Listed: TSX, NYSE Symbol: POT SASKATOON, SK, April 26
/PRNewswire-FirstCall/ -- With improved performance in nitrogen and
phosphate segments and increased income from global investments,
Potash Corporation of Saskatchewan Inc. (PotashCorp) today
announced record first-quarter earnings per share. Despite
significantly reduced potash shipments in the absence of a price
settlement with China, earnings rose to $1.19 per diluted share,
exceeding the $1.15 per share in the same period last year. These
first-quarter earnings were supplemented by a $12.3 million ($0.12
per share) cash tax recovery that more than offset additional costs
($0.08 per share) related to mine shutdowns, as we followed our
long-held strategy of matching supply to demand. Although net
income declined to $125.5 million from $131.3 million in the same
quarter last year, the rise in EPS reflected the value of a reduced
share base following the repurchase of 9.5 million shares during
2005. The temporary slowdown of our higher-margin potash business
affected total gross margin, which went from $258.5 million in last
year's first quarter to $203.5 million this year. Still, operating
cash flow before working capital changes of $189.4(1) million was
roughly equivalent quarter over quarter. Our investments in
Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile, Arab Potash
Company (APC) in Jordan and an increased dividend from Israel
Chemicals Ltd. (ICL) in Israel contributed to the $31.2 million of
other income for the quarter, which was up 56 percent over last
year's first quarter. The total market value of our investments in
these publicly traded companies, and in Sinochem Hong Kong Holdings
Limited (Sinofert) in China, equates to approximately $19.25 per
PotashCorp share and now exceeds their book value by $1.2 billion.
"The key to PotashCorp's strategy is not only are we a
three-nutrient company, but we understand how to maximize the value
of the best areas of each of the three nutrients," said PotashCorp
President and CEO Bill Doyle. "While long-term increases in potash
demand are inevitable, we know that growth doesn't always follow a
straight line up. By focusing on our unique advantages in Trinidad
nitrogen and in specialty phosphate products, we delivered record
per-share performance even as potash, the heart of our business,
took a breather. With our unique assets and our world-class
investments, we demonstrated our ability to deliver earnings growth
with reduced volatility." Market Conditions Potash demand remained
constrained as offshore and North American markets delayed
purchasing, awaiting the outcome of the Belarusian Potash Company
(BPC) negotiations with China. With a settlement not reached by the
end of the quarter, many offshore customers began buying to meet
their seasonal requirements. North American potash sales were
weaker than expected as a result of low crop commodity prices,
higher energy costs and uncertainty around planting decisions.
Dealers purchased cautiously in an attempt to end this fertilizer
season with no inventory. In nitrogen, supply/demand fundamentals
remained tight and ammonia prices stayed firm despite a drop in the
North American spot price for natural gas. Continuing high prices
for Western European gas led to ammonia production curtailments
and, along with higher ocean freight costs, caused Baltic producers
to send a larger percentage of their product to markets closer to
home. In phosphate, prices continued to climb for all products in
response to continuing high input costs and reasonably tight
supply/demand fundamentals. Potash As a result of reduced sales
volumes, potash gross margin of $90.8 million was substantially
lower than the $176.2 million in the first quarter of 2005.
PotashCorp took 32 mine shutdown weeks in response to the reduced
demand, which lowered production from 2.4 million tonnes to 1.3
million tonnes quarter over quarter and increased our costs.
Inventories of 1.15 million tonnes were flat from the end of the
fourth quarter of 2005, but higher than the abnormally low levels
at the end of the first quarter of that year. Offshore volumes were
down 48 percent from the first quarter of 2005, as shipments to
China, India and Brazil by Canpotex, the offshore marketing agent
for Saskatchewan potash producers, dropped from 1.18 million to
0.13 million tonnes. Volumes to many smaller potash-consuming
countries such as the Philippines, Taiwan, Vietnam, Ecuador and
Mexico were up from the same period last year. North American
volumes were 43 percent lower than in last year's first quarter.
Realized prices were up 8 percent for offshore sales and 25 percent
in North America quarter over quarter, including 1 percent and 3
percent, respectively, over the fourth quarter of 2005. Nitrogen
Nitrogen gross margin was up 22 percent from the same period last
year to $79.4 million, a first-quarter record and the third-highest
quarter ever. Trinidad contributed $50.4 million, or 63 percent of
this total. US nitrogen operations contributed $8.1 million in
gross margin. Total nitrogen sales volumes were down 17 percent
from last year's first quarter, as fertilizer volumes dropped 30
percent while US farmers waited to buy, hoping for lower prices. As
a result, we sold roughly 70 percent of our nitrogen volumes to our
stable industrial customer base. In total, ammonia and urea prices
were up 39 percent and 15 percent, respectively, over the same
period last year. Our average natural gas cost for the quarter,
including the benefit of our hedge and lower-cost Trinidad gas
contracts, was $4.34 per MMBtu, which was 17 percent higher than in
the first quarter of 2005 but 25 percent lower than in the fourth
quarter. In addition, we recognized $20.9 million of natural gas
hedge gains. This compared to $8.6 million of hedge gain recognized
in the same quarter last year. Phosphate Gross margin of $33.3
million marked the best first quarter for phosphate in seven years
and was almost double the $17.0 million in gross margin in last
year's first quarter. Feed phosphate provided $16.0 million of the
phosphate gross margin for the quarter, capitalizing on higher
prices even as volumes declined. Industrial products, long the
foundation of our phosphate business, added gross margin of $14.8
million. Within industrial, purified acid was again the most
profitable product, generating gross margin of $14.3 million, which
was 32 percent of net sales. Realized prices for solid phosphate
fertilizer climbed, but higher ammonia and sulfur costs diminished
margins. Feed phosphate volumes dropped 28 percent from the first
quarter of last year, but a 33-percent jump in prices produced the
higher margin. Industrial volumes rose 12 percent and prices 3
percent quarter over quarter. In solid fertilizer, volumes
increased 15 percent as our US spring season started strongly and
prices rose 13 percent from last year's first quarter. Liquid
fertilizer sales were up 4 percent quarter over quarter, with
realized prices increasing 13 percent. Financial In the first
quarter, we exercised our option to purchase a further
10.01-percent stake in Sinofert, the largest fertilizer company in
the People's Republic of China, investing $126.3 million to raise
our ownership to 20 percent. An additional $120.0 million was used
during the quarter for capital expenditures on property, plant and
equipment, including $53.3 million to bring back idled potash
capacity. Capacity expansions at our Trinidad 02 plant and the new
Aurora purified acid plant required $10.4 million and $8.4 million,
respectively. These investing activities were financed through our
short-term credit facilities. PotashCorp's consolidated effective
income tax rate for the first quarter was approximately 26 percent,
compared to 33 percent in the first quarter of 2005. This reduction
was due primarily to the receipt of a $12.3 million income tax
refund tied to 2002-2004 taxation years, brought about by a recent
Canadian appeals court decision in the case of a uranium producer.
Provincial mining and other taxes were 63 percent lower than in the
first quarter of 2005 due to the significant decrease in potash
gross margin. Outlook The world's potash market is well positioned
to regain its momentum. Most customers have worked through their
product supply, leaving available inventories in the hands of
producers. Shipments are expected to ramp up strongly partway
through the second quarter and continue at higher volumes through
the end of the year. However, due to the delay in reaching a
settlement on price with China, we are shutting down our Lanigan
and Allan mines for one week in May. Supply is being further
constrained by an illegal labor strike at APC in Jordan that began
on April 24, 2006, and there are reports of shutdowns at all three
of Silvinit's mines in Russia and curtailments at three of four
Belarus mines. After negotiations are completed, Canpotex shipments
to China for the remainder of the year are expected to approximate
the record volumes for all of 2005. Brazil is also expected to
purchase more vigorously in the second half, which is its spring
season, taking somewhere between the record tonnes of 2004 and the
reduced levels of 2005. The issues that slowed its 2005 purchases
are being resolved, as potash inventories are low, a significant
government aid package for farmers has been announced and the
Brazilian real, while still strong, has stabilized. India has
worked through its inventories and is currently negotiating new
potash price and volume contracts. We anticipate these negotiations
will conclude quickly, as we believe India's NPK producers are
short of potash. Southeast Asian countries are expected to continue
purchasing as a result of favorable growing conditions, lower
inventories and an increasing need for potash. An expected
favorable price settlement with China and lower dry bulk
ocean-freight rates should support higher realized potash prices
going forward. In North America, the spring season is now
strengthening, buoyed by improving corn prices, decent weather and
a need to catch up on potash applications after less was used last
fall. PotashCorp also benefits from the evolving global energy
story. Continuing high natural gas prices are a reality, not only
in the US but globally as well. The increase in gas prices in
Western and Eastern Europe, including Russia, is making our
Trinidad asset even more valuable. First, the tightening energy
supply has pushed up prices for natural gas, which increases the
profitability of our Trinidad nitrogen operation. It not only keeps
nitrogen product prices high, but expands our margins, given our
favorable gas contracts. In addition, as oil prices reach all-time
highs, ocean-going vessel bunker costs rise, and the proximity of
Trinidad to the US becomes increasingly important. These attributes
give us an excellent opportunity to capitalize on rising energy
costs. Secondly, the demand for ethanol and biofuels is rising.
These energy products are made from crops that are intensive users
of potash and other fertilizers. In Brazil, high fuel prices are
leading to a rapid expansion of sugar cane acreage - a crop that
uses over four times as much potash per hectare as soybeans in that
country. In the US, the escalating energy demand is strengthening
corn fundamentals by boosting consumption for ethanol production.
In other countries, increased oil crop production is required to
meet rising demand for biodiesel. This evolving shift to biofuels
is tightening supply/demand fundamentals and, in the short term, is
improving commodity prices for the crops involved. In the longer
term, it will require even greater crop yields, which should be
favorable for fertilizer consumption. Natural gas futures for the
next 12 months are trading at between $7 and $12 per MMBtu, which
is expected to drive continued strong financial performance of our
Trinidad asset. The debottlenecking of our Trinidad 02 plant was
completed in the first quarter, increasing its annual ammonia
production by 70,000 tonnes, or 17 percent. The 01 plant
debottleneck will be implemented during a three-week turnaround
starting in May 2006. The current market value of our total North
American 10-year gas hedge position is approximately $270 million.
Capital expenditures for 2006 are now expected to be $500 million.
Selling and administrative expenses in the second quarter of 2006
are expected to be similar to the same quarter last year. This is
again due to a non-cash expense associated with performance stock
options that, upon shareholder approval, are expected to be granted
in that quarter. However, our significant Saskatchewan potash
operations may allow us further benefits from potential federal and
provincial tax changes. Based on a $1.15 Canadian dollar,
PotashCorp is expecting second-quarter net income per share to be
in the range of $1.25 to $1.50 per diluted share and continues to
believe net income for the full year will be in the range of $5.25
to $6.25 per diluted share. Conclusion "The first quarter
demonstrated the value of our superior assets, our strategies
designed to capitalize on our strengths and the successful
execution of our plans. It was a testament to our belief that price
is more important than volumes," said Doyle. "We anticipate that
the remainder of the year will highlight our strength in potash.
Our first-quarter performance was achieved with our largest potash
customers on the sidelines. The lull in potash is very near its
end, and we are prepared to produce and deliver - for our customers
and our shareholders." Notes: ------ 1. See reconciliation and
description of non-GAAP measures in the attached section titled
"Selected Non-GAAP Measures and Reconciliations." Potash
Corporation of Saskatchewan Inc. is the world's largest fertilizer
enterprise producing the three primary plant nutrients and a
leading supplier to three distinct market categories: agriculture,
with the largest capacity in the world in potash, third largest in
phosphate and fourth largest in nitrogen; animal nutrition, with
the world's largest capacity in phosphate feed ingredients; and
industrial chemicals, as the largest global producer of industrial
nitrogen products and one of only three North American suppliers of
industrial phosphates. This release contains forward-looking
statements. These statements are based on certain factors and
assumptions as set forth in this release, including foreign
exchange rates, expected growth, results of operations, performance
and business prospects and opportunities. While the company
considers these factors and assumptions to be reasonable, based on
information currently available, they may prove to be incorrect. A
number of factors could cause actual results to differ materially
from those in the forward-looking statements, including, but not
limited to: fluctuations in supply and demand in fertilizer,
sulfur, transportation and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks
associated with natural gas and other hedging activities; changes
in capital markets; changes in currency and exchange rates;
unexpected geological or environmental conditions; and government
policy changes. Additional risks and uncertainties can be found in
our 2005 annual report to shareholders and in filings with the U.S.
Securities and Exchange Commission and Canadian provincial
securities commissions. Forward-looking statements are given only
as at the date of this release and the company disclaims any
obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
In the case of guidance, should subsequent events show that the
forward-looking statements released herein may be materially
off-target, the company will evaluate whether to issue and, if
appropriate following such review, issue a news release updating
guidance or explaining reasons for the difference.
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PotashCorp will host a conference call on Wednesday April 26, 2006,
at 11:00 a.m. Eastern Time. To join the call, dial (416) 644-3426
at least 10 minutes prior to the start time. Alternatively, visit
http://www.potashcorp.com/ for a live webcast of the conference
call in a listen-only mode. This news release is also available at
this same website. Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Financial Position (in
millions of US dollars except share amounts) (unaudited) March 31,
December 31, 2006 2005
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Assets Current assets Cash and cash equivalents $ 172.7 $ 93.9
Accounts receivable 390.0 453.3 Inventories 513.4 522.5 Prepaid
expenses and other current assets 68.1 41.1
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1,144.2 1,110.8 Property, plant and equipment 3,327.2 3,262.8 Other
assets (Note 2) 989.8 852.8 Intangible assets 33.9 34.5 Goodwill
97.0 97.0
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$ 5,592.1 $ 5,357.9
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Liabilities Current liabilities Short-term debt $ 604.9 $ 252.2
Accounts payable and accrued charges 591.4 842.7 Current portion of
long-term debt 1.2 1.2
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1,197.5 1,096.1 Long-term debt 1,257.3 1,257.6 Future income tax
liability 561.5 543.3 Accrued pension and other post-retirement
benefits 213.0 213.9 Accrued environmental costs and asset
retirement obligations 100.1 97.3 Other non-current liabilities and
deferred credits 15.3 17.2
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3,344.7 3,225.4
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Shareholders' Equity Share capital 1,383.0 1,379.3 Unlimited
authorization of common shares without par value; issued and
outstanding 103,672,170 and 103,593,792 at March 31, 2006 and
December 31, 2005, respectively Contributed surplus 37.3 36.3
Retained earnings 827.1 716.9
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2,247.4 2,132.5
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$ 5,592.1 $ 5,357.9
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Operations and Retained Earnings (in millions of US
dollars except per-share amounts) (unaudited) Three Months Ended
March 31 2006 2005
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Sales (Note 6) $ 861.6 $ 921.4 Less: Freight 54.9 67.2
Transportation and distribution 31.2 28.9 Cost of goods sold 572.0
566.8
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Gross Margin 203.5 258.5
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Selling and administrative 30.8 29.3 Provincial mining and other
taxes 14.2 38.4 Foreign exchange gain (2.4) (5.9) Other income
(Note 8) (31.2) (20.0)
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11.4 41.8
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Operating Income 192.1 216.7 Interest Expense 23.2 20.7
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Income Before Income Taxes 168.9 196.0 Income Taxes (Note 4) 43.4
64.7
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Net Income 125.5 131.3 Retained Earnings, Beginning of Period 716.9
701.5 Dividends (15.3) (16.8)
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Retained Earnings, End of Period $ 827.1 $ 816.0
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Net Income Per Share (Note 5) Basic $ 1.21 $ 1.18 Diluted $ 1.19 $
1.15
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Dividends Per Share $ 0.15 $ 0.15
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Condensed Consolidated
Statements of Cash Flow (in millions of US dollars) (unaudited)
Three Months Ended March 31 2006 2005
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Operating Activities Net income $ 125.5 $ 131.3
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Adjustments to reconcile net income to cash (used in) provided by
operating activities Depreciation and amortization 58.8 59.6
Stock-based compensation 1.5 1.0 Loss on disposal of long-term
assets 0.3 2.0 Foreign exchange on future income tax (0.2) (1.2)
Provision for future income tax 13.9 6.5 Undistributed earnings of
equity investees (12.4) (13.1) Other long-term liabilities 2.0 5.2
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Subtotal of adjustments 63.9 60.0
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Changes in non-cash operating working capital Accounts receivable
63.3 (63.5) Inventories 8.9 (1.7) Prepaid expenses and other
current assets (27.0) (6.2) Accounts payable and accrued charges
(247.1) 1.8
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Subtotal of changes in non-cash operating working capital (201.9)
(69.6)
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Cash (used in) provided by operating activities (12.5) 121.7
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Investing Activities Additions to property, plant and equipment
(120.0) (63.0) Purchase of long-term investments (126.3) - Proceeds
from disposal of property, plant and equipment 2.0 4.4 Proceeds
from sale of long-term investments - 5.2 Other assets and
intangible assets (4.5) 3.0
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Cash used in investing activities (248.8) (50.4)
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Cash before financing activities (261.3) 71.3
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Financing Activities Repayment of long-term debt obligations (0.3)
(0.2) Proceeds from short-term debt obligations 352.7 0.8 Dividends
(15.3) (16.5) Repurchase of common shares - (82.3) Issuance of
common shares 3.0 47.0
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Cash provided by (used in) financing activities 340.1 (51.2)
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Increase in Cash and Cash Equivalents 78.8 20.1 Cash and Cash
Equivalents, Beginning of Period 93.9 458.9
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Cash and Cash Equivalents, End of Period $ 172.7 $ 479.0
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Supplemental cash flow disclosure Interest paid $ 16.3 $ 11.2
Income taxes paid $ 142.0 $ 75.5
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc. Notes to the Condensed
Consolidated Financial Statements For the Three Months Ended March
31, 2006 (in millions of US dollars except share and per-share
amounts) (unaudited) 1. Significant Accounting Policies With its
subsidiaries, Potash Corporation of Saskatchewan Inc. ("PCS") -
together known as "PotashCorp" or "the company" except to the
extent the context otherwise requires - forms an integrated
fertilizer and related industrial and feed products company. The
company's accounting policies are in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). The
accounting policies used in preparing these interim condensed
consolidated financial statements are consistent with those used in
the preparation of the 2005 annual consolidated financial
statements, except as described below. These interim condensed
consolidated financial statements include the accounts of PCS and
its subsidiaries; however, they do not include all disclosures
normally provided in annual consolidated financial statements and
should be read in conjunction with the 2005 annual consolidated
financial statements. In management's opinion, the unaudited
financial statements include all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly such
information. Interim results are not necessarily indicative of the
results expected for the fiscal year. Implicit Variable Interests
In January 2006, the company adopted Emerging Issues Committee
Abstract No. 157, "Implicit Variable Interests Under AcG-15"
("EIC-157"). This EIC addresses whether a company has an implicit
variable interest in a VIE or potential VIE when specific
conditions exist. An implicit variable interest acts the same as an
explicit variable interest except that it involves the absorbing
and/or receiving of variability indirectly from the entity (rather
than directly). The identification of an implicit variable interest
is a matter of judgment that depends on the relevant facts and
circumstances. The implementation of this EIC did not have a
material impact on the company's condensed consolidated financial
statements. 2. Other Assets In February 2006, the company acquired
an additional 10.01-percent interest in the ordinary shares of
Sinochem Hong Kong Holdings Limited ("Sinofert") for cash
consideration of $126.3. The purchase price was financed by
short-term debt. The additional investment increased the company's
interest in Sinofert to 20 percent. In April 2006, the company
purchased an additional 220,100 shares of Arab Potash Company Inc.
("APC") for cash consideration of $3.7. The company's ownership
interest in APC is approximately 28 percent. 3. Plant Shutdowns -
2003 In 2003, the company indefinitely shut down its Memphis,
Tennessee plant and suspended production of certain products at its
Geismar, Louisiana facilities due to high US natural gas costs and
low product margins. The company recorded certain employee
termination costs and asset impairment charges in connection with
the shutdowns at that time. Management expects to incur other
shutdown-related costs of approximately $10.3 should applicable
facilities be dismantled, and nominal annual expenditures for site
security and other maintenance costs. The other shutdown-related
costs have not been recorded in the consolidated financial
statements as of March 31, 2006. Such costs will be recognized and
recorded in the period in which they are incurred. 4. Income Taxes
The company's consolidated effective income tax rate for the three
month period ended March 31, 2006 is approximately 26 percent (2005
- 33 percent). The reduction in the effective rate for the quarter
was due to the receipt of income tax refunds relating to a recent
Canadian appeals court decision in the case of a uranium producer.
The refunds related to the 2002-2004 taxation years. The company
also expects income tax refunds in connection with the 1999-2001
taxation years. These refunds are currently under review and have
not been reflected in these interim condensed consolidated
financial statements. In April 2006, the Province of Saskatchewan
announced changes to the corporation income tax and the capital tax
resource surcharge. The corporate income tax rate will be reduced
from 17 percent to 12 percent over the next three years, with a 3
percentage point reduction (to 14 percent) effective July 1, 2006
and further 1 percentage point reductions on July 1, 2007 and July
1, 2008. The capital tax resource surcharge will be reduced from
3.6 percent to 3.0 percent over this same period, with a reduction
to 3.3 percent on July 1, 2006, 3.1 percent on July 1, 2007 and 3.0
percent on July 1, 2008. The company would only recognize the
benefit of these announced changes should they become substantively
enacted. 5. Net Income Per Share Basic net income per share for the
quarter is calculated on the weighted average shares issued and
outstanding for the three months ended March 31, 2006 of
103,641,000 (2005 - 111,110,000). Diluted net income per share is
calculated based on the weighted average number of shares issued
and outstanding during the period. The denominator is: (i)
increased by the total of the additional common shares that would
have been issued assuming exercise of all stock options with
exercise prices at or below the average market price for the
period; and (ii) decreased by the number of shares that the company
could have repurchased if it had used the assumed proceeds from the
exercise of stock options to repurchase them on the open market at
the average share price for the period. The weighted average number
of shares outstanding for the diluted net income per share
calculation for the three months ended March 31, 2006 was
105,825,000 (2005 - 114,265,000). 6. Segment Information The
company has three reportable business segments: potash, nitrogen
and phosphate. These business segments are differentiated by the
chemical nutrient contained in the product that each produces.
Inter-segment sales are made under terms that approximate market
value. The accounting policies of the segments are the same as
those described in Note 1. Three Months Ended March 31, 2006
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All Consoli Potash Nitrogen Phosphate Others -dated
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Sales $ 225.8 $ 331.9 $ 303.9 $ - $ 861.6 Freight 25.0 9.6 20.3 -
54.9 Transportation and distribution 7.4 13.3 10.5 - 31.2 Net sales
- third party 193.4 309.0 273.1 - Cost of goods sold 102.6 229.6
239.8 - 572.0 Gross margin 90.8 79.4 33.3 - 203.5 Depreciation and
amortization 11.8 19.3 24.3 3.4 58.8 Inter-segment sales 4.0 31.9
2.2 - - Three Months Ended March 31, 2005
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All Consoli Potash Nitrogen Phosphate Others -dated
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Sales $ 352.1 $ 304.8 $ 264.5 $ - $ 921.4 Freight 37.2 10.2 19.8 -
67.2 Transportation and distribution 9.1 11.7 8.1 - 28.9 Net sales
- third party 305.8 282.9 236.6 - Cost of goods sold 129.6 217.6
219.6 - 566.8 Gross margin 176.2 65.3 17.0 - 258.5 Depreciation and
amortization 18.1 16.9 22.3 2.3 59.6 Inter-segment sales 2.0 19.8
4.2 - - 7. Pension and Other Post-Retirement Expenses Defined
Benefit Pension Plans Three Months Ended March 31
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2006 2005
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Service cost $ 3.6 $ 3.6 Interest cost 8.4 7.8 Expected return on
plan assets (9.6) (8.9) Net amortization 2.9 1.7
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Net expense $ 5.3 $ 4.2
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Other Post-Retirement Plans Three Months Ended March 31
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2006 2005
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Service cost $ 1.2 $ 1.4 Interest cost 3.0 3.3 Net amortization
(0.1) 0.4
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Net expense $ 4.1 $ 5.1
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For the three months ended March 31, 2006, the company contributed
$6.8 to its defined benefit pension plans, $6.0 to its defined
contribution pension plans and $2.1 to its other post-retirement
plans. Total 2006 contributions to these plans are not expected to
differ significantly from the amounts previously disclosed in the
consolidated financial statements for the year ended December 31,
2005. 8. Other Income Three Months Ended March 31
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2006 2005
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Share of earnings of equity investees $ 12.4 $ 13.1 Dividend income
9.1 3.1 Other 9.7 3.8
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$ 31.2 $ 20.0
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9. Comparative Figures Certain of the prior period's figures have
been reclassified to conform with the current period's
presentation. Potash Corporation of Saskatchewan Inc. Selected
Operating and Revenue Data (unaudited) Three Months Ended March 31
2006 2005
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Potash Operating Data Production (KCl Tonnes - thousands) 1,295
2,389 Shutdown weeks 31.7 - Sales (tonnes - thousands) North
America 527 922 Offshore 732 1,401
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1,259 2,323
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Potash Net Sales (US $ millions) Sales $ 225.8 $ 352.1 Less:
Freight 25.0 37.2 Transportation and distribution 7.4 9.1
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Net Sales $ 193.4 $ 305.8
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North America $ 91.9 $ 128.9 Offshore 97.2 172.8
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Potash Subtotal 189.1 301.7 Miscellaneous 4.3 4.1
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$ 193.4 $ 305.8
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Potash Average Net Sales Price per MT North America $ 174.31 $
139.86 Offshore $ 132.90 $ 123.35
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$ 150.24 $ 129.90
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Phosphate Operating Data Production (P2O5 Tonnes - thousands) 513
502 P2O5 Operating Rate 86% 80% Sales (tonnes - thousands)
Fertilizer - Liquid Phosphates 260 250 Fertilizer - Solid
Phosphates 377 327 Feed 165 230 Industrial 173 155
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975 962
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Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended March 31 2006 2005
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Phosphate Net Sales (US $ millions) Sales $ 303.9 $ 264.5 Less:
Freight 20.3 19.8 Transportation and distribution 10.5 8.1
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Net Sales $ 273.1 $ 236.6
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Fertilizer - Liquid Phosphates $ 61.9 $ 52.6 Fertilizer - Solid
Phosphates 93.1 71.3 Feed 52.3 55.1 Industrial 63.2 54.7
Miscellaneous 2.6 2.9
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$ 273.1 $ 236.6
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Phosphate Average Net Sales Price per MT Fertilizer - Liquid
Phosphates $ 238.13 $ 210.61 Fertilizer - Solid Phosphates $ 246.86
$ 217.89 Feed $ 317.20 $ 239.25 Industrial $ 364.04 $ 353.44
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$ 279.94 $ 245.87
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Nitrogen Operating Data Production (N Tonnes - thousands) 559 638
Average Natural Gas Cost per MMBtu $ 4.34 $ 3.72 Sales (tonnes -
thousands) Manufactured Product Ammonia 364 406 Urea 281 359
Nitrogen solutions/Nitric acid/Ammonium nitrate 382 450
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Manufactured Product 1,027 1,215 Purchased Product 54 93
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1,081 1,308
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Fertilizer sales tonnes 322 463 Feed/Industrial sales tonnes 759
845
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1,081 1,308
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Potash Corporation of Saskatchewan Inc. Selected Operating and
Revenue Data (unaudited) Three Months Ended March 31 2006 2005
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Nitrogen Net Sales (US $ millions) Sales $ 331.9 $ 304.8 Less:
Freight 9.6 10.2 Transportation and distribution 13.3 11.7
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Net Sales $ 309.0 $ 282.9
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Manufactured Product Ammonia $ 123.0 $ 98.9 Urea 81.4 90.3 Nitrogen
solutions/Nitric acid/Ammonium nitrate 81.0 65.2 Miscellaneous 6.6
5.3
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Net Sales Manufactured Product 292.0 259.7 Net Sales Purchased
Product 17.0 23.2
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$ 309.0 $ 282.9
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Fertilizer net sales $ 88.1 $ 105.8 Feed/Industrial net sales 220.9
177.1
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$ 309.0 $ 282.9
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Nitrogen Average Net Sales Price per MT Ammonia $ 337.69 $ 243.78
Urea $ 289.81 $ 251.43 Nitrogen solutions/Nitric acid/Ammonium
nitrate $ 211.96 $ 144.76
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Manufactured Product $ 284.19 $ 213.70 Purchased Product $ 316.85 $
250.68
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$ 285.81 $ 216.31
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Fertilizer average price per MT $ 273.66 $ 228.85 Feed/Industrial
average price per MT $ 290.97 $ 209.45
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$ 285.81 $ 216.31
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Exchange Rate (Cdn$/US$) 2006 2005
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December 31 1.1659 March 31 1.1671 1.2096 First-quarter average
conversion rate 1.1557 1.2280 Potash Corporation of Saskatchewan
Inc. Selected Non-GAAP Financial Measures and Reconciliations (in
millions of US dollars) (unaudited) The following information is
included for convenience only. Generally, a non-GAAP financial
measure is a numerical measure of a company's performance,
financial position or cash flows that either excludes or includes
amounts that are not normally excluded or included in the most
directly comparable measure calculated and presented in accordance
with generally accepted accounting principles ("GAAP"). EBITDA,
cash flow prior to working capital changes and free cash flow are
not measures of financial performance (nor do they have
standardized meanings) under either Canadian GAAP or US GAAP. In
evaluating these measures, investors should consider that the
methodology applied in calculating such measures may differ among
companies and analysts. The company uses both GAAP and certain
non-GAAP measures to assess performance. The company's management
believes these non-GAAP measures provide useful supplemental
information to investors in order that they may evaluate
PotashCorp's financial performance using the same measures as
management. PotashCorp's management believes that, as a result, the
investor is afforded greater transparency in assessing the
financial performance of the company. These non-GAAP financial
measures should not be considered as a substitute for, nor superior
to, measures of financial performance prepared in accordance with
GAAP. A. EBITDA ------ Set forth below is a reconciliation of
"EBITDA" to net income, the most directly comparable financial
measure calculated and presented in accordance with Canadian GAAP.
Three Months Ended March 31
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2006 2005
-------------------------------------------------------------------------
Net income $ 125.5 $ 131.3 Income taxes 43.4 64.7 Interest expense
23.2 20.7 Depreciation and amortization 58.8 59.6
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EBITDA $ 250.9 $ 276.3
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EBITDA is calculated as earnings before interest, income taxes,
depreciation and amortization. PotashCorp uses EBITDA as a
supplemental financial measure of its operational performance.
Management believes EBITDA to be an important measure as it
excludes the effects of items which primarily reflect the impact of
long-term investment decisions, rather than the performance of the
company's day-to-day operations. As compared to net income
according to GAAP, this measure is limited in that it does not
reflect the periodic costs of certain capitalized tangible and
intangible assets used in generating revenues in the company's
business. Management evaluates such items through other financial
measures such as capital expenditures and cash flow provided by
operating activities. The company believes that this measurement is
useful to measure a company's ability to service debt and to meet
other payment obligations or as a valuation measurement. Potash
Corporation of Saskatchewan Inc. Selected Non-GAAP Financial
Measures and Reconciliations (in millions of US dollars)
(unaudited) B. CASH FLOW --------- Set forth below is a
reconciliation of "cash flow prior to working capital changes" and
"free cash flow" to cash provided by operating activities, the most
directly comparable financial measure calculated and presented in
accordance with Canadian GAAP. Three Months Ended March 31
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2006 2005
-------------------------------------------------------------------------
Cash flow prior to working capital changes(1) $ 189.4 $ 191.3
-------------------------------------------------------------------------
Changes in non-cash operating working capital Accounts receivable
63.3 (63.5) Inventories 8.9 (1.7) Prepaid expenses and other
current assets (27.0) (6.2) Accounts payable and accrued charges
(247.1) 1.8
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Changes in non-cash operating working capital (201.9) (69.6)
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Cash (used in) provided by operating activities $ (12.5) $ 121.7
-------------------------------------------------------------------------
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Free cash flow(2) $ 64.9 $ 131.3 Additions to property, plant and
equipment 120.0 63.0 Other assets and intangible assets 4.5 (3.0)
Changes in non-cash operating working capital (201.9) (69.6)
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Cash (used in) provided by operating activities $ (12.5) $ 121.7
-------------------------------------------------------------------------
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(1) The company uses cash flow prior to working capital changes as
a supplemental financial measure in its evaluation of liquidity.
Management believes that adjusting principally for the swings in
non-cash working capital items due to seasonality assists
management in making long-term liquidity assessments. The company
also believes that this measurement is useful as a measure of
liquidity or as a valuation measurement. (2) The company uses free
cash flow as a supplemental financial measure in its evaluation of
liquidity and financial strength. Management believes that
adjusting principally for the swings in non-cash operating working
capital items due to seasonality, additions to property, plant and
equipment, and changes to other assets assists management in the
long-term assessment of liquidity and financial strength. The
company also believes that this measurement is useful as an
indicator of the company's ability to service its debt, meet other
payment obligations and make strategic investments. Readers should
be aware that free cash flow does not represent residual cash flow
available for discretionary expenditures. Certain of the prior
period's figures have been reclassified to conform with the current
period's presentation. DATASOURCE: Potash Corporation of
Saskatchewan Inc. CONTACT: Betty-Ann Heggie, Senior Vice President,
Corporate Relations, Phone: (306) 933-8521, Fax: (306) 933-8844,
E-mail: ; Web Site: http://www.potashcorp.com/
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