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 June 30, 2014

OR

 

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

Commission File Number 1-10351

 

 

Potash Corporation of Saskatchewan Inc.

(Exact name of registrant as specified in its charter)

 

Canada		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
122 — 1st Avenue South Saskatoon, Saskatchewan, Canada (Address of principal executive offices)		S7K 7G3 (Zip Code)

306-933-8500

(Registrant’s telephone number, including area code)

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

  Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

  Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

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

  Yes  ¨    No  þ

As at July 7, 2014, Potash Corporation of Saskatchewan Inc. had 829,282,715 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)

 

As at		June 30,    2014				December 31, 2013
Assets
Current assets
Cash and cash equivalents		$	107			$	628
Receivables			848				752
Inventories (Note 2)			708				728
Prepaid expenses and other current assets			57				81
			1,720				2,189
Non-current assets
Property, plant and equipment			12,254				12,233
Investments in equity-accounted investees			1,284				1,276
Available-for-sale investments (Note 3)			1,719				1,722
Other assets			375				401
Intangible assets			139				137
Total Assets		$	17,491			$	17,958
Liabilities
Current liabilities
Short-term debt and current portion of long-term debt (Note 4)		$	430			$	967
Payables and accrued charges			976				1,104
Current portion of derivative instrument liabilities			40				42
			1,446				2,113
Non-current liabilities
Long-term debt (Note 4)			3,711				2,970
Derivative instrument liabilities			111				129
Deferred income tax liabilities			2,115				2,013
Pension and other post-retirement benefit liabilities			424				410
Asset retirement obligations and accrued environmental costs			599				557
Other non-current liabilities and deferred credits			138				138
Total Liabilities			8,544				8,330
Shareholders’ Equity
Share capital (Note 5)			1,608				1,600
Contributed surplus			230				219
Accumulated other comprehensive income			724				673
Retained earnings			6,385				7,136
Total Shareholders’ Equity			8,947				9,628
Total Liabilities and Shareholders’ Equity		$	17,491			$	17,958

(See Notes to the Condensed Consolidated Financial Statements)

 

1		PotashCorp 2014 Second 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)

 

		Three Months Ended June 30								Six Months Ended June 30
		2014				2013				2014				2013
Sales (Note 6)		$	1,892			$	2,144			$	3,572			$	4,244
Freight, transportation and distribution			(158	)			(147	)			(324	)			(296	)
Cost of goods sold			(987	)			(1,018	)			(1,936	)			(2,102	)
Gross Margin			747				979				1,312				1,846
Selling and administrative expenses			(55	)			(51	)			(123	)			(117	)
Provincial mining and other taxes			(69	)			(81	)			(123	)			(144	)
Share of earnings of equity-accounted investees			32				37				65				117
Dividend income			24				54				93				54
Impairment of available-for-sale investment (Note 3)			—				—				(38	)			—
Other income (expenses)			7				(11	)			31				(12	)
Operating Income			686				927				1,217				1,744
Finance costs			(48	)			(39	)			(95	)			(74	)
Income Before Income Taxes			638				888				1,122				1,670
Income taxes (Note 8)			(166	)			(245	)			(310	)			(471	)
Net Income		$	472			$	643			$	812			$	1,199
Net Income per Share
Basic		$	0.56			$	0.74			$	0.96			$	1.39
Diluted		$	0.56			$	0.73			$	0.95			$	1.37
Dividends Declared per Share		$	0.35			$	0.35			$	0.70			$	0.63
Weighted Average Shares Outstanding
Basic			840,342,000				865,991,000				846,596,000				865,526,000
Diluted			847,014,000				877,141,000				853,320,000				876,930,000

(See Notes to the Condensed Consolidated Financial Statements)

 

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		2

---

Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions of US dollars)

(unaudited)

 

		Three Months Ended June 30								Six Months Ended June 30
(Net of related income taxes)		2014				2013				2014				2013
Net Income		$	472			$	643			$	812			$	1,199
Other comprehensive (loss) income
Items that will not be reclassified to net income:
Net actuarial gain on defined benefit plans (1)			—				150				—				150
Items that have been or may be subsequently reclassified to net income:
Available-for-sale investments (2)
Net fair value (loss) gain during the period			(15	)			(656	)			35				(470	)
Cash flow hedges
Net fair value loss during the period (3)			—				—				(1	)			—
Reclassification to income of net loss (4)			7				8				13				19
Other			2				(2	)			4				(2	)
Other Comprehensive (Loss) Income			(6	)			(500	)			51				(303	)
Comprehensive Income		$	466			$	143			$	863			$	896

 

(1)	Net of income taxes of $NIL (2013 — $(87)) for the three and six months ended June 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 $NIL (2013 — $NIL) for the three months ended June 30, 2014 and $1 (2013 — $NIL) for the six months ended June 30, 2014.

(4)	Net of income taxes of $(4) (2013 — $(4)) for the three months ended June 30, 2014 and $(8) (2013 — $(10)) for the six months ended June 30, 2014.

(See Notes to the Condensed Consolidated Financial Statements)

 

3		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Potash Corporation of Saskatchewan Inc.

Condensed Consolidated Statements of Cash Flow

(in millions of US dollars)

(unaudited)

 

		Three Months Ended June 30								Six Months Ended June 30
		2014				2013				2014				2013
Operating Activities
Net income		$	472			$	643			$	812			$	1,199
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization			182				186				358				340
Share-based compensation			4				5				19				21
Net distributed (undistributed) earnings of equity-accounted investees			28				70				(3	)			(7	)
Impairment of available-for-sale investment (Note 3)			—				—				38				—
Realized excess tax benefit related to share-based compensation			2				9				2				10
Provision for deferred income tax			64				151				110				253
Pension and other post-retirement benefits			12				9				21				(22	)
Other long-term liabilities and miscellaneous			1				34				10				49
Subtotal of adjustments			293				464				555				644
Changes in non-cash operating working capital
Receivables			54				170				(104	)			66
Inventories			(3	)			(6	)			17				41
Prepaid expenses and other current assets			9				12				27				13
Payables and accrued charges			(37	)			(81	)			20				(23	)
Subtotal of changes in non-cash operating working capital			23				95				(40	)			97
Cash provided by operating activities			788				1,202				1,327				1,940
Investing Activities
Additions to property, plant and equipment			(199	)			(354	)			(423	)			(850	)
Other assets and intangible assets			(8	)			(5	)			(10	)			(10	)
Cash used in investing activities			(207	)			(359	)			(433	)			(860	)
Financing Activities
Proceeds from long-term debt obligations			—				—				737				—
Repayment of and finance costs on long-term debt obligations			(500	)			(4	)			(500	)			(254	)
Proceeds from (repayment of) short-term debt obligations			429				(580	)			(41	)			(369	)
Dividends			(283	)			(233	)			(576	)			(410	)
Repurchase of common shares			(669	)			—				(1,065	)			—
Issuance of common shares			16				19				30				21
Cash used in financing activities			(1,007	)			(798	)			(1,415	)			(1,012	)
(Decrease) Increase in Cash and Cash Equivalents			(426	)			45				(521	)			68
Cash and Cash Equivalents, Beginning of Period			533				585				628				562
Cash and Cash Equivalents, End of Period		$	107			$	630			$	107			$	630
Cash and cash equivalents comprised of:
Cash		$	88			$	40			$	88			$	40
Short-term investments			19				590				19				590
		$	107			$	630			$	107			$	630
Supplemental cash flow disclosure
Interest paid		$	68			$	91			$	92			$	100
Income taxes paid		$	120			$	52			$	170			$	107

(See Notes to the Condensed Consolidated Financial Statements)

 

PotashCorp 2014 Second 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)

 

										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			—				—				—				—				—				—				—				812				812
Other comprehensive income			—				—				35				12				—				4				51				—				51
Share repurchase (Note 5)			(53	)			(2	)			—				—				—				—				—				(976	)			(1,031	)
Dividends declared			—				—				—				—				—				—				—				(587	)			(587	)
Effect of share-based compensation including issuance of common shares			40				13				—				—				—				—				—				—				53
Shares issued for dividend reinvestment plan			21				—				—				—				—				—				—				—				21
Balance — June 30, 2014		$	1,608			$	230			$	815			$	(93	)		$	—	(2)		$	2			$	724			$	6,385			$	8,947
Balance — December 31, 2012		$	1,543			$	299			$	1,539			$	(138	)		$	—	(2)		$	(2	)		$	1,399			$	6,671			$	9,912
Net income			—				—				—				—				—				—				—				1,199				1,199
Other comprehensive (loss) income			—				—				(470	)			19				150				(2	)			(303	)			—				(303	)
Dividends declared			—				—				—				—				—				—				—				(544	)			(544	)
Effect of share-based compensation including issuance of common shares			29				11				—				—				—				—				—				—				40
Shares issued for dividend reinvestment plan			13				—				—				—				—				—				—				—				13
Transfer of net actuarial gain on defined benefit plans			—				—				—				—				(150	)			—				(150	)			150				—
Balance — June 30, 2013		$	1,585			$	310			$	1,069			$	(119	)		$	—	(2)		$	(4	)		$	946			$	7,476			$	10,317

 

(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 Second Quarter Quarterly Report on Form 10-Q

---

Potash Corporation of Saskatchewan Inc.

Notes to the Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2014

(in millions of US dollars except as otherwise noted)

(unaudited)

 

 

Standards, amendments and interpretations effective and applied

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

 

Standard		Description		Impact
Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities		Issued as part of the IASB’s offsetting project, amendments clarify certain items regarding offsetting financial assets and financial liabilities.		Adopted retrospectively effective January 1, 2014 with no change to the company’s 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 company’s 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 company’s consolidated financial statements.

Standards, amendments and interpretations not yet effective and not applied

The IASB and IFRIC have issued the following standards and amendments or interpretations to existing standards that were not yet effective and not applied at June 30, 2014. The company does not anticipate early adoption of these standards at this time.

 

 

Standard		Description		Impact		Effective Date (1)
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.		The company is reviewing the standard to determine the potential impact, if any; however, no significant impact is anticipated.		July 1, 2014, applied retrospectively.

 

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

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		6

---

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.
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

 

 

		June 30,    2014				December 31, 2013
Finished products		$	315			$	340
Intermediate products			84				85
Raw materials			94				101
Materials and supplies			215				202
		$	708			$	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.

 

7		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Changes in fair value, and related accounting, for the company’s 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	)

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.

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			1,759,100				40
Issued for dividend reinvestment plan			608,182				21
Repurchased			(29,200,892	)			(53	)
Balance — June 30, 2014			829,282,715			$	1,608

Share Repurchase Program

On July 24, 2013, the company’s Board of Directors authorized a share repurchase program of up to 5 percent of PotashCorp’s 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.

Under this program, the company repurchased for cancellation 17,478,892 common shares during the three months ended June 30, 2014, at a cost of $632 and an average price per share of $36.19. The repurchase resulted in a reduction of share capital of $32, and the excess of net cost over the average book value of the shares was recorded as a reduction of contributed surplus of $1 and a reduction of retained earnings of $599. During the six months ended June 30, 2014, a total of 29,200,892 common shares were repurchased at a cost of $1,031 and an average price per share of $35.31, resulting in a reduction of share capital of $53, a reduction of contributed surplus of $2 and a reduction of retained earnings of $976.

 

PotashCorp 2014 Second 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 company’s operating segments have been determined based on reports reviewed by the Chief Executive Officer, its chief operating decision-maker, that are used to make strategic decisions.

 

		Three Months Ended June 30, 2014
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales — third party		$	747			$	656			$	489			$	—			$	1,892
Freight, transportation and distribution — third party			(79	)			(28	)			(51	)			—				(158	)
Net sales — third party			668				628				438				—
Cost of goods sold — third party			(273	)			(342	)			(372	)			—				(987	)
Margin (cost) on inter-segment sales (1)			—				18				(18	)			—				—
Gross margin			395				304				48				—				747
Depreciation and amortization			(44	)			(44	)			(90	)			(4	)			(182	)
Assets			9,365				2,258				2,385				3,483				17,491
Cash flows for additions to property, plant and equipment			103				48				45				3				199

 

(1)	Inter-segment net sales were $33.

 

		Three Months Ended June 30, 2013
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales — third party		$	975			$	629			$	540			$	—			$	2,144
Freight, transportation and distribution — third party			(68	)			(27	)			(52	)			—				(147	)
Net sales — third party			907				602				488				—
Cost of goods sold — third party			(294	)			(333	)			(391	)			—				(1,018	)
Margin (cost) on inter-segment sales (1)			—				7				(7	)			—				—
Gross margin			613				276				90				—				979
Depreciation and amortization			(67	)			(42	)			(74	)			(3	)			(186	)
Assets			8,914				2,198				2,485				4,428				18,025
Cash flows for additions to property, plant and equipment			264				27				57				6				354

 

(1)	Inter-segment net sales were $35.

 

		Six Months Ended June 30, 2014
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales — third party		$	1,418			$	1,237			$	917			$	—			$	3,572
Freight, transportation and distribution — third party			(165	)			(59	)			(100	)			—				(324	)
Net sales — third party			1,253				1,178				817				—
Cost of goods sold — third party			(558	)			(665	)			(713	)			—				(1,936	)
Margin (cost) on inter-segment sales (1)			—				30				(30	)			—				—
Gross margin			695				543				74				—				1,312
Depreciation and amortization			(96	)			(86	)			(168	)			(8	)			(358	)
Assets			9,365				2,258				2,385				3,483				17,491
Cash flows for additions to property, plant and equipment			227				115				76				5				423

 

(1)	Inter-segment net sales were $58.

 

9		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

		Six Months Ended June 30, 2013
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales — third party		$	1,860			$	1,288			$	1,096			$	—			$	4,244
Freight, transportation and distribution — third party			(139	)			(52	)			(105	)			—				(296	)
Net sales — third party			1,721				1,236				991				—
Cost of goods sold — third party			(604	)			(714	)			(784	)			—				(2,102	)
Margin (cost) on inter-segment sales (1)			—				25				(25	)			—				—
Gross margin			1,117				547				182				—				1,846
Depreciation and amortization			(108	)			(80	)			(145	)			(7	)			(340	)
Assets			8,914				2,198				2,485				4,428				18,025
Cash flows for additions to property, plant and equipment			613				72				122				43				850

 

(1)	Inter-segment net sales were $80.

7. Share-Based Compensation

On May 15, 2014, the company’s 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 company’s common shares on the last trading day immediately preceding the date of the grant, and an option’s maximum term is 10 years. In general, options will vest, if at all, according to a schedule based on the three-year average excess of the company’s consolidated cash flow return on investment over weighted average cost of capital. As of June 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 June 30								Six Months Ended June 30
		2014				2013				2014				2013
Income tax expense		$	166			$	245			$	310			$	471
Actual effective tax rate on ordinary earnings			27%				25%				27%				26%
Actual effective tax rate including discrete items			26%				28%				28%				28%
Discrete tax adjustments that impacted the tax rate		$	(6	)		$	18			$	(4	)		$	37

Significant items to note include the following:

 

Ÿ

The actual effective tax rate on ordinary earnings for the three and six months ended June 30, 2014 increased compared to the same periods last year due to different income weightings between jurisdictions.

Ÿ

In first-quarter 2014, a non-tax deductible impairment of the company’s available-for-sale investment in Sinofert was recorded. This increased the actual effective tax rate including discrete items for the six months ended June 30, 2014 by 1 percent.

Ÿ

In the first six months of 2013, a tax expense of $16 ($1 in the second quarter) was recorded to adjust the 2012 income tax provision.

Ÿ

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

 

PotashCorp 2014 Second 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		June 30,     2014				December 31, 2013
Current income tax assets
Current		Receivables		$	83			$	90
Non-current		Other assets			128				126
Deferred income tax assets		Other assets			9				21
Total income tax assets				$	220			$	237
Current income tax liabilities
Current		Payables and accrued charges		$	(28	)		$	(3	)
Non-current		Other non-current liabilities and deferred credits			(135	)			(135	)
Deferred income tax liabilities		Deferred income tax liabilities			(2,115	)			(2,013	)
Total income tax liabilities				$	(2,278	)		$	(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 arm’s-length transaction between knowledgeable willing parties. The valuation policies and procedures for financial reporting purposes are determined by the company’s finance department.

Due to their short-term nature, the fair value of cash and cash equivalents, receivables, short-term debt, and payables and accrued charges was assumed to approximate carrying value. The company’s derivative instruments and investments in Israel Chemicals Ltd. (“ICL”) and Sinofert were carried at fair value. The fair value of derivative instruments that are not traded in an active market (such as natural gas swaps and foreign currency derivatives) was determined using valuation techniques. The company used a variety of methods and made assumptions that were based on market conditions existing at each reporting date.

The fair value of foreign currency derivatives was determined using quoted forward exchange rates (Level 2) at the statements of financial position dates.

Natural gas swap valuations were 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 company’s 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 and others were not based on observable market data.

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. 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 June 30, 2014 was $4.31 to $5.02 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 company’s derivatives. Interest rates used to discount estimated cash flows at June 30, 2014 were between 0.16 percent and 3.02 percent (December 31, 2013 — between 0.17 percent and 3.59 percent) depending on the settlement date.

Fair value of investments designated as available-for-sale was based on the closing bid price of the common shares (Level 1) as of the statements of financial position dates.

 

11		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

The fair value of the company’s senior notes at June 30, 2014 reflected the yield valuation based on observed market prices (Level 1), which ranged from 0.56 percent to 4.47 percent (December 31, 2013 — 0.50 percent to 5.25 percent). The fair value of the company’s other long-term debt instruments approximated carrying value. Presented below is a comparison of the fair value of the company’s senior notes to their carrying values.

 

		June 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			$	4,160			$	3,500			$	3,791

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

 

						Fair Value Measurements at Reporting Date Using:
		Carrying Amount of Asset (Liability)				Quoted Prices in Active Markets for Identical Assets (Level 1) (1)				Significant Other Observable Inputs (Level 2) (1,2)				Significant Unobservable Inputs (Level 3) (2)
June 30, 2014
Derivative instrument assets
Natural gas derivatives		$	9			$	—			$	(1	)		$	10
Foreign currency derivatives			1				—				1				—
Investments in ICL and Sinofert			1,719				1,719				—				—
Derivative instrument liabilities
Natural gas derivatives			(151	)			—				(15	)			(136	)
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 six months ended June 30, 2014 and twelve months ended December 31, 2013, there were no transfers between Level 1 and Level 2.

(2)

During the six months ended June 30, 2014, there were no transfers into or out of Level 3. 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 company’s policy is to recognize transfers at the end of the reporting period.

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		12

---

The following table presents a reconciliation of the beginning and ending balances of the company’s fair value measurements using significant unobservable inputs (Level 3):

 

 

		Natural Gas Derivatives
		Six Months Ended June 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 (cost of goods sold)			(10	)			(27	)
Included in other comprehensive income			9				27
Purchases			—				—
Sales			—				—
Issues			—				—
Settlements			16				36
Transfers of losses out of Level 3			—				14
Balance, end of period		$	(126	)		$	(141	)
Gains (losses) for the period included in net income (cost of goods sold) were:
Change in unrealized gains (losses) relating to instruments still held at the reporting date		$	—			$	—
Total losses (realized and unrealized)			(10	)			(27	)

 

 

13		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		14

---

 

15		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

 

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 June 30, 2014
Create superior long-term shareholder value.		Exceed total shareholder return performance for our sector and the DAXglobal Agribusiness Index.		PotashCorp’s total shareholder return was 17 percent in the first six months of 2014 compared to our sector’s weighted average return (based on market capitalization) of 5 percent and the DAXglobal Agribusiness Index weighted average return (based on market capitalization) of 5 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 second quarter of 2014 showed improvement over a very difficult 2014 first quarter performance. Persistent congestion created from an increase in North American rail volumes and a backlog of shipments due to severe winter conditions resulted in net rail cycle times higher in the 2014 second quarter than each of the previous three second quarter periods. Our second quarter net rail cycle time was 35 percent above the benchmark 2011 second quarter and 25 percent above the average of the prior three second quarters. For the first six months of 2014 our performance was 50 percent above our targeted net rail cycle time through the Chicago corridor. With continued rail congestion and resource shortages in the North American rail network we do not anticipate reaching our corporate goal of reducing the cycle time by 10 percent below the 2011 benchmark number. We continue to work with our carriers to prioritize our shipments.
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 six months of 2014 was 89 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 six months of 2014, total site recordable injury rate was 1.16.
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 29 percent during the first six months of 2014 compared to 2013 annual levels. Compared to the first six months of 2013, total reportable incidents were up 10 percent.

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		16

---

 

Earnings Guidance — Second Quarter 2014

 

 

		Company Guidance		Actual Results
Earnings per share		$    0.40 –$    0.45		$	0.56

Overview of Actual Results

 

 

		Three Months Ended June 30																Six Months Ended June 30
Dollars (millions) — except per-share amounts		2014				2013				Change				% Change				2014				2013				Change				% Change
Sales		$	1,892			$	2,144			$	(252	)			(12	)		$	3,572			$	4,244			$	(672	)			(16	)
Gross margin			747				979				(232	)			(24	)			1,312				1,846				(534	)			(29	)
Operating income			686				927				(241	)			(26	)			1,217				1,744				(527	)			(30	)
Net income			472				643				(171	)			(27	)			812				1,199				(387	)			(32	)
Net income per share — diluted			0.56				0.73				(0.17	)			(23	)			0.95				1.37				(0.42	)			(31	)
Other comprehensive (loss) income			(6	)			(500	)			494				(99	)			51				(303	)			354				n/m

 

n/m	= not meaningful

 

 

 

17		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

 

Statement of Financial Position

 

 

PotashCorp 2014 Second 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
i   Cash and cash equivalents held in certain foreign subsidiaries were $24 million at June 30, 2014, down from $480 million at December 31, 2013 as a result of a repatriation of funds in the first quarter of 2014. There are no current plans to repatriate the funds at June 30, 2014 in a taxable manner.		i   Short-term debt and current portion of long-term debt declined due to the repayment 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 timing of share repurchases 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.

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 six months of 2014.

 

 

 

 

19		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Potash

Potash Financial Performance

 

 

		Three Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne (1)
		2014				2013				% Change				2014				2013				% Change				2014				2013				% Change
Manufactured product
Net sales
North America		$	303			$	352				(14	)			943				834				13			$	321			$	421				(24	)
Offshore			362				554				(35	)			1,582				1,711				(8	)		$	229			$	324				(29	)
			665				906				(27	)			2,525				2,545				(1	)		$	263			$	356				(26	)
Cost of goods sold			(261	)			(290	)			(10	)														$	(102	)		$	(114	)			(11	)
Gross margin			404				616				(34	)														$	161			$	242				(33	)
Other miscellaneous and purchased product gross margin (2)			(9	)			(3	)			200
Gross Margin		$	395			$	613				(36	)														$	156			$	241				(35	)

 

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

(2)	Comprised of net sales of $3 million (2013 — $1 million) less cost of goods sold of $12 million (2013 — $4 million).

 

 

		Six Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne (1)
		2014				2013				% Change				2014				2013				% Change				2014				2013				% Change
Manufactured product
Net sales
North America		$	594			$	683				(13	)			1,931				1,628				19			$	307			$	419				(27	)
Offshore			649				1,031				(37	)			2,905				3,143				(8	)		$	223			$	328				(32	)
			1,243				1,714				(27	)			4,836				4,771				1			$	257			$	359				(28	)
Cost of goods sold			(535	)			(594	)			(10	)														$	(111	)		$	(124	)			(10	)
Gross margin			708				1,120				(37	)														$	146			$	235				(38	)
Other miscellaneous and purchased product gross margin (2)			(13	)			(3	)			333
Gross Margin		$	695			$	1,117				(38	)														$	144			$	234				(38	)

 

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

(2)	Comprised of net sales of $10 million (2013 — $7 million) less cost of goods sold of $23 million (2013 — $10 million).

Potash gross margin variance attributable to:

 

 

		Three Months Ended June 30 2014 vs. 2013																Six Months Ended June 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		$	37			$	(95	)		$	(2	)		$	(60	)		$	101			$	(216	)		$	9			$	(106	)
Offshore			(30	)			(152	)			30				(152	)			(57	)			(304	)			55				(306	)
Change in market mix			(14	)			13				1				—				(27	)			25				2				—
Total manufactured product		$	(7	)		$	(234	)		$	29				(212	)		$	17			$	(495	)		$	66				(412	)
Other miscellaneous and purchased product															(6	)															(10	)
Total														$	(218	)														$	(422	)

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		20

---

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

 

 

		Three Months Ended June 30																								Six Months Ended June 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)			42				44				(5	)			—				—				—				44				42				5				—				—				—
Latin America			29				26				12				100				100				—				28				26				8				100				100				—
China			13				15				(13	)			—				—				—				14				19				(26	)			—				—				—
India			10				12				(17	)			—				—				—				7				8				(13	)			—				—				—
Oceania, Europe and Other			6				3				100				—				—				—				7				5				40				—				—				—
			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 was down significantly due to price erosion during the second half of 2013. Improving market fundamentals through the first half – most notably in granular markets in North America and Brazil – resulted in our average realized price increasing relative to first-quarter 2014.		h   Strong customer engagement in all key potash markets and improving rail logistics supported increased shipments from earlier in the year.   h   Continued strength in North America led to sales volumes significantly exceeding those of the comparative period in 2013.   i   Although rail challenges began to abate, offshore sales volumes for the quarter were impacted by backlogs and trailed 2013 comparative totals.		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 facilities.   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 positive cost of goods sold variance.   i   Costs were incurred due to a review of potash mining practices.

 

21		PotashCorp 2014 Second 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 realizations, though prices rose compared to the trailing quarter due to tighter granular supplies and logistical constraints.		h   North American totals were up due to low distributor inventories at the start of the year and higher acreage and application rates.   i   Our offshore sales volumes fell as rail constraints limited shipments.		h   5 shutdown weeks were taken in 2014 mainly as a result of a fatality at Cory and logistical constraints at Patience Lake while 20 shutdown weeks were taken in 2013 mainly as a result of our strategy to match production with demand and weather-related pond issues at our Patience Lake 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.
The change in market mix produced an unfavorable variance of $27 million related to sales volumes and a favorable variance of $25 million in sales prices, due primarily to more higher-priced granular product being sold in North America in 2014.

Potash Non-Financial Performance

 

				Three Months Ended June 30												Six Months Ended June 30
				2014				2013				% Change				2014				2013				% Change
Production		KCl tonnes produced (thousands)			2,321				2,677				(13	)			4,716				4,702				—
Safety		Total site recordable injury rate			2.09				1.18				77				1.71				1.30				32
		Life-altering injuries			—				—				—				1				—				n/m
Employee		Percentage of senior staff positions filled internally			100%				100%				—				100%				100%				—
Environmental		Waste (000’s tonnes)			4,860				5,790				(16	)			9,360				10,295				(9	)
		Environmental incidents			5				2				150				9				8				13

 

n/m	= not meaningful

 

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		22

---

Nitrogen

Nitrogen Financial Performance

 

 

		Three Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne (1)
		2014				2013				% Change				2014				2013				% Change				2014				2013				% Change
Manufactured product (2)
Net sales
Ammonia		$	360			$	318				13				665				549				21			$	542			$	578				(6	)
Urea			114				120				(5	)			258				277				(7	)		$	441			$	432				2
Solutions, Nitric acid, Ammonium nitrate			180				170				6				740				656				13			$	243			$	259				(6	)
			654				608				8				1,663				1,482				12			$	393			$	410				(4	)
Cost of goods sold			(355	)			(335	)			6															$	(213	)		$	(227	)			(6	)
Gross margin			299				273				10															$	180			$	183				(2	)
Other miscellaneous and purchased product gross margin (3)			5				3				67
Gross Margin		$	304			$	276				10															$	183			$	186				(2	)

 

(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 $31 million, cost of goods sold $14 million and 52,000 sales tonnes (2013 — net sales $19 million, cost of goods sold $11 million and 33,000 sales tonnes). Inter-segment profits are eliminated on consolidation.

(3)

Comprised of third-party and inter-segment sales, including: third-party net sales $5 million less cost of goods sold $1 million (2013 — net sales $13 million less cost of goods sold $9 million) and inter-segment net sales $2 million less cost of goods sold $1 million (2013 — net sales $16 million less cost of goods sold $17 million). Inter-segment profits are eliminated on consolidation.

 

 

		Six Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne (1)
		2014				2013				% Change				2014				2013				% Change				2014				2013				% Change
Manufactured product (2)
Net sales
Ammonia		$	606			$	660				(8	)			1,248				1,108				13			$	486			$	596				(18	)
Urea			264				265				—				606				582				4			$	436			$	455				(4	)
Solutions, Nitric acid, Ammonium nitrate			344				331				4				1,438				1,278				13			$	239			$	259				(8	)
			1,214				1,256				(3	)			3,292				2,968				11			$	369			$	423				(13	)
Cost of goods sold			(679	)			(715	)			(5	)														$	(206	)		$	(241	)			(15	)
Gross margin			535				541				(1	)														$	163			$	182				(10	)
Other miscellaneous and purchased product gross margin (3)			8				6				33
Gross Margin		$	543			$	547				(1	)														$	165			$	184				(10	)

 

(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 $56 million, cost of goods sold $26 million and 100,000 sales tonnes (2013 — net sales $50 million, cost of goods sold $25 million and 79,000 sales tonnes). Inter-segment profits are eliminated on consolidation.

(3)

Comprised of third-party and inter-segment sales, including: third-party net sales $20 million less cost of goods sold $12 million (2013 — net sales $30 million less cost of goods sold $24 million) and inter-segment net sales $2 million less cost of goods sold $2 million (2013 — net sales $30 million less cost of goods sold $30 million). Inter-segment profits are eliminated on consolidation.

 

23		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Nitrogen gross margin variance attributable to:

 

 

		Three Months Ended June 30 2014 vs. 2013																Six Months Ended June 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		$	42			$	(27	)		$	9			$	24			$	55			$	(138	)		$	42			$	(41	)
Urea			(6	)			4				—				(2	)			6				(11	)			4				(1	)
Solutions, NA, AN			15				(13	)			2				4				15				(30	)			44				29
Hedge			—				—				—				—				—				—				7				7
Change in product mix			(7	)			7				—				—				—				—				—				—
Total manufactured product		$	44			$	(29	)		$	11				26			$	76			$	(179	)		$	97				(6	)
Other miscellaneous and purchased product															2																2
Total														$	28															$	(4	)

 

 

		Three Months Ended June 30																Six Months Ended June 30
		Sales Tonnes (thousands)								Price per Tonne								Sales Tonnes (thousands)								Price per Tonne
		2014				2013				2014				2013				2014				2013				2014				2013
Fertilizer			551				488			$	424			$	463				1,128				898			$	396			$	458
Industrial and Feed			1,112				994			$	379			$	384				2,164				2,070			$	355			$	408
			1,663				1,482			$	393			$	410				3,292				2,968			$	369			$	423

 

PotashCorp 2014 Second 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		Cost of Goods Sold
i   Our average realized price declined primarily due to slightly weaker benchmark prices contributing to lower realizations for our ammonia fertilizer products.		h   Improved production levels across all of our facilities increased nitrogen sales volumes.		h   Cost of goods sold variance was impacted by lower costs at Trinidad associated with fewer gas interruptions in 2014 and costs at Augusta in 2013 that did not repeat in 2014.   i   Average costs, including our hedge position, for natural gas used as feedstock in production increased 4 percent. Costs for natural gas used as feedstock in Trinidad production rose 1 percent (contract price indexed, in part, to Tampa ammonia prices) while our US spot costs for natural gas increased 10 percent. Including losses on our hedge position, US gas prices rose 9 percent.

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 from higher levels in the first half of 2013 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) and fewer gas interruptions in Trinidad compared to the same period in 2013, all of which also led to an increase in saleable downstream products.		h   Average costs, including our hedge position, for natural gas used as feedstock in production decreased 4 percent. Costs for natural gas used as feedstock in Trinidad production fell 15 percent (contract price indexed, in part, to Tampa ammonia prices) while our US spot costs for natural gas increased 24 percent. Including losses on our hedge position, US gas prices rose 15 percent.   h   The cost of goods sold variance for ammonia mainly reflected decreased costs for natural gas used as feedstock in Trinidad production exceeding increased US natural gas costs, but to a greater extent in ammonia than in 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.

 

25		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Nitrogen Non-Financial Performance

 

				Three Months Ended June 30												Six Months Ended June 30
				2014				2013				% Change				2014				2013				% Change
Production		N tonnes produced (thousands)			830				726				14				1,663				1,449				15
Safety		Total site recordable injury rate			0.28				0.63				(56	)			0.38				0.56				(32	)
Employee		Percentage of senior staff positions filled internally			100%				100%				—				100%				100%				—
Environmental		Greenhouse gas emissions (CO2 equivalent tonnes/tonne of product)			2.2				2.5				(12	)			2.2				2.3				(4	)
		Environmental incidents			—				—				—				1				1				—

Production

The increase in production was mainly due to the availability of production at Geismar and Augusta as discussed above.

Safety

The total site recordable injury rate was affected by two recordable injuries among employees in the second quarter and first half of 2014 compared to four in the second quarter of 2013 and five in the first half of 2013.

Phosphate

Phosphate Financial Performance

 

 

		Three Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne (1)
		2014				2013				% Change				2014				2013				% Change				2014				2013				% Change
Manufactured product
Net sales
Fertilizer		$	245			$	288				(15	)			539				635				(15	)		$	455			$	454				—
Feed and Industrial			187				193				(3	)			310				295				5			$	603			$	654				(8	)
			432				481				(10	)			849				930				(9	)		$	509			$	517				(2	)
Cost of goods sold			(387	)			(395	)			(2	)														$	(457	)		$	(422	)			8
Gross margin			45				86				(48	)														$	52			$	95				(45	)
Other miscellaneous and purchased product gross margin (2)			3				4				(25	)
Gross Margin		$	48			$	90				(47	)														$	57			$	97				(41	)

 

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

(2)	Comprised of net sales of $6 million (2013 — $7 million) less cost of goods sold of $3 million (2013 — $3 million).

 

 

		Six Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne (1)
		2014				2013				% Change				2014				2013				% Change				2014				2013				% Change
Manufactured product
Net sales
Fertilizer		$	455			$	585				(22	)			1,041				1,225				(15	)		$	437			$	478				(9	)
Feed and Industrial			352				392				(10	)			582				608				(4	)		$	605			$	644				(6	)
			807				977				(17	)			1,623				1,833				(11	)		$	497			$	533				(7	)
Cost of goods sold			(738	)			(802	)			(8	)														$	(455	)		$	(437	)			4
Gross margin			69				175				(61	)														$	42			$	96				(56	)
Other miscellaneous and purchased product gross margin (2)			5				7				(29	)
Gross Margin		$	74			$	182				(59	)														$	46			$	99				(54	)

 

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

(2)	Comprised of net sales of $10 million (2013 — $14 million) less cost of goods sold of $5 million (2013 — $7 million).

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		26

---

Phosphate gross margin variance attributable to:

 

 

		Three Months Ended June 30 2014 vs. 2013																Six Months Ended June 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		$	(25	)		$	2			$	(12	)		$	(35	)		$	(50	)		$	(42	)		$	11			$	(81	)
Feed and Industrial			8				(14	)			—				(6	)			(10	)			(22	)			7				(25	)
Change in product mix			(4	)			4				—				—				(6	)			6				—				—
Total manufactured product		$	(21	)		$	(8	)		$	(12	)			(41	)		$	(66	)		$	(58	)		$	18				(106	)
Other miscellaneous and purchased product															(1	)															(2	)
Total														$	(42	)														$	(108	)

 

 

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

Although market fundamentals remained largely unchanged, the decline in prices was mainly related to industrial contracts, which tend to lag current market conditions.

i

Sales volumes were down due to reduced production caused by short-term issues relating to weather, mining conditions and mechanical challenges which created difficulties in sustaining the supply of ore feed to our facilities.

i

Depreciation was higher due to accelerated depreciation as a result of operational changes announced in the fourth quarter of 2013.

h

Sulfur costs were down 20 percent, reducing our cost of goods sold.

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

Weaker fertilizer market conditions through the second half of 2013 weighed on our first-half 2014 realizations.

i

Volumes fell as weather-related production and logistical issues reduced operating rates across all our facilities and constrained our sales.

h

Sulfur costs were down 27 percent and ammonia costs were down 18 percent, reducing our cost of goods sold.

i

Industrial prices were down due to certain contracts being tied to input costs on a lagging basis.

i

Depreciation was higher due to accelerated depreciation as a result of operational changes announced in the fourth quarter of 2013.

 

27		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Phosphate Non-Financial Performance

 

 

				Three Months Ended June 30												Six Months Ended June 30
				2014				2013				% Change				2014				2013				% Change
Production		P2O5 tonnes produced (thousands)			459				521				(12	)			828				1,020				(19	)
		P2O5 operating rate percentage			77%				88%				(13	)			70%				86%				(19	)
Safety		Total site recordable injury rate			1.45				1.42				2				1.43				0.95				51
Employee		Percentage of senior staff positions filled internally			80%				75%				7				91%				67%				36
Environmental		Water usage (m3 per tonne of product)			26				29				(10	)			28				30				(7	)
		Recycled water used in operations (percentage)			95%				94%				1				94%				94%				—
		Environmental incidents			1				1				—				1				1				—

 

 

 

Other Expenses and Income

 

 

		Three Months Ended June 30																Six Months Ended June 30
Dollars (millions)		2014				2013				Change				% Change				2014				2013				Change				% Change
Selling and administrative expenses		$	(55	)		$	(51	)		$	(4	)			8			$	(123	)		$	(117	)		$	(6	)			5
Provincial mining and other taxes			(69	)			(81	)			12				(15	)			(123	)			(144	)			21				(15	)
Share of earnings of equity-accounted investees			32				37				(5	)			(14	)			65				117				(52	)			(44	)
Dividend income			24				54				(30	)			(56	)			93				54				39				72
Impairment of available-for-sale investment			—				—				—				n/m				(38	)			—				(38	)			n/m
Other income (expenses)			7				(11	)			18				n/m				31				(12	)			43				n/m
Finance costs			(48	)			(39	)			(9	)			23				(95	)			(74	)			(21	)			28
Income taxes			(166	)			(245	)			79				(32	)			(310	)			(471	)			161				(34	)

n/m = not meaningful

 

 

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		28

---

For the second quarter and first six months of 2014, income taxes decreased due to lower ordinary earnings before taxes and discrete tax adjustments. Effective tax rates and discrete items were as follows:

 

		Three Months Ended June 30								Six Months Ended June 30
Dollars (millions), except percentage amounts		2014				2013				2014				2013
Actual effective tax rate on ordinary earnings			27%				25%				27%				26%
Actual effective tax rate including discrete items			26%				28%				28%				28%
Discrete tax adjustments that impacted the rate		$	6			$	(18	)		$	4			$	(37	)

Significant items to note are described in Note 8 to the financial statements in this Form 10-Q.

For the first six months of 2014, 64 percent of the effective tax rate on the current year’s ordinary earnings pertained to current income taxes (2013 — 49 percent) and 36 percent related to deferred income taxes (2013 — 51 percent). The increase in the current portion was largely due to lower tax depreciation partially offset by a drawdown of intercompany inventory.

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. 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 in our contractual obligations and other commitments table referenced above. 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.

Capital Expenditures

Based on anticipated exchange rates, during 2014 we expect to incur capital expenditures, including capitalized interest, of approximately $545 million for opportunity capital and approximately $615 million to sustain operations at existing levels and for major repairs and maintenance (including plant turnarounds).

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 $190 million through the fourth quarter of 2015 ($100 million in 2014) to increase our capacity in ammonia (88,000 tons) and urea (80,000 tons).

We anticipate that all capital spending will be financed by internally generated cash flows supplemented, if and as necessary, by borrowing from existing financing sources.

 

29		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Sources and Uses of Cash

Cash flows from operating, investing and financing activities, as reflected in the unaudited interim condensed consolidated statements of cash flow, are summarized in the following table:

 

		Three Months Ended June 30																Six Months Ended June 30
Dollars (millions)		2014				2013				Change				% Change				2014				2013				Change				% Change
Cash provided by operating activities		$	788			$	1,202			$	(414	)			(34	)		$	1,327			$	1,940			$	(613	)			(32	)
Cash used in investing activities			(207	)			(359	)			152				(42	)			(433	)			(860	)			427				(50	)
Cash used in financing activities			(1,007	)			(798	)			(209	)			26				(1,415	)			(1,012	)			(403	)			40
(Decrease) increase in cash and cash equivalents		$	(426	)		$	45			$	(471	)			n/m			$	(521	)		$	68			$	(589	)			n/m

n/m	= not meaningful

 

 

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		30

---

 

31		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

Quarterly Financial Highlights

 

 

Dollars (millions), except per-share amounts		June 30, 2014				March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012
Sales		$	1,892			$	1,680			$	1,541			$	1,520			$	2,144			$	2,100			$	1,642			$	2,143
Gross margin			747				565				460				484				979				867				586				927
Net income			472				340				230				356				643				556				421				645
Net income per share — basic (1)			0.56				0.40				0.27				0.41				0.74				0.64				0.49				0.75
Net income per share — diluted (1)			0.56				0.40				0.26				0.41				0.73				0.63				0.48				0.74

 

(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.

 

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		32

---

 

33		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		34

---

 

35		PotashCorp 2014 Second 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 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about company purchases of equity securities that are registered by the company pursuant to Section 12 of the Exchange Act during the quarter ended June 30, 2014:

 

Period		(a) Total Number of Shares Purchased				(b) Average Price Paid per Share  (1)				(c) Total Number of Shares Purchased as Part of Publicly Announced Programs (2)				(d) Maximum Number of Shares that May Yet Be Purchased Under the Program (2)
April 1, 2014 — April 30, 2014			884,000			$	35.80				884,000				16,594,892
May 1, 2014 — May 31, 2014			7,748,000			$	36.03				7,748,000				8,846,892
June 1, 2014 — June 30, 2014			8,846,892			$	36.36				8,846,892				—
Total			17,478,892			$	36.19				17,478,892				—

 

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

 

(2)

On July 24, 2013, the company’s Board of Directors authorized a share repurchase program of up to 5 percent of PotashCorp’s outstanding common shares (up to $2,000 million of its outstanding common shares) through a normal course issuer bid. Shares could be repurchased from time to time on the open market commencing on August 2, 2013 through August 1, 2014 at prevailing market prices. Shareholders may obtain a copy of the notice filed with the Toronto Stock Exchange, without charge, by contacting the Corporate Secretary. The company completed the repurchase program by June 30, 2014.

 

 

Item 6. Exhibits

(a) Exhibits

 

				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

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		36

---

				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(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 registrant’s offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036.		8-K		11/30/2006		4(a)
4(c)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019.		8-K		5/1/2009		4(b)
4(d)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015.		8-K		9/25/2009		4(a)
4(e)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020.		8-K		9/25/2009		4(b)
4(f)		Form of Note relating to the registrant’s 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 registrant’s offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017.		8-K		11/29/2010		4(a)
4(k)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040.		8-K		11/29/2010		4(b)
4(l)		Agreement of Resignation, Appointment and Acceptance, dated as of June 25, 2013, by and among the registrant, The Bank of Nova Scotia Trust Company of New York and U.S. Bank National Association.		8-K		6/27/2013		4(a)
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.

The registrant hereby undertakes to file with the Securities and Exchange Commission, upon request, copies of any constituent instruments defining the rights of holders of long-term debt of the registrant or its subsidiaries that have not been filed herewith because the amounts represented thereby are less than 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.

 

				Incorporated By Reference (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
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)		Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended.		8-K			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)

 

37		PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q

---

				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(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)
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)		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)

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		38

---

				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(dd)		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)
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		PotashCorp 2014 Second 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.

 

		POTASH CORPORATION OF SASKATCHEWAN INC.
July 29, 2014		By:		/s/    JOSEPH PODWIKA
				Joseph Podwika
				Senior Vice President, General Counsel and Secretary
July 29, 2014		By:		/s/    WAYNE R. BROWNLEE
				Wayne R. Brownlee
				Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

 

PotashCorp 2014 Second Quarter Quarterly Report on Form 10-Q		40

---

EXHIBIT INDEX

 

				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 registrant’s offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036.		8-K		11/30/2006		4(a)
4(c)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 6.50% Notes due May 15, 2019.		8-K		5/1/2009		4(b)
4(d)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 3.75% Notes due September 30, 2015.		8-K		9/25/2009		4(a)
4(e)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 4.875% Notes due March 30, 2020.		8-K		9/25/2009		4(b)
4(f)		Form of Note relating to the registrant’s 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 registrant’s offering of $500,000,000 principal amount of 3.25% Notes due December 1, 2017.		8-K		11/29/2010		4(a)
4(k)		Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.625% Notes due December 1, 2040.		8-K		11/29/2010		4(b)
4(l)		Agreement of Resignation, Appointment and Acceptance, dated as of June 25, 2013, by and among the registrant, The Bank of Nova Scotia Trust Company of New York and U.S. Bank National Association.		8-K		6/27/2013		4(a)
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.

---

The registrant hereby undertakes to file with the Securities and Exchange Commission, upon request, copies of any constituent instruments defining the rights of holders of long-term debt of the registrant or its subsidiaries that have not been filed herewith because the amounts represented thereby are less than 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.

 

				Incorporated By Reference (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
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)		Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended.		8-K			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)
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)

---

				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(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)		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)		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)
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.