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, 2014
OR
¨
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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)
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Canada |
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N/A |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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122 1st Avenue South Saskatoon, Saskatchewan,
Canada (Address of principal executive offices) |
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S7K 7G3 (Zip Code) |
306-933-8500
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
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):
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Large accelerated filer þ |
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Accelerated filer ¨ |
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Non-accelerated filer ¨ |
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Smaller reporting company ¨ |
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(Do not check if a smaller reporting company) |
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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, 2014, Potash Corporation of Saskatchewan Inc. had 829,695,745 Common Shares outstanding.
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)
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As at |
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September 30, 2014 |
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December 31, 2013 |
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Assets |
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Current assets |
|
|
|
|
|
|
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Cash and cash equivalents |
|
$ |
152 |
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$ |
628 |
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Receivables |
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|
820 |
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|
752 |
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Inventories (Note 2) |
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690 |
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|
728 |
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Prepaid expenses and other current assets |
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58 |
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81 |
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1,720 |
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2,189 |
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Non-current assets |
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Property, plant and equipment |
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12,428 |
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12,233 |
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Investments in equity-accounted investees |
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1,230 |
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1,276 |
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Available-for-sale investments (Note 3) |
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1,490 |
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1,722 |
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Other assets |
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351 |
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401 |
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Intangible assets |
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142 |
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137 |
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Total Assets |
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$ |
17,361 |
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$ |
17,958 |
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Liabilities |
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Current liabilities |
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Short-term debt and current portion of long-term debt (Note 4) |
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$ |
980 |
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$ |
967 |
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Payables and accrued charges |
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|
948 |
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1,104 |
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Current portion of derivative instrument liabilities |
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49 |
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42 |
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1,977 |
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2,113 |
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Non-current liabilities |
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Long-term debt (Note 4) |
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3,212 |
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2,970 |
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Derivative instrument liabilities |
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107 |
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129 |
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Deferred income tax liabilities |
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2,150 |
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2,013 |
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Pension and other post-retirement benefit liabilities |
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422 |
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|
410 |
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Asset retirement obligations and accrued environmental costs |
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608 |
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557 |
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Other non-current liabilities and deferred credits |
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125 |
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138 |
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Total Liabilities |
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8,601 |
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8,330 |
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Shareholders Equity |
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Share capital (Note 5) |
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1,620 |
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1,600 |
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Contributed surplus |
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229 |
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219 |
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Accumulated other comprehensive income |
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495 |
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673 |
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Retained earnings |
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6,416 |
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7,136 |
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Total Shareholders Equity |
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8,760 |
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9,628 |
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Total Liabilities and Shareholders Equity |
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$ |
17,361 |
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$ |
17,958 |
|
(See Notes to the Condensed Consolidated Financial Statements)
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1 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Income
(in millions of US dollars except per-share and share amounts)
(unaudited)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
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2014 |
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2013 |
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2014 |
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2013 |
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Sales (Note 6) |
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$ |
1,641 |
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$ |
1,520 |
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$ |
5,213 |
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$ |
5,764 |
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Freight, transportation and distribution |
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(141 |
) |
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(139 |
) |
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(465 |
) |
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(435 |
) |
Cost of goods sold |
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(911 |
) |
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(897 |
) |
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(2,847 |
) |
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(2,999 |
) |
Gross Margin |
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589 |
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484 |
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1,901 |
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2,330 |
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Selling and administrative expenses |
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(49 |
) |
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(48 |
) |
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(172 |
) |
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(165 |
) |
Provincial mining and other taxes |
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(52 |
) |
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(10 |
) |
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(175 |
) |
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(154 |
) |
Share of earnings of equity-accounted investees |
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20 |
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57 |
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85 |
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174 |
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Dividend income |
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7 |
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31 |
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100 |
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85 |
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Impairment of available-for-sale investment (Note 3) |
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(38 |
) |
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Other income (expenses) |
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5 |
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(9 |
) |
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36 |
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(21 |
) |
Operating Income |
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520 |
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|
505 |
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1,737 |
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2,249 |
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Finance costs |
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(47 |
) |
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(33 |
) |
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(142 |
) |
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(107 |
) |
Income Before Income Taxes |
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473 |
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472 |
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1,595 |
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2,142 |
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Income taxes (Note 8) |
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(156 |
) |
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(116 |
) |
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(466 |
) |
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(587 |
) |
Net Income |
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$ |
317 |
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$ |
356 |
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$ |
1,129 |
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$ |
1,555 |
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Net Income per Share |
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Basic |
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$ |
0.38 |
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$ |
0.41 |
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$ |
1.34 |
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$ |
1.80 |
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Diluted |
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$ |
0.38 |
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$ |
0.41 |
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$ |
1.33 |
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$ |
1.77 |
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Dividends Declared per Share |
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$ |
0.35 |
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$ |
0.35 |
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$ |
1.05 |
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$ |
0.98 |
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Weighted Average Shares Outstanding |
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Basic |
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829,506,000 |
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866,108,000 |
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840,837,000 |
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865,707,000 |
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Diluted |
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835,835,000 |
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874,339,000 |
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847,429,000 |
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|
876,027,000 |
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(See Notes to the Condensed Consolidated Financial Statements)
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|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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2 |
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions of US dollars)
(unaudited)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
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(Net of related income taxes) |
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2014 |
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2013 |
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2014 |
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|
2013 |
|
Net Income |
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$ |
317 |
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$ |
356 |
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$ |
1,129 |
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$ |
1,555 |
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Other comprehensive loss |
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Items that will not be reclassified to net income: |
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Net actuarial gain on defined benefit plans (1) |
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150 |
|
Items that have been or may be subsequently reclassified to net income: |
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Available-for-sale investments (2) |
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Net fair value loss during the period |
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(229 |
) |
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(267 |
) |
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(194 |
) |
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(737 |
) |
Cash flow hedges |
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Net fair value loss during the period (3) |
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(6 |
) |
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(7 |
) |
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Reclassification to income of net loss (4) |
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|
7 |
|
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|
6 |
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|
|
20 |
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|
|
25 |
|
Other |
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(1 |
) |
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3 |
|
|
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3 |
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1 |
|
Other Comprehensive Loss |
|
|
(229 |
) |
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(258 |
) |
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(178 |
) |
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(561 |
) |
Comprehensive Income |
|
$ |
88 |
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$ |
98 |
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$ |
951 |
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$ |
994 |
|
(1) |
Net of income taxes of $NIL (2013 $NIL) for the three months ended September 30, 2014 and $NIL (2013 $(87)) for the nine months ended
September 30, 2014. |
(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 $3 (2013 $NIL) for the three months ended
September 30, 2014 and $4 (2013 $NIL) for the nine months ended September 30, 2014. |
(4) |
Net of income taxes of $(3) (2013 $(4)) for the three months ended September 30, 2014 and $(11) (2013 $(14)) for the nine months ended
September 30, 2014. |
(See Notes to the Condensed Consolidated Financial Statements)
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3 |
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Cash Flow
(in millions of US dollars)
(unaudited)
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Three Months Ended September 30 |
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Nine Months Ended September 30 |
|
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|
2014
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|
2013
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|
2014
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|
2013
|
|
Operating Activities |
|
|
|
|
|
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|
|
|
|
|
|
|
|
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Net income |
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$ |
317 |
|
|
$ |
356 |
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|
$ |
1,129 |
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|
$ |
1,555 |
|
Adjustments to reconcile net income to cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Depreciation and amortization |
|
|
161 |
|
|
|
149 |
|
|
|
519 |
|
|
|
489 |
|
Share-based compensation |
|
|
3 |
|
|
|
4 |
|
|
|
22 |
|
|
|
25 |
|
Net distributed (undistributed) earnings of equity-accounted investees |
|
|
54 |
|
|
|
(55 |
) |
|
|
51 |
|
|
|
(62 |
) |
Impairment of available-for-sale investment (Note 3) |
|
|
|
|
|
|
|
|
|
|
38 |
|
|
|
|
|
Provision for deferred income tax |
|
|
32 |
|
|
|
58 |
|
|
|
142 |
|
|
|
311 |
|
Pension and other post-retirement benefits |
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2 |
|
|
|
12 |
|
|
|
23 |
|
|
|
(10 |
) |
Asset retirement obligations and accrued environmental costs |
|
|
7 |
|
|
|
(12 |
) |
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|
16 |
|
|
|
(16 |
) |
Other long-term liabilities and miscellaneous |
|
|
7 |
|
|
|
6 |
|
|
|
10 |
|
|
|
69 |
|
Subtotal of adjustments |
|
|
266 |
|
|
|
162 |
|
|
|
821 |
|
|
|
806 |
|
Changes in non-cash operating working capital |
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Receivables |
|
|
24 |
|
|
|
96 |
|
|
|
(80 |
) |
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|
162 |
|
Inventories |
|
|
7 |
|
|
|
(12 |
) |
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|
24 |
|
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|
29 |
|
Prepaid expenses and other current assets |
|
|
(6 |
) |
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|
(17 |
) |
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|
21 |
|
|
|
(4 |
) |
Payables and accrued charges |
|
|
(34 |
) |
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|
31 |
|
|
|
(14 |
) |
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|
8 |
|
Subtotal of changes in non-cash operating working capital |
|
|
(9 |
) |
|
|
98 |
|
|
|
(49 |
) |
|
|
195 |
|
Cash provided by operating activities |
|
|
574 |
|
|
|
616 |
|
|
|
1,901 |
|
|
|
2,556 |
|
Investing Activities |
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|
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|
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|
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Additions to property, plant and equipment |
|
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(303 |
) |
|
|
(360 |
) |
|
|
(726 |
) |
|
|
(1,210 |
) |
Other assets and intangible assets |
|
|
(2 |
) |
|
|
2 |
|
|
|
(12 |
) |
|
|
(8 |
) |
Cash used in investing activities |
|
|
(305 |
) |
|
|
(358 |
) |
|
|
(738 |
) |
|
|
(1,218 |
) |
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt obligations |
|
|
|
|
|
|
|
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|
737 |
|
|
|
|
|
Repayment of and finance costs on long-term debt obligations |
|
|
|
|
|
|
|
|
|
|
(500 |
) |
|
|
(254 |
) |
Proceeds from (repayment of) short-term debt obligations |
|
|
55 |
|
|
|
113 |
|
|
|
14 |
|
|
|
(256 |
) |
Dividends |
|
|
(281 |
) |
|
|
(290 |
) |
|
|
(857 |
) |
|
|
(700 |
) |
Repurchase of common shares |
|
|
|
|
|
|
(166 |
) |
|
|
(1,065 |
) |
|
|
(166 |
) |
Issuance of common shares |
|
|
2 |
|
|
|
10 |
|
|
|
32 |
|
|
|
31 |
|
Cash used in financing activities |
|
|
(224 |
) |
|
|
(333 |
) |
|
|
(1,639 |
) |
|
|
(1,345 |
) |
Increase (Decrease) in Cash and Cash Equivalents |
|
|
45 |
|
|
|
(75 |
) |
|
|
(476 |
) |
|
|
(7 |
) |
Cash and Cash Equivalents, Beginning of Period |
|
|
107 |
|
|
|
630 |
|
|
|
628 |
|
|
|
562 |
|
Cash and Cash Equivalents, End of Period |
|
$ |
152 |
|
|
$ |
555 |
|
|
$ |
152 |
|
|
$ |
555 |
|
Cash and cash equivalents comprised of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
63 |
|
|
$ |
59 |
|
|
$ |
63 |
|
|
$ |
59 |
|
Short-term investments |
|
|
89 |
|
|
|
496 |
|
|
|
89 |
|
|
|
496 |
|
|
|
$ |
152 |
|
|
$ |
555 |
|
|
$ |
152 |
|
|
$ |
555 |
|
Supplemental cash flow disclosure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
40 |
|
|
$ |
23 |
|
|
$ |
132 |
|
|
$ |
123 |
|
Income taxes paid |
|
$ |
122 |
|
|
$ |
6 |
|
|
$ |
292 |
|
|
$ |
113 |
|
(See Notes to the Condensed Consolidated Financial Statements)
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
4 |
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Changes in Equity
(in millions of US dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
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, 2013 |
|
$ |
1,600 |
|
|
$ |
219 |
|
|
$ |
780 |
|
|
$ |
(105 |
) |
|
$ |
|
(2) |
|
$ |
(2 |
) |
|
$ |
673 |
|
|
$ |
7,136 |
|
|
$ |
9,628 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,129 |
|
|
|
1,129 |
|
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
(194 |
) |
|
|
13 |
|
|
|
|
|
|
|
3 |
|
|
|
(178 |
) |
|
|
|
|
|
|
(178 |
) |
Share repurchase (Note 5) |
|
|
(53 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(976 |
) |
|
|
(1,031 |
) |
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(873 |
) |
|
|
(873 |
) |
Effect of share-based compensation including issuance of common shares |
|
|
43 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 |
|
Shares issued for dividend reinvestment plan |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
|
Balance September 30, 2014 |
|
$ |
1,620 |
|
|
$ |
229 |
|
|
$ |
586 |
|
|
$ |
(92 |
) |
|
$ |
|
(2) |
|
$ |
1 |
|
|
$ |
495 |
|
|
$ |
6,416 |
|
|
$ |
8,760 |
|
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 |
|
(1) |
All equity transactions were attributable to common shareholders. |
(2) |
Any amounts incurred during a period are 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 2014 Third Quarter Quarterly Report on Form 10-Q |
Potash Corporation of Saskatchewan Inc.
Notes to the Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2014
(in millions of US dollars
except as otherwise noted)
(unaudited)
1. Significant Accounting Policies
Basis of Presentation
With its subsidiaries, Potash Corporation of Saskatchewan Inc. (PCS)
together known as PotashCorp or the company except to the extent the context otherwise requires forms an integrated fertilizer and related industrial and feed products company. These unaudited interim condensed
consolidated financial statements are based on International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), and have been prepared in accordance with International Accounting Standard
(IAS) 34, Interim Financial Reporting. The accounting policies and methods of computation used in preparing these unaudited interim condensed consolidated financial statements are consistent with those used in the preparation
of the companys 2013 annual consolidated financial statements, except as described below.
These unaudited 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 companys 2013 annual consolidated financial statements. In managements opinion, the
unaudited interim condensed consolidated financial statements include all adjustments necessary to fairly present such information. Interim results are not necessarily indicative of the results expected for the fiscal year.
These unaudited interim condensed consolidated financial statements were authorized by the audit committee of the Board of Directors for issue on October 28,
2014.
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 by the company.
|
|
|
|
|
Standard |
|
Description |
|
Impact |
Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities |
|
Issued as part of the IASBs offsetting project, amendments clarify certain items regarding offsetting financial assets and financial
liabilities. |
|
Adopted retrospectively effective January 1, 2014 with no change to the companys consolidated financial statements. |
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 CGU. |
|
Adopted retrospectively effective January 1, 2014 with no change to the companys consolidated financial statements. |
IFRIC 21, Levies |
|
Provides guidance on when to recognize a liability for a levy imposed by a government. |
|
Adopted retrospectively effective January 1, 2014 with no change to the companys consolidated financial statements. |
Amendments to IAS 19, Employee Benefits |
|
Issued to simplify the accounting for employee or third-party contributions to defined benefit plans that are independent of the number of years
of employee service. |
|
Adopted retrospectively effective July 1, 2014 with no change to the companys 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, 2014. The company does not anticipate early adoption of these standards at this time.
|
|
|
|
|
|
|
Standard |
|
Description |
|
Impact |
|
Effective Date (1) |
Amendments to IAS 16, Property, Plant and Equipment and IAS 38, Intangible Assets |
|
Issued to clarify acceptable methods of depreciation and amortization. |
|
The company is reviewing the standard to determine the potential impact, if any; however, no significant impact is anticipated. |
|
January 1, 2016, applied prospectively. |
Amendments to IFRS 11, Joint Arrangements |
|
Issued to provide additional guidance on accounting for the acquisition of an interest in a joint operation. |
|
The company is reviewing the standard to determine the potential impact, if any; however, no significant impact is anticipated. |
|
January 1, 2016, applied prospectively. |
(1) |
Effective date for annual periods beginning on or after the stated date. |
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
6 |
|
|
|
|
|
|
|
Standard |
|
Description |
|
Impact |
|
Effective Date (1) |
IFRS 15, Revenue From Contracts With Customers |
|
Issued to provide guidance on the recognition of revenue from contracts with customers including multiple-element arrangements and transactions
not previously addressed comprehensively, and enhance disclosures about revenue. |
|
The company is reviewing the standard to determine the potential impact, if any. |
|
January 1, 2017, applied retrospectively with certain limitations. |
IFRS 9, Financial Instruments |
|
Issued to replace IAS 39, providing guidance on the classification, measurement and disclosure of financial instruments and introducing a new
hedge accounting model. |
|
The company is reviewing the standard to determine the potential impact, if any. |
|
January 1, 2018, applied retrospectively with certain exceptions. |
(1) |
Effective date for annual periods beginning on or after the stated date. |
2. Inventories
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
Finished products |
|
$ |
307 |
|
|
$ |
340 |
|
Intermediate products |
|
|
79 |
|
|
|
85 |
|
Raw materials |
|
|
93 |
|
|
|
101 |
|
Materials and supplies |
|
|
211 |
|
|
|
202 |
|
|
|
$ |
690 |
|
|
$ |
728 |
|
3. Available-for-Sale Investments
The company assesses at the end of each reporting period whether there is objective evidence of impairment. A significant or prolonged decline in the fair value of the investment below its cost would be evidence
that the asset is impaired. If objective evidence of impairment exists, the impaired amount (i.e., the unrealized loss) is recognized in net income; any subsequent reversals would be recognized in other comprehensive income (OCI) and
would not flow back into net income. Any subsequent decline in fair value below the carrying amount at the impairment date would represent a further impairment to be recognized in net income.
During 2012, the company concluded its investment in Sinofert Holdings Limited (Sinofert) was impaired due to the significance by which fair value was below cost. As a result, an impairment loss of $341
was recognized in net income during 2012. At March 31, 2014, the company concluded its investment in Sinofert was further impaired due to the fair value declining below the carrying amount of $238 at the previous impairment date. As a result,
an impairment loss of $38 was recognized in net income during the three months ended March 31, 2014. The fair value was determined through the market value of Sinofert shares on the Hong Kong Stock Exchange.
Changes in fair value, and related accounting, for the companys investment in Sinofert since December 31, 2013 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Unrealized Loss on: |
|
|
|
Fair Value |
|
|
Unrealized
Loss |
|
|
OCI and AOCI |
|
|
Net Income and Retained Earnings |
|
Balance December 31, 2013 |
|
$ |
254 |
|
|
$ |
(325 |
) |
|
$ |
16 |
|
|
$ |
(341 |
) |
Decrease in fair value and recognition of impairment |
|
|
(54 |
) |
|
|
(54 |
) |
|
|
(16 |
) |
|
|
(38 |
) |
Balance March 31, 2014 |
|
$ |
200 |
|
|
$ |
(379 |
) |
|
$ |
|
|
|
$ |
(379 |
) |
Increase in fair value subsequent to recognition of impairment |
|
|
10 |
|
|
|
10 |
|
|
|
10 |
|
|
|
|
|
Balance June 30, 2014 |
|
$ |
210 |
|
|
$ |
(369 |
) |
|
$ |
10 |
|
|
$ |
(379 |
) |
Increase in fair value subsequent to recognition of impairment |
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
|
|
|
|
Balance September 30, 2014 |
|
$ |
221 |
|
|
$ |
(358 |
) |
|
$ |
21 |
|
|
$ |
(379 |
) |
|
|
|
7 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
4. Long-Term Debt
On March 7, 2014, the company closed the issuance of $750 of 3.625 percent senior notes due March 15, 2024. The senior notes were issued under a US shelf registration statement.
On March 7, 2014, the company issued a notice of redemption for all of its outstanding $500 of 5.250 percent senior notes due May 15, 2014. On
April 7, 2014, the company completed the redemption of all $500 of the senior notes at a redemption price of 100.497 percent of the principal amount of the notes redeemed plus accrued interest.
During the third quarter of 2014, the company classified as current the $500 aggregate principal amount of 3.750 percent senior notes due September 30, 2015.
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. The first preferred shares may be issued in one or more series with rights and conditions to be determined by the Board of Directors. No first preferred shares have been issued.
Issued
|
|
|
|
|
|
|
|
|
|
|
Number of Common Shares |
|
|
Consideration |
|
Balance December 31, 2013 |
|
|
856,116,325 |
|
|
$ |
1,600 |
|
Issued under option plans |
|
|
1,929,900 |
|
|
|
43 |
|
Issued for dividend reinvestment plan |
|
|
850,412 |
|
|
|
30 |
|
Repurchased |
|
|
(29,200,892 |
) |
|
|
(53 |
) |
Balance September 30, 2014 |
|
|
829,695,745 |
|
|
$ |
1,620 |
|
Share Repurchase Program
On
July 24, 2013, the companys Board of Directors authorized a share repurchase program of up to 5 percent of PotashCorps outstanding common shares (up to $2,000 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 were dependent upon the availability and
alternative uses of capital, market conditions, applicable US and Canadian regulations and other factors. The company completed the repurchase program by June 30, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Common shares repurchased for cancellation |
|
|
NIL |
|
|
|
6,300,000 |
|
|
|
29,200,892 |
|
|
|
6,300,000 |
|
Average price per share |
|
$ |
|
|
|
$ |
30.95 |
|
|
$ |
35.31 |
|
|
$ |
30.95 |
|
Repurchase resulted in a reduction of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
$ |
|
|
|
$ |
11 |
|
|
$ |
53 |
|
|
$ |
11 |
|
Contributed surplus (1) |
|
|
|
|
|
|
79 |
|
|
|
2 |
|
|
|
79 |
|
Retained earnings (1) |
|
|
|
|
|
|
105 |
|
|
|
976 |
|
|
|
105 |
|
Total cost |
|
$ |
|
|
|
$ |
195 |
|
|
$ |
1,031 |
|
|
$ |
195 |
|
(1) |
The excess of net cost over the average book value of the shares. |
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
8 |
6. Segment Information
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 and are measured in a manner consistent with that of the financial statements. The
companys 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2014 |
|
|
|
Potash |
|
|
Nitrogen |
|
|
Phosphate |
|
|
All Others |
|
|
Consolidated |
|
Sales third party |
|
$ |
633 |
|
|
$ |
562 |
|
|
$ |
446 |
|
|
$ |
|
|
|
$ |
1,641 |
|
Freight, transportation and distribution third party |
|
|
(64 |
) |
|
|
(30 |
) |
|
|
(47 |
) |
|
|
|
|
|
|
(141 |
) |
Net sales third party |
|
|
569 |
|
|
|
532 |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
Cost of goods sold third party |
|
|
(274 |
) |
|
|
(314 |
) |
|
|
(323 |
) |
|
|
|
|
|
|
(911 |
) |
Margin (cost) on inter-segment sales (1) |
|
|
|
|
|
|
15 |
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
Gross margin |
|
|
295 |
|
|
|
233 |
|
|
|
61 |
|
|
|
|
|
|
|
589 |
|
Depreciation and amortization in cost of goods sold |
|
|
(48 |
) |
|
|
(42 |
) |
|
|
(66 |
) |
|
|
|
|
|
|
(156 |
) |
Assets |
|
|
9,452 |
|
|
|
2,282 |
|
|
|
2,403 |
|
|
|
3,224 |
|
|
|
17,361 |
|
Cash flows for additions to property, plant and equipment |
|
|
138 |
|
|
|
94 |
|
|
|
65 |
|
|
|
6 |
|
|
|
303 |
|
(1) |
Inter-segment net sales were $25. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2013 |
|
|
|
Potash |
|
|
Nitrogen |
|
|
Phosphate |
|
|
All Others |
|
|
Consolidated |
|
Sales third party |
|
$ |
539 |
|
|
$ |
493 |
|
|
$ |
488 |
|
|
$ |
|
|
|
$ |
1,520 |
|
Freight, transportation and distribution third party |
|
|
(57 |
) |
|
|
(26 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(139 |
) |
Net sales third party |
|
|
482 |
|
|
|
467 |
|
|
|
432 |
|
|
|
|
|
|
|
|
|
Cost of goods sold third party |
|
|
(254 |
) |
|
|
(304 |
) |
|
|
(339 |
) |
|
|
|
|
|
|
(897 |
) |
Margin (cost) on inter-segment sales (1) |
|
|
|
|
|
|
15 |
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
Gross margin |
|
|
228 |
|
|
|
178 |
|
|
|
78 |
|
|
|
|
|
|
|
484 |
|
Depreciation and amortization in cost of goods sold |
|
|
(36 |
) |
|
|
(41 |
) |
|
|
(69 |
) |
|
|
|
|
|
|
(146 |
) |
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 |
|
(1) |
Inter-segment net sales were $31. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2014 |
|
|
|
Potash |
|
|
Nitrogen |
|
|
Phosphate |
|
|
All Others |
|
|
Consolidated |
|
Sales third party |
|
$ |
2,051 |
|
|
$ |
1,799 |
|
|
$ |
1,363 |
|
|
$ |
|
|
|
$ |
5,213 |
|
Freight, transportation and distribution third party |
|
|
(229 |
) |
|
|
(89 |
) |
|
|
(147 |
) |
|
|
|
|
|
|
(465 |
) |
Net sales third party |
|
|
1,822 |
|
|
|
1,710 |
|
|
|
1,216 |
|
|
|
|
|
|
|
|
|
Cost of goods sold third party |
|
|
(832 |
) |
|
|
(979 |
) |
|
|
(1,036 |
) |
|
|
|
|
|
|
(2,847 |
) |
Margin (cost) on inter-segment sales (1) |
|
|
|
|
|
|
45 |
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
Gross margin |
|
|
990 |
|
|
|
776 |
|
|
|
135 |
|
|
|
|
|
|
|
1,901 |
|
Depreciation and amortization in cost of goods sold |
|
|
(165 |
) |
|
|
(128 |
) |
|
|
(234 |
) |
|
|
|
|
|
|
(527 |
) |
Assets |
|
|
9,452 |
|
|
|
2,282 |
|
|
|
2,403 |
|
|
|
3,224 |
|
|
|
17,361 |
|
Cash flows for additions to property, plant and equipment |
|
|
365 |
|
|
|
209 |
|
|
|
141 |
|
|
|
11 |
|
|
|
726 |
|
(1) |
Inter-segment net sales were $83. |
|
|
|
9 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2013 |
|
|
|
Potash |
|
|
Nitrogen |
|
|
Phosphate |
|
|
All Others |
|
|
Consolidated |
|
Sales third party |
|
$ |
2,399 |
|
|
$ |
1,781 |
|
|
$ |
1,584 |
|
|
$ |
|
|
|
$ |
5,764 |
|
Freight, transportation and distribution third party |
|
|
(196 |
) |
|
|
(78 |
) |
|
|
(161 |
) |
|
|
|
|
|
|
(435 |
) |
Net sales third party |
|
|
2,203 |
|
|
|
1,703 |
|
|
|
1,423 |
|
|
|
|
|
|
|
|
|
Cost of goods sold third party |
|
|
(858 |
) |
|
|
(1,018 |
) |
|
|
(1,123 |
) |
|
|
|
|
|
|
(2,999 |
) |
Margin (cost) on inter-segment sales (1) |
|
|
|
|
|
|
40 |
|
|
|
(40 |
) |
|
|
|
|
|
|
|
|
Gross margin |
|
|
1,345 |
|
|
|
725 |
|
|
|
260 |
|
|
|
|
|
|
|
2,330 |
|
Depreciation and amortization in cost of goods sold |
|
|
(137 |
) |
|
|
(121 |
) |
|
|
(214 |
) |
|
|
|
|
|
|
(472 |
) |
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 |
|
(1) |
Inter-segment net sales were $111. |
7. Share-Based Compensation
On May 15, 2014, the companys shareholders approved the 2014
Performance Option Plan under which the company may, after February 20, 2014 and before January 1, 2015, grant options to acquire up to 3,500,000 common shares. Under the plan, the exercise price shall not be less than the quoted market
closing price of the companys common shares on the last trading day immediately preceding the date of the grant, and an options 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 companys consolidated cash flow return on investment over weighted average cost of capital. As of September 30, 2014, options to purchase a total of 2,547,900 common shares had been granted under the plan.
The weighted average fair value of options granted was $9.42 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 |
|
$ |
37.15 |
|
Expected annual dividend per share |
|
$ |
1.40 |
|
Expected volatility |
|
|
39% |
|
Risk-free interest rate |
|
|
1.67% |
|
Expected life of options |
|
|
5.4 years |
|
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 |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Income tax expense |
|
$ |
156 |
|
|
$ |
116 |
|
|
$ |
466 |
|
|
$ |
587 |
|
Actual effective tax rate on ordinary earnings |
|
|
28% |
|
|
|
25% |
|
|
|
27% |
|
|
|
26% |
|
Actual effective tax rate including discrete items |
|
|
33% |
|
|
|
25% |
|
|
|
29% |
|
|
|
27% |
|
Discrete tax adjustments that impacted the tax rate |
|
$ |
25 |
|
|
$ |
|
|
|
$ |
21 |
|
|
$ |
37 |
|
Significant items to note include the following:
|
|
The actual effective tax rate on ordinary earnings for the three and nine months ended September 30, 2014 increased compared to the same periods last year
due to different income weightings between jurisdictions. |
|
|
In third-quarter 2014, a deferred tax expense of $11 was recorded as a result of a Chilean income tax rate increase. |
|
|
In first-quarter 2014, a non-tax deductible impairment of the companys available-for-sale investment in Sinofert was recorded. This increased the actual
effective tax rate including discrete items for the nine months ended September 30, 2014 by 1 percent. |
|
|
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.
|
|
|
In second-quarter 2013, a deferred tax expense of $11 was recorded as a result of a Canadian income tax rate increase. |
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
10 |
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, 2014 |
|
|
December 31, 2013 |
|
Current income tax assets |
|
|
|
|
|
|
|
|
|
|
Current |
|
Receivables |
|
$ |
70 |
|
|
$ |
90 |
|
Non-current |
|
Other assets |
|
|
112 |
|
|
|
126 |
|
Deferred income tax assets |
|
Other assets |
|
|
8 |
|
|
|
21 |
|
Total income tax assets |
|
|
|
$ |
190 |
|
|
$ |
237 |
|
Current income tax liabilities |
|
|
|
|
|
|
|
|
|
|
Current |
|
Payables and accrued charges |
|
$ |
(13 |
) |
|
$ |
(3 |
) |
Non-current |
|
Other non-current liabilities and deferred credits |
|
|
(122 |
) |
|
|
(135 |
) |
Deferred income tax liabilities |
|
Deferred income tax liabilities |
|
|
(2,150 |
) |
|
|
(2,013 |
) |
Total income tax liabilities |
|
|
|
$ |
(2,285 |
) |
|
$ |
(2,151 |
) |
9. 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 arms-length transaction between knowledgeable willing parties. The valuation policies and procedures for financial reporting purposes are determined by the companys finance department.
Financial instruments included in the consolidated statements of financial position are measured either at fair value or amortized cost. The tables
below explain the valuation methods used to determine the fair value of each financial instrument and its associated level in the fair value hierarchy.
|
|
|
Financial Instruments Measured at Fair Value |
|
Fair Value Method |
Cash and cash equivalents |
|
Approximated carrying value. |
Investments in Israel Chemicals Ltd. (ICL) and Sinofert designated as available-for-sale |
|
Based on the closing bid price of the common shares (Level 1) as of the statements of financial position
dates. |
Foreign currency derivatives not traded in an active market |
|
Determined using quoted forward exchange rates (Level 2) at the statements of financial position dates. |
Natural gas swaps not traded in an active market |
|
Based on a discounted cash flow model. The inputs used in the model included contractual cash flows based on prices for
natural gas futures contracts, fixed prices and notional volumes specified by the swap contracts, the time value of money, liquidity risk, the companys own credit risk (related to instruments in a liability position) and counterparty credit
risk (related to instruments in an asset position). Certain of the futures contract prices used as inputs in the model were supported by prices quoted in an active market (Level 2) and others were not based on observable market data (Level 3). For
valuations that included both observable and unobservable data, if the unobservable input was determined to be significant to the overall inputs, the entire valuation was categorized in Level 3. |
|
|
|
11 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
For natural gas swaps, the primary input into the valuation model was natural gas futures prices, which were based on
delivery at the Henry Hub and were observable only for up to three years in the future. The unobservable futures price range at September 30, 2014 was $4.15 to $5.01 per MMBtu (December 31, 2013 $4.00 to $4.54 per MMBtu).
Changes in the unobservable natural gas futures prices would not result in significantly higher or lower fair values as any price change would be counterbalanced by offsetting derivative positions for the majority of the companys derivatives.
Interest rates used to discount estimated cash flows at September 30, 2014 were between 0.15 percent and 3.69 percent (December 31, 2013 between 0.17 percent and 3.59 percent) depending on the settlement
date.
|
|
|
Financial Instruments Measured at Amortized Cost |
|
Fair Value Method |
Receivables, short-term debt and payables and accrued charges |
|
Assumed to approximate carrying value due to their short-term nature. |
Long-term debt senior notes |
|
Quoted market prices (Level 1 or 2 depending on the market liquidity of the debt). |
Other long-term debt instruments |
|
Assumed to approximate carrying value. |
Presented below is a comparison of the fair value of the companys senior notes to their carrying values.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
Carrying Amount of Liability |
|
|
Fair Value of Liability |
|
|
Carrying Amount of
Liability |
|
|
Fair Value of
Liability |
|
Long-term debt senior notes |
|
$ |
3,750 |
|
|
$ |
4,152 |
|
|
$ |
3,500 |
|
|
$ |
3,791 |
|
The following table presents the companys 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, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instrument assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas derivatives |
|
$ |
10 |
|
|
$ |
|
|
|
$ |
(7 |
) |
|
$ |
17 |
|
Investments in ICL and Sinofert |
|
|
1,490 |
|
|
|
1,490 |
|
|
|
|
|
|
|
|
|
Derivative instrument liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas derivatives |
|
|
(152 |
) |
|
|
|
|
|
|
(25 |
) |
|
|
(127 |
) |
Foreign currency derivatives |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instrument assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas derivatives |
|
$ |
8 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8 |
|
Investments in ICL and Sinofert |
|
|
1,722 |
|
|
|
1,722 |
|
|
|
|
|
|
|
|
|
Derivative instrument liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas derivatives |
|
|
(170 |
) |
|
|
|
|
|
|
(21 |
) |
|
|
(149 |
) |
Foreign currency derivatives |
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
(1) |
During the nine months ended September 30, 2014 and twelve months ended December 31, 2013, there were no transfers between Level 1 and Level 2.
|
(2) |
During the nine months ended September 30, 2014, there were no transfers into Level 3 and $19 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. During the twelve months ended December 31, 2013, there were no transfers into Level 3 and $14 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 companys policy is to recognize transfers at the end of the reporting period.
|
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
12 |
The following table presents a reconciliation of the beginning and ending balances of the companys fair value
measurements using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Derivatives |
|
|
|
Nine Months Ended September 30, 2014 |
|
|
Twelve Months Ended December 31, 2013 |
|
Balance, beginning of period |
|
$ |
(141 |
) |
|
$ |
(191 |
) |
Total (losses) gains (realized and unrealized) before income taxes |
|
|
|
|
|
|
|
|
Included in net income, within cost of goods sold |
|
|
(15 |
) |
|
|
(27 |
) |
Included in other comprehensive income |
|
|
4 |
|
|
|
27 |
|
Purchases |
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
Issues |
|
|
|
|
|
|
|
|
Settlements |
|
|
23 |
|
|
|
36 |
|
Transfers of losses out of Level 3 |
|
|
19 |
|
|
|
14 |
|
Balance, end of period |
|
$ |
(110 |
) |
|
$ |
(141 |
) |
(Losses) gains for the period included in net income, within cost of goods sold, were: |
|
|
|
|
|
|
|
|
Change in unrealized (losses) gains relating to instruments still held at the reporting date |
|
$ |
(1 |
) |
|
$ |
|
|
Total losses, realized and unrealized |
|
|
(15 |
) |
|
|
(27 |
) |
10. Seasonality
The
companys sales of fertilizer can be seasonal. Typically, fertilizer sales are highest in the second quarter of the year, due to the North American spring planting season. However, planting conditions and the timing of customer purchases will
vary each year and sales can be expected to shift from one quarter to another.
11. Contingencies and Other Matters
Canpotex
PCS is a shareholder in Canpotex Limited (Canpotex), which markets Saskatchewan potash
offshore. Should any operating losses or other liabilities be incurred by Canpotex, the shareholders have contractually agreed to reimburse it for such losses or liabilities in proportion to each shareholders productive capacity. Through
September 30, 2014, there were no such operating losses or other liabilities.
Mining Risk
The risk of underground water inflows, as with other underground risks, is currently not insured.
Legal and Other Matters
The company is engaged in ongoing site assessment and/or remediation activities at a
number of facilities and sites, and anticipated costs associated with these matters are added to accrued environmental costs in the manner previously described in Note 14 to the companys 2013 annual consolidated financial statements. This
includes matters related to investigation of potential brine migration at certain of the potash sites. The following environmental site assessment and/or remediation matters have uncertainties that may not be fully reflected in the amounts accrued
for those matters:
Nitrogen and phosphate
|
|
The US Environmental Protection Agency (USEPA) has identified PCS Nitrogen, Inc. (PCS Nitrogen) as a potentially responsible party at the
Planters Property or Columbia Nitrogen site in Charleston, South Carolina. The current owner of the Planters Property filed a complaint against PCS Nitrogen in the US District Court for the District of South Carolina seeking environmental response
costs. The district court allocated 30 percent of the liability for response costs at the site to PCS Nitrogen, as well as a proportional share of any costs that cannot be recovered from another responsible party. The district courts
judgment is now final as all appeals have been exhausted. In December 2013, the USEPA issued an order to PCS Nitrogen and four other respondents requiring them jointly and severally to conduct certain cleanup work at the site and reimburse the
USEPAs costs for overseeing that work. The USEPA also has requested reimbursement of $4 of previously incurred response costs. The ultimate amount of liability for PCS Nitrogen depends upon the final outcome of separate litigation to impose
liability on additional parties, the amount needed for remedial activities, the ability of other parties to pay and the availability of insurance. |
|
|
PCS Phosphate Company, Inc. (PCS Phosphate) has agreed to participate, on a non-joint and several basis, with parties to an Administrative Settlement
Agreement with the USEPA (Settling Parties) in a removal action and the payment of certain other
|
|
|
|
13 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
|
costs associated with PCB soil contamination at the Ward Transformer Superfund Site in Raleigh, North Carolina (Site), including reimbursement of past USEPA costs. The removal
activities commenced in August 2007 and are believed to be nearly complete. In September 2013, PCS Phosphate and other parties entered into an Administrative Order on Consent with the USEPA, pursuant to which a supplemental remedial investigation
and focused feasibility study will be performed on the portion of the Site that was subject to the removal action. The completed and anticipated work on the Site is estimated to cost a total of $80. PCS Phosphate is a party to ongoing Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) contribution and cost recovery litigation for the recovery of costs of the removal activities. The USEPA has also issued an order to a number of entities requiring
remediation downstream of the area subject to the removal action (Operable Unit 1). PCS Phosphate did not receive this order. At this time, the company is unable to evaluate the extent of any exposure that it may have for the matters
addressed in the CERCLA litigation or for Operable Unit 1. |
|
|
In 1996, PCS Nitrogen Fertilizer, L.P. (PCS Nitrogen Fertilizer), then known as Arcadian Fertilizer, L.P., entered into a Consent Order (the
Order) with the Georgia Environmental Protection Division (GEPD) in conjunction with PCS Nitrogen Fertilizers acquisition of real property in Augusta, Georgia. Under the Order, PCS Nitrogen Fertilizer is required to
perform certain activities to investigate and, if necessary, implement corrective measures for substances in soil and groundwater. The investigation has proceeded and the results have been presented to GEPD. Two interim corrective measures for
substances in groundwater have been proposed by PCS Nitrogen Fertilizer and approved by GEPD. PCS Nitrogen Fertilizer is implementing the approved interim corrective measures which may be modified by PCS Nitrogen Fertilizer from time to time but it
is unable to estimate with reasonable certainty the total cost of its corrective action obligations under the Order at this time. |
Based on current information and except for the uncertainties described in the preceding paragraphs, the company does not believe that its future obligations with
respect to these facilities and sites are reasonably likely to have a material adverse effect on its consolidated financial position or results of operations.
Other legal matters with significant uncertainties include the following:
Nitrogen and phosphate
|
|
The USEPA has an ongoing initiative to evaluate implementation within the phosphate industry of a particular exemption for mineral processing wastes under the
hazardous waste program. In connection with this industry-wide initiative, the USEPA conducted inspections at numerous phosphate operations and
|
|
|
notified the company of alleged violations of the US Resource Conservation and Recovery Act (RCRA) at its plants in Aurora, North Carolina; Geismar, Louisiana; and White Springs,
Florida; and one alleged Clean Air Act (CAA) violation at its Geismar, Louisiana plant. The company has entered into RCRA 3013 Administrative Orders on Consent and has performed certain site assessment activities at all of these plants.
At this time, the company does not know the scope of action, if any, that may be required. As to the alleged RCRA violations, the company continues to participate in settlement discussions with the USEPA but is uncertain if any resolution will be
possible without litigation, or, if litigation occurs, what the outcome would be. |
|
|
The USEPA has pursued an initiative to evaluate compliance with the CAA at sulfuric acid and nitric acid plants. In connection with this industry-wide
initiative, the USEPA sent requests for information to numerous facilities, including the companys plants in Augusta, Georgia; Aurora, North Carolina; Geismar, Louisiana; Lima, Ohio; and White Springs, Florida. The USEPA and the Louisiana
Department of Environmental Quality notified the company of various alleged violations of the CAA at its Geismar, Louisiana plant. In May 2012, the USEPA issued a Notice of Violation to the companys White Springs, Florida plant, alleging that
certain projects at the sulfuric acid plants were undertaken in violation of the CAA. While the company disputes the alleged violations, in September 2014, the parties reached a global settlement, which covers the sulfuric acid plants at
the Geismar and White Springs facilities, which were the subject of alleged CAA violations, as well as the Aurora facilitys sulfuric acid plants, which were never the subject of a notice of violation. The consent decree is expected to take
effect in late 2014 or early 2015. The consent decree will require capital improvements, process changes and penalties for the companys sulfuric acid plants in Aurora, North Carolina; Geismar, Louisiana; and White Springs, Florida, and a
supplemental environmental project at the Geismar facility. The total estimated costs for complying with the consent decree are expected to be at least $51 over a compliance period that extends into 2020. |
|
|
In December 2010, the USEPA issued a final rule to numerically restrict nutrient concentrations in certain surface waters in Florida to levels below those
currently permitted to be discharged from the companys White Springs, Florida plant. The USEPA took this step because it had determined that Floridas longstanding narrative criteria for nutrients were not protecting Floridas waters
and a new standard using numeric nutrient criteria was necessary. In November 2012, the USEPA shifted course, finding that not all water bodies in Florida require numeric nutrient criteria to meet Clean Water Act requirements. The USEPA has approved
Floridas new set of water quality standards, which apply numeric nutrient criteria to the majority of water bodies in the state, but also provide
|
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
14 |
|
|
avenues for site-specific relief. To prevent overlapping federal and state water quality standards, in September 2014, the USEPA published a final rule withdrawing its 2010 rule. The withdrawal
is effective October 27, 2014, at which time the states water quality standards will govern. The company believes the White Springs plant will meet the state rules criteria for site-specific relief and expects to apply for relief. In the
meantime, the company is monitoring a 2013 lawsuit filed by the Florida Wildlife Federation against the USEPA. The complaint asserts that the USEPAs little used antidegradation regulation under the Clean Water Act requires new water quality
standards in Florida. The parties to this litigation reached a partial settlement on some counts and the litigation continues with respect to the remaining counts. To date, the court in which this matter is pending has not allowed industry or the
State of Florida to intervene in this lawsuit. The company will continue to monitor further developments in this lawsuit and assess whether there will be an opportunity to intervene, as necessary. It is possible that the state water quality
standards could change as a result of this litigation, making it unclear at this time whether the company will need to expend capital costs at the White Springs plant to meet numeric nutrient water quality standards. |
General
|
|
The scope or timing of any final, effective requirements to control the companys greenhouse gas emissions in the US or Canada is uncertain. Canada has
withdrawn from participation in the Kyoto Protocol, and the Canadian government has announced its intention to coordinate greenhouse gas policies with the US. Although the US Congress has not passed any greenhouse gas emission control laws, the
USEPA has adopted several rules to control such emissions using authority under existing environmental laws. Some Canadian provinces and US states are considering the adoption of greenhouse gas emission control requirements. In Saskatchewan,
provincial regulations pursuant to the Management and Reduction of Greenhouse Gases Act, which impose a type of carbon tax to achieve a goal of a 20 percent reduction in greenhouse gas emissions by 2020 compared to 2006 levels, may become effective
in 2015. None of these regulations has resulted in material limitations on greenhouse gas emissions at the companys facilities. The company is monitoring these developments and their future effect on its operations cannot be determined with
certainty at this time. |
In addition, various other claims and lawsuits are pending against the company in the ordinary course of
business. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is the companys belief that the ultimate resolution of such actions is not
reasonably likely to have a material adverse effect on its consolidated financial position or results of operations.
The breadth of the companys operations and the global complexity of tax regulations require assessments of
uncertainties and judgments in estimating the taxes it will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of
disputes arising from federal, provincial, state and local tax audits. The resolution of these uncertainties and the associated final taxes may result in adjustments to the companys tax assets and tax liabilities.
The company owns facilities that have been either permanently or indefinitely shut down. It expects to incur nominal annual expenditures for site security and other
maintenance costs at certain of these facilities. Should the facilities be dismantled, certain other shutdown-related costs may be incurred. Such costs are not expected to have a material adverse effect on the companys consolidated financial
position or results of operations and would be recognized and recorded in the period in which they are incurred.
12. Related Party
Transactions
The company sells potash from its Saskatchewan mines for use outside Canada and the US exclusively to Canpotex, a potash export, sales and
marketing company owned in equal shares by the three producers in Saskatchewan. Sales are at prevailing market prices and are settled on normal trade terms. Sales to Canpotex for the three months ended September 30, 2014 were $268
(2013 $199) and the nine months ended September 30, 2014 were $859 (2013 $1,069). At September 30, 2014, $160 (December 31, 2013 $166) was owing from Canpotex.
13. Comparative Figures
Prior periods figures
within Note 6 have been reclassified to disclose the impact of the margin (cost) on inter-segment sales separate from third-party transactions. Previously, these amounts were included as additions or reductions to cost of goods sold in each segment.
There was no change in gross margin, by segment or in total. The company believes these reclassifications provide more succinct information. Additionally, comparative figures related to nitrogen inter-segment sales in Note 6 have been reduced by $1
for the three months ended September 30, 2013 and $30 for the nine months ended September 30, 2013, to exclude sales within the same operating segment. Prior periods figures within Note 6 have also been adjusted to reflect
depreciation and amortization only within cost of goods sold, which is the amount that affects the reportable operating segments gross margin. The company believes this provides more relevant information. These adjustments had no effect on any
other amounts within the unaudited interim condensed consolidated financial statements.
|
|
|
15 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis is the responsibility of management and is as of October 28, 2014. The Board of Directors carries
out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews and, prior to its publication, approves this disclosure, pursuant to the
authority delegated to it by the Board of Directors. The term PCS refers to Potash Corporation of Saskatchewan Inc. and the terms we, us, our, PotashCorp and the company refer
to PCS and, as applicable, PCS and its direct and indirect subsidiaries as a group. Additional information relating to PotashCorp, including our Annual Report on Form 10-K for the year ended December 31, 2013 (Form 10-K), can be found on
SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The company is a foreign private issuer under the rules and regulations of the US Securities and Exchange Commission (the SEC); however, it currently files voluntarily on the SECs domestic
forms.
PotashCorp and Our Business Environment
PotashCorp is an integrated producer of fertilizer, industrial and animal feed products. We are the worlds largest fertilizer company by capacity, producing the three primary crop nutrients: potash (K),
nitrogen (N) and phosphate (P). As the worlds largest potash producer by capacity, we are responsible for nearly one-fifth of global capacity through our Canadian operations. To enhance our global footprint, we have investments in four
potash-related businesses in South America, the Middle East and Asia. We complement our potash assets with focused positions in nitrogen and phosphate.
A detailed description of our market and customers can be found on pages 54 and 55 (potash), 65 (nitrogen) and 73 (phosphate) in our 2013 Annual Integrated Report.
PotashCorp Strategy
Our business strategy is detailed on pages 20 to 23 in our 2013 Annual Integrated Report. Key strategies, risks and mitigation are outlined for each of our
nutrients on pages 52 (potash), 63 (nitrogen) and 71 (phosphate) in our 2013 Annual Integrated Report.
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 2014 targets are set out on pages 40 to 50 of our
2013 Annual Integrated Report. A summary of our progress against selected goals and representative annual targets is set out below.
|
|
|
|
|
Goal |
|
Representative 2014 Annual Target |
|
Performance
to September 30, 2014 |
Create superior long-term shareholder value. |
|
Exceed total shareholder return performance for our sector and the DAXglobal Agribusiness Index. |
|
PotashCorps total shareholder return was 8 percent in the first nine months of
2014 compared to our sectors weighted average return (based on market capitalization) of NIL percent and the DAXglobal Agribusiness Index weighted average return (based on market capitalization) of 1 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 2014 did not show improvement to the second quarter 2014 performance or any of the prior third quarter periods. Persistent congestion created from an increase in North American rail volumes coupled
with a shortage of locomotive power and crews continued to yield lower train velocity than the first nine months of 2013. Our 2014 third quarter net rail cycle time was 28 percent above the prior year third quarter and 16 percent above the 2011
benchmark quarter. For the first nine months of 2014, our domestic potash net rail cycle time through the Chicago corridor was 29 percent above the prior year period and 28 percent above the benchmark 2011 performance. We continue to work with our
rail partners to increase efficiency and reduce transit times but we currently believe we will not be able to achieve the stated goal of a 10 percent reduction in net rail cycle times during the 2014 calendar year. |
Attract and retain talented, motivated and productive employees
who are committed to our long-term goals. |
|
Fill 75 percent of senior staff openings with qualified internal candidates. |
|
The percentage of senior staff positions filled internally in the first nine months of 2014
was 84 percent. |
Achieve no harm to people. |
|
Achieve zero life-altering injuries at our sites. |
|
Tragically, we had a fatality at our Cory potash facility during the first quarter of 2014. |
|
|
Reduce total site recordable injury rate to 0.95 (per 200,000 hours worked) or lower. |
|
During the first nine months of 2014, total site recordable injury rate was 1.20. |
Achieve no damage to the environment. |
|
Reduce total reportable incidents (releases, permit excursions and spills) by 15 percent from 2013
levels. |
|
Annualized total reportable incidents were up 49 percent during the first nine months of
2014 compared to 2013 annual levels. Compared to the first nine months of 2013, total reportable incidents were up 46 percent. |
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
16 |
Share Repurchase Program
In the second quarter of 2014, the company completed a share repurchase program as described in Note 5 to the financial statements in this Form 10-Q. During the program a total of 43,345,992 common shares
were repurchased for cancellation at a cost of $1,476 million and an average price per share of $34.05.
Performance Overview
This discussion and analysis are based on the companys unaudited interim condensed consolidated financial statements included in
Item 1 of this Quarterly Report on Form 10-Q (financial statements in this Form 10-Q) based on International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS), unless otherwise stated. All references to per-share amounts pertain to diluted net income per share.
For an understanding of trends,
events, uncertainties and the effect of critical accounting estimates on our results and financial condition, this Form 10-Q should be read carefully, together with our 2013 Annual Integrated Report.
Earnings Guidance Third Quarter
2014
|
|
|
|
|
|
|
|
|
Company Guidance |
|
Actual Results |
|
Earnings per share |
|
$0.35 $0.45 |
|
$ |
0.38 |
|
Overview of Actual Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
Dollars (millions) except per-share amounts |
|
2014 |
|
|
2013 |
|
|
Change |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
% Change |
|
Sales |
|
$ |
1,641 |
|
|
$ |
1,520 |
|
|
$ |
121 |
|
|
|
8 |
|
|
$ |
5,213 |
|
|
$ |
5,764 |
|
|
$ |
(551 |
) |
|
|
(10 |
) |
Gross margin |
|
|
589 |
|
|
|
484 |
|
|
|
105 |
|
|
|
22 |
|
|
|
1,901 |
|
|
|
2,330 |
|
|
|
(429 |
) |
|
|
(18 |
) |
Operating income |
|
|
520 |
|
|
|
505 |
|
|
|
15 |
|
|
|
3 |
|
|
|
1,737 |
|
|
|
2,249 |
|
|
|
(512 |
) |
|
|
(23 |
) |
Net income |
|
|
317 |
|
|
|
356 |
|
|
|
(39 |
) |
|
|
(11 |
) |
|
|
1,129 |
|
|
|
1,555 |
|
|
|
(426 |
) |
|
|
(27 |
) |
Net income per share diluted |
|
|
0.38 |
|
|
|
0.41 |
|
|
|
(0.03 |
) |
|
|
(7 |
) |
|
|
1.33 |
|
|
|
1.77 |
|
|
|
(0.44 |
) |
|
|
(25 |
) |
Other comprehensive loss |
|
|
(229 |
) |
|
|
(258 |
) |
|
|
29 |
|
|
|
(11 |
) |
|
|
(178 |
) |
|
|
(561 |
) |
|
|
383 |
|
|
|
(68 |
) |
|
|
|
|
|
|
Earnings in the third quarter of 2014 were lower than the third quarter of 2013 as increases in potash and nitrogen
gross margin were more than offset by higher provincial mining and other taxes, higher income taxes, lower share of earnings of equity-accounted investees and lower dividend income. For the first nine months of 2014, earnings were primarily impacted
by lower potash gross margin, higher nitrogen gross margin, lower phosphate gross margin, lower share of earnings of equity-accounted investees, and lower income taxes.
Unlike 2013, when global potash demand stalled due to market uncertainty, this years third quarter saw all key
markets engaged. This shift was most significant offshore, with greater demand in Asian and Latin American markets leading to higher shipments from North American producers. Purchasing activity in North America remained healthy as dealers worked to
position product in advance of anticipated fall requirements.
Global potash shipments through the first nine months of 2014 were at all-time highs.
During the third quarter, typical maintenance downtime further tightened market fundamentals and resulted in prices moving higher in all major spot markets.
|
|
|
17 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
In nitrogen, strong global demand and supply constraints in key exporting countries led to higher prices for ammonia.
Improved fundamentals contributed to higher prices for urea and UAN products compared to the prior year, although greater supply availability in urea caused prices to show signs of seasonal softness as the quarter came to a close. Similarly,
phosphate prices for third-quarter 2014 were stronger relative to the previous year, given healthier demand and the influence of higher input and production costs.
Other comprehensive loss for the third quarter and first nine months of 2014 mainly resulted from a decrease in the
fair value of our investment in Israel Chemicals Ltd. (ICL). Other comprehensive loss for the third quarter of 2013 was due to decreases in the fair value of our investments in ICL and Sinofert Holdings Limited (Sinofert). For the first nine months
of 2013, these reductions were partially offset by a net actuarial gain resulting from a remeasurement of our defined benefit plans.
Statement of Financial Position
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
18 |
The most significant contributors to the changes in our statements of financial position were as follows (direction of
arrows refers to increase or decrease):
|
|
|
Assets |
|
Liabilities |
h Property, plant and equipment increased primarily due to our previously announced potash and nitrogen capacity expansions and other potash projects, partially offset by routine and
accelerated depreciation. i Available-for-sale investments were mainly impacted by the lower fair value
of our investment in ICL. |
|
h Short-term debt and current portion of long-term debt increased due to the reclassification of $500 million in senior notes due September 30, 2015 as current in the third quarter
of 2014 and an increase in commercial paper outstanding, partially offset by the redemption of $500 million in senior notes in the second quarter of 2014.
i Payables and accrued charges were lower largely due to reduced capital spending and share repurchase payables outstanding at December 31, 2013.
h Long-term debt was higher as a result of the issuance of $750 million in
senior notes in the first quarter of 2014, partially offset by our senior notes due September 30, 2015 being classified as current during the third quarter of 2014. |
|
Equity |
i Equity was mainly impacted by net income (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 2014. |
As at September 30, 2014, $91 million (December 31, 2013 $480 million) of our cash and cash equivalents
were held in certain foreign subsidiaries. There are no current plans to repatriate the funds at September 30, 2014 in a taxable manner. A net repatriation of funds totaling $454 million was completed in the first quarter of 2014.
Operating Segment Review
We report our results (including gross margin) in three business segments: potash, nitrogen and phosphate as described in Note 6 to the financial statements in this Form 10-Q. Our reporting structure reflects
how we manage our business and how we classify our operations for planning and measuring performance. We include net sales in segment disclosures in the financial statements in this Form 10-Q pursuant to IFRS, which require segmentation based upon
our internal organization and reporting of revenue and profit measures. As a component of gross margin,
net sales (and the related per-tonne amounts) are the primary revenue measures we use and review in making decisions about operating matters on a business segment basis. These decisions include
assessments about potash, nitrogen and phosphate performance and the resources to be allocated to these segments. We also use net sales (and the related per-tonne amounts) for business planning and monthly forecasting. Net sales are calculated as
sales revenues less freight, transportation and distribution expenses. Realized prices refer to net sales prices. Certain of the prior years figures within the nitrogen segment have been reclassified to conform with the current years
presentation as disclosed in Note 13 to the financial statements in this Form 10-Q.
Our discussion of segment operating performance is set out below and
includes nutrient product and/or market performance results, where applicable, to give further insight into these results.
|
|
|
19 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Potash
Potash Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
|
Dollars (millions) |
|
|
Tonnes (thousands) |
|
|
Average per Tonne (1) |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Manufactured product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
272 |
|
|
$ |
240 |
|
|
|
13 |
|
|
|
789 |
|
|
|
721 |
|
|
|
9 |
|
|
$ |
344 |
|
|
$ |
333 |
|
|
|
3 |
|
Offshore |
|
|
293 |
|
|
|
240 |
|
|
|
22 |
|
|
|
1,221 |
|
|
|
843 |
|
|
|
45 |
|
|
$ |
240 |
|
|
$ |
285 |
|
|
|
(16 |
) |
|
|
|
565 |
|
|
|
480 |
|
|
|
18 |
|
|
|
2,010 |
|
|
|
1,564 |
|
|
|
29 |
|
|
$ |
281 |
|
|
$ |
307 |
|
|
|
(8 |
) |
Cost of goods sold |
|
|
(264 |
) |
|
|
(248 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(131 |
) |
|
$ |
(159 |
) |
|
|
(18 |
) |
Gross margin |
|
|
301 |
|
|
|
232 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
150 |
|
|
$ |
148 |
|
|
|
1 |
|
Other miscellaneous and purchased product gross margin (2) |
|
|
(6 |
) |
|
|
(4 |
) |
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
$ |
295 |
|
|
$ |
228 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
147 |
|
|
$ |
146 |
|
|
|
1 |
|
(1) |
Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
(2) |
Comprised of net sales of $4 million (2013 $2 million) less cost of goods sold of $10 million (2013 $6 million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
|
|
Dollars (millions) |
|
|
Tonnes (thousands) |
|
|
Average per Tonne (1) |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Manufactured product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
866 |
|
|
$ |
923 |
|
|
|
(6 |
) |
|
|
2,720 |
|
|
|
2,349 |
|
|
|
16 |
|
|
$ |
318 |
|
|
$ |
393 |
|
|
|
(19 |
) |
Offshore |
|
|
942 |
|
|
|
1,271 |
|
|
|
(26 |
) |
|
|
4,126 |
|
|
|
3,986 |
|
|
|
4 |
|
|
$ |
228 |
|
|
$ |
319 |
|
|
|
(29 |
) |
|
|
|
1,808 |
|
|
|
2,194 |
|
|
|
(18 |
) |
|
|
6,846 |
|
|
|
6,335 |
|
|
|
8 |
|
|
$ |
264 |
|
|
$ |
346 |
|
|
|
(24 |
) |
Cost of goods sold |
|
|
(799 |
) |
|
|
(842 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(117 |
) |
|
$ |
(133 |
) |
|
|
(12 |
) |
Gross margin |
|
|
1,009 |
|
|
|
1,352 |
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
147 |
|
|
$ |
213 |
|
|
|
(31 |
) |
Other miscellaneous and purchased product gross margin (2) |
|
|
(19 |
) |
|
|
(7 |
) |
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
$ |
990 |
|
|
$ |
1,345 |
|
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
145 |
|
|
$ |
212 |
|
|
|
(32 |
) |
(1) |
Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
(2) |
Comprised of net sales of $14 million (2013 $9 million) less cost of goods sold of $33 million (2013 $16 million).
|
Potash gross margin variance attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 2014 vs. 2013 |
|
|
Nine Months Ended September 30 2014 vs. 2013 |
|
|
|
|
|
|
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 |
|
$ |
13 |
|
|
$ |
13 |
|
|
$ |
7 |
|
|
$ |
33 |
|
|
$ |
114 |
|
|
$ |
(203 |
) |
|
$ |
16 |
|
|
$ |
(73 |
) |
Offshore |
|
|
90 |
|
|
|
(69 |
) |
|
|
15 |
|
|
|
36 |
|
|
|
33 |
|
|
|
(373 |
) |
|
|
70 |
|
|
|
(270 |
) |
Change in market mix |
|
|
13 |
|
|
|
(12 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
13 |
|
|
|
1 |
|
|
|
|
|
Total manufactured product |
|
$ |
116 |
|
|
$ |
(68 |
) |
|
$ |
21 |
|
|
$ |
69 |
|
|
$ |
133 |
|
|
$ |
(563 |
) |
|
$ |
87 |
|
|
|
(343 |
) |
Other miscellaneous and purchased product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12 |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(355 |
) |
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
20 |
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 (1) |
|
|
From New Brunswick |
|
|
By Canpotex (1) |
|
|
From New Brunswick |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Other Asian countries (2) |
|
|
38 |
|
|
|
39 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
41 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America |
|
|
32 |
|
|
|
34 |
|
|
|
(6 |
) |
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
29 |
|
|
|
28 |
|
|
|
4 |
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
China |
|
|
9 |
|
|
|
8 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
17 |
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
India |
|
|
14 |
|
|
|
9 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
8 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oceania, Europe and Other |
|
|
7 |
|
|
|
10 |
|
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
6 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
(1) |
Canpotex Limited (Canpotex). |
(2) |
All Asian countries except China and India. |
The most significant contributors to the change in total gross margin quarter over quarter were as follows (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 last years third quarter due to lower offshore prices as the sharp decline through the final half of 2013 had yet to be fully
reflected in prior-period results. A greater proportion of sales to lower-priced offshore markets also had a negative impact. |
|
h Offshore sales volumes were up as the comparative period in 2013 saw significantly more volatility and uncertainty.
h In North America, sales volumes increased as customers took deliveries
in anticipation of strong farmer demand to replenish crop nutrients following an expected record harvest. |
|
h Costs were lower due to our workforce reduction and operational changes announced in December 2013 along with our decision to optimize production at our lowest cost
facility. h The Canadian dollar weakened relative to the US dollar, reducing
cost of goods sold. |
|
|
|
21 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
The most significant contributors to the change in total gross margin year over year were as follows (direction of
arrows refers to impact on gross margin):
|
|
|
|
|
Net Sales Prices |
|
Sales Volumes |
|
Cost of Goods Sold |
i Potash prices were lower as the sharp decline during the second half of 2013 weighed on price realizations, though prices rose compared to the trailing quarters due to tighter supplies and
record global demand. |
|
h North American totals were up due to low distributor inventories at the start of the year, higher acreage and application rates and earlier second-half customer engagement for the fall
application season. h Our offshore sales volumes rose due to increased demand but were constrained
by limited product availability in the third quarter of 2014 and rail constraints in the first half of 2014. |
|
h Shutdown weeks were lower in 2014 (14 shutdown weeks) compared to 2013 (32 shutdown weeks) primarily as a result of our
strategy to match production with demand in 2013. h Costs were lower due to our
workforce reduction and operational changes announced in December 2013 along with our decision to optimize production at our lowest cost facility.
h The Canadian dollar weakened relative to the US dollar, reducing cost of goods sold.
h More product from our lower-cost mines was sold to offshore customers resulting in a higher cost of goods sold variance. |
|
|
Potash Non-Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Production |
|
KCl tonnes produced (thousands) |
|
|
1,453 |
|
|
|
1,150 |
|
|
|
26 |
|
|
|
6,169 |
|
|
|
5,852 |
|
|
|
5 |
|
Safety |
|
Total site recordable injury rate |
|
|
2.53 |
|
|
|
1.75 |
|
|
|
45 |
|
|
|
1.96 |
|
|
|
1.45 |
|
|
|
35 |
|
|
|
Life-altering injuries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
n/m |
|
Employee |
|
Percentage of senior staff positions filled internally |
|
|
100% |
|
|
|
100% |
|
|
|
|
|
|
|
100% |
|
|
|
100% |
|
|
|
|
|
Environmental |
|
Waste (million tonnes) |
|
|
3.6 |
|
|
|
2.8 |
|
|
|
29 |
|
|
|
12.9 |
|
|
|
13.2 |
|
|
|
(2 |
) |
|
|
Environmental incidents |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
12 |
|
|
|
11 |
|
|
|
9 |
|
Production
During the first half of 2014, we successfully completed a safe Canpotex entitlement run at Allan, which increased our proportion of Canpotex sales to offshore
markets from approximately 49 percent to approximately 54 percent commencing July 1, 2014.
Potash production rose quarter over quarter as
production in 2013 was affected by additional downtime at our Cory facility (four weeks) and reduced operating rates at our Rocanville facility (no reduction in 2014). Year over year potash production rose as a reduction in shutdown weeks (discussed
above) more than offset the effects of our operational changes announced in December 2013.
Safety
Tragically, we had a fatality at our Cory facility during the first quarter of 2014. Total site recordable injury rate increased mainly due to higher recordable
injury rates for non-nested contractors. Even though fewer recordable injuries were experienced in this group there were significantly fewer hours worked during the third quarter and first nine months of 2014.
Employee
Due
to improved fundamentals in the granular potash market, we rescinded previously announced layoff notices at our Penobsquis, New Brunswick facility (impacting 56 employees) and began a recall process at our Lanigan facility to reinstate 47 permanent
employees in the second quarter of 2014, and began a recall process at our Cory facility to reinstate 38 permanent employees in the third quarter.
Environmental
Waste is comprised of byproducts including
coarse and fine tailings and salt as brine to injection wells. Waste increased quarter over quarter due to higher mining waste per tonne (lower recovery and/or ore quality) combined with increased mining activity at certain sites. Year over
year waste decreased due to lower mining waste per tonne (higher recovery and/or ore quality) combined with decreased mining activity at certain sites during the first half of 2014, partially offset by increased mining waste in the third quarter as
discussed above.
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
22 |
Nitrogen
Nitrogen Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
|
Dollars (millions) |
|
|
Tonnes (thousands) |
|
|
Average per Tonne (1) |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Manufactured product (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia |
|
$ |
269 |
|
|
$ |
239 |
|
|
|
13 |
|
|
|
528 |
|
|
|
512 |
|
|
|
3 |
|
|
$ |
509 |
|
|
$ |
468 |
|
|
|
9 |
|
Urea |
|
|
100 |
|
|
|
82 |
|
|
|
22 |
|
|
|
248 |
|
|
|
218 |
|
|
|
14 |
|
|
$ |
402 |
|
|
$ |
376 |
|
|
|
7 |
|
Solutions, Nitric acid, Ammonium nitrate |
|
|
182 |
|
|
|
158 |
|
|
|
15 |
|
|
|
773 |
|
|
|
700 |
|
|
|
10 |
|
|
$ |
236 |
|
|
$ |
226 |
|
|
|
4 |
|
|
|
|
551 |
|
|
|
479 |
|
|
|
15 |
|
|
|
1,549 |
|
|
|
1,430 |
|
|
|
8 |
|
|
$ |
356 |
|
|
$ |
335 |
|
|
|
6 |
|
Cost of goods sold |
|
|
(322 |
) |
|
|
(304 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(209 |
) |
|
$ |
(212 |
) |
|
|
(1 |
) |
Gross margin |
|
|
229 |
|
|
|
175 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
147 |
|
|
$ |
123 |
|
|
|
20 |
|
Other miscellaneous and purchased product gross margin (3) |
|
|
4 |
|
|
|
3 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
$ |
233 |
|
|
$ |
178 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
150 |
|
|
$ |
124 |
|
|
|
21 |
|
(1) |
Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
(2) |
Includes inter-segment ammonia sales, comprised of: net sales $25 million, cost of goods sold $10 million and 41,000 sales
tonnes (2013 net sales $29 million, cost of goods sold $14 million and 57,000 sales tonnes). Inter-segment profits are eliminated on consolidation. |
(3) |
Comprised of third-party and inter-segment sales, including: third-party net sales $6 million less cost of goods sold $2 million (2013
net sales $17 million less cost of goods sold $14 million) and inter-segment net sales $NIL million less cost of goods sold $NIL million (2013 net sales $2 million less cost of goods sold $2 million). Inter-segment
profits are eliminated on consolidation. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
|
|
Dollars (millions) |
|
|
Tonnes (thousands) |
|
|
Average per Tonne (1) |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Manufactured product (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia |
|
$ |
875 |
|
|
$ |
899 |
|
|
|
(3 |
) |
|
|
1,776 |
|
|
|
1,620 |
|
|
|
10 |
|
|
$ |
493 |
|
|
$ |
555 |
|
|
|
(11 |
) |
Urea |
|
|
364 |
|
|
|
347 |
|
|
|
5 |
|
|
|
854 |
|
|
|
800 |
|
|
|
7 |
|
|
$ |
426 |
|
|
$ |
433 |
|
|
|
(2 |
) |
Solutions, Nitric acid, Ammonium nitrate |
|
|
526 |
|
|
|
489 |
|
|
|
8 |
|
|
|
2,211 |
|
|
|
1,978 |
|
|
|
12 |
|
|
$ |
238 |
|
|
$ |
247 |
|
|
|
(4 |
) |
|
|
|
1,765 |
|
|
|
1,735 |
|
|
|
2 |
|
|
|
4,841 |
|
|
|
4,398 |
|
|
|
10 |
|
|
$ |
365 |
|
|
$ |
395 |
|
|
|
(8 |
) |
Cost of goods sold |
|
|
(1,001 |
) |
|
|
(1,019 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(207 |
) |
|
$ |
(232 |
) |
|
|
(11 |
) |
Gross margin |
|
|
764 |
|
|
|
716 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
158 |
|
|
$ |
163 |
|
|
|
(3 |
) |
Other miscellaneous and purchased product gross margin (3) |
|
|
12 |
|
|
|
9 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
$ |
776 |
|
|
$ |
725 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
160 |
|
|
$ |
165 |
|
|
|
(3 |
) |
(1) |
Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
(2) |
Includes inter-segment ammonia sales, comprised of: net sales $81 million, cost of goods sold $36 million and 141,000 sales tonnes
(2013 net sales $79 million, cost of goods sold $39 million and 136,000 sales tonnes). Inter-segment profits are eliminated on consolidation. |
(3) |
Comprised of third-party and inter-segment sales, including: third-party net sales $26 million less cost of goods sold $14 million (2013
net sales $47 million less cost of goods sold $38 million) and inter-segment net sales $2 million less cost of goods sold $2 million (2013 net sales $32 million less cost of goods sold $32 million). Inter-segment profits
are eliminated on consolidation. |
|
|
|
23 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Nitrogen gross margin variance attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 2014 vs. 2013 |
|
|
Nine Months Ended September 30 2014 vs. 2013 |
|
|
|
|
|
|
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 |
|
$ |
1 |
|
|
$ |
26 |
|
|
$ |
(1 |
) |
|
$ |
26 |
|
|
$ |
56 |
|
|
$ |
(112 |
) |
|
$ |
41 |
|
|
$ |
(15 |
) |
Urea |
|
|
8 |
|
|
|
5 |
|
|
|
(1 |
) |
|
|
12 |
|
|
|
14 |
|
|
|
(6 |
) |
|
|
3 |
|
|
|
11 |
|
Solutions, NA, AN |
|
|
11 |
|
|
|
9 |
|
|
|
(5 |
) |
|
|
15 |
|
|
|
26 |
|
|
|
(21 |
) |
|
|
39 |
|
|
|
44 |
|
Hedge |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
8 |
|
Change in product mix |
|
|
6 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
Total manufactured product |
|
$ |
26 |
|
|
$ |
34 |
|
|
$ |
(6 |
) |
|
|
54 |
|
|
$ |
102 |
|
|
$ |
(145 |
) |
|
$ |
91 |
|
|
|
48 |
|
Other miscellaneous and purchased product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
|
|
Sales Tonnes (thousands) |
|
|
Price per Tonne |
|
|
Sales Tonnes (thousands) |
|
|
Price per Tonne |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Fertilizer |
|
|
571 |
|
|
|
463 |
|
|
$ |
339 |
|
|
$ |
335 |
|
|
|
1,699 |
|
|
|
1,361 |
|
|
$ |
377 |
|
|
$ |
416 |
|
Industrial and Feed |
|
|
978 |
|
|
|
967 |
|
|
$ |
365 |
|
|
$ |
335 |
|
|
|
3,142 |
|
|
|
3,037 |
|
|
$ |
358 |
|
|
$ |
385 |
|
|
|
|
1,549 |
|
|
|
1,430 |
|
|
$ |
356 |
|
|
$ |
335 |
|
|
|
4,841 |
|
|
|
4,398 |
|
|
$ |
365 |
|
|
$ |
395 |
|
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
24 |
The most significant contributors to the change in total gross margin quarter over quarter were as follows (direction
of arrows refers to impact on gross margin):
|
|
|
|
|
Net Sales Prices |
|
|
|
Sales Volumes |
h With key benchmark pricing at higher levels, our average realized price increased. |
|
|
|
h Improved production levels across all nitrogen facilities more than offset losses from gas curtailments in Trinidad. |
The most significant contributors to the change in total gross margin year over year were as follows (direction of arrows refers to
impact on gross margin):
|
|
|
|
|
Net Sales Prices |
|
Sales Volumes |
|
Cost of Goods Sold |
i Ammonia prices fell as strong demand and supply challenges in key producing regions were more prevalent in 2013 than 2014. |
|
h Ammonia volumes were up due to the availability of production at Geismar and Augusta in 2014 (both projects began producing part-way through the first half of 2013) compared to the
same period in 2013, which also led to an increase in saleable downstream products. |
|
i Average costs, including our hedge position, for natural gas used as feedstock in production increased 1 percent. Costs for natural gas used as feedstock in Trinidad production
fell 6 percent (contract price indexed, in part, to Tampa ammonia prices) while our US spot costs for natural gas increased 20 percent. Including losses on our hedge position, US gas prices rose 13 percent.
h The cost of goods sold variance for ammonia mainly reflected lower
costs in 2014 for natural gas used as feedstock in Trinidad production compared to 2013, partially offset by higher US natural gas costs in 2014 compared to 2013. This affected ammonia to a greater extent than urea.
h The cost of goods sold variance was better for solutions, nitric acid
and ammonium nitrate due mainly to the impact of costs associated with Geismar in 2013 that did not repeat in 2014. |
Nitrogen Non-Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Production |
|
N tonnes produced (thousands) |
|
|
787 |
|
|
|
705 |
|
|
|
12 |
|
|
|
2,450 |
|
|
|
2,155 |
|
|
|
14 |
|
Safety |
|
Total site recordable injury rate |
|
|
0.71 |
|
|
|
0.76 |
|
|
|
(7 |
) |
|
|
0.51 |
|
|
|
0.63 |
|
|
|
(19 |
) |
Employee |
|
Percentage of senior staff positions filled internally |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
100% |
|
|
|
100% |
|
|
|
|
|
Environmental |
|
Greenhouse gas emissions (CO2 equivalent tonnes/tonne of product) |
|
|
2.3 |
|
|
|
2.4 |
|
|
|
(4 |
) |
|
|
2.3 |
|
|
|
2.3 |
|
|
|
|
|
|
|
Environmental incidents |
|
|
3 |
|
|
|
|
|
|
|
n/m |
|
|
|
4 |
|
|
|
1 |
|
|
|
300 |
|
n/a = not applicable as there were no senior staff positions filled during the period
n/m = not meaningful
Production
Quarter over quarter production was impacted by a plant turnaround at our Trinidad facility in the third quarter of 2013 which did not occur in 2014. Year over year
production increased mainly due to the availability of production at Geismar and Augusta as discussed above.
Safety
There were 11 recordable injuries in the first nine months of 2014 compared to 14 in the same period in 2013 with similar hours
worked, resulting in a decrease in the nitrogen total site recordable injury rate.
Environmental
The three environmental incidents that
occurred during the third quarter of 2014 have or are being investigated and such corrective actions as deemed appropriate have or will be taken.
|
|
|
25 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Phosphate
Phosphate Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
|
Dollars (millions) |
|
|
Tonnes (thousands) |
|
|
Average per Tonne (1) |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Manufactured product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer |
|
$ |
201 |
|
|
$ |
250 |
|
|
|
(20 |
) |
|
|
445 |
|
|
|
634 |
|
|
|
(30 |
) |
|
$ |
452 |
|
|
$ |
395 |
|
|
|
14 |
|
Feed and Industrial |
|
|
174 |
|
|
|
176 |
|
|
|
(1 |
) |
|
|
280 |
|
|
|
279 |
|
|
|
|
|
|
$ |
621 |
|
|
$ |
631 |
|
|
|
(2 |
) |
|
|
|
375 |
|
|
|
426 |
|
|
|
(12 |
) |
|
|
725 |
|
|
|
913 |
|
|
|
(21 |
) |
|
$ |
517 |
|
|
$ |
467 |
|
|
|
11 |
|
Cost of goods sold |
|
|
(317 |
) |
|
|
(351 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(437 |
) |
|
$ |
(384 |
) |
|
|
14 |
|
Gross margin |
|
|
58 |
|
|
|
75 |
|
|
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
80 |
|
|
$ |
83 |
|
|
|
(4 |
) |
Other miscellaneous and purchased product gross
margin (2) |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
$ |
61 |
|
|
$ |
78 |
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
84 |
|
|
$ |
85 |
|
|
|
(1 |
) |
(1) |
Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
(2) |
Comprised of net sales of $24 million (2013 $6 million) less cost of goods sold of $21 million (2013 $3 million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
|
|
Dollars (millions) |
|
|
Tonnes (thousands) |
|
|
Average per Tonne (1) |
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Manufactured product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer |
|
$ |
656 |
|
|
$ |
835 |
|
|
|
(21 |
) |
|
|
1,486 |
|
|
|
1,859 |
|
|
|
(20 |
) |
|
$ |
441 |
|
|
$ |
449 |
|
|
|
(2 |
) |
Feed and Industrial |
|
|
526 |
|
|
|
568 |
|
|
|
(7 |
) |
|
|
862 |
|
|
|
887 |
|
|
|
(3 |
) |
|
$ |
610 |
|
|
$ |
640 |
|
|
|
(5 |
) |
|
|
|
1,182 |
|
|
|
1,403 |
|
|
|
(16 |
) |
|
|
2,348 |
|
|
|
2,746 |
|
|
|
(14 |
) |
|
$ |
503 |
|
|
$ |
511 |
|
|
|
(2 |
) |
Cost of goods sold |
|
|
(1,055 |
) |
|
|
(1,153 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(449 |
) |
|
$ |
(420 |
) |
|
|
7 |
|
Gross margin |
|
|
127 |
|
|
|
250 |
|
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
54 |
|
|
$ |
91 |
|
|
|
(41 |
) |
Other miscellaneous and purchased product gross
margin (2) |
|
|
8 |
|
|
|
10 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
$ |
135 |
|
|
$ |
260 |
|
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
57 |
|
|
$ |
95 |
|
|
|
(40 |
) |
(1) |
Rounding differences may occur due to the use of whole dollars in per-tonne calculations. |
(2) |
Comprised of net sales of $34 million (2013 $20 million) less cost of goods sold of $26 million (2013 $10 million).
|
Phosphate gross margin variance attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 2014 vs. 2013 |
|
|
Nine Months Ended September 30 2014 vs. 2013 |
|
|
|
|
|
|
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 |
|
$ |
(14 |
) |
|
$ |
28 |
|
|
$ |
(25 |
) |
|
$ |
(11 |
) |
|
$ |
(31 |
) |
|
$ |
(14 |
) |
|
$ |
(47 |
) |
|
$ |
(92 |
) |
Feed and Industrial |
|
|
2 |
|
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(6 |
) |
|
|
(8 |
) |
|
|
(23 |
) |
|
|
|
|
|
|
(31 |
) |
Change in product mix |
|
|
(13 |
) |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
19 |
|
|
|
|
|
|
|
|
|
Total manufactured product |
|
$ |
(25 |
) |
|
$ |
40 |
|
|
$ |
(32 |
) |
|
|
(17 |
) |
|
$ |
(58 |
) |
|
$ |
(18 |
) |
|
$ |
(47 |
) |
|
|
(123 |
) |
Other miscellaneous and purchased product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(125 |
) |
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
26 |
The most significant contributors to the change in total gross margin quarter over quarter were as follows (direction of arrows
refers to impact on gross margin):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales Prices |
|
|
|
|
Sales Volumes |
|
|
|
|
Cost of Goods Sold |
h |
|
Our average realized phosphate price increased largely due to a greater proportion of our production being allocated to higher-netback feed and industrial products, in
addition to improved prices for our fertilizer products because of better market fundamentals. |
|
i |
|
|
|
The closure in July of our Suwannee River chemical plant, combined with mechanical challenges at our White Springs facility, constrained the number of tonnes available for
sale. |
|
i |
|
|
|
Depreciation was higher due to accelerated depreciation related to fertilizer as a result of operational changes announced in the fourth
quarter of 2013 prior to the closure of the Suwannee River chemical plant at our White Springs facility at the end of July 2014. |
|
|
|
|
|
|
|
|
|
i |
|
|
|
Unfavorable adjustments to our asset retirement obligations occurred in 2014 (due to a decrease in relevant discount rates) while favorable
adjustments occurred in 2013 (due to an increase in relevant discount rates). |
The most significant contributors to the change in total gross margin year over year were as follows (direction of arrows refers to
impact on gross margin):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales Prices |
|
|
|
|
Sales Volumes |
|
|
|
|
Cost of Goods Sold |
i |
|
Industrial prices were down due to certain contracts being tied to input costs on a lagging basis. |
|
i |
|
|
|
Volumes fell as weather-related production issues, logistical issues and an extended plant turnaround at White Springs in the third quarter of 2014 reduced operating rates
across all our facilities and constrained our sales. |
|
i
|
|
|
|
Depreciation was higher due to accelerated depreciation related to fertilizer as a result of operational changes announced in the fourth
quarter of 2013. |
|
|
|
|
|
|
|
|
|
h |
|
|
|
Sulfur costs were down 19 percent and ammonia costs were down 10 percent, reducing our cost of goods sold. |
|
|
|
|
|
|
|
|
|
i |
|
|
|
Unfavorable adjustments to our asset retirement obligations occurred in 2014 while favorable adjustments occurred in 2013 as a result of changes in the relevant discount
rates. |
Phosphate Non-Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
Production |
|
P2O5 tonnes produced
(thousands) |
|
|
431 |
|
|
|
533 |
|
|
|
(19 |
) |
|
|
1,259 |
|
|
|
1,553 |
|
|
|
(19 |
) |
|
|
P2O5 operating rate
percentage |
|
|
83% |
|
|
|
90% |
|
|
|
(8 |
) |
|
|
74% |
|
|
|
87% |
|
|
|
(15 |
) |
Safety |
|
Total site recordable injury rate |
|
|
0.59 |
|
|
|
1.35 |
|
|
|
(56 |
) |
|
|
1.12 |
|
|
|
1.07 |
|
|
|
5 |
|
Employee |
|
Percentage of senior staff positions filled internally |
|
|
60% |
|
|
|
100% |
|
|
|
(40 |
) |
|
|
81% |
|
|
|
72% |
|
|
|
13 |
|
Environmental |
|
Water usage (m3 per tonne of product) |
|
|
25 |
|
|
|
28 |
|
|
|
(11 |
) |
|
|
26 |
|
|
|
29 |
|
|
|
(10 |
) |
|
|
Recycled water used in operations (percentage) |
|
|
95% |
|
|
|
94% |
|
|
|
1 |
|
|
|
95% |
|
|
|
94% |
|
|
|
1 |
|
|
|
Environmental incidents |
|
|
2 |
|
|
|
|
|
|
|
n/m |
|
|
|
3 |
|
|
|
1 |
|
|
|
200 |
|
n/m = not meaningful
|
|
|
27 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Production
Phosphate production fell quarter over quarter due to the loss of production at White Springs because of the closure of the Suwannee River chemical facility in the
third quarter of 2014. Phosphate production was limited year over year due to weather-related production issues during the first quarter of 2014, and the closure of Suwannee River chemical facility during the third quarter of 2014 as described
above.
Safety
Quarter over quarter the total
site recordable injury rate decreased due to four recordable injuries occurring in the third quarter of 2014 (compared to 11 in the same period in 2013). Year over year
the total site recordable injury rate increased as while there were fewer recordable injuries (21 in 2014 compared to 27 in the same period 2013), there were even fewer hours worked during the
first nine months of 2014.
Employee
In the third
quarter of 2014, three of five senior staff positions were filled internally while the one position was filled internally in the same period in 2013.
Environmental
The two environmental incidents that occurred
during the third quarter of 2014 have or are being investigated and such corrective actions as deemed appropriate have or will be taken.
Other Expenses and Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30
|
|
|
Nine Months Ended September 30
|
|
Dollars (millions) |
|
2014 |
|
|
2013 |
|
|
Change |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
% Change |
|
Selling and administrative expenses |
|
$ |
(49 |
) |
|
$ |
(48 |
) |
|
$ |
(1 |
) |
|
|
2 |
|
|
$ |
(172 |
) |
|
$ |
(165 |
) |
|
$ |
(7 |
) |
|
|
4 |
|
Provincial mining and other taxes |
|
|
(52 |
) |
|
|
(10 |
) |
|
|
(42 |
) |
|
|
420 |
|
|
|
(175 |
) |
|
|
(154 |
) |
|
|
(21 |
) |
|
|
14 |
|
Share of earnings of equity-accounted investees |
|
|
20 |
|
|
|
57 |
|
|
|
(37 |
) |
|
|
(65 |
) |
|
|
85 |
|
|
|
174 |
|
|
|
(89 |
) |
|
|
(51 |
) |
Dividend income |
|
|
7 |
|
|
|
31 |
|
|
|
(24 |
) |
|
|
(77 |
) |
|
|
100 |
|
|
|
85 |
|
|
|
15 |
|
|
|
18 |
|
Impairment of available-for-sale investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m |
|
|
|
(38 |
) |
|
|
|
|
|
|
(38 |
) |
|
|
n/m |
|
Other income (expenses) |
|
|
5 |
|
|
|
(9 |
) |
|
|
14 |
|
|
|
n/m |
|
|
|
36 |
|
|
|
(21 |
) |
|
|
57 |
|
|
|
n/m |
|
Finance costs |
|
|
(47 |
) |
|
|
(33 |
) |
|
|
(14 |
) |
|
|
42 |
|
|
|
(142 |
) |
|
|
(107 |
) |
|
|
(35 |
) |
|
|
33 |
|
Income taxes |
|
|
(156 |
) |
|
|
(116 |
) |
|
|
(40 |
) |
|
|
34 |
|
|
|
(466 |
) |
|
|
(587 |
) |
|
|
121 |
|
|
|
(21 |
) |
n/m = not meaningful
Provincial mining and other taxes were higher in the third quarter of 2014 than in the same period in 2013 due to
higher potash production tax (PPT). PPT increased due in part to a higher proportion of forecasted annual gross margin earned in the third quarter of 2014 as compared to the same period in 2013. In addition, in the third quarter of 2013, PPT
included a significant reduction due to a change in forecasted PPT for the year. This resulted in a reversal of part of the PPT recorded in the first half of 2013.
Share of earnings of equity-accounted investees pertains primarily to Sociedad Quimica y Minera de Chile S.A. (SQM) and Arab
Potash Company (APC). Lower earnings quarter over quarter and year over year were mainly due to lower earnings for SQM and APC over those periods.
Quarter over quarter dividend income was down due to lower dividends from ICL. Year over year dividend income was up as the company received a special dividend of
$69 million from ICL in the first nine months of 2014 (none in the first nine months of 2013).
As discussed in Note 3 to the financial statements in
this Form 10-Q, a non-tax deductible impairment loss of $38 million was recorded in net income on our investment in Sinofert during the first quarter of 2014. No such losses were recognized in
2013.
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
28 |
Weighted average debt obligations outstanding and the associated interest rates were as follows:
For the third quarter, income taxes increased due to a higher actual effective tax rate on ordinary earnings and higher discrete
tax adjustments. For the first nine months of the year, income taxes decreased due to lower ordinary earnings before taxes and discrete tax adjustments partially offset by a higher actual effective tax rate on ordinary earnings. Effective tax rates
and discrete items were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
Dollars (millions), except percentage amounts |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Actual effective tax rate on ordinary earnings |
|
|
28% |
|
|
|
25% |
|
|
|
27% |
|
|
|
26% |
|
Actual effective tax rate including discrete items |
|
|
33% |
|
|
|
25% |
|
|
|
29% |
|
|
|
27% |
|
Discrete tax adjustments that impacted the rate |
|
$ |
(25 |
) |
|
$ |
|
|
|
$ |
(21 |
) |
|
$ |
(37 |
) |
Significant items to note are described in Note 8 to the financial statements in this Form 10-Q.
For the first nine months of 2014, 70 percent of the effective tax rate on the current years ordinary earnings pertained to current income taxes (2013
50 percent) and 30 percent related to deferred income taxes (2013 50 percent). The increase in the current portion was largely due to lower tax depreciation.
Liquidity and Capital Resources
Cash Requirements
Contractual Obligations and Other Commitments
Our contractual obligations and other commitments detailed on pages 84 and 85 of our 2013 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. Significant items during 2014 that affected our contractual
obligations and other commitments were as follows as of September 30, 2014:
|
|
The issuance of 3.625 percent senior notes due March 15, 2024 during the first quarter of 2014 increased our long-term debt obligations by $750 million and
estimated annual interest payments by $27 million |
|
|
During the second quarter of 2014, the company completed the early redemption of all its outstanding $500 million of 5.250 percent senior notes due May 15,
2014. |
|
|
During the third quarter of 2014, the company entered into a purchase commitment for certain phosphate products with OCP S.A. for specified purchase quantities
and prices based on market rates at the time of delivery. The purchase commitment was approximately $445 million based on expected contract prices and expires in 2016. |
Capital Expenditures
Based on anticipated exchange rates, during 2014 we expect to incur
capital expenditures, including capitalized interest, of approximately $555 million for opportunity capital and approximately $575 million to sustain operations at existing levels and for major repairs and maintenance (including plant turnarounds).
|
|
|
29 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Page 62 of our 2013 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 2014, excluding capitalized interest, are
outlined in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDN Dollars (billions) |
|
2014 Forecast |
|
|
Total Forecast (2) |
|
|
Started |
|
|
Expected Completion (3)
(Description) |
|
Forecasted
Remaining Spending (after 2014) (2) |
|
New Brunswick |
|
$ |
0.1 |
|
|
$ |
2.2 |
|
|
|
2007 |
|
|
2014 (mine shaft and mill) |
|
$ |
0.3 |
|
Rocanville, Saskatchewan |
|
$ |
0.2 |
|
|
$ |
2.8 |
|
|
|
2008 |
|
|
2015 (mine shaft and mill) |
|
$ |
|
|
(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 and costs.
|
(3) |
Excludes ramp-up time. We expect these projects will be fully ramped up by the end of 2015, subject to market conditions. |
In 2013, we began an expansion of ammonia production at our Lima, Ohio plant. We are investing approximately $210 million through the fourth quarter of 2015
($110 million in 2014) to increase our capacity in ammonia (100,000 tonnes) and urea (73,000 tonnes).
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.
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 in this Form 10-Q, are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
Nine Months Ended September 30 |
|
Dollars (millions) |
|
2014 |
|
|
2013 |
|
|
Change |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
% Change |
|
Cash provided by operating activities |
|
$ |
574 |
|
|
$ |
616 |
|
|
$ |
(42 |
) |
|
|
(7 |
) |
|
$ |
1,901 |
|
|
$ |
2,556 |
|
|
$ |
(655 |
) |
|
|
(26 |
) |
Cash used in investing activities |
|
|
(305 |
) |
|
|
(358 |
) |
|
|
53 |
|
|
|
(15 |
) |
|
|
(738 |
) |
|
|
(1,218 |
) |
|
|
480 |
|
|
|
(39 |
) |
Cash used in financing activities |
|
|
(224 |
) |
|
|
(333 |
) |
|
|
109 |
|
|
|
(33 |
) |
|
|
(1,639 |
) |
|
|
(1,345 |
) |
|
|
(294 |
) |
|
|
22 |
|
Increase (decrease) in cash and cash equivalents |
|
$ |
45 |
|
|
$ |
(75 |
) |
|
$ |
120 |
|
|
|
n/m |
|
|
$ |
(476 |
) |
|
$ |
(7 |
) |
|
$ |
(469 |
) |
|
|
n/m |
|
The following graph presents summarized working capital information.
Page 87 of our 2013 Annual Integrated Report explains liquidity needs that can be met through a variety of sources and the
primary uses of funds.
Cash provided by operating activities was lower quarter over quarter due primarily to:
|
|
Lower net income in the third quarter of 2014; |
|
|
Net distributed earnings of equity-accounted investees in 2014 compared to net undistributed earnings of equity-accounted investees in 2013; and
|
|
|
Cash inflows from receivables in the third quarter of 2014 were lower than the third quarter of 2013. |
Cash provided by operating activities was lower year over year as a result of:
|
|
Lower net income in the first nine months of 2014; |
|
|
A lower non-cash provision for deferred income taxes; |
|
|
Net distributed earnings of equity-accounted investees in 2014 compared to net undistributed earnings of equity-accounted investees in 2013; and
|
|
|
Cash outflows from receivables in the first nine months of 2014 compared to cash inflows in the first nine months of 2013.
|
|
|
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
|
30 |
Cash used in investing activities was primarily for additions to property, plant and equipment, of which
approximately 46 percent in the third quarter of 2014 (2013 72 percent) and 50 percent in the first nine months of 2014 (2013 72 percent) related to the potash segment.
Cash used in financing activities decreased quarter over quarter and was mainly impacted by share repurchases in 2013 (none in third-quarter 2014) partially offset
by lower commercial paper proceeds in 2014 as compared to 2013. Year over year cash used in financing activities rose due to increased share repurchases, dividend payments and repayment of senior notes, partially offset by the issuance of senior
notes (none in 2013) and commercial paper proceeds in 2014 (repayments in 2013).
We believe that internally generated cash flow, supplemented if
necessary by available borrowings under our existing financing sources, will be sufficient to meet our anticipated capital expenditures and other cash requirements for at least the next 12 months, exclusive of any possible acquisitions. At this
time, we do not reasonably expect any presently known trend or uncertainty to affect our ability to access our historical sources of liquidity.
Principal Debt Instruments
(1) |
The authorized aggregate amount under the companys commercial paper programs in Canada and the US is $2,500 million. The amounts available under the
commercial paper programs are limited to the availability of backup funds under the credit facility. Included in the amount outstanding and committed was $485 million of commercial paper.
|
We use a combination of short-term and long-term debt to finance our operations. We typically pay floating rates of
interest on our short-term debt and credit facility, and fixed rates on our senior notes.
During the third quarter of 2014, we extended the maturity on
$3.4 billion of our syndicated credit facility to May 31, 2019 (original maturity May 31, 2018) with the maturity on the remaining $100 million remaining unchanged and extended the maturity on our $75 million short-term line of credit
to August 2015 (from August 2014). There were no significant changes to the nature of our outstanding commercial paper, including interest rates and uncommitted letter of credit facility described on Page 88 in our 2013 Annual Integrated Report.
The line of credit and credit facility have financial tests and covenants, including consequences of non-compliance, referenced on page 88 of our 2013
Annual Integrated Report with which we must comply at each quarter-end. We were in compliance with all covenants as at September 30, 2014 and at this time anticipate being in compliance with such covenants through 2014.
The accompanying table summarizes the limits and results of certain covenants:
|
|
|
|
|
|
|
|
|
Debt covenants |
|
|
|
|
|
|
Dollars (millions), except ratio amounts |
|
Limit |
|
|
September 30,
2014 |
|
Debt-to-capital ratio (1) |
|
£ |
0.6 |
|
|
|
0.3 |
|
Long-term debt-to-EBITDA ratio (2) |
|
£ |
3.5 |
|
|
|
1.0 |
|
Debt of subsidiaries |
|
<$ |
1,000 |
|
|
$ |
6 |
|
The following non-IFRS financial measures are requirements of our debt covenants and should not be considered as substitutes for,
nor superior to, measures of financial performance prepared in accordance with IFRS:
(1) |
Debt-to-capital ratio = debt (short-term debt and current portion of long-term debt + long-term debt) / (debt + shareholders equity).
|
(2) |
Long-term debt-to-EBITDA ratio = long-term debt / EBITDA. EBITDA is calculated according to the definition in Note 9 to the 2013 audited annual
consolidated financial statements for the trailing 12 months. As compared to net income according to IFRS, EBITDA is limited in that periodic costs of certain capitalized tangible and intangible assets used in generating revenues are excluded.
Long-term debt to net income for the trailing 12 months was 2.4. |
Our ability to access reasonably priced debt in the capital markets
is dependent, in part, on the quality of our credit ratings. We continue to maintain investment-grade credit ratings for our long-term debt. A downgrade of the credit rating of our long-term debt would increase the interest rates applicable to
borrowings under our credit facility and our line of credit.
|
|
|
31 |
|
PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Commercial paper markets are normally a source of same-day cash for the company. Our access to the Canadian and US
commercial paper markets primarily depends on maintaining our current short-term credit ratings as well as general conditions in the money markets.
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt |
|
Short-Term Debt |
Rating (outlook) |
|
Sep 30, 2014 |
|
Dec 31, 2013 |
|
Sep 30, 2014 |
|
Dec 31, 2013 |
Moodys |
|
A3 (stable) |
|
A3 (stable) |
|
P-2 |
|
P-2 |
Standard & Poors |
|
A-(stable) |
|
A-(negative) |
|
A-2 (1) |
|
A-2 (1) |
DBRS |
|
n/a |
|
n/a |
|
R-1 (low) |
|
R-1 (low) |
(1) |
S&P assigned a global commercial paper rating of A-2, but rated our commercial paper A-1 (low) on a Canadian scale. |
A security rating is not a recommendation
to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the respective credit rating agency and each rating should be evaluated independently of any other rating.
Our $3,750 million of outstanding senior notes were issued under US shelf registration statements.
For the first nine months of 2014, our weighted average cost of capital was 9.3 percent (2013 9.7 percent), of which 88 percent represented the cost of equity (2013
90 percent).
Outstanding Share Data
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
Common shares issued and outstanding |
|
|
829,695,745 |
|
|
|
856,116,325 |
|
Options to purchase common shares outstanding |
|
|
20,702,185 |
|
|
|
20,332,335 |
|
Number of stock option plans |
|
|
10 |
|
|
|
9 |
|
Off-Balance Sheet Arrangements
Off-balance sheet arrangements are described on page 89 of our 2013 Annual Integrated Report. We do not reasonably expect any presently known trend or uncertainty
to affect our ability to continue using these arrangements. Refer to Note 11 to the financial statements in this Form 10-Q for a contingency related to Canpotex. Refer to page 89 of our 2013 Annual Integrated Report for information pertaining
to our guarantees and derivative instruments. See Cash Requirements above and our 2013 Annual Integrated Report for obligations related to operating leases and certain of our long-term raw materials agreements which contain fixed price
and/or volume components.
Quarterly Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars (millions), except per-share amounts |
|
September 30, 2014 |
|
|
June 30, 2014 |
|
|
March 31, 2014 |
|
|
December 31, 2013 |
|
|
September 30, 2013 |
|
|
June 30, 2013 |
|
|
March 31, 2013 |
|
|
December 31, 2012 |
|
Sales |
|
$ |
1,641 |
|
|
$ |
1,892 |
|
|
$ |
1,680 |
|
|
$ |
1,541 |
|
|
$ |
1,520 |
|
|
$ |
2,144 |
|
|
$ |
2,100 |
|
|
$ |
1,642 |
|
Gross margin |
|
|
589 |
|
|
|
747 |
|
|
|
565 |
|
|
|
460 |
|
|
|
484 |
|
|
|
979 |
|
|
|
867 |
|
|
|
586 |
|
Net income |
|
|
317 |
|
|
|
472 |
|
|
|
340 |
|
|
|
230 |
|
|
|
356 |
|
|
|
643 |
|
|
|
556 |
|
|
|
421 |
|
Net income per share basic (1) |
|
|
0.38 |
|
|
|
0.56 |
|
|
|
0.40 |
|
|
|
0.27 |
|
|
|
0.41 |
|
|
|
0.74 |
|
|
|
0.64 |
|
|
|
0.49 |
|
Net income per share diluted (1) |
|
|
0.38 |
|
|
|
0.56 |
|
|
|
0.40 |
|
|
|
0.26 |
|
|
|
0.41 |
|
|
|
0.73 |
|
|
|
0.63 |
|
|
|
0.48 |
|
(1) |
Net income per share for each quarter has been computed based on the weighted average number of shares issued and outstanding during the respective
quarter, including the dilutive number of shares assumed for the diluted earnings per share computation; therefore, as the number of shares varies each period, quarterly amounts may not add to the annual total. |
|
Certain aspects of our business can be impacted by seasonal factors. Fertilizers are sold primarily for spring and fall application in both Northern and Southern
Hemispheres. However, planting conditions and the timing of customer purchases will vary each year and fertilizer sales can be expected to shift from one quarter to another. Most feed and industrial sales are by contract and are more evenly
distributed throughout the year. |
In the first quarter of 2014, earnings were impacted by $38 million of non-tax deductible impairment losses on our
available-for-sale investment in Sinofert due to the significance by which fair value was below cost.
Related Party Transactions
Refer to Note 12 to the financial statements in this Form 10-Q for information pertaining to transactions with related parties.
Critical Accounting Estimates
There have been no
material changes to our critical accounting estimate policies in the first nine months of 2014.
We have discussed the development, selection and
application of our key accounting policies, and the critical accounting estimates
and assumptions they involve, with the audit committee of the Board of Directors, and the committee reviewed the disclosures described in this Form 10-Q.
Recent Accounting Changes
Refer to Note 1 to the financial statements in this Form 10-Q for information pertaining to accounting changes effective in 2014 and for information on issued
accounting pronouncements that will be effective in future periods.
Risk Management
Execution of our corporate strategy
requires an effective program to manage the associated risks.
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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32 |
The companys Risk Management Process of identification, management and reporting of risk is continuous and
dynamic. Changes to corporate risk that result from changing internal and external factors are evaluated on a quarterly basis and significant changes in risks and corresponding mitigation activities are reported regularly to the Board of Directors
through the committees, which focus on risks within their areas of oversight. Detailed discussion of the PotashCorp Global Risk Perspective can be found on pages 24 - 28 of our 2013 Annual Integrated Report as well as in our Form 10-K. Risk management discussions specific to potash, nitrogen and phosphate operations can be found on pages 52, 63, and 71 respectively of the 2013 Annual Integrated Report.
The greatest potential risks to potash reported in the 2013 Annual Integrated Report include market supply imbalances which may result from fluctuations in global
demand for product, global potash demand insufficient to consume PotashCorp capacity, physical risks particular to underground mines (such as unexpected underground rock falls and water inflow from underground water-bearing strata) and safety
related risks.
We mitigate the potash market imbalance and insufficient demand risks by managing production to meet market demand. Underground mine
risk mitigation activities include the use of advanced geophysical surveys, microseismic monitoring, rock mechanics modeling, ground penetrating radar, training and procedures and protective structures. We mitigate the risk of unsafe actions or
conditions by enhancing safety systems at all sites. Similar risks of cyclicality and market imbalance exist in phosphate and nitrogen, largely due to competitive costs, availability of supply and government involvement. The company mitigates these
risks by focusing on less cyclical markets, maintaining a diversified sulfur supply portfolio and employing natural gas price risk hedging strategies where appropriate.
Governance
The competitive selection process for
the companys external audit services (as discussed on page 93 in our Annual Integrated Report) is now complete and the Audit Committee has recommended no change at this time.
Outlook
Market Outlook
As we move into the fourth quarter, we continue to see strong customer engagement in all key
potash markets. We anticipate global shipments will surpass the upper end of our previous guidance, and now forecast totals for 2014 to be in the range of 58-60 million tonnes. While recent weakness in crop prices is expected to result in some
reduction to global crop acreage, we believe potash remains an affordable and necessary investment for growers as they look to offset lower prices by enhancing yields.
In North America, the fall application season is underway and product demand remains strong. Given what we believe
are especially low potash inventories throughout the North American supply chain, distributors are actively positioning product in advance of anticipated needs. Even though dealers are taking these steps, we forecast that sales volumes will slow
through the fourth quarter, with the majority of PotashCorps shipments fulfilling previously committed summer-fill tonnes.
In Latin America,
product for the key planting season is now largely in place and we believe buyers have shifted their focus to Safrinha crop requirements. Although customers continue to secure potash tonnage, we expect shipments to this region will begin to reflect
the typical seasonal slowdown as the end of the year approaches. Even with this expected slowdown, we believe annual Latin American demand will again establish a record.
In both China and India we have seen encouraging potash consumption trends, including increased demand for compound fertilizers with higher potassium content. Canpotex continues to deliver product to both markets
under previous commitments and we anticipate shipments will remain strong during the final quarter of 2014.
Potash demand in Other Asian countries
(outside of China and India) remains healthy. Stronger demand for standard product through the second half of 2014 has translated into higher transacted prices in recent tenders and is expected to be reflected in our realized prices in early 2015.
Financial Outlook
As a result of these market
conditions, we have increased our estimate for potash annual sales volumes to 9.0-9.2 million tonnes. Fourth-quarter shipments are expected to be heavily weighted towards offshore contract markets and to result in lower average realizations. We now
anticipate potash gross margin will approximate $1.3-$1.4 billion.
We expect robust nitrogen fundamentals, especially for ammonia, will continue through
the balance of the year. While gas supply restrictions at our Trinidad facility are now anticipated to exceed our previous estimates, sales volumes are expected to outpace previous-year levels and result in record nitrogen gross margin in 2014. In
phosphate, we anticipate relatively stable markets through the balance of the year. Our sales volumes are expected to remain below those of fourth-quarter 2013 with the closure of our Suwannee River chemical plant. Given these considerations, we now
forecast our 2014 combined nitrogen and phosphate gross margin will be in the range of $1.2-$1.3 billion.
We have revised our annual estimate for income
from offshore investments to a range of $205-$215 million to better align with projected earnings and associated tax changes in Chile and Israel. The Chilean tax change is also expected to impact our annual
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33 |
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
effective tax rate, which is now anticipated to be in the range of 27-29 percent.
Based on these
factors, we now expect our annual earnings range to be $1.75-$1.85 per share.
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q, including those in the Outlook section of Managements Discussion and Analysis of Financial Condition and Results of Operations,
contain forward-looking statements or forward-looking information (forward-looking statements). These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical
fact. These statements often contain words such as should, could, expect, may, anticipate, believe, intend, estimates, plans and similar
expressions. These statements are based on certain factors and assumptions as set forth in this Form 10-Q, including with respect to: foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities
and effective tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward-looking statements are subject to risks and uncertainties that are
difficult to predict. The results or events set forth in forward-looking statements may differ materially from actual results or events. Several factors could cause actual results or
events to differ materially from those expressed in forward-looking statements including, but not limited to the following: variations from our assumptions with respect to foreign exchange rates,
expected growth, results of operations, performance, business prospects and opportunities, and effective tax rates; risks and uncertainties related to operating and workforce changes made in response to our industry and the markets we serve; changes
in competitive pressures, including pricing pressures; risks and uncertainties related to our international operations and assets; fluctuations in supply and demand in the fertilizer, sulfur, transportation and petrochemical markets; costs and
availability of transportation and distribution for our raw materials and products, including railcars and ocean freight; adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contract
negotiations within major markets; unexpected geological or environmental conditions, including water inflows; economic and political uncertainty around the world; risks associated with natural gas and other hedging activities; changes in capital
markets; unexpected or adverse weather conditions; changes in currency and exchange rates; imprecision in reserve estimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we may undertake;
increases in the price or reduced availability of the raw materials that we use; strikes or other forms of work stoppage or slowdowns; timing and impact of capital expenditures; rates of return on, and the risks associated with, our investments and
capital expenditures; changes in, and the effects of, government policies and regulations; security risks related to our information technology systems; risks related to reputational loss; and earnings, and the decisions of taxing authorities, which
could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2013 under the captions Forward-Looking Statements and Item 1A Risk
Factors and in our filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this report, and the company disclaims any obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential
for loss from adverse changes in the market value of financial instruments. The level of market risk to which we are exposed varies depending on the composition of our derivative instrument portfolio, as well as current and expected market
conditions. A discussion of enterprise-wide risk management can be found in our 2013 Annual Integrated Report, pages 24 to 28.
Price, foreign
exchange and interest rate risks faced by the company and how we manage those risks are outlined in Notes 11 and 24 to the 2013 audited annual consolidated
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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34 |
financial statements and there were no significant changes as at September 30, 2014, except as noted below.
Price Risk
The carrying amount of our investments in ICL and
Sinofert was $1,490 million at September 30, 2014 (December 31, 2013 $1,722 million). A 10 percent increase in the prices of these investments would increase other comprehensive income by $149 million, while a 10 percent
decrease would reduce other comprehensive income by $148 million and an impairment of $1 million for our investment in Sinofert would be recognized in net income. At September 30, 2014, this analysis assumed that price decreases related to
the companys investment in ICL would not represent an impairment, price decreases related to the companys investment in Sinofert below the carrying amount at the impairment date of March 31, 2014 ($200 million) would represent an
impairment, and all other variables remain constant.
As at September 30, 2014, the company had natural gas derivatives qualifying for hedge
accounting in the form of swaps, which represented a notional amount of 68 million MMBtu (December 31, 2013 NIL) with maturities in 2014 through 2022. A 10 percent increase in natural gas prices would increase other comprehensive
income by $27 million, while a 10 percent decrease would reduce other comprehensive income by $24 million.
Foreign Exchange Risk
As at September 30, 2014, the company had entered into foreign currency forward
contracts to sell US dollars and receive Canadian dollars in the notional amount of $210 million (December 31, 2013 $148 million) at an average exchange rate of 1.0992 (December 31, 2013 1.0569) per US dollar with
maturities in 2014. There were no substantial changes to the US dollar sensitivities reported in Note 24 to the 2013 audited annual consolidated financial statements.
Interest Rate Risk
As at September 30, 2014, the company had no significant exposure to interest rate risk.
Item 4. Controls and Procedures
As of
September 30, 2014, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon that evaluation and as of September 30, 2014, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports the company files and submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
There has been no change in our internal control over financial reporting during the quarter ended
September 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
Part II. Other Information
Item 1. Legal Proceedings
For a description of certain other legal and environmental
proceedings, see Note 11 to the unaudited interim condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q.
Item 4. Other Information
Mine Safety Disclosures
Safety is the companys top priority, and we are committed to providing a healthy
and safe work environment for our employees, contractors and all others at our sites to help meet our company-wide goal of achieving no harm to people.
The operations at the companys Aurora, Weeping Water and White Springs facilities are subject to the Federal Mine Safety and Health Act of 1977, as
amended by the Mine Improvement and New Emergency Response Act of 2006, and the implementing regulations, which impose stringent health and safety standards on numerous aspects of mineral extraction and processing
operations, including the training of personnel, operating procedures, operating equipment and other matters. Our Senior Safety Leadership Team is responsible for managing compliance with
applicable government regulations, as well as implementing and overseeing the elements of our safety program as outlined in our Safety, Health and Environment Manual.
Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1503(a)) requires us to include certain safety information in the periodic reports we file with the United
States Securities and Exchange Commission. The information concerning mine safety violations and other regulatory matters required by Section 1503(a) and Item 104 of Regulation S-K is included in
Exhibit 95 to this Quarterly Report on Form 10-Q.
Item 6. Exhibits
(a) Exhibits
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Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
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. |
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10-Q |
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6/30/2002 |
|
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3(b) |
|
Bylaws of the registrant effective May 15, 2002. |
|
10-Q |
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6/30/2002 |
|
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4(a) |
|
Indenture dated as of February 27, 2003, between the registrant and U.S. Bank National Association, as successor to The Bank of Nova Scotia Trust Company of New York. |
|
10-K |
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12/31/2002 |
|
4(c) |
4(b) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036. |
|
8-K |
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11/30/2006 |
|
4(a) |
4(c) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019. |
|
8-K |
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5/1/2009 |
|
4(b) |
4(d) |
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Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015. |
|
8-K |
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9/25/2009 |
|
4(a) |
4(e) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020. |
|
8-K |
|
9/25/2009 |
|
4(b) |
4(f) |
|
Form of Note relating to the registrants offering of $750,000,000 principal amount of 3.625% Notes due March 15, 2024. |
|
8-K |
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3/7/2014 |
|
4(a) |
4(g) |
|
Revolving Term Credit Facility Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated December 11, 2009. |
|
8-K |
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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 September 23, 2011. |
|
8-K |
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9/26/2011 |
|
4(a) |
4(i) |
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Revolving Term Credit Facility Second Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dates as of May 24, 2013. |
|
8-K |
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5/28/2013 |
|
4(a) |
4(j) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017. |
|
8-K |
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11/29/2010 |
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4(a) |
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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36 |
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Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
Exhibit Number (if different) |
4(k) |
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Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040. |
|
8-K |
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11/29/2010 |
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4(b) |
4(l) |
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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. |
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8-K |
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6/27/2013 |
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4(a) |
4(m) |
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Revolving Term Credit Facility Third Amending Agreement between the Bank of Nova Scotia and other financial institutions and the
registrant dated July 8, 2014. |
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10-Q |
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07/29/2014 |
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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.
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Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
|
Exhibit Number (if different) |
10(a) |
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Consolidated, Restated and Amended Canpotex Shareholders Agreement, Eighth Memorandum of Agreement dated January 1, 2014 between Agrium Inc., Mosaic Canada Crop
Nutrition, LP, by its general partner, 4379934 Canada Ltd., the registrant and Canpotex Limited. |
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10-K |
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12/31/2013 |
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10(b) |
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Consolidated, Restated and Amended Producer Agreement, Eighth Memorandum of Agreement dated January 1, 2014 between Canpotex Limited, Agrium Inc., Mosaic Canada Crop Nutrition, LP,
by its general partner, 4379934 Canada Ltd. and the registrant. |
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10-K |
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12/31/2013 |
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10(c) |
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Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended. |
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8-K |
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3/13/2012 |
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10(a) |
10(d) |
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Resolution and Forms of Agreement for Supplemental Executive Retirement Income Plan, for officers and key employees of the registrant. |
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10-K |
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12/31/1995 |
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10(o) |
10(e) |
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Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant. |
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10-Q |
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6/30/1996 |
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10(x) |
10(f) |
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Amended and restated Supplemental Executive Retirement Income Plan of the registrant and text of amendment to existing supplemental income plan agreements. |
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10-Q |
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9/30/2000 |
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10(mm) |
10(g) |
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Amendment, dated February 23, 2009, to the amended and restated Supplemental Executive Retirement Income Plan. |
|
10-K |
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12/31/2008 |
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10(r) |
10(h) |
|
Amendment, dated December 29, 2010, to the amended and restated Supplemental Executive Retirement Income Plan. |
|
10-K |
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12/31/2010 |
|
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10(r) |
10(i) |
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Form of Letter of amendment to existing supplemental income plan agreements of the registrant. |
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10-K |
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12/31/2002 |
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10(cc) |
10(j) |
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Amended and restated agreement dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Executive Retirement Income Plan. |
|
10-K |
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12/31/2006 |
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10(s) |
10(k) |
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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 |
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12/31/2008 |
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10(u) |
10(l) |
|
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 |
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12/31/2008 |
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10(v) |
10(m) |
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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. |
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10-K |
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12/31/2008 |
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10(w) |
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37 |
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
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Exhibit Number (if different) |
10(n) |
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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. |
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10-K |
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12/31/2010 |
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10(y) |
10(o) |
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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 |
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12/31/2010 |
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10(z) |
10(p) |
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Supplemental Retirement Agreement dated December 24, 2008, between the registrant and Stephen F. Dowdle. |
|
10-K |
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12/31/2011 |
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10(bb) |
10(q) |
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Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999. |
|
10-Q |
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6/30/2002 |
|
|
10(aa) |
10(r) |
|
Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2008 |
|
|
10(z) |
10(s) |
|
Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2008 |
|
|
10(aa) |
10(t) |
|
Amendment No. 3, dated December 2, 2013, to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2013 |
|
|
|
10(u) |
|
Amendment No. 4, dated February 25, 2014 to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2013 |
|
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10(v) |
|
Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant. |
|
10-K |
|
|
12/31/1995 |
|
|
10(p) |
10(w) |
|
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(x) |
|
Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant. |
|
10-K |
|
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12/31/1995 |
|
|
10(q) |
10(y) |
|
Resolution and Form of Agreement of Indemnification dated January 24, 2001. |
|
10-K |
|
|
12/31/2000 |
|
|
10(ii) |
10(z) |
|
Resolution and Form of Agreement of Indemnification dated July 21, 2004. |
|
10-Q |
|
|
6/30/2004 |
|
|
10(ii) |
10(aa) |
|
Chief Executive Officer Medical and Dental Benefits. |
|
10-K |
|
|
12/31/2010 |
|
|
10(jj) |
10(bb) |
|
The Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors. |
|
10-Q |
|
|
3/31/2012 |
|
|
10(ll) |
10(cc) |
|
Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended. |
|
10-Q |
|
|
3/31/2005 |
|
|
10(nn) |
10(dd) |
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Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended. |
|
10-Q |
|
|
3/31/2006 |
|
|
|
10(ee) |
|
Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement. |
|
10-Q |
|
|
3/31/2007 |
|
|
|
10(ff) |
|
Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement. |
|
10-Q |
|
|
3/31/2008 |
|
|
|
10(gg) |
|
Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement. |
|
10-Q |
|
|
3/31/2009 |
|
|
10(mm) |
10(hh) |
|
Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/7/2010 |
|
|
10.1 |
10(ii) |
|
Potash Corporation of Saskatchewan Inc. 2011 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/13/2011 |
|
|
10(a) |
10(jj) |
|
Potash Corporation of Saskatchewan Inc. 2012 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/18/2012 |
|
|
10(a) |
10(kk) |
|
Potash Corporation of Saskatchewan Inc. 2013 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/17/2013 |
|
|
10(a) |
10(ll) |
|
Potash Corporation of Saskatchewan Inc. 2014 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/16/2014 |
|
|
10(a) |
10(mm) |
|
Medium-Term Incentive Plan of the registrant effective January 1, 2012. |
|
10-K |
|
|
12/31/2011 |
|
|
10(uu) |
10(nn) |
|
Executive Employment Agreement, dated July 1, 2014, between the registrant and Jochen A. Tilk. |
|
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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38 |
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Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
Exhibit Number (if different) |
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. |
|
|
|
|
|
|
|
|
|
39 |
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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.
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POTASH CORPORATION OF SASKATCHEWAN INC. |
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October 28, 2014 |
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By: |
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/s/ JOSEPH PODWIKA |
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Joseph Podwika |
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Senior Vice President, General Counsel and Secretary |
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October 28, 2014 |
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By: |
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/s/ WAYNE R. BROWNLEE |
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Wayne R. Brownlee |
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Executive Vice President, Treasurer and
Chief Financial Officer (Principal Financial and
Accounting Officer) |
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PotashCorp 2014 Third Quarter Quarterly Report on Form 10-Q |
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40 |
EXHIBIT INDEX
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|
|
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|
|
|
|
Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
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 to The Bank of Nova Scotia Trust Company of New York. |
|
10-K |
|
12/31/2002 |
|
4(c) |
4(b) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036. |
|
8-K |
|
11/30/2006 |
|
4(a) |
4(c) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019. |
|
8-K |
|
5/1/2009 |
|
4(b) |
4(d) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015. |
|
8-K |
|
9/25/2009 |
|
4(a) |
4(e) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020. |
|
8-K |
|
9/25/2009 |
|
4(b) |
4(f) |
|
Form of Note relating to the registrants offering of $750,000,000 principal amount of 3.625% Notes due March 15, 2024. |
|
8-K |
|
3/7/2014 |
|
4(a) |
4(g) |
|
Revolving Term Credit Facility Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated December 11, 2009. |
|
8-K |
|
12/15/2009 |
|
4(a) |
4(h) |
|
Revolving Term Credit Facility First Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated 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 dates as of May 24, 2013. |
|
8-K |
|
5/28/2013 |
|
4(a) |
4(j) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017. |
|
8-K |
|
11/29/2010 |
|
4(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
Exhibit Number (if different) |
4(k) |
|
Form of Note relating to the registrants offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040. |
|
8-K |
|
11/29/2010 |
|
4(b) |
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) |
4(m) |
|
Revolving Term Credit Facility Third Amending Agreement between the Bank of Nova Scotia and other financial institutions and the
registrant dated July 8, 2014. |
|
10-Q |
|
07/29/2014 |
|
|
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.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
|
Exhibit Number (if different) |
10(a) |
|
Consolidated, Restated and Amended Canpotex Shareholders Agreement, Eighth Memorandum of Agreement dated January 1, 2014 between Agrium Inc., Mosaic Canada Crop
Nutrition, LP, by its general partner, 4379934 Canada Ltd., the registrant and Canpotex Limited. |
|
10-K |
|
|
12/31/2013 |
|
|
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10(b) |
|
Consolidated, Restated and Amended Producer Agreement, Eighth Memorandum of Agreement dated January 1, 2014 between Canpotex Limited, Agrium Inc., Mosaic Canada Crop Nutrition, LP,
by its general partner, 4379934 Canada Ltd. and the registrant. |
|
10-K |
|
|
12/31/2013 |
|
|
|
10(c) |
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Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended. |
|
8-K |
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3/13/2012 |
|
|
10(a) |
10(d) |
|
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(e) |
|
Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant. |
|
10-Q |
|
|
6/30/1996 |
|
|
10(x) |
10(f) |
|
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(g) |
|
Amendment, dated February 23, 2009, to the amended and restated Supplemental Executive Retirement Income Plan. |
|
10-K |
|
|
12/31/2008 |
|
|
10(r) |
10(h) |
|
Amendment, dated December 29, 2010, to the amended and restated Supplemental Executive Retirement Income Plan. |
|
10-K |
|
|
12/31/2010 |
|
|
10(r) |
10(i) |
|
Form of Letter of amendment to existing supplemental income plan agreements of the registrant. |
|
10-K |
|
|
12/31/2002 |
|
|
10(cc) |
10(j) |
|
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(k) |
|
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(l) |
|
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(m) |
|
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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
|
Exhibit Number (if different) |
10(n) |
|
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(o) |
|
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(p) |
|
Supplemental Retirement Agreement dated December 24, 2008, between the registrant and Stephen F. Dowdle. |
|
10-K |
|
|
12/31/2011 |
|
|
10(bb) |
10(q) |
|
Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999. |
|
10-Q |
|
|
6/30/2002 |
|
|
10(aa) |
10(r) |
|
Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2008 |
|
|
10(z) |
10(s) |
|
Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2008 |
|
|
10(aa) |
10(t) |
|
Amendment No. 3, dated December 2, 2013, to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2013 |
|
|
|
10(u) |
|
Amendment No. 4, dated February 25, 2014 to the Supplemental Retirement Plan for U.S. Executives. |
|
10-K |
|
|
12/31/2013 |
|
|
|
10(v) |
|
Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant. |
|
10-K |
|
|
12/31/1995 |
|
|
10(p) |
10(w) |
|
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(x) |
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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(y) |
|
Resolution and Form of Agreement of Indemnification dated January 24, 2001. |
|
10-K |
|
|
12/31/2000 |
|
|
10(ii) |
10(z) |
|
Resolution and Form of Agreement of Indemnification dated July 21, 2004. |
|
10-Q |
|
|
6/30/2004 |
|
|
10(ii) |
10(aa) |
|
Chief Executive Officer Medical and Dental Benefits. |
|
10-K |
|
|
12/31/2010 |
|
|
10(jj) |
10(bb) |
|
The Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors. |
|
10-Q |
|
|
3/31/2012 |
|
|
10(ll) |
10(cc) |
|
Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended. |
|
10-Q |
|
|
3/31/2005 |
|
|
10(nn) |
10(dd) |
|
Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended. |
|
10-Q |
|
|
3/31/2006 |
|
|
|
10(ee) |
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Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement. |
|
10-Q |
|
|
3/31/2007 |
|
|
|
10(ff) |
|
Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement. |
|
10-Q |
|
|
3/31/2008 |
|
|
|
10(gg) |
|
Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement. |
|
10-Q |
|
|
3/31/2009 |
|
|
10(mm) |
10(hh) |
|
Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/7/2010 |
|
|
10.1 |
10(ii) |
|
Potash Corporation of Saskatchewan Inc. 2011 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/13/2011 |
|
|
10(a) |
10(jj) |
|
Potash Corporation of Saskatchewan Inc. 2012 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/18/2012 |
|
|
10(a) |
10(kk) |
|
Potash Corporation of Saskatchewan Inc. 2013 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/17/2013 |
|
|
10(a) |
10(ll) |
|
Potash Corporation of Saskatchewan Inc. 2014 Performance Option Plan and Form of Option Agreement. |
|
8-K |
|
|
5/16/2014 |
|
|
10(a) |
10(mm) |
|
Medium-Term Incentive Plan of the registrant effective January 1, 2012. |
|
10-K |
|
|
12/31/2011 |
|
|
10(uu) |
10(nn) |
|
Executive Employment Agreement, dated July 1, 2014, between the registrant and Jochen A. Tilk. |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated By Reference
(File No. 001-10351, unless otherwise indicated) |
Exhibit Number |
|
Description of Document |
|
Form |
|
Filing Date/Period End Date |
|
Exhibit Number (if different) |
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. |
|
|
|
|
|
|
Exhibit 10(nn)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of July, 2014.
BETWEEN:
Potash Corporation of Saskatchewan
Inc. (the Corporation)
- and -
Jochen E. Tilk (the Executive)
WHEREAS the Corporation wishes to employ the Executive and the Executive wishes to be employed by the Corporation as the Chief Executive Officer of the
Corporation;
AND WHEREAS the Corporation and the Executive have agreed that the employment of the Executive by the Corporation will be in accordance with
the provisions of this Agreement and the Conditional Offer of Employment dated April 5, 2014 (the Offer) which is attached hereto as Schedule A and hereby incorporated into this Agreement;
NOW THEREFORE, THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants herein contained and for other good and valuable consideration, the
parties hereto agree as follows:
1.1 Subject to the terms and conditions set out in this Agreement, the Corporation
shall employ the Executive as the Chief Executive Officer of the Corporation. The Executive shall report to the Corporations Board of Directors.
1.2 This Agreement and the employment of the Executive in accordance herewith shall be for an indefinite period and may be terminated by the Executive or the
Corporation in accordance with the terms of this Agreement.
1.3 The Executive agrees to perform the duties and responsibilities which are normally
associated with the position of Chief Executive Officer, in addition to carrying out such other duties and responsibilities which are assigned to him from time to time by the Board of Directors. The Executive shall perform his duties and
responsibilities diligently and in good faith, using his energy, skill and best efforts to further the business and interests of the Corporation.
1.4 The
Executive shall at all times comply with all applicable laws and regulations, and all of the Corporations policies and procedures, including but not limited to the Core Values and Code of Conduct, the Respect in the Workplace Policy, and the
Employee Handbook for Saskatoon Corporate Employees. In the event any of the Corporations policies are in conflict with this Agreement, this Agreement shall govern.
1.5 The Executive agrees to relocate to and become a resident of the City of Saskatoon and make his best efforts to actively participate in the Saskatoon
community during the term of his employment with the Corporation.
1.6 The Executive agrees that prior to accepting any directorship, advisory role or
other similar role with another company (except an associate or affiliate of the Corporation), the Executive shall obtain the written consent of the Corporation. Any such role with outside corporations shall not conflict with or impair the
performance of the Executives duties and responsibilities as set out in this Agreement.
1
1.7 The Executive agrees that he shall, no later than July 1, 2019, own stock of the Corporation valued at
no less than five (5) times his then-current annual salary. Vested Restricted Share Units, Deferred Share Units and earned but unvested share units shall be considered stock for the purposes of this requirement as described in the Offer.
1.8 The position of Chief Executive Officer of the Corporation is considered a safety-sensitive position and accordingly the Executive shall complete a
controlled substance test in accordance with the Corporations applicable policies.
2. |
REMUNERATION AND BENEFITS |
2.1 In consideration for performance of his duties and
responsibilities as set out herein, the Corporation shall pay the Executive the salary as described in the Offer. The Executive shall also be entitled to participate in the Corporations Short-Term Incentive Plan and in the Multi-Year Incentive
Plan for the Executive as described in the Offer. The specific terms of the Multi-Year Incentive Plan, shall be established in accordance with the Offer.
2.2 The Executive shall also be entitled to participate in the Corporations PCS Inc. Pension Plan, and either a new supplemental defined contribution
pension plan or the Corporations Supplemental Executive Retirement Income plan as set out in the Offer.
2.3 The Executive shall also be entitled to
participate in all executive healthcare benefits that the Corporation provides, including an annual executive physical examination at a Canadian facility, as set out in the Offer. The Executive is entitled to reimbursement for relocation expenses in
accordance with the Global Relocation Policy.
2.4 The Executive shall be entitled to five (5) weeks paid vacation on an annual basis, which
will be pro-rated for 2014.
2.5 An assigned underground parking space is available to the Executive, the cost of which shall be shared by the Executive
and the Corporation in accordance with the Corporations Parking Policy. The Parking Policy and the cost of the Executives parking space are subject to change by the Corporation and the third party vendor from which the space is leased.
2.6 The Corporation wishes to keep the Executive whole from a Canadian income tax perspective, and therefore agrees to indemnify the
Executive against any United States federal and state income tax that may arise as a result of the Executive performing or exercising his duties and responsibilities in the United States. The parties agree that the indemnity shall apply only to the
extent that the Executives United States federal and state income tax exceeds the amount of any Canadian federal and provincial foreign income tax credit (deduction) the Executive receives or is entitled to receive in Canada in respect of such
United States federal or state income tax.
In addition to the terms set out in the Offer, the following terms apply to the
termination of the Executives employment with the Corporation:
3.1 |
Termination by the Corporation for Just Cause |
3.1.1 The Corporation may terminate the Executives
employment at any time immediately and without notice, severance or pay in lieu of notice for just cause. Just cause shall include any act or conduct which at law constitutes just cause, including but not limited to:
|
(a) |
Failure to perform the duties set out in this Agreement; |
2
|
(b) |
Breach of any of the Corporations policies; |
|
(c) |
Having a negative result on the Executives controlled substance test; |
|
(d) |
Engaging in any conduct that is materially injurious to the Corporation, financially or otherwise; |
|
(e) |
A breach of any provision in Article 4 of this Agreement and/or the Non-Competition section of the Offer; |
|
(f) |
The conviction of the Executive of an indictable offence; or |
|
(g) |
Fraud, theft, gross negligence, willful misconduct or lack of good faith by the Executive that relates to or affects the Corporation. |
3.1.2 In the event the Corporation terminates the Executive for just cause, the Corporation shall provide to the Executive a written description of the nature
of the just cause.
3.2 |
Termination by the Corporation without Just Cause |
The Corporation may terminate the Executives
employment at any time in its absolute discretion for any reason. The terms and conditions applicable to a termination of the Executive without just cause are as set out in the Offer. The severance amounts payable to the Executive shall be paid upon
receipt of an executed release from the Executive.
3.3.1 For the purposes of this Agreement, Change in Control shall include
any of the following:
|
(a) |
Within any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Corporation and any new directors whose appointment by the Board or nominated for
election by shareholders of the Corporation was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose appointment or nomination for election was previously
so approved, cease for any reason to constitute a majority of the Board; |
|
(b) |
There occurs an amalgamation, merger, consolidation, wind-up, reorganization or restructuring of the Corporation with or into any other entity, or a similar event or series of such events, other than any such event or
series of events which results in securities of the surviving or consolidated corporation representing 50% or more of the combined voting power of the surviving or consolidated corporations then outstanding securities entitled to vote in the
election of directors of the surviving or consolidated corporation being beneficially owned, directly or indirectly, by the persons who were the holders of the Corporations outstanding securities entitled to vote in the election of directors
of the Corporation prior to such event or series of events in substantially the same proportions as their ownership immediately prior to such event of the Corporations then outstanding securities entitled to vote in the election of the
directors of the Corporation; |
|
(c) |
50% or more of the fixed assets (based on book value as shown on the most recent available audited annual or unaudited quarterly consolidated financial statements) of the Corporation are sold or otherwise disposed of
(by liquidation, dissolution, dividend or otherwise) in one transaction or series of transactions within any twelve month period; |
|
(d) |
Any party, including persons acting jointly or in concert with that party, becomes (through take-over bid or otherwise) the beneficial owner, directly
or indirectly, of securities of the Corporation |
3
|
representing 20% or more of the combined voting power of the Corporations then outstanding securities entitled to vote in the election of directors of the Corporation, unless in any
particular situation the Board determines in advance of such event that such event shall not constitute a change in control; or |
|
(e) |
There is a public announcement of a transaction that would constitute a change in control under clause (b) (c) or (d) of this section and the Board determines that the change in control resulting from
such transaction will be deemed to have occurred as of a specific date earlier than the date under (b) (c) or (d) as applicable. |
3.3.1 For the purposes of this Agreement, Good Reason shall include:
|
(a) |
A substantial diminution in the Executives authority, duties, responsibilities or status (including offices, title and reporting requirements) from those in effect immediately prior to the Change in Control;
|
|
(b) |
The Corporation requiring the Executive to be based at a location in excess of eighty (80) kilometers from the location of the Executives principal job location or office immediately prior to the Change in
Control, except for required travel on Corporation business to an extent substantially consistent with the Executives business obligations immediately prior to the Change in Control; |
|
(c) |
A reduction in the Executives base salary, or a substantial reduction in the Executives target compensation under any incentive compensation plan, as in effect as of the date of the Change in Control;
|
|
(d) |
A failure by the Corporation to increase the Executives base salary in a manner consistent (both as to frequency and percentage increase) with practices in effect immediately prior to the Change in Control or with
practices implemented subsequent to the Change in Control with respect to similarly positioned employees; or |
|
(e) |
A failure by the Corporation to continue in effect the Executives participation in the Corporations short and long-term incentive plans, stock option plans, and employee benefit and retirement plans,
policies or practices at a level substantially similar or superior to and on a basis consistent with the relative levels of participation of other similarly-positioned employees, as existed immediately prior to the Change in Control.
|
However, Good Reason shall not include any of the above events occurring with the consent of the Executive.
3.3.2 If a Change in Control of the Corporation occurs which results in a Good Reason, the Executive may, within two (2) years of the effective date of
the Change in Control, terminate his employment with the Corporation upon providing written notice to the Corporation within thirty (30) days of the date of the occurrence of the Good Reason which resulted from the Change in Control.
3.3.3 If a Change in Control occurs and either (a) the Corporation terminates the Executive without just cause within two (2) years of the effective
date of the Change in Control or (b) the Executive terminates his employment following the occurrence of a Good Reason in accordance with the terms of this Agreement, then the Corporation shall pay to the Executive, upon receipt of an executed
release from the Executive, a severance in accordance with the severance provision of the Offer. In addition, if a Change in Control occurs while the Multi-Year Incentive Plan is in effect and before the Restricted Share Units
(RSUs) or Deferred Share Units (DSUs) have been earned or vested and either (a) the Corporation terminates the Executive without just cause or (b) the Executive terminates his employment following the
occurrence of a Good Reason in accordance with the terms of this Agreement, then the full amount of the units granted or earned will vest as of the date of the Change in Control.
4
The amounts payable to the Executive pursuant to this section of this Agreement
shall not be reduced in the event the Executive secures or does not reasonably pursue alternate employment following the termination of his employment with the Corporation.
4. |
NON-SOLICITATION AND NON-COMPETITION |
4.1 During the Executives employment with the
Corporation and for a period of one (1) year after the date of termination of the Executives employment if the Executives employment is terminated within six (6) months of the date of this Agreement, or for a period of two
(2) years after the termination of the Executives employment if the Executives employment is terminated anytime after six (6) months of the date of this Agreement, the Executive shall not, without the prior written consent of
the Corporation, directly or indirectly through any person, agent, employee or representative:
|
(a) |
Engage in any activity, including without limitation, as an officer, director, employee, principal, manager, agent or consultant for another entity that directly competes or is seeking to compete with the Corporation,
any subsidiary or Canpotex Limited in any actual product, service or business activity (or in any product, service or business activity which was under active development while the Executive was employed by the Corporation or a subsidiary if such
development is being actively pursued by the Corporation or a subsidiary during the one (1) or two (2) year periods referred to above as applicable) in any territory in which the Corporation, a subsidiary or Canpotex Limited operates,
engages in any business activity or sells its products; |
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(b) |
Solicit or hire, including without limitation, as an officer, director, employee, principal, manager, agent or consultant for another entity, any individual who was employed by, or provided services as a consultant or
contractor to, the Corporation, a subsidiary or Canpotex Limited at any time within the six months immediately preceding such solicitation or hire; or |
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(c) |
Disclose to anyone outside of the Corporation or a subsidiary, or use in other than the Corporations or a subsidiarys business, any confidential, proprietary or trade secret information or material relating
to the business of the Corporation or its subsidiaries, acquired by the Executive during his employment with the Corporation. For greater certainty, nothing contained herein shall limit the Executives ongoing obligations regarding
confidentiality that may exist pursuant to any other agreement, policy of the Corporation or by operation of law. |
This Agreement shall enure to the benefit of and be binding upon the Corporation, its
successors and permitted assigns, and the Executive and his personal representatives. Neither the Executive nor the Corporation may assign its rights hereunder to another person without the consent of the other party.
This Agreement represents the entire agreement between the parties hereto with respect
to the employment of the Executive by the Corporation. While the Offer forms part of this Agreement, in the event of any conflict or inconsistency between this Agreement and the Offer, this Agreement shall govern to the extent of any conflict or
inconsistency.
5
Any notice required or permitted to be given under this Agreement shall be in writing and shall
be properly given if delivered personally, by facsimile, by prepaid courier service or by certified or prepaid registered mail, addressed as follows (or to such other address provided by one party to the other party):
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Executive: |
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122 1st Avenue South
Suite 500 Saskatoon, Saskatchewan S7K 7G3 |
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Corporation: |
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122 1st Avenue South
Suite 500 Saskatoon, Saskatchewan S7K 7G3
Attn: Chair of the Board of Directors |
5.4 |
Governing Law and Jurisdiction |
This Agreement shall be governed by and construed in accordance with the
laws in force in the Province of Saskatchewan. The Executive and the Corporation each attorn to the exclusive jurisdiction of the courts of Saskatchewan except insofar as a court of another jurisdiction is required to enforce the restrictive
covenants outlined in Article 4 herein.
This Agreement may be signed in two (2) counterparts, each of which shall be deemed
an original and both of which shall together constitute the same instrument.
The Executive acknowledges having had the full opportunity to seek independent legal
advice in connection with the negotiation and execution of this Agreement.
IN WITNESS WHEREOF this Agreement has been executed by the
parties hereto:
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POTASH CORPORATION OF SASKATCHEWAN INC. |
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Per: |
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/s/ Dallas J. Howe |
Chair, Board of Directors |
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/s/ Jochen E. Tilk |
Jochen E. Tilk |
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/s/ Barb Kennedy |
Witness to Signature of Jochen E. Tilk |
6
SCHEDULE A
POTASH CORPORATION OF SASKATCHEWAN
April 5, 2014
Jochen E. Tilk
via E-mail: jochen.tilk@gmail.com
Dear Jochen:
Re: Conditional Offer of Employment
We are pleased to offer you the position of Chief Executive Officer of Potash Corporation of Saskatchewan Inc. (the Company). As discussed, this
offer is conditional upon: 1) you relocating to Saskatoon and becoming an active resident and member of the Saskatoon community; 2) the execution of a subsequent executive employment agreement; and 3) the approval of this offer by the Companys
Board of Directors (the Board).
The following are the basic terms of your offer of employment which will be set out in a subsequent executive
employment agreement:
As the CEO, you will report to the Board. Should you accept this offer, you will commence your employment on July 1, 2014 or
such other date as is mutually agreed, for an indefinite period unless terminated in accordance with any executive employment agreement between you and the Company.
Compensation:
Your initial annual base salary will be
$1,000,000 CDN (less applicable withholdings and deductions) which will be paid monthly. After December, 2014, you will be eligible for an increase to be effective January 1, 2015 in accordance with Company policies and procedures and based on
performance and internal and external equity.
You will be entitled participate in the Companys short-term incentive program. Your target will be
100% of your salary. Your target will be prorated in 2014 based on your start date and days worked vs. total work days in the calendar year.
You will
also be entitled to participate in a Multi-year Incentive program unique to you for the period from your start date through December 31, 2015. This is offered to you in lieu of participation in the Companys long-term compensation plans
and in lieu of receiving a signing bonus or other initial payment.
Further details are set out in the attached Schedule A.
Retirement Plan:
You will be entitled to participate in
the Companys base pension plan which is a defined-contribution plan involving employee and Company contributions. In addition, the Company will undertake to provide a
7
new supplemental defined-contribution pension plan that will be competitive with the retirement benefits provided to executives in Canada at the median level. Your benefits under that new plan
will include service retroactive to the date your employment commences and at your compensation from that date. If a new plan has not been designed by June 30, 2015, you will be included as a member in the existing defined-benefit Supplemental
Executive Retirement Income (SERI) plan effective as of the date of start of employment.
Benefits and Perquisites:
You will be reimbursed (and tax gross up) for all reasonable expenses actually and properly incurred in connection with performing your duties, including
reimbursement for companion travel required by the Company for Company business.
You will also be reimbursed for all reasonable moving expenses incurred
in accordance with the Company policy.
You will be entitled to participate in all Company benefits provided to its executives, including one executive
medical physical per year at a mutually agreed Canadian medical facility.
Stock Ownership:
As the CEO, you will be required to own Company stock valued at five (5) times your annual salary by the completion of five (5) years of employment.
Vested Restricted Share Units and Deferred Share Units will be considered stock for this requirement. Earned but unvested units will also be considered for this requirement if you plan to pay the taxes on exercise from other sources.
Change in Control:
Your executive employment agreement
will contain a double-trigger change of control provision which shall be mutually agreed upon.
Severance:
If, despite best efforts by all parties, the Board decides that the situation is not working, your employment may be terminated by the Board immediately
without just cause and the Company shall provide the following as severance, upon receipt of an executed release:
(a) |
If terminated within six (6) months of the commencement of your employment: |
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payment representing (1) year of the then-current base salary plus your target short term incentive bonus; and |
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benefits for one (1) year. |
(b) |
If terminated anytime after six (6) months of the commencement of your employment: |
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payment of two (2) years of the then-current base salary plus your short term incentive bonus (The yearly short-term bonus amount shall be calculated by averaging the amount of short term bonuses received by
you in the two years prior to your termination. However, if you are dismissed after six months of employment but before the completion of two years of employment, the yearly bonus amount shall be the target short-term bonus for the purpose of
calculating the severance.; and |
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benefits for two (2) years. |
8
In the event of termination of your employment by the Company without just cause, you will continue to be under
the Company pension and SERI plans or such other pension plan for one year from the date of your termination if you are terminated within six (6) months of the commencement of your employment with the Company; and for two (2) years from
the date of your termination if you are terminated anytime after six (6) months of your employment.
To be clear, the above severance is not payable
where the Company terminates your employment for just cause or if you resign or retire.
Non-competition:
You agree not to directly or indirectly or in any manner engage in any activities or business that is materially similar to or is competitive with or competes
with the Company or any aspect of the business of the Company following the termination of your employment with the Company for any reason, for a period of one (1) year if terminated within six (6) months of your employment; and for a
period of two (2) years if terminated anytime after six (6) months of employment.
We look forward to you joining the Company and hope that you
will find this position to be both challenging and professionally rewarding.
I look forward to hearing from you
Yours truly,
Dallas Howe
Chair, Board of Directors
Potash Corporation of Saskatchewan
Inc.
9
SCHEDULE A
Short-Term Incentive
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Target of 100% of salary, prorated in 2014 based on start date using days worked vs. total work days in the year. |
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Nominal amount of STI dollars will be determined for each year (2014 and 2015) according to the existing STIP that applies to all members of the plan (i.e. the formula and company results will be used to calculate the
nominal amount available). |
The percentage of this nominal amount that will actually be paid will be based on performance on goals agreed to
in the first twelve weeks after the start date. The following is an illustration of goals and the mechanics:
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Goal Performance |
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Goal Rating |
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Exceeded above and beyond |
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10 |
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Met all of goal |
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8 |
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Met most of goal |
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6 |
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Fell well short of goal |
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4 |
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Did not perform goal |
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0 |
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Goal |
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Weighting |
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Rating |
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Product |
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Goal 1: Residency |
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10 |
% |
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10 |
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1.00 |
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Goal 2: Leadership Team |
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15 |
% |
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8 |
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1.20 |
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Goal 3: PCS Knowledge |
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20 |
% |
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8 |
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1.60 |
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Goal 4: Strategy |
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25 |
% |
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7 |
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1.75 |
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Goal 5: Messaging |
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15 |
% |
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6 |
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0.90 |
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Goal 6: Compensation Plans |
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15 |
% |
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8 |
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1.20 |
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Totals |
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100 |
% |
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7.65 |
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A composite STI goal performance of 7.65 would earn 94.75% of the nominal amount.
10
Multi-Year Incentive
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In lieu of participation in the companys long-term compensation plans and in lieu of a signing bonus or other initial payment, the following relatively simple compensation plan will be used for the period through
December 21, 2015. |
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This plan is based on full-value stock units (Restricted Stock Units (RSUs) or Deferred Share Units (DSUs) as selected by the CEO prior to employment). The units will vest in three years from the grant date and will be
subject to a performance period from the start date to December 31, 2015 with the number of units vested being based on company performance and individual CEO performance during the performance period. |
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The number of RSUs granted will be the number that would equal $7.5 million using the average price of PotashCorp stock on the TSX averaged over the 20 trading days prior to the employment start date For results at the
top award level (Level A), the full amount will be earned. For results at the lower award level (Level B), 70% of the units will be earned. If performance falls below the threshold, no units will be earned. In all cases, vesting will take place at
the end of three full years of employment. |
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Company performance would represent 50% of the evaluation and individual performance would represent 50%. |
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Company performance will be focused on important internal metrics that can be influenced in the first 18 months with the company. No amount would be earned if the metrics are below the 2013 baseline. |
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The metrics to assess company performance will be established within the first twelve weeks after the start date. The following internal metrics are used for illustration of the mechanics. All comparisons are to 2013
results. (The weightings and % improvement numbers below are also just placeholders.) |
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Metric |
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Weighting |
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Improvement |
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Vesting |
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0 |
% |
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None |
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Safety, environmental performance |
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10 |
% |
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5 |
% |
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Level B |
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10 |
%+ |
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Level A |
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0 |
% |
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None |
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Gross Margin Improvement over 2013 Potash |
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25 |
% |
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5 |
% |
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Level B |
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10 |
%+ |
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Level A |
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0 |
% |
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None |
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Gross Margin Improvement over 2013 Nitrogen |
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20 |
% |
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5 |
% |
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Level B |
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0 |
%+ |
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Level A |
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0 |
% |
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None |
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Gross Margin Improvement over 2013 Phosphate |
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20 |
% |
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5 |
% |
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Level B |
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10 |
%+ |
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Level A |
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0 |
% |
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None |
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Conversion of Net Income to Cash |
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25 |
% |
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5 |
% |
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Level B |
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10 |
%+ |
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Level A |
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Interpolation between vesting percentages will be done using the judgment of the Compensation Committee at the end of the performance period. |
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The assessment of individual performance under this plan will be based on specific performance objectives established within the first twelve weeks after the start date. The following are examples to demonstrate the
mechanics: |
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With the senior leadership team and the Board of Directors, develop a multi-year strategy by the end of 2015 that has been approved by all. |
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Develop corporate compensation plans linked to the strategy for use in 2016 and beyond. |
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Establish and implement an effective operational excellence plan. |
11
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Become familiar with the key players in the industry, the governments of influence and the community of Saskatoon and become involved in significant activities in all three areas. |
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The individual performance will be assessed in the same way as it was under the STI plan that is by weighting the goals and assigning a numerical rating. An overall rating of 10 on the objectives would earn 100% of the
eligible units (Level A) and an overall rating on the objectives of 6 would earn 70% of the eligible units (Level B). |
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The two components company performance and individual performance will be added together to result in a number of stock units granted. |
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If RSUs are selected for the award, they will be settled in cash. If DSUs are selected, they will be settled in cash when employment is terminated. |
12
Exhibit 31(a)
CERTIFICATION
I, Jochen Tilk, certify
that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Potash Corporation of Saskatchewan Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent functions): |
(a) all significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants
internal control over financial reporting.
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Date: October 28, 2014 |
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By: |
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/s/ Jochen Tilk |
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Jochen Tilk |
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President and Chief Executive Officer |
Exhibit 31(b)
CERTIFICATION
I, Wayne R. Brownlee,
certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Potash Corporation of Saskatchewan Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent functions): |
(a) all significant deficiencies and
material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants
internal control over financial reporting.
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Date: October 28, 2014 |
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By: |
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/s/ Wayne R. Brownlee |
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Wayne R. Brownlee |
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Executive Vice President, Treasurer and Chief Financial Officer |
Exhibit 32
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title
18, United States Code), each of the undersigned officers of Potash Corporation of Saskatchewan Inc. (the Company), does hereby certify, to such officers knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 (the Form 10-Q), of the Company fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the
Company.
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Date: October 28, 2014 |
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By: |
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/s/ Jochen Tilk |
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Jochen Tilk |
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President and Chief Executive Officer |
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Date: October 28, 2014 |
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By: |
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/s/ Wayne R. Brownlee |
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Wayne R. Brownlee |
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Executive Vice President, Treasurer and Chief Financial Officer |
The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation
S-K, Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q.
Exhibit 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.
The following table reflects citations, orders and notices issued to us by the United States Mine Safety and Health Administration
(the MSHA) for the quarter ended September 30, 2014 (the Reporting Period) and contains certain additional information as required by Section 1503(a) and Item 104 of
Regulation S-K of the United States Securities and Exchange Commission, including information regarding mining-related fatalities, proposed assessments from the MSHA and legal actions (Legal
Actions) before the United States Federal Mine Safety and Health Review Commission (FMSHRC), an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the United
States Federal Mine Safety and Health Act of 1977, as amended by the Mine Improvement and New Emergency Response Act of 2006 (the Act).
Included below is the information required by Section 1503(a) with respect to our facilities at Aurora, North Carolina (MSHA
Identification Number 31-00212) (Aurora), Weeping Water, Nebraska (MSHA Identification Number 25-00554) (Weeping Water) and White Springs, Florida (MSHA Identification Number
08-00798) (White Springs) for the Reporting Period:
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Aurora |
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Weeping
Water |
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White
Springs |
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(a) |
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the total number of alleged violations of mandatory health or safety standards that could significantly or substantially contribute to the cause and effect of a coal or other mine safety or health hazard under Section 104 of the
Act for which a citation was received from the MSHA |
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0 |
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0 |
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1 |
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(b) |
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the total number of orders issued under Section 104(b) of the Act |
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0 |
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0 |
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0 |
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(c) |
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the total number of citations received and orders issued under Section 104(d) of the Act for alleged unwarrantable failures of the Company to comply with mandatory health or safety standards |
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0 |
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0 |
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0 |
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(d) |
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the total number of alleged flagrant violations under Section 110(b)(2) of the Act |
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0 |
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0 |
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0 |
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(e) |
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the total number of imminent danger orders issued under Section 107(a) of the Act |
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0 |
|
|
|
0 |
|
|
|
0 |
|
(f) |
|
the total value (in dollars) of proposed assessments from the MSHA under the Act |
|
$ |
0 |
|
|
$ |
200 |
|
|
$ |
17,800 |
(1) |
(g) |
|
the total number of mining-related fatalities |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
(h) |
|
received notice from the MSHA of a pattern of violations under Section 104(e) of the Act |
|
|
No |
|
|
|
No |
|
|
|
No |
|
(i) |
|
received notice from the MSHA of potential to have a pattern of violations under Section 104(e) of the Act |
|
|
No |
|
|
|
No |
|
|
|
No |
|
(j) |
|
the total number of Legal Actions pending as of the last day of the Reporting Period |
|
|
0 |
|
|
|
0 |
|
|
|
1 |
|
(k) |
|
Legal Actions initiated during the Reporting Period |
|
|
0 |
|
|
|
0 |
|
|
|
1 |
|
(l) |
|
Legal Actions resolved during the Reporting Period |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
(1) |
This amount represents a proposed penalty of $17,800.00 that is being contested. |
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