<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-10351
-------
POTASH CORPORATION OF SASKATCHEWAN INC.
(Exact name of registrant as specified in its charter)
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)
306 - 933 - 8500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 (2) has been subject to such
filing requirements for the past 90 days. YES X NO
------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. AS AT OCTOBER 31, 1997
----------
53,763,183 COMMON SHARES.
-------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
These interim consolidated financial statements do not include all
disclosure normally provided in annual financial statements. In management's
opinion, the unaudited financial information includes all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
such information. Interim results are not necessarily indicative of the results
expected for the fiscal year.
POTASH CORPORATION OF SASKATCHEWAN INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(in thousands of U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
--------------------- ------------------------
<S> <C> <C> <C> <C>
Net sales................................ $573,773 $ 342,148 $1,715,255 $1,061,388
Cost of goods sold....................... 424,307 252,264 1,266,610 773,787
--------- --------- ---------- ----------
GROSS MARGIN............................. 149,466 89,884 448,645 287,601
--------- --------- ---------- ----------
Selling and administrative............... 25,580 15,440 72,769 44,662
Provincial mining and other taxes........ 20,574 8,596 45,543 29,497
Other income............................. (5,539) (570) (23,745) (14,464)
--------- --------- ---------- ----------
40,615 23,466 94,567 59,695
--------- --------- ---------- ----------
OPERATING INCOME......................... 108,851 66,418 354,078 227,906
INTEREST EXPENSE......................... 22,749 11,038 60,127 36,784
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES............... 86,102 55,380 293,951 191,122
INCOME TAXES............................. 14,684 8,608 69,188 28,274
--------- --------- ---------- ----------
NET INCOME............................... $ 71,418 $ 46,772 224,763 162,848
========= =========
RETAINED EARNINGS, BEGINNING OF PERIOD... 438,526 277,689
DIVIDENDS................................ (41,738) (35,816)
---------- ----------
RETAINED EARNINGS, END OF PERIOD......... $ 621,551 $ 404,721
========= ========= ========== ==========
NET INCOME PER SHARE (NOTE 4)............ $1.33 $1.03 $4.34 $3.58
========= ========= ========== ==========
DIVIDENDS PER SHARE (NOTE 5)............. $0.26 $0.26 $0.78 $0.79
========= ========= ========== ==========
</TABLE>
(See Notes to the Consolidated Financial Statements)
-I-1-
<PAGE>
POTASH CORPORATION OF SASKATCHEWAN INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................... $ 74,198 $ ---
Accounts receivable............................... 331,320 230,778
Inventories (Note 3).............................. 365,573 219,433
Prepaid expenses.................................. 26,647 16,748
---------- ----------
797,738 466,959
Property, plant and equipment....................... 2,969,692 1,978,692
Goodwill............................................ 513,891 1,686
Other assets 114,648 47,050
---------- ----------
$4,395,969 $2,494,387
========== ==========
LIABILITIES
Current Liabilities
Bank Indebtedness................................. $ --- $ 6,330
Short-term debt................................... 140,000 ---
Accounts payable and accrued charges.............. 337,396 180,008
Current portion of long-term debt................. --- 1,520
Current obligations under capital leases.......... 300 300
---------- ----------
477,696 188,158
Long-term debt...................................... 1,174,700 618,800
Obligations under capital leases.................... 942 1,163
Deferred income tax liability....................... 297,946 28,480
Accrued post-retirement/post-employment benefits.... 122,634 95,460
Accrued reclamation costs........................... 140,892 146,512
Other non-current liabilities and deferred credits.. 15,695 10,318
---------- ----------
2,230,505 1,088,891
---------- ----------
SHAREHOLDERS' EQUITY
Share Capital....................................... 1,207,427 630,484
Contributed Surplus................................. 336,486 336,486
Retained Earnings................................... 621,551 438,526
---------- ----------
2,165,464 1,405,496
---------- ----------
$4,395,969 $2,494,387
========== ==========
</TABLE>
(See Notes to the Consolidated Financial Statements)
-I-2-
<PAGE>
POTASH CORPORATION OF SASKATCHEWAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1997 1996
---------- ----------
<S> <C> <C>
Operating Activities
Net income $ 224,763 $ 162,848
Items not affecting cash
Depreciation and amortization 122,661 67,242
(Gain) loss on disposal of property, plant and equipment (1,368) 786
Provision for deferred income taxes 34,357 14,735
Provision for post-retirement/post-employment benefits 4,933 6,472
----------- ---------
385,346 252,083
Changes in non-cash operating working capital
Accounts receivable 44,777 48,078
Inventories 10,564 29,619
Prepaid expenses (2,331) (1,860)
Accounts payable and accrued charges (64,571) (48,604)
Accrued reclamation costs (5,620) (3,147)
Other non-current liabilities and deferred credits (7,718) (8,477)
----------- ---------
Cash provided by operating activities 360,447 267,692
----------- ---------
Investing Activities
Acquisition of Arcadian Corporation (Note 2) (1,039,858) ---
Additions to property, plant and equipment (87,126) (37,101)
Proceeds on disposal of property, plant and equipment 8,597 22,285
(Additions to) disposals of other assets (15,470) 309
----------- ---------
Cash used in investing activities (1,133,857) (14,507)
----------- ---------
Cash (deficiency) before financing activities (773,410) 253,185
----------- ---------
Financing Activities
Proceeds from (repayment of) long-term obligations 553,259 (151,586)
Proceeds from short-term debt 140,000 ---
Repayment of note payable (374,526) ---
Dividends (41,738) (35,816)
Issuance of shares 576,943 2,254
----------- ---------
Cash provided by (used in) financing activities 853,938 (185,148)
----------- ---------
Increase in Cash 80,528 68,037
(Bank Indebtedness) Cash and Cash Equivalents, Beginning of Period (6,330) 40,497
----------- ---------
Cash and Cash Equivalents, End of Period $ 74,198 $ 108,534
----------- ---------
Supplemental cash flow disclosure
Interest paid $ 48,564 $ 39,091
Income taxes paid $ 39,436 $ 24,419
----------- ---------
</TABLE>
(See Notes to the Consolidated Financial Statements)
-I-3-
<PAGE>
POTASH CORPORATION OF SASKATCHEWAN INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars)
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
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 7.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Potash
Corporation of Saskatchewan Inc. (PCS) and its operating subsidiaries
(the "Company" except to the extent the context otherwise requires):
- PCS Sales (Canada) Inc.
- PCS Sales (Iowa), Inc.
- PCS Sales (Indiana), Inc.
- Potash Corporation of Saskatchewan (Florida) Inc.
- Potash Corporation of Saskatchewan Transport Limited
- PCS Sales (USA), Inc.
- PCS Phosphate Company, Inc. (PCS Phosphate)
- Albright & Wilson Company (proportionately consolidated)
- White Springs Agricultural Chemicals, Inc.
- PCS Nitrogen, Inc. (PCS Nitrogen)
2. ACQUISITION OF ARCADIAN CORPORATION
On March 6, 1997, the Company acquired all of the outstanding shares of
Arcadian Corporation for cash of $555,145 and the issuance of 8,030,236
common shares valued at $573,278. The cash consideration was financed by
debt. Arcadian Corporation is based in Memphis, Tennessee and is a producer
of nitrogen and nitrogen products. The acquisition was completed through
the merger of Arcadian Corporation into a wholly-owned subsidiary of PCS,
PCS Nitrogen.
The acquisition has been accounted for by the purchase method of accounting
and, accordingly, the results of operations of PCS Nitrogen have been
included in the consolidated financial statements from March 7, 1997. The
excess of the purchase price over the fair value of the net identifiable
assets acquired of $519,826 has been recorded as goodwill and is being
amortized on a straight-line basis over 40 years.
<TABLE>
<CAPTION>
Net assets acquired were:
<S> <C>
Working capital.......................................... $ 177,894
Fixed assets and other assets............................ 1,074,984
Goodwill................................................. 519,826
----------
1,772,704
Long-term debt and other long-term liabilities........... 644,281
----------
Net assets acquired...................................... 1,128,423
Less: Cash acquired..................................... 88,565
----------
Net acquisition cost..................................... $1,039,858
==========
</TABLE>
The following unaudited pro forma financial information presents the
combined results of operations of the Company and PCS Nitrogen as if the
acquisition had occurred at the beginning of the periods presented, after
giving effect to certain adjustments including amortization of goodwill,
additional depreciation expense, increased interest expense on debt
related to the acquisition, decreased interest expense and interest income
due to debt retired in connection with the acquisition, and
-I-4-
<PAGE>
related income tax effects.
The consolidated financial statements and the pro forma amounts are based
on a preliminary allocation of the purchase price. However, changes to
the consolidated financial statements and pro forma amounts are expected
as evaluations of assets and liabilities are completed and additional
information becomes available. Accordingly, the final allocated values
may differ from the amounts set forth in the consolidated financial
statements and below.
The unaudited pro forma financial information is for informational
purposes only and is not necessarily indicative of the future results of
operations of the combined company or the results of operations that would
have actually occurred had the acquisition been in effect for the periods
presented.
<TABLE>
<CAPTION>
Nine Months Ended September 30
1997 1996
---------- ----------
(unaudited pro forma)
<S> <C> <C>
Net sales $1,877,311 $1,919,920
Operating income 384,424 430,777
Net income 240,274 265,213
Net income per share $4.52 $4.95
</TABLE>
3. INVENTORIES
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Finished product $ 152,417 $ 93,717
Materials and supplies 113,356 73,912
Raw materials 47,670 29,917
Work in process 52,130 21,887
------------- -------------
$ 365,573 $ 219,433
============= =============
</TABLE>
4. EARNINGS PER SHARE
Earnings per share for the year-to-date are calculated on the weighted
average shares issued and outstanding during the nine months ended September
30, 1997 of 51,765,000 (1996 - 45,525,000). The weighted average shares
issued and outstanding during the third quarter of 1997 were 53,724,000
(1996 - 45,525,000).
5. DIVIDENDS
The Company declares its dividends in Canadian dollars.
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
As a result of the acquisition of Arcadian Corporation, the Company now
employs certain derivative instruments for the purpose of establishing the
cost of a portion of its natural gas requirements (primarily futures, swaps
and options) thereby managing the exposure to commodity price risk in the
purchase of natural gas, the primary raw material used in the manufacture of
ammonia. These activities have been designated as hedging activities by the
Company and are accounted for as such. The Company hedges for both committed
and anticipated purchases of natural gas. The Company does not hold these
instruments for trading purposes.
Gains or losses resulting from changes in the fair value of hedging
transactions which have not yet been settled are not recognized as they
generally relate to changes in the spot price of anticipated natural gas
purchases. Gains or losses arising from settled hedging transactions are
-I-5-
<PAGE>
deferred as a component of inventory until the product containing the hedged
item is sold, at which time both the natural gas purchase cost and the
related hedging deferral are recorded as cost of sales. The Company
regularly evaluates its unrecognized or deferred gains and losses on these
derivatives from a net realizable value of inventory perspective and
establishes appropriate reserves, if necessary.
7. 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:
Earnings per share: In computing primary earnings per share, under US GAAP,
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 be included in cost of sales and transportation and
distribution expenses be included in selling and administrative expenses.
The application of US GAAP, as described above, would have had the following
approximate effects on net income, net income per share, total assets and
shareholders' equity:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income as reported in the consolidated
statements of income and retained earnings $ 71,418 $ 46,772 $ 224,763 $ 162,848
Item decreasing reported net income
Deferred income taxes 8,176 1,435 12,468 5,753
----------- ----------- ----------- -----------
Approximate net income - US GAAP $ 63,242 $ 45,337 $ 212,295 $ 157,095
=========== =========== =========== ===========
Weighted average shares outstanding - US GAAP 54,206,000 46,028,000 52,281,000 45,989,000
=========== =========== =========== ===========
Net income per share - US GAAP $ 1.17 $ 0.98 $ 4.06 $ 3.42
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Total assets as reported in the consolidated statements of financial
position $ 4,395,969 $ 2,494,387
Item increasing reported total assets
Deferred income tax asset 3,269 15,727
----------- -----------
Approximate total assets - US GAAP $ 4,399,228 $ 2,510,114
=========== ===========
Shareholders' equity as reported in the consolidated statements of
financial position $ 2,165,464 $ 1,405,496
Item (decreasing) increasing reported shareholders' equity
Deferred income taxes (1,086) 11,382
----------- -----------
Approximate shareholders' equity - US GAAP $ 2,164,378 $ 1,416,878
=========== ===========
</TABLE>
-I-6-
<PAGE>
8. COMPARATIVE FIGURES
Certain of the prior period's comparative figures have been reclassified to
conform with the current period's presentation. Results for the first nine
months of 1996 do not include the operations of PCS Nitrogen (formerly
Arcadian Corporation) acquired March 6, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
O V E R V I E W
With the exception of purchased product, nitrogen data for 1997 is only for the
period subsequent to the acquisition of PCS Nitrogen, Inc. (formerly Arcadian
Corporation). Phosphate data for 1997 includes phosphate produced by the Geismar
operation acquired as part of the acquisition of PCS Nitrogen, Inc.
THIRD QUARTER
Net sales revenue and net income for the three months ended September 30, 1997
improved 68 percent and 53 percent, respectively, over the same period in 1996.
Net income for the three months ended September 30, 1997, was $71.4 million
(1996 - $46.8 million) on net sales of $573.8 million (1996 - $342.1 million),
or $1.33 per share (1996 - $1.03 per share). For the third quarter of 1997,
gross margin and operating income were $149.5 million and $108.9 million,
respectively, compared to a gross margin of $89.9 million and an operating
income of $66.4 million for the same period in 1996 (increases of 66 percent and
64 percent, respectively).
For the three months ended September 30, 1997, North American and offshore net
sales revenue were $407.9 million (1996 - $202.9 million) and $165.9 million
(1996 - $139.2 million), respectively. North American net sales revenue
represented 71 percent (1996 - 59 percent) of total net sales revenue, whereas
offshore sales represented 29 percent of net sales revenue (1996 - 41 percent).
Net sales revenue for the third quarter of 1997 was $573.8 million, an increase
of $231.7 million or 68 percent over the same period in 1996. Potash, phosphate
and nitrogen net sales revenue for the quarter ended September 30, 1997 were
$123.1 million (1996 - $101.6 million), $235.2 million (1996 - $217.4 million),
and $215.5 million (1996 - $23.1 million) respectively.
Gross margins for the third quarter of 1997 increased $59.6 million or 66
percent over the same quarter in 1996. Gross margin for potash was $68.0
million, an increase of $24.2 million when compared to the same quarter of 1996.
Gross margin for phosphate was $51.8 million, an increase of $6.1 million when
compared to the third quarter of 1996. Gross margin for nitrogen products was
$29.7 million.
The increase in net income of $24.6 million when comparing the third quarters of
1997 and 1996 is attributable to: potash sales volumes increasing 10 percent and
the gross margin increasing 55 percent; industrial phosphate volumes increasing
113 percent, resulting in a 13 percent increase in phosphate gross margin; and
a $29.7 million gross margin contribution by nitrogen. These increases in gross
margin were offset by: additional nitrogen selling and administrative expenses
of $8.9 million (including amortization of goodwill); $12.0 million of
additional potash mining taxes relating primarily to an adjustment in the
expected annual tax based on revised sales projections; $11.7 million additional
interest expense relating primarily to the acquisition of the nitrogen
operations and a $6.1 million increase in the provision for income taxes.
YEAR TO DATE
Net sales and net income for the nine months ended September 30, 1997 improved
62 percent and 38 percent, respectively, over the same period in 1996. Net
income for the nine months ended September 30, 1997 was $224.8 million (1996 -
$162.8 million) on net sales of $1,715.3 million (1996 - $1,061.4 million), or
$4.34 per share (1996 - $3.58 per share). For the first nine months of 1997,
gross margin and operating income were $448.6 million and $354.1 million,
respectively, compared to a gross margin of $287.6 million and operating income
of $227.9 million for the same period in 1996 (increases of 56 percent and 55
percent, respectively).
For the nine months ended September 30, 1997, North American and offshore net
sales revenue were
-I-7-
<PAGE>
$1,237.0 million (1996 $638.2 million) and $478.3 million (1996 - $423.2
million), respectively. North American net sales revenue represented 72 percent
(1996 - 60 percent) of total net sales revenue, whereas offshore sales
represented 28 percent of net sales revenue (1996 - 40 percent).
Potash, phosphate and nitrogen net sales revenue for the first nine months of
1997 was $367.4 million (1996 - $309.4 million), $705.8 million (1996 - $663.5
million), and $642.1 million (1996 - $88.5 million), respectively.
Gross margins for the first nine months of 1997 increased $161.0 million or 56
percent over the same period in 1996. Gross margin for potash products was
$178.3 million, an increase of $36.4 million when compared to the first nine
months of 1996. Gross margin for phosphate products was $145.7 million, an
increase of $2.1 million when compared to the first nine months of 1996. Gross
margin for nitrogen products was $124.6 million.
The increase in net income of $61.9 million when comparing the first nine months
of 1997 with the first nine months of 1996 is attributable to: a 16 percent
increase in potash sales volumes; a 26 percent increase in the potash gross
margin and a $124.6 million gross margin contributed by nitrogen. These
increases in gross margin were offset by: $22.2 million of nitrogen selling and
administrative expense (including amortization of goodwill); a $16.0 million
increase in potash mining taxes; a $23.3 million increase in interest expense
relating to the acquisition of the nitrogen operations and a $40.9 million
increase in the provision for income taxes.
POTASH REVENUE
THIRD QUARTER
Potash net sales revenue for the quarter ended September 30, 1997 increased by
$21.5 million or 21 percent as compared to the same period in 1996 (1997 -
$123.1 million; 1996 - $101.6 million). Potash net sales revenue represented 21
percent of consolidated net sales revenue. The Company sold 1.578 million tonnes
of potash in the third quarter of 1997, compared to 1.437 million tonnes sold in
the same period last year, an increase of 0.141 million tonnes or 10 percent.
Potash prices overall increased by 10 percent for the third quarter of 1997 when
compared to the third quarter of 1996. The gross margin for potash products was
$68.0 million (1996 - $43.8 million) or 45 percent of the consolidated gross
margin.
In the third quarter of 1997, North American potash sales volumes decreased 4
percent and offshore potash sales volumes increased 25 percent over the same
period in 1996. Prices in the North American market were up 22 percent while
offshore prices were flat. Comparisons to the third quarter of 1996 are affected
by sales to a competitor which occurred in that quarter.
North American net sales revenue from potash operations represented 41 percent
of the potash net sales revenue of the Company during the third quarter of 1997
(1996 - 42 percent). In the third quarter of 1997, the decrease in North
American potash sales volumes and the increase in North American prices resulted
in a $7.4 million increase in North American potash net sales revenue over the
same period in 1996. North American potash sales volumes for the third quarter
of 1997 decreased 0.03 million tonnes (1997 - 0.715 million tonnes; 1996 - 0.745
million tonnes) compared to the third quarter of 1996.
In the third quarter of 1997, offshore net sales revenue from potash operations
represented 59 percent of net potash sales revenue of the Company (1996 - 58
percent). In the third quarter of 1997, the increase in offshore sales volumes
resulted in a $14.1 million increase in offshore potash net sales revenue over
the same period in 1996. In the offshore market, the Company sold 0.863 million
potash tonnes during the third quarter of 1997 (1996 - 0.691 million tonnes), an
increase of 25 percent. Of the 0.863 million tonnes, 0.744 million tonnes were
sold through Canpotex and the remaining 0.119 million tonnes were produced by
PCS New Brunswick and sold and delivered to offshore markets by PCS Sales.
Potash net sales revenue for the first nine months of 1997 increased by $58.0
million or 19 percent as compared to the first nine months of 1996 (1997 -
$367.4 million; 1996 $309.4 million). The Company sold 5.011 million tonnes of
potash in the first nine months of 1997, compared to 4.324 million tonnes sold
in the same period last year, an increase of 0.687 million tonnes or 16 percent.
Potash prices overall increased marginally in the first nine months of 1997 as
compared to the first nine months of 1996.
YEAR TO DATE
In the first nine months of 1997, North American and offshore potash sales
volumes increased 9 percent and 22 percent, respectively, over the same period
in 1996. Potash prices decreased 4 percent in the offshore
-I-8-
<PAGE>
market; however, price increases of 11 percent were realized in the domestic
market. Comparisons to 1996 are affected by sales to another producer.
North American net sales revenue from potash operations represented 41 percent
of the potash net sales revenue of the Company during this year's first nine
months. In the first nine months of 1997, the increase in North American potash
sales volumes and an increase in North American prices resulted in a $26.4
million increase in North American potash net sales revenue over the same period
in 1996. North American potash sales volumes for the first nine months of 1997
increased 0.187 million tonnes (1997 - 2.253 million tonnes; 1996 - 2.066
million tonnes).
In the first nine months of 1997, offshore net sales revenue from potash
operations represented 59 percent of potash net sales revenue of the Company.
In the first nine months of 1997, the increase in offshore sales volumes and the
decrease in overall offshore selling price resulted in a $31.6 million increase
in offshore potash net sales revenue over the same period in 1996. In the
offshore market, the Company sold 2.758 million potash tonnes during the first
nine months of 1997 (1996 - 2.257 million tonnes), an increase of 22 percent.
Of the 2.758 million tonnes, 2.237 million tonnes were sold through Canpotex and
the remaining 0.521 million tonnes were produced by PCS New Brunswick and sold
and delivered to offshore markets by PCS Sales.
PHOSPHATE REVENUE
The acquired Geismar operation increased P2O5 production, liquid and industrial
sales both for the quarter and on a year to date basis.
THIRD QUARTER
Phosphate net sales revenue for the three months ended September 30, 1997 was
$235.2 million representing 41 percent of the consolidated net sales revenue.
The distribution of this revenue was as follows: liquid phosphate fertilizer
$65.4 million (28 percent); solid phosphate fertilizers $91.2 million (39
percent); animal feed $45.6 million (19 percent) and industrial products $33.0
million (14 percent). For the same quarter of 1996 net sales revenue was $217.4
million; liquid phosphate fertilizer $57.4 million (26 percent); solid phosphate
fertilizer $94.3 million (43 percent); animal feed $44.0 million (20 percent);
industrial products $19.6 million (9 percent) and phosphate rock $2.1 million (2
percent). Gross margin for phosphate products was $51.8 million (1996 - $45.7
million) or 35 percent of consolidated gross margin.
Third quarter net sales revenue from liquid and solid fertilizers was $156.6
million (1996 - $151.7 million) with sales volumes of 0.814 million tonnes
(1996 - 0.783 million tonnes). Solid phosphate fertilizer (substantially all
DAP) accounted for 39 percent (1996 - 43 percent) or $91.2 million (1996 - $94.3
million) of the total phosphate net sales revenue. Liquid fertilizer prices were
flat but volumes increased by 13 percent, resulting in additional net sales
revenue of $8.0 million over the third quarter of 1996. Solid phosphate
fertilizer prices and volumes changed only marginally as compared to the third
quarter of 1996.
Net sales revenue from animal feed and industrial products during the third
quarter was $78.6 million (1996 - $63.6 million) with sales volumes of 0.279
million tonnes (1996 - 0.223 million tonnes). Animal feed prices and volumes
were flat as compared to the third quarter of 1996. Industrial product prices
declined by 21 percent; however, volumes increased by 113 percent. The result
was additional net sales revenue of $13.4 million. Gross margin provided by feed
and industrial products increased by 25 percent over the same period a year ago.
YEAR TO DATE
Phosphate net sales revenue for the nine months ended September 30, 1997 was
$705.8 million representing 41 percent of the consolidated net sales revenue.
The distribution of this revenue was as follows: liquid phosphate fertilizer
$201.0 million (28 percent); solid phosphate fertilizer $272.1 million (39
percent); animal feed $140.2 million (20 percent); industrial products $91.2
million (13 percent) and phosphate rock $1.3 million. For the same nine months
of 1996 net sales revenue was $663.5 million; liquid phosphate fertilizer $176.0
million (27 percent); solid phosphate fertilizer $286.4 million (43 percent);
animal feed $134.9 million (20 percent); industrial products $60.8 million (9
percent) and phosphate rock $5.4 million. Gross margin for phosphate was $145.7
million (1996 - $143.6 million) or 32 percent of consolidated gross margin.
For the nine months ended September 30, 1997 net sales revenue from liquid and
solid fertilizers was $473.1 million (1996 - $462.4 million) with sales volumes
of 2.435 million tonnes (1996 - 2.313 million tonnes). Solid phosphate
fertilizer (substantially all DAP) accounted for 39 percent (1996 - 43
percent) or $272.1 million
-I-9-
<PAGE>
(1996 - $286.4 million) of the total phosphate net sales revenue. Compared to
the first nine months of 1996 the Company received higher prices for most of its
phosphate products (with the exception of DAP and industrial products, the
latter due to product mix). Liquid fertilizer prices increased by 6 percent
and sales volumes increased by 8 percent, resulting in additional net sales
revenue of $25.0 million over the first nine months of 1996. Solid phosphate
fertilizer prices declined 8 percent as compared to the first nine months of
1996. However, this was partially offset by a volume increase of 3 percent
resulting in a reduction of net sales revenue of $14.3 million compared to the
first nine months of 1996.
Net sales revenue from animal feed and industrial products during the first nine
months was $231.4 million (1996 - $195.7 million) with sales volumes of 0.825
million tonnes (1996 - 0.741 million tonnes). Animal feed prices increased 7
percent and volumes decreased 3 percent as compared to the first nine months of
1996. This resulted in additional net sales revenue of $5.3 million. Industrial
product prices declined by 5 percent while sales volumes increased by 58
percent. The result was additional net sales revenue of $30.4 million. Gross
margin provided by feed and industrial products increased by 33 percent over the
same period a year ago.
NITROGEN REVENUE
THIRD QUARTER
During the third quarter of 1997 nitrogen net sales revenue was $215.5 million.
Net sales revenue includes $57.8 million of purchased nitrogen products.
Manufactured nitrogen net sales revenue for the three months ended September 30,
1997 was $157.7 million. The distribution of this revenue was as follows:
ammonia $46.0 million (29 percent); urea $53.1 million (34 percent); nitrogen
solutions $26.2 million (17 percent) and other nitrogen products $32.4 million
(20 percent). Gross margin for nitrogen products was $29.7 million.
For the three months ended September 30, 1997 sales tonnes for manufactured
nitrogen products were as follows: ammonia 0.273 million tonnes; urea 0.335
million tonnes; nitrogen solutions 0.311 million tonnes and other nitrogen
products 0.255 million tonnes. Purchased nitrogen products sales tonnes for the
three months ended September 30, 1997 were 0.345 million tonnes.
YEAR TO DATE
From the date of acquisition, nitrogen net sales revenue was $642.1 million.
Net sales revenue includes $155.4 million of purchased nitrogen products for
resale. The overall gross margin was impacted negatively by reductions in
volumes and sales prices. Manufactured nitrogen net sales revenue for the seven
months ended September 30, 1997 was $486.7 million. The distribution of this
revenue was as follows: ammonia $134.7 million (28 percent); urea $153.2 million
(31 percent); nitrogen solutions $112.8 million (23 percent) and other nitrogen
products $86.0 million (18 percent). Gross margin for nitrogen products was
$124.6 million.
From the date of acquisition, sales tonnes for manufactured nitrogen products
were as follows: ammonia 0.745 million tonnes; urea 0.876 million tonnes;
nitrogen solutions 1.124 million tonnes and other nitrogen products 0.650
million tonnes. Purchased nitrogen products sales tonnes for the seven months
ended September 30, 1997 were 0.864 million tonnes.
Limited imports of urea into China has resulted in pricing pressures in the rest
of the world, however, the Company continues to sell the majority of its North
American urea production to the more stable industrial market. In addition, the
Company's U.S. mid-west urea prices have not declined as much as U.S. gulf urea
prices. Ammonia prices have declined since the acquisition, but results were
supported by the Company's strategic plant locations in North America and its
favorable gas contracts in Trinidad.
COST OF GOODS SOLD
THIRD QUARTER
During the third quarter of 1997 the Company produced 1.297 million potassium
chloride (KCL) tonnes, a 72 percent increase from the 0.755 tonnes produced in
the third quarter of 1996. During the third quarter of 1997 the Company
produced 0.599 million phosphoric acid (P2O5) tonnes (1996 - 0.533
million tonnes), an increase of 12 percent (due to the acquisition of the
Geismar operations). Nitrogen production during the third quarter of 1997 was
0.722 million nitrogen (N) tonnes.
Potash unit cost of sales were decreased by 9 percent due primarily to higher
production volumes and fewer shutdown weeks in the third quarter of 1997
compared to the same period in 1996.
-I-10-
<PAGE>
Phosphate unit cost of sales during the third quarter of 1997 decreased
marginally for solid and liquid fertilizers and for feed products compared to
the same period in 1996. The unit cost of sales of industrial products decreased
18 percent as compared to the same period in 1996 due to changes in product mix.
The input cost of sulfur increased and ammonia decreased as compared to the same
period in 1996.
The per unit natural gas cost included in PCS Nitrogen's cost of sales increased
approximately 4 percent from the same period in 1996.
Depreciation and amortization expense for the third quarter of 1997 was $44.7
million compared to $21.1 million in 1996, an increase of $23.6 million or 112
percent. The increase is largely attributable to additional depreciation and
amortization of $20.2 million from the acquired nitrogen operations.
YEAR TO DATE
For the nine months ended September 30, 1997, the Company produced 4.636 million
potassium chloride (KCL) tonnes, compared to 3.965 million tonnes in the first
nine months of 1996, an increase of 0.671 million tonnes (17 percent). For the
nine months ended September 30, 1997, the Company produced 1.720 million
phosphoric acid (P205) tonnes from its phosphate operations, compared to 1.553
million tonnes in 1996, an increase of 0.167 million tonnes (due to the
acquisition of the Geismar operations). From the date of acquisition, nitrogen
production was 1.685 million N tonnes.
Potash unit cost of sales decreased by 3 percent in the first nine months of
1997 compared to the same period in 1996 due primarily to higher production
volumes and fewer shutdown weeks.
Phosphate unit cost of sales in the first nine months of 1997 decreased by 3
percent for feed products as compared to the same period in the prior year.
However, this was offset by increases of 6 percent and 2 percent in the unit
cost of sales of liquid fertilizer and industrial products, respectively. These
increased costs, which were primarily caused by increased rock costs as a result
of excessive moisture in the overburden at Aurora, were reduced in the third
quarter when compared to the first quarter of 1997. The unit cost of sales of
solid fertilizer remained unchanged during the first nine months of 1997 as
compared to the same period in 1996. The input cost of sulfur decreased and
ammonia was flat as compared to the same period in 1996.
In nitrogen, U.S. natural gas market prices have increased since the date of
acquisition; however, PCS Nitrogen, through its natural gas hedging program and
favorable gas contracts in Trinidad, has kept its per unit natural gas cost
relatively flat. The per unit natural gas cost included in PCS Nitrogen's cost
of sales increased approximately 4 percent from the same period in 1996.
Depreciation and amortization expense for the first nine months of 1997 was
$122.7 million compared to $67.2 million in 1996, an increase of $55.5 million
or 83 percent. The increase is largely attributable to $47.3 million additional
depreciation and amortization from the acquired nitrogen operations.
SELLING AND ADMINISTRATIVE
Selling and administrative expenses during the third quarter of 1997 were $25.6
million as compared to $15.4 million in 1996, an increase of $10.2 million
(which includes amortization of goodwill). During the first nine months of 1997,
selling and administrative expenses were $72.8 million as compared to $44.7
million in 1996, an increase of $28.1 million (which includes amortization of
goodwill). The increases are attributable to the acquisition of PCS Nitrogen and
to general increases in supplies, compensation and benefits.
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.
For the third quarter of 1997, Saskatchewan provincial mining and other taxes
were $20.6 million as compared to $8.6 million in the third quarter of 1996, an
increase of $12.0 million. Potash production tax for the third quarter of 1997
was $16.3 million compared to $5.6 million in the same period in 1996, an
increase of $10.7 million. Corporate capital tax was $4.3 million in the third
quarter ended September 30, 1997 compared to $3.0 million in the same period in
1996, an increase of $1.3 million. For the first nine months of 1997,
Saskatchewan provincial mining and other taxes were $45.5 million as compared to
$29.5 million in the first nine months of 1996, an increase of $16.0 million.
Potash production tax for the first nine months of 1997
-I-11-
<PAGE>
was $33.1 million compared to $19.8 million in the same period in 1996, an
increase of $13.3 million. The increase in potash production tax includes an
adjustment in the expected annual tax based on revised sales projections.
Corporate capital tax was $12.3 million in the nine months ended September 30,
1997 compared to $9.7 million in the same period in 1996, an increase of $2.6
million.
INTEREST EXPENSE
For the third quarter of 1997, interest expense was $22.7 million as compared to
$11.0 million in the same period in 1996. For the first nine months of 1997,
interest expense was $60.1 million as compared to $36.8 million in the same
period in 1996. The 1997 amounts include interest on the debt incurred with the
acquisition of PCS Nitrogen in March.
INCOME TAXES
Income taxes in the third quarter of 1997 were $14.7 million, compared to $8.6
million in the same period of 1996, an increase of $6.1 million. Income taxes in
the first nine months of 1997 were $69.2 million, compared to $28.3 million in
the same period of 1996, an increase of $40.9 million. The increase is largely
attributable to an increase in deferred income tax relating to the Company's
acquired nitrogen operations and an increase in U.S. withholding taxes. The tax
rate applicable to the U.S. operations for the first nine months of 1997 is
approximately 27 percent of income before taxes. This rate for 1996 was
approximately 21 percent of income before taxes.
ANALYSIS OF FINANCIAL CONDITION AND CASH FLOW
Working capital for the first nine months of 1997 increased by $41.2 million.
Cash flow from operations was $360.4 million. Quick and current ratios were
.85 and 1.67 at September 30, 1997, respectively. The Company paid down its
long-term debt by $256.7 million (of which $255.0 million was voluntary) and
paid dividends of $41.7 million. At the end of the first nine months of 1997,
the debt to capital ratio was at 38 percent and the interest coverage ratio was
5.9 to 1. The net debt to market capitalization at September 30, 1997 was 26
percent.
OUTLOOK
The statements in this "Management Discussion and Analysis" in this "Outlook"
section, relating to the period after September 30, 1997, are forward-looking
statements subject to uncertainties. The Company's financial performance
continues to be affected by fertilizer prices tied to the worldwide state of
supply and demand for potash, phosphate and nitrogen products, agricultural
commodity prices, government assistance programs, weather conditions, exchange
rates and trade policies of producing and consuming nations which, among other
things, are influenced by domestic political conditions. The Company sells to a
diverse group of customers both by geography and by end product. Market
conditions by country will vary on a year-over-year basis and sales shift from
one period to another.
The rising world population and the demand for better diets in developing
nations will continue to drive consumption for fertilizer products over the
long-term. Over the short-term, there should be increased fertilizer usage over
the next few years as world grain stocks are historically low, and governments
around the world focus on food production. The Company expects to be an
important supplier to these markets. While the consumption trend line is
expected to continue to climb over the long-term, there will be, at times,
fluctuations in demand.
North American fertilizer demand is generally considered mature but is expected
to fluctuate from year to year, as a function of acres planted and application
rates per acre which are influenced by crop prices and weather. The North
American agricultural market is expected to have strong fall fertilizer demand
which is expected to firm markets and support prices in the fourth quarter of
1997. On a year-to-date basis approximately 50 percent of the Company's
phosphate and nitrogen gross margins comes from non-fertilizer markets. The
demand for these products will be affected by domestic economic growth. The
optimistic outlook for continued strong domestic economic growth, if correct,
supports the industrial markets and should translate into increased demand for
the Company's upgraded products. In the phosphate feed industry demand has
improved, reflecting positive livestock markets.
Potash is expected to continue to perform well in both the domestic and offshore
markets. The Company introduced a price increase of $6 per short ton in the
domestic market in mid-September which appears to be holding. An additional $3
per short ton increase was announced at the end of October. With an early U.S.
grain harvest, a tightening of supply and ongoing solid farm economics, good
sales volumes in the fall fertilizer application season are expected. Although
export prices are down from a year ago the strong offshore volumes so far in
1997 have resulted in an
-I-12-
<PAGE>
upward trend in price which is expected to continue. In addition, Canpotex and
International Potash Company (a major FSU potash supplier) have formed a joint
venture to market potash in Malaysia. This joint venture has recently announced
it's first sale, at a new higher price level. Supply has tightened as a
competitor in New Brunswick has shut down due to mine flooding and another mine
in New Mexico is slated for closure in early December, 1997.
The near-term outlook for phosphate pricing is expected to remain favorable as
supply and demand are in reasonably good balance. Worldwide phosphoric acid
capacity utilization remains historically high. The outlook for liquid phosphate
fertilizer is strong from both a demand and price perspective. Since two-thirds
of U.S. DAP is exported, a strong offshore market is required to maintain upward
pressure on prices. China, the biggest offshore buyer, has been purchasing DAP
on pace with last year's levels and India is back in the market after subsidies
were reinstated last year. However, on a year-to-date basis exports were up only
1 percent over last year because of lower DAP shipments to countries other than
China and India. Recently China returned to the market for additional DAP tonnes
at higher prices. In addition, Mississippi Chemical has just joined PhosChem,
further strengthening the association's offshore sales position. In North
America, projected increased corn and wheat acreage is expected to support
liquid and solid phosphate fertilizer sales.
To date, the currency devaluation in Far Eastern countries has not
significantly affected the Company's potash and phosphate fertilizer sales as
these countries purchase fertilizer to grow cash crops for export and to grow
food for internal use and are placing fertilizer purchases as a priority in
spending plans. However, the persistence of the currency devaluation could
affect the growth trend.
Market prices for nitrogen fertilizer are expected to come under some additional
pressure as new capacity comes on stream. The urea market is influenced by
China. Earlier in 1997, China stopped importing urea which had a negative effect
on prices. Chinese buyers remain inactive and though they have recently
postponed plans for the construction of two urea plants, they are not expected
to return to the market until mid-1998. The overall urea price realizations have
been aided by higher priced industrial product. The difficult urea market
carries over into the nitrogen solutions market, where volumes and prices
continue to be disappointing. As a result, PCS Nitrogen has cut nitrogen
solutions production at its Wilmington plant. This plant is scheduled to be
closed next year. However, the Company expects that its strategic plant
locations and sales to industrial customers (both of which result in higher
margins) and its favorable gas contracts in Trinidad will continue to impact
favorably on nitrogen margins.
U.S. farmers are expected to plant more wheat and corn in 1998 beginning with
winter wheat this fall. With near record harvests in 1997 and the larger
acreages for corn and wheat, it is expected that demand for fertilizer will
remain strong as farmers look to replenish depleted nutrient levels in the soil.
Early harvests are expected to result in a good fall fertilizer application
season.
PCS continues to operate its potash mines by matching production to sales
demand. Shutdowns at potash mines for inventory correction will influence potash
production costs on a quarter over quarter comparative basis. Ammonia prices
have moderated and are expected to impact favorably upon phosphate processing
input costs for the balance of 1997. PCS can use one-third of the ammonia it
produces and sells as ammonia at its own phosphate plants. The Company manages
its natural gas costs through a combination of fixed price contracts, hedges and
the Trinidad gas contracts. As the most flexible producer, the Company will
continue to allocate its nitrogen and phosphate feed stock to production of the
products with the best margins.
Capital expenditures in 1997 will exceed those in 1996 primarily due to the
acquired nitrogen operations. Plans for such expenditures include expansion
capital previously committed by Arcadian and sustaining capital.
The narrative, included under this Management Discussion and Analysis, has been
prepared with reference to the financial statements reported under Canadian
Generally Accepted Accounting Principles (GAAP).
-I-13-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CIVIL ANTITRUST COMPLAINTS
In June, 1993, Potash Corporation of Saskatchewan Inc. (the "Company")
and PCS Sales (Canada) Inc. ("PCS Sales") were 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 alleged 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 sought treble damages in an
unspecified amount and other relief. The Company and PCS Sales filed a motion
for summary judgment on December 22, 1995. On January 2, 1997, Judge Richard H.
Kyle issued an order granting the defendants' motions for summary judgment and
dismissing the lawsuit. The plaintiffs appealed that order to the United States
Court of Appeals for the Eighth Circuit, on January 31, 1997. A hearing for
arguments has been set for November 17, 1997.
Additional complaints were filed in the 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 parties have agreed to stay proceedings pending the outcome of the
appeal to the United States Court of Appeals for the Eighth Circuit. The
Illinois State Court dismissed the Illinois State Court complaint for failure to
state a cause of action. The Illinois plaintiff appealed that dismissal and that
dismissal was affirmed by the Appellate Court of Illinois on November 27, 1996.
On January 15, 1997 the appellate court denied the plaintiff's request for
rehearing. On February 17, 1997, the plaintiff petitioned the Supreme Court of
Illinois to review the Appellate Court's decision. The Illinois Supreme Court
denied that petition on April 2, 1997.
LAKE CHARLES PLANT
In connection with a 1992 incident at PCS Nitrogen's Lake Charles
plant, the United States Occupational Safety and Health Administration ("OSHA")
proposed penalties totaling $4.35 million, based on multiplying the base penalty
for the alleged violation by the number of employees allegedly exposed in the
incident. On February 19, 1997, an administrative law judge of the Occupational
Safety and Health Review Commission issued a decision finding that PCS Nitrogen
had committed a willful violation of the federal Occupational Safety and Health
Act and assessing a penalty of $50,000. PCS Nitrogen has appealed the judge's
decision. In another phase of the OSHA litigation, on April 28, 1997, the United
States Court of Appeals for the Fifth Circuit held that OSHA may not multiply
the penalty for the violation by the number of employees allegedly exposed in
the incident. OSHA has not appealed that decision and it has become final.
Therefore any civil penalty ultimately paid will be no more than $70,000, the
maximum allowed under the Occupational Safety and Health Act for the alleged
violation.
In September 1996, PCS Nitrogen's liability insurers negotiated
preliminary settlements of substantially all of the civil litigation arising
from the Lake Charles incident. The settlements, which in the aggregate are
within the policy limits of PCS Nitrogen's liability insurance, have been
finalized and approved by the court as to fairness. There remain three lawsuits
on appeal to the United States Court of Appeals for the Fifth Circuit from the
United States District Court for the Western District of Louisiana against PCS
Nitrogen arising from the incident, which lawsuits were brought in July 1993 by
former employees at the Lake Charles plant who allege that they were wrongfully
terminated following the incident. Management and legal counsel believe that
these lawsuits are without merit, and that there will be no material adverse
effect on the Company upon their resolution.
PCS NITROGEN SHAREHOLDER LITIGATION
Following announcement of Arcadian Corporation's proposed business
combination with Freeport McMoRan Inc., five lawsuits were filed in the Court of
Chancery of the State of Delaware in New Castle County on behalf of a purported
class of all stockholders of Arcadian Corporation other than the defendants and
their affiliates against Arcadian Corporation and some or all of its directors.
PCS was named as an additional defendant in an amended complaint, but PCS was
not served process. The amended complaint alleged generally that the defendants
acted improperly in causing Arcadian Corporation to enter into the merger
agreement with PCS and PCS Nitrogen, and
II-1
<PAGE>
sought an injuction preventing the merger, unspecified monetary damages, and
other relief.
The defendants believe the lawsuit is without merit. Nevertheless,
Arcadian Corporation and the other defendants entered into a Stipulation and
Agreement of Compromise, Settlement and Release (the "Stipulation") with the
plaintiffs providing for the settlement of the litigation. In so doing, the
defendants denied that they violated the law and agreed to settle the suit
solely to eliminate the burden and expense of any further litigation relating to
the merger. The Stipulation provides among other things that PCS will pay the
fees and expenses, if any, awarded by the court to the plaintiffs' counsel, up
to $450,000. The Stipulation also provides for, among other things, (a) the
dismissal of all claims asserted in the lawsuit with prejudice; and (b) the
release by the plaintiffs of any and all claims relating to the merger that they
may have against the defendants and related persons. The court, at a hearing on
September 10, 1997 approved the settlement and awarded plaintiffs' counsel
$450,000 in fees and expenses. The settlement has become final.
FORMER ARCADIAN EXECUTIVE PROCEEDINGS
On May 7, 1997, J. Douglas Campbell, Alfred L. Williams, Peter H.
Kesser, and David Alyea, former officers of Arcadian Corporation, filed lawsuits
against PCS in the United States District Court for the Western District of
Tennessee. The complaints allege that PCS breached employment agreements between
Arcadian and the officers and breached the related assumption agreement among
PCS, PCS Nitrogen, and Arcadian. In addition, Mr. Alyea's complaint names
Charles Childers, John Gugulyn, and John Hampton as additional defendants and
alleges that the defendants interfered with and conspired to interfere with his
employment agreement, and did not accurately state their intentions in entering
into the assumption agreement. The complaints of Mr. Campbell, Mr. Williams, Mr.
Kesser, and Mr. Alyea seek damages in excess of $22.2 million, $6.2 million,
$3.7 million, and $4.2 million, respectively. In addition, on October 14, 1997,
Charles Lance, a former officer of Arcadian Corporation, filed a lawsuit in the
same court against PCS also alleging breaches of his employment agreement and
the related assumption agreement. Mr. Lance seeks damages in an amount exceeding
$3.0 million. Each complaint also seeks certain additional unspecified damages.
Trial with respect to the original four plaintiffs' claims has been set for
August 17, 1998. Management of the Company, having consulted with legal counsel,
believes that the lawsuits will not have a material adverse effect on the
Company.
On September 15, 1997, PCS and PCS Nitrogen filed an action in the
Circuit Court of Tennessee for Thirtieth Judicial District at Memphis against J.
Douglas Campbell, Peter H. Kesser, Alfred F. Williams, Charles W. Lance, Jr.,
and David L. Alyea, for declaratory relief and damages. PCS and PCS Nitrogen
allege that the defendants, all former executives of Arcadian, committed
breaches of their fiduciary duties in the negotiation of, obtaining approval
for, and execution of the Employment Agreements each of them had with Arcadian.
In addition, PCS has sought a declaratory judgment with respect to the
unenforceability of the Employment Agreements. On October 14, 1997, the
defendants removed this action from the Circuit Court of Tennessee to the United
States District Court for the Western District of Tennessee. On October 21,
1997, the five defendants filed counterclaims: (i) under the Employee Retirement
Income Security Act of 1974, as amended, against PCS Nitrogen, (ii) alleging
that PCS and PCS Nitrogen unlawfully interfered with their attainment of
benefits under their Employment Agreements, and (iii) incorporating by reference
all claims asserted in their individually filed complaints. The damages sought
by the defendants in these counterclaims appear substantially equivalent to the
damages sought in their individually filed suits as plaintiffs.
PORT AUTHORITY PROCEEDINGS
On March 13, 1996, PCS Nitrogen, two other nitrogen producers, and up
to 30 unidentified parties were named as defendants in a lawsuit filed in the
name of the Port Authority of New York and New Jersey (the "Port Authority") in
New Jersey state court. The lawsuit was actually filed by attorneys hired by the
Port Authority's subrogated insurance carriers. The Port Authority's insurers
are seeking to recover damages allegedly incurred as a result of the explosion
at the World Trade Center in New York City on February 26, 1993. The Port
Authority's insurers allege in their complaint that the two other named
defendants and one or more unidentified parties (as manufacturers of ammonium
nitrate), PCS Nitrogen and one or more unidentified parties (as producers of
urea), and one or more unidentified makers of nitric acid are liable under
various tort theories for unspecified property damages, business interruption
losses, lost rent and other damages allegedly incurred by the Port Authority as
a result of the World Trade Center explosion. The lawsuit was removed to federal
court in New Jersey. On February 7, 1997, the defendants filed a motion, which
is still pending, to dismiss the suit for failure to state a claim upon which
relief could be granted. On July 29, 1997, the court requested the parties to
brief the issue of the court's subject matter jurisdiction over the case. On
October 2, 1997, the court issued an order confirming its jurisdiction over the
lawsuit's subject matter. Although neither the Port Authority nor its subrogated
insurers have alleged or otherwise revealed the amount
II-2
<PAGE>
of damages sought from PCS Nitrogen in the lawsuit, the Port Authority stated in
an affidavit submitted to the court in support of its motion to disqualify its
insurers' counsel that as of April 9, 1996, the Port Authority had submitted to
its insurers claims relating to the explosion totaling approximately $340
million, of which the insurers had paid approximately $160 million. PCS Nitrogen
is unaware of any basis for liability and intends to vigorously defend the
lawsuit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No. Description of Document
- ----------- -----------------------
3(i) Restated Articles of Incorporation of the registrant dated
October 31, 1989, as amended May 11, 1995, incorporated by
reference to Exhibit 3(i) to the registrant's report on Form 10-
K for the year ended December 31, 1995 (the "1995 Form 10-K").
3(ii) Bylaws of the registrant dated March 2, 1995, incorporated by
reference to Exhibit 3(ii) to the 1995 Form 10-K.
4(a) Term Credit Agreement between The Bank of Nova Scotia and other
financial institutions and the registrant dated October 4, 1996,
incorporated by reference to Exhibit 4(b) to the registrant's
Form S-4 (File No. 333-17841).
4(b) Indenture dated as of June 16, 1997 between the registrant and
The Bank of Nova Scotia Trust Company of New York, incorporated
by reference to Exhibit 4(a) the registrant's report on Form 8-K
dated June 18, 1997.
The registrant hereby undertakes to file with the Securities and Exchange
Commission, upon request, copies of any constituent instruments defining the
rights of holders of long-term debt of the registrant or its subsidiaries that
have not been filed herewith because the amounts represented thereby are less
than 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis.
10(a) Suspension Agreement concerning Potassium Chloride from Canada
dated January 7, 1988, among U.S. Department of Commerce, the
registrant, International Minerals and Chemical (Canada)
Limited, Noranda, Inc. (Central Canada Potash Co.), Potash
Company of America, a Division of Rio Algom Limited, S & P
Canada, II (Kalium Chemicals), Cominco Ltd., Potash Company of
Canada Limited, Agent for Denison-Potacan Potash Co. and
Saskterra Fertilizers Ltd., incorporated by reference to Exhibit
10 (a) to the registrant's Form F-1 (File No. 33-31303) (the "F-
1 Registration Statement").
10(b) Sixth Voting Agreement dated April 22, 1978, between Central
Canada Potash, Division of Noranda, Inc., Cominco Ltd.,
International Minerals and Chemical Corporation (Canada)
Limited, PCS Sales and Texasgulf Inc., incorporated by reference
to Exhibit 10(f) to the F-1 Registration Statement.
10(c) Canpotex Limited Shareholders Seventh Memorandum of Agreement
effective April 21, 1978, between Central Canada Potash,
Division of Noranda Inc., Cominco Ltd., International Minerals
and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf
Inc. and Canpotex Limited as amended by Canpotex S & P amending
agreement dated November 4, 1987, incorporated by reference to
Exhibit 10(g) to the F-1 Registration Statement.
10(d) Producer Agreement dated April 21, 1978, between Canpotex
Limited and PCS Sales, incorporated by reference to Exhibit
10(h) to the F-1 Registration Statement.
10(e) Agreement of Limited Partnership of Arcadian Fertilizer, L.P.
(now PCS Nitrogen Fertilizer, L.P.) dated as of March 3, 1992
(form), and the related Certificate of Limited Partnership of
Arcadian Fertilizer, L.P., filed with the Secretary of State of
the State of Delaware on March 3, 1992 (incorporated by
reference to Exhibits 3.1 and 3.2 to Arcadian Partners L.P.'s
Registration Statement on Form S-1 (File No. 33-45828)).
10(f) Geismar Complex Services Agreement dated June 4, 1984, between
Allied Corporation and Arcadian
II-3
<PAGE>
Corporation, incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1 (File No. 33-34357).
10(g) Canpotex/PCS Amending Agreement, dated with effect October 1,
1992, incorporated by reference to Exhibit 10(f) to the 1995
Form 10-K.
10(h) Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
dated with effect October 7, 1993, incorporated by reference to
Exhibit 10(g) to the 1995 Form 10-K.
10(i) Esterhazy Restated Mining and Processing Agreement dated January
31, 1978, between International Minerals and Chemical
Corporation (Canada) Limited and the registrant's predecessor,
incorporated by reference to Exhibit 10(e) to the F-1
Registration Statement.
10(j) Agreement dated December 21, 1990, between International
Minerals & Chemical Corporation (Canada) Limited and the
registrant, amending the Esterhazy Restated Mining and
Processing Agreement dated January 31, 1978, incorporated by
reference to Exhibit 10(p) to the registrant's report on Form
10-K for the year ended December 31, 1990.
10(k) Operating Agreement dated May 11, 1993, between BP Chemicals
Inc. and Arcadian Ohio, L.P., as amended by the First Amendment
to the Operating Agreement dated as of November 20, 1995,
between BP Chemicals Inc. and Arcadian Ohio, L.P. ("First
Amendment"), incorporated by reference to Exhibit 10.2 to
Arcadian Partners L.P.'s current report on Form 8-K for the
report event dated May 11, 1993 ("Partners 5/11/93 Report"),
except for the First Amendment which is incorporated by
reference to Arcadian Corporation's report on Form 10-K for the
year ended December 31, 1995 ("Arcadian 10-K").
10(l) Manufacturing Support Agreement dated May 11, 1993, between BP
Chemicals Inc. and Arcadian Ohio, L.P., incorporated by
reference to Exhibit 10.3 to the Partners 05/11/93 Report.
10(m) Amended and Restated Agreement for Lease dated as of May 16,
1997, between Trinidad Ammonia Company, Limited Partnership, and
PCS Nitrogen Fertilizer, L.P., incorporated by reference to
Exhibit 10(n) to the registrant's report on Form 10-Q for the
quarterly period ended June 30, 1997 (the "Second Quarter 1997
Form 10-Q").
10(n) Amended and Restated Lease Agreement dated as of May 16, 1997,
between Trinidad Ammonia Company, Limited Partnership, and PCS
Nitrogen Fertilizer, L.P., incorporated by reference to Exhibit
10(o) to the Second Quarter 1997 Form 10-Q.
10(o) Amended and Restated Agreement for Lease dated as of May 16,
1997, between Nitrogen Leasing Company, Limited Partnership, and
PCS Nitrogen Fertilizer, L.P., incorporated by reference to
Exhibit 10(p) to the Second Quarter 1997 Form 10-Q.
10(p) Amended and Restated Lease Agreement dated as of May 16, 1997,
between Nitrogen Leasing Company, Limited Partnership, and PCS
Nitrogen Fertilizer, L.P., incorporated by reference to Exhibit
10(q) to the Second Quarter 1997 Form 10-Q.
10(q) Amended and Restated Purchase Option Agreement dated as of May
16, 1997, between Nitrogen Leasing Company, Limited Partnership,
and PCS Nitrogen Fertilizer Operations, Inc., incorporated by
reference to Exhibit 10(r) to the Second Quarter 1997 Form 10-Q.
10(r) Amended and Restated Purchase Option Agreement dated as of May
16, 1997, between Trinidad Ammonia Company, Limited Partnership
and PCS Nitrogen Fertilizer Operations, Inc., incorporated by
reference to Exhibit 10(s) to the Second Quarter 1997 Form 10-Q.
10(s) Agreement dated October 13, 1995 between the registrant and
Charles E. Childers, incorporated by reference to Exhibit 10(j)
to the 1995 Form 10-K.
10(t) Potash Corporation of Saskatchewan Inc. Stock Option Plan -
Unaffiliated Directors, incorporated by reference Exhibit 4(a)
to the registrant's Post-effective Amendment No. 1 to Form S-8
(File No. 333-19215) (the "Form S-8").
II-4
<PAGE>
10(u) Potash Corporation of Saskatchewan Inc. Stock Option Plan -
Officers and Key Employees, incorporated by reference to Exhibit
4(b) to the Form S-8.
10(v) Short Term Incentive Plan of the registrant, as amended May 7,
1997, incorporated by reference to Exhibit 10(w) to the Second
Quarter 1997 Form 10-Q.
10(w) Long-Term Incentive Plan of the registrant, as amended May 7,
1997, incorporated by reference to Exhibit 10(x) to the Second
Quarter 1997 Form 10-Q.
10(x) Resolution and Forms of Agreement for Supplemental Retirement
Income Plan, for officers and key employees of the registrant,
incorporated by reference to Exhibit 10(o) to the 1995 Form
10-K.
10(y) Supplemental Executive Retirement Plan of Arcadian Corporation,
incorporated by reference to Exhibit 10.16 to the Arcadian S-4.
10(z) Forms of Agreement dated December 30, 1994, between the
registrant and certain officers of the registrant, concerning a
change in control of the registrant, incorporated by reference
to Exhibit 10(p) 1995 Form 10-K.
10(aa) Form of Agreement of Indemnification dated August 8, 1995,
between the registrant and certain officers and directors of the
registrant, incorporated by reference to Exhibit 10(q) to the
1995 Form 10-K.
10(bb) Employment Agreement between Arcadian Corporation and Gary E.
Carlson, dated as of September 5, 1996, incorporated by
reference to Exhibit 10(cc) to the registrant's report on Form
10-Q for the period ended March 31, 1997.
10(cc) Deferred Compensation Plan, for certain officers of PCS
Phosphate Company, Inc, incorporated by reference to Exhibit
10(r) to the 1995 Form 10-K.
10(dd) Supplemental Retirement Benefits Plan, for eligible employees of
PCS Phosphate Company, Inc., incorporated by reference to
Exhibit 10(s) to the 1995 Form 10-K .
10(ee) Second Amended and Restated Membership Agreement dated January
1, 1995, among Phosphate Chemicals Export Association, Inc. and
members of such association, including Texasgulf Inc. (now PCS
Phosphate Company, Inc.), incorporated by reference to Exhibit
10(t) to the 1995 Form 10-K.
10(ff) International Agency Agreement dated January 1, 1995, between
Phosphate Chemicals Export Association, Inc. and Texasgulf Inc.
(now PCS Phosphate Company, Inc.) establishing Texasgulf Inc. as
exclusive marketing agent for such association's wet phosphatic
materials, incorporated by reference to Exhibit 10(u) to the
1995 Form 10-K.
10(gg) General Partnership Agreement forming Albright & Wilson Company,
dated July 29, 1988 and amended January 31, 1995, between
Texasgulf Inc. (now PCS Phosphate Company, Inc.) and Albright &
Wilson Americas, Inc., incorporated by reference to Exhibit
10(v) to the 1995 Form 10-K.
10(hh) Royalty Agreement dated October 7, 1993, by and between the
registrant and Rio Algom Limited, incorporated by reference to
Exhibit 10(x) to the 1995 Form 10-K.
10(ii) Amending Resolution and revised forms of agreement regarding
Supplemental Retirement Income Plan of the registrant,
incorporated by reference to Exhibit 10(x) to the registrant's
report on Form 10-Q for the quarterly period ended June 30, 1996
(the "Second Quarter 1996 Form 10-Q").
10(jj) Employment Agreement dated May 16, 1996, by and between PCS
Phosphate Company, Inc. and Thomas J. Wright, incorporated by
reference to Exhibit 10(y) to the Second Quarter 1996 Form 10-Q.
10(kk) Shareholders Rights Agreement dated November 10, 1994, as
amended on March 28, 1995, and May 4, 1995, and approved by the
shareholders on May 11, 1995, incorporated by reference to
Exhibit 4(a) to the 1995 Form 10-K.
II-5
<PAGE>
11 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule.
(B) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by the registrant during the quarterly
period covered by this Report.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Potash Corporation of Saskatchewan Inc.
November 5, 1997 By: /s/ John L.M. Hampton
--------------------------------------
John L.M. Hampton
Senior Vice President, General Counsel
and Secretary
November 5, 1997 By: /s/ Barry E. Humphreys
--------------------------------------------
Barry E. Humphreys
Sr. Vice President, Finance and Treasurer
(Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Document
- ----------- -----------------------
3(i) Restated Articles of Incorporation of the registrant dated October
31, 1989, as amended May 11, 1995, incorporated by reference to
Exhibit 3(i) to the registrant's report on Form 10-K for the year
ended December 31, 1995 (the "1995 Form 10-K").
3(ii) Bylaws of the registrant dated March 2, 1995, incorporated by
reference to Exhibit 3(ii) to the 1995 Form 10-K.
4(a) Term Credit Agreement between The Bank of Nova Scotia and other
financial institutions and the registrant dated October 4, 1996,
incorporated by reference to Exhibit 4(b) to the registrant's Form
S-4 (File No. 333-17841).
4(b) Indenture dated as of June 16, 1997 between the registrant and The
Bank of Nova Scotia Trust Company of New York, incorporated by
reference to Exhibit 4(a) the registrant's report on Form 8-K dated
June 18, 1997.
10(a) Suspension Agreement concerning Potassium Chloride from Canada
dated January 7, 1988, among U.S. Department of Commerce, the
registrant, International Minerals and Chemical (Canada) Limited,
Noranda, Inc. (Central Canada Potash Co.), Potash Company of
America, a Division of Rio Algom Limited, S & P Canada, II (Kalium
Chemicals), Cominco Ltd., Potash Company of Canada Limited, Agent
for Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd.,
incorporated by reference to Exhibit 10 (a) to the registrant's
Form F-1 (File No. 33-31303) (the "F-1 Registration Statement").
10(b) Sixth Voting Agreement dated April 22, 1978, between Central Canada
Potash, Division of Noranda, Inc., Cominco Ltd., International
Minerals and Chemical Corporation (Canada) Limited, PCS Sales and
Texasgulf Inc., incorporated by reference to Exhibit 10(f) to the
F-1 Registration Statement.
10(c) Canpotex Limited Shareholders Seventh Memorandum of Agreement
effective April 21, 1978, between Central Canada Potash, Division
of Noranda Inc., Cominco Ltd., International Minerals and Chemical
Corporation (Canada) Limited, PCS Sales, Texasgulf Inc. and
Canpotex Limited as amended by Canpotex S & P amending agreement
dated November 4, 1987, incorporated by reference to Exhibit 10(g)
to the F-1 Registration Statement.
10(d) Producer Agreement dated April 21, 1978, between Canpotex Limited
and PCS Sales, incorporated by reference to Exhibit 10(h) to the F-
1 Registration Statement.
10(e) Agreement of Limited Partnership of Arcadian Fertilizer, L.P. (now
PCS Nitrogen Fertilizer, L.P.) dated as of March 3, 1992 (form),
and the related Certificate of Limited Partnership of Arcadian
Fertilizer, L.P., filed with the Secretary of State of the State of
Delaware on March 3, 1992 (incorporated by reference to Exhibits
3.1 and 3.2 to Arcadian Partners L.P.'s Registration Statement on
Form S-1 (File No. 33-45828)).
10(f) Geismar Complex Services Agreement dated June 4, 1984, between
Allied Corporation and Arcadian Corporation, incorporated by
reference to Exhibit 10.4 to Registration Statement on Form S-1
(File No. 33-34357).
10(g) Canpotex/PCS Amending Agreement, dated with effect October 1, 1992,
incorporated by reference to Exhibit 10(f) to the 1995 Form 10-K.
10(h) Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated
with effect October 7, 1993, incorporated by reference to Exhibit
10(g) to the 1995 Form 10-K.
10(i) Esterhazy Restated Mining and Processing Agreement dated January
31, 1978, between International Minerals and Chemical Corporation
(Canada) Limited and the registrant's predecessor, incorporated by
reference to Exhibit 10(e) to the F-1 Registration Statement.
<PAGE>
10(j) Agreement dated December 21, 1990, between International Minerals &
Chemical Corporation (Canada) Limited and the registrant, amending
the Esterhazy Restated Mining and Processing Agreement dated
January 31, 1978, incorporated by reference to Exhibit 10(p) to the
registrant's report on Form 10-K for the year ended December 31,
1990.
10(k) Operating Agreement dated May 11, 1993, between BP Chemicals Inc.
and Arcadian Ohio, L.P., as amended by the First Amendment to the
Operating Agreement dated as of November 20, 1995, between BP
Chemicals Inc. and Arcadian Ohio, L.P. ("First Amendment"),
incorporated by reference to Exhibit 10.2 to Arcadian Partners L.
P.'s current report on Form 8-K for the report event dated May 11,
1993 ("Partners 5/11/93 Report"), except for the First Amendment
which is incorporated by reference to Arcadian Corporation's report
on Form 10-K for the year ended December 31, 1995 ("Arcadian 10-
K").
10(l) Manufacturing Support Agreement dated May 11, 1993, between BP
Chemicals Inc. and Arcadian Ohio, L.P., incorporated by reference
to Exhibit 10.3 to the Partners 05/11/93 Report.
10(m) Amended and Restated Agreement for Lease dated as of May 16, 1997,
between Trinidad Ammonia Company, Limited Partnership, and PCS
Nitrogen Fertilizer, L.P., incorporated by reference to Exhibit
10(n) to the registrant's report on Form 10-Q for the quarterly
period ended June 30, 1997 (the "Second Quarter 1997 Form 10-Q").
10(n) Amended and Restated Lease Agreement dated as of May 16, 1997,
between Trinidad Ammonia Company, Limited Partnership, and PCS
Nitrogen Fertilizer, L.P., incorporated by reference to Exhibit
10(o) to the Second Quarter 1997 Form 10-Q.
10(o) Amended and Restated Agreement for Lease dated as of May 16, 1997,
between Nitrogen Leasing Company, Limited Partnership, and PCS
Nitrogen Fertilizer, L.P., incorporated by reference to Exhibit
10(p) to the Second Quarter 1997 Form 10-Q.
10(p) Amended and Restated Lease Agreement dated as of May 16, 1997,
between Nitrogen Leasing Company, Limited Partnership, and PCS
Nitrogen Fertilizer, L.P., incorporated by reference to Exhibit
10(q) to the Second Quarter 1997 Form 10-Q.
10(q) Amended and Restated Purchase Option Agreement dated as of May 16,
1997, between Nitrogen Leasing Company, Limited Partnership, and
PCS Nitrogen Fertilizer Operations, Inc., incorporated by reference
to Exhibit 10(r) to the Second Quarter 1997 Form 10-Q.
10(r) Amended and Restated Purchase Option Agreement dated as of May 16,
1997, between Trinidad Ammonia Company, Limited Partnership and PCS
Nitrogen Fertilizer Operations, Inc., incorporated by reference to
Exhibit 10(s) to the Second Quarter 1997 Form 10-Q.
10(s) Agreement dated October 13, 1995 between the registrant and Charles
E. Childers, incorporated by reference to Exhibit 10(j) to the 1995
Form 10-K.
10(t) Potash Corporation of Saskatchewan Inc. Stock Option Plan -
Unaffiliated Directors, incorporated by reference Exhibit 4(a) to
the registrant's Post-effective Amendment No. 1 to Form S-8 (File
No. 333-19215) (the "Form S-8").
10(u) Potash Corporation of Saskatchewan Inc. Stock Option Plan -
Officers and Key Employees, incorporated by reference to Exhibit
4(b) to the Form S-8.
10(v) Short Term Incentive Plan of the registrant, as amended May 7,
1997, incorporated by reference to Exhibit 10(w) to the Second
Quarter 1997 Form 10-Q.
10(w) Long-Term Incentive Plan of the registrant, as amended May 7, 1997,
incorporated by reference to Exhibit 10(x) to the Second Quarter
1997 Form 10-Q.
10(x) Resolution and Forms of Agreement for Supplemental Retirement
Income Plan, for officers and key employees of the registrant,
incorporated by reference to Exhibit 10(o) to the 1995 Form 10-K.
10(y) Supplemental Executive Retirement Plan of Arcadian Corporation,
incorporated by reference to Exhibit 10.16 to the Arcadian S-4.
<PAGE>
10(z) Forms of Agreement dated December 30, 1994, between the registrant
and certain officers of the registrant, concerning a change in
control of the registrant, incorporated by reference to Exhibit
10(p) to the 1995 Form 10-K.
10(aa) Form of Agreement of Indemnification dated August 8, 1995, between
the registrant and certain officers and directors of the
registrant, incorporated by reference to Exhibit 10(q) to the 1995
Form 10-K.
10(bb) Employment Agreement between Arcadian Corporation and Gary E.
Carlson, dated as of September 5, 1996, incorporated by reference
to Exhibit 10(cc) to the registrant's report on Form 10-Q for the
period ended March 31, 1997.
10(cc) Deferred Compensation Plan, for certain officers of PCS Phosphate
Company, Inc, incorporated by reference to Exhibit 10(r) to the
1995 Form 10-K.
10(dd) Supplemental Retirement Benefits Plan, for eligible employees of
PCS Phosphate Company, Inc., incorporated by reference to Exhibit
10(s) to the 1995 Form 10-K.
10(ee) Second Amended and Restated Membership Agreement dated January 1,
1995, among Phosphate Chemicals Export Association, Inc. and
members of such association, including Texasgulf Inc. (now PCS
Phosphate Company, Inc.), incorporated by reference to Exhibit
10(t) to the 1995 Form 10-K.
10(ff) International Agency Agreement dated January 1, 1995, between
Phosphate Chemicals Export Association, Inc. and Texasgulf Inc.
(now PCS Phosphate Company, Inc.) establishing Texasgulf Inc. as
exclusive marketing agent for such association's wet phosphatic
materials, incorporated by reference to Exhibit 10(u) to the 1995
Form 10-K.
10(gg) General Partnership Agreement forming Albright & Wilson Company,
dated July 29, 1988 and amended January 31, 1995, between Texasgulf
Inc. (now PCS Phosphate Company, Inc.) and Albright & Wilson
Americas, Inc., incorporated by reference to Exhibit 10(v) to the
1995 Form 10-K.
10(hh) Royalty Agreement dated October 7, 1993, by and between the
registrant and Rio Algom Limited, incorporated by reference to
Exhibit 10(x) to the 1995 Form 10-K.
10(ii) Amending Resolution and revised forms of agreement regarding
Supplemental Retirement Income Plan of the registrant, incorporated
by reference to Exhibit 10(x) to the registrant's report on Form
10-Q for the quarterly period ended June 30, 1996 (the "Second
Quarter 1996 Form 10-Q").
10(jj) Employment Agreement dated May 16, 1996, by and between PCS
Phosphate Company, Inc. and Thomas J. Wright, incorporated by
reference to Exhibit 10(y) to the Second Quarter 1996 Form 10-Q.
10(kk) Shareholders Rights Agreement dated November 10, 1994, as amended
on March 28, 1995, and May 4, 1995, and approved by the
shareholders on May 11, 1995, incorporated by reference to Exhibit
4(a) to the 1995 Form 10-K.
11 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule.
<PAGE>
POTASH CORPORATION OF SASKATCHEWAN INC.
COMPUTATION OF PER SHARE EARNINGS
FOR THE QUARTERS ENDED SEPTEMBER 30
(Figures and amounts expressed in thousands, except per share and per option
amounts)
<TABLE>
<CAPTION>
YTD-1997 YTD-1996 Q3-1997 Q3-1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
A Net Income as reported, Canadian GAAP $224,763 $162,848 $71,418 $46,772
B Items adjusting net income $(12,468) $ (5,753) $(8,176) $(1,435)
C Net income, US GAAP (A+B) $212,295 $157,095 $63,242 $45,337
D Weighted average number of shares outstanding 51,765 45,525 53,724 45,549
E Options outstanding to purchase equivalent 1,587 1,271 1,587 1,271
F Average exercise price per option $52.90 $43.55 $52.90 $43.55
G Average market price per share $78.37 $68.57 $76.00 $69.87
H Period end market price per share $78.50 $66.25 $78.50 $73.13
I Rate of Return available on option proceeds 0.05 0.05 0.05 0.05
CANADIAN GAAP
Based earnings per share (A/D) $4.34 $3.58 $1.33 $1.03
J Fully diluted earnings per share
Imputed earnings on option proceeds (E*F) 4,197 2,768 4,197 2,768
Fully diluted earnings per share ((A+J)/(D+L)) $4.29 $3.54 $1.37 $1.06
UNITED STATES GAAP
K Basic earnings per share
Net additional shares issuable (E-(E*F/G)) 516 464 482 479
Basic earnings per share (C/(D+K)) $4.06 $3.42 $1.17 $0.98
L Fully diluted earnings per share
Net additional shares issuable (E-(E*F/H)) 517 435 517 514
Fully diluted earnings per share (C/(D+L)) $4.06 $3.42 $1.17 $0.98
D+K Weighted average shares for US GAAP 52,281 45,989 54,206 46,028
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 74,198
<SECURITIES> 0
<RECEIVABLES> 338,146
<ALLOWANCES> (6,826)
<INVENTORY> 365,573
<CURRENT-ASSETS> 797,738
<PP&E> 3,595,031
<DEPRECIATION> (625,339)
<TOTAL-ASSETS> 4,395,969
<CURRENT-LIABILITIES> 477,696
<BONDS> 1,175,642
0
0
<COMMON> 1,207,427
<OTHER-SE> 958,037
<TOTAL-LIABILITY-AND-EQUITY> 4,395,969
<SALES> 1,715,255
<TOTAL-REVENUES> 1,715,255
<CGS> 1,266,610
<TOTAL-COSTS> 1,266,610
<OTHER-EXPENSES> 94,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,127
<INCOME-PRETAX> 293,951
<INCOME-TAX> 69,188
<INCOME-CONTINUING> 224,763
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,763
<EPS-PRIMARY> 4.34
<EPS-DILUTED> 4.29
</TABLE>
