...................................... $ 6,242 $ 1,200 $ 4,899
</TABLE>
F-5
<PAGE> 17
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF US DOLLARS)
1. DESCRIPTION OF BUSINESS
Potash Corporation of Saskatchewan Inc. (PCS) is an integrated fertilizer
company. The Company's potash producing assets include five mines and mills and
mining rights to potash reserves at a sixth location all located in the Province
of Saskatchewan, one mine and mill located in the Province of New Brunswick and
one mine and mill located in the State of Utah. The Company's phosphate
producing assets include a vertically-integrated phosphate mine and processing
plant located in the State of North Carolina, phosphate feed plants in four
states, and two industrial phosphoric acid plants owned in a joint venture
carrying on business as Albright & Wilson Company. As a result of the recent
acquisition of all the outstanding shares of White Springs Agricultural
Chemicals, Inc., the Company also owns phosphate production facilities in the
State of Florida comprised of two mine and chemical plant complexes, a bulk
terminal facility in Florida, two ammonia terminals located in the States of
Georgia and Texas, a feed plant in the State of Iowa and two other feed plants
at one of the facilities in Florida.
The Company sells potash from its Saskatchewan mines for use outside North
America exclusively to Canpotex Limited (Canpotex). Canpotex, a potash export,
sales and marketing company owned in equal shares by the four potash producers
in the Province of Saskatchewan (including the Company), resells potash to
offshore customers. Potash Corporation of Saskatchewan Sales Limited (PCS
Sales), a wholly-owned subsidiary of the Company, executes offshore marketing
and sales for the Company's New Brunswick potash and executes marketing and
sales for the Company's potash and phosphate products in North America.
PhosChem, a phosphate export association established under US law, is the
principal vehicle through which the Company executes offshore marketing and
sales for its phosphate fertilizers.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's accounting policies are in accordance with accounting
principles generally accepted in Canada. These policies are consistent with
accounting principles generally accepted in the United States except as outlined
in Note 27 . The following policies are considered to be significant:
Principles of Consolidation
The consolidated financial statements include the accounts of PCS and its
operating subsidiaries (the "Company" except to the extent the context otherwise
requires):
- -- Potash Corporation of Saskatchewan Sales Limited (PCS Sales)
-- PCS Sales (Iowa), Inc.
-- PCS Sales (Indiana), Inc.
-- Potash Corporation of Saskatchewan (Florida) Inc. (PCS Florida)
- -- Potash Corporation of Saskatchewan Transport Limited (PCS Transport)
- -- PCS Phosphate Company, Inc. (PCS Phosphate)
- -- Albright & Wilson Company (proportionately consolidated)
- -- White Springs Agricultural Chemicals, Inc. (White Springs)
All significant intercompany balances and transactions have been
eliminated.
determined using the first in, first out (FIFO) method. Inventories of materials
and supplies are valued at the lower of average cost and replacement cost.
F-6
<PAGE> 18
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, except for mineral
properties and rights to be distributed which are carried at the lower of cost
or fair value. Costs of additions, betterments and renewals are capitalized. The
Company periodically reviews property, plant and equipment for indicators of
potential impairment. Impairment would be measured by comparing book value
against the estimated undiscounted future operating cash flows and any such
impairment loss would be included in the statement of income.
Maintenance and repair expenditures which do not improve or extend
productive life are expensed as incurred.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided for on a basis and at rates
calculated to amortize the cost of the fixed assets over their estimated useful
lives. Depreciation and amortization rates for all mine assets (including mine
development costs) and potash mills are determined using the units of production
method based on estimates of proven and probable reserves. Other asset classes
are depreciated or amortized on a straight-line basis as follows: land
improvements 5 to 30 years, buildings and improvements 6 to 30 years and
machinery and equipment 5 to 20 years.
RESEARCH AND DEVELOPMENT COSTS
Research costs are expensed as incurred.
Development costs include costs for equipment, labor and material relating
to the testing or evaluating of product and process alternatives. These costs
are deferred and amortized on a straight-line basis over a period not exceeding
five years unless the project is determined not to be economically feasible and
of no future benefit to the Company, at which time the costs are expensed.
OTHER ASSETS -- DEFERRED CHARGES
Issue costs of long-term obligations are amortized over the term of the
related liability.
Preproduction costs represent costs incurred during the start-up phase of
new milling facilities, net of revenue earned, and are amortized on a
straight-line basis over ten years.
Trade names and goodwill are being amortized on a straight-line basis over
their estimated useful lives of 15 years. Impairment would be identified by
comparing book value against the estimated undiscounted future operating cash
flows, and any such impairment loss would be included in the statement of
income.
The cost of constructing bases for gypsum stacks is capitalized to Other
Assets and is amortized on a straight-line basis over their estimated useful
lives of three years.
LEASES
Leases entered into are classified as either capital or operating leases.
Leases that transfer substantially all of the benefits and risks of ownership of
property to the Company are accounted for as capital leases. At the time a
capital lease is entered into, an asset is recorded together with the related
long-term obligation. Equipment acquired under capital leases is being
depreciated on the same basis as other fixed assets. Gains or time a capital
lease is entered into, an asset is recorded together with the related long-term
obligation. Equipment acquired under capital leases is being depreciated on the
same basis as other fixed assets. Gains or losses resulting from sale-leaseback
transactions are deferred and amortized in proportion to the amortization of the
leased asset. Rental payments under operating leases are charged to expense as
incurred.
F-7
<PAGE> 19
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
REVENUE RECOGNITION
Sales revenue is recognized when the product is shipped or a service is
performed. Revenue is recorded based on the F.O.B. mine or plant price.
Transportation costs are recovered from the customer through sales pricing.
POST-EMPLOYMENT AND POST-RETIREMENT BENEFITS
Accrual of the costs of providing certain post-retirement benefits,
including medical and life insurance coverage, during the active service period
of the employee is recorded monthly and adjusted annually as actuaries reports
become available.
Accrual during periods of active employment, for the expected cost of
certain benefits payable to former or inactive employees, is also recorded
monthly and adjusted annually. These benefits include long-term disability
income payments and related medical and insurance costs.
FOREIGN EXCHANGE TRANSACTIONS
PCS and its operating subsidiaries all have the US dollar as their
functional currency.
Operating transactions are translated to United States dollars at the
average exchange rate of the previous month. Monetary assets and liabilities are
translated at period end exchange rates. Non-monetary assets owned at December
31, 1994 have been translated under the Translation of Convenience Method at the
December 31, 1994 year end exchange rate of US $1.00 = CDN $1.4028. Additions
subsequent to December 31, 1994 are translated at the exchange rate prevailing
at the time of the transaction.
CASH EQUIVALENTS
Highly liquid investments with an original maturity of three months or less
are considered to be cash equivalents.
3. CHANGE IN REPORTING CURRENCY
The consolidated financial statements of the Company have historically been
expressed in Canadian dollars. As a result of sales revenues and a significant
portion of expenses, assets and debt being denominated in United States dollars
and the increasing international focus of the Company's operations, the United
States dollar has become the principal currency of the Company's business.
Accordingly, the US dollar has been adopted as the currency of measurement and
as the reporting currency effective January 1, 1995.
F-8
<PAGE> 20
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
The comparative financial information for 1994 and 1993 has been translated
into US dollars at the December 31, 1994 year end exchange rate of US$1.00 =
Cdn$1.4028 using the Translation of Convenience Method. The following is a
summary of the Company's comparative amounts expressed in Canadian dollars had
the US dollar not been used as the currency of measurement or as the reporting
currency.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Net sales.......................................... $1,242,203 $ 570,805 $ 350,643
Operating Income................................... $ 307,487 $ 138,140 $ 79,776
Net Income......................................... $ 219,209 $ 127,962 $ 62,701
Cash from operations............................... $ 323,195 $ 211,409 $ 69,821
Total Assets....................................... $3,557,823 $1,441,750 $1,453,988
Shareholders' Equity............................... $1,728,530 $1,352,767 $1,267,737
Net Income Per Share............................... $ 5.07 $ 2.98 $ 1.58
</TABLE>
4. ACQUISITION OF TEXASGULF INC.
On March 5, 1995, the Company signed a stock purchase agreement with Elf
Aquitaine, Inc. and Williams Acquisition Holding Company, Inc., to purchase all
of the outstanding shares of Texasgulf Inc., a producer of phosphate rock and
phosphate products. On April 10,1995, the Company acquired such shares for
$832,568 (including acquisition costs). The acquisition was financed by cash of
$72,568 and debt financing of $760,000. The results of operations are included
in the accompanying consolidated financial statements since the date of
purchase.
Net assets acquired were:
<TABLE>
<S> <C>
Working capital.......................................... $ 113,513
Fixed assets and other assets............................ 928,283
----------
1,041,796
Long-term debt and other long-term liabilities........... 209,228
----------
Net assets acquired...................................... 832,568
Less: Cash acquired...................................... 20,342
----------
Net cash outlay.......................................... $ 812,226
==========
</TABLE>
5. ACQUISITION OF WHITE SPRINGS AGRICULTURAL CHEMICALS, INC.
On September 11, 1995 the Company signed a stock purchase agreement with
Occidental Chemical Corporation (Oxychem) to purchase all of the outstanding
shares of White Springs Agricultural Chemicals, Inc. (formerly the Agricultural
Products Division of Oxychem), a producer of phosphate rock and phosphate
products. On October 31, 1995, the Company acquired such shares for an aggregate
purchase price of $291,540 (including acquisition costs). The acquisition was
financed by cash of $11,540, debt financing of $118,816 and the net proceeds of
a share offering of $161,184. The results of operations are included in the
accompanying consolidated financial statements since the date of purchase.
F-9
<PAGE> 21
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
Net assets acquired were:
<TABLE>
<S> <C>
Working capital (subject to adjustment)................... $ 86,540
Fixed assets and other assets............................. 286,633
--------
373,173
Long-term debt and other long-term liabilities............ 81,633
--------
Net assets acquired....................................... $291,540
========
</TABLE>
6. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Trade Accounts -- Canpotex Limited................................. $ 42,129 $ 36,951
-- Other.......................................... 174,383 32,997
Non-trade accounts................................................. 11,124 5,091
-------- --------
227,636 75,039
Less allowance for doubtful accounts............................... 4,259 936
-------- --------
$223,377 $ 74,103
======== ========
</TABLE>
7. INVENTORIES
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Finished product................................................... $115,491 $ 37,016
Materials and supplies............................................. 66,708 23,831
Raw materials...................................................... 11,954 --
Work in process.................................................... 27,758 --
-------- --------
$221,911 $ 60,847
======== ========
</TABLE>
8. PREPAID EXPENSES
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Prepaid freight.................................................... $ 9,193 $ 9,465
Other.............................................................. 2,848 3,722
-------- --------
$ 12,041 $ 13,187
======== ========
</TABLE>
Prepaid freight relates to product inventory stored at warehouse facilities
which is invoiced to customers at the time of sale of the inventory.
F-10
<PAGE> 22
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
9. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1995
--------------------------------------------
ACCUMULATED
DEPRECIATION AND NET BOOK
COST AMORTIZATION VALUE
--------- ---------------- ---------
<S> <C> <C> <C>
Land and improvements........................... $ 207,868 $ 15,183 $ 192,685
Buildings and improvements...................... 381,370 83,563 297,807
Machinery and equipment......................... 1,734,288 315,458 1,418,830
Mine development costs.......................... 126,003 32,761 93,242
Equipment under capital lease................... 36,955 7,180 29,775
---------- -------- ----------
$2,486,484 $454,145 $2,032,339
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------
ACCUMULATED
DEPRECIATION AND NET BOOK
COST AMORTIZATION VALUE
---------- ---------------- --------
<S> <C> <C> <C>
Land and improvements............................ $ 52,544 $ 12,763 $ 39,781
Buildings and improvements....................... 341,330 76,358 264,972
Machinery and equipment.......................... 685,505 262,718 422,787
Mine development costs........................... 126,425 30,329 96,096
Equipment under capital lease.................... 36,450 6,398 30,052
---------- -------- --------
$1,242,254 $388,566 $853,688
========== ======== ========
</TABLE>
10. OTHER ASSETS
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred charges -- net of accumulated amortization
Issue costs -- long-term obligations................................. $ 7,994 $ 108
Preproduction costs.................................................. 2,576 2,311
Trade names.......................................................... 1,740 1,657
Goodwill............................................................. 1,830 1,973
Gypstack linings..................................................... 6,407 --
Prepaid pension costs.................................................. 11,958 --
Land held for sale..................................................... 10,464 --
Investments............................................................ 3,952 2,337
Notes receivable....................................................... 1,416 979
------- -------
$48,337 $ 9,365
======= =======
</TABLE>
11. SHORT-TERM DEBT
The Company has available lines of credit for short-term financing in the
amount of $91,600 at December 31, 1995 (1994 -- $107,000). The lines of credit
are unsecured.
F-11
<PAGE> 23
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
12. ACCOUNTS PAYABLE AND ACCRUED CHARGES
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Trade accounts...................................................... $155,891 $42,437
Accrued interest.................................................... 2,993 12
Accrued payroll..................................................... 14,968 5,931
Income taxes........................................................ 13,351 1,390
Dividends........................................................... 12,019 11,107
-------- -------
$199,222 $60,877
======== =======
</TABLE>
13. LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
BANK OF NOVA SCOTIA
Facility A.......................................................... $274,416 $ --
Matures June 30, 2000 with three semi-annual instalments of
$44,400 and six semi-annual instalments of $50,400 with
interest at a floating rate. Loan covenants ensure that surplus
cash as defined by a formula is to be applied against Facility
A thereby reducing semi-annual instalments in the inverse order
of maturity until the first tranche has been paid in full with
no penalty for early retirement. The loan is unsecured with no
penalty for early retirement and bore interest (LIBOR + 5/8%)
at an average rate of 6.7% in 1995 and 6.4% at December 31,
1995.
Facility B.......................................................... 553,000 --
Matures December 28, 2000 with three semi-annual instalments of
$7,000 and six semi-annual instalments of $14,930, the balance
due December 28, 2000. The loan is unsecured with no penalty
for early retirement and bore interest (LIBOR + 5/8%) at an
average rate of 6.7% in 1995 and 6.4% at December 31, 1995.
Industrial Revenue and Pollution Control Obligations................ 49,140
Adjustable Rate Industrial Revenue and Pollution Control
Obligations with varying interest rates and with maturity dates
ranging from 1996 to 2012. No sinking fund requirements prior
to maturity. The Adjustable Rate Municipal Industrial Revenue
and Pollution Control Obligations bear interest at a fraction
of 1% over The Bankers Trust Company tax-exempt note rate. The
average interest rate on the obligations was 3.11% in 1995.
These loans are secured by bank letters of credit which are
guaranteed by the Company.
-------- -------
876,556 --
Less current maturities............................................. 164,971 --
-------- -------
$711,585 $ --
======== =======
</TABLE>
The fair values of all long-term obligations are approximated by their face
values.
F-12
<PAGE> 24
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
Long-term debt at December 31, 1995 matures as follows:
<TABLE>
<S> <C>
1996.............................................................................. $164,971
1997.............................................................................. 118,250
1998.............................................................................. 63,825
1999.............................................................................. 31,060
2000.............................................................................. 464,350
Subsequent Years.................................................................. 34,100
--------
$876,556
========
</TABLE>
14. COMMITMENTS
LEASE COMMITMENTS
The Company has long-term lease agreements for buildings, port facilities,
equipment and rail cars, (excluding mineral leases), the latest of which expires
in 2017. Future minimum lease payments under these capital and operating leases
will be approximately as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
------- ------
<S> <C> <C>
1996...................................................................... $12,192 $1,291
1997...................................................................... 8,013 1,291
1998...................................................................... 6,165 1,290
1999...................................................................... 5,747 467
2000...................................................................... 4,755 467
Subsequent years.......................................................... 23,563 --
------
4,806
Less amount representing interest......................................... 1,023
------
Present value of minimum capital lease payments........................... 3,783
Current obligation........................................................ 870
------
Long-term portion......................................................... $2,913
======
</TABLE>
Rental expense for operating leases for the year ending December 31, 1995
was $11,437 (1994 -- $9,287; 1993 -- $7,572).
OBLIGATIONS RELATED TO MITIGATION AGREEMENT
The Company has a mitigation agreement with the State of Florida which
provids for reclamation standards no more restrictive than current rules and
allows for various operational improvements. Under the agreement, the Company
will make annual contributions to the State of Florida to be used to acquire
offsite environmentally sensitive wetlands. The implementation of this agreement
is subject to approval of conceptual reclamation plans by the State of Florida,
a US Army Corps of Engineers permit modification and a land acquisition
agreement between the State of Florida and the Nature Conservancy. The agreement
covers the remaining life of the Company's mining operations. Under the terms of
the mitigation agreement, the Company is obligated to pay the State of Florida a
minimum of $750 in the year the agreement is implemented, $500 in the following
year and $250 per year in the following five years. Thereafter, if mining
continues, the Company is obligated to pay a minimum of $250 per year. The
agreement is expected to be
F-13
<PAGE> 25
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
implemented in 1996. These obligations are included in the accrual for
reclamation and restoration costs discussed in Note 16. The Company's
performance under the terms of the agreement will, upon receipt of the necessary
approvals, satisfy reclamation obligations currently secured by a surety bond
totalling approximately $13 million.
OTHER COMMITMENTS
The Company has entered into raw material purchase commitments based upon
market rates at the time of delivery through 1996 in the amount of approximately
$242,286.
In 1992, the Company entered into a settlement agreement with a third party
to resolve a dispute under a long-term sales agreement for the purchase of soda
ash. The sales agreement had been entered into when Tg Soda Ash was a division
of Texasgulf Inc., and accordingly, the Company was a party thereto. The
settlement requires annual payments by the Company over a 17-year period
beginning in 1992. The Company had made these payments and had been reimbursed
by Tg Soda Ash. In 1995, the Company and Tg Soda Ash entered into an agreement
in which Tg Soda Ash assumed responsibility for payments during the remaining 14
years. Nevertheless, the Company remains liable in the event Tg Soda Ash does
not make the required payments. However, on April 10, 1995, Elf Aquitaine, Inc.
agreed to reimburse the Company for any amounts that the Company is required to
pay in connection with the settlement agreement. The aggregate liability at
December 31, 1995 totalled approximately $9,084 payable in annual installments
of $699.
15. POST-RETIREMENT/POST-EMPLOYMENT BENEFITS AND PENSION PLANS
CANADIAN
Substantially all employees of the Company are participants in either a
defined contribution or a defined benefit pension plan. The Company's
obligations under the defined contribution plans are limited to making regular
payments to the plan to match voluntary salary reduction contributions made by
the employees for current services. Based on the latest actuarial valuations of
the defined benefit plans conducted at December 31, 1994, and updated as at
December 31, 1995, accrued pension benefits were $6,730 and the market values of
the assets of the plans were $6,822.
The Company has established a supplemental retirement income plan for
senior management which is unfunded and non-contributory and which provides a
supplementary pension benefit. The plan is provided for by charges to earnings
sufficient to meet the projected benefit obligation.
UNITED STATES
The Company has contributory pension plans that cover a substantial
majority of its employees. Benefits are based on a combination of years of
service and compensation levels, depending on the plan. Generally, contributions
to the US plans are made to meet minimum funding requirements of the Employee
Retirement Income Security Act of 1994 (ERISA). The Company's US plans were
purchased through acquisitions of PCS Phosphate (formerly Texasgulf Inc.) on
April 10, 1995 and White Springs Agricultural Chemicals, Inc. ("WSA", formerly a
division of Occidental Chemical Corporation) on October 31, 1995. The WSA plan
is a collective bargaining plan for hourly union employees of the Company's
Florida phosphate mining and manufacturing operations.
F-14
<PAGE> 26
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
The components of net pension expense for these plans, computed
actuarially, were as follows:
<TABLE>
<CAPTION>
WSA PCS PHOSPHATE
----------------- -----------------
11/01/95-12/31/95 4/10/95-12/31/95
----------------- -----------------
<S> <C> <C>
Service costs for benefits earned during the year...... $ 84 $ 2,500
Interest cost on projected benefit obligation.......... 211 8,810
Return on plan assets.................................. (534) (25,514)
Net amortization and deferral.......................... 422 15,622
----- --------
Net pension expense.................................... $ 183 $ 1,418
===== ========
</TABLE>
Assets of both US funded plans consist mainly of corporate equity, US
government and corporate debt securities and units of participation in a
collective short-term investment fund.
The funding status of the Company's US pension plans and amounts recognized
in the Consolidated Statements of Financial Position was as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Plans' assets at fair value................................................... $208,992
========
Actuarial present value of projected benefit obligation:
Vested benefits............................................................. 168,111
Non-vested benefits......................................................... 11,273
--------
Accumulated benefit obligations............................................... 179,384
Excess projected benefit obligation over accumulated benefit obligation....... 41,578
--------
Total projected benefit obligations........................................... 220,962
--------
Plans' assets (less than) projected benefit obligations....................... (11,970)
Items not yet recognized in earnings:
Unrecognized net loss....................................................... 23,675
Unrecognized transition liability........................................... 253
--------
Prepaid pension cost.......................................................... $ 11,958
========
Significant actuarial assumptions for the Company's US funded plans were as
follows:
Discount rate............................................................... 7.25%
Long-term rate of return on assets -- WSA................................... 8.00%
-- PCS Phosphate......................... 9.00%
Rate of increase in compensation levels....................................... 5.00%
</TABLE>
OTHER POSTRETIREMENT PLANS
The Company provides certain health care and life insurance benefits for
retired employees. These plans are either contributory or non-contributory and
contain certain cost sharing features such as deductibles and coinsurance. These
plans are unfunded and benefits are subject to change.
Although the Company prepares its financial statements under Canadian GAAP,
it has continued to apply the treatment prescribed by SFAS No. 106 under US GAAP
"Employers' Accounting for Postretirement Benefits Other Than Pensions." This
statement requires the accrual of the cost of providing other post-retirement
benefits (OPEBs), including medical and life insurance coverage, during the
active service period of the employee.
F-15
<PAGE> 27
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
The components of OPEBs expense for 1995 were as follows:
<TABLE>
<CAPTION>
1995
------
<S> <C>
Service cost.................................................................... $1,017
Interest cost................................................................... 3,999
Net amortization and deferral................................................... 373
------
Net cost........................................................................ $5,389
======
</TABLE>
The significant assumptions used in determining post-retirement benefit
cost were as follows:
<TABLE>
<S> <C>
Discount rate.................................................................. 7.25%
Health care trend rate -- WSA.................................................. 9.50%*
-- PCS Phosphate........................................ 12.50%*
</TABLE>
*Decreasing gradually to 6.00% in 2003 and thereafter.
If the health care cost trend rate was increased by 1.0 percent, the
accumulated post-retirement benefit obligation as of December 31, 1995 and the
aggregate of service and interest cost for 1995 would have increased as follows:
<TABLE>
<CAPTION>
PCS PHOSPHATE WSA
------------- ------
<S> <C> <C>
Accumulated post-retirement benefit obligation................. $ 260 $2,390
Aggregate of service and interest cost......................... $ 21 $ 316
</TABLE>
The components of the Company's post-retirement benefit liability at
December 31, 1995 were as follows:
<TABLE>
<S> <C>
Retirees....................................................................... $45,748
Active:
Fully eligible............................................................... 15,051
Not fully eligible........................................................... 41,006
-------
Total.......................................................................... 101,805
Unrecognized net loss.......................................................... 11,215
-------
90,590
Less current portion of SFAS 106............................................... (3,530)
-------
Add SFAS 112 liability......................................................... 2,510
-------
Accrued post-retirement/post-employment benefits liability..................... $89,570
=======
</TABLE>
The Company has applied Canadian GAAP to prepare its financial statements
but continues to apply SFAS No. 112 under US GAAP "Employers' Accounting for
Postemployment Benefits". This statement requires the Company to accrue, during
periods of active employment, the expected cost of certain benefits payable to
former or inactive employees. These benefits include long-term disability income
payments and related medical and insurance costs.
During 1995 the effect of these costs on income before income taxes was
$332. As of December 31, 1995, the Company has a recorded liability for these
costs of $2,510.
All of the Company's US employees may participate in defined contribution
savings plans. These plans are subject to US federal tax limitations and provide
for voluntary employee salary reduction contributions of
F-16
<PAGE> 28
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
up to 15 percent of salary and Company matching contributions of up to 5.5
percent of salary. The Company's matching contributions were $1,971 for 1995.
16. ENVIRONMENTAL COSTS
RECLAMATION AND RESTORATION COSTS
Site restoration and reclamation costs have been accrued for various sites.
At December 31, 1995, the Company has accrued $38,353 for the Aurora, North
Carolina facility, $65,235 for the White Springs, Florida facility, $27,509 for
the Moab, Utah facility and $20,434 for various sulphur facilities. The idle
sulphur facilities were part of the acquisition of Texasgulf Inc. and are
undergoing dismantlement and environmental restoration efforts. The current
portion of restoration and reclamation accrued in 1995 totalled $3,850. These
amounts represent the Company's current estimate of potential site restoration
and reclamation costs which were last assessed in February 1995. These
expenditures are generally incurred over an extended period of time.
Annual environmental expenditures for reclamation and restoration during
the years ended December 31, 1995, 1994 and 1993 were $32,971, $10,800 and
$5,600, respectively. Of the 1995 amount, $28,296 was charged to operations
$4,018 was capitalized and $657 was charged against accrued reclamation costs.
CAPPING OF BYPRODUCT GYPSUM STACKS
In 1993, the State of Florida passed certain legislation requiring
companies to reduce the potential environmental hazards associated with
accumulations of byproduct gypsum (gypsum stacks). The legislation requires
companies to "cap" the gypsum stacks in order to reduce seepage into the
groundwater. The procedures are not required until the gypsum stacks are no
longer in use, which management currently estimates to be no earlier than the
year 2010. At December 31, 1995, a balance of $34,385 was included in Accrued
reclamation costs for this gypsum stack capping requirement. The obligation is
guaranteed by the Company.
In North Carolina, on expiry of the mine's phosphate reserves, capping of
the remaining gypsum stack must comply with the laws in place at that time.
OTHER ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Other than reclamation and restoration and
gypsum stack capping costs discussed above, no significant costs relating to
existing conditions caused by past operations were incurred by the Company
during 1995. Reserves for estimated costs are recorded when environmental
remedial efforts are likely and the costs can be reasonably estimated. In
determining the reserves, the Company uses the most current information
available, including similar past experiences, available technology, regulations
in effect, the timing of remediation and cost-sharing arrangements. At December
31, 1995, there were no environmental reserves recorded by the Company other
that those related to reclamation and restoration and gypsum stack capping as
discussed above.
The Company's estimated operating expenses, other than reclamation and
restoration and gypsum stack capping, relating to compliance with environmental
laws and regulations governing ongoing operations were approximately $8,598 for
the year ended December 31, 1995. In addition, capital expenditures for
environmental compliance were approximately $1,896 for the year ended December
31, 1995.
F-17
<PAGE> 29
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
17. SHARE CAPITAL
Authorized:
The Company is authorized to issue an unlimited number of common shares
without par value and an unlimited number of first preferred shares. The
first preferred shares may be issued in one or more series with rights and
conditions to be determined by the Board of Directors.
Issued:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
CONSIDERATION CONSIDERATION CONSIDERATION
------------- ------------- -------------
<S> <C> <C> <C>
Issued, beginning of year................... $ 463,811 $ 461,365 $ 390,878
Shares issued under option.................. 2,516 2,310 454
Shares issued by prospectus................. 161,184 -- 69,994
Shares issued for dividend reinvestment
plan...................................... 189 136 39
-------- -------- --------
Issued, end of year......................... $ 627,700 $ 463,811 $ 461,365
======== ======== ========
</TABLE>
Issued:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
NUMBER OF NUMBER OF NUMBER OF
COMMON SHARES COMMON SHARES COMMON SHARES
------------- ------------- -------------
<S> <C> <C> <C>
Issued, beginning of year................... 42,988,238 42,780,928 38,737,000
Shares issued under option.................. 147,650 203,200 41,875
Shares issued by prospectus................. 2,300,000 -- 4,000,000
Shares issued for dividend reinvestment
plan...................................... 3,779 4,110 2,053
---------- ---------- ----------
Issued, end of year......................... 45,439,667 42,988,238 42,780,928
========== ========== ==========
</TABLE>
STOCK OPTIONS
At December 31, 1995, there were stock options outstanding in respect of
1,392,525 common shares granted to certain employees of the Company and the
directors of PCS with an exercise price from Cdn$14.00 to Cdn$102.00 for options
held by optionees resident in Canada, and US$12.00 to US$74.75 for optionees
resident in the United States. Options for 26,000 common shares granted on
November 30, 1995 to the unaffiliated directors of PCS are subject to
shareholder approval. As at December 31, 1995 694,025 of the outstanding options
were exercisable.
The foregoing options have expiry dates ranging from November 30, 1999 to
November 30, 2005.
STOCK-BASED COMPENSATION DISCLOSURE
The Company continues with its policy of not recording any compensation
expense for the stock options as 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 the grant.
SHAREHOLDER RIGHTS PLAN
The Board of Directors of the Company adopted a shareholder rights plan
(the Plan) on November 10, 1994. The Plan was amended by the Board of Directors
on March 28, 1995 and May 4, 1995 and approved by the shareholders on May 11,
1995. Under the Plan, the Board of Directors declared a dividend distribution of
F-18
<PAGE> 30
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
one right for each common share to holders of record. The rights are not
currently exercisable and only become exercisable upon the occurrence of certain
events as specified in the Plan.
18. GEOGRAPHIC SEGMENTS
Financial information by geographic area is summarized in the accompanying
table.
<TABLE>
<CAPTION>
CANADA UNITED STATES CONSOLIDATED
---------- ------------- ------------
<S> <C> <C> <C>
1995
Sales to customers outside the enterprise
Canada.......................................... $ 12,483 $ 23,461 $ 35,944
United States................................... 128,594 320,902 449,496
PhosChem........................................ -- 128,320 128,320
Canpotex........................................ 221,169 -- 221,169
Other........................................... 53,686 18,282 71,968
---------- ---------- ----------
$ 415,932 $ 490,965 $ 906,897
========== ========== ==========
Segment operating earnings........................ $ 138,939 $ 85,310 $ 224,249
========== ========== ==========
Assets............................................ $ 935,075 $ 1,646,742 $ 2,581,817
========== ========== ==========
1994
Sales to customers outside the enterprise
Canada.......................................... $ 9,990 $ -- $ 9,990
United States................................... 119,171 43,786 162,957
Canpotex........................................ 185,776 -- 185,776
Other........................................... 48,181 -- 48,181
---------- ---------- ----------
$ 363,118 $ 43,786 $ 406,904
========== ========== ==========
Segment operating earnings........................ $ 98,374 $ 101 $ 98,475
========== ========== ==========
Assets............................................ $ 995,083 $ 32,683 $ 1,027,766
========== ========== ==========
1993
Sales to customers outside the enterprise
Canada.......................................... $ 5,804 $ -- $ 5,804
United States................................... 93,914 37,767 131,681
Canpotex........................................ 109,240 -- 109,240
Other........................................... 3,235 -- 3,235
---------- ---------- ----------
$ 212,193 $ 37,767 $ 249,960
========== ========== ==========
Segment operating earnings........................ $ 56,096 $ 773 $ 56,869
========== ========== ==========
Assets............................................ $1,007,159 $ 29,332 $ 1,036,491
========== ========== ==========
</TABLE>
F-19
<PAGE> 31
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
19. PROVINCIAL MINING AND OTHER TAXES
Provincial mining taxes and other taxes consist of:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Potash Production Tax..................................... $29,589 $20,613 $10,020
Saskatchewan Capital Tax.................................. 13,799 11,739 7,775
------- ------- -------
$43,388 $32,352 $17,795
======= ======= =======
</TABLE>
20. INTEREST EXPENSE
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Interest on
Short-term debt......................................... $ 190 $ 1,036 $ 687
Long-term debt.......................................... 41,177 -- --
Obligations under capital leases........................ 450 2,736 7,999
------- ------- -------
$41,817 $ 3,772 $ 8,686
======= ======= =======
</TABLE>
21. INCOME TAXES
As the Company operates in a specialized industry and in several tax
jurisdictions, its income is subject to various rates of taxation.
F-20
<PAGE> 32
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
The provision for income taxes differs from the amount that would have
resulted from applying the statutory income tax rates to income before income
taxes as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes
Canada................................................. $102,540 $ 94,703 $ 48,183
United States.......................................... 79,892 -- --
-------- -------- --------
Income before income taxes............................. $182,432 $ 94,703 $ 48,183
======== ======== ========
Federal and Provincial Statutory tax rates............. 46.08% 45.84% 45.84%
======== ======== ========
Tax at statutory rates................................. $ 84,065 $ 43,412 $ 22,087
Adjusted for the effect of:
Non-deductible provincial tax and royalties and
resource allowances............................... (22,262) (15,122) (6,599)
Additional tax deductions............................ (38,579) (26,317) (14,061)
Other................................................ (278) 1,511 2,059
-------- -------- --------
Income tax expense..................................... $ 22,946 $ 3,484 $ 3,486
======== ======== ========
The principal timing differences and their tax effect
are as follows:
Depreciation and amortization........................ $ 19,232 $ -- $ --
Capitalized expenditures............................. (8,328) -- --
Other................................................ 394 -- --
Alternative minimum tax carry forward................ (6,555) -- --
-------- -------- --------
Deferred tax liability................................. $ 4,743 $ -- $ --
======== ======== ========
Details of income tax expense are as follows:
Canadian
Current.............................................. $ 3,236 $ 3,484 $ 3,486
United States -- Federal
Current.............................................. 14,967 -- --
Deferred............................................. 3,356 -- --
United States -- State
Deferred............................................. 1,387 -- --
-------- -------- --------
Income tax expense..................................... $ 22,946 $ 3,484 $ 3,486
======== ======== ========
</TABLE>
At December 31, 1995, the Company has income tax losses carried forward of
approximately $236,000 which will begin to expire in 1997. The benefit relating
to these loss carry forwards has been recognized by reducing deferred income tax
liabilities.
22. NET INCOME PER SHARE (EARNINGS PER SHARE)
Net income per share is calculated on the weighted average number of shares
issued and outstanding during the twelve months ended December 31, 1995 of
43,352,000 (1994 -- 42,872,000; 1993 -- 39,793,000). Fully diluted net income
per share did not differ materially from net income per share in any of the
accounting periods.
F-21
<PAGE> 33
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
23. CONTINGENCIES
PCS is a shareholder in Canpotex which markets potash offshore. Should any
operating losses or other liabilities be incurred by Canpotex, the shareholders
have contractually agreed to reimburse Canpotex for such losses or liabilities
in proportion to their productive capacity. There were no such operating losses
or other liabilities in 1995.
In common with other companies in the industry, the Company is unable to
acquire insurance for underground assets.
In June 1993, the Company was served with a complaint relating to a suit
filed in the United States District Court for Minnesota against most North
American potash producers, including the Company. The complaint alleges a
conspiracy among the defendants to fix the price of potash purchased by the
plaintiffs as well as potash purchased by the members of a class of certain
purchasers proposed by the plaintiffs. The complaint seeks treble damages in an
unspecified amount and other relief. Similar complaints were filed in the United
States District Courts for the Northern District of Illinois and the Western
District of Virginia. On motion of the defendants, all of the complaints were
transferred and consolidated for pre-trial purposes in the United States
District Court for Minnesota. Amended complaints were filed in March and April
1994. On January 12, 1995, the Minnesota Federal Court granted the plaintiffs'
motion for class certification. Merits discovery was completed in September
1995. Expert discovery was completed in November 1995. The Company and PCS Sales
filed a motion for summary judgment on December 22, 1995.
Additional complaints were filed in California and Illinois State Courts on
behalf of purported classes of indirect purchasers of potash in those states.
The Company moved to dismiss the California State Court lawsuit for lack of
personal jurisdiction and the court ruled that it does not have personal
jurisdiction over the Company but that it does have personal jurisdiction over
PCS Sales. The case remains at an early stage; no merits discovery has taken
place. The Illinois State Court dismissed the Illinois State Court complaint for
failure to state a cause of action. The Illinois plaintiff has appealed that
dismissal.
In the litigation, the plaintiff's have retained an economist who has
issued a report in which he states that if the plaintiffs prevail, in his
opinion, the plaintiffs would be entitled to a total of approximately $311
million in damages (subject to trebling) from all the defendants. However, the
Company believes that the approach used by the plaintiffs economist is so
seriously flawed as to be untenable and insofar as the allegations of wrongdoing
relate to the Company, management of the Company, having consulted with legal
counsel, believes that the allegations are without merit, that the Company has
valid defences and that the lawsuits will not have a material adverse effect on
the Company. However, management of the Company cannot predict with certainty
the outcome of the litigation.
PCS Sales received a grand jury subpoena on December 29, 1993 from the
Antitrust Division of the US Department of Justice for certain documents
relating to its North American potash business activities. Document production
is ongoing. In addition, ten employees of PCS Sales have received grand jury
subpoenas. The Company believes the Antitrust Division's subpoenas are part of
the Division's ongoing investigation of the allegations made in the civil
complaints. Since the investigation is at a preliminary stage, it is not
possible to determine whether charges will be filed.
Various other claims and lawsuits are pending against the Company. While it
is not possible to determine the ultimate outcome of such actions at this time,
it is management's opinion that the ultimate resolution of such items, including
those pertaining to environmental matters, will not have a material effect on
the Company.
F-22
<PAGE> 34
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
24. RELATED PARTY TRANSACTIONS
The Company has a one-fourth interest in Canpotex which markets potash
offshore. Sales to Canpotex are at prevailing market prices. Sales for the year
ended December 31, 1995 are $221,169 (1994 -- $185,776, 1993 -- $109,240).
Account balances resulting from the Canpotex transactions are included in
the Consolidated Statements of Financial Position and settled on normal trade
terms.
25. QUARTERLY RESULTS (UNAUDITED)
The following quarterly information in management's opinion includes all
adjustments (consisting solely of normal recurring adjustments) necessary for
fair presentation.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Sales........................................... $151,972 $222,141 $221,458 $311,326
Gross Profit.................................... $ 71,568 $ 85,696 $ 60,754 $ 91,524
Operating Income................................ $ 52,594 $ 64,374 $ 41,154 $ 66,127
Net Income...................................... $ 51,475 $ 47,744 $ 23,077 $ 37,190
Net Income per Share............................ $ 1.20 $ 1.11 $ 0.53 $ 0.84
1994
Sales........................................... $ 80,927 $146,544 $ 97,553 $ 81,880
Gross Profit.................................... $ 61,930 $ 89,133 $ 53,594 $ 46,441
Operating Income................................ $ 9,295 $ 39,038 $ 25,509 $ 24,633
Net Income...................................... $ 7,168 $ 37,261 $ 23,757 $ 23,033
Net Income per Share............................ $ 0.16 $ 0.88 $ 0.55 $ 0.53
</TABLE>
26. COMPARATIVE FIGURES
Certain of the prior years' figures have been reclassified to conform with
the current year's presentation.
27. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
A description of the accounting principles which differ significantly in
certain respects from generally accepted accounting principles in the United
States (US GAAP) follows:
Product development costs: Certain costs incurred relating to testing or
evaluating product and process alternatives are deferred until the alternative
is determined not to be technically or economically feasible. US GAAP would
require the reduction of these amounts in the current period's income.
Prior period adjustment: The provincial mining taxes of $6,245 and a
subsidiary's income tax adjustment of $1,267 have been accounted for as a prior
period adjustment, thereby excluding those amounts from the current period's
income. US GAAP would require the reduction of these amounts in the current
period's income.
Other investments: Other investments include portfolio investments which
are carried at cost. US GAAP requires that available-for-sale securities be
reported at fair value, with unrealized gains and losses excluded from earnings
and reported in a separate component of shareholders' equity.
F-23
<PAGE> 35
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
Foreign currency translation adjustment: The foreign currency translation
adjustment results from the restatement of prior periods so that all periods
presented are in the same reporting currency. US GAAP requires that the
comparative Consolidated Statements of Income and the Consolidated Statements of
Cash Flow be translated using weighted average exchange rates for the applicable
periods. In contrast, the Consolidated Statements of Financial Position are
translated using the exchange rates at the end of the applicable periods. The
difference in these exchange rates is what gives rise to the foreign currency
translation adjustment.
Earnings per share: In computing primary earnings per share, under US
GAAP, the stock options are included in the calculation to the extent that they
are exercisable.
Deferred income taxes: Deferred tax assets have been recognized only to
the extent of reducing deferred tax liabilities. US GAAP would require that
deferred tax assets be recorded when their realization is more likely than not.
Net sales: Sales are recorded net of freight costs (less related revenues)
and transportation and distribution expenses. US GAAP would require that net
freight costs and transportation and distribution expenses be included in cost
of sales.
In 1995 the Financial Accounting Standards Board issued Statements No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" and No. 123 "Accounting for Stock-Based Compensation". The
Company has decided to continue to apply APB 25 for measurement of compensation
of employees. Statement No. 121 is not expected to have a significant effect on
the financial statements.
The application of US GAAP, as described above, would have had the
following approximate effects on operating income, net income, net income per
share, total assets and shareholders' equity:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Operating income as reported in the consolidated
statements of income and retained earnings....... $ 224,249 $ 98,475 $ 56,869
Items increasing (decreasing) reported operating
income
Amortization of product development costs........ -- 1,132 861
Provincial mining taxes.......................... -- (6,245) --
Foreign currency translation adjustment.......... -- 2,080 5,022
----------- ----------- -----------
Approximate operating income -- US GAAP............ $ 224,249 $ 95,442 $ 62,752
=========== =========== ===========
Net income as reported in the consolidated
statements of income and retained earnings....... $ 159,486 $ 91,219 $ 44,697
Items increasing (decreasing) reported net income
Amortization of product development costs........ -- 1,132 861
Subsidiary income tax adjustment................. -- (1,267) 299
Provincial mining taxes.......................... -- (6,245) --
Deferred income taxes............................ 18,598
Foreign currency translation adjustment.......... -- 1,841 4,069
----------- ----------- -----------
Approximate net income -- US GAAP.................. $ 178,084 $ 86,680 $ 49,926
=========== =========== ===========
Weighted average shares outstanding -- US
GAAP........................................ 43,813,000 43,286,000 40,014,000
=========== =========== ===========
Net income per share -- US GAAP.................... $ 4.06 $ 2.00 $ 1.25
=========== =========== ===========
</TABLE>
F-24
<PAGE> 36
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Total assets as reported in the consolidated
statements of financial position................. $2,581,817 $1,027,766 $1,036,490
Items increasing (decreasing) reported total assets
Unrealized gain on available-for-sale security... -- 919 --
Deferred income tax asset........................ 18,598 -- --
Product development costs........................ -- (519) (1,723)
Foreign currency translation adjustment.......... -- -- 61,585
----------- ----------- -----------
Approximate total assets -- US GAAP................ $2,600,415 $1,028,094 $1,096,352
=========== =========== ===========
Shareholders' equity as reported in the
consolidated statements of financial position.... $1,241,875 $ 964,334 $ 903,719
Items increasing (decreasing) reported
shareholders' equity
Prior period adjustment.......................... -- -- 7,513
Deferred income taxes............................ 18,598 -- --
Unrealized gain on available-for-sale security... -- 919 --
Product development costs........................ -- (591) (1,723)
Foreign currency translation adjustment.......... -- -- 54,130
----------- ----------- -----------
Approximate shareholders' equity -- US GAAP........ $1,260,473 $ 964,662 $ 963,639
=========== =========== ===========
</TABLE>
SUPPLEMENTAL US GAAP DISCLOSURE
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are:
<TABLE>
<CAPTION>
1995 1994
-------- ------
<S> <C> <C>
Deferred tax assets:
Loss and credit carry forwards....................................... $ 75,209 --
Post-retirement/post-employment benefits............................. 47,386 --
Accrued reclamation costs............................................ 61,884 --
Other................................................................ 9,549 --
-------- ------
Total deferred tax assets.............................................. 194,028 --
-------- ------
Deferred tax liabilities:
Basis difference in fixed assets..................................... 176,453 --
Other................................................................ 3,720 --
-------- ------
Total deferred tax liabilities......................................... 180,173 --
-------- ------
Net deferred tax asset................................................. $ 13,855 --
======== ======
Consisting of:
Current deferred tax asset........................................... $ 18,598 $ --
Long-term deferred tax liability..................................... 4,743 --
-------- ------
$ 13,855 $ --
======== ======
</TABLE>
F-25
<PAGE> 37
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
The following pro forma information for the year ending December 31, 1994
gives effect to the acquisition of Texasgulf, Inc. and WSA as though they had
occurred on January 1, 1994:
<TABLE>
<S> <C>
Net sales........................................................................ $1,337,033
Net income....................................................................... $ 143,385
Net income per share............................................................. $ 3.20
</TABLE>
The following pro forma information for the year ended December 31, 1995
gives effect to the acquisition of Texasgulf, Inc. and WSA as though they had
occurred on January 1, 1995:
<TABLE>
<S> <C>
Net sales........................................................................ $1,364,863
Net income....................................................................... $ 212,382
Net income per share............................................................. $ 4.90
</TABLE>
The pro forma information for the year ended December 31, 1995 includes the
results of operations of WSA for the period from January 1, 1995 to June 30,
1995 and November 1, 1995 to December 31, 1995. The Company believes that the
results of operations for the period from July 1, 1995 to October 31, 1995,
although profitable, would not have a material impact on the pro forma results
of operations in 1995.
F-26
<PAGE> 38
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
The following supplemental schedules present the Income, Cash Flow, and
Financial Position in accordance with US GAAP as adjusted for the US GAAP
differences described in this note.
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED FINANCIAL POSITION
AS AT DECEMBER 31
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................................... $ 40,497 $ 16,576
Accounts receivable............................................... 223,377 74,103
Inventories....................................................... 221,911 60,847
Prepaid expenses.................................................. 12,041 13,187
Other current assets.............................................. 3,315 --
Deferred income tax asset......................................... 18,598 --
---------- ----------
519,739 164,713
Property, plant and equipment....................................... 2,032,339 853,688
Other assets........................................................ 48,337 9,693
---------- ----------
$2,600,415 $1,028,094
========== ==========
LIABILITIES
Current Liabilities
Accounts payable and accrued charges.............................. $ 199,222 $ 60,877
Current portion of long-term debt................................. 164,971 --
Current obligations under capital leases.......................... 870 555
---------- ----------
365,063 61,432
Long-term debt...................................................... 711,585 --
Obligations under capital leases.................................... 2,913 2,000
Deferred income taxes............................................... 4,743 --
Accrued post-retirement/post-employment benefits.................... 89,570 --
Accrued reclamation costs........................................... 151,531 --
Other non-current liabilities and deferred credits.................. 14,537 --
---------- ----------
1,339,942 63,432
---------- ----------
SHAREHOLDERS' EQUITY
Share Capital....................................................... 627,700 463,811
Contributed Surplus................................................. 336,486 336,486
Retained Earnings................................................... 317,216 184,966
Foreign Currency Translation Adjustment............................. (20,929) (20,601)
---------- ----------
1,260,473 964,662
---------- ----------
$2,600,415 $1,028,094
========== ==========
</TABLE>
F-27
<PAGE> 39
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $961,805 $436,078 $278,829
Cost of goods sold......................................... 652,263 275,473 194,625
---------- ---------- ----------
GROSS MARGIN............................................... 309,542 160,605 84,204
---------- ---------- ----------
Research and development................................... 1,553 1,578 1,716
Selling and administrative expenses........................ 56,985 36,404 31,286
Provincial mining and other taxes.......................... 43,388 39,572 19,405
Insurance proceeds......................................... -- -- (19,400)
Other income............................................... (16,633) (12,391) (11,555)
---------- ---------- ----------
85,293 65,163 21,452
---------- ---------- ----------
OPERATING INCOME........................................... 224,249 95,442 62,752
INTEREST EXPENSE........................................... 41,817 3,882 9,396
---------- ---------- ----------
INCOME BEFORE INCOME TAXES................................. 182,432 91,560 53,356
INCOME TAXES............................................... 4,348 4,880 3,430
---------- ---------- ----------
NET INCOME................................................. 178,084 86,680 49,926
RETAINED EARNINGS, BEGINNING OF YEAR....................... 184,966 132,205 105,011
DIVIDENDS.................................................. (45,834) (33,919) (22,732)
---------- ---------- ----------
RETAINED EARNINGS, END OF YEAR............................. $317,216 $184,966 $132,205
========== ========== ==========
NET INCOME PER SHARE....................................... $ 4.06 $ 2.00 $ 1.25
========== ========== ==========
DIVIDENDS PER SHARE........................................ $ 1.06 $ 0.79 $ 0.57
========== ========== ==========
</TABLE>
F-28
<PAGE> 40
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED CASH FLOW
FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Working capital from operations
Net income............................................. $ 178,084 $ 86,680 $ 49,926
Depreciation and amortization.......................... 70,953 39,150 31,679
Loss on disposal of fixed assets....................... 726 349 157
Provision for deferred income taxes.................... (13,855) -- --
Provision for post-retirement/post-employment
benefits............................................ 2,052 -- --
Changes in non-cash operating working capital
Accounts receivable.................................... (48,831) (14,746) (6,808)
Inventories............................................ 9,297 14,958 (23,764)
Prepaid expenses....................................... 2,521 481 (307)
Other current assets................................... 1,778 -- --
Accounts payable and accrued charges................... 26,581 19,665 3,700
Accrued reclamation costs................................ 5,214 -- --
Other non-current liabilities and deferred credits....... (1,037) -- --
---------- -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES.................... 233,483 146,537 54,583
---------- -------- --------
INVESTING ACTIVITIES
Additions to property, plant and equipment
Acquisition of Texasgulf Inc........................... (812,226) -- --
Acquisition of White Springs Agricultural Chemicals,
Inc................................................. (291,540) -- --
Acquisition of Potash Company of America............... -- -- (121,487)
Sustaining operations.................................. (39,596) (17,206) (17,176)
Proceeds on disposal of fixed assets..................... 503 2,095 249
Additions to other assets................................ (10,298) (338) (2,787)
---------- -------- --------
CASH USED IN INVESTING ACTIVITIES........................ (1,153,157) (15,449) (141,201)
---------- -------- --------
FINANCING ACTIVITIES
Proceeds from long-term obligations...................... 1,040,000 -- --
Repayment of long-term obligations....................... (214,460) (21,194) (34,080)
Proceeds from (repayment of) short-term debt............. -- (69,694) 59,936
Dividends................................................ (45,834) (33,919) (22,732)
Issuance of shares....................................... 163,889 2,512 76,644
---------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......... 943,595 (122,295) 79,768
---------- -------- --------
EFFECTS OF CHANGES IN EXCHANGE RATES ON MONETARY ITEMS... -- 7,783 (592)
---------- -------- --------
INCREASE (DECREASE) IN CASH.............................. 23,921 16,576 (7,442)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............. 16,576 -- 7,442
---------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR................... $ 40,497 $ 16,576 $ --
========== ======== ========
</TABLE>
F-29
<PAGE> 41
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF US DOLLARS)
28. SUBSEQUENT EVENTS
On September 2, 1996 the Company announced that it had entered into a
definitive merger agreement with Arcadian Corporation. The Company is to acquire
all the outstanding common shares of Arcadian (approximately 45.5 million shares
on a fully diluted basis) at a price of US$25.00 to US$27.00 per share. The
merger is subject to approval by the Arcadian stockholders.
On December 6, 1996 the Company entered into an agreement to purchase a 51%
interest in Kali und Salz AG at a price of 250 million Deutche Marks
(approximately $164,000).
F-30
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
POTASH CORPORATION OF SASKATCHEWAN, INC.
By: /s/ CHARLES E. CHILDERS
---------------------------------------
Charles E. Childers
Chief Executive Officer
January 10, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CHARLES E. CHILDERS Chairman of the Board, President and January 10, 1997
- ------------------------------------- Chief Executive Officer
Charles E. Childers
/s/ BARRY E. HUMPHREYS Sr. Vice-President, Finance and January 10, 1997
- ------------------------------------- Treasurer (Principal Financial and
Barry E. Humphreys Accounting Officer)
/s/ ISABEL B. ANDERSON Director January 10, 1997
- -------------------------------------
Isabel B. Anderson
/s/ DOUGLAS J. BOURNE Director January 10, 1997
- -------------------------------------
Douglas J. Bourne
/s/ DENIS J. COTE Director January 10, 1997
- -------------------------------------
Denis J. Cote
Director
- -------------------------------------
William J. Doyle
/s/ WILLARD Z. ESTEY Director January 10, 1997
- -------------------------------------
Hon. Willard Z. Estey, Q.C.
/s/ DALLAS J. HOWE Director January 10, 1997
- -------------------------------------
Dallas J. Howe
/s/ JAMES F. LARDNER Director January 10, 1997
- -------------------------------------
James F. Lardner
/s/ DONALD E. PHILLIPS Director January 10, 1997
- -------------------------------------
Donald E. Phillips
</TABLE>
F-31
<PAGE> 43
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PAUL SCHOENHALS Director January 10, 1997
- -------------------------------------
Paul Schoenhals
/s/ DARYL K. SEAMAN Director January 10, 1997
- -------------------------------------
Daryl K. Seaman
/s/ E. ROBERT STROMBERG Director January 10, 1997
- -------------------------------------
E. Robert Stromberg, Q.C.
/s/ JACK G. VICQ Director January 10, 1997
- -------------------------------------
Jack G. Vicq
/s/ BARRIE A. WIGMORE Director January 10, 1997
- -------------------------------------
Barrie A. Wigmore
/s/ PAUL S. WISE Director January 10, 1997
- -------------------------------------
Paul S. Wise
</TABLE>
F-32
