Listed: TSX, NYSE Symbol: POT SASKATOON, SK, Jan. 26
/PRNewswire-FirstCall/ -- Record fourth-quarter potash shipments to
offshore customers and higher prices for all three nutrients pushed
PotashCorp's earnings for the period to $117.1 million ($1.09 per
diluted share) compared to $100.1 million ($0.88 per diluted share)
in the same quarter last year. This is the best fourth quarter in
our history and capped a year that set new company standards for
net earnings, gross margin and potash production. Our 2005 earnings
of $542.9 million ($4.89 per diluted share) were more than 80
percent higher than the previous record of $298.6 million ($2.70
per diluted share) set in 2004 and the most ever for a publicly
traded North American fertilizer company. Fourth-quarter gross
margin of $242.2 million was 23 percent better than last year's
fourth quarter ($197.3 million) and raised total 2005 gross margin
to $1.125 billion, 65 percent higher than the previous best of
$681.4 million in 2004 and nearly triple the level in 2003. This
included record gross margin for the year of $707.4 million in
potash and $318.7 million in nitrogen. PotashCorp also generated
$865.1 million in cash flow from operations during the year. This
strong cash flow was used to complete the second phase of our share
repurchase program, as an additional 3.6 million shares were bought
back during the quarter for $290.6 million. For the year, we
purchased 9.5 million shares for $851.9 million. Capital
expenditures of $130.8 million during the quarter were used on
announced projects to bring back idle potash capacity and continue
an expansion of purified acid production at Aurora. Our investments
in Arab Potash Company (APC) and Sociedad Quimica y Minera (SQM)
contributed an additional $8.8 million to fourth-quarter income
and, added to dividends received from Israel Chemicals Ltd. (ICL),
contributed a total of $61.3 million for the year. The current
total market value of our investments in these publicly traded
companies, plus our investment in Sinofert, equates to $17 per
PotashCorp share, and now exceeds the book value on our balance
sheet by approximately $1.0 billion. "Our outstanding financial
performance in 2005 illustrates the power of our Potash First
strategy, as we generated over $1.1 billion in total gross margin
and still operated our potash mines at only 68 percent of
capacity," said PotashCorp President and CEO Bill Doyle. "This
nutrient, along with Trinidad nitrogen and industrial phosphate,
provides the springboard to our future earnings growth. We view
this second consecutive year of earnings records as an affirmation
of our strategy and proof of the earnings generating capacity of
our potash resource." Market Conditions World GDP grew by an
estimated 4.3 percent in 2005, led by China and India. Many people
in these countries are seeking to use this economic strength to
improve their diets, primarily with more protein from animal
sources. This requires more grain - and, as a result, more
fertilizer. That contributed to strong potash demand from some key
offshore customers, as China increased its purchases by 1.2 million
tonnes compared to 2004 and India bought an additional 1.5 million
tonnes. This increase in demand offset reduced potash imports by
Brazil, where a strong real, weak soybean prices and tighter
agricultural credit affected consumption. These conditions
continued in the fourth quarter, with China purchasing record
volumes from Canpotex, the offshore marketing agent for
Saskatchewan potash, and Brazil staying out of the market. In North
America, a sharp spike in energy costs combined with low crop
commodity prices led farmers to step back from the fertilizer
market after a strong first half of the year. US purchasers appear
to have deferred buying decisions from the fall of 2005 to the
spring of 2006 to avoid building high-cost inventories. In
nitrogen, ammonia prices climbed rapidly as sustained high natural
gas prices at more than $13 per MMBtu led North American producers
to curtail half their ammonia operating capacity by year-end,
tightening market supply. Potash Potash gross margin of $140.3
million was up from $113.9 million in the same quarter last year
and raised the total for the year to $707.4 million from $422.8
million the previous year. Gross margin as a percentage of net
sales rose to 58 percent from 50 percent quarter over quarter. For
the year, gross margin as a percentage of net sales reached 60
percent versus 47 percent in 2004. Price was the largest
contributor to the substantial increase in margins for the quarter
and year. Realized prices for potash were up 21 percent from last
year's fourth quarter, but down 5 percent from the third quarter,
as the current quarter included record volumes of lower-priced
standard-grade tonnes sold to China under the old contract. For the
year, PotashCorp's realized prices were up more than 38 percent, or
$40 per tonne. Offshore potash volumes increased by 7 percent
quarter over quarter to 1.1 million tonnes, and were flat compared
to 2004. Canpotex shipped 1.8 million tonnes in the quarter and 8.2
million tonnes for the year, creating new fourth-quarter and annual
records. China increased its Canpotex purchases by 32 percent in
2005. This represented 26 percent of our offshore volumes, while
Brazil accounted for 17 percent and India 10 percent. Our North
American volumes declined by 32 percent quarter over quarter, as
farmers delayed purchasing. PotashCorp produced 2.4 million tonnes
of potash in the fourth quarter, an increase of 18 percent quarter
over quarter that raised our 2005 total to a record 8.8 million
tonnes. We took six mine shutdown weeks in the fourth quarter -
three fewer weeks than in the same quarter last year. Inventories
returned to a more normal 1.1 million tonnes by the end of the
year. Our quarter-over-quarter costs were flat, even as the
stronger Canadian dollar added about $2.00 per tonne and higher
natural gas costs added $3.00. A major contributor offsetting these
higher costs was the increased efficiencies at our expanded
Rocanville operation, which added 749,000 tonnes of annual
production capacity - far exceeding the expected capacity increase
of 400,000 tonnes. This raised our total potash capacity to 12.9
million tonnes. During the fourth quarter, new three-year labor
contracts were successfully ratified at PotashCorp's Allan, Cory
and Patience Lake mines. These contracts extend to April 30, 2008.
Nitrogen Nitrogen gross margin of $74.3 million was up 2 percent
from last year's fourth quarter and raised 2005 gross margin for
this segment to $318.7 million, a 31-percent increase over the
record 2004 margin of $242.8 million. Our Trinidad operation, with
its long-term, lower-cost natural gas contracts, again proved its
value and contributed 87 percent of the quarterly nitrogen gross
margin. In the fourth quarter, the company recognized another $12.5
million of the $48-million hedge gain triggered in the first
quarter of 2005. For the year, Trinidad contributed 68 percent of
nitrogen gross margin, with North American production adding 17
percent and gains on our hedges 15 percent. During 2005,
debottlenecking projects at our 03 and 04 Trinidad plants were
completed. Strong nitrogen prices coupled with above- design
results have generated investment payback periods of two years and
one year respectively. The record margin was driven by high natural
gas prices in North America, which led to sustained high realized
prices for nitrogen products. Ammonia prices were up 27 percent
quarter over quarter and 14 percent year over year, while urea
prices were up 22 percent for the quarter and 26 percent for the
year. Volumes dropped 9 percent from last year's fourth quarter and
2 percent for the year. Approximately two-thirds of PotashCorp's
nitrogen production is sold into industrial markets, which helped
maintain stability in this nutrient as farm purchases slowed in the
quarter. Our average natural gas costs for the quarter, including
our Trinidad contracts and North American gas hedge, were up 37
percent from last year's fourth quarter. Higher gas prices had a
significant impact on our North American production, as gas costs
were up 78 percent quarter over quarter. We extended a planned
turnaround at Lima to 55 days and operated it and Augusta at 80
percent of capacity. Phosphate Phosphate gross margin of $27.6
million for the quarter was up from $10.4 million in the same
quarter last year. It raised phosphate gross margin for the year to
$98.9 million from the 2004 total of $15.8 million. Industrial
products, led by purified acid, contributed 53 percent of this
annual gross margin, while feed represented 26 percent, liquid
fertilizers 18 percent and solid fertilizer, a negative last year,
added 3 percent. Purified phosphoric acid remained our most
profitable product in this segment. Industrial volumes were up 2
percent quarter over quarter at prices $10 per tonne higher, and up
9 percent for the year at prices $14 per tonne higher. Tighter
supply/demand fundamentals and higher input costs pushed up
realized prices for solid fertilizer by 11 percent quarter over
quarter and 5 percent over the trailing quarter. The continuing
effects of hurricanes Katrina and Rita, the closure of US Chem's
plant and additional production curtailments as a result of input
pressures kept DAP supply tight despite weaker-than-expected US
agricultural demand. The price gains were largely offset by higher
costs for sulfur and ammonia. Liquid volumes improved by 6 percent
over 2004's fourth quarter, with prices up 16 percent, largely as a
result of better domestic and offshore prices. Feed prices
continued to climb, rising by 3 percent from the third quarter and
25 percent quarter over quarter, due primarily to tight
supply/demand fundamentals. Feed volumes dropped 14 percent for the
fourth quarter, but only 3 percent for the year. Financial The
Canadian dollar, which gained strength against the US dollar over
the course of 2005, opened the fourth quarter at 1.1611 and closed
at 1.1659. Every one-cent change in the Canadian dollar impacts our
foreign exchange gain/loss by approximately $4.5 million, which is
primarily a non-cash translation item. Selling and administrative
expenses were down $18.3 million quarter over quarter, reflecting
the timing of reductions in accruals for our long-term incentive
plan, which was based on PotashCorp's share price. Provincial
mining taxes were 3 percent higher than in last year's fourth
quarter, but 48 percent higher for the year as a result of
increased profitability in potash. Additions to property, plant and
equipment in 2005 increased to $382.7 million from $220.5 million
the previous year. Excluding the $135.0 million spent on sustaining
capital, this was driven primarily by expenditures to bring back
idled potash capacity, debottleneck Trinidad ammonia plants and
expand purified phosphoric acid production. Outlook After
significant growth raised potash demand by 4 percent in the first
half of 2005, producers and customers slowed activity in the second
half, resulting in global demand growth of 1 percent for the year.
This lull has carried forward into the first quarter of 2006, as
producers from around the world negotiate new contracts with China.
In the interim, many customers continue to wait on the sidelines to
gauge the impact of these contracts on forward pricing. It is
expected that Asian nations such as Malaysia, Indonesia and
Vietnam, that all reduced potash consumption in 2005 due to adverse
weather, are likely to return to the market. Brazil, PotashCorp's
largest customer in 2004, is also expected to return to the market
with purchases somewhere between its record of 2004 and the reduced
2005 level. Brazil traditionally buys in the second or third
quarter as it prepares for its spring season, so this will have a
greater impact in the second half of the year. The requirements of
the mature North American market are well established and, once it
resumes purchasing, potash sales volumes are expected to reach
their traditional levels in 2006. Many purchasers are holding out
to see if fertilizer prices decline. Last-minute purchases could
create delivery challenges for the transportation industry, a
situation that could result in even higher prices. PotashCorp has
an advantage in this scenario because of our extensive US warehouse
system. Potash inventories are expected to remain steady as
producers have curtailed production in the first quarter of 2006.
PotashCorp announced an additional 16 mine shutdown weeks in the
first quarter. Still, the industry operating rate, with the
exception of PotashCorp, is high. Demand, meanwhile, should return
to trend line levels or higher in 2006 and prices should be up in
the year. In nitrogen, the futures markets suggest natural gas
prices will remain near $9 per MMBtu or higher through 2006, which
is expected to constrain North American production and increase the
need for imports. Ammonia shipping costs from Baltic regions to the
US Gulf have doubled, impacting the cost- competitiveness of many
producers. With Trinidad's proximity to the United States,
PotashCorp is able to move nitrogen to North America with
comparatively lower costs and greater speed. Our total North
American ten-year gas hedge position is currently valued at
approximately $300 million, with the 2006 portion representing
roughly $80 million. We liquidated 40 percent of the 2006 position
in the fourth quarter for a $40 million gain, which will be
recognized over the course of the year as the related inventory is
sold. Phosphate fertilizers continue to enjoy some improvement as
inventories are under control and demand is rising. Industrial
products will continue to be a strong provider of gross margin in
this segment. Feed phosphate supplement margins are expected to
grow as fundamentals are tight and prices are projected to increase
by 10 percent based on our December 2005 price announcement.
PotashCorp's 2006 capital expenditures are estimated to be $480
million, of which $160 million will relate to sustaining capital.
The majority of the new capital will be used to return long-idled
capacity to production at Allan and Lanigan, to conclude the final
two Trinidad ammonia plant debottlenecks and to complete the
purified acid expansion at Aurora. Depreciation and amortization
costs are expected to approximate $265 million. Our income tax rate
may continue at 33 percent; however a recent Canadian appeals court
decision in the case of a uranium producer could lead to a tax
refund in 2006 that, while not assured, would have the effect of
lowering our effective annual tax rate to 31 percent. The non-cash
future tax rate is expected to increase to 25 percent from 15
percent in 2005, due to anticipated higher tax depreciation claims
related to expenditures for the Allan and Lanigan potash projects.
Provincial mining and other taxes are forecast to approximate 15
percent of total potash gross margin in 2006, down from 19 percent
in 2005, again due to accelerated depreciation claims. In these
conditions, and assuming a Canadian dollar exchange rate of 1.15,
we anticipate a third consecutive record year, with earnings
expected to increase approximately 10 percent to 30 percent. That
would provide 2006 earnings between $5.25 and $6.25 per share,
including first-quarter earnings in the range of $1.00-$1.25.
Conclusion "PotashCorp's growth potential and value proposition
were clearly demonstrated in 2005," said Doyle. "Our consistent
operating philosophy over the past two decades has positioned us to
deliver high-quality earnings as we move forward. The long-term
fundamentals that shaped our strategies have not changed; in fact,
they have become more pronounced. We enter 2006 having had an
opportunity to retrench and prepare for another wave of growth.
We'll continue to manage our resources and considerable cash flow
in an effort to create a productive and profitable future for all
stakeholders in our company." Potash Corporation of Saskatchewan
Inc. is the world's largest fertilizer enterprise producing the
three primary plant nutrients and a leading supplier to three
distinct market categories: agriculture, with the largest capacity
in the world in potash, third largest in phosphate and fourth
largest in nitrogen; animal nutrition, with the world's largest
capacity in phosphate feed ingredients; and industrial chemicals,
as the largest global producer of industrial nitrogen products and
one of only three North American suppliers of industrial
phosphates. This release contains forward-looking statements. These
statements are based on certain factors and assumptions as set
forth in this release including foreign exchange rates, expected
growth, results of operations, performance and business prospects
and opportunities. While the company considers these factors and
assumptions to be reasonable based on information currently
available, they may prove to be incorrect. A number of factors
could cause actual results to differ materially from those in the
forward-looking statements, including, but not limited to:
fluctuations in supply and demand in fertilizer, sulfur, natural
gas, transportation and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks
associated with natural gas and other hedging activities; changes
in capital markets; changes in currency and exchange rates;
unexpected geological or environmental conditions; and government
policy changes. Additional risks and uncertainties can be found in
our 2004 annual report to shareholders and in filings with the U.S.
Securities and Exchange Commission and Canadian provincial
securities commissions. Forward-looking statements are given only
as at the date of this release and the company disclaims any
obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
Should subsequent events show that the forward-looking statements
released herein may be materially off-target, the company will
evaluate whether to issue, and, if appropriate following such
review, issue a news release updating guidance or explaining
reasons for the difference.
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PotashCorp will host a conference call on Thursday, January 26,
2006, at 1:00 p.m. Eastern Time. To join the call, dial (706)
643-3329 at least 10 minutes prior to the start time.
Alternatively, visit http://www.potashcorp.com/ for a live webcast
of the conference call in a listen-only mode. This news release is
also available at this same website.
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Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Financial Position (in millions of US dollars except
share amounts) (unaudited) December 31, December 31, 2005 2004
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Assets Current assets Cash and cash equivalents $ 93.9 $ 458.9
Accounts receivable 453.3 352.6 Inventories 522.5 396.8 Prepaid
expenses and other current assets 41.1 35.3
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1,110.8 1,243.6 Property, plant and equipment 3,262.8 3,098.9 Other
assets (Note 3) 852.8 650.2 Intangible assets 34.5 37.1 Goodwill
97.0 97.0
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$ 5,357.9 $ 5,126.8
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Liabilities Current liabilities Short-term debt $ 252.2 $ 93.5
Accounts payable and accrued charges 842.7 599.9 Current portion of
long-term debt 1.2 10.3
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1,096.1 703.7 Long-term debt 1,257.6 1,258.6 Future income tax
liability 543.3 499.4 Accrued pension and post-retirement benefits
213.9 193.4 Accrued environmental costs and asset retirement
obligations 97.3 81.2 Other non-current liabilities and deferred
credits 17.2 4.9
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3,225.4 2,741.2
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Shareholders' Equity Share capital (Note 4) 1,379.3 1,408.4
Unlimited authorization of common shares without par value; issued
and outstanding 103,593,792 and 110,630,503 at December 31, 2005
and December 31, 2004, respectively Contributed surplus (Note 4)
36.3 275.7 Retained earnings (Note 4) 716.9 701.5
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2,132.5 2,385.6
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$ 5,357.9 $ 5,126.8
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Operations and Retained Earnings (in millions of US
dollars except per-share amounts) (unaudited) Three Months Ended
Twelve Months Ended December 31 December 31 2005 2004 2005 2004
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Sales (Note 8) $ 930.5 $ 866.6 $ 3,847.2 $ 3,244.4 Less: Freight
55.2 60.5 249.7 238.7 Transportation and distribution 31.1 26.4
121.9 104.3 Cost of goods sold 602.0 582.4 2,350.6 2,220.0
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Gross Margin 242.2 197.3 1,125.0 681.4
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Selling and administrative 28.5 46.8 144.5 130.6 Provincial mining
and other taxes 25.8 25.1 137.2 92.6 Foreign exchange loss 0.1 17.7
12.5 19.7 Other income (Note 11) (7.5) (46.5) (61.8) (75.8)
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46.9 43.1 232.4 167.1
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Operating Income 195.3 154.2 892.6 514.3 Interest Expense 20.6 20.2
82.3 84.0
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Income Before Income Taxes 174.7 134.0 810.3 430.3 Income Taxes
(Note 6) 57.6 33.9 267.4 131.7
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Net Income $ 117.1 $ 100.1 542.9 298.6 ----------------------
---------------------- Retained Earnings, Beginning of Year 701.5
462.8 Repurchase of Common Shares (Note 4) (462.5) - Dividends
(65.0) (59.9)
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Retained Earnings, End of Year $ 716.9 $ 701.5
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Net Income Per Share (Note 7) Basic $ 1.11 $ 0.91 $ 5.00 $ 2.77
Diluted $ 1.09 $ 0.88 $ 4.89 $ 2.70
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Dividends Per Share $ 0.15 $ 0.15 $ 0.60 $ 0.55
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Cash Flow (in millions of US dollars) (unaudited)
Three Months Ended Twelve Months Ended December 31 December 31 2005
2004 2005 2004
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Operating Activities Net income $ 117.1 $ 100.1 $ 542.9 $ 298.6
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Adjustments to reconcile net income to cash provided by operating
activities Depreciation and amortization 61.4 60.8 242.4 240.0
Stock-based compensation 1.8 2.7 27.5 11.1 Loss (gain) on disposal
of property, plant and equipment 6.1 (0.1) 11.8 (0.7) Gain on sale
of long-term investments - (34.4) - (34.4) Foreign exchange on
future income tax (1.1) 11.4 8.9 17.2 Provision for (recovery of)
future income tax 19.1 (7.9) 40.1 26.3 Share of earnings of equity
investees (8.8) (11.2) (52.1) (30.9) Dividends received from equity
investees - 4.1 18.6 8.7 (Recovery of) provision for PCS Yumbes
S.C.M. - (2.3) - 3.6 Other long-term liabilities (2.4) (2.9) 20.2
(1.2)
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Subtotal of adjustments 76.1 20.2 317.4 239.7
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Changes in non-cash operating working capital Accounts receivable
(36.8) (42.8) (107.6) (51.9) Inventories (86.0) (27.0) (119.9)
(10.5) Prepaid expenses and other current assets 8.4 5.3 (5.8)
(6.3) Accounts payable and accrued charges 6.3 116.8 238.1 188.7
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Subtotal of changes in non-cash operating working capital (108.1)
52.3 4.8 120.0
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Cash provided by operating activities 85.1 172.6 865.1 658.3
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Investing Activities Additions to property, plant and equipment
(130.8) (127.2) (382.7) (220.5) Purchase of long-term investments -
(105.5) (190.9) (105.5) Proceeds from disposal of property, plant
and equipment 1.3 1.3 7.2 2.5 Proceeds from sale of long-term
investments - 100.8 5.2 100.8 Other assets and intangible assets
(1.8) (7.4) 5.9 (2.8)
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Cash used in investing activities (131.3) (138.0) (555.3) (225.5)
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Cash before financing activities (46.2) 34.6 309.8 432.8
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Financing Activities Repayment of long-term debt obligations (9.2)
(0.3) (10.1) (1.0) Proceeds from (repayment of) short-term debt
obligations 157.5 (1.4) 158.7 (82.7) Dividends (16.0) (16.3) (65.4)
(56.1) Repurchase of common shares (321.0) - (851.9) - Issuance of
common shares 0.8 61.6 93.9 161.2
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Cash (used in) provided by financing activities (187.9) 43.6
(674.8) 21.4
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(Decrease) Increase in Cash and Cash Equivalents (234.1) 78.2
(365.0) 454.2 Cash and Cash Equivalents, Beginning of Period 328.0
380.7 458.9 4.7
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Cash and Cash Equivalents, End of Period $ 93.9 $ 458.9 $ 93.9 $
458.9
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Supplemental cash flow disclosure Interest paid $ 31.5 $ 28.3 $
86.3 $ 83.3 Income taxes paid $ 15.2 $ 11.4 $ 141.6 $ 33.5
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Notes to the Condensed
Consolidated Financial Statements For the Three and Twelve Months
Ended December 31, 2005 (in millions of US dollars except share and
per-share amounts) (unaudited) 1. Significant Accounting Policies
With its subsidiaries, Potash Corporation of Saskatchewan Inc.
("PCS") - together known as "PotashCorp" or "the company" except to
the extent the context otherwise requires - forms an integrated
fertilizer and related industrial and feed products company. The
company's accounting policies are in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). The
accounting policies used in preparing these interim condensed
consolidated financial statements are consistent with those used in
the preparation of the 2004 annual consolidated financial
statements, except as disclosed in Note 2. These interim condensed
consolidated financial statements include the accounts of PCS and
its subsidiaries; however, they do not include all disclosures
normally provided in annual consolidated financial statements and
should be read in conjunction with the 2004 annual consolidated
financial statements. In management's opinion, the unaudited
financial statements include all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly such
information. 2. Change in Accounting Policy Consolidation of
Variable Interest Entities Effective January 1, 2005, the company
adopted revised CICA Accounting Guideline 15 ("AcG-15"),
"Consolidation of Variable Interest Entities". AcG-15 is harmonized
in all material respects with US GAAP and provides guidance for
applying consolidation principles to certain entities (called
variable interest entities or VIEs) that are subject to control on
a basis other than ownership of voting interests. An entity is a
VIE when, by design, one or both of the following conditions exist:
(a) total equity investment at risk is insufficient to permit that
entity to finance its activities without additional subordinated
support from other parties; (b) as a group, the holders of the
equity investment at risk lack certain essential characteristics of
a controlling financial interest. AcG-15 requires consolidation by
a business of VIEs in which it is the primary beneficiary. The
primary beneficiary is defined as the party that has exposure to
the majority of the expected losses and/or expected residual
returns of the VIE. The adoption of this guideline did not have a
material impact on the company's consolidated financial statements.
3. Other Assets In June 2005, the company acquired (i) 1,000,000
additional shares in Arab Potash Company ("APC") for $18.6; and
(ii) 21,000,000 additional shares in Israel Chemicals Ltd. ("ICL")
for $74.9. As a result of the purchases, the company's ownership
interest in APC and ICL increased to approximately 28 percent and
10 percent, respectively. The company accounts for its investment
in APC under the equity method and for ICL under the cost method.
In July 2005, the company acquired a 9.99 percent interest in the
ordinary shares of Sinochem Hong Kong Holdings Limited for cash
consideration of $97.1, plus transaction costs. Pursuant to a
strategic investment agreement, the company also holds an option to
acquire an additional 10.01 percent interest within three years of
the acquisition. The price for the shares subject to the option
will be determined by the prevailing market price at the time of
exercise. Sinochem Hong Kong Holdings Limited, a
vertically-integrated fertilizer enterprise in the People's
Republic of China, is a subsidiary of Sinochem Corporation and is
listed on The Hong Kong Stock Exchange. The company accounts for
its investment in Sinochem Hong Kong Holdings Limited under the
cost method. 4. Normal Course Issuer Bid On January 25, 2005, the
Board of Directors of PCS authorized a share repurchase program of
up to 5,500,000 common shares (approximately 5 percent of the
company's issued and outstanding common shares) through a normal
course issuer bid. On September 22, 2005, the Board of Directors
authorized an increase in the number of common shares sought under
the share repurchase program. This amendment allowed PotashCorp to
repurchase up to 4,000,000 additional common shares. Shares could
be repurchased from time to time on the open market through
February 14, 2006 at prevailing market prices. The timing and
amount of purchases under the program were dependent upon the
availability and alternative uses of capital, market conditions and
other factors. The company completed the repurchase program by
December 31, 2005. During the fourth quarter of 2005, the company
repurchased for cancellation 3,571,100 common shares under the
program, at a net cost of $290.5 and an average price per share of
$81.36. For the twelve months ended December 31, 2005, a total of
9,500,000 shares were repurchased at a net cost of $851.9 and an
average price per share of $89.67, resulting in a reduction of
share capital of $125.1, a reduction of contributed surplus of
$264.3, and a reduction of retained earnings of $462.5. 5. Plant
Shutdowns - 2003 In June 2003, the company indefinitely shut down
its Memphis, Tennessee plant and suspended production of certain
products at its Geismar, Louisiana facilities due to high US
natural gas costs and low product margins. The company determined
that all employee positions pertaining to the affected operations
would be eliminated and recorded $4.8 in connection with costs of
special termination benefits in 2003. No significant payments
relating to the terminations remain to be made. Management expects
to incur other shutdown-related costs of approximately $10.3 should
these nitrogen facilities be dismantled, and nominal annual
expenditures for site security and other maintenance costs. The
other shutdown-related costs have not been recorded in the
consolidated financial statements as of December 31, 2005. Such
costs will be recognized and recorded in the period in which they
are incurred. No additional significant costs were incurred in 2005
in connection with the plant shutdowns. The following table
summarizes, by reportable segment, the total costs incurred to date
and the total costs expected to be incurred in connection with the
plant shutdowns described above: Cumulative Total Costs Costs
Incurred Expected to to Date be Incurred
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Nitrogen Segment Employee termination and related benefits $ 4.8 $
4.8 Writedown of parts inventory 12.4 12.4 Asset impairment charges
101.6 101.6 Other related exit costs - 10.3
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$ 118.8 $ 129.1
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6. Income Taxes The company's consolidated income tax rate for each
of the three month and twelve month periods ended December 31, 2005
is approximately 33 percent (2004 - 33 percent, exclusive of the
gain on sale of long-term investments and a cumulative adjustment
regarding the charges relating to PCS Yumbes as described in Note
11). 7. Net Income Per Share Basic net income per share for the
quarter is calculated on the weighted average shares issued and
outstanding for the three months ended December 31, 2005 of
105,438,000 (2004 - 109,879,000). Basic net income per share for
the twelve months ended December 31, 2005 is calculated on the
weighted average shares issued and outstanding for the year ended
December 31, 2005 of 108,568,000 (2004 - 107,967,000). Diluted net
income per share is calculated based on the weighted average number
of shares issued and outstanding during the period. The denominator
is: (i) increased by the total of the additional common shares that
would have been issued assuming exercise of all stock options with
exercise prices at or below the average market price for the
period; and (ii) decreased by the number of shares that the company
could have repurchased if it had used the assumed proceeds from the
exercise of stock options to repurchase them on the open market at
the average share price for the period. The weighted average number
of shares outstanding for the diluted net income per share
calculation for the three months ended December 31, 2005 was
107,601,000 (2004 - 113,565,000) and for the year ended December
31, 2005 was 111,078,000 (2004 - 110,739,000). 8. Segment
Information The company has three reportable business segments:
potash, phosphate and nitrogen. These business segments are
differentiated by the chemical nutrient contained in the product
that each produces. Inter-segment sales are made under terms that
approximate market value. The accounting policies of the segments
are the same as those described in Note 1. Three Months Ended
December 31, 2005
-------------------------------------------------------------------------
Consol- Potash Phosphate Nitrogen All Others idated
-------------------------------------------------------------------------
Sales $ 274.0 $ 289.6 $ 366.9 $ - $ 930.5 Freight 24.4 19.9 10.9 -
55.2 Transportation and distribution 7.4 10.7 13.0 - 31.1 Net sales
- third party 242.2 259.0 343.0 - Cost of goods sold 101.9 231.4
268.7 - 602.0 Gross margin 140.3 27.6 74.3 - 242.2 Depreciation and
amortization 13.5 25.5 19.5 2.9 61.4 Inter-segment sales 0.9 2.6
26.0 - - Three Months Ended December 31, 2004
-------------------------------------------------------------------------
Consol- Potash Phosphate Nitrogen All Others idated
-------------------------------------------------------------------------
Sales $ 264.2 $ 265.7 $ 336.7 $ - $ 866.6 Freight 31.0 20.4 9.1 -
60.5 Transportation and distribution 5.8 7.9 12.7 - 26.4 Net sales
- third party 227.4 237.4 314.9 - Cost of goods sold 113.5 227.0
241.9 - 582.4 Gross margin 113.9 10.4 73.0 - 197.3 Depreciation and
amortization 16.2 21.2 21.0 2.4 60.8 Inter-segment sales 1.3 2.3
27.8 - - Twelve Months Ended December 31, 2005
-------------------------------------------------------------------------
Consol- Potash Phosphate Nitrogen All Others idated
-------------------------------------------------------------------------
Sales $ 1,341.1 $ 1,137.3 $ 1,368.8 $ - $ 3,847.2 Freight 129.7
80.1 39.9 - 249.7 Transportation and distribution 34.5 37.9 49.5 -
121.9 Net sales - third party 1,176.9 1,019.3 1,279.4 - Cost of
goods sold 469.5 920.4 960.7 - 2,350.6 Gross margin 707.4 98.9
318.7 - 1,125.0 Depreciation and amortization 64.5 95.4 72.2 10.3
242.4 Inter-segment sales 5.8 14.0 100.7 - - Twelve Months Ended
December 31, 2004
-------------------------------------------------------------------------
Consol- Potash Phosphate Nitrogen All Others idated
-------------------------------------------------------------------------
Sales $ 1,056.1 $ 977.9 $ 1,210.4 $ - $ 3,244.4 Freight 128.7 71.9
38.1 - 238.7 Transportation and distribution 32.6 29.4 42.3 - 104.3
Net sales - third party 894.8 876.6 1,130.0 - Cost of goods sold
472.0 860.8 887.2 - 2,220.0 Gross margin 422.8 15.8 242.8 - 681.4
Depreciation and amortization 66.4 84.4 79.7 9.5 240.0
Inter-segment sales 5.9 12.1 92.7 - - 9. Stock-Based Compensation
The company has three stock option plans. On May 5, 2005, the
company's shareholders approved the 2005 Performance Option Plan
under which the company was permitted to, after February 28, 2005
and before January 1, 2006, issue up to 1,200,000 common shares
pursuant to the exercise of options. Under the plan, the exercise
price is the quoted market closing price of the company's common
shares on the last trading day immediately preceding the date of
grant and an option's maximum term is ten years. Options will vest,
if at all, based on achievement of certain corporate performance
measures over a three-year period. As of December 31, 2005, options
to purchase a total of 1,188,500 common shares have been granted
under the plan. Prior to 2003, the company applied the intrinsic
value based method of accounting for its stock option plans.
Effective December 15, 2003, the company adopted the fair value
based method of accounting for stock options prospectively to all
employee awards granted, modified or settled after January 1, 2003.
Since the company's stock option awards prior to 2003 vest over two
years, the compensation cost included in the determination of net
income for the three and twelve month periods ended December 31,
2004 is less than that which would have been recognized if the fair
value based method had been applied to all awards since the
original effective date of CICA Section 3870, "Stock-based
Compensation and Other Stock-based Payments". The following table
illustrates the effect on net income and the related per-share
amount if the fair value based method had been applied to all
outstanding and unvested awards in each period. Three Months Ended
Twelve Months Ended December 31 December 31
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Net income - as reported $ 117.1 $ 100.1 $ 542.9 $ 298.6 Add:
Stock-based employee compensation expense included in reported net
income, net of related tax effects 1.2 2.2 18.4 8.8 Less:Total
stock-based employee compensation expense determined under fair
value based method for all option awards, net of related tax
effects (1.2) (3.2) (18.4) (12.8)
-------------------------------------------------------------------------
Net income - pro forma(1) $ 117.1 $ 99.1 $ 542.9 $ 294.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Compensation expense under the fair value method is recognized
over the vesting period of the related stock options. Accordingly,
the pro forma results of applying this method may not be indicative
of future results. Basic Net Income Per Share - as reported $ 1.11
$ 0.91 $ 5.00 $ 2.77 Basic Net Income Per Share - pro forma $ 1.11
$ 0.90 $ 5.00 $ 2.73 Diluted Net Income Per Share - as reported $
1.09 $ 0.88 $ 4.89 $ 2.70 Diluted Net Income Per Share - pro forma
$ 1.09 $ 0.87 $ 4.89 $ 2.66 In calculating the foregoing pro forma
amounts, the fair value of each option grant was estimated as of
the date of grant using the Black-Scholes-Merton option-pricing
model with the following weighted average assumptions: Year of
Grant
-------------------------------------------------------------------------
2005 2003 2002
-------------------------------------------------------------------------
Expected dividend $0.60 $0.50 $0.50 Expected volatility 28% 27% 32%
Risk-free interest rate 3.86% 4.06% 4.13% Expected life of options
6.5 years 8 years 8 years The company did not grant any stock
options during 2004. 10. Pension and Other Post-Retirement Expenses
Defined Benefit Pension Plans Three Months Ended Twelve Months
Ended December 31 December 31
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Service cost $ 3.4 $ 2.4 $ 13.8 $ 12.9 Interest cost 7.7 7.7 31.1
30.2 Expected return on plan assets (9.1) (8.3) (37.0) (33.5)
Change in valuation allowance 2.4 (2.2) 2.4 (2.2) Net amortization,
plan amendments, plan curtailments 2.4 1.7 7.3 5.0
-------------------------------------------------------------------------
Net expense $ 6.8 $ 1.3 $ 17.6 $ 12.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other Post-Retirement Plans Three Months Ended Twelve Months Ended
December 31 December 31
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Service cost $ 1.5 $ 1.3 $ 5.7 $ 5.2 Interest cost 3.4 3.2 13.3
13.2 Net amortization 0.3 0.3 1.5 0.8
-------------------------------------------------------------------------
Net expense $ 5.2 $ 4.8 $ 20.5 $ 19.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the three months ended December 31, 2005, the company
contributed $9.9 to its defined benefit pension plans, $8.8 to its
defined contribution pension plans and $2.6 to its other
post-retirement plans. Contributions for the year ended December
31, 2005, were $24.6 to the company's defined benefit pension
plans, $15.0 to its defined contribution pension plans and $8.3 to
its other post-retirement plans. 11. Other Income Three Months
Ended Twelve Months Ended December 31 December 31
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Share of earnings of equity investees $ 8.8 $ 11.2 $ 52.1 $ 30.9
Dividend income - 0.3 9.2 8.2 Gain on sale of long-term investments
- 34.4 - 34.4 Recovery of (provision for) PCS Yumbes S.C.M. - 2.3 -
(3.6) Other (1.3) (1.7) 0.5 5.9
-------------------------------------------------------------------------
$ 7.5 $ 46.5 $ 61.8 $ 75.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
In 2004, prior to the sale of PCS Yumbes to Sociedad Quimica y
Minera de Chile S.A. ("SQM") as described below, the company
(through a subsidiary) sold 8,500,000 Series A shares of SQM via
public auction on the Santiago Stock Exchange (the "Exchange") and
1,301,724 Series A shares in other Exchange transactions. Proceeds
on sale were $66.3, resulting in a non-taxable gain recorded in
Other Income of $34.4, net of selling costs. In December 2004, the
company concluded the sale of 100 percent of its shares of PCS
Yumbes to SQM. The total gain on sale was $3.5, of which $2.6 was
recognized in 2004. During 2004, the company recorded a writedown
of $6.2 ($0.3 in the fourth quarter) for PCS Yumbes, relating
primarily to certain mining machinery and equipment that was not to
be transferred to SQM under the terms of the agreement. For
measurement purposes, fair value was determined in reference to
market prices for similar assets. The machinery and equipment was
sold in 2005 for nominal proceeds. 12. Comparative Figures In the
third quarter of 2004, the Board of Directors of PCS approved a
split of the company's outstanding common shares on a two-for-one
basis in the form of a stock dividend. All comparative share and
per-share data have been retroactively adjusted to reflect the
stock split. Certain of the prior periods' figures have been
reclassified to conform with the current periods' presentation.
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Twelve Months Ended
December 31 December 31 2005 2004 2005 2004
-------------------------------------------------------------------------
Potash Operating Data Production (KCl Tonnes - thousands) 2,358
1,990 8,816 7,914 Shutdown weeks 6.1 9.3 24.0 28.2 Sales (tonnes -
thousands) North America 536 788 3,144 3,246 Offshore 1,116 1,044
5,020 5,030
-------------------------------------------------------------------------
1,652 1,832 8,164 8,276
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Net Sales (US $ millions) Sales $274.0 $264.2 $1,341.1
$1,056.1 Less: Freight 24.4 31.0 129.7 128.7 Transportation and
distribution 7.4 5.8 34.5 32.6
-------------------------------------------------------------------------
Net Sales $242.2 $227.4 $1,176.9 $894.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
North America $90.4 $93.0 $495.6 $347.5 Offshore 147.6 125.0 668.3
504.6
-------------------------------------------------------------------------
Potash Subtotal 238.0 218.0 1,163.9 852.1 Miscellaneous 4.2 9.4
13.0 42.7
-------------------------------------------------------------------------
$242.2 $227.4 $1,176.9 $894.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Average Price per MT North America $168.75 $118.14 $157.64
$107.06 Offshore $132.20 $119.73 $133.13 $100.33
-------------------------------------------------------------------------
$144.06 $119.05 $142.56 $102.97
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Operating Data Production (P(2)O(5) Tonnes - thousands)
460 549 2,012 1,962 P(2)O(5) Operating Rate 74% 83% 81% 75% Sales
(tonnes - thousands) Fertilizer - Liquid Phosphates 244 231 931 704
Fertilizer - Solid Phosphates 353 369 1,516 1,590 Feed 209 243 860
888 Industrial 159 156 664 611
-------------------------------------------------------------------------
965 999 3,971 3,793
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Twelve Months Ended
December 31 December 31 2005 2004 2005 2004
-------------------------------------------------------------------------
Phosphate Net Sales (US $ millions) Sales $289.6 $265.7 $1,137.3
$977.9 Less: Freight 19.9 20.4 80.1 71.9 Transportation and
distribution 10.7 7.9 37.9 29.4
-------------------------------------------------------------------------
Net Sales $259.0 $237.4 $1,019.3 $876.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer - Liquid Phosphates $57.2 $46.9 $208.2 $147.3 Fertilizer
- Solid Phosphates 86.4 81.6 346.7 324.7 Feed 57.4 53.1 221.0 190.6
Industrial 56.1 53.4 231.2 204.1 Miscellaneous 1.9 2.4 12.2 9.9
-------------------------------------------------------------------------
$259.0 $237.4 $1,019.3 $876.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Average Price per MT Fertilizer - Liquid Phosphates
$234.82 $203.30 $223.68 $209.17 Fertilizer - Solid Phosphates
$244.64 $221.08 $228.60 $204.16 Feed $274.38 $218.86 $256.96
$214.78 Industrial $351.95 $342.08 $348.12 $334.09
-------------------------------------------------------------------------
$268.32 $237.74 $256.66 $231.11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Operating Data Production (N Tonnes - thousands) 654 650
2,600 2,558 Average Natural Gas Cost per MMBtu $5.81 $4.24 $4.46
$3.71 Sales (tonnes - thousands) Manufactured Product Ammonia 409
468 1,672 1,776 Urea 275 278 1,321 1,165 Nitrogen solutions/ Nitric
acid/ Ammonium nitrate 480 453 1,850 1,797
-------------------------------------------------------------------------
Manufactured Product 1,164 1,199 4,843 4,738 Purchased Product 63
150 377 612
-------------------------------------------------------------------------
1,227 1,349 5,220 5,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer sales tonnes 447 506 1,978 2,063 Feed/Industrial sales
tonnes 780 843 3,242 3,287
-------------------------------------------------------------------------
1,227 1,349 5,220 5,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended Twelve Months Ended
December 31 December 31 2005 2004 2005 2004
-------------------------------------------------------------------------
Nitrogen Net Sales (US $ millions) Sales $366.9 $336.7 $1,368.8
$1,210.4 Less: Freight 10.9 9.1 39.9 38.1 Transportation and
distribution 13.0 12.7 49.5 42.3
-------------------------------------------------------------------------
Net Sales $343.0 $314.9 $1,279.4 $1,130.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product Ammonia $146.9 $132.8 $490.0 $458.0 Urea 85.9
71.3 369.5 259.1 Nitrogen solutions/ Nitric acid/ Ammonium nitrate
80.2 63.6 284.2 239.2 Miscellaneous 6.5 5.2 25.8 22.2
-------------------------------------------------------------------------
Net Sales Manufactured Product 319.5 272.9 1,169.5 978.5 Net Sales
Purchased Product 23.5 42.0 109.9 151.5
-------------------------------------------------------------------------
$343.0 $314.9 $1,279.4 $1,130.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer net sales $126.3 $122.7 $505.3 $438.7 Feed/Industrial
net sales 216.7 192.2 774.1 691.3
-------------------------------------------------------------------------
$343.0 $314.9 $1,279.4 $1,130.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Average Price per MT Ammonia $359.14 $283.60 $293.05
$257.85 Urea $312.78 $256.11 $279.63 $222.44 Nitrogen solutions/
Nitric acid/ Ammonium nitrate $167.27 $140.59 $153.67 $133.13
-------------------------------------------------------------------------
Manufactured Product $274.70 $227.61 $241.49 $206.52 Purchased
Product $370.30 $279.42 $291.28 $247.66
-------------------------------------------------------------------------
$279.64 $233.38 $245.09 $211.23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer average price per MT $282.98 $242.50 $255.42 $212.73
Feed/Industrial average price per MT $277.74 $227.92 $238.78
$210.28
-------------------------------------------------------------------------
$279.64 $233.38 $245.09 $211.23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exchange Rate (Cdn$/US$) 2005 2004
-------------------------------------------------------------------------
December 31 1.1659 1.2036 Fourth-quarter average conversion rate
1.1788 1.2436 Potash Corporation of Saskatchewan Inc. Selected
Non-GAAP Financial Measures and Reconciliations (in millions of US
dollars) (unaudited) The following information is included for
convenience only. Generally, a non-GAAP financial measure is a
numerical measure of a company's performance, financial position or
cash flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable
measure calculated and presented in accordance with generally
accepted accounting principles ("GAAP"). EBITDA, cash flow prior to
working capital changes and free cash flow are not measures of
financial performance (nor do they have standardized meanings)
under either Canadian GAAP or US GAAP. In evaluating these
measures, investors should consider that the methodology applied in
calculating such measures may differ among companies and analysts.
The company uses both GAAP and certain non-GAAP measures to assess
performance. The company's management believes these non-GAAP
measures provide useful supplemental information to investors in
order that they may evaluate PotashCorp's financial performance
using the same measures as management. PotashCorp's management
believes that, as a result, the investor is afforded greater
transparency in assessing the financial performance of the company.
These non-GAAP financial measures should not be considered as a
substitute for, nor superior to, measures of financial performance
prepared in accordance with GAAP. A. EBITDA ------ Set forth below
is a reconciliation of "EBITDA" to net income, the most directly
comparable financial measure calculated and presented in accordance
with Canadian GAAP. Three Months Ended Twelve Months Ended December
31 December 31
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Net income $ 117.1 $ 100.1 $ 542.9 $ 298.6 Income taxes 57.6 33.9
267.4 131.7 Interest expense 20.6 20.2 82.3 84.0 Depreciation and
amortization 61.4 60.8 242.4 240.0
-------------------------------------------------------------------------
EBITDA $ 256.7 $ 215.0 $ 1,135.0 $ 754.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDA is calculated as earnings before interest, income taxes,
depreciation and amortization. PotashCorp uses EBITDA as a
supplemental financial measure of its operational performance.
Management believes EBITDA to be an important measure as it
excludes the effects of items which primarily reflect the impact of
long-term investment decisions, rather than the performance of the
company's day-to-day operations. As compared to net income
according to GAAP, this measure is limited in that it does not
reflect the periodic costs of certain capitalized tangible and
intangible assets used in generating revenues in the company's
business. Management evaluates such items through other financial
measures such as capital expenditures and cash flow provided by
operating activities. The company believes that this measurement is
useful to measure a company's ability to service debt and to meet
other payment obligations or as a valuation measurement. Potash
Corporation of Saskatchewan Inc. Selected Non-GAAP Financial
Measures and Reconciliations (in millions of US dollars)
(unaudited) B. CASH FLOW --------- Set forth below is a
reconciliation of "cash flow prior to working capital changes" and
"free cash flow" to cash provided by operating activities, the most
directly comparable financial measure calculated and presented in
accordance with Canadian GAAP. Three Months Ended Twelve Months
Ended December 31 December 31
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
Cash flow prior to working capital changes (1) $ 193.2 $ 120.3 $
860.3 $ 538.3
-------------------------------------------------------------------------
Changes in non-cash operating working capital Accounts receivable
(36.8) (42.8) (107.6) (51.9) Inventories (86.0) (27.0) (119.9)
(10.5) Prepaid expenses and other current assets 8.4 5.3 (5.8)
(6.3) Accounts payable and accrued charges 6.3 116.8 238.1 188.7
-------------------------------------------------------------------------
Changes in non-cash operating working capital (108.1) 52.3 4.8
120.0
-------------------------------------------------------------------------
Cash provided by operating activities $ 85.1 $ 172.6 $ 865.1 $
658.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Free cash flow (2) $ 60.6 $ (14.3) $ 483.5 $ 315.0 Additions to
property, plant and equipment 130.8 127.2 382.7 220.5 Other assets
and intangible assets 1.8 7.4 (5.9) 2.8 Changes in non-cash
operating working capital (108.1) 52.3 4.8 120.0
-------------------------------------------------------------------------
Cash provided by operating activities $ 85.1 $ 172.6 $ 865.1 $
658.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The company uses cash flow prior to working capital changes as
a supplemental financial measure in its evaluation of liquidity.
Management believes that adjusting principally for the swings in
non-cash working capital items due to seasonality assists
management in making long-term liquidity assessments. The company
also believes that this measurement is useful as a measure of
liquidity or as a valuation measurement. (2) The company uses free
cash flow as a supplemental financial measure in its evaluation of
liquidity and financial strength. Management believes that
adjusting principally for the swings in non-cash operating working
capital items due to seasonality, additions to property, plant and
equipment, and changes to other assets assists management in the
long-term assessment of liquidity and financial strength. The
company also believes that this measurement is useful as an
indicator of the company's ability to service its debt, meet other
payment obligations and make strategic investments. Readers should
be aware that free cash flow does not represent residual cash flow
available for discretionary expenditures. Certain of the prior
periods' figures have been reclassified to conform with the current
periods' presentation. DATASOURCE: Potash Corporation of
Saskatchewan Inc. CONTACT: Betty-Ann Heggie, Senior Vice President,
Corporate Relations, Phone: (306) 933-8521, Fax: (306) 933-8844,
E-mail: , Web Site: http://www.potashcorp.com/
Copyright