Attached files
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EX-11 - EX-11 - POTASH CORP OF SASKATCHEWAN INC | o70502exv11.htm |
EX-32 - EX-32 - POTASH CORP OF SASKATCHEWAN INC | o70502exv32.htm |
EX-31.B - EX-31.B - POTASH CORP OF SASKATCHEWAN INC | o70502exv31wb.htm |
EX-31.A - EX-31.A - POTASH CORP OF SASKATCHEWAN INC | o70502exv31wa.htm |
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarterly Period Ended March 31, 2011 | ||
OR
|
||
o
|
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)
Canada | N/A | |
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
122
1st
Avenue South Saskatoon, Saskatchewan, Canada (Address of principal executive offices) |
S7K 7G3 (Zip Code) |
306-933-8500
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer
þ
|
Accelerated filer o |
Non-accelerated
filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company
(as defined in Exchange Act
Rule 12b-2). Yes o NO þ
As at April 30, 2011, Potash Corporation of Saskatchewan
Inc. had 854,785,533 Common Shares outstanding.
Part I. Financial Information | ||||||||
Item 1. Financial Statements | ||||||||
Condensed Consolidated Statements of Financial Position | ||||||||
EX-11 | ||||||||
EX-31.A | ||||||||
EX-31.B | ||||||||
EX-32 |
Table of Contents
Item 1. Financial
Statements
Potash
Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Financial Position
(in millions of US dollars)
(unaudited)
Condensed Consolidated Statements of Financial Position
(in millions of US dollars)
(unaudited)
March 31, |
December 31, |
January 1, |
|||||||||||||
2011 | 2010 | 2010 | |||||||||||||
Assets
|
|||||||||||||||
Current assets
|
|||||||||||||||
Cash and cash equivalents
|
$ | 473 | $ | 412 | $ | 385 | |||||||||
Receivables (Note 2)
|
1,256 | 1,059 | 1,214 | ||||||||||||
Inventories (Note 3)
|
597 | 570 | 624 | ||||||||||||
Prepaid expenses and other current assets
|
55 | 54 | 69 | ||||||||||||
2,381 | 2,095 | 2,292 | |||||||||||||
Non-current assets
|
|||||||||||||||
Property, plant and equipment
|
8,494 | 8,141 | 6,444 | ||||||||||||
Investments in equity-accounted investees
|
1,100 | 1,051 | 955 | ||||||||||||
Available-for-sale
investments
|
3,571 | 3,842 | 2,760 | ||||||||||||
Other assets
|
305 | 303 | 274 | ||||||||||||
Intangible assets
|
114 | 115 | 117 | ||||||||||||
Total Assets
|
$ | 15,965 | $ | 15,547 | $ | 12,842 | |||||||||
Liabilities
|
|||||||||||||||
Current liabilities
|
|||||||||||||||
Short-term debt and current portion of long-term debt
|
$ | 1,694 | $ | 1,871 | $ | 729 | |||||||||
Payables and accrued charges
|
1,261 | 1,198 | 817 | ||||||||||||
Current portion of derivative instrument liabilities
|
61 | 75 | 52 | ||||||||||||
3,016 | 3,144 | 1,598 | |||||||||||||
Non-current liabilities
|
|||||||||||||||
Long-term debt
|
3,707 | 3,707 | 3,319 | ||||||||||||
Derivative instrument liabilities
|
175 | 204 | 123 | ||||||||||||
Deferred income tax liabilities
|
799 | 737 | 643 | ||||||||||||
Accrued pension and other post-retirement benefits
|
474 | 468 | 455 | ||||||||||||
Asset retirement obligations and accrued environmental costs
|
488 | 455 | 300 | ||||||||||||
Other non-current liabilities and deferred credits
|
126 | 147 | 99 | ||||||||||||
Total Liabilities
|
8,785 | 8,862 | 6,537 | ||||||||||||
Shareholders Equity
|
|||||||||||||||
Share capital (Note 4)
|
1,449 | 1,431 | 1,430 | ||||||||||||
Contributed surplus
|
359 | 308 | 273 | ||||||||||||
Accumulated other comprehensive income
|
2,148 | 2,394 | 1,798 | ||||||||||||
Retained earnings
|
3,224 | 2,552 | 2,804 | ||||||||||||
Total Shareholders Equity
|
7,180 | 6,685 | 6,305 | ||||||||||||
Total Liabilities and Shareholders Equity
|
$ | 15,965 | $ | 15,547 | $ | 12,842 | |||||||||
Contingencies (Note 10)
|
(See Notes to the Condensed
Consolidated Financial Statements)
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 1
Table of Contents
Potash
Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Income
(in millions of US dollars except per-share amounts)
(unaudited)
Condensed Consolidated Statements of Income
(in millions of US dollars except per-share amounts)
(unaudited)
Three Months Ended |
||||||||||
March 31 | ||||||||||
2011 | 2010 | |||||||||
Sales (Note 5)
|
$ | 2,204 | $ | 1,714 | ||||||
Freight, transportation and distribution
|
(149 | ) | (155 | ) | ||||||
Cost of goods sold
|
(959 | ) | (830 | ) | ||||||
Gross Margin
|
1,096 | 729 | ||||||||
Selling and administrative
|
(75 | ) | (60 | ) | ||||||
Provincial mining and other taxes
|
(34 | ) | (23 | ) | ||||||
Foreign exchange loss
|
(8 | ) | (8 | ) | ||||||
Share of earnings of equity-accounted investees
|
51 | 26 | ||||||||
Other (expenses) income
|
(5 | ) | 2 | |||||||
Operating Income
|
1,025 | 666 | ||||||||
Finance Costs (Note 6)
|
(50 | ) | (31 | ) | ||||||
Income Before Income Taxes
|
975 | 635 | ||||||||
Income Taxes (Note 7)
|
(243 | ) | (191 | ) | ||||||
Net Income
|
$ | 732 | $ | 444 | ||||||
Net Income Attributable to Common Shareholders
|
$ | 732 | $ | 444 | ||||||
Net Income per Share (Note 8)
|
||||||||||
Basic
|
$ | 0.86 | $ | 0.50 | ||||||
Diluted
|
$ | 0.84 | $ | 0.49 | ||||||
Dividends per Share
|
$ | 0.07 | $ | 0.03 | ||||||
(See Notes to the Condensed
Consolidated Financial Statements)
2 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Potash
Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions of US dollars)
(unaudited)
Condensed Consolidated Statements of Comprehensive Income
(in millions of US dollars)
(unaudited)
Three Months Ended |
||||||||||
March 31 | ||||||||||
(Net of related income taxes) | 2011 | 2010 | ||||||||
Net Income
|
$ | 732 | $ | 444 | ||||||
Other comprehensive (loss) income
|
||||||||||
Net (decrease) increase in unrealized gains on
available-for-sale
investments(1)
|
(271 | ) | 126 | |||||||
Net gains (losses) on derivatives designated as cash flow
hedges(2)
|
13 | (53 | ) | |||||||
Reclassification to income of net losses on cash flow
hedges(3)
|
14 | 9 | ||||||||
Other
|
(2 | ) | (1 | ) | ||||||
Other Comprehensive (Loss) Income
|
(246 | ) | 81 | |||||||
Comprehensive Income
|
$ | 486 | $ | 525 | ||||||
Comprehensive Income Attributable to Common Shareholders
|
$ | 486 | $ | 525 | ||||||
(1) | Available-for-sale investments are comprised of shares in Israel Chemicals Ltd. and Sinofert Holdings Limited. |
(2) | Cash flow hedges are comprised of natural gas derivative instruments, and are net of income taxes of $8 (2010 $(32)). |
(3) | Net of income taxes of $8 (2010 $6). |
(See Notes to the Condensed
Consolidated Financial Statements)
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 3
Table of Contents
Potash
Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Changes in Equity
(in millions of US dollars)
(unaudited)
Condensed Consolidated Statements of Changes in Equity
(in millions of US dollars)
(unaudited)
Equity Attributable to Common Shareholders | ||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | ||||||||||||||||||||||||||||||||||||||
Net unrealized |
Actuarial |
|||||||||||||||||||||||||||||||||||||
Unrealized |
losses on |
gains |
Total |
|||||||||||||||||||||||||||||||||||
gains on |
derivatives |
(losses) on |
Accumulated |
|||||||||||||||||||||||||||||||||||
available-for- |
designated as |
defined |
Other |
|||||||||||||||||||||||||||||||||||
Share |
Contributed |
sale |
cash flow |
benefit |
Comprehensive |
Retained |
Total |
|||||||||||||||||||||||||||||||
Capital | Surplus | investments | hedges | plans | Other | Income | Earnings | Equity | ||||||||||||||||||||||||||||||
Balance January 1, 2011
|
$ | 1,431 | $ | 308 | $ | 2,563 | $ | (177 | ) | $ | | (1) | $ | 8 | $ | 2,394 | $ | 2,552 | $ | 6,685 | ||||||||||||||||||
Net income
|
| | | | | | | 732 | 732 | |||||||||||||||||||||||||||||
Other comprehensive (loss) income
|
| | (271 | ) | 27 | | (2 | ) | (246 | ) | | (246 | ) | |||||||||||||||||||||||||
Effect of share-based compensation
|
| 51 | | | | | | | 51 | |||||||||||||||||||||||||||||
Dividends declared
|
| | | | | | | (60 | ) | (60 | ) | |||||||||||||||||||||||||||
Issuance of common shares
|
18 | | | | | | | | 18 | |||||||||||||||||||||||||||||
Balance
March 31, 2011
|
$ | 1,449 | $ | 359 | $ | 2,292 | $ | (150 | ) | $ | | (1) | $ | 6 | $ | 2,148 | $ | 3,224 | $ | 7,180 | ||||||||||||||||||
(1) | Any amounts incurred during a period are cleared out to retained earnings at each period end. Therefore, no balance exists in the reserve at beginning or end of period. |
Equity Attributable to Common Shareholders | ||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | ||||||||||||||||||||||||||||||||||||||
Net unrealized |
Actuarial |
|||||||||||||||||||||||||||||||||||||
Unrealized |
losses on |
gains |
Total |
|||||||||||||||||||||||||||||||||||
gains on |
derivatives |
(losses) on |
Accumulated |
|||||||||||||||||||||||||||||||||||
available-for- |
designated as |
defined |
Other |
|||||||||||||||||||||||||||||||||||
Share |
Contributed |
sale |
cash flow |
benefit |
Comprehensive |
Retained |
Total |
|||||||||||||||||||||||||||||||
Capital | Surplus | investments | hedges | plans | Other | Income | Earnings | Equity | ||||||||||||||||||||||||||||||
Balance January 1, 2010
|
$ | 1,430 | $ | 273 | $ | 1,900 | $ | (111 | ) | $ | | (1) | $ | 9 | $ | 1,798 | $ | 2,804 | $ | 6,305 | ||||||||||||||||||
Net income
|
| | | | | | | 444 | 444 | |||||||||||||||||||||||||||||
Other comprehensive income (loss)
|
| | 126 | (44 | ) | | (1 | ) | 81 | | 81 | |||||||||||||||||||||||||||
Effect of share-based compensation
|
| 29 | | | | | | | 29 | |||||||||||||||||||||||||||||
Dividends declared
|
| | | | | | | (30 | ) | (30 | ) | |||||||||||||||||||||||||||
Issuance of common shares
|
14 | | | | | | | | 14 | |||||||||||||||||||||||||||||
Balance March 31, 2010
|
$ | 1,444 | $ | 302 | $ | 2,026 | $ | (155 | ) | $ | | (1) | $ | 8 | $ | 1,879 | $ | 3,218 | $ | 6,843 | ||||||||||||||||||
(1) | Any amounts incurred during a period are cleared out to retained earnings at each period end. Therefore, no balance exists in the reserve at beginning or end of period. |
(See Notes to the Condensed
Consolidated Financial Statements)
4 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Potash
Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Cash Flow
(in millions of US dollars)
(unaudited)
Condensed Consolidated Statements of Cash Flow
(in millions of US dollars)
(unaudited)
Three Months Ended |
||||||||||
March 31 | ||||||||||
2011 | 2010 | |||||||||
Operating Activities
|
||||||||||
Net income
|
$ | 732 | $ | 444 | ||||||
Adjustments to reconcile net income to cash provided by
operating activities
|
||||||||||
Depreciation and amortization
|
124 | 110 | ||||||||
Share-based compensation
|
14 | 15 | ||||||||
Excess tax benefit related to share-based compensation
|
12 | 7 | ||||||||
Provision for deferred income tax
|
75 | 58 | ||||||||
Undistributed earnings of equity-accounted investees
|
(51 | ) | (26 | ) | ||||||
Other
|
(7 | ) | 25 | |||||||
Subtotal of adjustments
|
167 | 189 | ||||||||
Changes in non-cash operating working capital
|
||||||||||
Receivables
|
(213 | ) | 94 | |||||||
Inventories
|
(27 | ) | 42 | |||||||
Prepaid expenses and other current assets
|
| 6 | ||||||||
Payables and accrued charges
|
31 | 36 | ||||||||
Subtotal of changes in non-cash operating working capital
|
(209 | ) | 178 | |||||||
Cash provided by operating activities
|
690 | 811 | ||||||||
Investing Activities
|
||||||||||
Additions to property, plant and equipment
|
(441 | ) | (457 | ) | ||||||
Purchase of long-term investments
|
| (422 | ) | |||||||
Other assets and intangible assets
|
| (34 | ) | |||||||
Cash used in investing activities
|
(441 | ) | (913 | ) | ||||||
Cash before financing activities
|
249 | (102 | ) | |||||||
Financing Activities
|
||||||||||
Proceeds from long-term debt obligations
|
| 400 | ||||||||
Repayment of long-term debt obligations
|
| (150 | ) | |||||||
Repayments of short-term debt obligations
|
(253 | ) | (215 | ) | ||||||
Dividends
|
(28 | ) | (29 | ) | ||||||
Issuance of common shares
|
18 | 10 | ||||||||
Cash (used in) provided by financing activities
|
(263 | ) | 16 | |||||||
Decrease in Cash Position
|
(14 | ) | (86 | ) | ||||||
Cash Position, Beginning of Period
|
412 | 385 | ||||||||
Cash Position, End of Period
|
$ | 398 | $ | 299 | ||||||
Cash position comprised of:
|
||||||||||
Cash
|
$ | 82 | $ | 51 | ||||||
Short-term investments
|
391 | 248 | ||||||||
Cash and cash equivalents
|
473 | 299 | ||||||||
Bank overdraft (included in short-term debt)
|
(75 | ) | | |||||||
$ | 398 | $ | 299 | |||||||
Supplemental cash flow disclosure
|
||||||||||
Interest paid
|
$ | 41 | $ | 42 | ||||||
Income taxes paid
|
$ | 175 | $ | 22 | ||||||
(See Notes to the Condensed
Consolidated Financial Statements)
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 5
Table of Contents
Potash
Corporation of Saskatchewan Inc.
Notes to the
Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2011
(in millions of US dollars except share, per-share,
percentage and ratio amounts)
(unaudited)
1. | Significant Accounting Policies |
Basis of
Presentation
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 previously prepared its financial statements in
accordance with Canadian generally accepted accounting
principles (Canadian GAAP) as set out in the
Handbook of the Canadian Institute of Chartered Accountants
(CICA Handbook). In 2010, the CICA Handbook was
revised to incorporate International Financial Reporting
Standards (IFRS), and required publicly accountable
enterprises to apply such standards effective for years
beginning on or after January 1, 2011, with early adoption
permitted. Accordingly, these unaudited interim condensed
consolidated financial statements are based on IFRS, as issued
by the International Accounting Standards Board
(IASB). In these unaudited interim condensed
consolidated financial statements, the term Canadian
GAAP refers to Canadian GAAP before the companys
adoption of IFRS.
As these financial statements represent the companys
initial presentation of its financial position, financial
performance and cash flows under IFRS, they have been prepared
in accordance with International Accounting Standard
(IAS) 34, Interim Financial Reporting, and IFRS 1,
First-Time Adoption of International Financial Reporting
Standards (IFRS 1). Subject to certain transition
elections disclosed in Note 13, the company has
consistently applied the same accounting policies in its opening
IFRS statement of financial position as at January 1, 2010
and throughout all periods presented, as if these policies had
always been in effect. Note 13 discloses the impact of the
transition to IFRS on the companys reported financial
position and financial performance, including the nature and
effect of significant changes in accounting policies from those
used in its Canadian GAAP consolidated financial statements for
the year ended December 31, 2010. Except as disclosed in
Note 12, these policies are consistent with accounting
principles generally accepted in the United States (US
GAAP) in all material respects.
These unaudited interim condensed consolidated financial
statements are based on IFRS issued and outstanding as of
May 3, 2011, the date the companys Board of Directors
approved the statements and the policies the company plans to
adopt in its annual consolidated financial statements for the
year ending December 31, 2011. The company will ultimately
prepare its opening statement of financial position and
financial statements for 2010 and 2011 by applying existing IFRS
with an effective date of December 31, 2011 or prior.
Accordingly, the opening statement of financial position and
financial statements for 2010 and 2011 may differ from
these financial statements.
These unaudited interim condensed consolidated financial
statements include the accounts of PCS and its wholly owned
subsidiaries; however, they do not include all disclosures
normally provided in annual consolidated financial statements
and should be read in conjunction with the 2010 annual
consolidated financial statements. Certain information and note
disclosures which are considered material to the understanding
of the companys unaudited interim condensed consolidated
financial statements and which are normally included in annual
consolidated financial statements prepared in accordance with
IFRS are provided below and in Note 13, along with
reconciliations and descriptions of the effect of the transition
from Canadian GAAP to IFRS on financial performance and
financial position. In managements opinion, the unaudited
interim condensed consolidated financial statements include all
adjustments (consisting solely of normal recurring adjustments)
necessary to fairly present such information. Interim results
are not necessarily indicative of the results expected for the
fiscal year.
These unaudited interim condensed consolidated financial
statements were prepared under the historical cost convention,
except for certain items not carried at historical cost as
discussed below.
6 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Below is a summary description of the accounting policies the
company considered to be significant, including a comparison to
policies previously disclosed in the corresponding area under
Canadian GAAP. Please refer to Note 13, Transition to
IFRS, for a more complete description of the impacts of
adopting IFRS (including policies elected upon first-time
adoption of IFRS) on the companys consolidated financial
statements.
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Principles of Consolidation | |||
Subsidiaries are all entities (including special purpose
entities) over which the company has the power to govern the
financial and operating policies generally accompanying a
shareholding of more than one-half of the voting rights. The
existence and effect of potential voting rights that are
currently exercisable or convertible are considered when
assessing whether the group controls another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the group. They are deconsolidated
from the date that control ceases. Principal (wholly owned)
operating subsidiaries are: PCS Sales (Canada) Inc. PCS Joint Venture, Ltd. (PCS Joint Venture) PCS Sales (USA), Inc. |
The consolidated financial statements included the accounts of PotashCorp and its subsidiaries, and any material variable interest entities (VIEs) for which the company was the primary beneficiary. Principal (wholly owned) operating subsidiaries were consistent with the principal operating subsidiaries identified under IFRS. | ||
PCS Phosphate Company, Inc. (PCS
Phosphate)
|
|||
PCS Purified Phosphates
|
|||
White Springs Agricultural Chemicals,
Inc. (White Springs)
|
|||
PCS Nitrogen Fertilizer, L.P.
|
|||
PCS Nitrogen Ohio, L.P.
|
|||
PCS Nitrogen Trinidad Limited
|
|||
PCS Cassidy Lake Company
|
|||
All significant intercompany balances and transactions are eliminated. | |||
Foreign Currency Transactions | |||
Items included in the consolidated financial statements of the company and each of its subsidiaries are measured using the currency of the primary economic environment in which the individual entity operates (the functional currency). The consolidated financial statements are presented in United States dollars (US dollars), which is the functional currency of the company and the majority of its subsidiaries.
Foreign currency transactions, including Canadian, Trinidadian and Chilean dollar operating transactions, are generally translated to US dollars at the average exchange rate for the previous month. Monetary assets and liabilities are translated at period-end exchange rates. |
Translation of transactions and balances depended upon whether a subsidiary was considered integrated or self-sustaining. The majority of the companys operations were considered integrated and were translated into US dollars using the temporal method, which is consistent with the methods described under IFRS. | ||
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss in the period in which they arise. | |||
All other foreign exchange gains and losses are presented in the income statement within foreign exchange gain (loss). | |||
Translation differences on non-monetary assets and liabilities carried at fair value are recognized as part of changes in fair value. Translation differences on non-monetary financial assets such as investments in equity securities classified as available-for-sale are included in other comprehensive income (OCI). | |||
Cash Equivalents | |||
Highly liquid investments with a maturity of three months or less from the date of purchase are considered to be cash equivalents. | Canadian GAAP policy was consistent. | ||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 7
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Asset Impairment | |||
Assets that have an indefinite useful life (i.e., goodwill) are not subject to amortization and are tested at least annually for impairment (in April), or more frequently if events or circumstances indicate there may be an impairment. At the end of each reporting period, the company reviews the carrying amounts of both its long-lived assets to be held and used and identifiable intangible assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (this can be at the asset or cash-generating unit level). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. If an indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). An impairment loss is recognized for the amount by which the assets carrying amount exceeds its recoverable amount. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Non-financial assets, other than goodwill, that have previously suffered an impairment loss are reviewed for possible reversal of the impairment at each reporting date.
Goodwill is allocated to cash-generating units or groups of cash-generating units for the purpose of impairment testing based on the level at which it is monitored by management, and not at a level higher than an operating segment. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. |
The company reviewed both long-lived assets to be held and used and identifiable intangible assets with finite lives whenever events or changes in circumstances indicated that the carrying amount of such assets might not have been fully recoverable. Determination of recoverability was based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expected to hold and use was based on the fair value of the assets, whereas such assets to be disposed of were reported at the lower of carrying amount or fair value less costs to sell. Reversal of previous impairments was not permitted. Changes resulting from the difference in these Canadian GAAP policies as compared to the corresponding policies under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (a).
Goodwill impairment was assessed at the reporting unit level at least annually (in April), or more frequently if events or circumstances indicated there might be an impairment. Reporting units comprised business operations with similar economic characteristics and strategies and might have represented either a business segment or a business unit within a business segment. Potential impairment was identified when the carrying value of a reporting unit, including the allocated goodwill, exceeded its fair value. Goodwill impairment was measured as the excess of the carrying amount of the reporting units allocated goodwill over the implied fair value of the goodwill, based on the fair value of the assets and liabilities of the reporting unit. Upon adoption of IFRS, no changes resulted from the difference in these Canadian GAAP policies as compared to the corresponding policies under IFRS. Other Canadian GAAP policies were consistent. |
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Receivables | |||
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost less provision for impairment of trade accounts receivable. A provision for impairment of trade accounts receivable is established when there is a reasonable expectation that the company will not be able to collect all amounts due. The carrying amount of the trade receivables is reduced through the use of the provision for impairment account, and the amount of any increase in the provision for impairment is recognized in the consolidated statements of income. When a trade receivable is uncollectible, it is written off against the provision for impairment account for trade accounts receivable. Subsequent recoveries of amounts previously written off are credited to the consolidated statements of income. | Canadian GAAP policies were consistent. | ||
8 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Inventories | |||
Inventories of finished products, intermediate products, raw materials and materials and supplies are valued at the lower of cost and net realizable value. Costs, allocated to inventory using the weighted average cost method, include direct acquisition costs, direct costs related to the units of production and a systematic allocation of fixed and variable production overhead, as applicable. Net realizable value for finished products, intermediate products and raw materials is generally considered to be the selling price of the finished product in the ordinary course of business less the estimated costs of completion and estimated costs to make the sale. In certain circumstances, particularly pertaining to the companys materials and supplies inventories, replacement cost is considered to be the best available measure of net realizable value. Inventory is reviewed monthly to ensure the carrying value does not exceed net realizable value. If so, a writedown is recognized. The writedown may be reversed if the circumstances which caused it no longer exist. | Canadian GAAP policies were consistent. | ||
Prepaid Expenses | |||
The company has classified freight and other transportation and distribution costs incurred relating to product inventory stored at warehouse and terminal facilities as prepaid expenses. | Canadian GAAP policies were consistent. | ||
Financial Instruments | |||
Financial assets and financial liabilities are recognized initially at fair value, normally being the transaction price plus directly attributable transaction costs. Transaction costs related to financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. Regular way purchases and sales of financial assets are accounted for on the trade date. | Canadian GAAP policies were consistent. | ||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 9
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Fair Value | |||
Estimated fair values for financial instruments are designed to approximate amounts at which the instruments could be exchanged in a current arms-length transaction between knowledgeable willing parties. The fair value of derivative instruments traded in active markets (such as natural gas futures and exchange traded options) is based on the quoted market prices at the reporting date. | Canadian GAAP policies were consistent. | ||
The fair value of derivative instruments that are not traded in an active market (such as natural gas swaps, over-the-counter option contracts and foreign currency derivatives) is determined by using valuation techniques. The company uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Natural gas swap valuations are based on a discounted cash flows model. The inputs used in the model include contractual cash flows based on prices for natural gas futures contracts, fixed prices and notional volumes specified by the swap contracts, the time value of money, liquidity risk, the companys own credit risk (related to instruments in a liability position) and counterparty credit risk (related to instruments in an asset position). Certain of the futures contract prices are supported by prices quoted in an active market and others are not based on observable market data. Over-the-counter option contracts are valued based on quoted market prices for similar instruments where available or an option valuation model. The fair value of foreign currency derivatives is determined using quoted forward exchange rates at the statement of financial position date. | |||
Fair value of investments designated as available-for-sale is based on the closing bid price of the common shares as of the statement of financial position date. | |||
The companys fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are: | |||
Level 1 Values based on unadjusted quoted
prices in active markets that are accessible at the measurement
date for identical assets or liabilities.
|
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Level 2 Values based on quoted prices in
markets that are not active or model inputs that are observable
either directly or indirectly for substantially the full term of
the asset or liability.
|
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Level 3 Values based on prices or
valuation techniques that require inputs that are both
unobservable and significant to the overall fair value
measurement.
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When the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair value measurement is categorized is based on the companys assessment of the lowest level input that is the most significant to the fair value measurement. | |||
10 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Derivative Financial Instruments | |||
Derivative financial instruments are used by the company to manage its exposure to commodity price, exchange rate and interest rate fluctuations. The company recognizes its derivative instruments at fair value on the consolidated statements of financial position where appropriate. Contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments, as if the contracts were financial instruments (except contracts that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with expected purchase, sale or usage requirements), are accounted for as derivative financial instruments. | Canadian GAAP policies were consistent. | ||
The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship. For instruments designated as fair value hedges, the effective portion of the change in the fair value of the derivative is offset in profit or loss against the change in fair value, attributed to the risk being hedged, of the underlying hedged asset, liability or firm commitment. For cash flow hedges, the effective portion of the change in the fair value of the derivative is accumulated in other comprehensive income until the variability in cash flows being hedged is recognized in profit or loss in future accounting periods. Ineffective portions of hedges are recorded in profit or loss in the current period. The change in fair value of derivative instruments not designated as hedges is recorded in profit or loss in the current period. | |||
The companys policy is not to use derivative instruments for trading or speculative purposes, although it may choose not to designate an economic hedging relationship as an accounting hedge. The company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction. This process includes linking derivatives to specific assets and liabilities or to specific firm commitments or forecast transactions. The company also assesses, both at the hedges inception and on an ongoing basis, whether the derivatives used in hedging transactions are expected to be or were, as appropriate, highly effective in offsetting changes in fair values of hedged items. Hedge effectiveness related to the companys natural gas hedges is assessed on a prospective and retrospective basis using regression analyses. A hedging relationship may be terminated because the hedge ceases to be effective; the underlying asset or liability being hedged is derecognized; or the derivative instrument is no longer designated as a hedging instrument. In such instances, the difference between the fair value and the accrued value of the hedging derivatives upon termination is deferred and recognized in profit or loss on the same basis that gains, losses, revenue and expenses of the previously hedged item are recognized. If a cash flow hedging relationship is terminated because it is no longer probable that the anticipated transaction will occur, then the net gain or loss accumulated in OCI is recognized in current period profit or loss. | |||
Significant recent derivatives include the following: | |||
Natural gas futures, swaps and option
agreements to manage the cost of natural gas, generally
designated as cash flow hedges of anticipated transactions. The
portion of gain or loss on derivative instruments designated as
cash flow hedges that is deferred in accumulated other
comprehensive income (AOCI) is reclassified into
cost of goods sold when the product containing the hedged item
impacts earnings. Any hedge ineffectiveness is recorded in cost
of goods sold in the current period.
|
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Foreign currency forward contracts for
the primary purpose of limiting exposure to exchange rate
fluctuations relating to expenditures denominated in currencies
other than the US dollar and foreign currency swap contracts to
limit exposure to exchange rate fluctuations relating to
Canadian dollar-denominated commercial paper. These contracts
are not designated as hedging instruments for accounting
purposes. Accordingly, they are
marked-to-market
with changes in fair value recognized through foreign exchange
gain (loss) in earnings.
|
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Interest rate swaps designated as fair
value hedges to manage the interest rate mix of the
companys total debt portfolio and related overall cost of
borrowing. Hedge accounting treatment resulted in interest
expense on the related debt being reflected at hedged rates
rather than original contractual interest rates.
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PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 11
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Property, Plant and Equipment | |||
Property, plant and equipment (which include certain mine development costs, pre-stripping costs and assets in construction) are carried at cost less accumulated depreciation less any recognized impairment loss. Costs of additions, betterments, renewals and interest during construction are capitalized. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to ready for their intended use are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. The capitalization rate is based on the weighted average interest rate on all of the companys outstanding third-party debt. All other borrowing costs are charged through finance costs in the period in which they are incurred. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When the cost of replacing part of an item of property, plant and equipment is capitalized, the carrying amount of the replaced part is derecognized. The cost of major inspections and overhauls is capitalized and depreciated over the period until the next major inspection or overhaul. Maintenance and repair expenditures that do not improve or extend productive life are expensed in the period incurred. |
The borrowing cost capitalization rate was based on the weighted average interest rate on the companys outstanding third-party long-term debt. Changes resulting from the difference in this Canadian GAAP policy as compared to the corresponding policy under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (i).
Maintenance and repair expenditures that did not improve or extend productive life were expensed in the year incurred. Changes resulting from the difference in this Canadian GAAP policy as compared to the corresponding policy under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (g). Other Canadian GAAP policies were consistent. |
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Depreciation of assets in construction commences when the assets are ready for their intended use. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the depreciation period or method, as appropriate, and are treated as changes in accounting estimates. | |||
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset, and is recognized in the income statement. | |||
Investments | |||
Significant influence is the power to participate in the financial and operating policy decisions of an investee but is not control or joint control over those policies. Investments in which the company exercises significant influence (but does not control) are accounted for as investments in associates using the equity method. The companys interest in jointly controlled entities is accounted for using the equity method. The proportionate share of any net income or losses from investments accounted for using the equity method, and any gain or loss on disposal, are recorded in profit or loss. The companys share of its associates post-acquisition movements in other comprehensive income is recognized in the companys other comprehensive income. The cumulative post-acquisition movements in profit or loss and in other comprehensive income are adjusted against the carrying amount of the investment. An impairment test is performed when there is objective evidence of impairment, such as significant adverse changes in the environment in which the associate operates or a significant or prolonged decline in the fair value of the investment below its cost. An impairment loss is recorded when the recoverable amount becomes lower than the carrying amount, recoverable amount being the higher of value in use and fair value less costs to sell. Impairment losses are reversed if the recoverable amount subsequently exceeds the carrying amount. |
The companys interest in jointly controlled entities was accounted for using the proportionate consolidation method. Changes resulting from the difference in this Canadian GAAP policy as compared to the corresponding policy under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (o).
Other Canadian GAAP policies were consistent. |
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The fair value of investments designated as available-for-sale is recorded in the consolidated statements of financial position, with unrealized gains and losses, net of related income taxes, recorded in AOCI. The cost of investments sold is based on the weighted average method. Realized gains and losses on these investments are removed from AOCI and recorded in profit or loss. | |||
The company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity instruments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost would be evidence that the assets are impaired. Such impairment losses recognized in the consolidated statements of income on equity instruments are not reversed through the consolidated statements of income. | |||
12 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Other Assets | |||
The costs of certain ammonia catalysts are capitalized to other assets and are amortized, net of salvage value, on a straight-line basis over their estimated useful lives of 3 to 10 years. | Canadian GAAP policies were consistent. | ||
Upfront lease costs are capitalized to other assets and amortized over the life of the leases, the latest of which extends through 2038. | |||
Intangible Assets | |||
Intangible assets relate primarily to production and technology rights and computer software. Internally generated intangible assets relate to computer software and other developed projects. | Canadian GAAP policies were consistent. | ||
Costs associated with maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the company are recognized as intangible assets when the following criteria are met: | |||
It is technically feasible to complete
the software product so that it will be available for use;
|
|||
Management intends to complete the
software product and use or sell it;
|
|||
There is an ability to use or sell the
software product;
|
|||
It can be demonstrated how the software
product will generate probable future economic benefits;
|
|||
Adequate technical, financial and other
resources to complete the development and to use or sell the
software product are available; and
|
|||
The expenditure attributable to the
software product during its development can be reliably measured.
|
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Directly attributable costs that are capitalized as part of the software product include applicable employee costs. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. | |||
Amortization expense is recognized in net income in the expense category consistent with the function of the intangible asset. The assets useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. | |||
Goodwill | |||
All business combinations are accounted for using the purchase method. Identifiable intangible assets are recognized separately from goodwill. Goodwill is carried at cost, is not amortized and represents the excess of the cost of an acquisition over the fair value of the companys share of the net identifiable assets of the acquired subsidiary or equity method investee at the date of acquisition. Goodwill arising on business combinations before the date of transition to IFRS has been retained at the previous Canadian GAAP carrying amount, as allowed by the exemption in IFRS 1. Separately recognized goodwill is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. | Canadian GAAP policies were consistent, with the exception of the policy related to first-time adoption of IFRS as allowed under IFRS 1. | ||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 13
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Leases | |||
Leases entered into are classified as either finance or operating leases. Leases that transfer substantially all of the risks and rewards of ownership of property to the company are accounted for as finance leases. Finance leases are capitalized at the commencement of the lease at the lower of the fair value of the leased equipment and the present value of the minimum lease payments. Equipment acquired under a finance lease is depreciated over the shorter of the period of expected use on the same basis as other similar property, plant and equipment and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rental payments under operating leases are expensed to profit or loss on a straight-line basis over the period of the lease. |
Leases were classified as either capital or operating. Leases that transferred substantially all of the benefits and risks of ownership of property to the company were accounted for as capital leases in a manner generally consistent with the way finance leases are accounted for under IFRS.
Other Canadian GAAP policies were consistent. |
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Long-Term Debt | |||
Issue costs of long-term debt obligations and gains and losses on interest rate swaps are capitalized to long-term obligations and are amortized to expense over the term of the related liability using the effective interest rate method. | Canadian GAAP policies were consistent. | ||
Pension and Other Post-Employment Benefits | |||
The company offers a number of benefit plans that provide pension and other post-retirement benefits to qualified employees. These plans include defined benefit pension plans, supplemental pension plans, defined contribution plans and health, disability, dental and life insurance plans. | |||
Defined Benefit Plans | Defined Benefit Plans | ||
The company accrues its obligations under employee benefit plans and the related costs, net of plan assets. The cost of pensions and other retirement benefits earned by employees is generally actuarially determined using the projected unit credit method and managements best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health-care costs. Actuaries perform valuations on a regular basis to determine the actuarial present value of the accrued pension and other post-employment benefits. For the purpose of calculating the expected return on plan assets, such assets are valued at fair value. Prior service costs from plan amendments are deferred and amortized on a straight-line basis over the average period until the benefits become vested. However, to the extent that benefits are already vested, such prior service costs are recognized immediately.
Actuarial gains (losses) arise from the difference between the actual rate of return on plan assets for a period and the expected long-term rate of return on plan assets for that period, or from changes in actuarial assumptions used to determine the defined benefit obligation. All actuarial gains (losses) for defined benefit plans are recognized immediately in the period in which they arise through other comprehensive income. When the restructuring of a benefit plan simultaneously gives rise to both a curtailment and a settlement of obligation, the curtailment is accounted for prior to the settlement. Pension and other post-employment benefit expense includes, as applicable, the net of managements best estimate of the cost of benefits provided, interest cost of projected benefits, expected return on plan assets, past service costs and the effect of any curtailments or settlements. |
Prior service costs from plan amendments were deferred and amortized on a straight-line basis to income over the average remaining service period of employees active at the date of amendment.
The excess of the net accumulated actuarial gain (loss) over 10 percent of the greater of the benefit obligation and the fair value of plan assets was amortized to income over the average remaining service period of active employees. Changes resulting from the difference in the above Canadian GAAP policies as compared to the corresponding policies under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (b). Other Canadian GAAP policies were consistent. |
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Defined Contribution Plans | Defined Contribution Plans | ||
Defined contribution plan costs are recognized in profit or loss for services rendered by employees during the period. | Canadian GAAP policies were consistent. | ||
14 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Provisions for Environmental and Other Costs | |||
Provisions are recognized when: the company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for costs that need to be incurred to operate in the future or expected future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax risk-free discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Environmental costs that relate to current operations are expensed or capitalized as appropriate. Environmental costs may be capitalized if the costs extend the life of the property, increase its capacity, mitigate or prevent contamination from future operations, or relate to legal or constructive asset retirement obligations. Costs that relate to existing conditions caused by past operations and that do not contribute to current or future revenue generation are expensed. Provisions for estimated costs are recorded when environmental remedial efforts are likely and the costs can be reasonably estimated. In determining the provisions, the company uses the most current information available, including similar past experiences, available technology, regulations in effect, the timing of remediation and cost-sharing arrangements. The company recognizes its decommissioning obligations (also known as asset retirement obligations). The present value of a liability for a decommissioning obligation is recognized in the period in which it is incurred if a reasonable estimate of present value can be made. The associated costs are: capitalized as part of the carrying amount of any related long-lived asset and then amortized over its estimated remaining useful life; capitalized as part of inventory; or expensed in the period. The best estimate of the amount required to settle the obligation is reviewed at the end of each reporting period and updated to reflect changes in the discount rate, foreign exchange rate and the amount or timing of the underlying cash flows. When there is a change in the best estimate, an adjustment is recorded against the carrying value of the provision and any related asset, and the effect is then recognized in profit or loss over the remaining life of the asset. The increase in the provision due to the passage of time is recognized as a finance cost. A gain or loss may be incurred upon settlement of the liability. |
Liabilities were recognized when the company had a legal obligation as a result of past events; it was likely that an outflow of resources would be required to settle the obligation; and the amount could be reliably estimated.
Obligations to retire certain tangible long-lived assets were recognized with the associated costs capitalized as part of the carrying amount of the long-lived asset (and then amortized over its estimated useful life) or expensed in the period. In subsequent periods, the asset retirement obligation was adjusted for the passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period through charges to cost of goods sold. The asset retirement obligation was also adjusted for any changes in the amount or timing of the underlying future cash flows. Obligations were not updated for any future change in the discount rate. New discount rates were applied only to upwards adjustments to the companys undiscounted obligation. Changes resulting from the difference in the above Canadian GAAP policies as compared to the corresponding policies under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (d). Other Canadian GAAP policies were consistent. |
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Sales | |||
Sales revenue is recognized when the product is shipped, the sales price can be measured reliably, costs incurred or to be incurred can be measured reliably and collectibility is probable. Revenue is recorded based on the FOB mine, plant, warehouse or terminal price, except for certain vessel sales or specific product sales that are shipped on a delivered basis. Transportation costs are recovered from the customer through sales pricing. Revenue is measured at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates allowed. |
Sales revenue was recognized when the product was shipped, the sales price was determinable and collectibility was reasonably assured. Upon adoption of IFRS, no changes resulted from the difference in this Canadian GAAP policy as compared to the corresponding policy under IFRS.
Other Canadian GAAP policies were consistent. |
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Cost of Goods Sold | |||
The primary components of cost of goods sold are labor, employee benefits, services, raw materials (including inbound freight and purchasing and receiving costs), operating supplies, energy costs, royalties, property and miscellaneous taxes, and depreciation and amortization. | Canadian GAAP policies were consistent. | ||
Selling and Administrative | |||
The primary components of selling and administrative are compensation, employee benefits, supplies, communications, travel, professional services, and depreciation and amortization. | Canadian GAAP policies were consistent. | ||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 15
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Income Taxes | |||
The tax expense for the period comprises current and deferred income tax. Taxation is recognized in the statement of income except to the extent that it relates to items recognized directly in equity, in which case the tax is recognized in equity.
Current income tax is generally the expected income tax payable on the taxable income for the year calculated using rates enacted or substantively enacted at the statement of financial position date in the countries where the companys subsidiaries and associates operate and generate taxable income, and includes any adjustment to income tax payable or recoverable in respect of previous years. The realized and unrealized excess tax benefit from share-based payment arrangements is recognized in equity. When an asset is transferred between enterprises within the consolidated group, the difference between the tax rates of the two entities is recognized in tax expense in the period in which the transfer occurs. Current tax payable by the transferor is recognized for any taxes payable in the current period, and a deferred tax asset is recognized by the transferee for any temporary difference. Uncertain income tax positions are accounted for using the standards applicable to current income tax assets and liabilities; i.e., both liabilities and assets are recorded when probable at the companys best estimate of the amount. Deferred income tax is recognized using the liability method, based on temporary differences between consolidated financial statement carrying amounts of assets and liabilities and their respective income tax bases. Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The tax effect of certain temporary differences is not recognized, principally with respect to temporary differences relating to investments in subsidiaries, jointly controlled entities and associates where the company is able to control the reversal of the temporary difference and the temporary difference is not expected to reverse in the foreseeable future. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred income tax recognized is based on the expected manner and timing of realization or settlement of the carrying amount of assets and liabilities. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax assets are reviewed at each statement of financial position date and amended to the extent that it is no longer probable that the related tax benefit will be realized. Current income tax assets and liabilities are offset when the company has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. Normally the company would only have a legally enforceable right to set off a current tax asset against a current tax liability when they relate to income taxes levied by the same taxation authority and the taxation authority permits the company to make or receive a single net payment. Deferred income tax assets and liabilities are offset when the company has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either: (1) the same taxable entity; or (2) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultane ously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. |
Taxation on earnings comprised current and future income tax (which is similar to deferred taxes under IFRS, except as otherwise described below).
The realized excess tax benefit from share-based payment arrangements was recognized as a reduction to tax expense. When an asset was transferred between enterprises within the consolidated group, any income taxes paid or payable by the transferor as a result of the transfer were recorded as an asset in the consolidated financial statements until the gain or loss was recognized by the consolidated entity. Uncertain income tax positions were accounted for using the standards applicable to contingent assets and contingent liabilities; i.e., liabilities were recorded when likely, and assets were recorded when realized. Future income tax assets and liabilities were offset to the extent that they related to income taxes levied on the same taxable entity by the same taxation authority. The current portion of the future income tax asset was presented with other current assets and the long-term portion was presented with other assets. Changes resulting from the difference in the above Canadian GAAP policies as compared to the corresponding policies under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (e). Other Canadian GAAP policies were consistent. |
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16 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
IFRS Accounting Policies | Comparison to Prior Canadian GAAP Policies | ||
Share-Based Compensation | |||
Grants under the companys share-based compensation plans are accounted for in accordance with the fair value-based method of accounting. For stock option plans that will settle through the issuance of equity, the fair value of stock options is determined on their grant date using a valuation model and recorded as compensation expense over the period that the stock options vest, with a corresponding increase to contributed surplus. Forfeitures are estimated throughout the vesting period based on past experience and future expectations, and adjusted upon actual option vesting. When stock options are exercised, the proceeds, together with the amount recorded in contributed surplus, are recorded in share capital.
Share-based plans that are likely to settle in cash or other assets are accounted for as liabilities based on the fair value of the awards each period. The compensation expense is accrued over the vesting period of the award. Fluctuations in the fair value of the award will result in a change to the accrued compensation expense, which is recognized in the period in which the fluctuation occurs. |
Stock-based plans that were likely to be settled in cash or other assets were accounted for as liabilities based on the intrinsic value of the awards. The compensation expense was accrued over the vesting period of the award, based on the difference between the market value of the underlying stock and the exercise price of the award, if any. Fluctuations in the market value of the underlying stock, as determined based on the closing price of the stock on the last day of each reporting period, would result in a change to the accrued compensation expense, which was recognized in the period in which the fluctuation occurred. Changes resulting from the difference in this Canadian GAAP policy as compared to the corresponding policy under IFRS upon adoption of IFRS are described more fully in Note 13, Changes in Accounting Policies table, item (c).
Other Canadian GAAP policies were consistent. |
||
Reportable Segments | |||
The company has three reportable operating segments: potash, phosphate and nitrogen. These operating 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. | Canadian GAAP policies were consistent. | ||
Critical
Accounting Estimates and Judgments
Certain of the companys policies involve critical
accounting estimates and judgments because they require the
company to make particularly subjective or complex judgments
about matters that are inherently uncertain and because of the
likelihood that materially different amounts could be reported
under different conditions or using different assumptions.
The following section discusses the critical accounting
estimates, judgments and assumptions that the company has made
and how they affect the amounts reported in the consolidated
financial statements.
Special
Purpose Entities
In the normal course of business, the company may enter into
arrangements that are created to accomplish a narrow and
well-defined objective. Any such special purpose entities
(SPE) must be consolidated when the substance of the
relationship between the company and the SPE indicates that the
SPE is controlled by the company. Assessing the substance of
such a relationship involves considerable judgment. In addition
to considering the general indicators of control, such as the
companys proportion of voting rights, power to govern the
financial and operating policies of the entity and power to
appoint or remove the majority of the board of directors, the
company considers a number of additional factors to determine
whether in substance it controls the SPE, even in cases where it
controls less than half of the voting rights or owns little or
none of the SPEs equity.
Financial
Instruments, Derivatives and Hedging
All financial instruments (assets and liabilities) and most
derivative instruments are recorded on the statement of
financial position, some at fair value. Those recorded at fair
value must be remeasured at each reporting date and changes in
the fair value will be recorded in either net income or other
comprehensive income. Uncertainties, estimates and use of
judgment inherent in applying the standards are: assessment of
contracts as derivative instruments and for embedded
derivatives; valuation of financial instruments and derivatives
at fair value; and hedge accounting.
In determining whether a contract represents a derivative or
contains an embedded derivative, the most significant area where
judgment has been applied pertains to the determination as to
whether the contract can be settled net, one of the criteria in
determining whether a contract for a non-financial asset is
considered a derivative and accounted for as such. Judgment is
also applied in determining whether an embedded derivative is
closely related to the host contract, in which case bifurcation
and separate accounting are not necessary.
A number of the companys financial instruments are
recorded on the statement of financial position at fair value,
as described in Note 12. Fair value represents
point-in-time
estimates that may
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 17
Table of Contents
change in subsequent reporting periods due to market conditions
or other factors. Estimated fair values are designed to
approximate amounts at which the financial instruments could be
exchanged in a current transaction between willing parties.
Multiple methods exist by which fair value can be determined,
which can cause values (or a range of reasonable values) to
differ. There is no universal model that can be broadly applied
to all items being valued. Further, assumptions underlying the
valuations may require estimation of costs/prices over time,
discount rates, inflation rates, defaults and other relevant
variables.
IFRS require the use of a three-level hierarchy for disclosing
fair values for instruments measured at fair value on a
recurring basis. Judgment and estimation are required to
determine in which category of the hierarchy items should be
included. When the inputs used to measure fair value fall within
more than one level of the hierarchy, the level within which the
fair value measurement is categorized is based on the
companys assessment of the lowest level input that is the
most significant to the fair value measurement.
To obtain and maintain hedge accounting for its natural gas
derivative instruments, the company must be able to establish
that the hedging instrument is effective at offsetting the risk
of the hedged item both retrospectively and prospectively, and
ensure documentation meets stringent requirements. The process
to test effectiveness requires the application of judgment and
estimation, including the number of data points to test to
ensure adequate and appropriate measurement to confirm or dispel
hedge effectiveness and valuation of data within effectiveness
tests where external existing data available do not perfectly
match the companys circumstances. Judgment and estimation
are also used to assess credit risk separately in the
companys hedge effectiveness testing.
Pension
and Other Post-Employment Costs
The company sponsors plans that provide pensions and other
post-retirement benefits for most of its employees. The
calculation of employee benefit plan expenses and obligations
depends on several critical assumptions such as discount rates,
expected rates of return on assets, health-care cost trend
rates, projected salary increases, retirement age, mortality and
termination rates. These assumptions are determined by
management and are reviewed annually by the companys
actuaries.
The companys discount rate assumption reflects the
weighted average interest rate at which the pension and other
post-retirement liabilities could be effectively settled at the
measurement date. The rate varies by country. The company
determines the discount rate using a yield curve approach. Based
on the respective plans demographics, expected future
pension benefits and medical claims payments are measured and
discounted to determine the present value of the expected future
cash flows. The cash flows are discounted using yields on
high-quality AA-rated non-callable bonds with cash flows of
similar timing. The resulting rates are used by the company to
determine the final discount rate.
The expected rate of return on plan assets assumption is based
on expected returns for the various asset classes.
Other assumptions are based on actual experience and the
companys best estimates. Actual results that differ from
the assumptions are recognized immediately in other
comprehensive income. These differences relate primarily to:
(1) actual actuarial gains/losses incurred on the benefit
obligation versus those expected and recognized in the
consolidated financial statements; (2) actual versus
expected return on plan assets; and (3) actual past service
costs incurred as a result of plan amendments versus those
expected and recognized in the consolidated financial statements.
For further details on the assumptions impacting the
companys annual expense and obligation, see Additional
Annual Disclosures in Note 13.
Provisions
for Asset Retirement Obligations and Environmental
Costs
The company has recorded provisions relating to asset retirement
obligations, environmental and other matters. Most of these
costs will not be settled for a number of years, therefore
requiring the company to make estimates over a long period.
Environmental laws and regulations and interpretations by
regulatory authorities could change or circumstances affecting
the companys operations could change, either of which
could result in significant changes to its current plans. The
recorded provisions are based on the companys best
estimate of costs required to settle the obligations, taking
into account the nature, extent and timing of current and
proposed reclamation and closure techniques in view of present
environmental laws and regulations. It is reasonably possible
that the ultimate costs could change in the future and that
changes to these estimates could have a material effect on the
companys consolidated financial statements.
For further details on the assumptions impacting the
companys provisions, see Additional Annual Disclosures in
Note 13.
Income
Taxes
The company operates in a specialized industry and in several
tax jurisdictions. As a result, its income is subject to various
rates of taxation. The breadth of its operations and the global
complexity of tax regulations require assessments of
uncertainties and judgments in estimating the taxes the company
will ultimately pay. The final taxes paid are dependent upon
many factors, including negotiations with taxing authorities in
various jurisdictions, outcomes of tax litigation and resolution
of disputes arising from federal, provincial, state and local
tax audits. The resolution of
18 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
these uncertainties and the associated final taxes may result in
adjustments to the companys tax assets and tax liabilities.
The company estimates deferred income taxes based upon temporary
differences between the assets and liabilities that it reports
in its consolidated financial statements and the tax bases of
its assets and liabilities as determined under applicable tax
laws. The amount of deferred tax assets recognized is generally
limited to the extent that it is probable that taxable profit
will be available against which the related deductible temporary
differences can be utilized. Therefore, the amount of the
deferred income tax asset recognized and considered realizable
could be reduced if projected income is not achieved.
Asset
Impairment
The impairment process begins with the identification of the
appropriate asset or cash-generating unit for purposes of
impairment testing. Identification and measurement of any
impairment is based on the assets recoverable amount,
which is the higher of its fair value less costs to sell and
value in use. Value in use is generally based on an estimate of
discounted future cash flows. Judgment is required in
determining the appropriate discount rate. Assumptions must also
be made about future sales, margins and market conditions over
the long-term life of the assets or cash-generating units.
The company cannot predict if an event that triggers impairment
will occur, when it will occur or how it will affect reported
asset amounts. Although estimates are reasonable and consistent
with current conditions, internal planning and expected future
operations, such estimates are subject to significant
uncertainties and judgments. As a result, it is reasonably
possible that the amounts reported for asset impairments could
be different if different assumptions were used or if market and
other conditions were to change. The changes could result in
non-cash charges that could materially affect the companys
consolidated financial statements.
Contingent
Assets and Contingent Liabilities
The company is exposed to possible losses and gains related to
environmental matters and other various claims and lawsuits
pending for and against it in the ordinary course of business.
Prediction of the outcome of such uncertain events (i.e., being
virtually certain, probable, remote or undeterminable),
determination of whether accrual or disclosure in the
consolidated financial statements is required and estimation of
potential financial effects are matters for judgment. While the
amount disclosed in the consolidated financial statements may
not be material, the potential for large liabilities exists and
therefore these estimates could have a material impact on the
companys consolidated financial statements.
Share-Based
Compensation
Determining the fair value of equity-settled share-based
compensation awards at the grant date requires judgment,
including estimating the expected term of stock options, the
expected volatility of the companys stock and expected
dividends. In addition, judgment is required to estimate the
number of share-based awards that are expected to be forfeited.
The company uses a Monte Carlo simulation model to estimate the
fair value of its cash-settled performance unit incentive plan
liability at each reporting period, which requires judgment,
including making assumptions about the stock price volatility of
the company and the DAXglobal Agribusiness Index, as well as the
correlation between those two amounts, over the three-year plan
cycle.
For those awards with performance conditions that determine the
number of options or units to which its employees will be
entitled, measurement of compensation cost is based on the
companys best estimate of the outcome of the performance
conditions. If actual results differ significantly from these
estimates, stock-based compensation expense and results of
operations could be impacted.
Restructuring
Charges
Plant shutdowns, sales of business units or other corporate
restructurings trigger incremental costs to the company (e.g.,
expenses for employee termination, contract termination and
other exit costs). Because such activities are complex processes
that can take several months to complete, they involve making
and reassessing estimates.
Capitalization,
Depreciation and Amortization
Property, plant and equipment are recognized initially at cost,
which includes all expenditures directly attributable to
bringing the asset to the location and installing it in working
condition for its intended use. Determination of which costs are
directly attributable (e.g., materials, labor, overhead) is a
matter of judgment. Capitalization of carrying costs ceases when
an item is substantially complete and in the location and
condition necessary for it to be capable of operating in the
manner intended by management. Determining when an asset, or a
portion thereof, is substantially complete and in the location
and condition necessary for it to be capable of operating in the
manner intended by management requires consideration of the
circumstances and the industry in which it is to be operated,
normally predetermined by management with reference to such
factors as productive capacity. This determination is a matter
of judgment that can be complex and subject to differing
interpretations and views, particularly when significant capital
projects contain multiple phases over an extended period of time.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 19
Table of Contents
An intangible asset is defined as being identifiable, able to
bring future economic benefits to the company and controlled by
the company. An asset meets the identifiability criterion when
it is separable or arises from contractual rights. Judgment is
necessary to determine whether expenditures made by the company
on non-tangible items represent intangible assets eligible for
capitalization. Finite-lived intangible assets are accounted for
at cost and are amortized on a straight-line basis over their
estimated useful lives as follows: production and technology
rights 25 to 30 years and computer software up to
5 years.
Certain mining and milling assets are depreciated using the
units-of-production
method based on the shorter of estimates of reserves or service
lives. Pre-stripping costs are amortized on a
units-of-production
basis over the ore mined from the mineable acreage stripped.
Land is not depreciated. Other asset classes are depreciated on
a straight-line basis as follows: land improvements 5 to
40 years, buildings and improvements 4 to 40 years and
machinery and equipment (comprised primarily of plant equipment)
20 to 40 years.
The company performs assessments of its existing assets and
depreciable lives in connection with the review of mine
operating plans. When it is determined that assigned asset lives
do not reflect the expected remaining period of benefit,
prospective changes are made to their depreciable lives. A
number of uncertainties are inherent in estimating reserve
quantities, particularly as they relate to assumptions regarding
future prices, the geology of the companys mines, the
mining methods used and the related costs incurred to develop
and mine the companys reserves. Changes in these
assumptions could result in material adjustments to reserve
estimates, which could result in changes to
units-of-production
depreciation expense in future periods, particularly if reserve
estimates are reduced.
Leases
The company is party to various leases, including leases for
railcars and vessels. Judgment is required in considering a
number of factors to ensure that leases to which the company is
party are classified appropriately as operating or financing.
Such factors include whether the lease term is for the major
part of the assets economic life and whether the present
value of minimum lease payments amounts to substantially all of
the fair value of the leased asset.
Substantially all of the leases to which the company is party
have been classified as operating leases.
Recent Accounting
Pronouncements
The following new standards and amendments or interpretations to
existing standards have been published and are mandatory for
periods beginning on or after January 1, 2011, or later:
IFRS
9, Financial Instruments
In November 2009, the IASB issued guidance relating to the
classification and measurement of financial assets. Financial
assets will generally be measured initially at fair value plus
particular transaction costs. Financial assets will subsequently
be measured at either amortized cost or fair value. In October
2010, the IASB issued additions to IFRS 9 relating to accounting
for financial liabilities. Under the new requirements, an entity
choosing to measure a financial liability at fair value will
present the portion of any change in its fair value due to
changes in the entitys own credit risk in other
comprehensive income, rather than within profit or loss. The
standard must be applied retrospectively and is effective for
periods commencing on or after January 1, 2013. The company
is currently reviewing the standard to determine the potential
impact, if any, on its consolidated financial statements.
Amendments
to IFRIC 14, Prepayments of a Minimum Funding
Requirement
In November 2009, the International Financial Reporting
Interpretations Committee (IFRIC) issued amendments
to IFRIC 14 relating to the prepayments of a minimum funding
requirement for an employee defined benefit plan. The amendments
apply when an entity is subject to minimum funding requirements
and makes an early payment of contributions to cover those
requirements. The amendments permit such an entity to treat the
benefit of such an early payment as an asset. The amendment must
be applied from the beginning of the first comparative period
presented in the first financial statements in which the
amendment is applied and is effective for periods commencing on
or after January 1, 2011. The company has applied these
amendments in these unaudited interim condensed consolidated
financial statements.
Amendments
to IFRS 7, Financial Instruments: Disclosures
In May 2010, the IASB issued amendments to IFRS 7 as part of its
annual improvements process. The amendments addressed various
requirements relating to the disclosure of financial
instruments. They are effective for periods commencing on or
after January 1, 2011, with earlier application permitted.
The company has applied these amendments in these unaudited
interim condensed consolidated financial statements.
20 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Amendments
to IFRS 7, Disclosures Transfers of Financial
Assets
In October 2010, the IASB issued amendments to IFRS 7,
Financial Instruments: Disclosures. The amendments
require entities to provide additional disclosures to assist
users of financial statements in evaluating the risk exposures
relating to transfer of financial assets which are not
derecognized or for which the entity has a continuing
involvement in the transferred asset. As the company does not
typically retain any continuing involvement in financial assets
once transferred, these amendments are not expected to have a
significant impact. The amendments are effective for annual
periods beginning on or after July 1, 2011, with earlier
application permitted.
Amendments
to IAS 1, Presentation of Financial Statements
In May 2010, the IASB issued amendments to IAS 1 as part of its
annual improvements process. The amendments clarify that
entities may present the required reconciliation of changes in
each component of other comprehensive income either in the
statement of changes in equity or in the notes to the financial
statements. The amendments are effective for periods commencing
on or after January 1, 2011, with earlier application
permitted. The company has applied these amendments in these
unaudited interim condensed consolidated financial statements.
Amendments
to IAS 34, Interim Financial Reporting
In May 2010, the IASB issued amendments to IAS 34 as part of its
annual improvements process. The amendments provided
clarification of the disclosures required by IAS 34 when
considered against the disclosure requirements of other IFRS and
are effective for periods commencing on or after January 1,
2011, with earlier application permitted. The company has
applied these amendments in these unaudited interim condensed
consolidated financial statements.
2. | Receivables |
March 31, |
December 31, |
January 1, |
|||||||||||||
2011 | 2010 | 2010 | |||||||||||||
Trade accounts Canpotex Limited
(Canpotex)
|
$ | 365 | $ | 298 | $ | 164 | |||||||||
Other
|
667 | 448 | 264 | ||||||||||||
Less provision for impairment of trade accounts receivable
|
(8 | ) | (8 | ) | (8 | ) | |||||||||
1,024 | 738 | 420 | |||||||||||||
Margin deposits on derivative instruments
|
163 | 198 | 109 | ||||||||||||
Income taxes receivable
|
28 | 46 | 363 | ||||||||||||
Provincial mining and other taxes receivable
|
4 | | 235 | ||||||||||||
Other non-trade accounts
|
37 | 77 | 87 | ||||||||||||
$ | 1,256 | $ | 1,059 | $ | 1,214 | ||||||||||
3. | Inventories |
March 31, |
December 31, |
January 1, |
|||||||||||||
2011 | 2010 | 2010 | |||||||||||||
Finished products
|
$ | 296 | $ | 255 | $ | 303 | |||||||||
Intermediate products
|
113 | 127 | 159 | ||||||||||||
Raw materials
|
61 | 65 | 51 | ||||||||||||
Materials and supplies
|
127 | 123 | 111 | ||||||||||||
$ | 597 | $ | 570 | $ | 624 | ||||||||||
4. | Share Capital |
Authorized
The company is authorized to issue an unlimited number of common
shares without par value and an unlimited number of first
preferred shares. The common shares are not redeemable or
convertible. The first preferred shares may be issued in one or
more series with rights and conditions to be determined by the
companys Board of Directors. No first preferred shares
have been issued.
Issued
Number of |
||||||||
Common Shares | Consideration | |||||||
Balance January 1, 2010
|
887,926,650 | $ | 1,430 | |||||
Issued under option plans
|
7,339,116 | 68 | ||||||
Issued for dividend reinvestment plan
|
46,947 | 2 | ||||||
Repurchased
|
(42,190,020 | ) | (69 | ) | ||||
Balance December 31, 2010
|
853,122,693 | 1,431 | ||||||
Issued under option plans
|
1,635,538 | 18 | ||||||
Issued for dividend reinvestment plan
|
4,152 | | ||||||
Balance
March 31, 2011
|
854,762,383 | $ | 1,449 | |||||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 21
Table of Contents
5. | Segment Information |
The companys operating segments have been determined based
on reports reviewed by the Chief Executive Officer that are used
to make strategic decisions. The company has three reportable
operating segments: potash, phosphate and nitrogen. These
operating 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 March 31, 2011 | ||||||||||||||||||||
Potash | Phosphate | Nitrogen | All Others | Consolidated | ||||||||||||||||
Sales
|
$ | 1,109 | $ | 549 | $ | 546 | $ | | $ | 2,204 | ||||||||||
Freight, transportation and distribution
|
(83 | ) | (43 | ) | (23 | ) | | (149 | ) | |||||||||||
Net sales third party
|
1,026 | 506 | 523 | | ||||||||||||||||
Cost of goods sold
|
(283 | ) | (356 | ) | (320 | ) | | (959 | ) | |||||||||||
Gross margin
|
743 | 150 | 203 | | 1,096 | |||||||||||||||
Depreciation and amortization
|
(42 | ) | (47 | ) | (33 | ) | (2 | ) | (124 | ) | ||||||||||
Inter-segment sales
|
| | 38 | | | |||||||||||||||
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Potash | Phosphate | Nitrogen | All Others | Consolidated | ||||||||||||||||
Sales
|
$ | 892 | $ | 401 | $ | 421 | $ | | $ | 1,714 | ||||||||||
Freight, transportation and distribution
|
(96 | ) | (35 | ) | (24 | ) | | (155 | ) | |||||||||||
Net sales third party
|
796 | 366 | 397 | | ||||||||||||||||
Cost of goods sold
|
(266 | ) | (302 | ) | (262 | ) | | (830 | ) | |||||||||||
Gross margin
|
530 | 64 | 135 | | 729 | |||||||||||||||
Depreciation and amortization
|
(30 | ) | (48 | ) | (30 | ) | (2 | ) | (110 | ) | ||||||||||
Inter-segment sales
|
| | 26 | | | |||||||||||||||
Assets | Potash | Phosphate | Nitrogen | All Others | Consolidated | |||||||||||||||
Assets at March 31, 2011
|
$ | 6,205 | $ | 2,492 | $ | 1,805 | $ | 5,463 | $ | 15,965 | ||||||||||
Assets at December 31, 2010
|
$ | 5,773 | $ | 2,395 | $ | 1,808 | $ | 5,571 | $ | 15,547 | ||||||||||
Assets at January 1, 2010
|
$ | 4,685 | $ | 2,250 | $ | 1,656 | $ | 4,251 | $ | 12,842 | ||||||||||
Additions to property, plant and equipment (three months ended
March 31, 2011)
|
$ | 347 | $ | 47 | $ | 18 | $ | 29 | $ | 441 | ||||||||||
6. | Finance Costs |
Three Months Ended March 31 | ||||||||||
2011 | 2010 | |||||||||
Interest expense on debt
|
||||||||||
Short-term
|
$ | (5 | ) | $ | (1 | ) | ||||
Long-term
|
(64 | ) | (54 | ) | ||||||
Unwinding of discount on asset retirement obligations
|
(4 | ) | (3 | ) | ||||||
Borrowing costs capitalized to property, plant and equipment
|
19 | 18 | ||||||||
Interest income
|
4 | 9 | ||||||||
$ | (50 | ) | $ | (31 | ) | |||||
22 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
7. | Income Taxes |
A separate estimated average annual effective tax rate is
determined for each taxing jurisdiction and applied individually
to the interim period pre-tax income of each jurisdiction.
For the three months ended March 31, 2011, the
companys income tax expense was $243. This compared to an
expense of $191 for the same period last year. The actual
effective tax rate including discrete items for the three months
ended March 31, 2011 was 25 percent compared to
30 percent for the first three months of 2010. Total
discrete tax adjustments that impacted the rate in the first
quarter resulted in an income tax recovery of $23 compared to an
income tax expense of $11 in the same period last year.
Significant items recorded included the following:
| In first-quarter 2011, a current tax recovery of $21 for previously paid withholding taxes. |
| In first-quarter 2010, a current tax expense of $18 to adjust the 2009 income tax provision to the income tax return filed that quarter. |
| In first-quarter 2010, a current tax recovery of $10 for an anticipated refund of taxes paid related to forward exchange contracts. |
Income tax balances within the consolidated statements of
financial position were comprised of the following:
March 31, |
December 31, |
January 1, |
|||||||||||||
Income tax assets (liabilities) | Statements of Financial Position Location | 2011 | 2010 | 2010 | |||||||||||
Current income tax assets:
|
|||||||||||||||
Current
|
Receivables | $ | 28 | $ | 46 | $ | 363 | ||||||||
Non-current
|
Other assets | 102 | 101 | 57 | |||||||||||
Deferred income tax assets
|
Other assets | 36 | 38 | 31 | |||||||||||
Total income tax assets
|
$ | 166 | $ | 185 | $ | 451 | |||||||||
Current income tax liabilities:
|
|||||||||||||||
Current
|
Payables and accrued charges | $ | (139 | ) | $ | (160 | ) | $ | (17 | ) | |||||
Non-current
|
Other non-current liabilities and deferred credits | (82 | ) | (101 | ) | (71 | ) | ||||||||
Deferred income tax liabilities
|
Deferred income tax liabilities | (799 | ) | (737 | ) | (643 | ) | ||||||||
Total income tax liabilities
|
$ | (1,020 | ) | $ | (998 | ) | $ | (731 | ) | ||||||
8. | Net Income per Share |
Basic net income per share for the quarter is calculated on the
weighted average shares issued and outstanding for the three
months ended March 31, 2011 of 854,033,000
(2010 888,357,000).
Diluted net income per share is calculated based on the weighted
average number of shares issued and outstanding during the
period. The denominator is: (1) increased by the total of
the additional common shares that would have been issued
assuming exercise of all stock options with exercise prices at
or below the average market price for the period; and
(2) decreased by the number of shares that the
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 23
Table of Contents
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.
For performance-based stock option plans, the number of
contingently issuable common shares included in the calculation
is based on the number of shares, if any, that would be issuable
if the end of the reporting period were the end of the
performance period and the effect is dilutive. The weighted
average number of shares outstanding for the diluted net income
per share calculation for the three months ended March 31,
2011 was 876,467,000 (2010 914,112,000).
Excluded from the calculation of diluted net income per share
were weighted average options outstanding of 1,436,700 relating
to the 2008 Performance Option Plan, as the options
exercise prices were greater than the average market price of
common shares for the period.
9. | Seasonality |
The companys sales of fertilizer can be seasonal.
Typically, the second quarter of the year is when fertilizer
sales will be highest, due to the North American spring planting
season. However, planting conditions and the timing of customer
purchases will vary each year and sales can be expected to shift
from one quarter to another.
10. | Contingencies |
Canpotex
PCS is a shareholder in Canpotex, which markets potash offshore.
Should any operating losses or other liabilities be incurred by
Canpotex, the shareholders have contractually agreed to
reimburse it for such losses or liabilities in proportion to
their productive capacity. There were no such operating losses
or other liabilities during the first three months of 2011 or
2010.
Mining
Risk
In common with other companies in the industry, the company is
unable to acquire insurance for underground assets.
Legal and Other
Matters
Significant environmental site assessment
and/or
remediation matters of note include the following:
| The company, along with other parties, has been notified by the US Environmental Protection Agency (USEPA) of potential liability under the US Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) with respect to certain soil and groundwater conditions at a site in Lakeland, Florida that includes a former PCS Joint Venture fertilizer blending facility and certain surrounding properties. A Record of Decision (ROD) was issued in September 2007 and provides for a remedy that requires excavation of impacted soils and interim treatment of groundwater. The total remedy cost is estimated in the ROD to be $9. In September 2010, the USEPA approved the Remedial Design Report to address the soil contamination. Site preparation and mobilization has commenced for the soil remediation. |
| The USEPA has identified PCS Nitrogen, Inc. (PCS Nitrogen) as a potentially responsible party with respect to a former fertilizer blending operation in Charleston, South Carolina known as the Planters Property or Columbia Nitrogen site, formerly owned by a company from which PCS Nitrogen acquired certain other assets. The USEPA has requested reimbursement of $3 of previously incurred response costs and the performance or financing of future site investigation and response activities from PCS Nitrogen and other named potentially responsible parties. In September 2005, Ashley II of Charleston, L.L.C., the current owner of the Planters Property, filed a complaint in the United States District Court for the District of South Carolina seeking a declaratory judgment that PCS Nitrogen is liable to pay environmental response costs that Ashley II of Charleston, L.L.C. alleges it has incurred and will incur in connection with response activities at the site. After the Phase II trial, the district court allocated 30 percent of the liability for response costs at the site to PCS Nitrogen, as well as a proportional share of any costs that cannot be recovered from another responsible party. PCS Nitrogen has filed a motion for amendment of this decision. If that request is denied, the decision may be appealed, along with a previous decision imposing successor liability on PCS Nitrogen. The ultimate amount of liability for PCS Nitrogen, if any, depends upon the amount needed for remedial activities, the ability of other parties to pay and the availability of insurance. |
| PCS Phosphate has agreed to participate, on a non-joint and several basis, with parties to an Administrative Settlement Agreement with the USEPA (Settling Parties) in the performance of a removal action and the payment of certain other costs associated with PCB soil contamination at the Ward Superfund Site in Raleigh, North Carolina (Site), including reimbursement of the USEPAs past costs. The removal activities commenced at the Site in August 2007. The cost of performing the removal action at the Site is estimated at $73. The Settling Parties have initiated CERCLA cost recovery litigation against PCS Phosphate and more than 100 other entities. PCS Phosphate filed crossclaims and counterclaims seeking cost recovery. In addition to the removal action at the Site, investigation of sediments downstream of the Site in what is called Operable Unit 1 has occurred. In September 2008, the USEPA issued a final remedy for Operable Unit 1, with an estimated cost of $6. In response to a special notice letter from the USEPA, PCS Phosphate and the Settling Parties made a good-faith offer to perform and/or pay for certain actions described in the special notice letter. At this time, the |
24 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
company is unable to evaluate the extent of any exposure that it
may have for the matters addressed in the special notice letter.
| Pursuant to the 1996 Corrective Action Consent Order (the Order) executed between PCS Nitrogen Fertilizer, L.P., formerly known as Arcadian Fertilizer, L.P. (PCS Nitrogen Fertilizer) and Georgia Department of Natural Resources, Environmental Protection Division (GEPD) in conjunction with PCS Nitrogen Fertilizers purchase of real property located in Augusta, Georgia, PCS Nitrogen Fertilizer agreed to perform certain activities including a facility investigation and, if necessary, a corrective action. It has performed investigations of environmental site conditions and has documented its findings in several reports submitted to GEPD. PCS Nitrogen Fertilizer received written comments from GEPD and, to address certain of these comments, PCS Nitrogen Fertilizer is conducting additional groundwater investigation. PCS Nitrogen Fertilizer also has conducted a pilot study to evaluate the viability of in-situ bioremediation of groundwater at the site. In May 2009, PCS Nitrogen Fertilizer submitted a Corrective Action Plan (CAP) to GEPD proposing to utilize in-situ bioremediation of groundwater at the site. Pending review of the complete CAP and in accordance with the requirements of the Order, on March 31, 2011, PCS Nitrogen Fertilizer submitted to GEPD a proposed Interim Measure Work Plan that, if approved, will require implementation of a slightly modified version of the in-situ groundwater remedy for the source area originally proposed as a component of the CAP. PCS Nitrogen Fertilizer continues to perform the required additional groundwater investigation and is evaluating whether any additional modifications to the proposed groundwater remedy are necessary to comply with the Order. |
| In December 2009, during a routine inspection of a gypsum stack at the White Springs, Florida facility, a sinkhole was discovered that resulted in the loss of approximately 84 million gallons of water from the stack. The company is sampling production and monitoring wells on its property and drinking water wells on neighboring property to assess impacts. The company incurred costs of $11 to address the sinkhole between the time of discovery and March 31, 2011. In December 2010, the company entered into a consent order with the Florida Department of Environmental Protection (FDEP) pursuant to which the company agreed to, among other things, remediate the sinkhole and perform additional monitoring of the groundwater quality and hydrogeologic conditions related to the sinkhole collapse. The company also entered into an order on consent with the USEPA. On May 2, 2011, the USEPA approved the companys proposal to implement certain mitigation measures to meet the goals of the USEPA order on consent. The company remeasured the asset retirement obligation (ARO) for the White Springs gypsum stacks to account for the measures identified in the proposal. This remeasurement resulted in a $39 adjustment to the ARO, of which $33 was capitalized as an addition to the ARO and $6 was expensed in the first quarter of 2011. With the USEPA approval, the proposal will be presented to the Board of Directors with a request for authorization to proceed. |
The company is also engaged in ongoing site assessment
and/or
remediation activities at a number of other facilities and
sites. Based on current information, it does not believe that
its future obligations with respect to these facilities and
sites are reasonably likely to have a material adverse effect on
its consolidated financial position or results of operations.
Other significant matters of note include the following:
| The USEPA has an ongoing initiative to evaluate implementation within the phosphate industry of a particular exemption for mineral processing wastes under the hazardous waste program. In connection with this industry-wide initiative, the USEPA conducted inspections at numerous phosphate operations and notified the company of various alleged violations of the US Resource Conservation and Recovery Act (RCRA) at its plants in Aurora, North Carolina; Geismar, Louisiana; and White Springs, Florida. The company has entered into RCRA 3013 Administrative Orders on Consent and has performed certain site assessment activities at all three plants. At this time, the company does not know the scope of corrective action, if any, that may be required. The company continues to participate in settlement discussions with the USEPA but is uncertain if any resolution will be possible without litigation, or, if litigation occurs, what the outcome would be. At this time, the company is unable to evaluate the extent of any exposure that it may have in these matters. |
| The USEPA has also begun an initiative to evaluate compliance with the Clean Air Act at sulfuric acid and nitric acid plants. In connection with this industry-wide initiative, the USEPA has sent requests for information to numerous facilities, including the companys plants in Augusta, Georgia; Aurora, North Carolina; Geismar, Louisiana; Lima, Ohio; and White Springs, Florida. The USEPA has notified the company of various alleged violations of the Clean Air Act at its Geismar, Louisiana plant. The government has demanded process changes and penalties that would cost a total of approximately $27, but the company denies that it has any liability for the Geismar, Louisiana matter. Although the company is proceeding with planning and permitting for the process changes demanded by the government, the company is uncertain if any resolution will be possible without litigation, or, if litigation occurs, what the outcome would be. In July 2010, without alleging any specific violation of the Clean Air Act, the USEPA requested that the company meet and demonstrate compliance with the Clean Air Act for specified projects undertaken at the White Springs, Florida sulfuric acid plants. The company participated in such meeting but, at this time, is unable to evaluate if it has any exposure. |
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 25
Table of Contents
| Significant portions of the companys phosphate reserves in Aurora, North Carolina are located in wetlands. Under the Clean Water Act, the company must obtain a permit from the US Army Corps of Engineers (the Corps) before mining in the wetlands. In January 2009, the Division of Water Quality of the North Carolina Department of Natural Resources issued a certification under Section 401 of the Clean Water Act that mining of phosphate in excess of 30 years from lands owned or controlled by the company, including some wetlands, would not degrade water quality. Thereafter, in June 2009, the Corps issued the company a permit that will allow the company to mine the phosphate deposits identified in the Section 401 certification. The USEPA decided not to seek additional review of the permit. In March 2009, four environmental organizations (Pamlico-Tar River Foundation, North Carolina Coastal Federation, Environmental Defense Fund and Sierra Club) filed a Petition for a Contested Case Hearing before the North Carolina Office of Administrative Hearings (OAH) challenging the Section 401 certification. The company has intervened in this proceeding. Cross motions for summary judgment by the Petitioners and the company have been filed, briefed and argued. The OAH has not issued a decision on them. At this time, the company is unable to evaluate the extent of any exposure that it may have in this matter. |
| In May 2009, the Canadian government announced that its new industrial greenhouse gas emissions policies will be coordinated with policies that may be implemented in the US. The Province of Saskatchewan is considering the adoption of greenhouse gas emission control requirements. Regulations pursuant to the Management and Reduction of Greenhouse Gases Act in Saskatchewan, which impose a type of carbon tax to achieve a goal of a 20 percent reduction in greenhouse gas emissions by 2020 compared to 2006 levels, may become effective in 2012. There is no certainty as to the scope or timing of any final, effective provincial requirements. Although the US Congress has not passed any greenhouse gas emission control laws, the USEPA has adopted several rules to control greenhouse gas emissions using authority under existing environmental laws. In January 2011, the USEPA began phasing in requirements for all stationary sources, such as the companys plants, to obtain permits incorporating the best available control technology for greenhouse gas emissions at a source if it is a new source that could emit 100,000 tons of greenhouse gases per year or if it is a modified source that increases such emissions by 75,000 tons per year. The company is not currently aware of any projects at its facilities that would be subject to these requirements. The company is monitoring these developments, and, except as indicated above, their effect on its operations cannot be determined with certainty at this time. |
| In December 2010, the USEPA issued a final rule to restrict nutrient concentrations in surface waters in Florida to levels below those currently permitted at the companys White Springs, Florida plant. The revised nutrient criteria will become part of Floridas water quality standards in March 2012. Projected capital costs resulting from the rule could be in excess of $100 for the companys White Springs, Florida plant, and there is no guarantee that controls can be implemented that are capable of achieving compliance with the revised nutrient standards under all flow conditions. This estimate assumes that the rule survives court challenges and that none of the site-specific mechanisms for relief from the revised nutrient criteria are available to the White Springs, Florida plant. Various judicial challenges to the rule have been filed, including one lawsuit by The Fertilizer Institute and White Springs. The prospects for a rule to be implemented as issued by the USEPA and the availability of the site-specific mechanisms are uncertain. |
| The company, having been unable to agree with Mosaic Potash Esterhazy Limited Partnership (Mosaic) on the remaining amount of potash that the company is entitled to receive from Mosaic pursuant to the mining and processing agreement in respect of the companys rights at the Esterhazy mine, issued a Statement of Claim in the Saskatchewan Court of Queens Bench (Court) against Mosaic on May 27, 2009 and the claim was amended on January 19, 2010. In the Amended Statement of Claim, the company has asserted that it has the right under the mining and processing agreement to receive potash from Mosaic until at least 2012 and potentially much later, and seeks an order from the Court declaring the amount of potash which the company has the right to receive. Mosaic, in its Statement of Defence, asserts that at a delivery rate of 1.24 million tons of product per year, the companys entitlement to receive potash under the mining and processing agreement would terminate August 30, 2010. |
In addition, at the time of filing its Statement of Defence,
Mosaic commenced a counterclaim against the company, asserting
that the company has breached the mining and processing
agreement due to its refusal to take delivery of potash product
under the agreement based on an event of force majeure.
The company was notified on May 2, 2011 that Mosaic
believes that it has satisfied its obligations to produce potash
at the Esterhazy mine for the company under the mining and
processing agreement and as such it has no further obligation to
deliver potash to the company from the Esterhazy mine, other
than the companys remaining inventory. The company
disputes this interpretation and intends to take all necessary
steps to enforce its rights under the agreement, pending
determination of the matters currently in issue before the Court.
The company will continue to assert its position in these
proceedings vigorously and it denies liability to Mosaic in
connection with its counterclaim.
26 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
| Between September and October 2008, the company and PCS Sales (USA), Inc. were named as defendants in eight very similar antitrust complaints filed in US federal courts. Other potash producers are also defendants in these cases. Each of the separate complaints alleges conspiracy to fix potash prices, to divide markets, to restrict supply and to fraudulently conceal the conspiracy, all in violation of Section 1 of the Sherman Act. The company and PCS Sales (USA), Inc. believe each of these eight private antitrust lawsuits is without merit and intend to defend them vigorously. |
In addition, various other claims and lawsuits are pending
against the company in the ordinary course of business. While it
is not possible to determine the ultimate outcome of such
actions at this time, and there exist inherent uncertainties in
predicting such outcomes, it is the companys belief that
the ultimate resolution of such actions is not reasonably likely
to have a material adverse effect on its consolidated financial
position or results of operations.
The breadth of the companys operations and the global
complexity of tax regulations require assessments of
uncertainties and judgments in estimating the taxes it will
ultimately pay. The final taxes paid are dependent upon many
factors, including negotiations with taxing authorities in
various jurisdictions, outcomes of tax litigation and resolution
of disputes arising from federal, provincial, state and local
tax audits. The resolution of these uncertainties and the
associated final taxes may result in adjustments to the
companys tax assets and tax liabilities.
The company owns facilities which have been either permanently
or indefinitely shut down. It expects to incur nominal annual
expenditures for site security and other maintenance costs at
certain of these facilities. Should the facilities be
dismantled, certain other shutdown-related costs may be
incurred. Such costs are not expected to have a material adverse
effect on the companys consolidated financial position or
results of operations and would be recognized and recorded in
the period in which they are incurred.
11. | Related Party Transactions |
The company sells potash from its Saskatchewan mines for use
outside of North America exclusively to Canpotex, a potash
export, sales and marketing company owned in equal shares by the
three potash producers in the Province of Saskatchewan. Sales to
Canpotex for the quarter ended March 31, 2011 were $481
(2010 $268). Sales to Canpotex are at prevailing
market prices and are settled on normal trade terms.
12. | Reconciliation of IFRS and United States Generally Accepted Accounting Principles |
IFRS vary in certain significant respects from US GAAP. As
required by the United States Securities and Exchange
Commission, the effect of these principal differences on the
companys unaudited interim condensed consolidated
financial statements is described and quantified below.
(a) Inventories: Under IFRS, when the
circumstances that previously caused inventories to be written
down below cost no longer exist or when there is clear evidence
of an increase in net realizable value because of changed
economic circumstances, the amount of the writedown is reversed.
The reversal is limited to the amount of the original writedown.
Under US GAAP, the reversal of a writedown is not permitted
unless the reversal relates to a writedown recorded in a prior
interim period during the same fiscal year.
Under IFRS, interim price, efficiency, spending, and volume
variances of a manufacturing entity are recognized in income at
interim reporting dates to the same extent that those variances
are recognized in income at year-end. Under IFRS, deferral of
variances that are expected to be absorbed by year-end is not
appropriate because such deferrals could result in reporting
inventory at the interim date at more or less than its portion
of the actual cost of manufacture. Under US GAAP, variances that
are planned and expected to be absorbed by the end of the year
are ordinarily deferred at the end of an interim period.
(b) Long-term investments: Certain of the
companys investments in international entities are
accounted for under the equity method. Accounting principles
generally accepted in those foreign jurisdictions may vary in
certain important respects from IFRS and in certain other
respects from US GAAP. The companys share of earnings of
these equity-accounted investees under IFRS has been adjusted
for the significant effects of conforming to US GAAP.
(c) Property, plant and equipment: The net book
value of property, plant and equipment under IFRS differs from
that under US GAAP in certain respects, including the following:
Major repairs and maintenance, including turnarounds, are
capitalized under IFRS and expensed under US GAAP unless costs
represent a betterment, in which case capitalization under US
GAAP is appropriate.
Borrowing costs under IFRS are capitalized to property, plant
and equipment based on the weighted average interest rate on all
of the companys outstanding third-party debt; under US
GAAP, only the weighted average interest rate on third-party
long-term debt is used to determine the capitalized amount.
(d) Impairment of assets: Upon adopting IFRS,
the company elected not to restate past business combinations,
which resulted in the carrying amount of goodwill under IFRS
being its carrying amount under previous Canadian GAAP at the
date of transition to IFRS. Because past provisions for asset
impairment were based on undiscounted cash flows from use under
Canadian GAAP and on fair value under US GAAP, the carrying
amount of goodwill is lower under US GAAP.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 27
Table of Contents
In respect of oil and gas assets, US GAAP requires that
writedowns be based on discounted cash flows, a prescribed
discount rate and the unweighted average
first-day-of-the-month
resource prices for the prior 12 months; IFRS requires
discounted cash flows using estimated future resource prices
based on the best information available to the company.
Assets, except goodwill, that were previously impaired can be
reversed in subsequent periods, under IFRS, if the conditions
that led to the original impairment reversed. Reversals of asset
impairments are prohibited under US GAAP.
(e) Depreciation and amortization: Depreciation
and amortization under IFRS differ from that under US GAAP, as a
result of differences in the carrying amounts of property, plant
and equipment under IFRS and US GAAP, as described above.
(f) Exploration costs: Under IFRS, capitalized
exploration costs are classified as exploration and evaluation
assets. For US GAAP, these costs are generally expensed until
such time as a final feasibility study has confirmed the
existence of a commercially mineable deposit.
(g) Pension and other post-retirement
benefits: Under US GAAP, the company recognizes the
difference between the benefit obligation and the fair value of
plan assets in the consolidated statements of financial position
with the offset to OCI. Amounts in OCI are amortized to net
income. Under IFRS, actuarial gains and losses are recognized
directly in OCI without ever being amortized to net income.
Unrecognized prior service costs are not recognized in OCI, but
are amortized to net income over the average remaining vesting
period.
(h) Offsetting of certain amounts: US GAAP
requires an entity to adopt a policy of either offsetting or not
offsetting fair value amounts recognized for derivative
instruments and for the right to reclaim cash collateral or the
obligation to return cash collateral against fair value amounts
recognized for derivative instruments executed with the same
counterparty under the same master netting arrangement. The
company adopted a policy to offset such amounts. Under IFRS,
offsetting of the margin deposits is not permitted.
(i) Share-based compensation: Under IFRS, stock
options are recognized over the service period, which for
PotashCorp is established by the option performance period.
Under US GAAP, stock options are recognized over the requisite
service period, which does not commence until the option plan is
approved by the companys shareholders and options are
granted thereunder.
Performance |
Service Period Commenced | |||||||||
Option Plan Year | IFRS | US GAAP | ||||||||
2008
|
January 1, 2008 | May 8, 2008 | ||||||||
2009
|
January 1, 2009 | May 7, 2009 | ||||||||
2010
|
January 1, 2010 | May 6, 2010 | ||||||||
This difference impacts the stock-based compensation cost
recorded and may impact diluted earnings per share.
Further, under IFRS the company has recognized an estimate of
compensation cost in relation to performance options for which
service has commenced but which have not yet been granted.
Specifically, an estimate of compensation cost was recognized at
the end of the first quarter of 2011 in relation to the 2011
Performance Option Plan expected to be approved on May 12,
2011 at the companys annual meeting of shareholders for
which service has commenced but for which performance options
have not yet been granted. A corresponding estimate was made at
the end of the first quarter of 2010 in relation to the 2010
Performance Option Plan. The compensation cost recognized will
be trued up once options have been granted. Under US GAAP, no
compensation cost is recognized until the option plans are
approved.
(j) Stripping costs: Under IFRS, the company
capitalizes and amortizes costs associated with the activity of
removing overburden and other mine waste minerals in the
production phase. US GAAP requires such stripping costs to be
attributed to ore produced in that period as a component of
inventory and recognized in cost of sales in the same period as
related revenue.
(k) Provisions: Asset retirement obligations under
IFRS are measured and remeasured each reporting period using a
current risk-free discount rate. Under US GAAP, the obligation
is initially measured using a credit-adjusted risk-free discount
rate. Subsequent upward revisions are measured using the current
discount rate while downward revisions are valued using the
historical discount rate. Under IFRS, obligations incurred
through the production of inventory are included in the cost of
that inventory. Under US GAAP, obligations incurred through the
production of inventory are added to the carrying amount of the
related long-lived asset or charged to expense as incurred.
Under IFRS, provisions for asset retirement obligations include
constructive obligations. Under US GAAP, only legal obligations
are recognized.
Under IFRS, a provision is recognized for either a legal or
constructive obligation when the applicable criteria are
otherwise met. Under US GAAP, constructive obligations are
recognized only when required under a specific standard.
(l) Income taxes related to the above
adjustments: The income tax adjustment reflects the
impact on income taxes of the US GAAP adjustments described
above. Accounting for income taxes under IFRS and US GAAP is
similar, except that income tax
28 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
rates of enacted or substantively enacted tax law must be used
to calculate deferred income tax assets and liabilities under
IFRS, whereas only income tax rates of enacted tax law can be
used under US GAAP.
(m) Income taxes related to US GAAP effective income tax
rate: As it relates to interim periods, under IFRS a
separate estimated average annual effective income tax rate is
determined for each taxing jurisdiction and applied individually
to the interim period pre-tax income of each jurisdiction,
whereas under US GAAP a weighted average of the annual rates
expected across all jurisdictions is applied.
(n) Income tax consequences of share-based employee
compensation: Under IFRS, the income tax benefit
attributable to share-based compensation that is deductible in
computing taxable income but is not recorded in the consolidated
financial statements as an expense of any period includes the
amount realized in the period (the realized excess
benefit), as well as the amount of future tax deductions
that the company expects to receive based on the current market
price of the shares (the unrealized excess benefit).
The unrealized excess benefit is recognized as a deferred income
tax asset with the offset recorded in contributed surplus. Under
US GAAP, only the realized excess benefit is recorded, in
additional paid-in capital.
Under IFRS, the income tax benefit associated with share-based
compensation that is recorded in the consolidated financial
statements as an expense in the current or previous period is
reviewed at each statement of financial position date and
amended to the extent that it is no longer probable that the
related tax benefit will be realized. Under US GAAP, this income
tax benefit is calculated without estimating the income tax
effects of anticipated share-based payment transactions.
(o) Uncertain income tax positions: US GAAP
prescribes a comprehensive model for how a company should
recognize, measure, present and disclose in its consolidated
financial statements uncertain income tax positions that it has
taken or expects to take on a tax return (including a decision
whether to file or not to file a return in a particular
jurisdiction). IFRS have no similar requirements related to
uncertain income tax positions. The company accounts for
uncertain income tax positions under IFRS using the standards
applicable to current income tax assets and liabilities, i.e.,
both liabilities and assets are recorded when probable at the
companys best estimate of the amount.
(p) Income taxes related to intragroup
transactions: Under IFRS, unrealized profits resulting
from intragroup transactions are eliminated from the carrying
amount of assets, but no equivalent adjustment is made for tax
purposes. The difference between the tax rates of the two
entities will result in an impact on net income. This differs
from US GAAP, where the current tax payable in relation to such
profits is recorded as a current asset until the transaction is
realized by the group.
(q) Classification of deferred income
taxes: Under IFRS, deferred income taxes are classified
as long-term. Under US GAAP, deferred income taxes are separated
between current and long-term on the consolidated statements of
financial position.
(r) Cash flow statements: US GAAP requires the
disclosure of income taxes paid. IFRS require the disclosure of
income tax cash flows, which would include any income taxes
recovered during the period. For the three months ended
March 31, 2011, income taxes paid under US GAAP were $195
(2010 $22). Under IFRS, interest paid is not reduced
for the effects of capitalized interest whereas under US GAAP
this amount is net of capitalized interest. Interest paid under
US GAAP for the three months ended March 31, 2011 was $22
(2010 $24).
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 29
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The application of US GAAP, as described above, would have
had the following effects on net income, net income per share,
total assets and shareholders equity.
Three Months Ended |
||||||||||
March 31 | ||||||||||
2011 | 2010 | |||||||||
Net income as reported IFRS
|
$ | 732 | $ | 444 | ||||||
Items increasing (decreasing) reported net income
|
||||||||||
Manufacturing cost
variances(a)
|
(21 | ) | (9 | ) | ||||||
Share of earnings of equity-accounted
investees(b)
|
| (1 | ) | |||||||
Major repairs and
maintenance(c)
|
(14 | ) | | |||||||
Borrowing
costs(c)
|
4 | 3 | ||||||||
Asset impairment and asset writedowns
(recoveries)(d)
|
(1 | ) | (1 | ) | ||||||
Depreciation and
amortization(e)
|
2 | 2 | ||||||||
Pension and other post-retirement
benefits(g)
|
(5 | ) | (6 | ) | ||||||
Share-based
compensation(i)
|
13 | 12 | ||||||||
Stripping
costs(j)
|
4 | (9 | ) | |||||||
Asset retirement
obligations(k)
|
7 | 1 | ||||||||
Deferred income taxes relating to the above
adjustments(l)
|
3 | 3 | ||||||||
Income taxes related to US GAAP effective income tax
rate(m)
|
8 | (4 | ) | |||||||
Uncertain income tax
positions(o)
|
5 | 14 | ||||||||
Income taxes related to intragroup
transactions(p)
|
5 | 9 | ||||||||
Net income US GAAP
|
$ | 742 | $ | 458 | ||||||
Basic weighted average shares outstanding US GAAP
|
854,033,000 | 888,357,000 | ||||||||
Diluted weighted average shares outstanding US
GAAP(i)
|
876,461,000 | 914,112,000 | ||||||||
Basic net income per share US GAAP
|
$ | 0.87 | $ | 0.52 | ||||||
Diluted net income per share US GAAP
|
$ | 0.85 | $ | 0.50 | ||||||
March 31, |
December 31, |
|||||||||
2011 | 2010 | |||||||||
Total assets as reported IFRS
|
$ | 15,965 | $ | 15,547 | ||||||
Items increasing (decreasing) reported total assets
|
||||||||||
Investment in equity-accounted
investees(b)
|
44 | 40 | ||||||||
Property, plant and
equipment(c,
d)
|
(107 | ) | (109 | ) | ||||||
Major repairs and
maintenance(c)
|
(66 | ) | (52 | ) | ||||||
Borrowing
costs(c)
|
29 | 25 | ||||||||
Goodwill(d)
|
(47 | ) | (47 | ) | ||||||
Asset impairment and asset writedowns
(recoveries)(d)
|
(6 | ) | (5 | ) | ||||||
Exploration
costs(f)
|
(14 | ) | (14 | ) | ||||||
Margin deposits associated with derivative
instruments(h)
|
(163 | ) | (198 | ) | ||||||
Stripping
costs(j)
|
(58 | ) | (62 | ) | ||||||
Asset retirement
obligations(k)
|
(81 | ) | (46 | ) | ||||||
Uncertain income tax
positions(o)
|
(122 | ) | (122 | ) | ||||||
Income taxes related to intragroup
transactions(p)
|
20 | 15 | ||||||||
Deferred income tax asset due to US GAAP adjustments
|
(13 | ) | (13 | ) | ||||||
Reclassification of deferred income
taxes(q)
|
28 | 28 | ||||||||
Total assets US GAAP
|
$ | 15,409 | $ | 14,987 | ||||||
30 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
March 31, |
December 31, |
|||||||||
2011 | 2010 | |||||||||
Total shareholders equity as reported IFRS
|
$ | 7,180 | $ | 6,685 | ||||||
Items increasing (decreasing) reported shareholders equity
|
||||||||||
Manufacturing cost
variances(a)
|
(21 | ) | | |||||||
Share of earnings of equity-accounted
investees(b)
|
43 | 42 | ||||||||
Major repairs and
maintenance(c)
|
(66 | ) | (52 | ) | ||||||
Borrowing
costs(c)
|
29 | 25 | ||||||||
Asset impairment and asset writedown
(recoveries)(d)
|
(257 | ) | (256 | ) | ||||||
Depreciation and
amortization(e)
|
97 | 95 | ||||||||
Exploration
costs(f)
|
(14 | ) | (14 | ) | ||||||
Pension and other post-retirement
benefits(g)
|
13 | 13 | ||||||||
Stripping
costs(j)
|
(58 | ) | (62 | ) | ||||||
Asset retirement
obligations(k)
|
86 | 79 | ||||||||
Constructive
obligations(k)
|
5 | 5 | ||||||||
Deferred income taxes relating to the above
adjustments(l)
|
15 | 12 | ||||||||
Income taxes related to US GAAP effective income tax
rate(m)
|
(39 | ) | (47 | ) | ||||||
Deferred income taxes on share-based
compensation(n)
|
(175 | ) | (148 | ) | ||||||
Uncertain income tax
positions(o)
|
38 | 33 | ||||||||
Income taxes related to intragroup
transactions(p)
|
11 | 6 | ||||||||
Shareholders equity US GAAP
|
$ | 6,887 | $ | 6,416 | ||||||
Supplemental US
GAAP Disclosures
Disclosures
About Derivative Instruments and Hedging Activities
Derivative financial instruments are used by the company to
manage its exposure to commodity, price, exchange rate and
interest rate fluctuations. Further information, including
strategies, is provided in Note 12 to the consolidated
financial statements in the companys 2010 Financial Review
Annual Report.
Fair Values of
Derivative Instruments in the Condensed Consolidated Statements
of Financial Position
March 31, |
December 31, |
||||||||||
Derivative instrument assets (liabilities)(1) | Statements of Financial Position Location | 2011 | 2010 | ||||||||
Derivatives designated as hedging instruments:
|
|||||||||||
Natural gas derivatives
|
Prepaid expenses and other current assets | $ | 2 | $ | | ||||||
Natural gas derivatives
|
Current portion of derivative instrument liabilities | (61 | ) | (75 | ) | ||||||
Natural gas derivatives
|
Derivative instrument liabilities | (175 | ) | (204 | ) | ||||||
Total derivatives designated as hedging instruments
|
(234 | ) | (279 | ) | |||||||
Derivatives not designated as hedging instruments:
|
|||||||||||
Foreign currency derivatives
|
Prepaid expenses and other current assets | 4 | 5 | ||||||||
Total derivatives not designated as hedging instruments
|
$ | 4 | $ | 5 | |||||||
(1) | All fair value amounts are gross and exclude netted cash collateral balances |
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 31
Table of Contents
The Effect of
Derivative Instruments on the Condensed Consolidated Statements
of Income for the Three Months Ended March 31
Amount of Loss |
||||||||||||||||||||||||||||||
Amount of Loss |
Recognized in |
|||||||||||||||||||||||||||||
Reclassified |
Income |
|||||||||||||||||||||||||||||
Amount of Gain |
from |
(Ineffective |
||||||||||||||||||||||||||||
(Loss) |
Accumulated |
Location of Loss |
Portion |
|||||||||||||||||||||||||||
Recognized in |
Location of |
OCI |
Recognized in Income |
and Amount |
||||||||||||||||||||||||||
OCI |
Loss Reclassified |
into Income |
(Ineffective Portion |
Excluded from |
||||||||||||||||||||||||||
Derivatives in Cash |
(Effective |
from Accumulated |
(Effective |
and Amount |
Effectiveness |
|||||||||||||||||||||||||
Flow Hedging |
Portion) |
OCI into Income |
Portion) |
Excluded from |
Testing) | |||||||||||||||||||||||||
Relationships | 2011 | 2010 | (Effective Portion) | 2011 | 2010 | Effectiveness Testing) | 2011 | 2010 | ||||||||||||||||||||||
Natural gas derivatives
|
$ | 21 | $ | (85 | ) | Cost of goods sold | $ | (22 | ) | $ | (15 | ) | Cost of goods sold | $ | | $ | | |||||||||||||
Amount of (Loss) |
|||||||||||
Gain Recognized in |
|||||||||||
Income | |||||||||||
Derivatives Not Designated as Hedging Instruments | Location of (Loss) Gain Recognized in Income | 2011 | 2010 | ||||||||
Foreign currency derivatives
|
Foreign exchange | $ | 3 | $ | (2 | ) | |||||
Financial
Instruments and Related Risk Management
Financial
Risks
The company is exposed in varying degrees to a variety of
financial risks from its use of financial instruments: credit
risk, liquidity risk and market risk. The source of risk
exposure and how each is managed is described in Note 25 to
the consolidated financial statements in the companys 2010
Financial Review Annual Report.
Credit
Risk
The company is exposed to credit risk on its cash and cash
equivalents, receivables and derivative instrument assets. The
maximum exposure to credit risk is represented by the carrying
amount of the financial assets.
The company sells potash from its Saskatchewan mines for use
outside Canada and the US exclusively to Canpotex. Sales to
Canpotex are at prevailing market prices and are settled on
normal trade terms. There were no amounts past due or impaired
relating to amounts owing to the company from Canpotex.
Liquidity
Risk
Liquidity risk arises from the companys general funding
needs and in the management of its assets, liabilities and
optimal capital structure. It manages its liquidity risk to
maintain sufficient liquid financial resources to fund its
operations and meet its commitments and obligations in a
cost-effective manner. In managing its liquidity risk, the
company has access to a range of funding options.
Certain derivative instruments of the company contain provisions
that require its debt to maintain specified credit ratings from
two major credit rating agencies. If the companys debt
were to fall below the specified ratings, it would be in
violation of these provisions, and the counterparties to the
derivative instruments could request immediate payment or demand
immediate and ongoing full overnight collateralization on
derivative instruments in net liability positions. The aggregate
fair value of all derivative instruments with credit
risk-related contingent features that were in a liability
position on March 31, 2011 was $234, for which the company
has posted collateral of $163 in the normal course of business.
If the credit risk-related contingent features underlying these
agreements were triggered on March 31, 2011, the company
would have been required to post an additional $71 of collateral
to its counterparties.
Market
Risk
Market risk is the risk that financial instrument fair values
will fluctuate due to changes in market prices. The significant
market risks to which the company is exposed are foreign
exchange risk, interest rate risk and price risk (related to
commodity and equity securities).
32 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Foreign Exchange
Risk
At March 31, 2011, the company had entered into foreign
currency forward contracts to sell US dollars and receive
Canadian dollars in the notional amount of $250
(December 31, 2010 $170, January 1,
2010 $140) at an average exchange rate of 0.9860
(December 31, 2010 1.0170, January 1,
2010 1.0681) per US dollar with maturities in 2011.
At March 31, 2011, the company had foreign currency swaps
to sell US dollars and receive Canadian dollars in the notional
amount of $NIL (December 31, 2010 $69,
January 1, 2010 $263) at an average exchange
rate of NIL (December 31, 2010 1.0174,
January 1, 2010 1.0551) per US dollar.
Price
Risk
At March 31, 2011, the company had natural gas derivatives
qualifying for hedge accounting in the form of swaps for which
it has price risk exposure; derivatives represented a notional
amount of 74 million MMBtu with maturities in 2011 through
2019. At December 31, 2010, the notional amount of swaps
was 103 million MMBtu with maturities in 2011 through 2019.
At January 1, 2010, the notional amount of swaps was
123 million MMBtu with maturities in 2010 through 2019.
Fair
Value
Fair value represents
point-in-time
estimates that may change in subsequent reporting periods due to
market conditions or other factors.
Presented below is a comparison of the fair value of each
financial instrument to its carrying value.
March 31, 2011 | December 31, 2010 | January 1, 2010 | |||||||||||||||||||||||||
Carrying |
Fair |
Carrying |
Fair |
Carrying |
Fair |
||||||||||||||||||||||
Amount |
Value |
Amount |
Value |
Amount |
Value |
||||||||||||||||||||||
of Asset |
of Asset |
of Asset |
of Asset |
of Asset |
of Asset |
||||||||||||||||||||||
(Liability) | (Liability) | (Liability) | (Liability) | (Liability) | (Liability) | ||||||||||||||||||||||
Derivative instrument assets
|
|||||||||||||||||||||||||||
Natural gas derivatives
|
$ | 2 | $ | 2 | $ | | $ | | $ | 4 | $ | 4 | |||||||||||||||
Foreign currency derivatives
|
4 | 4 | 5 | 5 | 5 | 5 | |||||||||||||||||||||
Investments in ICL and Sinofert
|
3,571 | 3,571 | 3,842 | 3,842 | 2,760 | 2,760 | |||||||||||||||||||||
Derivative instrument liabilities
|
|||||||||||||||||||||||||||
Natural gas derivatives
|
(236 | ) | (236 | ) | (279 | ) | (279 | ) | (175 | ) | (175 | ) | |||||||||||||||
Long-term debt
|
|||||||||||||||||||||||||||
Senior notes
|
(4,350 | ) | (4,528 | ) | (4,350 | ) | (4,525 | ) | (3,350 | ) | (3,506 | ) | |||||||||||||||
Other
|
(8 | ) | (8 | ) | (8 | ) | (8 | ) | (8 | ) | (8 | ) | |||||||||||||||
Due to their short-term nature, the fair value of cash and cash
equivalents, receivables, short-term debt, and payables and
accrued charges is assumed to approximate carrying value. The
fair value of the companys senior notes at March 31,
2011 reflected the yield valuation based on observed market
prices. Yield on senior notes ranged from 1.01 percent to
5.66 percent (December 31, 2010
1.08 percent to 5.66 percent, January 1,
2010 1.73 percent to 5.83 percent). The
fair value of the companys other long-term debt
instruments approximated carrying value.
Interest rates used to discount estimated cash flows related to
derivative instruments that were not traded in an active market
at March 31, 2011 were between 0.42 percent and
4.29 percent (December 31, 2010 between
0.47 percent and 4.31 percent, January 1,
2010 between 0.23 percent and
4.67 percent) depending on the settlement date.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 33
Table of Contents
The following table presents the companys fair value
hierarchy for those financial assets and financial liabilities
carried at fair value at March 31, 2011.
Fair Value Measurements at Reporting Date Using: | |||||||||||||||||||
Quoted Prices in |
Significant |
||||||||||||||||||
Active Markets for |
Significant Other |
Unobservable |
|||||||||||||||||
Carrying Amount of |
Identical Assets |
Observable Inputs |
Inputs |
||||||||||||||||
Description | Asset (Liability) | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||
March 31, 2011
|
|||||||||||||||||||
Derivative instrument assets
|
|||||||||||||||||||
Natural gas hedging derivatives
|
$ | 2 | $ | | $ | | $ | 2 | (1) | ||||||||||
Foreign currency derivatives
|
4 | | 4 | (1) | | ||||||||||||||
Investments in ICL and Sinofert
|
3,571 | 3,571 | (1) | | | ||||||||||||||
Derivative instrument liabilities
|
|||||||||||||||||||
Natural gas hedging derivatives
|
(236 | ) | | (42 | )(1) | (194 | )(1) | ||||||||||||
December 31, 2010
|
|||||||||||||||||||
Derivative instrument assets
|
|||||||||||||||||||
Foreign currency derivatives
|
$ | 5 | $ | | $ | 5 | $ | | |||||||||||
Investments in ICL and Sinofert
|
3,842 | 3,842 | | | |||||||||||||||
Derivative instrument liabilities
|
|||||||||||||||||||
Natural gas hedging derivatives
|
(279 | ) | | (55 | ) | (224 | ) | ||||||||||||
January 1, 2010
|
|||||||||||||||||||
Derivative instrument assets
|
|||||||||||||||||||
Natural gas derivatives
|
$ | 4 | $ | | $ | 1 | $ | 3 | |||||||||||
Foreign currency derivatives
|
5 | | 5 | | |||||||||||||||
Investments in ICL and Sinofert
|
2,760 | 2,760 | | | |||||||||||||||
Derivative instrument liabilities
|
|||||||||||||||||||
Natural gas derivatives
|
(175 | ) | | (53 | ) | (122 | ) | ||||||||||||
(1) | During the period ending March 31, 2011, there were no transfers between Level 1 and Level 2, or into or out of Level 3. Company policy is to recognize transfers at the end of the reporting period. |
Fair Value
Measurements Using Significant Unobservable Inputs
(Level 3)
Natural Gas Hedging Derivatives | ||||||||||
Three Months |
Twelve Months |
|||||||||
Ended |
Ended |
|||||||||
March 31, |
December 31, |
|||||||||
2011 | 2010 | |||||||||
Balance, beginning of period
|
$ | (224 | ) | $ | (119 | ) | ||||
Total losses (realized and unrealized) before income taxes
|
||||||||||
Included in earnings (cost of goods sold)
|
(26 | ) | (36 | ) | ||||||
Included in other comprehensive income
|
19 | (126 | ) | |||||||
Settlements
|
39 | 46 | ||||||||
Transfers out of Level 3
|
| 11 | ||||||||
Balance, end of period
|
$ | (192 | ) | $ | (224 | ) | ||||
34 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Pension
and Other Post-Retirement Expenses
Three Months |
||||||||||
Ended March 31 | ||||||||||
Defined Benefit Pension Plans | 2011 | 2010 | ||||||||
Service cost
|
$ | 6 | $ | 5 | ||||||
Interest cost
|
12 | 12 | ||||||||
Expected return on plan assets
|
(13 | ) | (12 | ) | ||||||
Net amortization
|
6 | 7 | ||||||||
Net expense
|
$ | 11 | $ | 12 | ||||||
Three Months |
||||||||||
Ended March 31 | ||||||||||
Other Post-Retirement Plans | 2011 | 2010 | ||||||||
Service cost
|
$ | 2 | $ | 2 | ||||||
Interest cost
|
4 | 4 | ||||||||
Net amortization
|
(1 | ) | (1 | ) | ||||||
Net expense
|
$ | 5 | $ | 5 | ||||||
For the three months ended March 31, 2011, the company
contributed $2 to its defined benefit pension plans, $10 to its
defined contribution pension plans and $2 to its other
post-retirement plans. Total 2011 contributions to these plans
are not expected to differ significantly from the amounts
previously disclosed in Note 14 to the consolidated
financial statements in the companys 2010 Financial Review
Annual Report.
Uncertainty
in Income Taxes
Unrecognized tax benefits decreased $7 during the first three
months of 2011. It is reasonably possible that a reduction in a
range of $35 to $37 of unrecognized income tax benefits may
occur within 12 months as a result of projected resolutions
of worldwide income tax disputes.
Guarantees
In the normal course of operations, the company provides
indemnifications, which are often standard contractual terms, to
counterparties in transactions such as purchase and sale
contracts, service agreements, director/officer contracts and
leasing transactions. These indemnification agreements may
require the company to compensate the counterparties for costs
incurred as a result of various events, including environmental
liabilities and changes in (or in the interpretation of) laws
and regulations, or as a result of litigation claims or
statutory sanctions that may be suffered by the counterparty as
a consequence of the transaction. The terms of these
indemnification agreements will vary based upon the contract,
the nature of which prevents the company from making a
reasonable estimate of the maximum potential amount that it
could be required to pay to counterparties. Historically, the
company has not made any significant payments under such
indemnifications and no amounts have been accrued in the
accompanying unaudited interim condensed consolidated financial
statements with respect to these indemnification guarantees
(apart from any appropriate accruals relating to the underlying
potential liabilities).
The company enters into agreements in the normal course of
business that may contain features which meet the definition of
a guarantee. Various debt obligations (such as overdrafts, lines
of credit with counterparties for derivatives and
back-to-back
loan arrangements) and other commitments (such as railcar
leases) related to certain subsidiaries and investees have been
directly guaranteed by the company under such agreements with
third parties. The company would be required to perform on these
guarantees in the event of default by the guaranteed parties. No
material loss is anticipated by reason of such agreements and
guarantees. At March 31, 2011, the maximum potential amount
of future (undiscounted) payments under significant guarantees
provided to third parties approximated $562. It is unlikely that
these guarantees will be drawn upon, and since the maximum
potential amount of future payments does not consider the
possibility of recovery under recourse or collateral provisions,
this amount is not indicative of future cash requirements or the
companys expected losses from these arrangements. At
March 31, 2011, no subsidiary balances subject to
guarantees were outstanding in connection with the
companys cash management facilities, and it had no
liabilities recorded for other obligations other than subsidiary
bank borrowings of approximately $6.
The company has guaranteed the gypsum stack capping, closure and
post-closure obligations of White Springs and PCS Nitrogen in
Florida and Louisiana, respectively, pursuant to the financial
assurance regulatory requirements in those states. In addition,
it has guaranteed the performance of certain remediation
obligations of PCS Joint Venture and PCS Nitrogen at the
Lakeland, Florida and Augusta, Georgia sites, respectively. The
USEPA has announced that it plans to adopt rules requiring
financial assurance from a variety of mining operations,
including phosphate rock mining. It is too early in the
rulemaking process to determine what the impact, if any, on the
companys facilities will be when these rules are issued.
The environmental regulations of the Province of Saskatchewan
require each potash mine to have decommissioning and reclamation
plans. Financial assurances for these plans must be established
within one year following their approval by the responsible
provincial minister. The Minister of the Environment for
Saskatchewan (MOE) has approved the plans submitted
by the company. The company had previously provided a CDN $2
irrevocable letter of credit and a payment of CDN $3 into the
agreed-upon
trust fund. Under the regulations, the decommissioning and
reclamation plans and financial assurances are to be reviewed at
least once every five years, or as required by the MOE. The next
scheduled review for the decommissioning and
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 35
Table of Contents
reclamation plans and financial assurances is currently
underway. The MOE has indicated it is seeking an increase of the
amount paid into the trust fund by the company. The company
anticipates that all matters regarding the decommissioning and
reclamation plans and financial assurances for this review will
be completed by the end of 2011. Based on current information,
the company does not believe that its financial assurance
requirements or future obligations with respect to this matter
are reasonably likely to have a material impact on its
consolidated financial position or results of operations.
The company has met its financial assurance responsibilities as
of March 31, 2011. Costs associated with the retirement of
long-lived tangible assets have been accrued in the accompanying
unaudited interim condensed consolidated financial statements to
the extent that a legal liability to retire such assets exists.
During the period, the company entered into various other
commercial letters of credit in the normal course of operations.
As at March 31, 2011, $52 of letters of credit were
outstanding.
The company expects that it will be able to satisfy all
applicable credit support requirements without disrupting normal
business operations.
Recent Accounting
Pronouncements
Fair
Value Disclosures
In January 2010, the FASB issued a new accounting standard aimed
at improving disclosures about fair value measurements. As of
January 1, 2010, the company was required to disclose
information on significant transfers in and out of Levels 1
and 2 and the reasons for those transfers. The implementation of
this guidance did not have a material impact on the
companys consolidated financial statements. Additional
disclosures related to details of activity in Level 3 were
required effective January 1, 2011. The company has applied
these amendments in these unaudited interim condensed
consolidated financial statements.
13. | Transition to IFRS |
The company adopted IFRS on January 1, 2011 with effect
from January 1, 2010. The companys financial
statements for the year ending December 31, 2011 will be
the first annual consolidated financial statements that comply
with IFRS and these unaudited interim condensed consolidated
financial statements were prepared as described in Note 1,
including the application of IFRS 1. Accordingly, the company
will make an unreserved statement of compliance with IFRS
beginning with its 2011 annual consolidated financial statements.
Initial Elections
upon Adoption
Most adjustments required on transition to IFRS will be made
retrospectively against opening retained earnings as of the date
of the first comparative statements of financial position
presented (i.e., January 1, 2010). IFRS 1 provides entities
adopting IFRS for the first time with a number of optional
exemptions and mandatory exceptions, in certain areas, to the
general requirement for full retrospective application of IFRS.
The most significant IFRS 1 exemptions that are expected to
apply to the company upon adoption are summarized below.
IFRS
1 Exemption Options
Business
Combinations
Choice: The company may elect, on transition to
IFRS, to either restate all past business combinations in
accordance with IFRS 3, Business Combinations, or to
apply an elective exemption from applying IFRS 3 to past
business combinations.
Policy selection: If the elective exemption is
chosen, specific requirements must be met, such as maintaining
the classification of the acquirer and the acquiree, recognizing
or derecognizing certain acquired assets or liabilities as
required under IFRS and remeasuring certain assets and
liabilities at fair value. The company will elect, on transition
to IFRS, to apply the elective exemption such that transactions
entered into prior to the transition date will not be restated.
Expected transition impact: None.
Expected future impact: None.
Property, Plant
and Equipment
Choice: The company may elect to report items of
property, plant and equipment in its opening statement of
financial position on the transition date at a deemed cost
instead of the actual cost that would be determined under IFRS.
The deemed cost of an item may be either its fair value at the
date of transition to IFRS or an amount determined by a previous
revaluation under Canadian GAAP (as long as that amount was
close to its fair value, cost or adjusted cost). The exemption
can be applied on an
asset-by-asset
basis.
Policy selection: The company will elect to use the
fair values of a number of previously impaired items of
property, plant and equipment (with a total carrying amount of
zero) as their deemed costs. The aggregate of the fair values
for these particular assets is zero. Therefore, no adjustment
will result on transition to IFRS as a result of making this
election.
Expected transition impact: None.
Expected future impact: None.
36 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Share-based
Payments
Choice: The company may elect not to apply IFRS 2,
Share-Based Payments, to equity instruments granted
on or before November 7, 2002 or which vested before the
companys date of transition to IFRS. The company may also
elect not to apply IFRS 2 to liabilities arising from
share-based payment transactions which settled before the date
of transition to IFRS.
Policy selection: The company will elect not to
apply IFRS 2 to equity instruments granted on or before
November 7, 2002 or which vested before its date of
transition to IFRS. The company will also elect not to apply
IFRS 2 to liabilities arising from share-based payment
transactions which settled before the date of transition to IFRS.
Expected transition impact: None.
Expected future impact: None.
Employee
Benefits
Choice: The company may elect to recognize all
cumulative actuarial gains and losses through opening retained
earnings at the date of transition to IFRS. Actuarial gains and
losses would have to be recalculated under IFRS from the
inception of each defined benefit plan if the exemption is not
taken. The companys choice must be applied to all defined
benefit plans consistently.
Policy selection: As the company intends to adopt an
ongoing policy of recognizing all actuarial gains and losses
immediately in other comprehensive income, all cumulative
actuarial gains and losses at the date of transition to IFRS
will be recognized at the date of transition to IFRS. The
company will make use of this exemption.
Expected transition impact: See Employee Benefits
under Changes in Accounting Policies below.
Expected future impact: See Employee Benefits under
Changes in Accounting Policies below.
Foreign
Exchange
Choice: On transition, cumulative translation gains
or losses in accumulated other comprehensive income can be
reclassified to retained earnings at the companys
election. If not elected, all cumulative translation differences
must be recalculated under IFRS from inception.
Policy selection: The company has recalculated the
cumulative foreign exchange translation gains or losses in
accumulated other comprehensive income under IFRS
retrospectively.
Expected transition impact: None.
Expected future impact: None.
Decommissioning
Liabilities
Choice: In accounting for changes in obligations to
dismantle, remove and restore items of property, plant and
equipment (asset retirement obligations), the guidance in IFRS
requires changes in such obligations to be added to or deducted
from the cost of the asset to which they relate. The adjusted
depreciable amount of the asset is then depreciated
prospectively over its remaining useful life. Rather than
recalculating the effect of all such changes throughout the life
of the obligation, the company may elect to measure the
liability and the related depreciation effects at the date of
transition to IFRS.
Policy selection: The company will elect to measure
any asset retirement obligations and the related depreciation
effects at the date of transition to IFRS.
Expected transition impact: See Provisions under
Changes in Accounting Policies below.
Expected future impact: See Provisions under
Changes in Accounting Policies below.
Oil and Gas
Properties
Choice: For a first-time adopter that has previously
employed the full cost method of accounting for oil and natural
gas exploration and development expenditures, IFRS 1 provides an
exemption which allows entities to measure those assets at the
transition date at amounts determined under the entitys
previous GAAP.
Policy selection: The company will elect to measure
its oil and gas assets at their Canadian GAAP carrying value at
the date of transition to IFRS.
Expected transition impact: None.
Expected future impact: None.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 37
Table of Contents
IFRS
1 Mandatory Exceptions
IFRS 1 prohibits retrospective application of some aspects of
other IFRS. As a result, the following mandatory exceptions from
full retrospective application of IFRS will be applied and
relevant on transition to IFRS:
| The companys estimates in accordance with IFRS at the date of transition to IFRS will be consistent with estimates made for the same date in accordance with Canadian GAAP (after adjustments to reflect any difference in accounting policies). |
| The company will not reflect in its opening IFRS statements of financial position a hedging relationship of a type that did not qualify for hedge accounting in accordance with IFRS. No transactions entered into before the date of transition to IFRS will be retrospectively designated as hedges. |
Changes in
Accounting Policies
The key areas where the company has identified that accounting
policies will differ or where accounting policy decisions were
necessary that may impact its consolidated financial statements
are set out in the following table. Note that this does not
include impact of transition policy choices made under IFRS 1,
described above.
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(a) Impairment of
Assets |
Choices: There are no policy choices available under IFRS.
Differences from previous Canadian GAAP: IAS 36, Impairment of Assets, uses a one-step approach for both testing for and measurement of impairment, with asset carrying values compared directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows). Canadian GAAP generally used a two-step approach to impairment testing, first comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists, and then measuring any impairment by comparing asset carrying values with fair values. This difference may potentially result in more impairments where carrying values of assets were previously supported under Canadian GAAP on an undiscounted cash flow basis, but could not be supported on a discounted cash flow basis. |
||
In addition, IAS 36 requires the
reversal of any previous impairment losses (to the amounts the
assets would now be carried at had depreciation continued) where
circumstances have changed such that the impairments have been
reduced. Canadian GAAP prohibited reversal of impairment losses.
|
|||
Expected transition impact:
The company has identified certain assets for which
impairment losses have been previously recognized, but which are
no longer impaired. The previously recognized impairment loss
will need to be reversed on transition to IFRS, which will
result in an increase in the carrying amount of property, plant
and equipment at December 31, 2010 of $9 (January 1,
2010 $10). Net income for 2010 will decrease by $1.
The company has also identified items which are regarded as
impaired under IFRS, but not under Canadian GAAP. As a result,
equity at December 31, 2010 will decrease by $4 (January 1,
2010 $2). Net income for 2010 will decrease by $2.
|
|||
Expected future impact:
Dependent upon future circumstances, as described above.
|
|||
38 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(b) Employee
Benefits |
Choices: Actuarial gains and losses are permitted under IAS 19, Employee Benefits, to be recognized directly in other comprehensive income rather than through profit or loss. | ||
Policy selection: Actuarial
gains and losses will be recognized in other comprehensive
income.
|
|||
Differences from previous
Canadian GAAP: IAS 19 requires the past service cost element
of defined benefit plans to be expensed on an accelerated basis,
with vested past service costs expensed immediately and unvested
past service costs recognized on a straight-line basis until the
benefits become vested. Under Canadian GAAP, past service costs
were generally amortized on a straight-line basis over the
average remaining service period of active employees expected
under the plan.
|
|||
Under Canadian GAAP, certain gains
and losses which were unrecognized at the time of adopting the
current Canadian accounting standard were permitted to be
amortized over a period under transitional provisions of the
current standards. Those amounts must be recognized on
transition to IFRS.
|
|||
Expected transition impact: Equity at December 31, 2010 will be reduced by $365 (January 1, 2010 $352). Net income for 2010 will increase by $24. | |||
Expected future impact: The
effect of actuarial gains and losses will no longer affect net
income under the companys accounting policy choice.
Shareholders equity is expected to be subject to greater
variability as the effects of actuarial gains and losses will be
recognized immediately, rather than being deferred and amortized
over a period of time.
|
|||
(c) Share-Based Payments
|
Choices: There are no policy choices available under
IFRS. Differences from previous
Canadian GAAP: IFRS 2, Share-Based Payments,
requires that cash-settled share-based payments to employees be
measured (both initially and at each reporting date) based on
fair value of the awards. Canadian GAAP required that such
payments be measured based on intrinsic value of the awards.
This difference is expected to impact the accounting measurement
of some of the companys cash-settled employee incentive
plans, such as its performance unit incentive plan.
|
||
IFRS 2 requires an estimate of
compensation cost to be recognized in relation to performance
options for which service has commenced but which have not yet
been granted. The compensation cost recognized would then be
trued up once options have been granted. Under Canadian GAAP,
compensation cost was first recognized when the options were
granted. This will create a timing difference between IFRS and
Canadian GAAP in terms of when compensation cost relating to
employee service provided in the first quarter of the year is
recognized. In relation to stock option costs in 2010, net
income will decrease in the first quarter and increase in the
second quarter by $13. Net income and equity for annual periods
are not affected.
|
|||
Expected transition impact:
In relation to the companys cash-settled share-based
payments, equity at December 31, 2010 will be increased by $1
(January 1, 2010 $3). Net income for 2010 will
decrease by $2.
|
|||
Expected future impact: Any
future significant difference between the fair value and
intrinsic value of outstanding units under the companys
performance unit incentive plan will result in different
measurements under IFRS and Canadian GAAP in any particular
year; however, this will be a timing difference only. The total
future compensation expense relating to these awards will be the
same under IFRS and Canadian GAAP over the duration of each
incentive plan cycle. In relation to stock option cost, a timing
difference will exist between IFRS and Canadian GAAP, whereby
net income under IFRS will decrease in the first quarter and
increase in the second quarter of each year by offsetting
amounts. Net income and equity for annual periods are not
affected.
|
|||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 39
Table of Contents
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(d) Provisions
(including Asset Retirement Obligations) |
Choices: There are no policy choices available under
IFRS. Differences from previous
Canadian GAAP: IAS 37, Provisions, Contingent
Liabilities and Contingent Assets, requires a provision to
be recognized when: there is a present obligation (legal or
constructive) as a result of a past transaction or event; it is
probable that an outflow of resources will be required to settle
the obligation; and a reliable estimate can be made of the
obligation. Probable in this context means more
likely than not. Under Canadian GAAP, constructive obligations
were recognized only if required by a specific standard, and the
criterion for recognition in the financial statements was
likely, which is a higher threshold than
probable. Therefore, it is possible that there may
be some contingent liabilities not recognized under Canadian
GAAP which would require a provision under IFRS.
|
||
Other differences between IFRS and
Canadian GAAP exist in relation to the measurement of
provisions, such as the methodology for determining the best
estimate where there is a range of equally possible outcomes
(IFRS uses the mid-point of the range whereas Canadian GAAP used
the low end), and the requirement under IFRS for provisions to
be discounted where material.
|
|||
In relation to asset retirement
obligations, measurement under IFRS will be based on
managements best estimate, while measurement under
Canadian GAAP was based on the fair value of the obligation
(which takes market assumptions into account). Under IFRS, the
full asset retirement obligation is remeasured each period using
the current discount rate. Under Canadian GAAP, cash flow
estimates associated with asset retirement obligations were
discounted using historical discount rates. Changes in the
discount rate alone did not result in a remeasurement of the
liability. Changes in estimates that decreased the liability
were discounted using the discount rate applied upon initial
recognition of the liability. When changes in estimates
increased the liability, the additional liability was discounted
using the current discount rate.
|
|||
IFRS require the companys
asset retirement obligations to be discounted using a risk-free
rate. Under Canadian GAAP, asset retirement obligations were
discounted using a credit-adjusted risk-free rate.
|
|||
Under IFRS, the increase in the
measurement of an asset retirement obligation due to the passage
of time (unwinding of the discount) is classified as a finance
expense. Under Canadian GAAP, this amount was classified as an
operating expense.
|
|||
Expected transition impact:
Equity at December 31, 2010 will be reduced by $84 (January 1,
2010 $68). Net income for 2010 will decrease by $16.
|
|||
Expected future impact:
Measurement of provisions may fluctuate more under IFRS and
a change in the discount rate will have a more significant
impact on the obligation as well as the companys assets
and expenses. As well, provisions may be recognized earlier
under IFRS than under Canadian GAAP.
|
|||
40 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(e) Income
Taxes |
Choices: Where exchange rate differences on deferred income tax liabilities or assets are recognized in the income statement, such differences may be classified as either foreign exchange gains/losses or deferred tax expense/income under IFRS. | ||
Policy selection: Exchange
rate differences on deferred income tax liabilities or assets
will be classified as foreign exchange gains/losses. This is
consistent with the companys accounting policy under
Canadian GAAP.
|
|||
Differences from previous
Canadian GAAP, expected transition impact and expected future
impact of each: Under IFRS, the guidance in IAS 12,
Income Taxes, will be used to determine the benefit
to be received in relation to uncertain tax positions. This
differs from the methodology used under Canadian GAAP. Equity at
December 31, 2010 will be increased by $48 (January 1,
2010 $36). Net income for 2010 will increase by $12.
Impacts in future periods will depend on the particular
circumstances existing in those periods.
|
|||
Under IFRS, deferred tax assets
recognized in relation to share-based payment arrangements (for
example, the companys employee stock option plan in the
US) are adjusted each period to reflect the amount of future tax
deductions that the company expects to receive in excess of
stock-based compensation recorded in the consolidated financial
statements based on the current market price of the shares. The
benefit of such amounts is recognized in contributed surplus and
never impacts net income. Under the companys Canadian GAAP
policy, tax deductions for its employee stock option plan in the
US were recognized as reductions to tax expense, within net
income, in the period that the deduction was allowed. This
difference will result in a decrease to net income in 2010 of
$45. Equity at December 31, 2010 will increase by $143 (January
1, 2010 $116). In future periods, current tax
expense will be higher and the balance of the companys
deferred tax liability is expected to be more volatile under
IFRS.
|
|||
Under IFRS, deferred tax assets
associated with share-based compensation that are recorded in
the consolidated financial statements as an expense in the
current or previous period should be reviewed at each statement
of financial position date and amended to the extent that it is
no longer probable that the related tax benefit will be
realized. Under Canadian GAAP, this income tax benefit was
calculated without estimating the income tax effects of
anticipated share-based payment transactions. This difference
will result in an increase to net income of $1. Equity at
December 31, 2010 will decrease by $7 (January 1,
2010 $8). In future periods, the balance in the
companys deferred tax liability is expected to be more
volatile under IFRS.
|
|||
Under IFRS, adjustments relating to
a change in tax rates are recognized in the same category of
comprehensive income in which the original amounts were
recognized. Under Canadian GAAP, such adjustments were
recognized in net income, regardless of the category in which
the original amounts were recognized. In addition, foreign
exchange gains on deferred income tax liabilities would be
recorded in other comprehensive income under IFRS, but were
recorded in net income under Canadian GAAP. In combination,
these differences will result in $150 related to an internal
restructuring that occurred in 2009 being re-categorized at the
date of transition to IFRS from retained earnings to accumulated
other comprehensive income. There will be no future impacts
resulting from this item.
|
|||
Under IFRS, deferred income taxes
are classified as long-term. Under Canadian GAAP, future income
taxes were separated between current and long-term on the
statement of financial position. This will result in a decrease
in 2010 of $28 (January 1, 2010 $18) in current
assets and non-current liabilities on the statement of financial
position. This classification difference will continue to exist
in future periods; however, the size and direction of the
difference will depend on circumstances existing in those
periods.
|
|||
Under IFRS, unrealized profits
resulting from intragroup transactions are eliminated from the
carrying amount of assets, but no equivalent adjustment is made
for tax purposes. The difference between the tax rates of the
two entities will impact net income. This differs from Canadian
GAAP, where the current tax payable in relation to such profits
was recorded as a current asset until the transaction was
realized by the group. As a result, 2010 net income will
decrease by $14. Equity at December 31, 2010 will increase by $6
(January 1, 2010 $20). In future periods, the tax
impact of intragroup transactions will be recognized earlier
under IFRS; however, the size and direction of the difference
will depend on circumstances existing in those periods.
|
|||
Interest and penalties on income
tax deficiencies are classified as financing expenses or
operating expenses, respectively, under IFRS. Penalties on all
income tax deficiencies will be classified as operating
expenses. All interest expense related to income taxes (whether
cash taxes or uncertain tax positions) will be disclosed as
finance costs. Under Canadian GAAP, these were classified as
either operating expenses or income tax expense depending on
their nature. In future periods, finance costs and interest
payable will be higher under IFRS.
|
|||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 41
Table of Contents
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(f) Consolidation | Choices: There are no policy choices available under IFRS. | ||
Differences from previous
Canadian GAAP: The IFRS approach to consolidation is
principles-based whereby consolidation is required for all
entities which are controlled. Unlike the Canadian GAAP two-step
model, which first required consideration as to whether an
entity was a VIE, the IFRS guidance on consolidation is a
single-step model the control model. IFRS do bring
in the concepts of risk and rewards where the existence of
control is not apparent, although not in the same rules-based
manner as under Canadian GAAP.
|
|||
Expected transition impact:
None.
|
|||
Expected future impact: None.
|
|||
(g) Property,
Plant and Equipment |
Choices: Either a historical cost model or a revaluation
model can be used to value property, plant and equipment. Policy selection: The
company will value property, plant and equipment using the
historical cost model. Differences from previous
Canadian GAAP: Under IFRS, where part of an item of
property, plant and equipment has a cost that is significant in
relation to the cost of the item as a whole, it must be
depreciated separately from the remainder of the item. Canadian
GAAP was similar in this respect; however, the componentization
concept was not often applied to the same extent due to
practicality and/or materiality.
|
||
Under IFRS, the cost of major
overhauls on items of property, plant and equipment is
capitalized as a component of the related item of property,
plant and equipment and amortized over the period until the next
major overhaul. Under Canadian GAAP, these costs were expensed
in the year incurred.
|
|||
Expected transition impact:
Equity at December 31, 2010 will be increased by $52
(January 1, 2010 $18). Net income for 2010 will
increase by $34.
|
|||
Expected future impact: The
cost of future replacement of components of property, plant and
equipment (including the cost of major overhauls) will be
capitalized and amortized over several years rather than being
expensed in the year incurred. This will result in a difference
in timing between IFRS and Canadian GAAP in terms of when such
costs are recognized as expenses.
|
|||
(h) Inventories | Choices: Either first-in, first-out (FIFO) or weighted average can be used to value inventories. | ||
Policy selection: The
weighted average method will be used to value inventories.
|
|||
Differences from previous
Canadian GAAP: None, as it relates to annual periods.
|
|||
Under IFRS, at interim periods,
price, efficiency, spending, and volume variances of a
manufacturing entity are recognized in income to the same extent
that those variances are recognized in income at financial
year-end. Under IFRS, deferral of variances that are expected to
be absorbed by year-end is not appropriate because it could
result in reporting inventory at the interim date at more or
less than its portion of the actual cost of manufacture. Under
Canadian GAAP, variances that were planned and expected to be
absorbed by the end of the year were ordinarily deferred at the
end of an interim period. In relation to manufacturing cost
variances, 2010 net income will increase in the first
quarter by $9 and in the second quarter by $6, decrease in the
third quarter by $48 and increase in the fourth quarter by $33.
Equity will increase at March 31, 2010 by $9, increase at June
30, 2010 by $15 and decrease at September 30, 2010 by $33. Net
income and equity for annual periods are not affected.
|
|||
Expected transition impact:
None, as it relates to annual periods.
|
|||
Expected future impact:
None, as it relates to annual periods. Manufacturing cost
variances that were deferred at interim periods will no longer
be deferred. This will result in a difference in timing during
the year between IFRS and Canadian GAAP in terms of when such
costs are recognized as expenses.
|
|||
42 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(i) Borrowing Costs
|
Choices: There are no policy choices available under
IFRS. Differences from previous
Canadian GAAP: Under IFRS, borrowing costs will be
capitalized to assets which take a substantial time to develop
or construct using a capitalization rate based on the weighted
average interest rate on all of the companys outstanding
third-party debt. Under the companys Canadian GAAP policy,
the interest capitalization rate was based only on the weighted
average interest rate on third-party long-term debt.
|
||
Expected transition impact:
Equity at December 31, 2010 will be reduced by $25 (January
1, 2010 $14). Net income for 2010 will decrease by
$11.
|
|||
Expected future impact:
There will be an ongoing difference based on the difference
in capitalization rates.
|
|||
(j) Financial
Instruments |
Choices: Trade date or settlement date can be used. Policy selection: The
company will recognize regular-way purchases and sales of
financial assets at the trade date.
|
||
Differences from previous
Canadian GAAP: None.
|
|||
Expected transition impact:
None.
|
|||
Expected future impact: None.
|
|||
(k) Definition of a Derivative
|
Choices: There are no policy choices available under
IFRS. Differences from previous
Canadian GAAP: Derivatives usually have a notional amount
(that is, an amount of currency, a number of shares or other
number of units specified in the contract). Under IFRS, the
definition of a derivative does not specifically require an
instrument to have a notional amount, and the lack of a notional
amount does not result in an exemption from treatment of the
contract as a derivative. Under Canadian GAAP, when the quantity
of a non-financial asset or liability to be purchased or sold
was not specified and was not otherwise determinable (for
example, by reference to anticipated quantities to be used in
the calculation of penalty amounts in the event of
non-performance), the contract was not accounted for as a
derivative since the standard setters concluded its fair value
would not be reliably determinable. As a result, a notional
amount was also required implicitly for such a contract to meet
the definition of a derivative under Canadian GAAP. Whereas
under Canadian GAAP such an instrument would not be accounted
for as a derivative, under IFRS it is necessary to analyze all
other features to determine whether the contract is a
derivative. If so, it is necessary to determine a reasonable
estimation of what a notional amount could be, and measure the
instrument at fair value as a derivative or embedded derivative
based on such.
|
||
Expected transition impact:
None.
|
|||
Expected future impact: More
contracts may be categorized as derivatives (either assets or
liabilities) than under Canadian GAAP.
|
|||
(l) Embedded
Derivatives |
Choices: There are no policy choices available under
IFRS. Differences from previous
Canadian GAAP: For transitional purposes under Canadian
GAAP, the company elected to record embedded derivatives only
for contracts entered into or substantively modified on or after
January 1, 2003. This transitional option does not exist under
IFRS and therefore additional potential embedded derivatives
will be considered within contracts previously not reviewed in
this context to conclude whether bifurcation and recording will
be necessary.
|
||
Expected transition impact:
None.
|
|||
Expected future impact:
None.
|
|||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 43
Table of Contents
Accounting |
|||
Policy Area |
Impact of Policy Adoption |
||
(m) Hedge
Accounting |
Choices: There are no policy choices available under
IFRS. Differences from previous
Canadian GAAP: Under Canadian GAAP, a short-cut method for
assessing hedge effectiveness was permitted if the critical
terms of the hedged item and hedging instrument matched. This
method is not permitted under IFRS. The company had certain
deferred amounts related to the previous use of this method
under Canadian GAAP pertaining to interest rate swaps. However,
because the previously designated hedging relationship was of a
type that would have qualified for hedge accounting under IFRS,
the provisions of IFRS 1, First-Time Adoption of
International Financial Reporting Standards, allow the
company to discontinue hedge accounting prospectively. Because
hedge accounting had already been discontinued prospectively
under Canadian GAAP, no adjustment will be necessary as a result
of adopting IFRS.
|
||
Expected transition impact:
None.
|
|||
Expected future impact:
None.
|
|||
(n) Statement of Cash Flows
|
Choices: Either the direct or indirect method may be presented. Dividends paid, interest paid, interest received and dividends received can be presented as operating, investing or financing activities. | ||
Policy selection: The
company will use the indirect method. Dividends paid will be
presented as financing activities. Interest and dividends
received will be presented as operating activities. Interest
paid will be presented as operating activities except where it
has been capitalized to property, plant and equipment, in which
case it will be presented as investing activities.
|
|||
Differences from previous
Canadian GAAP: None.
|
|||
Expected transition impact:
None.
|
|||
Expected future impact:
None.
|
|||
(o) Investments
|
Choices: Jointly controlled entities may be accounted for either by using proportionate consolidation or the equity method. | ||
Policy selection: The equity
method will be used to account for joint ventures.
|
|||
Differences from previous
Canadian GAAP: Under Canadian GAAP, joint ventures were
accounted for using proportionate consolidation.
|
|||
Certain of the companys
equity-accounted investees adopted IFRS earlier than PotashCorp,
resulting in certain IFRS 1 elections being made, particularly
related to use of fair value as deemed cost on certain items of
property, plant and equipment and related to the use of the
business combinations exemption. As a result, the company will
recognize its share of such elections as an adjustment to its
opening retained earnings and its investments in
equity-accounted investees.
|
|||
Expected transition impact:
Equity at December 31, 2010 will be reduced by $45 (January
1, 2010 $45). Net income for 2010 will be
unaffected.
|
|||
Expected future impact: One
joint venture will be accounted for using the equity method,
rather than proportionate consolidation method. The impact is
expected to be minimal.
|
|||
44 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Reconciliations
from Canadian GAAP to IFRS
Reconciliation
of Net Income
Year to Date Period Ended | |||||||||
December 31, |
March 31, |
||||||||
2010 | 2010 | ||||||||
Net Income Canadian GAAP
|
$ | 1,806 | $ | 449 | |||||
IFRS adjustments to net income:
|
|||||||||
Policy choices
|
|||||||||
Employee benefits Actuarial gains and
losses(b)
|
26 | 6 | |||||||
Other
|
|||||||||
Provisions Changes in asset retirement
obligations(d)
|
(13 | ) | (1 | ) | |||||
Property, plant and
equipment(g)
|
34 | | |||||||
Borrowing
costs(i)
|
(11 | ) | (2 | ) | |||||
Employee benefits Past service
costs(b)
|
(2 | ) | | ||||||
Impairment of
assets(a)
|
(3 | ) | 1 | ||||||
Constructive
obligations(d)
|
(3 | ) | | ||||||
Share-based
payments(c)
|
(2 | ) | (15 | ) | |||||
Manufacturing cost variances at interim
periods(h)
|
| 9 | |||||||
Income taxes Tax effect of above differences
|
(10 | ) | | ||||||
Income tax-related
differences(e)
|
(47 | ) | (3 | ) | |||||
Net Income IFRS
|
$ | 1,775 | $ | 444 | |||||
References above relate to items described in the Changes in
Accounting Policies table above.
Reconciliation
of Shareholders Equity
December 31, |
March 31, |
January 1, |
|||||||||||
2010 | 2010 | 2010 | |||||||||||
Shareholders Equity Canadian GAAP
|
$ | 6,804 | $ | 6,952 | $ | 6,440 | |||||||
IFRS adjustments to shareholders equity:
|
|||||||||||||
Policy choices
|
|||||||||||||
Employee benefits Actuarial gains and
losses(b)
|
(375 | ) | (358 | ) | (365 | ) | |||||||
Other
|
|||||||||||||
Provisions Changes in asset retirement
obligations(d)
|
(79 | ) | (67 | ) | (66 | ) | |||||||
Property, plant and
equipment(g)
|
52 | 18 | 18 | ||||||||||
Investments(o)
|
(45 | ) | (45 | ) | (45 | ) | |||||||
Borrowing
costs(i)
|
(25 | ) | (16 | ) | (14 | ) | |||||||
Employee benefits Past service costs and
Canadian GAAP transition
amounts(b)
|
10 | 12 | 13 | ||||||||||
Impairment of
assets(a)
|
5 | 9 | 8 | ||||||||||
Constructive
obligations(d)
|
(5 | ) | (2 | ) | (2 | ) | |||||||
Share-based
payments(c)
|
1 | 1 | 3 | ||||||||||
Manufacturing cost variances at interim
periods(h)
|
| 9 | | ||||||||||
Income taxes Tax effect of above differences
|
154 | 152 | 152 | ||||||||||
Income tax-related
differences(e)
|
188 | 178 | 163 | ||||||||||
Shareholders Equity IFRS
|
$ | 6,685 | $ | 6,843 | $ | 6,305 | |||||||
References above relate to items described in the Changes in
Accounting Policies table above.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 45
Table of Contents
Reconciliation
of Comprehensive Income
Year to Date Period Ended | |||||||||
December 31, |
March 31, |
||||||||
2010 | 2010 | ||||||||
Comprehensive Income Canadian GAAP
|
$ | 2,402 | $ | 530 | |||||
IFRS adjustments to comprehensive income:
|
|||||||||
Policy choices
|
|||||||||
Employee benefits Actuarial gains and
losses(b)
|
(36 | ) | | ||||||
Tax effect of employee benefits Actuarial
gains and losses
|
11 | | |||||||
Other
|
|||||||||
Differences in net income
|
(31 | ) | (5 | ) | |||||
Comprehensive Income IFRS
|
$ | 2,346 | $ | 525 | |||||
References above relate to items described in the Changes in
Accounting Policies table above.
46 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Adjusted
Financial Statements
The following tables show the adjustments to the companys
consolidated statements of financial position and consolidated
statements of income.
Adjustments
to Consolidated Statement of Financial
Position as at December 31,
2010
IFRS |
IFRS |
||||||||||||||||||||
Canadian |
Adjust- |
Ref- |
Reclass- |
||||||||||||||||||
Canadian GAAP Accounts | GAAP | ments | erence | ifications | IFRS | IFRS Accounts | |||||||||||||||
Assets
|
Assets | ||||||||||||||||||||
Current assets
|
Current assets
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 412 | $ | | $ | | $ | 412 |
Cash and cash equivalents
|
||||||||||||
Receivables
|
1,044 | 15 | (e) | | 1,059 |
Receivables
|
|||||||||||||||
Inventories
|
570 | | | 570 |
Inventories
|
||||||||||||||||
Prepaid expenses and other current assets
|
114 | (60 | ) | (e) | | 54 |
Prepaid expenses and other current assets
|
||||||||||||||
2,140 | (45 | ) | | 2,095 | |||||||||||||||||
Non-current assets
|
|||||||||||||||||||||
Property, plant and equipment
|
8,063 | 78 | (a,d,g,i) | | 8,141 |
Property, plant and equipment
|
|||||||||||||||
Investments
|
4,938 | (45 | ) | (o) | (4,893 | ) | | ||||||||||||||
| | 1,051 | 1,051 |
Investments in equity-accounted investees
|
|||||||||||||||||
| | 3,842 | 3,842 |
Available-for-sale investments
|
|||||||||||||||||
Other assets
|
363 | (60 | ) | (b,e) | | 303 |
Other assets
|
||||||||||||||
Intangible assets
|
18 | | 97 | 115 |
Intangible assets
|
||||||||||||||||
Goodwill
|
97 | | (97 | ) | | ||||||||||||||||
$ | 15,619 | $ | (72 | ) | $ | | $ | 15,547 | Total Assets | ||||||||||||
Liabilities
|
Liabilities | ||||||||||||||||||||
Current liabilities
|
Current liabilities
|
||||||||||||||||||||
Short-term debt and current portion of
long-term debt |
$ | 1,871 | $ | | $ | | $ | 1,871 |
Short-term debt and current portion of long-term debt
|
||||||||||||
Payables and accrued charges
|
1,246 | (48 | ) | (c,d,e) | | 1,198 |
Payables and accrued charges
|
||||||||||||||
Current portion of derivative instrument
liabilities |
75 | | | 75 |
Current portion of derivative instrument liabilities
|
||||||||||||||||
3,192 | (48 | ) | | 3,144 | |||||||||||||||||
Non-current liabilities
|
|||||||||||||||||||||
Long-term debt
|
3,707 | | | 3,707 |
Long-term debt
|
||||||||||||||||
Derivative instrument liabilities
|
204 | | | 204 |
Derivative instrument liabilities
|
||||||||||||||||
Future income tax liabilities
|
1,078 | (341 | ) | (e) | | 737 |
Deferred income tax liabilities
|
||||||||||||||
Accrued pension and other post-retirement
benefits |
299 | 169 | (b) | | 468 |
Accrued pension and other post-retirement benefits
|
|||||||||||||||
Accrued environmental costs and asset
retirement obligations |
330 | 125 | (d) | | 455 |
Asset retirement obligations and accrued environmental costs
|
|||||||||||||||
Other non-current liabilities and deferred
credits |
5 | 142 | (e) | | 147 |
Other non-current liabilities and deferred credits
|
|||||||||||||||
8,815 | 47 | | 8,862 | Total Liabilities | |||||||||||||||||
Shareholders Equity
|
Shareholders Equity | ||||||||||||||||||||
Share capital
|
1,431 | | | 1,431 |
Share capital
|
||||||||||||||||
Contributed surplus
|
160 | 148 | (e) | | 308 |
Contributed surplus
|
|||||||||||||||
Accumulated other comprehensive income
|
2,244 | 150 | (e) | | 2,394 |
Accumulated other comprehensive income
|
|||||||||||||||
Retained earnings
|
2,969 | (417 | ) | | 2,552 |
Retained earnings
|
|||||||||||||||
6,804 | (119 | ) | | 6,685 | Total Shareholders Equity | ||||||||||||||||
$ | 15,619 | $ | (72 | ) | $ | | $ | 15,547 | Total Liabilities and Shareholders Equity | ||||||||||||
References above relate to items described in the Changes in
Accounting Policies table above.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 47
Table of Contents
Adjustments
to Consolidated Statement of Financial
Position as at January 1, 2010
IFRS |
IFRS |
||||||||||||||||||||
Canadian |
Adjust- |
Ref- |
Reclass- |
||||||||||||||||||
Canadian GAAP Accounts | GAAP | ments | erence | ifications | IFRS | IFRS Accounts | |||||||||||||||
Assets
|
Assets | ||||||||||||||||||||
Current assets
|
Current assets
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 385 | $ | | $ | | $ | 385 |
Cash and cash equivalents
|
||||||||||||
Receivables
|
1,138 | 76 | (e) | | 1,214 |
Receivables
|
|||||||||||||||
Inventories
|
624 | | | 624 |
Inventories
|
||||||||||||||||
Prepaid expenses and other current assets
|
125 | (56 | ) | (e) | | 69 |
Prepaid expenses and other current assets
|
||||||||||||||
2,272 | 20 | | 2,292 | ||||||||||||||||||
Non-current assets
|
|||||||||||||||||||||
Property, plant and equipment
|
6,413 | 31 | (a,d,g,i) | | 6,444 |
Property, plant and equipment
|
|||||||||||||||
Investments
|
3,760 | (45 | ) | (o) | (3,715 | ) | | ||||||||||||||
955 | 955 |
Investments in equity-accounted investees
|
|||||||||||||||||||
| | 2,760 | 2,760 |
Available-for-sale investments
|
|||||||||||||||||
Other assets
|
360 | (86 | ) | (b,e) | | 274 |
Other assets
|
||||||||||||||
Intangible assets
|
20 | | 97 | 117 |
Intangible assets
|
||||||||||||||||
Goodwill
|
97 | | (97 | ) | | ||||||||||||||||
$ | 12,922 | $ | (80 | ) | $ | | $ | 12,842 | Total Assets | ||||||||||||
Liabilities
|
Liabilities | ||||||||||||||||||||
Current liabilities
|
Current liabilities
|
||||||||||||||||||||
Short-term debt and current portion of long-term debt
|
$ | 729 | $ | | $ | | $ | 729 |
Short-term debt and current portion of long-term debt
|
||||||||||||
Payables and accrued charges
|
796 | 21 | (c,d,e) | | 817 |
Payables and accrued charges
|
|||||||||||||||
Current portion of derivative instrument liabilities
|
52 | | | 52 |
Current portion of derivative instrument liabilities
|
||||||||||||||||
1,577 | 21 | | 1,598 | ||||||||||||||||||
Non-current liabilities
|
|||||||||||||||||||||
Long-term debt
|
3,319 | | | 3,319 |
Long-term debt
|
||||||||||||||||
Derivative instrument liabilities
|
123 | | | 123 |
Derivative instrument liabilities
|
||||||||||||||||
Future income tax liabilities
|
963 | (320 | ) | (e) | | 643 |
Deferred income tax liabilities
|
||||||||||||||
Accrued pension and other post-retirement benefits
|
281 | 174 | (b) | | 455 |
Accrued pension and other post-retirement benefits
|
|||||||||||||||
Accrued environmental costs and asset retirement obligations
|
215 | 85 | (d) | | 300 |
Asset retirement obligations and accrued environmental costs
|
|||||||||||||||
Other non-current liabilities and deferred credits
|
4 | 95 | (e) | | 99 |
Other non-current liabilities and deferred credits
|
|||||||||||||||
6,482 | 55 | | 6,537 | Total Liabilities | |||||||||||||||||
Shareholders Equity
|
Shareholders Equity | ||||||||||||||||||||
Share capital
|
1,430 | | | 1,430 |
Share capital
|
||||||||||||||||
Contributed surplus
|
150 | 123 | (e) | | 273 |
Contributed surplus
|
|||||||||||||||
Accumulated other comprehensive income
|
1,649 | 149 | (e) | | 1,798 |
Accumulated other comprehensive income
|
|||||||||||||||
Retained earnings
|
3,211 | (407 | ) | | 2,804 |
Retained earnings
|
|||||||||||||||
6,440 | (135 | ) | | 6,305 | Total Shareholders Equity | ||||||||||||||||
$ | 12,922 | $ | (80 | ) | $ | | $ | 12,842 | Total Liabilities and Shareholders Equity | ||||||||||||
References above relate to items described in the Changes in
Accounting Policies table above.
48 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Adjustments
to Consolidated Statement of Income Year
Ended December 31, 2010
IFRS |
IFRS |
||||||||||||||||||||
Canadian |
Adjust- |
Ref- |
Reclass- |
||||||||||||||||||
Canadian GAAP Accounts | GAAP | ments | erence | ifications | IFRS | IFRS Accounts | |||||||||||||||
Sales
|
$ | 6,539 | $ | | $ | | $ | 6,539 | Sales | ||||||||||||
Freight
|
(336 | ) | | (152 | ) | (488 | ) | Freight, transportation and distribution | |||||||||||||
Transportation and distribution
|
(152 | ) | | 152 | | ||||||||||||||||
Cost of goods sold
|
(3,426 | ) | 65 | (a,b,c,d,g,i) | | (3,361 | ) | Cost of goods sold | |||||||||||||
Gross Margin
|
2,625 | 65 | | 2,690 | Gross Margin | ||||||||||||||||
Selling and administrative
|
(228 | ) | | (b,c,d) | | (228 | ) | Selling and administrative | |||||||||||||
Provincial mining and other taxes
|
(77 | ) | | | (77 | ) | Provincial mining and other taxes | ||||||||||||||
Foreign exchange loss
|
(17 | ) | | | (17 | ) | Foreign exchange loss | ||||||||||||||
| | 174 | 174 | Share of earnings of equity investees | |||||||||||||||||
| | 163 | 163 | Dividend income | |||||||||||||||||
Other income
|
245 | (16 | ) | (a,g) | (211 | ) | 18 | Other income | |||||||||||||
| | (126 | ) | (126 | ) | Other expenses | |||||||||||||||
Operating Income
|
2,548 | 49 | | 2,597 | Operating Income | ||||||||||||||||
Interest Expense
|
(99 | ) | (42 | ) | (d,e,i) | | (141 | ) | Finance Costs | ||||||||||||
Income Before Income Taxes
|
2,449 | 7 | | 2,456 | Income Before Income Taxes | ||||||||||||||||
Income Taxes
|
(643 | ) | (38 | ) | (e) | | (681 | ) | Income Taxes | ||||||||||||
Net Income
|
$ | 1,806 | $ | (31 | ) | $ | | $ | 1,775 | Net Income | |||||||||||
Net Income per Share
|
Net Income per Share | ||||||||||||||||||||
Basic
|
$ | 2.04 | $ | (0.04 | ) | $ | | $ | 2.00 |
Basic
|
|||||||||||
Diluted
|
$ | 1.98 | $ | (0.03 | ) | $ | | $ | 1.95 |
Diluted
|
|||||||||||
Dividends per Share
|
$ | 0.13 | $ | | $ | | $ | 0.13 | Dividends per Share | ||||||||||||
References above relate to items described in the Changes in
Accounting Policies table above.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 49
Table of Contents
Additional Annual
Disclosures under IFRS
Certain disclosures are required in annual financial statements
under IFRS that were not required under Canadian GAAP. Where
such annual information is considered material to an
understanding of the current interim period, it has been
disclosed below. Amounts included in the companys 2010
annual consolidated financial statements are not repeated
herein. The following IFRS annual disclosures for the year ended
December 31, 2010 are included below.
Property,
Plant and Equipment
Mine |
|||||||||||||||||||||||||
Land and |
Buildings and |
Machinery and |
Development |
Assets Under |
|||||||||||||||||||||
Improvements | Improvements | Equipment | Costs | Construction | Total | ||||||||||||||||||||
Balance at January 1, 2010 comprised of:
|
|||||||||||||||||||||||||
Cost
|
$ | 356 | $ | 911 | $ | 5,540 | $ | 400 | $ | 2,087 | $ | 9,294 | |||||||||||||
Accumulated depreciation
|
(76 | ) | (235 | ) | (2,307 | ) | (232 | ) | | (2,850 | ) | ||||||||||||||
Net book value
|
$ | 280 | $ | 676 | $ | 3,233 | $ | 168 | $ | 2,087 | $ | 6,444 | |||||||||||||
Net book value January 1, 2010
|
$ | 280 | $ | 676 | $ | 3,233 | $ | 168 | $ | 2,087 | $ | 6,444 | |||||||||||||
Impairment losses
|
| | (2 | ) | | | (2 | ) | |||||||||||||||||
Additions
|
2 | 12 | 156 | 82 | 1,926 | 2,178 | |||||||||||||||||||
Disposals
|
| (3 | ) | (22 | ) | | | (25 | ) | ||||||||||||||||
Transfers
|
59 | 595 | 1,322 | 67 | (2,043 | ) | | ||||||||||||||||||
Depreciation
|
(9 | ) | (32 | ) | (356 | ) | (57 | ) | | (454 | ) | ||||||||||||||
Net book value December 31, 2010
|
$ | 332 | $ | 1,248 | $ | 4,331 | $ | 260 | $ | 1,970 | $ | 8,141 | |||||||||||||
Balance at December 31, 2010 comprised of:
|
|||||||||||||||||||||||||
Cost
|
$ | 417 | $ | 1,513 | $ | 6,864 | $ | 548 | $ | 1,970 | $ | 11,312 | |||||||||||||
Accumulated depreciation
|
(85 | ) | (265 | ) | (2,533 | ) | (288 | ) | | (3,171 | ) | ||||||||||||||
Net book value
|
$ | 332 | $ | 1,248 | $ | 4,331 | $ | 260 | $ | 1,970 | $ | 8,141 | |||||||||||||
Depreciation and amortization of property, plant and equipment
included in cost of goods sold and in selling and administrative
expenses was $(441) in 2010. Depreciation and amortization of
property, plant and equipment included in the cost of other
assets was $(13) in 2010.
Interest capitalized to property, plant and equipment during
2010 was $107.
Pension
and Other Post-Retirement Benefits
Defined Benefit
Plans
The components of total expense for the companys pension
and other post-retirement benefit plans recognized in income for
2010 were as follows:
Pension | Other | ||||||||
Service cost for benefits earned during the year
|
$ | (20 | ) | $ | (7 | ) | |||
Interest cost on projected benefit obligations
|
(47 | ) | (16 | ) | |||||
Expected return on plan assets
|
47 | | |||||||
Past service costs
|
| 1 | |||||||
Plan settlements and curtailments
|
1 | | |||||||
Total recognized in income
|
$ | (19 | ) | $ | (22 | ) | |||
Of the total recognized in income, $(33) was included in cost of
goods sold and $(8) was included in selling and administrative
expenses.
50 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Gains and losses relating to the companys pension and
other post-retirement benefit plans recognized in other
comprehensive income for 2010 were as follows:
Pension | Other | ||||||||
Actuarial (loss) on obligations
|
$ | (66 | ) | $ | (7 | ) | |||
Actuarial gain on plan assets
|
37 | | |||||||
Total (loss) recognized in other comprehensive income
|
$ | (29 | ) | $ | (7 | ) | |||
The cumulative amount of actuarial gains and losses recognized
in other comprehensive income since the companys date of
transition to IFRS was $36 at December 31, 2010
(January 1, 2010 $NIL).
Assumptions regarding future mortality experience are set based
on actuarial advice in accordance with published statistics and
experience in each territory.
The benefit obligations and plan assets for the companys
pension and other post-retirement plans were as follows:
December 31, 2010 | January 1, 2010 | ||||||||||||||||||||||||
Pension | Other | Total | Pension | Other | Total | ||||||||||||||||||||
Present value of defined benefit obligations
|
$ | (893 | ) | $ | (298 | ) | $ | (1,191 | ) | $ | (792 | ) | $ | (276 | ) | $ | (1,068 | ) | |||||||
Fair value of plan assets
|
753 | | 753 | 649 | | 649 | |||||||||||||||||||
Funded status
|
(140 | ) | (298 | ) | (438 | ) | (143 | ) | (276 | ) | (419 | ) | |||||||||||||
Past service costs not recognized in statement of financial
position
|
| (13 | ) | (13 | ) | | (15 | ) | (15 | ) | |||||||||||||||
Accrued pension and other post-retirement benefit liabilities
|
$ | (140 | ) | $ | (311 | ) | $ | (451 | ) | $ | (143 | ) | $ | (291 | ) | $ | (434 | ) | |||||||
Provisions
for Asset Retirement, Environmental and Other
Obligations
Asset |
|||||||||||||||||
Retirement |
Environmental |
Other |
|||||||||||||||
Obligations | Restoration | Matters | Total | ||||||||||||||
Balance January 1, 2010
|
$ | (309 | ) | $ | (31 | ) | $ | (2 | ) | $ | (342 | ) | |||||
(Charged) credited to income:
|
|||||||||||||||||
Additional provisions
|
(51 | ) | (3 | ) | (5 | ) | (59 | ) | |||||||||
Unwinding of discount
|
(11 | ) | | | (11 | ) | |||||||||||
Capitalized to property, plant and equipment
|
(107 | ) | | | (107 | ) | |||||||||||
Incurred during period
|
24 | 9 | 2 | 35 | |||||||||||||
Exchange differences
|
(2 | ) | | | (2 | ) | |||||||||||
Balance December 31, 2010
|
$ | (456 | ) | $ | (25 | ) | $ | (5 | ) | $ | (486 | ) | |||||
Balance comprised of:
December 31, |
|||||||
Statements of Financial Position Location | 2010 | ||||||
Current liabilities
|
Payables and accrued charges | $ | (31 | ) | |||
Non-current liabilities
|
Asset retirement obligations and accrued environmental costs | (455 | ) | ||||
$ | (486 | ) | |||||
The estimated cash flows required to settle the asset retirement
obligations of the phosphate operations have been discounted at
a risk-free rate ranging from 1.97 percent to
4.34 percent at December 31, 2010 (January 1,
2010 2.56 percent to 4.63 percent).
The estimated cash flows required to settle the asset retirement
obligations of the potash operations have been discounted at a
risk-free rate of 6.00 percent at December 31, 2010
(January 1, 2010 7.00 percent).
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 51
Table of Contents
Item 2. Managements
Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis are the responsibility of
management and are as of May 6, 2011. The Board of
Directors carries out its responsibility for review of this
disclosure principally through its audit committee, comprised
exclusively of independent directors. The audit committee
reviews and, prior to its publication, approves this disclosure,
pursuant to the authority delegated to it by the Board of
Directors. The term PCS refers to Potash Corporation
of Saskatchewan Inc. and the terms we,
us, our, PotashCorp and
the company refer to PCS and, as applicable, PCS and
its direct and indirect subsidiaries as a group. Additional
information relating to the company, including our Annual Report
on
Form 10-K,
can be found on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov/edgar.shtml. The company is a foreign private issuer
under the rules and regulations of the US Securities and
Exchange Commission (the SEC); however, the company
currently files voluntarily on the SECs domestic forms.
Adoption
of International Financial Reporting Standards
(IFRS)
The unaudited interim condensed consolidated financial
statements included in Item 1 of this Quarterly Report on
10-Q reflect
the adoption of IFRS, with effect from January 1, 2010.
Periods prior to January 1, 2010 have not been restated and
were in accordance with Canadian GAAP which, as discussed in
Part 1 Item 1 of this Quarterly Report on
Form 10-Q,
was applied during the periods prior to the effective date of
the companys adoption of IFRS. Our financial statements
subsequent to this report will be prepared in accordance with
IFRS. As a foreign private issuer under the rules and
regulations of the SEC, the company is permitted to use IFRS.
Note 13 to the unaudited interim condensed consolidated
financial statements included in Item 1 of this Quarterly Report
on
Form 10-Q
contains a detailed description of our conversion to IFRS,
including a reconciliation of key components of our financial
statements previously prepared under Canadian GAAP to those
under IFRS as at and for the three months ended March 31,
2010, for the year ended December 31, 2010 and as at
January 1, 2010.
Although the adoption of IFRS resulted in adjustments to our
financial statements, it did not materially impact the
underlying cash flows or profitability trends of our operating
performance, debt covenants or compensation arrangements.
PotashCorp
and Our Business Environment
PotashCorp is an integrated producer of fertilizer, industrial
and animal feed products. We are the worlds largest
fertilizer enterprise by capacity, producing the three primary
plant nutrients: potash, phosphate and nitrogen. We sell
fertilizer to North American retailers, cooperatives and
distributors that provide storage and application services to
farmers, the end users. Our offshore customers are government
agencies and private importers who buy under contract and on the
spot market; spot sales are more prevalent in North America,
South America and Southeast Asia. Fertilizers are sold primarily
for spring and fall application in both Northern and Southern
hemispheres.
Transportation is an important part of the final purchase price
for fertilizer so producers usually sell to the closest
customers. In North America, we sell mainly on a delivered basis
via rail, barge, truck and pipeline. Offshore customers purchase
product either at the port where it is loaded or delivered with
freight included.
Potash, phosphate and nitrogen are also used as inputs for the
production of animal feed and industrial products. Most feed and
industrial sales are by contract and are more evenly distributed
throughout the year than fertilizer sales.
PotashCorp
Strategy
To provide our stakeholders with long-term value, our strategy
focuses on generating growth while striving to minimize
fluctuations in an upward-trending earnings line. We apply this
strategy by concentrating on our highest margin products. Such
analysis dictates our Potash First strategy, focusing our
capital internally and through
investments on our world-class potash assets
to meet the rising global demand for this vital nutrient. By
investing in potash capacity while producing to meet market
demand, we seek to create the opportunity for significant growth
while limiting downside risk. We complement our potash
operations with focused phosphate and nitrogen businesses that
emphasize the production of higher-margin products with stable
and sustainable earnings potential.
We strive to enhance our position as supplier of choice to our
customers, delivering the highest quality products at market
prices when they are needed. We seek to be the preferred
supplier to high-volume, high-margin customers with the lowest
credit risk. It is critical to our success that our customers
recognize our ability to create value for them based on the
price they pay for our products.
As we plan for our future, we carefully weigh our choices for
use of our cash flow. We base all investment decisions on cash
flow return materially exceeding cost of capital, evaluating the
best prospects for return on investment that match our Potash
First strategy. Most of our recent capital expenditures have
gone to investments in our own potash capacity, and we look to
increase our existing offshore potash investments and seek other
merger and acquisition opportunities in this nutrient. We also
consider share repurchases and increased dividends as ways to
maximize shareholder value over the long term.
52 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Key
Performance Drivers Performance Compared to
Goals
Each year we set targets to advance our long-term goals and
drive results. Our long-term goals and 2011 targets are set out
on pages 41 and 42 of our 2010 Financial Review Annual Report. A
summary of our progress against selected goals and
representative annual targets is set out below.
Representative |
Performance |
|||||
Goal | 2011 Annual Target | to March 31, 2011 | ||||
Achieve no harm to people.
|
Reduce total site severity injury rate by 35 percent from 2008 levels by the end of 2012. | Total site severity injury rate was 32 percent below the 2008 annual level for the first three months of 2011. It was 53 percent below the 2008 annual level for the first three months of 2010 and 62 percent below the 2008 annual level by the end of 2010. | ||||
Achieve no damage to the environment. | Reduce total reportable releases, permit excursions and spills by 10 percent from 2010 levels. | Annualized total reportable releases, permit excursions and spills were down 60 percent during the first three months of 2011 compared to 2010 annual levels. Compared to the first three months of 2010, total reportable releases, permit excursions and spills were down 67 percent. | ||||
Create superior long-term shareholder value. | Exceed total shareholder return performance for our sector and the DAXglobal Agribusiness Index for 2011. | PotashCorps total shareholder return was 14 percent in the first three months of 2011 compared to our sectors weighted average return (based on market capitalization) of NIL percent and the DAXglobal Agribusiness Index weighted average return (based on market capitalization) of 5 percent. | ||||
Financial
Overview
This discussion and analysis are based on the companys
unaudited interim condensed consolidated financial statements
reported under IFRS, unless otherwise stated. These principles
differ in certain significant respects from accounting
principles generally accepted in the United States. These
differences are described and quantified in Note 12 to the
unaudited interim condensed consolidated financial statements
included in Item 1 of this Quarterly Report on
Form 10-Q.
All references to per-share amounts pertain to diluted net
income per share.
For an understanding of trends, events, uncertainties and the
effect of critical accounting estimates on our results and
financial condition, the entire document should be read
carefully, together with our 2010 Financial Review Annual Report.
Earnings
Guidance First Quarter 2011
Company Guidance | Actual Results | ||||
Earnings per share
|
$0.70 $0.90 | $0.84 | |||
Effective tax rate, including discrete items
|
25% 27% | 25% | |||
Overview of
Actual Results
Operations
Three Months Ended March 31 | ||||||||||||||||
% |
||||||||||||||||
Dollars (millions) except per-share amounts | 2011 | 2010 | Change | Change | ||||||||||||
Sales
|
2,204 | 1,714 | 490 | 29 | ||||||||||||
Gross Margin
|
1,096 | 729 | 367 | 50 | ||||||||||||
Operating Income
|
1,025 | 666 | 359 | 54 | ||||||||||||
Net Income
|
732 | 444 | 288 | 65 | ||||||||||||
Net Income Per Share Diluted
|
0.84 | 0.49 | 0.35 | 71 | ||||||||||||
Other Comprehensive (Loss) Income
|
(246 | ) | 81 | (327 | ) | n/m | ||||||||||
n/m = not meaningful
Record first-quarter gross margin and earnings were due to
higher sales prices for all nutrients and increased demand for
potash (offshore), liquid fertilizer and ammonia compared to the
same period of 2010. Prices for goods that use our products were
mostly at or near record highs, creating incentive for users to
consume more of our products. Strong demand coupled with our low
inventories put upward pressure on pricing for most products.
Record first-quarter potash gross margin of $743 million
(68 percent of total) surpassed last years
first-quarter $530 million. Phosphate gross margin for the
first quarter was $150 million (2010 first
quarter $64 million) while nitrogen
gross margin
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 53
Table of Contents
climbed to $203 million in first-quarter 2011 from
$135 million in the same quarter last year.
Prices for many key crop commodities increased during the
quarter, fueled by declining inventories and growing concern
that farmers will be challenged to keep pace with rising demand.
However, higher prices did little to temper demand for crops
used for food, fiber, fuel and animal feed which kept global
grain inventories at extremely low levels. Global potash demand
approached record territory during the quarter as all major
potash-consuming markets actively moved to fill immediate needs.
Strong demand particularly from Latin America
and Asian countries outside of China and
India helped raise offshore shipments from
North American producers to a record 3.0 million tonnes,
surpassing the previous mark achieved in the second quarter of
2007 and 28 percent above the first quarter of 2010.
Domestic shipments from North American producers remained robust
at 2.4 million tonnes in the first quarter, even on the
heels of strong demand in fourth-quarter 2010. Although the
first-quarter total was below the 3.0 million tonnes
shipped in the same period last year when
dealers first began to address the limited movement of
2009 it reflected continued demand strength
in North America. Rising global demand reportedly left many
potash producers sold out for the second quarter, even with
Indias contracted shipments completed at the end of March.
With global supply capabilities being tested and North American
producer inventory levels falling well below the previous
five-year average, realized and announced prices moved higher in
nearly all markets. Solid phosphate fertilizer markets were
supported by strong domestic demand ahead of the key planting
season, with first-quarter shipments from US producers to North
American customers increasing 13 percent from the same
period last year. Offshore shipments declined 17 percent as
customers slowed their purchasing ahead of the settlement of new
supply contracts with India, the worlds largest phosphate
importer. The continuation of strong demand
along with rising costs for key inputs (including phosphate
rock, sulfur and ammonia) and production curtailments in North
Africa due to political unrest pushed prices
significantly higher compared to first-quarter 2010. In
nitrogen, healthy demand for ammonia continued, with US domestic
shipments at similar levels to the first quarter of 2010. With
strong global agricultural demand, improved industrial demand
and higher natural gas prices in key European producing regions,
including the Ukraine, prices for all nitrogen products rose
significantly. Urea experienced some softness on rising supply
availability, but demand and pricing began to firm by the end of
the quarter. Competitive US gas prices continue to support
healthy margins for domestic producers.
Other significant factors that affected earnings in the first
quarter of 2011 compared to the first quarter of 2010 were:
(1) higher income taxes due to increased earnings;
(2) larger finance costs as a result of elevated
borrowings; (3) more earnings from equity-accounted
investees; (4) higher selling and administrative expenses
(the value of certain compensation arrangements rose in
correlation to our share price); and (5) increased
provincial mining and other taxes as a result of escalating
sales revenue. Other comprehensive loss for 2011 was the result
of the decline in the fair value of our investments in Israel
Chemicals Ltd. (ICL) and Sinofert Holdings Limited
(Sinofert). Other comprehensive income for the first
three months of 2010 resulted primarily from the increased fair
value of our investments in ICL and Sinofert.
54 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Balance
Sheet
First-quarter additions to property, plant and equipment related
primarily (79 percent) to our previously announced potash
capacity expansions and other potash projects. Receivables were
mainly impacted by higher trade receivables (consistent with
higher sales) and partially offset by declines in hedge margin
deposits on our natural gas derivatives and dividends receivable
(due from ICL at December 31, 2010 while no dividend was
receivable at the end of the current quarter).
Available-for-sale
investments declined due to the fair value of our investments in
both ICL and Sinofert falling. Cash provided by operations
exceeded cash used to purchase property, plant and equipment and
repay commercial paper, resulting in higher cash and cash
equivalents.
Short-term debt decreased as a result of commercial paper
repayments during the first quarter of 2011. Payables and
accrued charges rose as a result of revenue being received in
advance, a more than doubling of quarterly dividends starting in
2011, interest payable on larger amounts of outstanding debt;
all of which was partially offset by employee bonuses accrued at
year-end being paid out during the quarter.
Significant changes in equity were primarily the result of net
income being partially offset by other comprehensive losses for
the first three months of 2011, as discussed in more detail
above.
Operating Segment
Review
Note 5 to the unaudited interim condensed consolidated
financial statements provides information pertaining to our
operating segments. Management includes net sales in segment
disclosures in the consolidated financial statements pursuant to
IFRS, which requires segmentation based upon our internal
organization and reporting of revenue and profit measures
derived from internal accounting methods. As a component of
gross margin, net sales (and the related per-tonne amounts) are
the primary revenue measures we use and review in making
decisions about operating matters on a business segment basis.
These decisions include assessments about potash, phosphate and
nitrogen performance and the resources to be allocated to these
segments. We also use net sales (and the related per-tonne
amounts) for business planning and monthly forecasting. Net
sales are calculated as sales revenues less freight,
transportation and distribution expenses.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 55
Table of Contents
Our discussion of segment operating performance is set out below
and includes nutrient product
and/or
market performance results where applicable to give further
insight into these results.
Potash
Three Months Ended March 31 | ||||||||||||||||||||||||||||||||||||
Dollars (millions) | Tonnes (thousands) | Average per Tonne(1) | ||||||||||||||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||||||||||||
Sales
|
$ | 1,109 | $ | 892 | 24 | |||||||||||||||||||||||||||||||
Freight, transportation and distribution
|
(83 | ) | (96 | ) | (14 | ) | ||||||||||||||||||||||||||||||
Net sales
|
$ | 1,026 | $ | 796 | 29 | |||||||||||||||||||||||||||||||
Manufactured product
|
||||||||||||||||||||||||||||||||||||
Net sales
|
||||||||||||||||||||||||||||||||||||
North America
|
$ | 466 | $ | 450 | 4 | 1,092 | 1,266 | (14 | ) | $ | 427 | $ | 355 | 20 | ||||||||||||||||||||||
Offshore
|
555 | 342 | 62 | 1,696 | 1,198 | 42 | $ | 327 | $ | 285 | 15 | |||||||||||||||||||||||||
1,021 | 792 | 29 | 2,788 | 2,464 | 13 | $ | 366 | $ | 321 | 14 | ||||||||||||||||||||||||||
Cost of goods sold
|
(280 | ) | (260 | ) | 8 | $ | (100 | ) | $ | (105 | ) | (5 | ) | |||||||||||||||||||||||
Gross margin
|
741 | 532 | 39 | $ | 266 | $ | 216 | 23 | ||||||||||||||||||||||||||||
Other miscellaneous and purchased product
|
||||||||||||||||||||||||||||||||||||
Net sales
|
5 | 4 | 25 | |||||||||||||||||||||||||||||||||
Cost of goods sold
|
(3 | ) | (6 | ) | (50 | ) | ||||||||||||||||||||||||||||||
Gross margin
|
2 | (2 | ) | n/m | ||||||||||||||||||||||||||||||||
Gross Margin
|
$ | 743 | $ | 530 | 40 | $ | 266 | $ | 215 | 24 | ||||||||||||||||||||||||||
(1) | Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
n/m = not meaningful
Potash gross margin
variance attributable to:
Three Months Ended March 31 |
|||||||||||||||||
2011 vs. 2010 | |||||||||||||||||
Change in |
|||||||||||||||||
Prices/Costs | |||||||||||||||||
Change in |
Cost of |
||||||||||||||||
Dollars (millions) | Sales Volumes | Net Sales | Goods Sold | Total | |||||||||||||
Manufactured product
|
|||||||||||||||||
North America
|
$ | (51 | ) | $ | 78 | $ | 14 | $ | 41 | ||||||||
Offshore
|
107 | 71 | (10 | ) | 168 | ||||||||||||
Change in market mix
|
27 | (24 | ) | (3 | ) | | |||||||||||
Total manufactured product
|
$ | 83 | $ | 125 | $ | 1 | $ | 209 | |||||||||
Other miscellaneous and purchased product
|
4 | ||||||||||||||||
Total
|
$ | 213 | |||||||||||||||
56 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 57
Table of Contents
The most significant contributors to the change in total gross
margin quarter over quarter were as
follows(1):
(1)
Direction of arrows refers to impact on gross margin.
Net Sales Prices
|
Sales Volumes
|
Cost of Goods Sold
|
||||||||
á
á |
The higher average realized price for the quarter reflected new pricing levels announced in late 2010 and early 2011.
Canpotex signed an agreement with China for the first half of 2011 at prices approximately $50 per tonne higher than the 2010 China contract. |
á
á â |
Strong sales pulled inventories down significantly despite near-record quarterly production.
Record Canpotex shipments to offshore markets were the result of strong demand for potash due to high commodity prices and limited customer inventories. Latin American imports improved more than any other market due to low customer potash inventory and higher prices for a wide range of key crop commodities. North American volumes were down compared to the record volumes shipped in the first quarter of 2010, when the depleted supply chain absorbed 1.3 million tonnes. |
á
á â â á â |
No shutdown cost incurred in 2011 (13 weeks taken in 2010) as facilities operated at or near their full capabilities.
Royalty costs lower as 2010 included high royalty costs from opening inventory. The Canadian dollar strengthened relative to the US dollar. Depreciation costs increased due to higher asset levels associated with our mine expansion activity. North American cost of goods sold variance was positive as a lower percentage of products produced at higher-cost mines, or using higher-cost processes, was sold. Offshore cost of goods sold variance was negative due to more of that product coming from our higher-cost mines. |
North American customers prefer premium priced granular product
over standard product more typically consumed offshore.
The change in market mix produced a favorable variance of
$27 million related to sales volumes and an unfavorable
variance of $24 million in sales prices due to the majority
of this quarters lower-priced standard product being sold
offshore whereas last year, higher-priced granular sales to
North America comprised a larger proportion of total sales.
Canpotex sales to major markets, by percentage of sales volumes,
were as follows:
Three Months Ended March 31 | |||||||||||||||||
2011 | 2010 | Change | % Change | ||||||||||||||
Asia (excluding China and India)
|
45 | 51 | (6 | ) | (12 | ) | |||||||||||
Latin America
|
27 | 19 | 8 | 42 | |||||||||||||
China
|
16 | 16 | | | |||||||||||||
India
|
7 | 7 | | | |||||||||||||
Oceania, Europe and Other
|
5 | 7 | (2 | ) | (29 | ) | |||||||||||
100 | 100 | ||||||||||||||||
58 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Phosphate
Three Months Ended March 31 | ||||||||||||||||||||||||||||||||||||
Dollars (millions) | Tonnes (thousands) | Average per Tonne(1) | ||||||||||||||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||||||||||||
Sales
|
$ | 549 | $ | 401 | 37 | |||||||||||||||||||||||||||||||
Freight, transportation and distribution
|
(43 | ) | (35 | ) | 23 | |||||||||||||||||||||||||||||||
Net sales
|
$ | 506 | $ | 366 | 38 | |||||||||||||||||||||||||||||||
Manufactured product
|
||||||||||||||||||||||||||||||||||||
Net sales
|
||||||||||||||||||||||||||||||||||||
Fertilizer liquids
|
$ | 170 | $ | 81 | 110 | 349 | 248 | 41 | $ | 488 | $ | 328 | 49 | |||||||||||||||||||||||
Fertilizer solids
|
157 | 126 | 25 | 255 | 293 | (13 | ) | $ | 616 | $ | 428 | 44 | ||||||||||||||||||||||||
Feed
|
71 | 71 | | 135 | 167 | (19 | ) | $ | 525 | $ | 426 | 23 | ||||||||||||||||||||||||
Industrial
|
101 | 82 | 23 | 154 | 152 | 1 | $ | 654 | $ | 540 | 21 | |||||||||||||||||||||||||
499 | 360 | 39 | 893 | 860 | 4 | $ | 559 | $ | 419 | 33 | ||||||||||||||||||||||||||
Cost of goods sold
|
(353 | ) | (300 | ) | 18 | $ | (396 | ) | $ | (349 | ) | 13 | ||||||||||||||||||||||||
Gross margin
|
146 | 60 | 143 | $ | 163 | $ | 70 | 133 | ||||||||||||||||||||||||||||
Other miscellaneous and purchased product
|
||||||||||||||||||||||||||||||||||||
Net sales
|
7 | 6 | 17 | |||||||||||||||||||||||||||||||||
Cost of goods sold
|
(3 | ) | (2 | ) | 50 | |||||||||||||||||||||||||||||||
Gross margin
|
4 | 4 | | |||||||||||||||||||||||||||||||||
Gross Margin
|
$ | 150 | $ | 64 | 134 | $ | 168 | $ | 74 | 127 | ||||||||||||||||||||||||||
(1) | Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
Phosphate gross
margin variance attributable to:
Three Months Ended March 31 |
|||||||||||||||||
2011 vs. 2010 | |||||||||||||||||
Change in |
|||||||||||||||||
Prices/Costs | |||||||||||||||||
Change in |
Cost of |
||||||||||||||||
Dollars (millions) | Sales Volumes | Net Sales | Goods Sold | Total | |||||||||||||
Manufactured product
|
|||||||||||||||||
Fertilizer liquids
|
$ | 20 | $ | 56 | $ | (36 | ) | $ | 40 | ||||||||
Fertilizer solids
|
(9 | ) | 48 | (14 | ) | 25 | |||||||||||
Feed
|
(7 | ) | 13 | | 6 | ||||||||||||
Industrial
|
2 | 18 | (5 | ) | 15 | ||||||||||||
Change in market mix
|
9 | (9 | ) | | | ||||||||||||
Total manufactured product
|
$ | 15 | $ | 126 | $ | (55 | ) | $ | 86 | ||||||||
Other miscellaneous and purchased product
|
| ||||||||||||||||
Total
|
$ | 86 | |||||||||||||||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 59
Table of Contents
The most significant contributors to the change in total gross
margin quarter over quarter were as
follows(1):
(1)
Direction of arrows refers to impact on gross margin.
Net Sales Prices
|
Sales Volumes
|
Cost of Goods Sold
|
||||||||
á
á á á |
Robust agricultural fundamentals, historically low inventories at the start of the quarter and higher input prices helped push up prices for all phosphate products.
The largest price increases were evident in liquid and solid fertilizers, which rose on strong agricultural fundamentals and higher production costs. Prices for feed products increased less rapidly than fertilizer prices as a result of challenging livestock feed economics. Industrial prices rose as these products include certain longer-term contracts that lag current market conditions. |
á
â â |
Liquid fertilizer grew as we allocated more production to capitalize on the higher-margin opportunity in this product line.
Sales of solid, feed and industrial products were limited due to the allocation of more production to liquid fertilizer. Demand for feed products was also impacted by higher grain prices which increased the use of substitute feed ingredients. |
â
â â |
Costs were impacted by higher sulfur costs (up 85 percent).
Solid fertilizer costs also reflected higher ammonia costs (up 25 percent). Liquid fertilizer costs were higher than solid fertilizer due to a higher allocation of fixed costs (a result of increasing liquid fertilizer production volumes and decreasing or flat volumes for the other products). |
60 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Nitrogen
Three Months Ended March 31 | ||||||||||||||||||||||||||||||||||||
Dollars (millions) | Tonnes (thousands) | Average per Tonne(1) | ||||||||||||||||||||||||||||||||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||||||||||||
Sales
|
$ | 546 | $ | 421 | 30 | |||||||||||||||||||||||||||||||
Freight, transportation and distribution
|
(23 | ) | (24 | ) | (4 | ) | ||||||||||||||||||||||||||||||
Net sales
|
$ | 523 | $ | 397 | 32 | |||||||||||||||||||||||||||||||
Manufactured product
|
||||||||||||||||||||||||||||||||||||
Net sales
|
||||||||||||||||||||||||||||||||||||
Ammonia
|
$ | 244 | $ | 147 | 66 | 514 | 430 | 20 | $ | 474 | $ | 343 | 38 | |||||||||||||||||||||||
Urea
|
138 | 121 | 14 | 331 | 344 | (4 | ) | $ | 416 | $ | 351 | 19 | ||||||||||||||||||||||||
Nitrogen solutions/Nitric acid/Ammonium nitrate
|
112 | 99 | 13 | 495 | 548 | (10 | ) | $ | 226 | $ | 180 | 26 | ||||||||||||||||||||||||
494 | 367 | 35 | 1,340 | 1,322 | 1 | $ | 368 | $ | 278 | 32 | ||||||||||||||||||||||||||
Cost of goods sold
|
(299 | ) | (239 | ) | 25 | $ | (222 | ) | $ | (181 | ) | 23 | ||||||||||||||||||||||||
Gross margin
|
195 | 128 | 52 | $ | 146 | $ | 97 | 51 | ||||||||||||||||||||||||||||
Other miscellaneous and purchased product
|
||||||||||||||||||||||||||||||||||||
Net sales
|
29 | 30 | (3 | ) | ||||||||||||||||||||||||||||||||
Cost of goods sold
|
(21 | ) | (23 | ) | (9 | ) | ||||||||||||||||||||||||||||||
Gross margin
|
8 | 7 | 14 | |||||||||||||||||||||||||||||||||
Gross Margin
|
$ | 203 | $ | 135 | 50 | $ | 151 | $ | 102 | 48 | ||||||||||||||||||||||||||
(1) | Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
Nitrogen gross
margin variance attributable to:
Three Months Ended March 31 |
|||||||||||||||||
2011 vs. 2010 | |||||||||||||||||
Change in |
|||||||||||||||||
Prices/Costs | |||||||||||||||||
Change in |
Cost of |
||||||||||||||||
Dollars (millions) | Sales Volumes | Net Sales | Goods Sold | Total | |||||||||||||
Manufactured product
|
|||||||||||||||||
Ammonia
|
$ | 16 | $ | 67 | $ | (31 | ) | $ | 52 | ||||||||
Urea
|
(3 | ) | 22 | (6 | ) | 13 | |||||||||||
Solutions, NA, AN
|
| 23 | (12 | ) | 11 | ||||||||||||
Hedge
|
| | (9 | ) | (9 | ) | |||||||||||
Change in market mix
|
(10 | ) | 10 | | | ||||||||||||
Total manufactured product
|
$ | 3 | $ | 122 | $ | (58 | ) | $ | 67 | ||||||||
Other miscellaneous and purchased product
|
1 | ||||||||||||||||
Total
|
$ | 68 | |||||||||||||||
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 61
Table of Contents
Sales Tonnes (Thousands) | Price per Tonne | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||
Fertilizer
|
388 | 498 | $ | 371 | $ | 259 | |||||||||||
Feed
|
8 | 8 | $ | 490 | $ | 419 | |||||||||||
Industrial
|
944 | 816 | $ | 366 | $ | 287 | |||||||||||
1,340 | 1,322 | $ | 368 | $ | 278 | ||||||||||||
The most significant contributors to the change in total gross
margin quarter over quarter were as
follows(1):
(1)
Direction of arrows refers to impact on gross margin.
Net Sales Prices
|
Sales Volumes
|
Cost of Goods Sold
|
||||||||
á | Realized prices increased as a result of tight global supplies for ammonia and nitrogen solutions, higher production costs in key producing regions (Ukraine and Western Europe) and stronger agricultural and industrial demand than in 2010. | á | Ammonia sales rose as a greater percentage of our production was allocated to this higher-margin product to meet strong industrial and agricultural demand, limiting production of downstream products. | â | Average natural gas costs in production, including hedge, increased 19 percent. Natural gas costs in Trinidad production rose 42 percent (contract price indexed, in part, to ammonia prices) while our US spot costs for natural gas used in production decreased 21 percent. Including hedge losses, US gas prices decreased 4 percent. |
62 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Expenses and
Other Income
Three Months Ended March 31 | |||||||||||||||||
Dollars (millions) | 2011 | 2010 | Change | % Change | |||||||||||||
Selling and administrative
|
(75 | ) | (60 | ) | (15 | ) | 25 | ||||||||||
Provincial mining and other taxes
|
(34 | ) | (23 | ) | (11 | ) | 48 | ||||||||||
Foreign exchange loss
|
(8 | ) | (8 | ) | | | |||||||||||
Share of earnings of equity-accounted investees
|
51 | 26 | 25 | 96 | |||||||||||||
Other (expenses) income
|
(5 | ) | 2 | (7 | ) | n/m | |||||||||||
Finance costs
|
(50 | ) | (31 | ) | (19 | ) | 61 | ||||||||||
Income taxes
|
(243 | ) | (191 | ) | (52 | ) | 27 | ||||||||||
n/m = not meaningful
Selling and administrative expenses were impacted by higher
expenses for our short-term incentive plan, deferred share units
and medium-term incentive plans (our share price increased more
in the first quarter of 2011 than it did during the same period
in 2010).
Provincial mining and other taxes are comprised mainly of the
Saskatchewan Potash Production Tax (PPT) and a
resource surcharge. The PPT is comprised of a base tax per tonne
of product sold and an additional tax based on mine profit,
which is reduced by potash capital expenditures. The resource
surcharge is a percentage of the value of the companys
Saskatchewan resource sales. The resource surcharge rose as a
result of higher potash sales revenues. Loss carryforwards and
deductions for potash capital expenditures resulted in nominal
PPT in the first three months of 2011 and no PPT in the first
three months of 2010.
Foreign exchange losses in first-quarter 2011 and 2010 were the
result of a strengthening Canadian dollar causing certain net
monetary liabilities to be revalued higher in US dollars.
Share of earnings of equity-accounted investees rose as our
share of earnings in Arab Potash Company Ltd. and Sociedad
Quimica y Minera de Chile S.A. was higher than last year due to
increased earnings by these companies.
Finance costs increased as a result of senior notes being issued
in the fourth quarter of 2010 and higher average outstanding
commercial paper balances in the first three months of 2011 than
in the same period of 2010. Weighted average debt obligations
outstanding and the associated interest rates were as follows:
Three Months Ended March 31 | |||||||||||||||||
Dollars (millions) except percentage amounts | 2011 | 2010 | Change | % Change | |||||||||||||
Long-term debt obligations, including current portion
|
|||||||||||||||||
Weighted average outstanding
|
$ | 4,358 | $ | 3,524 | $ | 834 | 24 | ||||||||||
Weighted average effective interest rate
|
5.5% | 5.5% | | | |||||||||||||
Short-term debt obligations
|
|||||||||||||||||
Weighted average outstanding
|
$ | 1,106 | $ | 614 | $ | 492 | 80 | ||||||||||
Weighted average effective interest rate
|
0.4% | 0.5% | (0.1 | )% | (20 | ) | |||||||||||
Total debt obligations
|
|||||||||||||||||
Weighted average outstanding
|
$ | 5,464 | $ | 4,138 | $ | 1,326 | 32 | ||||||||||
Weighted average effective interest rate
|
4.5% | 4.8% | (0.3 | )% | (6 | ) | |||||||||||
Income taxes rose due to increased income before taxes. The
effective tax rate including discrete items decreased to
25 percent from 30 percent. The income tax expense for
the first three months of 2011 was impacted by a current tax
recovery of $21 million for previously paid withholding
taxes. The income tax expense for the first three months of 2010
was impacted by a current tax expense of $18 million to
adjust the 2009 income tax provision to the income tax return
filed that quarter and a current tax recovery of
$10 million for an anticipated refund of taxes paid related
to forward exchange contracts. Excluding discrete items, for the
first three months of 2011, 72 percent of the effective tax
rate pertained to current income taxes and 28 percent
related to deferred income taxes. For the first three months of
2010, the split was 75 percent current and 25 percent
deferred.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 63
Table of Contents
Liquidity
and Capital Resources
Cash
Requirements
Contractual
Obligations and Other Commitments
Our contractual obligations and other commitments detailed on
pages 55 and 56 of our 2010 Financial Review Annual Report
summarize our short- and long-term liquidity and capital
resource requirements but exclude obligations with original
maturities of less than one year and planned (but not legally
committed) capital expenditures.
March 31, 2011 |
|||||||||||||||||||||
Payments Due By Period | |||||||||||||||||||||
Dollars (millions) | Total | Within 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | ||||||||||||||||
Long-term debt obligations
|
$ | 4,358 | $ | 607 | $ | 251 | $ | 1,000 | $ | 2,500 | |||||||||||
Estimated interest payments on long-term debt obligations
|
2,453 | 215 | 370 | 304 | 1,564 | ||||||||||||||||
Operating leases
|
571 | 90 | 164 | 136 | 181 | ||||||||||||||||
Purchase commitments
|
728 | 366 | 132 | 106 | 124 | ||||||||||||||||
Capital commitments
|
483 | 364 | 119 | | | ||||||||||||||||
Other commitments
|
105 | 47 | 31 | 8 | 19 | ||||||||||||||||
Asset retirement obligations and other environmental costs
|
515 | 27 | 48 | 35 | 405 | ||||||||||||||||
Other long-term liabilities
|
1,636 | 173 | 214 | 124 | 1,125 | ||||||||||||||||
Total
|
$ | 10,849 | $ | 1,889 | $ | 1,329 | $ | 1,713 | $ | 5,918 | |||||||||||
Capital
Expenditures
Page 21 of our 2010 Financial Review Annual Report outlines
key potash construction projects and their expected cost and
capacity expansion/debottlenecking. During 2011, we expect to
incur capital expenditures, including capitalized interest, of
approximately $1,820 million for opportunity capital,
approximately $310 million to sustain operations at
existing levels, approximately $110 million for major
repairs and maintenance (including plant turnarounds) and
approximately $70 million for site improvements.
The most significant potash projects on which funds are expected
to be spent in 2011, excluding capitalized interest, are
outlined in the table below:
Expected
Completion(1) |
Forecasted |
||||||||||||||||||
CDN Dollars (millions) | 2011 Forecast | Total Forecast | Started | (Description) | Remaining Spending | ||||||||||||||
Allan, Saskatchewan
|
$ | 240 | $ | 550 | 2008 | 2012 (general expansion) | $ | 70 | |||||||||||
Cory, Saskatchewan
|
$ | 210 | $ | 1,630 | 2007 | 2012 (general expansion) | $ | 20 | |||||||||||
Picadilly, New Brunswick
|
$ | 320 | $ | 1,660 | 2007 | 2012 (mine shaft and mill) | $ | 360 | |||||||||||
Rocanville, Saskatchewan
|
$ | 790 | $ | 2,800 | 2008 | 2014 (mine shaft and mill) | $ | 1,190 | |||||||||||
(1) | Excludes ramp-up time. We expect these projects will be fully ramped up by the end of 2015, provided market conditions warrant. |
We anticipate that all capital spending will be financed by
internally generated cash flows supplemented, if and as
necessary, by borrowing from existing financing sources.
64 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Sources and Uses
of Cash
The companys cash flows from operating, investing and
financing activities, as reflected in the unaudited interim
Condensed Consolidated Statements of Cash Flow, are summarized
in the following table:
Three Months Ended March 31 | |||||||||||||||||
Dollars (millions) | 2011 | 2010 | Change | % Change | |||||||||||||
Cash provided by operating activities
|
$ | 690 | $ | 811 | $ | (121 | ) | (15 | ) | ||||||||
Cash used in investing activities
|
(441 | ) | (913 | ) | 472 | (52 | ) | ||||||||||
Cash (used in) provided by financing activities
|
(263 | ) | 16 | (279 | ) | n/m | |||||||||||
n/m = not meaningful
The following table presents summarized working capital
information as at March 31, 2011 compared to
December 31, 2010:
Dollars (millions) except ratio amounts | March 31, 2011 | December 31, 2010 | Change | % Change | |||||||||||||
Current assets
|
$ | 2,381 | $ | 2,095 | $ | 286 | 14 | ||||||||||
Current liabilities
|
$ | (3,016 | ) | $ | (3,144 | ) | $ | 128 | (4 | ) | |||||||
Working capital
|
$ | (635 | ) | $ | (1,049 | ) | $ | 414 | (39 | ) | |||||||
Current ratio
|
0.79 | 0.67 | 0.12 | 18 | |||||||||||||
Liquidity needs can be met through a variety of sources,
including: cash generated from operations, drawdowns under our
long-term revolving credit facilities, issuance of commercial
paper and short-term borrowings under our line of credit. Our
primary uses of funds are operational expenses, sustaining and
opportunity capital spending, intercorporate investments,
dividends, interest and principal payments on our debt
securities.
Cash provided by operating activities decreased quarter over
quarter, despite increased net income, due primarily to changes
in non-cash operating working capital, which was impacted by
higher receivables and inventories (both decreased in
first-quarter 2010).
Cash used in investing activities decreased mainly due to the
purchase of additional shares in ICL in 2010. Approximately
79 percent (2010 83 percent) of our
expenditures on property, plant and equipment for the first
quarter related to the potash segment.
Cash used in financing activities in first-quarter 2011 was the
result of repayments of commercial paper while, in 2010,
borrowings under long-term credit facilities exceeded repayments
under those facilities.
We believe that internally generated cash flow, supplemented by
borrowing from existing financing sources, if necessary, will be
sufficient to meet our anticipated capital expenditures and
other cash requirements for at least the next 12 months,
exclusive of any acquisitions the company may consider from time
to time. At this time, we do not reasonably expect any presently
known trend or uncertainty to affect our ability to access our
historical sources of cash.
Principal Debt
Instruments
March 31, 2011 | |||||||||||||
Total |
Amount Outstanding |
Amount |
|||||||||||
Dollars (millions) | Amount | and Committed | Available | ||||||||||
Credit
facilities(1)
|
$ | 3,250 | $ | 1,021 | $ | 2,229 | |||||||
Line of credit
|
75 | 23 | (2) | 52 | |||||||||
(1) | In March 2011, the company established a commercial paper program in the US. The authorized amount under the companys commercial paper programs in Canada and the US is $1,500 million in the aggregate. The amounts available under the commercial paper programs are limited to the availability of backup funds under the credit facilities. Included in the amount outstanding and committed is $1,021 million of commercial paper. Per the terms of the agreements, the commercial paper outstanding and committed, as applicable under the Canadian program, is based on the US dollar balance or equivalent thereof in lawful money of other currencies at the time of issue; therefore, subsequent changes in the exchange rate applicable to Canadian dollar-denominated commercial paper have no impact on this balance. | |
(2) | Letters of credit committed. |
We use a combination of short-term and long-term debt to finance
our operations. We typically pay floating rates of interest on
our short-term debt and credit facilities, and fixed rates on
our senior notes. As of March 31, 2011, interest rates
ranged from 0.30 percent to 0.40 percent on
outstanding commercial paper denominated in US dollars.
Our two syndicated credit facilities provide for unsecured
advances up to the total facilities amount less direct
borrowings and amounts committed in respect of commercial paper
outstanding. The $2,500 million and $750 million
credit facilities mature December 11, 2012 and May 31,
2013, respectively. We also have a $75 million short-term
line of credit that is available through June 2011 and an
uncommitted $30 million letter of credit facility that is
due on demand. Direct borrowings and outstanding letters of
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 65
Table of Contents
credit reduce the amounts available under these facilities. The
line of credit and credit facilities have financial tests and
other covenants (detailed in Note 10 to the 2010 annual
consolidated financial statements) with which we must comply at
each quarter-end. Non-compliance with any such covenants could
result in accelerated payment of amounts borrowed and
termination of lenders further funding obligations under
the credit facilities and line of credit. We were in compliance
with all covenants as of March 31, 2011.
Our ability to access reasonably priced debt in the capital
markets is dependent, in part, on the quality of our credit
ratings. We continue to maintain investment grade credit ratings
for our long-term debt. Specifically, Moodys currently
rates our long-term debt Baa1 with a positive outlook (unchanged
from 2010) while Standard & Poors currently
rates our long-term debt A- with a negative outlook (unchanged
from 2010). A downgrade of the credit rating of our long-term
debt by Standard & Poors would increase the
interest rates applicable to borrowings under our syndicated
credit facilities, our line of credit and our letter of credit
facility. Commercial paper markets are normally a source of
same-day
cash for the company. Our access to the Canadian
and/or US
commercial paper markets primarily depends on maintaining our
current commercial paper credit ratings (R1(Low) by DBRS,
P-2 by
Moodys and
A-2 by
Standard & Poors) as well as general conditions
in the money markets.
A security rating is not a recommendation to buy, sell or hold
securities. Such rating may be subject to revision or withdrawal
at any time by the respective credit rating agency and each
rating should be evaluated independently of any other rating.
Our $4,350 million of outstanding senior notes were issued
under US shelf registration statements.
For the first three months of 2011, our weighted average cost of
capital was 10.5 percent (2010
10.6 percent), of which 90 percent represented equity
(2010 90 percent).
Outstanding Share
Data
We had 854,762,383 common shares issued and outstanding at
March 31, 2011 compared to 853,122,693 common shares issued
and outstanding at December 31, 2010. During the first
quarter of 2011, the company issued 1,639,690 common shares
pursuant to the exercise of stock options and under our dividend
reinvestment plan. At March 31, 2011, there were 30,505,921
options to purchase common shares outstanding under the
companys eight stock option plans, as compared to
32,121,309 at December 31, 2010.
Off-Balance Sheet
Arrangements
In the normal course of operations, PotashCorp engages in a
variety of transactions that, under IFRS, are either not
recorded on our Consolidated Statements of Financial Position or
are recorded there in amounts that differ from the full contract
amounts. Principal off-balance sheet activities we undertake
include operating leases, agreement to reimburse losses of
Canpotex, issuance of guarantee contracts, certain derivative
instruments and long-term contracts. We do not reasonably expect
any presently known trend or uncertainty to affect our ability
to continue using these arrangements. Refer to Note 12 to
the unaudited interim condensed consolidated financial
statements included in Item 1 of this Quarterly Report on
Form 10-Q
for information pertaining to our guarantees. Refer to
page 59 of our 2010 Financial Review Annual Report for
information on contingency related to Canpotex and derivative
instruments. See Cash Requirements above and our
2010 Financial Review Annual Report for obligations related to
operating leases and certain of our long-term raw materials
agreements which contain fixed price components.
Quarterly
Financial Highlights
Dollars (millions) |
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
June 30, |
|||||||||||||||||||||||||
except per-share amounts | 2011 | 2010 | 2010 | 2010 | 2010 | 2009(1) | 2009(1) | 2009(1) | |||||||||||||||||||||||||
Sales
|
$ | 2,204 | $ | 1,813 | $ | 1,575 | $ | 1,437 | $ | 1,714 | $ | 1,099 | $ | 1,099 | $ | 856 | |||||||||||||||||
Gross margin
|
1,096 | 826 | 550 | 585 | 729 | 273 | 345 | 169 | |||||||||||||||||||||||||
Net income
|
732 | 508 | 343 | 480 | 444 | 239 | 248 | 186 | |||||||||||||||||||||||||
Net income per share basic
|
0.86 | 0.58 | 0.39 | 0.54 | 0.50 | 0.27 | 0.28 | 0.21 | |||||||||||||||||||||||||
Net income per share diluted
|
0.84 | 0.56 | 0.38 | 0.53 | 0.49 | 0.26 | 0.27 | 0.20 | |||||||||||||||||||||||||
(1) | As we adopted IFRS with effect from January 1, 2010, our 2009 quarterly information is presented on a Canadian GAAP basis. Accordingly, our quarterly information for 2011 and 2010 may not be comparable to that for 2009. |
66 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Net income per share for each quarter has been computed based on
the weighted average number of shares issued and outstanding
during the respective quarter; therefore, quarterly amounts may
not add to the annual total.
Certain aspects of our business can be impacted by seasonal
factors. Fertilizers are sold primarily for spring and fall
application in both Northern and Southern hemispheres. However,
planting conditions and the timing of customer purchases will
vary each year and fertilizer sales can be expected to shift
from one quarter to another. Most feed and industrial sales are
by contract and are more evenly distributed throughout the year.
Related
Party Transactions
The company sells potash from its Saskatchewan mines for use
outside of North America exclusively to Canpotex, a potash
export, sales and marketing company owned in equal shares by the
three potash producers in the Province of Saskatchewan. Sales to
Canpotex for the quarter ended March 31, 2011 were
$481 million (2010 $268 million). Sales to
Canpotex are at prevailing market prices and are settled on
normal trade terms.
Critical
Accounting Estimates
Our discussion and analysis of our financial condition and
results of operations are based upon our unaudited interim
condensed consolidated financial statements, which have been
prepared in accordance with IFRS. These principles differ in
certain significant respects from accounting principles
generally accepted in the United States. These differences are
described and quantified in Note 12 to the unaudited
interim condensed consolidated financial statements included in
Item 1 of this Quarterly Report on
Form 10-Q.
The accounting policies used in preparing the unaudited interim
condensed consolidated financial statements are disclosed below
and in Notes 1 and 12 to the unaudited interim condensed
consolidated financial statements. Certain of these policies
involve critical accounting estimates because they require us to
make particularly subjective or complex judgments about matters
that are inherently uncertain and because of the likelihood that
materially different amounts could be reported under different
conditions or using different assumptions. There have been no
material changes to our critical accounting estimate policies in
the first three months of 2011.
We discussed the development, selection and application of our
key accounting policies, and the critical accounting estimates
and assumptions they involve, with the audit committee of the
Board of Directors, and the committee reviewed the disclosures
described in this section.
Recent
Accounting Changes
Refer to Note 1 to the unaudited interim condensed
consolidated financial statements included in Item 1 of
this Quarterly Report on
Form 10-Q
for information pertaining to accounting changes effective in
2011, and Notes 1 and 12 to the unaudited interim condensed
consolidated financial statements for information on issued
accounting pronouncements that will be effective in future
periods.
We applied IFRS as of January 1, 2010 and retrospectively
applied all effective IFRS, meaning that the comparative
financial information provided uses the same accounting policies
throughout all periods. The changes in our reported results were
the result of our adoption of IFRS and not an underlying change
in our business. We also applied certain optional and mandatory
exemptions as outlined in Note 13 in Item 1 of this
Quarterly Report on
Form 10-Q.
Risk
Management
Execution of our corporate strategy requires an effective
program to manage the associated risks. The PotashCorp Risk
Management Framework (the Framework) is applied to
identify and manage such risks. The Framework consists of a
comprehensive risk universe, with six corporate risk categories,
and corresponding identification of risk events. The major
corporate categories of risks are: markets/business,
distribution, operational, financial/information technology,
regulatory and integrity/empowerment. Separately and in
combination, these risks potentially threaten our strategies and
could affect our ability to deliver long-term shareholder value.
The Framework establishes an entity-wide risk ranking
methodology. Risk events are evaluated against the criteria of
likelihood or frequency of occurrence and the consequential
magnitude or severity of the event. Mitigation activities are
identified that will reduce the likelihood
and/or
severity of the occurrence of a risk event. The residual risk
that results from identified mitigation activities is also
evaluated using the same criteria. Management identifies the
most significant risks to our strategy and reports to the Board
of Directors on the mitigation plans.
The companys Risk Management Process of identification,
management and reporting of risk is continuous and dynamic.
Changes to corporate risk that result from changing internal and
external factors are evaluated on a quarterly basis and
significant changes in risks and corresponding mitigation
activities are reported quarterly to the audit committee.
Detailed discussion of the PotashCorp Risk Management Process
can be found on pages 45 and 46 of our 2010 Financial Review
Annual Report as well as in our 2010 Annual Report on
Form 10-K.
Risk management discussions specific to potash, phosphate and
nitrogen operations can be found on pages 25, 31 and 37,
respectively, of the 2010 Financial Review Annual Report.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 67
Table of Contents
The company recognizes damage to reputation as its most severe
risk consequence, which is mitigated by ongoing and transparent
communication with stakeholders, commitment to sustainability,
and best practices in corporate governance. Moreover,
significant investments and operations in a number of countries
subject the company to business risks which could be exaggerated
by differences in domestic culture, political and economic
conditions, policies, laws and regulations. The company may also
be adversely affected by changing anti-trust laws in operating
jurisdictions worldwide.
The risks of greatest potential impact to potash reported in the
2010 Financial Review Annual Report include market supply
imbalances which may result from fluctuations in global demand
for product or from new competitor supply in the form of
greenfield mines, inadequacy of the transportation and
distribution infrastructure to timely accommodate volume
delivery demands, and physical risks particular to underground
mines (such as unexpected underground rock falls and water
inflow from underground water-bearing strata). We mitigate the
market imbalance risks by managing production to meet market
demand. The company mitigates transportation and distribution
risks both directly and through Canpotex by working with rail
carriers and undertaking sufficient capital investment in
transportation infrastructure and railcars. Underground mine
risk mitigation activities include advanced geoseismic
monitoring. At Lanigan, Saskatchewan, mitigation includes ground
penetrating radar development and the installation of protective
canopies on mining machines.
Similar risks of cyclicality and market imbalance exist in
phosphate and nitrogen, largely due to competitive costs,
availability of supply and government involvement. The company
mitigates these risks by focusing on less cyclical markets,
maintaining a diversified sulfur supply portfolio and employing
natural gas price risk hedging strategies where appropriate.
Outlook
With rising demand putting pressure on global supplies of a wide
range of crop commodities, we believe the need for high-yield
agriculture around the world has never been greater. Higher crop
prices reflect tight supply/demand fundamentals, providing
farmers with significant economic opportunities and motivating
them to improve soil fertility to maximize production. We
believe this is a global opportunity that holds true for corn
farmers in the US, produce growers in China, soybean producers
in Brazil, and others.
While record or near-record prices for many crops
including
$7-per-bushel
corn and $14-per-bushel soybeans are creating
headlines, farmers are recognizing a business opportunity that
extends beyond short-term price movements. Even at crop prices
well below current levels, farmers see the opportunity to
generate a significant return on their investment. This is
shifting their emphasis towards maximizing yields to capitalize
on the economic opportunity and that is best
achieved by improving fertilization application practices to
replenish nutrients in the soil and protect its fertility for
future crops. We believe that the growth in demand for food and
fertilizers is supportive for our business in the current
environment, and are confident that these powerful trends will
lead to even greater opportunities in the years ahead,
especially in potash.
Rising demand from fertilizer buyers around the world is putting
pressure on the global potash industrys supply
capabilities and creating an environment of rising prices. These
conditions continue to provide a powerful earnings opportunity
for PotashCorp because of our unmatched ability to expand our
operational capability and increase production over the next
five years to meet this growing demand. Since 2003 and
continuing through the darkest days of the global recession, we
have been investing in new operational capability to prepare for
the situation that we believe is unfolding.
We recently completed construction of the first portion of a
two-phase expansion at our Cory facility and are ramping up its
new production. We expect to complete major projects at New
Brunswick and Allan in 2012 and at Rocanville, our largest
project, by 2014, with new production from all our expansion
projects ramped up by 2015. Cumulatively, these projects are
expected to raise our operational capability to an estimated
17.1 million tonnes annually, an increase of more than
50 percent from 2011 levels. Our additional tonnes
represent the largest percentage of new potash capacity expected
to become available worldwide over the next several years, and,
we believe, will be well timed to meet the rise in global demand.
The fundamental demand drivers that supported our decision to
invest in our potash expansion program continue today. We
believe the rising need for potash is not a product of
short-term surges or inventory restocking following the
deferrals of 2009, but a response to the increasing crop
nutrient requirements necessary to feed a growing world. Based
on current conditions, we continue to anticipate 2011 global
potash demand of 5560 million tonnes.
In North America, strong spring demand has PotashCorp fully
committed through the end of May, with sales at $515 per short
ton (FOB) to Midwest warehouses a price that has yet
to reflect the $45 per short ton increase announced in February.
Despite adverse weather impacting the early progress of spring
plantings and large volumes shipped during the past two
quarters, we anticipate that high application rates will support
robust second-quarter demand. We expect supportive crop
economics will also lead to strong second-half demand.
Potash demand in Latin America is projected to reach a record of
approximately 10 million tonnes due to strong crop
economics and limited distributor inventory entering the year.
Second-quarter shipments are likely to be at more seasonal
levels as distributors work to move record first-quarter
shipments to customers, and are expected to reflect a recently
realized increase in the Canpotex delivered price to Brazil to
$520 per tonne.
68 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Rising demand from growers in Asian countries outside of China
and India many striving to address the significant
potash requirements of crops such as oil palm and sugarcane to
capitalize on attractive economics is expected to
account for the largest share of Canpotex sales in the second
quarter. Demand in this region is now forecast to reach
7.3 million tonnes in 2011, supporting higher
prices including a $50 per tonne increase on new
business announced by Canpotex in April.
China, which now purchases through six-month contracts, is
expected to receive shipments under first-half agreements,
although continued pressure on its domestic food supply and
reduced potash inventories are expected to support higher
second-half volume commitments. We anticipate 2011 potash (KCl)
consumption could approach 11 million tonnes, including
imports of approximately 7 million tonnes.
With strong demand in all other markets, Canpotex is expected to
have limited product available to ship to India in the second
quarter, even if new supply contracts are settled. With low
inventory levels and significant agronomic need, we believe
Indias requirements remain high. We anticipate strong
pressure from fertilizer distributors and farmers to ensure
potash is available for their coming planting season.
Given global conditions, we now estimate our 2011 potash segment
gross margin will be between $2.7 billion and
$2.9 billion and total shipments within the range of
9.610.0 million tonnes.
In phosphate, the recent settlement of key supply contracts with
India is expected to support healthy export demand through 2011.
With strong agricultural demand and higher phosphate rock and
phosphoric acid prices, markets for processed phosphate products
are likely to remain strong throughout 2011, although rising
ammonia and sulfur prices may limit upside margin potential.
Sales volumes and prices for nitrogen products should also
remain relatively strong, based on continuing agricultural
strength and improved industrial demand. We forecast combined
2011 gross margin for our phosphate and nitrogen segments
to be in the range of $1.1 billion to $1.3 billion.
We now estimate selling and administration expenses will be
slightly higher than 2010 levels and finance costs for 2011 to
approximate $150$160 million.
PotashCorp expects second-quarter net income to be in the range
of $0.70 to $0.90 per share, with full-year earnings in the
range of $3.00 to $3.40 per share.
Forward-Looking
Statements
Certain statements in this Quarterly Report on
Form 10-Q,
including those in the Outlook section of
Managements Discussion and Analysis of Financial Condition
and Results of Operations relating to the period after
March 31, 2011 are forward-looking statements or
forward-looking information (forward-looking
statements). These statements can be identified by
expressions of belief, expectation or intention, as well as
those statements that are not historical fact. These statements
are based on certain factors and assumptions as set forth in
this
Form 10-Q,
including with respect to: foreign exchange rates; expected
growth, results of operations, performance, business prospects
and opportunities; and effective tax rates. While the company
considers these factors and assumptions to be reasonable based
on information currently available, they may prove to be
incorrect. Several factors could cause actual results to differ
materially from those expressed in the forward-looking
statements, including, but not limited to: fluctuations in
supply and demand in the fertilizer, sulfur, transportation and
petrochemical markets; changes in competitive pressures,
including pricing pressures; the recent global financial crisis
and conditions and changes in credit markets; the results of
sales contract negotiations with major markets; timing and
amount of capital expenditures; risks associated with natural
gas and other hedging activities; changes in capital markets and
corresponding effects on the companys investments; changes
in currency and exchange rates; unexpected geological or
environmental conditions, including water inflow; strikes or
other forms of work stoppage or slowdowns; changes in, and the
effects of, government policies and regulations; and earnings,
exchange rates and the decisions of taxing authorities, all of
which could affect our effective tax rates. Additional risks and
uncertainties can be found in our
Form 10-K
for the fiscal year ended December 31, 2010 under the
captions Forward-Looking Statements and
Item 1A Risk Factors and in our
filings with the US Securities and Exchange Commission and the
Canadian provincial securities commissions. Forward-looking
statements are given only as at the date of this report 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, except as required by
law.
Item 3. Quantitative
and Qualitative Disclosures About Market Risk
Market risk is the potential for loss from adverse changes in
the market value of financial instruments. The level of market
risk to which we are exposed varies depending on the composition
of our derivative instrument portfolio, as well as current and
expected market conditions. A discussion of enterprise-wide risk
management can be found in our 2010 Financial Review Annual
Report, pages 45 to 46, and risk management discussion specific
to potash, phosphate and nitrogen operations can be found on
pages 25, 31 and 37, respectively, of that report. A
discussion of commodity risk, foreign exchange risk, credit risk
and liquidity risk can be found in Note 12 to the unaudited
interim condensed consolidated financial statements included in
Item 1 of this Quarterly Report on
Form 10-Q.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 69
Table of Contents
Item 4. Controls
and Procedures
As of March 31, 2011, we carried out an evaluation under
the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. There are inherent
limitations to the effectiveness of any system of disclosure
controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving
their control objectives. Based upon that evaluation and as of
March 31, 2011, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and
procedures were effective to provide reasonable assurance that
information required to be disclosed in the reports the company
files and submits under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported as and when
required and that such information is accumulated and
communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
The conversion to IFRS from Canadian GAAP impacts the way we
present our financial results. We have evaluated the impact of
the conversion on our accounting and financial reporting systems
and updated the requisite systems to enable our reporting of
historical Canadian GAAP information related to our initial IFRS
adoption and for future periods to be reported under IFRS. Our
internal and disclosure control processes have not required
significant modification as a result of our adoption of IFRS. As
a result, there has been no change in our internal control over
financial reporting during the quarter ended March 31, 2011
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
70 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Part II.
Other Information
Item 1. Legal
Proceedings
For a description of certain other legal and environmental
proceedings, see Note 10 to the unaudited interim condensed
consolidated financial statements included in Part I of
this Quarterly Report on
Form 10-Q.
Item 5. Other
Information
Mine Safety
Practices
Safety is the companys top priority and we are committed
to providing a healthy and safe work environment for our
employees, contractors and all others at our sites to help meet
our company-wide goal of achieving no harm to people.
The operations at the companys Aurora, Weeping Water and
White Springs facilities are subject to the Federal Mine Safety
and Health Act of 1977, as amended by the Mine Improvement and
New Emergency Response Act of 2006 (the Act), and
the implementing regulations, which impose stringent health and
safety standards on numerous aspects of mineral extraction and
processing operations, including the training of personnel,
operating procedures, operating equipment and other matters. Our
Senior Safety Leadership Team is responsible for managing
compliance with applicable government regulations, as well as
implementing and overseeing the elements of our safety program
as outlined in our Safety, Health and Environment Manual. The
Weeping Water facility achieved a significant milestone on
September 26, 2010, completing six years without a Lost
Time Incident.
Section 1503
of Dodd-Frank Wall Street Reform and Consumer Protection Act:
Reporting Requirements Regarding Coal or Other Mine
Safety
Section 1503(a) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act requires us to include certain safety
information in the periodic reports we file with the United
States Securities and Exchange Commission. The table below
presents the following information for our Aurora,
Weeping Water and White Springs facilities for the three
months ended March 31, 2011:
Aurora, |
Weeping |
White |
||||||||||||
North |
Water, |
Springs, |
||||||||||||
Three Months Ended March 31, 2011 | Carolina | Nebraska | Florida | |||||||||||
(a)
|
the total number of alleged violations of mandatory health or safety standards that could significantly or substantially contribute to the cause and effect of a coal or other mine safety or health hazard under Section 104 of the Mine Safety and Health Act of 1977 (Act) for which a citation was received from the Mine Safety and Health Administration (MSHA); | 12 | 0 | 0 | ||||||||||
(b)
|
the total number of orders issued under section 104(b) of the Act; | 0 | 0 | 0 | ||||||||||
(c)
|
the total number of citations received and orders issued under section 104(d) of the Act for alleged unwarrantable failures of the company to comply with mandatory health or safety standards; | 0 | 0 | 0 | ||||||||||
(d)
|
the total number of alleged flagrant violations under section 110(b)(2) of the Act; | 0 | 0 | 0 | ||||||||||
(e)
|
the total number of imminent danger orders issued under section 107(a) of the Act; | 1 | 0 | 0 | ||||||||||
(f)
|
the total dollar value of proposed assessments from the MHSA under the Act; | $13,295.00 | $0.00 | $0.00 | ||||||||||
(g)
|
the total number of mining-related fatalities; and | 1 | 0 | 0 | ||||||||||
(h)
|
the total number of legal actions pending before the Federal Mine Safety and Health Review Commission as of March 31, 2011. | 1 | 1 | 2 | ||||||||||
During the three months ended March 31, 2011, the company
did not receive any written notice from the MSHA of (a) a
pattern of violations of mandatory health or safety standards
that are of such a nature as could have significantly and
substantially contributed to the cause and effect of coal or
other mine health or safety hazards under section 104(e) of
the Act or (b) the potential to have such a pattern.
The table above does not include any citation, order or
assessment that was both issued and vacated by the MSHA during
the three months ended March 31, 2011.
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 71
Table of Contents
Item 6. Exhibits
(a) | Exhibits |
Incorporated by Reference | |||||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||||
3(a)
|
Articles of Continuance of the registrant dated May 15, 2002. | 10-Q | 6/30/2002 | ||||||||||||
3(b)
|
Bylaws of the registrant effective May 15, 2002. | 10-Q | 6/30/2002 | ||||||||||||
4(a)
|
Term Credit Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated September 25, 2001. | 10-Q | 9/30/2001 | ||||||||||||
4(b)
|
Syndicated Term Credit Facility Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 23, 2003. | 10-Q | 9/30/2003 | ||||||||||||
4(c)
|
Syndicated Term Credit Facility Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 21, 2004. | 8-K | 9/24/2004 | ||||||||||||
4(d)
|
Syndicated Term Credit Facility Third Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 20, 2005. | 8-K | 9/22/2005 | 4 | (a) | ||||||||||
4(e)
|
Syndicated Term Credit Facility Fourth Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 27, 2006. | 10-Q | 9/30/2006 | ||||||||||||
4(f)
|
Syndicated Term Credit Facility Fifth Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated as of October 19, 2007. | 8-K | 10/22/2007 | 4 | (a) | ||||||||||
4(g)
|
Indenture dated as of June 16, 1997, between the registrant and The Bank of Nova Scotia Trust Company of New York. | 8-K | 6/18/1997 | 4 | (a) | ||||||||||
4(h)
|
Indenture dated as of February 27, 2003, between the registrant and The Bank of Nova Scotia Trust Company of New York. | 10-K | 12/31/2002 | 4 | (c) | ||||||||||
4(i)
|
Form of Note relating to the registrants offering of $600,000,000 principal amount of 7.75% Notes due May 31, 2011. | 8-K | 5/17/2001 | 4 | |||||||||||
4(j)
|
Form of Note relating to the registrants offering of $250,000,000 principal amount of 4.875% Notes due March 1, 2013. | 8-K | 2/28/2003 | 4 | |||||||||||
4(k)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036. | 8-K | 11/30/2006 | 4 | (a) | ||||||||||
4(l)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.25% Notes due May 15, 2014. | 8-K | 5/1/2009 | 4 | (a) | ||||||||||
4(m)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019. | 8-K | 5/1/2009 | 4 | (b) | ||||||||||
4(n)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015. | 8-K | 9/25/2009 | 4 | (a) | ||||||||||
4(o)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020. | 8-K | 9/25/2009 | 4 | (b) | ||||||||||
4(p)
|
Revolving Term Credit Facility Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated December 11, 2009. | 8-K | 12/15/2009 | 4 | (a) | ||||||||||
4(q)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017. | 8-K | 11/29/2010 | 4 | (a) | ||||||||||
4(r)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040. | 8-K | 11/29/2010 | 4 | (b) |
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.
72 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Incorporated By Reference | |||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||
10(a)
|
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. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(f | ) | ||||||||
10(b)
|
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. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(g | ) | ||||||||
10(c)
|
Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(h | ) | ||||||||
10(d)
|
Canpotex/PCS Amending Agreement, dated as of October 1, 1992. | 10-K | 12/31/1995 | 10(f | ) | ||||||||
10(e)
|
Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated as of October 7, 1993. | 10-K | 12/31/1995 | 10(g | ) | ||||||||
10(f)
|
Canpotex Producer Agreement amending agreement dated as of July 1, 2002. | 10-Q | 6/30/2004 | 10(g | ) | ||||||||
10(g)
|
Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between International Minerals & Chemical Corporation (Canada) Limited and the registrants predecessor. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(e | ) | ||||||||
10(h)
|
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. | 10-K | 12/31/1990 | 10(p | ) | ||||||||
10(i)
|
Agreement effective August 27, 1998, between International Minerals & Chemical (Canada) Global Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended). | 10-K | 12/31/1998 | 10(l | ) | ||||||||
10(j)
|
Agreement effective August 31, 1998, among International Minerals & Chemical (Canada) Global Limited, International Minerals & Chemical (Canada) Limited Partnership and the registrant assigning the interest in the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended) held by International Minerals & Chemical (Canada) Global Limited to International Minerals & Chemical (Canada) Limited Partnership. | 10-K | 12/31/1998 | 10(m | ) | ||||||||
10(k)
|
Potash Corporation of Saskatchewan Inc. Stock Option Plan Directors, as amended. | 10-K | 12/31/2006 | 10(l | ) | ||||||||
10(l)
|
Potash Corporation of Saskatchewan Inc. Stock Option Plan Officers and Employees, as amended. | 10-K | 12/31/2006 | 10(m | ) | ||||||||
10(m)
|
Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended. | 10-Q | 9/30/2009 | ||||||||||
10(n)
|
Resolution and Forms of Agreement for Supplemental Executive Retirement Income Plan, for officers and key employees of the registrant. | 10-K | 12/31/1995 | 10(o | ) | ||||||||
10(o)
|
Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant. | 10-Q | 6/30/1996 | 10(x | ) | ||||||||
10(p)
|
Amended and restated Supplemental Executive Retirement Income Plan of the registrant and text of amendment to existing supplemental income plan agreements. | 10-Q | 9/30/2000 | 10(mm | ) | ||||||||
10(q)
|
Amendment, dated February 23, 2009, to the amended and restated Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | 10(r | ) |
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 73
Table of Contents
Incorporated By Reference | |||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||
10(r)
|
Amendment, dated December 29, 2010, to the amended and restated Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(s)
|
Form of Letter of amendment to existing supplemental income plan agreements of the registrant. | 10-K | 12/31/2002 | 10(cc | ) | ||||||||
10(t)
|
Amended and restated agreement dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2006 | 10(s | ) | ||||||||
10(u)
|
Amendment, dated December 24, 2008, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(v)
|
Amendment, dated February 23, 2009, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(w)
|
Amendment, dated February 23, 2009, to the amended and restated agreement dated August 2, 1996, between the registrant and Wayne R. Brownlee concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(x)
|
Amendment, dated February 23, 2009, to the amended and restated agreement, dated August 2, 1996, between the registrant and Garth W. Moore concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(y)
|
Amendment, dated December 29, 2010, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(z)
|
Amendment, dated December 29, 2010, to the amended and restated agreement, dated August 2, 1996, between the registrant and Wayne R. Brownlee concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(aa)
|
Amendment, dated December 29, 2010, to the amended and restated agreement, dated August 2, 1996, between the registrant and Garth W. Moore concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(bb)
|
Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999. | 10-Q | 6/30/2002 | 10(aa | ) | ||||||||
10(cc)
|
Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives. | 10-K | 12/31/2008 | 10(z | ) | ||||||||
10(dd)
|
Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives. | 10-K | 12/31/2008 | 10(aa | ) | ||||||||
10(ee)
|
Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant. | 10-K | 12/31/1995 | 10(p | ) | ||||||||
10(ff)
|
Amendment, dated December 31, 2010, to the Agreement, dated December 30, 1994 between the registrant and William J. Doyle. | 10-K | 12/31/2010 | ||||||||||
10(gg)
|
Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant. | 10-K | 12/31/1995 | 10(q | ) | ||||||||
10(hh)
|
Resolution and Form of Agreement of Indemnification dated January 24, 2001. | 10-K | 12/31/2000 | 10(ii | ) | ||||||||
10(ii)
|
Resolution and Form of Agreement of Indemnification July 21, 2004. | 10-Q | 6/30/2004 | ||||||||||
10(jj)
|
Chief Executive Officer Medical and Dental Benefits. | 10-K | 12/31/2010 | ||||||||||
10(kk)
|
Deferred Share Unit Plan for Non-Employee Directors, as amended. | 10-Q | 3/31/2008 | 10(bb | ) | ||||||||
10(ll)
|
U.S. Participant Addendum No. 1 to the Deferred Share Unit Plan for Non-Employee Directors. | 10-K | 12/31/2008 | 10(jj | ) |
74 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
Incorporated By Reference | |||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||
10(mm)
|
Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended. | 10-K | 12/31/2006 | 10(cc | ) | ||||||||
10(nn)
|
Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended. | 10-K | 12/31/2006 | 10(dd | ) | ||||||||
10(oo)
|
Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement. | 10-Q | 3/31/2007 | 10(ee | ) | ||||||||
10(pp)
|
Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement. | 10-Q | 3/31/2008 | 10(ff | ) | ||||||||
10(qq)
|
Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement. | 10-Q | 3/31/2009 | 10(mm | ) | ||||||||
10(rr)
|
Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement. | 8-K | 5/7/2010 | 10.1 | |||||||||
10(ss)
|
Medium-Term Incentive Plan of the registrant effective January 1, 2009. | 10-K | 12/31/2008 | 10(qq | ) | ||||||||
11
|
Statement re Computation of Per Share Earnings. | ||||||||||||
31(a)
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||
31(b)
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||
32
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
PotashCorp 2011 First Quarter
Quarterly Report on Form 10-Q 75
Table of Contents
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.
May 6, 2011
By: |
/s/ JOSEPH
PODWIKA
|
Joseph Podwika
Senior Vice President, General Counsel and Secretary
May 6, 2011
By: |
/s/ WAYNE
R. BROWNLEE
|
Wayne R. Brownlee
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
76 PotashCorp
2011 First Quarter Quarterly Report on Form 10-Q
Table of Contents
EXHIBIT INDEX
Incorporated by Reference | |||||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||||
3(a)
|
Articles of Continuance of the registrant dated May 15, 2002. | 10-Q | 6/30/2002 | ||||||||||||
3(b)
|
Bylaws of the registrant effective May 15, 2002. | 10-Q | 6/30/2002 | ||||||||||||
4(a)
|
Term Credit Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated September 25, 2001. | 10-Q | 9/30/2001 | ||||||||||||
4(b)
|
Syndicated Term Credit Facility Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 23, 2003. | 10-Q | 9/30/2003 | ||||||||||||
4(c)
|
Syndicated Term Credit Facility Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 21, 2004. | 8-K | 9/24/2004 | ||||||||||||
4(d)
|
Syndicated Term Credit Facility Third Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 20, 2005. | 8-K | 9/22/2005 | 4 | (a) | ||||||||||
4(e)
|
Syndicated Term Credit Facility Fourth Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 27, 2006. | 10-Q | 9/30/2006 | ||||||||||||
4(f)
|
Syndicated Term Credit Facility Fifth Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated as of October 19, 2007. | 8-K | 10/22/2007 | 4 | (a) | ||||||||||
4(g)
|
Indenture dated as of June 16, 1997, between the registrant and The Bank of Nova Scotia Trust Company of New York. | 8-K | 6/18/1997 | 4 | (a) | ||||||||||
4(h)
|
Indenture dated as of February 27, 2003, between the registrant and The Bank of Nova Scotia Trust Company of New York. | 10-K | 12/31/2002 | 4 | (c) | ||||||||||
4(i)
|
Form of Note relating to the registrants offering of $600,000,000 principal amount of 7.75% Notes due May 31, 2011. | 8-K | 5/17/2001 | 4 | |||||||||||
4(j)
|
Form of Note relating to the registrants offering of $250,000,000 principal amount of 4.875% Notes due March 1, 2013. | 8-K | 2/28/2003 | 4 | |||||||||||
4(k)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036. | 8-K | 11/30/2006 | 4 | (a) | ||||||||||
4(l)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.25% Notes due May 15, 2014. | 8-K | 5/1/2009 | 4 | (a) | ||||||||||
4(m)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019. | 8-K | 5/1/2009 | 4 | (b) | ||||||||||
4(n)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015. | 8-K | 9/25/2009 | 4 | (a) | ||||||||||
4(o)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020. | 8-K | 9/25/2009 | 4 | (b) | ||||||||||
4(p)
|
Revolving Term Credit Facility Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated December 11, 2009. | 8-K | 12/15/2009 | 4 | (a) | ||||||||||
4(q)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017. | 8-K | 11/29/2010 | 4 | (a) | ||||||||||
4(r)
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040. | 8-K | 11/29/2010 | 4 | (b) |
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.
Table of Contents
Incorporated By Reference | |||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||
10(a)
|
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. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(f | ) | ||||||||
10(b)
|
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. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(g | ) | ||||||||
10(c)
|
Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(h | ) | ||||||||
10(d)
|
Canpotex/PCS Amending Agreement, dated as of October 1, 1992. | 10-K | 12/31/1995 | 10(f | ) | ||||||||
10(e)
|
Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated as of October 7, 1993. | 10-K | 12/31/1995 | 10(g | ) | ||||||||
10(f)
|
Canpotex Producer Agreement amending agreement dated as of July 1, 2002. | 10-Q | 6/30/2004 | 10(g | ) | ||||||||
10(g)
|
Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between International Minerals & Chemical Corporation (Canada) Limited and the registrants predecessor. |
F-1 (File No. 33-31303) |
9/28/1989 | 10(e | ) | ||||||||
10(h)
|
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. | 10-K | 12/31/1990 | 10(p | ) | ||||||||
10(i)
|
Agreement effective August 27, 1998, between International Minerals & Chemical (Canada) Global Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended). | 10-K | 12/31/1998 | 10(l | ) | ||||||||
10(j)
|
Agreement effective August 31, 1998, among International Minerals & Chemical (Canada) Global Limited, International Minerals & Chemical (Canada) Limited Partnership and the registrant assigning the interest in the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended) held by International Minerals & Chemical (Canada) Global Limited to International Minerals & Chemical (Canada) Limited Partnership. | 10-K | 12/31/1998 | 10(m | ) | ||||||||
10(k)
|
Potash Corporation of Saskatchewan Inc. Stock Option Plan Directors, as amended. | 10-K | 12/31/2006 | 10(l | ) | ||||||||
10(l)
|
Potash Corporation of Saskatchewan Inc. Stock Option Plan Officers and Employees, as amended. | 10-K | 12/31/2006 | 10(m | ) | ||||||||
10(m)
|
Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended. | 10-Q | 9/30/2009 | ||||||||||
10(n)
|
Resolution and Forms of Agreement for Supplemental Executive Retirement Income Plan, for officers and key employees of the registrant. | 10-K | 12/31/1995 | 10(o | ) | ||||||||
10(o)
|
Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant. | 10-Q | 6/30/1996 | 10(x | ) | ||||||||
10(p)
|
Amended and restated Supplemental Executive Retirement Income Plan of the registrant and text of amendment to existing supplemental income plan agreements. | 10-Q | 9/30/2000 | 10(mm | ) | ||||||||
10(q)
|
Amendment, dated February 23, 2009, to the amended and restated Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | 10(r | ) |
Table of Contents
Incorporated By Reference | |||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||
10(r)
|
Amendment, dated December 29, 2010, to the amended and restated Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(s)
|
Form of Letter of amendment to existing supplemental income plan agreements of the registrant. | 10-K | 12/31/2002 | 10(cc | ) | ||||||||
10(t)
|
Amended and restated agreement dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2006 | 10(s | ) | ||||||||
10(u)
|
Amendment, dated December 24, 2008, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(v)
|
Amendment, dated February 23, 2009, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(w)
|
Amendment, dated February 23, 2009, to the amended and restated agreement dated August 2, 1996, between the registrant and Wayne R. Brownlee concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(x)
|
Amendment, dated February 23, 2009, to the amended and restated agreement, dated August 2, 1996, between the registrant and Garth W. Moore concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2008 | ||||||||||
10(y)
|
Amendment, dated December 29, 2010, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(z)
|
Amendment, dated December 29, 2010, to the amended and restated agreement, dated August 2, 1996, between the registrant and Wayne R. Brownlee concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(aa)
|
Amendment, dated December 29, 2010, to the amended and restated agreement, dated August 2, 1996, between the registrant and Garth W. Moore concerning the Supplemental Executive Retirement Income Plan. | 10-K | 12/31/2010 | ||||||||||
10(bb)
|
Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999. | 10-Q | 6/30/2002 | 10(aa | ) | ||||||||
10(cc)
|
Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives. | 10-K | 12/31/2008 | 10(z | ) | ||||||||
10(dd)
|
Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives. | 10-K | 12/31/2008 | 10(aa | ) | ||||||||
10(ee)
|
Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant. | 10-K | 12/31/1995 | 10(p | ) | ||||||||
10(ff)
|
Amendment, dated December 31, 2010, to the Agreement, dated December 30, 1994 between the registrant and William J. Doyle. | 10-K | 12/31/2010 | ||||||||||
10(gg)
|
Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant. | 10-K | 12/31/1995 | 10(q | ) | ||||||||
10(hh)
|
Resolution and Form of Agreement of Indemnification dated January 24, 2001. | 10-K | 12/31/2000 | 10(ii | ) | ||||||||
10(ii)
|
Resolution and Form of Agreement of Indemnification July 21, 2004. | 10-Q | 6/30/2004 | ||||||||||
10(jj)
|
Chief Executive Officer Medical and Dental Benefits. | 10-K | 12/31/2010 | ||||||||||
10(kk)
|
Deferred Share Unit Plan for Non-Employee Directors, as amended. | 10-Q | 3/31/2008 | 10(bb | ) | ||||||||
10(ll)
|
U.S. Participant Addendum No. 1 to the Deferred Share Unit Plan for Non-Employee Directors. | 10-K | 12/31/2008 | 10(jj | ) |
Table of Contents
Incorporated By Reference | |||||||||||||
Exhibit |
Filing Date/Period |
Exhibit Number |
|||||||||||
Number | Description of Document | Form | End Date | (if different) | |||||||||
10(mm)
|
Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended. | 10-K | 12/31/2006 | 10(cc | ) | ||||||||
10(nn)
|
Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended. | 10-K | 12/31/2006 | 10(dd | ) | ||||||||
10(oo)
|
Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement. | 10-Q | 3/31/2007 | 10(ee | ) | ||||||||
10(pp)
|
Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement. | 10-Q | 3/31/2008 | 10(ff | ) | ||||||||
10(qq)
|
Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement. | 10-Q | 3/31/2009 | 10(mm | ) | ||||||||
10(rr)
|
Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement. | 8-K | 5/7/2010 | 10.1 | |||||||||
10(ss)
|
Medium-Term Incentive Plan of the registrant effective January 1, 2009. | 10-K | 12/31/2008 | 10(qq | ) | ||||||||
11
|
Statement re Computation of Per Share Earnings. | ||||||||||||
31(a)
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||
31(b)
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||
32
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |