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 September 30, 2013

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-10351

 

 

Potash Corporation of Saskatchewan Inc.

(Exact name of registrant as specified in its charter)

 

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

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

  Yes  þ    No  ¨

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  ¨    No  ¨

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  ¨		Non-accelerated filer  ¨		Smaller reporting company  ¨
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

  Yes  ¨    No  þ

As at October 3, 2013, Potash Corporation of Saskatchewan Inc. had 863,210,541 Common Shares outstanding.

 

 

 

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Part I. Financial Information

Item 1. Financial Statements

 

Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Financial Position

(in millions of US dollars)

(unaudited)

 

As at		September 30, 2013				December 31, 2012
Assets
Current assets
Cash and cash equivalents		$	555			$	562
Receivables			853				1,089
Inventories (Note 2)			724				762
Prepaid expenses and other current assets			85				83
			2,217				2,496
Non-current assets
Property, plant and equipment			12,043				11,505
Investments in equity-accounted investees			1,322				1,254
Available-for-sale investments			1,744				2,481
Other assets			390				344
Intangible assets			137				126
Total Assets		$	17,853			$	18,206
Liabilities
Current liabilities
Short-term debt and current portion of long-term debt (Note 3)		$	609			$	615
Payables and accrued charges			1,108				1,188
Current portion of derivative instrument liabilities			43				51
			1,760				1,854
Non-current liabilities
Long-term debt (Note 3)			2,969				3,466
Derivative instrument liabilities			138				167
Deferred income tax liabilities			1,915				1,482
Pension and other post-retirement benefit liabilities (Note 4)			421				569
Asset retirement obligations and accrued environmental costs			574				645
Other non-current liabilities and deferred credits			142				111
Total Liabilities			7,919				8,294
Shareholders’ Equity
Share capital (Note 5)			1,600				1,543
Contributed surplus			221				299
Accumulated other comprehensive income			688				1,399
Retained earnings			7,425				6,671
Total Shareholders’ Equity			9,934				9,912
Total Liabilities and Shareholders’ Equity		$	17,853			$	18,206

(See Notes to the Condensed Consolidated Financial Statements)

 

1		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Income

(in millions of US dollars except per-share amounts)

(unaudited)

 

		Three Months Ended September 30								Nine Months Ended September 30
		2013				2012				2013				2012
Sales (Note 6)		$	1,520			$	2,143			$	5,764			$	6,285
Freight, transportation and distribution			(139	)			(154	)			(435	)			(381	)
Cost of goods sold			(897	)			(1,062	)			(2,999	)			(3,080	)
Gross Margin			484				927				2,330				2,824
Selling and administrative expenses			(48	)			(53	)			(165	)			(166	)
Provincial mining and other taxes			(10	)			(62	)			(154	)			(162	)
Share of earnings of equity-accounted investees			57				77				174				220
Dividend income			31				39				85				106
Impairment of available-for-sale investment			—				—				—				(341	)
Other expenses			(9	)			(10	)			(21	)			(21	)
Operating Income			505				918				2,249				2,460
Finance costs			(33	)			(24	)			(107	)			(89	)
Income Before Income Taxes			472				894				2,142				2,371
Income taxes (Note 8)			(116	)			(249	)			(587	)			(713	)
Net Income		$	356			$	645			$	1,555			$	1,658
Net Income per Share (Note 9)
Basic		$	0.41			$	0.75			$	1.80			$	1.93
Diluted		$	0.41			$	0.74			$	1.77			$	1.89
Dividends Declared per Share		$	0.35			$	0.21			$	0.98			$	0.49

(See Notes to the Condensed Consolidated Financial Statements)

 

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		2

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Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions of US dollars)

(unaudited)

 

		Three Months Ended September 30								Nine Months Ended September 30
(Net of related income taxes)		2013				2012				2013				2012
Net Income		$	356			$	645			$	1,555			$	1,658
Other comprehensive (loss) income
Items that will not be reclassified to net income:
Net actuarial gain (loss) on defined benefit plans(1)			—				—				150				(84	)
Items that may be reclassified subsequently to net income:
Available-for-sale investments(2)
Net fair value (loss) gain during the period			(267	)			303				(737	)			169
Reclassification to income of unrealized loss on impaired investment			—				—				—				341
Cash flow hedges
Net fair value loss during the period(3)			—				(1	)			—				(16	)
Reclassification to income of net loss(4)			6				11				25				36
Other			3				—				1				(2	)
Other Comprehensive (Loss) Income			(258	)			313				(561	)			444
Comprehensive Income		$	98			$	958			$	994			$	2,102

 

(1)	Net of income taxes of $(87) (2012 — $48) for the nine months ended September 30, 2013.

(2)	Available-for-sale investments are comprised of shares in Israel Chemicals Ltd. and Sinofert Holdings Limited.

(3)	Cash flow hedges are comprised of natural gas derivative instruments and were net of income taxes of $NIL (2012 — $1) for the three months ended September 30, 2013 and $NIL (2012 — $11) for the nine months ended September 30, 2013.

(4)	Net of income taxes of $(4) (2012 — $(8)) for the three months ended September 30, 2013 and $(14) (2012 — $(24)) for the nine months ended September 30, 2013.

(See Notes to the Condensed Consolidated Financial Statements)

 

3		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Cash Flow

(in millions of US dollars)

(unaudited)

 

		Three Months Ended September 30								Nine Months Ended September 30
		2013				2012				2013				2012
Operating Activities
Net income		$	356			$	645			$	1,555			$	1,658
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization			149				149				489				434
Share-based compensation			4				3				25				21
Impairment of available-for-sale investment			—				—				—				341
Realized excess tax benefit related to share-based compensation			5				4				15				7
Provision for deferred income tax			58				162				311				366
Net undistributed earnings of equity-accounted investees			(55	)			(74	)			(62	)			(90	)
Pension and other post-retirement benefits			12				(86	)			(10	)			(71	)
Asset retirement obligations and accrued environmental costs			(12	)			(6	)			(16	)			4
Other long-term liabilities and miscellaneous			1				7				54				33
Subtotal of adjustments			162				159				806				1,045
Changes in non-cash operating working capital
Receivables			96				(90	)			162				(84	)
Inventories			(12	)			19				29				63
Prepaid expenses and other current assets			(17	)			(5	)			(4	)			(21	)
Payables and accrued charges			31				31				8				(308	)
Subtotal of changes in non-cash operating working capital			98				(45	)			195				(350	)
Cash provided by operating activities			616				759				2,556				2,353
Investing Activities
Additions to property, plant and equipment			(360	)			(546	)			(1,210	)			(1,505	)
Other assets and intangible assets			2				(23	)			(8	)			(37	)
Cash used in investing activities			(358	)			(569	)			(1,218	)			(1,542	)
Financing Activities
Repayment of and finance costs on long-term debt obligations			—				—				(254	)			(2	)
Proceeds from (repayment of) short-term debt obligations			113				(117	)			(256	)			(501	)
Dividends			(290	)			(116	)			(700	)			(293	)
Repurchase of common shares			(166	)			—				(166	)			—
Issuance of common shares			10				13				31				16
Cash used in financing activities			(333	)			(220	)			(1,345	)			(780	)
(Decrease) Increase in Cash and Cash Equivalents			(75	)			(30	)			(7	)			31
Cash and Cash Equivalents, Beginning of Period			630				491				562				430
Cash and Cash Equivalents, End of Period		$	555			$	461			$	555			$	461
Cash and cash equivalents comprised of:
Cash		$	59			$	69			$	59			$	69
Short-term investments			496				392				496				392
		$	555			$	461			$	555			$	461
Supplemental cash flow disclosure
Interest paid		$	23			$	12			$	123			$	114
Income taxes paid		$	6			$	91			$	113			$	583

(See Notes to the Condensed Consolidated Financial Statements)

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		4

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Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Changes in Equity

(in millions of US dollars)

(unaudited)

 

										Accumulated Other Comprehensive Income
		Share Capital				Contributed Surplus				Net unrealized gain on available-for- sale investments				Net loss on derivatives designated as cash flow hedges				Net actuarial gain on defined benefit plans				Other				Total Accumulated Other Comprehensive Income				Retained Earnings				Total Equity(1)
Balance — December 31, 2012		$	1,543			$	299			$	1,539			$	(138	)		$	—	(2)		$	(2	)		$	1,399			$	6,671			$	9,912
Net income			—				—				—				—				—				—				—				1,555				1,555
Other comprehensive (loss) income			—				—				(737	)			25				150				1				(561	)			—				(561	)
Share repurchase (Note 5)			(11	)			(79	)			—				—				—				—				—				(105	)			(195	)
Dividends declared			—				—				—				—				—				—				—				(846	)			(846	)
Effect of share-based compensation including issuance of common shares			42				1				—				—				—				—				—				—				43
Shares issued for dividend reinvestment plan			26				—				—				—				—				—				—				—				26
Transfer of net actuarial gain on defined benefit plans			—				—				—				—				(150	)			—				(150	)			150				—
Balance — September 30, 2013		$	1,600			$	221			$	802			$	(113	)		$	—	(2)		$	(1	)		$	688			$	7,425			$	9,934
Balance — December 31, 2011		$	1,483			$	291			$	982			$	(168	)		$	—	(2)		$	2			$	816			$	5,257			$	7,847
Net income			—				—				—				—				—				—				—				1,658				1,658
Other comprehensive income (loss)			—				—				510				20				(84	)			(2	)			444				—				444
Dividends declared			—				—				—				—				—				—				—				(423	)			(423	)
Effect of share-based compensation including issuance of common shares			18				25				—				—				—				—				—				—				43
Shares issued for dividend reinvestment plan			7				—				—				—				—				—				—				—				7
Transfer of net actuarial loss on defined benefit plans			—				—				—				—				84				—				84				(84	)			—
Balance — September 30, 2012		$	1,508			$	316			$	1,492			$	(148	)		$	—	(2)		$	—			$	1,344			$	6,408			$	9,576

 

(1)	All equity transactions were attributable to common shareholders.

(2)	Any amounts incurred during a period were closed out to retained earnings at each period-end. Therefore, no balance exists at the beginning or end of period.

(See Notes to the Condensed Consolidated Financial Statements)

 

5		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Potash Corporation of Saskatchewan Inc.

Notes to the Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2013

(in millions of US dollars except as otherwise noted)

(unaudited)

 

 

Standards, amendments and interpretations effective and applied

The International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”) have issued the following standards and amendments or interpretations to existing standards that were effective and applied.

 

Standard		Description		Impact
Amendments to IAS 1, Presentation of Financial Statements		Amendments require items within other comprehensive income (“OCI”) that may be reclassified to the profit or loss section of the income statement to be grouped together.		Adopted retrospectively effective January 1, 2013. The format of the company’s consolidated statements of comprehensive income has changed. Prior periods’ figures have been reclassified to conform with the current period’s presentation.
Amendments to IFRS 7, Financial Instruments: Disclosures		Issued as part of its offsetting project, addresses common disclosure requirements related to financial instruments.		Adopted retrospectively effective January 1, 2013. Applicable disclosures are included in Note 10 to these unaudited interim condensed consolidated financial statements, and will be included in the company’s 2013 annual consolidated financial statements.
IFRS 10, Consolidated Financial Statements		Builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company.		Adopted retrospectively effective January 1, 2013 with no change to the company’s consolidated financial statements.
IFRS 11, Joint Arrangements		Removes a choice in accounting method and requires equity accounting for participants in joint ventures. Also focuses on the rights and obligations of an arrangement rather than its legal form.		Adopted prospectively effective January 1, 2013 with no change to the company’s consolidated financial statements.
IFRS 12, Disclosure of Interests in Other Entities		Establishes a new and comprehensive standard on disclosure requirements for all forms of interest in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities.		Adopted prospectively effective January 1, 2013. Applicable disclosures will be included in the company’s 2013 annual consolidated financial statements.
IFRS 13, Fair Value Measurement		Establishes a single framework for measuring fair value and introduces consistent disclosure requirements on fair value measurements.		Adopted prospectively effective January 1, 2013. Applicable disclosures are included in Note 10 to these unaudited interim condensed consolidated financial statements, and will be included in the company’s 2013 annual consolidated financial statements.

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		6

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Standard		Description		Impact
Amendments to IAS 19, Employee Benefits		Changes relating to the recognition, measurement, presentation and disclosure of post-employment benefits. The amendment also changes the accounting for termination benefits and short-term employment benefits, along with other minor clarifications.		Adopted prospectively effective January 1, 2013. The amendments resulted in changes in accounting policy but did not result in any material adjustments to the company’s consolidated financial statements. Previously, the company calculated interest costs on the defined benefit obligation and the expected return on plan assets, and included such amounts within employee costs in cost of goods sold and selling and administrative expenses, as applicable. The net interest cost will now be calculated on the net funded status and included in finance costs. Previously, vested past service costs were recognized immediately and unvested past service costs were amortized on a straight-line basis over the average period until the benefits became vested. All past service costs will now be recognized immediately. Actuarial gains and losses will continue to be recognized in OCI, and closed out to retained earnings each period. Required additional disclosures will be included in the company’s 2013 annual consolidated financial statements.
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine		Clarifies the requirements for accounting for stripping costs in the production phase of a surface mine.		Adopted retrospectively effective January 1, 2013 with no change to the company’s consolidated financial statements.

Standards, amendments and interpretations not yet effective and not applied

The IASB and IFRIC have issued the following standards and amendments or interpretations to existing standards that were not yet effective and not applied at September 30, 2013. The company does not anticipate early adoption of these standards at this time.

 

 

Standard		Description		Impact		Effective Date(1)
Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities		Issued as part of the IASB’s offsetting project, amendments clarify certain items regarding offsetting financial assets and financial liabilities.		The company is reviewing the standard to determine the potential impact, if any; however, no significant impact is anticipated.		January 1, 2014, applied retrospectively.
Amendments to IAS 36, Recoverable Amount Disclosures for Non-Financial Assets		Amendments were issued that clarify disclosure requirements for the recoverable amount of an asset or cash-generating unit.		The company is reviewing the standard to determine the potential impact, if any; however, no significant impact is anticipated.		January 1, 2014, applied retrospectively.
IFRIC 21, Levies		Provides guidance on when to recognize a liability for a levy imposed by a government.		The company is reviewing the interpretation to determine the potential impact, if any.		January 1, 2014, applied retrospectively.
IFRS 9, Financial Instruments		Initially issued guidance on the classification and measurement of financial assets. Additional guidance was issued on the classification and measurement of financial liabilities. Further, amendments were issued which modify the requirements for transition from IAS 39 to IFRS 9. Further announced as part of the Limited Amendments to IFRS 9 project, the IASB tentatively decided to defer the mandatory effective date pending the finalization of the impairment and classification and measurement requirements.		The company is reviewing the standard to determine the potential impact, if any.		Pending IASB decision.

 

(1)	Effective date for annual periods beginning on or after the stated date.

 

7		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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2. Inventories

 

 

		September 30, 2013				December 31, 2012
Finished products		$	332			$	417
Raw materials			103				91
Intermediate products			89				82
Materials and supplies			200				172
		$	724			$	762

3. Long-Term Debt

During the first quarter of 2013, the company fully repaid $250 of 4.875 percent 10-year senior notes at maturity. During the second quarter of 2013, the company classified as current the $500 aggregate principal amount of 5.250 percent senior notes due May 15, 2014.

In May 2013, the company’s $750 credit facility was terminated and the company amended its $2,750 credit facility, increasing it to $3,500 and extending the maturity to May 31, 2018.

4. Pension and Other Post-Retirement Benefits

A remeasurement of the defined benefit plan assets and liabilities was performed at June 30, 2013. As a result of a change in the discount rate and actual return on plan assets, the company recorded net actuarial gains on defined benefit plan obligations of $150 in OCI, which was recognized immediately in retained earnings at June 30, 2013. The company’s defined benefit pension and other post-retirement benefit liabilities decreased by $133, accrued pension benefit assets increased by $104 and deferred income tax liabilities increased by $87 at June 30, 2013.

The discount rate used to determine the benefit obligation for the company’s significant plans in the June 30, 2013 remeasurement was 4.60 percent (December 31, 2012 — 3.85 percent).

5. 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. No first preferred shares have been issued.

Issued

 

 

		Number of Common Shares				Consideration
Balance — December 31, 2012			864,900,513			$	1,543
Issued under option plans			3,899,736				42
Issued for dividend reinvestment plan			710,292				26
Repurchased			(6,300,000	)			(11	)
Balance — September 30, 2013			863,210,541			$	1,600

Share Repurchase Program

On July 24, 2013, the company’s Board of Directors authorized a share repurchase program of up to $2,000 of PotashCorp’s outstanding common shares (5 percent of its outstanding common shares) through a normal course issuer bid. Shares could be repurchased from time to time on the open market commencing August 2, 2013 through August 1, 2014 at prevailing market prices. The timing and amount of purchases under the program are dependent upon the availability and alternative uses of capital, market conditions, applicable US and Canadian regulations and other factors.

At September 30, 2013, the company had repurchased for cancellation 6,300,000 common shares, at a cost of $195 and an average price per share of $30.95. The repurchase resulted in a reduction of share capital of $11, and the excess of net cost over the average book value of the shares was recorded as a reduction of contributed surplus of $79 and a reduction of retained earnings of $105.

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		8

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6. Segment Information

The company’s operating segments have been determined based on reports reviewed by the Chief Executive Officer, its chief operating decision-maker, that are used to make strategic decisions. The company has three reportable operating segments: potash, nitrogen and phosphate. These reportable 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 September 30, 2013
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales		$	539			$	493			$	488			$	—			$	1,520
Freight, transportation and distribution			(57	)			(26	)			(56	)			—				(139	)
Net sales — third party			482				467				432				—
Cost of goods sold			(254	)			(289	)			(354	)			—				(897	)
Gross margin			228				178				78				—				484
Depreciation and amortization			(36	)			(41	)			(69	)			(3	)			(149	)
Inter-segment sales			—				32				—				—				—
Assets			9,063				2,195				2,464				4,131				17,853
Cash flows for additions to property, plant and equipment			259				40				56				5				360

 

		Three Months Ended September 30, 2012
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales		$	963			$	612			$	568			$	—			$	2,143
Freight, transportation and distribution			(76	)			(23	)			(55	)			—				(154	)
Net sales — third party			887				589				513				—
Cost of goods sold			(333	)			(338	)			(391	)			—				(1,062	)
Gross margin			554				251				122				—				927
Depreciation and amortization			(49	)			(33	)			(64	)			(3	)			(149	)
Inter-segment sales			—				72				—				—				—
Assets			8,504				2,183				2,519				4,485				17,691
Cash flows for additions to property, plant and equipment			348				106				73				19				546

 

9		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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		Nine Months Ended September 30, 2013
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales		$	2,399			$	1,781			$	1,584			$	—			$	5,764
Freight, transportation and distribution			(196	)			(78	)			(161	)			—				(435	)
Net sales — third party			2,203				1,703				1,423				—
Cost of goods sold			(858	)			(978	)			(1,163	)			—				(2,999	)
Gross margin			1,345				725				260				—				2,330
Depreciation and amortization			(144	)			(121	)			(214	)			(10	)			(489	)
Inter-segment sales			—				141				—				—				—
Assets			9,063				2,195				2,464				4,131				17,853
Cash flows for additions to property, plant and equipment			872				112				178				48				1,210

 

		Nine Months Ended September 30, 2012
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales		$	2,731			$	1,804			$	1,750				$—			$	6,285
Freight, transportation and distribution			(165	)			(76	)			(140	)			—				(381	)
Net sales — third party			2,566				1,728				1,610				—
Cost of goods sold			(884	)			(956	)			(1,240	)			—				(3,080	)
Gross margin			1,682				772				370				—				2,824
Depreciation and amortization			(135	)			(103	)			(188	)			(8	)			(434	)
Inter-segment sales			—				164				—				—				—
Assets			8,504				2,183				2,519				4,485				17,691
Cash flows for additions to property, plant and equipment			1,029				261				172				43				1,505

7. Share-Based Compensation

On May 16, 2013, the company’s shareholders approved the 2013 Performance Option Plan under which the company may, after February 19, 2013 and before January 1, 2014, grant options to acquire up to 3,000,000 common shares. Under the plan, the exercise price shall not be less than the quoted market closing price of the company’s common shares on the last trading day immediately preceding the date of the grant, and an option’s maximum term is 10 years. In general, options will vest, if at all, according to a schedule based on the three-year average excess of the company’s consolidated cash flow return on investment over weighted average cost of capital. As of September 30, 2013, options to purchase a total of 1,952,000 common shares had been granted under the plan. The weighted average fair value of options granted was $15.13 per share, estimated as of the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions:

 

 

Exercise price per option		$	43.80
Expected annual dividend per share		$	1.40
Expected volatility			50%
Risk-free interest rate			1.06%
Expected life of options			5.5 years

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		10

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8. Income Taxes

A separate estimated average annual effective tax rate was determined for each taxing jurisdiction and applied individually to the interim period pre-tax income of each jurisdiction.

 

		Three Months Ended September 30								Nine Months Ended September 30
		2013				2012				2013				2012
Income tax expense		$	116			$	249			$	587			$	713
Actual effective tax rate on ordinary earnings			25%				26%				26%				26%
Actual effective tax rate including discrete items			25%				28%				27%				30%
Discrete tax adjustments that impacted the tax rate		$	—			$	14			$	37			$	17

Significant items to note include the following:

 

Ÿ

In the first nine months of 2013, a tax expense of $9 (recovery of $7 in the third quarter) was recorded to adjust the 2012 income tax provision.

Ÿ

In second-quarter 2013, a deferred tax expense of $11 was recorded as a result of a Canadian income tax rate increase.

Ÿ

In the first nine months of 2012, a tax expense of $17 ($12 in the third quarter) was recorded to adjust the 2011 income tax provision.

Ÿ

In second-quarter 2012, a non-tax deductible impairment of the company’s available-for-sale investment in Sinofert Holdings Limited (“Sinofert”) was recorded.

Income tax balances within the condensed consolidated statements of financial position were comprised of the following:

 

Income Tax Assets (Liabilities)		Statements of Financial Position Location		September 30, 2013				December 31, 2012
Current income tax assets:
Current		Receivables		$	62			$	124
Non-current		Other assets			129				130
Deferred income tax assets		Other assets			21				30
Total income tax assets				$	212			$	284
Current income tax liabilities:
Current		Payables and accrued charges		$	(30	)		$	(2	)
Non-current		Other non-current liabilities and deferred credits			(138	)			(110	)
Deferred income tax liabilities		Deferred income tax liabilities			(1,915	)			(1,482	)
Total income tax liabilities				$	(2,083	)		$	(1,594	)

9. Net Income per Share

Net income per share was calculated on the following weighted average number of shares:

 

		Three Months Ended September 30								Nine Months Ended September 30
		2013				2012				2013				2012
Basic			866,108,000				859,573,000				865,707,000				859,118,000
Diluted			874,339,000				876,026,000				876,027,000				875,885,000

 

 

11		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Options excluded from the calculation of diluted net income per share due to the options’ exercise prices being greater than the average market price of common shares were as follows:

		Three Months Ended September 30, 2013		Nine Months Ended September 30, 2013
Weighted average number of options		5,173,796		3,418,946
Performance Option Plan years excluded		2008 through 2012		2008, 2011, 2012

10. Financial Instruments

Fair Value

Estimated fair values for financial instruments are designed to approximate amounts at which the instruments could be exchanged in a current arm’s-length transaction between knowledgeable willing parties. The valuation policies and procedures for financial reporting purposes are determined by the company’s finance department.

Presented below is a comparison of the fair value of certain financial instruments to their carrying values.

 

		September 30, 2013								December 31, 2012
		Carrying Amount of Liability				Fair Value of Liability				Carrying Amount of Liability				Fair Value of Liability
Long-term debt senior notes		$	3,500			$	3,791			$	3,750			$	4,284

 

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		12

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The following table presents the company’s fair value hierarchy for financial assets and financial liabilities carried at fair value on a recurring basis.

 

						Fair Value Measurements at Reporting Date Using:
		Carrying Amount of Asset (Liability)				Quoted Prices in Active Markets for Identical Assets (Level 1)(1)				Significant Other Observable Inputs (Level 2)(1,2)				Significant Unobservable Inputs (Level 3)(2)
September 30, 2013
Derivative instrument assets
Natural gas derivatives		$	9			$	—			$	—			$	9
Investments in ICL and Sinofert			1,744				1,744				—				—
Derivative instrument liabilities
Natural gas derivatives			(181	)			—				(7	)			(174	)
December 31, 2012
Derivative instrument assets
Natural gas derivatives		$	9			$	—			$	—			$	9
Foreign currency derivatives			1				—				1				—
Investments in ICL and Sinofert			2,481				2,481				—				—
Derivative instrument liabilities
Natural gas derivatives			(218	)			—				(18	)			(200	)

 

(1)	During the nine months ended September 30, 2013 and twelve months ended December 31, 2012, there were no transfers between Level 1 and Level 2.

(2)

During the nine months ended September 30, 2013, there were no transfers into Level 3 and $1 of gains was transferred out of Level 3 into Level 2 as (due to the passage of time) the terms of certain natural gas derivatives now matured within 36 months. During the twelve months ended December 31, 2012, there were no transfers into Level 3 and $10 of losses was transferred out of Level 3 into Level 2 as (due to the passage of time) the terms of certain natural gas derivatives now matured within 36 months. The company’s policy is to recognize transfers at the end of the reporting period.

The following table presents the company’s fair value measurements using significant unobservable inputs (Level 3):

 

		Natural Gas Derivatives
		Nine Months Ended September 30, 2013				Twelve Months Ended December 31, 2012
Balance, beginning of period		$	(191	)		$	(229	)
Total (losses) gains (realized and unrealized) before income taxes
Included in net income (cost of goods sold)			(20	)			(27	)
Included in other comprehensive income			20				16
Purchases			—				—
Sales			—				—
Issues			—				—
Settlements			27				39
Transfers of (gains) losses out of Level 3			(1	)			10
Balance, end of period		$	(165	)		$	(191	)
Gains (losses) for the period included in net income (cost of goods sold) were:
Change in unrealized gains (losses) relating to instruments still held at the reporting date		$	—			$	—
Total losses (realized and unrealized)			(20	)			(27	)

 

 

13		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		14

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15		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		16

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17		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		18

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Key Performance Drivers — Performance Compared to Targets

Through our integrated value model, we set, evaluate and refine our goals and priorities to drive improvements that benefit all those impacted by our business. We demonstrate our accountability by tracking and reporting our progress against targets related to each goal. Our long-term goals and 2013 targets are set out on pages 42 to 52 of our 2012 Annual Integrated Report. A summary of our progress against selected goals and representative annual targets is set out below.

 

 

Goal		Representative 2013 Annual Target		Performance to September 30, 2013
Create superior long-term shareholder value.		Exceed total shareholder return performance for our sector and the DAXglobal Agribusiness Index.		PotashCorp’s total shareholder return was -21 percent in the first nine months of 2013 compared to our sector’s weighted average return (based on market capitalization) of -23 percent and the DAXglobal Agribusiness Index weighted average return (based on market capitalization) of NIL percent.
Be the supplier of choice to the markets we serve.		Reduce domestic potash net rail cycle time through the Chicago corridor by 10 percent in 2014, compared to 2011 levels.		The domestic potash net rail cycle time through the Chicago corridor during the third quarter of 2013 continued to improve compared to both the first and second quarters of 2013 and the comparable third quarter of the benchmark 2011 period. Improved rail performance during the third quarter of 2013 resulted in a 10 percent reduction in the net rail cycle time from the third quarter 2011 benchmark period. This improvement helped offset higher first quarter 2013 cycle times related to severe winter weather in the Canadian prairies and lowered our performance for the first nine months of 2013 to slightly below the comparable period in 2011.
Attract and retain talented, motivated and productive employees who are committed to our long-term goals.		Maintain an annual employee turnover rate (excluding retirements) of 5 percent or less.		Employee turnover rate (excluding retirements) on an annualized basis for the first nine months of 2013 was 4.8 percent.
Achieve no harm to people.		Become one of the safest resource companies in the world within five years by achieving a recordable injury rate in the lowest quartile of a best-in-class peer group.		A five-year strategic plan was developed in the second quarter of 2013. A benchmark group of best-in-class peer companies will be developed in the fourth quarter of 2013.
		Reduce total site recordable injury rate to 1.25 (per 200,000 hours worked) or lower.		During the first nine months of 2013, total site recordable injury rate was 1.12.
Achieve no damage to the environment.		Reduce total reportable incidents (releases, permit excursions and spills) by 15 percent from 2012 levels.		Annualized total reportable incidents were down 11 percent during the first nine months of 2013 compared to 2012 annual levels. Compared to the first nine months of 2012, total reportable incidents were down 28 percent.

 

 

 

Earnings Guidance — Third Quarter 2013

 

 

		Original Company Guidance				Actual Results
Earnings per share		$	0.45 – $0.60			$	0.41

 

19		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Overview of Actual Results

 

 

		Three Months Ended September 30																Nine Months Ended September 30
Dollars (millions) — except per-share amounts		2013				2012				Change				% Change				2013				2012				Change				% Change
Sales		$	1,520			$	2,143			$	(623	)			(29	)		$	5,764			$	6,285			$	(521	)			(8	)
Gross margin			484				927				(443	)			(48	)			2,330				2,824				(494	)			(17	)
Operating income			505				918				(413	)			(45	)			2,249				2,460				(211	)			(9	)
Net income			356				645				(289	)			(45	)			1,555				1,658				(103	)			(6	)
Net income per share — diluted			0.41				0.74				(0.33	)			(45	)			1.77				1.89				(0.12	)			(6	)
Other comprehensive (loss) income			(258	)			313				(571	)			n/m				(561	)			444				(1,005	)			n/m

 

n/m	= not meaningful

 

 

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		20

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Balance Sheet

The most significant contributors to the changes in our statements of financial position were as follows⁽¹⁾:

 

(1)	Direction of arrows refers to increase or decrease.

 

Assets		Liabilities
i   Available-for-sale investments were mainly impacted by the lower fair value of our investments in ICL and Sinofert.   h   Property, plant and equipment increased primarily (72 percent) due to our previously announced potash capacity expansions and other potash projects.   i   Receivables fell due to a reduction in income tax, potash production tax and trade receivables from Canpotex Limited (Canpotex).		i   Long-term debt declined as our senior notes due May 15, 2014 were classified as current during the second quarter of 2013.   h   Deferred income tax liabilities increased primarily due to tax depreciation exceeding accounting depreciation, the tax impact on the remeasurement of our defined benefit plans in the second quarter of 2013, reduced deferred tax assets on unexercised stock options and a Canadian income tax rate increase.   i   Payables and accrued charges were impacted by (1) lower trade payables; (2) higher dividends payable due to announced increases in dividends per share; and (3) fewer other payables due to decreases in accrued capital expenditures across all plant sites and payments made to settle the company’s eight anti-trust lawsuits.   i   Asset retirement obligations and accrued environmental costs were primarily impacted by the use of a higher risk-free interest rate.
Equity
h  Equity was impacted by net income, other comprehensive loss (both discussed in more detail above), dividends declared and common shares repurchased for cancellation (see Note 5 to the financial statements in this Form 10-Q) during the first nine months of 2013.

As at September 30, 2013, $496 million (December 31, 2012 — $481 million) of our cash and cash equivalents were held in certain foreign subsidiaries. There are no current plans to repatriate these funds in a taxable manner.

 

21		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Potash

Potash Financial Performance

 

 

		Three Months Ended September 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne(1)
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Manufactured product
Net sales
North America		$	240			$	443				(46	)			721				951				(24	)		$	333			$	466				(29	)
Offshore			240				441				(46	)			843				1,107				(24	)		$	285			$	398				(28	)
			480				884				(46	)			1,564				2,058				(24	)		$	307			$	429				(28	)
Cost of goods sold			(248	)			(330	)			(25	)														$	(159	)		$	(160	)			(1	)
Gross margin			232				554				(58	)														$	148			$	269				(45	)
Other miscellaneous and purchased product gross margin(2)			(4	)			—				n/m
Gross Margin		$	228			$	554				(59	)														$	146			$	269				(46	)

 

n/m	= not meaningful

(1)	Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

(2)	Comprised of net sales of $2 million (2012 — $3 million) less cost of goods sold of $6 million (2012 — $3 million).

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		22

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		Nine Months Ended September 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne(1)
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Manufactured product
Net sales
North America		$	923			$	968				(5	)			2,349				2,002				17			$	393			$	484				(19	)
Offshore			1,271				1,588				(20	)			3,986				3,911				2			$	319			$	406				(21	)
			2,194				2,556				(14	)			6,335				5,913				7			$	346			$	432				(20	)
Cost of goods sold			(842	)			(876	)			(4	)														$	(133	)		$	(148	)			(10	)
Gross margin			1,352				1,680				(20	)														$	213			$	284				(25	)
Other miscellaneous and purchased product gross margin(2)			(7	)			2				n/m
Gross Margin		$	1,345			$	1,682				(20	)														$	212			$	284				(25	)

 

n/m	= not meaningful

(1)	Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

(2)	Comprised of net sales of $9 million (2012 — $10 million) less cost of goods sold of $16 million (2012 — $8 million).

Potash gross margin variance attributable to:

 

		Three Months Ended September 30 2013 vs. 2012																Nine Months Ended September 30 2013 vs. 2012
						Change in Prices/Costs																Change in Prices/Costs
Dollars (millions)		Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total				Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total
Manufactured product
North America		$	(101	)		$	(82	)		$	3			$	(180	)		$	134			$	(213	)		$	6			$	(73	)
Offshore			(81	)			(92	)			31				(142	)			26				(347	)			66				(255	)
Change in market mix			14				(16	)			2				—				(17	)			15				2				—
Total manufactured product		$	(168	)		$	(190	)		$	36				(322	)		$	143			$	(545	)		$	74				(328	)
Other miscellaneous and purchased product															(4	)															(9	)
Total														$	(326	)														$	(337	)

 

 

23		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Offshore sales to major markets, by percentage of sales volumes, were as follows:

 

		Three Months Ended September 30																								Nine Months Ended September 30
		By Canpotex												From New Brunswick												By Canpotex												From New Brunswick
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Other Asia (excluding China and India)			39				41				(5	)			—				—				—				41				45				(9	)			—				—				—
Latin America			34				32				6				100				100				—				28				29				(3	)			100				100				—
China			8				12				(33	)			—				—				—				17				15				13				—				—				—
India			9				5				80				—				—				—				8				6				33				—				—				—
Oceania, Europe and Other			10				10				—				—				—				—				6				5				20				—				—				—
			100				100								100				100								100				100								100				100

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
i  Buyer caution and competitive pressures in all key markets weakened the pricing environment and our average realized price was down.		i  With many buyers delaying purchases, our third-quarter sales volumes declined. In North America, sales volumes were in line with historical levels but trailed the record in the third quarter of 2012. In offshore markets, sales fell as a result of reduced sales to Canpotex and fewer tonnes shipped from our New Brunswick facility.		h  Brine management costs fell as our tolling agreement at Esterhazy expired at the end of 2012.   h  More product from our lower-cost mines went to offshore customers resulting in a higher positive cost of goods sold variance.

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		24

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The most significant contributors to the change in total gross margin year over year were as follows⁽¹⁾:

 

(1)	Direction of arrows refers to impact on gross margin.

 

Net Sales Prices		Sales Volumes		Cost of Goods Sold
i  Our average realized potash price trailed the first nine months of 2012, reflecting lower pricing that took hold late in 2012 and 2013.		h  With limited dealer inventory carried into 2013 and strong agricultural fundamentals, North American sales volumes grew in the first half of 2013 more than offsetting lower third-quarter results. Buyer destocking occurred in the first half of 2012.   h  Record volumes shipped by Canpotex in the first half of 2013 (due to settlements with China and India occurring earlier than the previous year and less inventory being carried into 2013 in major offshore spot markets) more than offset declines in the third quarter.		h  Brine management costs fell as our tolling agreement at Esterhazy expired at the end of 2012.   h  32 shutdown weeks were taken in 2013 mainly as a result of our strategy to match production with market demand (55 shutdown weeks were taken in 2012 primarily to match supply to demand; during this downtime, we opted to allocate resources to non-production activities rather than lay off employees, which resulted in higher shutdown costs).   h  Royalty costs declined due to lower average North American listed sales price per tonne.   h  More product from our lower-cost mines went to offshore customers resulting in a higher positive cost of goods sold variance.

Potash Non-Financial Performance

 

 

		Three Months Ended September 30												Nine Months Ended September 30
		2013				2012				% Change				2013				2012				% Change
KCl tonnes produced (thousands)			1,150				1,579				(27	)			5,852				5,961				(2	)
Total site recordable injury rate			1.75				2.84				(38	)			1.45				2.32				(38	)
Employee turnover percentage (annualized)			6.4%				4.6%				39				5.6%				5.0%				12
Waste (000’s tonnes)			2,770				2,307				20				13,210				10,027				32
Environmental incidents			3				2				50				11				7				57

During the second quarter of 2013, we successfully completed a safe Canpotex entitlement run at Cory which will allow us a greater proportion of Canpotex sales to offshore markets and almost offsets the loss from the ending of our long-term tolling agreement at Esterhazy.

While production included normal maintenance downtime in 2013 and 2012, potash production was also affected by additional downtime at Cory (four weeks) and reduced operating rates at our Lanigan and Rocanville facilities (both of which experienced no reductions in 2012); year over year results were almost offset by the reduction in shutdown weeks as discussed above.

Total site recordable injury rate declined because of the effort by the site teams and an external consultant on targeted safety improvement projects at Allan, Cory and Rocanville as well as on-going safety improvements at other sites.

The labor market for talent in Saskatchewan is very competitive and has afforded employees opportunities to seek other employment that would coincide with relocation due to family or other personal reasons. We believe our pay and benefits remain very competitive.

Waste is comprised of byproducts, including: coarse and fine tailings and salt as brine to injection wells. Waste increased due to increased mining waste per tonne combined with increased mining activity at certain sites.

The increase in environmental incidents in potash for the first nine months of 2013 is due largely to several failures of refrigerant lines in new HVAC units installed at New Brunswick.

 

25		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Nitrogen

Nitrogen Financial Performance

 

 

		Three Months Ended September 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne(1)
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Manufactured product
Net sales
Ammonia		$	210			$	299				(30	)			455				466				(2	)		$	461			$	641				(28	)
Urea			82				121				(32	)			218				241				(10	)		$	376			$	504				(25	)
Solutions/Nitric acid/Ammonium nitrate			158				104				52				700				438				60			$	226			$	238				(5	)
			450				524				(14	)			1,373				1,145				20			$	327			$	458				(29	)
Cost of goods sold			(275	)			(291	)			(5	)														$	(199	)		$	(254	)			(22	)
Gross margin			175				233				(25	)														$	128			$	204				(37	)
Other miscellaneous and purchased product gross margin(2)			3				18				(83	)
Gross Margin		$	178			$	251				(29	)														$	130			$	219				(41	)

 

(1)	Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

(2)	Comprised of net sales of $17 million (2012 — $65 million) less cost of goods sold of $14 million (2012 — $47 million).

 

 

		Nine Months Ended September 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne(1)
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Manufactured product
Net sales
Ammonia		$	820			$	794				3				1,484				1,499				(1	)		$	553			$	530				4
Urea			347				456				(24	)			800				870				(8	)		$	433			$	525				(18	)
Solutions/Nitric acid/Ammonium nitrate			489				338				45				1,978				1,371				44			$	247			$	246				—
			1,656				1,588				4				4,262				3,740				14			$	388			$	425				(9	)
Cost of goods sold			(940	)			(869	)			8															$	(220	)		$	(233	)			(6	)
Gross margin			716				719				—															$	168			$	192				(13	)
Other miscellaneous and purchased product gross margin(2)			9				53				(83	)
Gross Margin		$	725			$	772				(6	)														$	170			$	206				(17	)

 

(1)	Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

(2)	Comprised of net sales of $47 million (2012 — $140 million) less cost of goods sold of $38 million (2012 — $87 million).

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		26

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Nitrogen gross margin variance attributable to:

 

 

		Three Months Ended September 30 2013 vs. 2012																Nine Months Ended September 30 2013 vs. 2012
						Change in Prices/Costs																Change in Prices/Costs
Dollars (millions)		Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total				Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total
Manufactured product
Ammonia		$	5			$	(83	)		$	4			$	(74	)		$	6			$	34			$	(54	)		$	(14	)
Urea			(5	)			(28	)			(3	)			(36	)			(23	)			(73	)			(22	)			(118	)
Solutions, NA, AN			21				(9	)			33				45				81				2				26				109
Hedge			—				—				7				7				—				—				20				20
Change in market mix			66				(57	)			(9	)			—				140				(118	)			(22	)			—
Total manufactured product		$	87			$	(177	)		$	32				(58	)		$	204			$	(155	)		$	(52	)			(3	)
Other miscellaneous and purchased product															(15	)															(44	)
Total														$	(73	)														$	(47	)

 

 

27		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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		Three Months Ended September 30																Nine Months Ended September 30
		Sales Tonnes (thousands)								Price per Tonne								Sales Tonnes (thousands)								Price per Tonne
		2013				2012				2013				2012				2013				2012				2013				2012
Fertilizer			406				301			$	309			$	455				1,225				1,108			$	397			$	474
Industrial and Feed			967				844			$	335			$	459				3,037				2,632			$	385			$	404
			1,373				1,145			$	327			$	458				4,262				3,740			$	388			$	425

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

i

Ammonia prices pulled back from the historically high levels of third-quarter 2012, while urea moved lower primarily due to increased supply pressures from key exporting countries.

h

Despite maintenance-related downtime in Trinidad, our third-quarter sales volumes increased; the key driver being the restart of ammonia capacity at Geismar.

h

Average natural gas costs in production, including hedge, decreased 27 percent. Natural gas costs in Trinidad production fell 31 percent (contract price indexed, in part, to Tampa ammonia prices) while our US spot costs for natural gas used in production increased 19 percent. Including losses on our hedge position, US gas prices declined 11 percent.

The change in market mix produced a favorable variance of $66 million related to sales volumes and an unfavorable variance of $57 million in sales prices due to increased sales of solutions as a result of our expansion at Geismar in 2013.

h

The cost of goods sold variance was higher for solutions/nitric acid/ammonium nitrate due to the impact of costs associated with Geismar in 2012 that did not repeat in 2013.

The most significant contributors to the change in total gross margin year over year were as follows⁽¹⁾:

 

(1)	Direction of arrows refers to impact on gross margin.

 

Net Sales Prices

Sales Volumes

Cost of Goods Sold

h

Sales prices rose due to strong spot ammonia pricing achieved in the second half of 2012 that carried over into 2013, despite prices declining throughout the first nine months of 2013.

h

Additional ammonia capacity at Geismar and Augusta led to an increase in saleable tonnes of downstream products.

i

Our US spot costs for natural gas used in production increased 35 percent. Including losses on our hedge position, US gas prices increased 3 percent.

i

Urea prices fell due to increased global capacity and record urea exports from China.

i

Urea volumes were down as gas interruptions in Trinidad led us to divert more production to higher-margin ammonia.

h

The cost of goods sold variance was positive for solutions/nitric acid/ammonium nitrate due to the impact of costs associated with Geismar in 2012 that did not repeat in 2013.

The change in market mix produced a favorable variance of $140 million related to sales volumes and an unfavorable variance of $118 million in sales prices due to increased sales of solutions as a result of our expansion at Geismar in 2013.

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		28

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Nitrogen Non-Financial Performance

 

 

		Three Months Ended September 30												Nine Months Ended September 30
		2013				2012				% Change				2013				2012				% Change
N tonnes produced (thousands)			705				651				8				2,155				2,029				6
Total site recordable injury rate			0.76				0.55				38				0.63				0.44				43
Employee turnover percentage (annualized)			7.7%				4.6%				67				6.0%				4.6%				30
Greenhouse gas emissions (CO2 equivalent tonnes/tonne of product)			2.4				2.3				4				2.3				2.3				—
Environmental incidents			—				3				(100	)			1				6				(83	)

There were 14 recordable injuries in the first nine months of 2013 compared to 14 in the same period in 2012, but fewer hours were worked in 2013, resulting in an increase in the nitrogen total site recordable injury rate.

An increase in voluntary terminations, which comprised the majority of employee turnover, drove an increase in employee turnover.

Environmental incidents fell due to improvement initiatives to find ways of reducing the company’s environmental impact, including the implementation of Reportable Quantity (RQ) prevention teams at each facility.

 

Phosphate

Phosphate Financial Performance

 

 

		Three Months Ended September 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne(1)
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Manufactured product
Net sales
Fertilizer		$	250			$	333				(25	)			634				676				(6	)		$	395			$	493				(20	)
Feed and Industrial			176				172				2				279				263				6			$	631			$	654				(4	)
			426				505				(16	)			913				939				(3	)		$	467			$	537				(13	)
Cost of goods sold			(351	)			(388	)			(10	)														$	(384	)		$	(413	)			(7	)
Gross margin			75				117				(36	)														$	83			$	124				(33	)
Other miscellaneous and purchased product gross margin(2)			3				5				(40	)
Gross Margin		$	78			$	122				(36	)														$	85			$	130				(35	)

 

(1)	Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

(2)	Comprised of net sales of $6 million (2012 — $8 million) less cost of goods sold of $3 million (2012 — $3 million).

 

 

		Nine Months Ended September 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne(1)
		2013				2012				% Change				2013				2012				% Change				2013				2012				% Change
Manufactured product
Net sales
Fertilizer		$	835			$	1,004				(17	)			1,859				1,932				(4	)		$	449			$	520				(14	)
Feed and Industrial			568				581				(2	)			887				873				2			$	640			$	666				(4	)
			1,403				1,585				(11	)			2,746				2,805				(2	)		$	511			$	565				(10	)
Cost of goods sold			(1,153	)			(1,229	)			(6	)														$	(420	)		$	(438	)			(4	)
Gross margin			250				356				(30	)														$	91			$	127				(28	)
Other miscellaneous and purchased product gross margin(2)			10				14				(29	)
Gross Margin		$	260			$	370				(30	)														$	95			$	132				(28	)

 

(1)	Rounding differences may occur due to the use of whole dollars in per-tonne calculations.

(2)	Comprised of net sales of $20 million (2012 — $25 million) less cost of goods sold of $10 million (2012 — $11 million).

 

29		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Phosphate gross margin variance attributable to:

 

 

		Three Months Ended September 30 2013 vs. 2012																Nine Months Ended September 30 2013 vs. 2012
						Change in Prices/Costs																Change in Prices/Costs
Dollars (millions)		Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total				Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total
Manufactured product
Fertilizer		$	(7	)		$	(61	)		$	22			$	(46	)		$	(13	)		$	(131	)		$	43			$	(101	)
Feed and Industrial			6				(8	)			6				4				4				(24	)			15				(5	)
Change in market mix			(6	)			4				2				—				(6	)			6				—				—
Total manufactured product		$	(7	)		$	(65	)		$	30				(42	)		$	(15	)		$	(149	)		$	58				(106	)
Other miscellaneous and purchased product															(2	)															(4	)
Total														$	(44	)														$	(110	)

 

 

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

Cost of Goods Sold

i

Our average realized phosphate price for the quarter was down largely due to a decline in prices for fertilizer products.

h

Costs were impacted by lower sulfur costs (down 26 percent).

h

Ammonia costs were lower (down 21 percent).

The most significant contributors to the change in total gross margin year over year were as follows⁽¹⁾:

 

(1)	Direction of arrows refers to impact on gross margin.

 

 

				Net Sales Prices						Cost of Goods Sold
	i			Our average realized phosphate price was down as a result of reduced global demand and start up of new capacity.				h		Costs were impacted by lower sulfur costs (down 22 percent), adjustments to our asset retirement obligations (the relevant discount rates increased in 2013 and decreased in 2012) and our Aurora workforce reduction in the second quarter of 2012.
								i		Rock input costs were higher.

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		30

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Phosphate Non-Financial Performance

 

		Three Months Ended September 30												Nine Months Ended September 30
		2013				2012				% Change				2013				2012				% Change
P2O5 tonnes produced (thousands)			533				493				8				1,553				1,479				5
P2O5 operating rate percentage			90%				83%				8				87%				83%				5
Total site recordable injury rate			1.35				0.60				125				1.07				0.54				98
Employee turnover percentage (annualized)			3.4%				14.5%				(77	)			3.3%				7.4%				(55	)
Water usage (m3 per tonne of product)			28				32				(13	)			29				34				(15	)
Recycled water used in operations (percentage)			94%				93%				1				94%				93%				1
Environmental incidents			—				1				(100	)			1				5				(80	)

We experienced an increased recordable injury rate at Aurora and White Springs. Both sites have implemented steps intended to reduce the injury rates.

Employee turnover fell as a work force reduction at our Aurora location occurred in the second quarter of 2012.

Water usage in our phosphate operations decreased primarily due to more water recycling at our White Springs location (less rain water to recycle in 2012) and efforts to conserve water.

Environmental incidents fell year over year as 2012 included four incidents occurring during or immediately following extreme weather events in the second and third quarters of 2012 (three in the second quarter and one in the third quarter).

 

31		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Other Expenses and Income

 

 

		Three Months Ended September 30																Nine Months Ended September 30
Dollars (millions)		2013				2012				Change				% Change				2013				2012				Change				% Change
Selling and administrative expenses		$	(48	)		$	(53	)		$	5				(9	)		$	(165	)		$	(166)			$	1				(1	)
Provincial mining and other taxes			(10	)			(62	)			52				(84	)			(154	)			(162)				8				(5	)
Share of earnings of equity-accounted investees			57				77				(20	)			(26	)			174				220				(46	)			(21	)
Dividend income			31				39				(8	)			(21	)			85				106				(21	)			(20	)
Impairment of available-for-sale investment			—				—				—				—				—				(341)				341				(100	)
Other expenses			(9	)			(10	)			1				(10	)			(21	)			(21)				—				—
Finance costs			(33	)			(24	)			(9	)			38				(107	)			(89)				(18	)			20
Income taxes			(116	)			(249	)			133				(53	)			(587	)			(713)				126				(18	)

 

 

Finance costs were higher in 2013 as a result of lower capitalized interest compared to 2012. Weighted average debt obligations outstanding and the associated interest rates were as follows:

 

 

Dollars (millions) — except percentage amounts				Three Months Ended September 30																Nine Months Ended September 30
Obligations		Weighted Average		2013				2012				Change				% Change				2013				2012				Change				% Change
Long-term debt(1)		Outstanding		$	3,506			$	3,756			$	(250)				(7	)		$	3,575			$	3,757			$	(182)				(5	)
		Effective interest rate			5.2%				5.2%				—%				—				5.2%				5.2%				—%				—
Short-term debt		Outstanding		$	55			$	330			$	(275)				(83	)		$	253			$	621			$	(368)				(59	)
		Effective interest rate			0.3%				0.4%				(0.1)%				(25	)			0.3%				0.4%				(0.1)%				(25	)

 

(1)	Includes current portion

For the third quarter, income taxes decreased due to lower ordinary earnings before taxes. For the first nine months of the year, income taxes decreased due to lower income taxes on reduced ordinary earnings before taxes partially offset by higher discrete tax adjustments. Effective tax rates and discrete items were as follows:

 

 

		Three Months Ended September 30								Nine Months Ended September 30
Dollars (millions) — except percentage amounts		2013				2012				2013				2012
Actual effective tax rate on ordinary earnings			25%				26%				26%				26%
Actual effective tax rate including discrete items			25%				28%				27%				30%
Discrete tax adjustments that impacted the rate		$	—				$(14)				$(37)				$(17)

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		32

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Liquidity and Capital Resources

Cash Requirements

Contractual Obligations and Other Commitments

Our contractual obligations and other commitments detailed on pages 81 and 82 of our 2012 Annual Integrated Report summarize certain of our liquidity and capital resource requirements, excluding obligations that have original maturities of less than one year, planned (but not legally committed) capital expenditures or potential share repurchases.

Capital Expenditures

Based on anticipated exchange rates, during 2013 we expect to incur capital expenditures, including capitalized interest, of approximately $900 million for opportunity capital and approximately $620 million to sustain operations at existing levels and for major repairs and maintenance (including plant turnarounds).

Page 58 of our 2012 Annual Integrated Report outlines key potash construction projects and their expected total cost, as well as the impact of these projects on capacity expansion/debottlenecking and any expected remaining spending on each project still in progress. The most significant of these potash projects⁽¹⁾ on which funds are expected to be spent in 2013, excluding capitalized interest, are outlined in the table below:

 

CDN Dollars (millions)		2013 Forecast				Total Forecast(2)				Started				Expected Completion(3) (Description)		Forecasted Remaining Spending (after 2013)(2)
Allan, Saskatchewan		$	50			$	770				2008			2012 (general expansion)		$	—
New Brunswick		$	150			$	2,180				2007			2013 (mine shaft and mill)		$	380
Rocanville, Saskatchewan		$	540			$	2,810				2008			2014 (mine shaft and mill)		$	220

 

(1)	The expansion at each of these projects is discussed in the technical report for such project filed on SEDAR in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects.

(2)	Amounts are based on the most recent forecast amounts approved by the Board of Directors, and are subject to change based on project timelines, cost changes and ongoing project reviews.

(3)	Excludes ramp-up time. We expect these projects will be fully ramped up by the end of 2015, subject to market conditions.

In 2011, we began the process to restart our anhydrous ammonia plant in Geismar, Louisiana. We invested approximately $260 million ($20 million in 2013) to increase ammonia production by an estimated 500,000 tonnes. We started production in the first quarter of 2013.

We anticipate starting an expansion of ammonia production at our Lima, Ohio plant in 2013. We are investing approximately $190 million through the fourth quarter of 2015 ($30 million in 2013) to increase our capacity in ammonia (88,000 tons) and urea (80,000 tons).

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.

 

33		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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Sources and Uses of Cash

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 September 30																Nine Months Ended September 30
Dollars (millions)		2013				2012				Change				% Change				2013				2012				Change				% Change
Cash provided by operating activities		$	616			$	759			$	(143	)			(19	)		$	2,556			$	2,353			$	203				9
Cash used in investing activities			(358	)			(569	)			211				(37	)			(1,218	)			(1,542	)			324				(21	)
Cash used in financing activities			(333	)			(220	)			(113	)			51				(1,345	)			(780	)			(565	)			72

 

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		34

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The following table presents summarized working capital information:

 

Dollars (millions) — except ratio amounts		September 30, 2013				December 31, 2012				Change				% Change
Current assets		$	2,217			$	2,496			$	(279	)			(11	)
Current liabilities			(1,760	)			(1,854	)			94				(5	)
Working capital			457				642				(185	)			(29	)
Working capital ratio			1.26				1.35				(0.09	)			(7	)

 

 

35		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		36

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Quarterly Financial Highlights

 

 

Dollars (millions) — except per-share amounts		September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012				December 31, 2011
Sales		$	1,520			$	2,144			$	2,100			$	1,642			$	2,143			$	2,396			$	1,746			$	1,865
Gross margin			484				979				867				586				927				1,199				698				890
Net income			356				643				556				421				645				522				491				683
Net income per share — basic			0.41				0.74				0.64				0.49				0.75				0.61				0.57				0.80
Net income per share — diluted			0.41				0.73				0.63				0.48				0.74				0.60				0.56				0.78

 

 

37		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		38

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39		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		40

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Part II. Other Information

Item 1. Legal Proceedings

For a description of certain other legal and environmental proceedings, see Note 12 to the unaudited interim condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about company purchases of equity securities that are registered by the company pursuant to Section 12 of the Exchange Act during the quarter ended September 30, 2013:

 

Period		(a) Total Number of Shares Purchased				(b) Average Price Paid per  Share(1)				(c) Total Number of Shares Purchased as Part of Publicly Announced Programs(2)				(d) Maximum Number of Shares that May Yet Be Purchased Under the Programs(2)
July 1, 2013 — July 31, 2013			0			$	0				0				43,345,992
August 1, 2013 — August 31, 2013			3,825,000			$	30.24				3,825,000				39,520,992
September 1, 2013 — September 30, 2013			2,475,000			$	32.05				2,475,000				37,045,992
Total			6,300,000			$	30.95				6,300,000				37,045,992

 

(1)	Average price paid per share includes cash paid for commissions.

 

(2)

On July 24, 2013, the company’s Board of Directors authorized a share repurchase program of up to $2,000 million of PotashCorp’s outstanding common shares (5 percent of its outstanding common shares) through a normal course issuer bid. Shares could be repurchased from time to time on the open market commencing on August 2, 2013 through August 1, 2014 at prevailing market prices. Shareholders may obtain a copy of the notice filed with the Toronto Stock Exchange, without charge, by contacting the Corporate Secretary.

 

 

Item 6. Exhibits

(a) Exhibits

 

				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (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)		Indenture dated as of February 27, 2003, between the registrant and U.S. Bank National Association, as successor trustee.		10-K			12/31/2002			4(c)

 

41		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (if different)
4(b)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036.		8-K			11/30/2006			4(a)
4(c)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.25% Notes due May 15, 2014.		8-K			5/1/2009			4(a)
4(d)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019.		8-K			5/1/2009			4(b)
4(e)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015.		8-K			9/25/2009			4(a)
4(f)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020.		8-K			9/25/2009			4(b)
4(g)		Revolving Term Credit Facility Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of December 11, 2009.		8-K			12/15/2009			4(a)
4(h)		Revolving Term Credit Facility First Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 23, 2011.		8-K			9/26/2011			4(a)
4(i)		Revolving Term Credit Facility Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of May 24, 2013.		8-K			5/28/2013			4(a)
4(j)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017.		8-K			11/29/2010			4(a)
4(k)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040.		8-K			11/29/2010			4(b)
4(l)		Agreement of Resignation, Appointment and Acceptance, dated as of June 25, 2013, by and among the registrant, The Bank of Nova Scotia Trust Company of New York and U.S. Bank National Association.		8-K			6/27/2013			4(a)

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.

 

				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (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 registrant’s 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)

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		42

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				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (if different)
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.		8-K			3/13/2012			10(a)
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)
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(u)
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(v)
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(w)
10(x)		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(y)
10(y)		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(z)
10(z)		Supplemental Retirement Agreement dated December 24, 2008, between the registrant and Stephen F. Dowdle.		10-K			12/31/2011			10(bb)
10(aa)		Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999.		10-Q			6/30/2002			10(aa)
10(bb)		Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives.		10-K			12/31/2008			10(z)
10(cc)		Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives.		10-K			12/31/2008			10(aa)
10(dd)		Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.		10-K			12/31/1995			10(p)
10(ee)		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(ff)
10(ff)		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(gg)		Resolution and Form of Agreement of Indemnification dated January 24, 2001.		10-K			12/31/2000			10(ii)
10(hh)		Resolution and Form of Agreement of Indemnification — July 21, 2004.		10-Q			6/30/2004			10(ii)
10(ii)		Chief Executive Officer Medical and Dental Benefits.		10-K			12/31/2010			10(jj)
10(jj)		Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors.		10-Q			3/31/2012			10(ll)
10(kk)		Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended.		10-K			12/31/2006			10(cc)

 

43		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (if different)
10(ll)		Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended.		10-K			12/31/2006			10(dd)
10(mm)		Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.		10-Q			3/31/2007			10(ee)
10(nn)		Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement.		10-Q			3/31/2008			10(ff)
10(oo)		Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement.		10-Q			3/31/2009			10(mm)
10(pp)		Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement.		8-K			5/7/2010			10.1
10(qq)		Potash Corporation of Saskatchewan Inc. 2011 Performance Option Plan and Form of Option Agreement.		8-K			5/13/2011			10(a)
10(rr)		Potash Corporation of Saskatchewan Inc. 2012 Performance Option Plan and Form of Option Agreement.		8-K			5/18/2012			10(a)
10(ss)		Potash Corporation of Saskatchewan Inc. 2013 Performance Option Plan and Form of Option Agreement		8-K			5/17/2013			10(a)
10(tt)		Medium-Term Incentive Plan of the registrant effective January 1, 2012.		10-K			12/31/2011			10(uu)
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.
95		Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q		44

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		POTASH CORPORATION OF SASKATCHEWAN INC.
October 29, 2013		By:		/s/    JOSEPH PODWIKA
				Joseph Podwika
				Senior Vice President, General Counsel and Secretary
October 29, 2013		By:		/s/    WAYNE R. BROWNLEE
				Wayne R. Brownlee
				Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

 

45		PotashCorp 2013 Third Quarter Quarterly Report on Form 10-Q

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EXHIBIT INDEX

 

				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (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)		Indenture dated as of February 27, 2003, between the registrant and U.S. Bank National Association, as successor trustee.		10-K			12/31/2002			4(c)
4(b)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036.		8-K			11/30/2006			4(a)
4(c)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.25% Notes due May 15, 2014.		8-K			5/1/2009			4(a)
4(d)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019.		8-K			5/1/2009			4(b)
4(e)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015.		8-K			9/25/2009			4(a)
4(f)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020.		8-K			9/25/2009			4(b)
4(g)		Revolving Term Credit Facility Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of December 11, 2009.		8-K			12/15/2009			4(a)
4(h)		Revolving Term Credit Facility First Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 23, 2011.		8-K			9/26/2011			4(a)
4(i)		Revolving Term Credit Facility Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of May 24, 2013.		8-K			5/28/2013			4(a)
4(j)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017.		8-K			11/29/2010			4(a)
4(k)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040.		8-K			11/29/2010			4(b)
4(l)		Agreement of Resignation, Appointment and Acceptance, dated as of June 25, 2013, by and among the registrant, The Bank of Nova Scotia Trust Company of New York and U.S. Bank National Association.		8-K			6/27/2013			4(a)

 

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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.

 

				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (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 registrant’s 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.		8-K			3/13/2012			10(a)
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)
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(u)

 

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				Incorporated by Reference
Exhibit Number		Description of Document		Form		Filing Date/Period End Date				Exhibit Number (if different)
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(v)
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(w)
10(x)		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(y)
10(y)		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(z)
10(z)		Supplemental Retirement Agreement dated December 24, 2008, between the registrant and Stephen F. Dowdle.		10-K			12/31/2011			10(bb)
10(aa)		Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999.		10-Q			6/30/2002			10(aa)
10(bb)		Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives.		10-K			12/31/2008			10(z)
10(cc)		Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives.		10-K			12/31/2008			10(aa)
10(dd)		Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.		10-K			12/31/1995			10(p)
10(ee)		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(ff)
10(ff)		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(gg)		Resolution and Form of Agreement of Indemnification dated January 24, 2001.		10-K			12/31/2000			10(ii)
10(hh)		Resolution and Form of Agreement of Indemnification — July 21, 2004.		10-Q			6/30/2004			10(ii)
10(ii)		Chief Executive Officer Medical and Dental Benefits.		10-K			12/31/2010			10(jj)
10(jj)		Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors.		10-Q			3/31/2012			10(ll)
10(kk)		Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended.		10-K			12/31/2006			10(cc)
10(ll)		Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended.		10-K			12/31/2006			10(dd)
10(mm)		Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.		10-Q			3/31/2007			10(ee)
10(nn)		Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement.		10-Q			3/31/2008			10(ff)
10(oo)		Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement.		10-Q			3/31/2009			10(mm)
10(pp)		Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement.		8-K			5/7/2010			10.1
10(qq)		Potash Corporation of Saskatchewan Inc. 2011 Performance Option Plan and Form of Option Agreement.		8-K			5/13/2011			10(a)
10(rr)		Potash Corporation of Saskatchewan Inc. 2012 Performance Option Plan and Form of Option Agreement.		8-K			5/18/2012			10(a)
10(ss)		Potash Corporation of Saskatchewan Inc. 2013 Performance Option Plan and Form of Option Agreement		8-K			5/17/2013			10(a)
10(tt)		Medium-Term Incentive Plan of the registrant effective January 1, 2012.		10-K			12/31/2011			10(uu)
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.
95		Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.