UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

For the Quarterly Period Ended June 30, 2017

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		S7K 7G3
(Address of principal executive offices)		(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  ☑    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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☑				Accelerated filer			☐
Non-accelerated filer		☐		(Do not check if a smaller reporting company)		Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

  Yes  ☐    No   ☑

As at June 30, 2017, Potash Corporation of Saskatchewan Inc. had 840,086,574 Common Shares outstanding.

 

 

 

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Income

Unaudited		In millions of US dollars except as otherwise noted

		Three Months Ended June 30								Six Months Ended June 30
		2017				2016				2017				2016
Sales (Note 2)		$	1,120			$	1,053			$	2,232			$	2,262
Freight, transportation and distribution			(116	)			(118	)			(249	)			(251	)
Cost of goods sold			(749	)			(692	)			(1,460	)			(1,534	)
Gross Margin			255				243				523				477
Selling and administrative expenses			(48	)			(55	)			(98	)			(108	)
Provincial mining and other taxes			(44	)			(26	)			(78	)			(57	)
Share of earnings of equity-accounted investees			49				30				88				49
Dividend income			4				16				12				16
Impairment of available-for-sale investment			–				(10	)			–				(10	)
Other (expenses) income (Note 3)			(16	)			1				(26	)			(9	)
Operating Income			200				199				421				358
Finance costs			(61	)			(54	)			(120	)			(106	)
Income Before Income Taxes			139				145				301				252
Income taxes (Note 4)			62				(24	)			49				(56	)
Net Income		$	201			$	121			$	350			$	196
Net Income per Share
Basic		$	0.24			$	0.14			$	0.42			$	0.23
Diluted		$	0.24			$	0.14			$	0.42			$	0.23
Weighted Average Shares Outstanding
Basic			840,060,000				839,285,000				839,959,000				838,202,000
Diluted			840,124,000				839,786,000				840,111,000				839,028,000

(See Notes to the Condensed Consolidated Financial Statements)

 

 

1		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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Condensed Consolidated Statements of Comprehensive Income (Loss)

 

Unaudited		In millions of US dollars

		Three Months Ended June 30								Six Months Ended June 30
(Net of related income taxes)		2017				2016				2017				2016
Net Income		$	201			$	121			$	350			$	196
Other comprehensive income (loss)
Items that will not be reclassified to net income:
Net actuarial loss on defined benefit plans 1			–				(103	)			–				(103	)
Items that have been or may be subsequently reclassified to net income:
Available-for-sale investments 2
Net fair value gain (loss) during the period			60				(104	)			93				(103	)
Cash flow hedges
Net fair value (loss) gain during the period 3			(2	)			9				(7	)			3
Reclassification to income of net loss 4			11				13				19				28
Other			–				1				3				2
Other Comprehensive Income (Loss)			69				(184	)			108				(173	)
Comprehensive Income (Loss)		$	270			$	(63	)		$	458			$	23

¹ Net of income taxes of $NIL (2016 – $60) for the three and six months ended June 30, 2017.

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

³ Cash flow hedges are comprised of natural gas derivative instruments and treasury lock derivatives and were net of income taxes of $1 (2016 – $(5)) for the three months ended June 30, 2017 and $4 (2016 – $(2)) for the six months ended June 30, 2017.

⁴ Net of income taxes of $(6) (2016 – $(8)) for the three months ended June 30, 2017 and $(11) (2016 – $(16)) for the six months ended June 30, 2017.

(See Notes to the Condensed Consolidated Financial Statements)

 

 

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		2

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Condensed Consolidated Statements of Cash Flow

 

Unaudited		In millions of US dollars

 

		Three Months Ended June 30								Six Months Ended June 30
		2017				2016				2017				2016
Operating Activities
Net income		$	201			$	121			$	350			$	196
Adjustments to reconcile net income to cash provided by operating activities (Note 5)			151				259				295				465
Changes in non-cash operating working capital (Note 5)			(24	)			44				(94	)			(49	)
Cash provided by operating activities			328				424				551				612
Investing Activities
Additions to property, plant and equipment			(128	)			(211	)			(261	)			(457	)
Other assets and intangible assets			(2	)			(9	)			(1	)			(9	)
Cash used in investing activities			(130	)			(220	)			(262	)			(466	)
Financing Activities
Finance costs on long-term debt obligations			–				(2	)			(1	)			(4	)
(Repayment of) proceeds from short-term debt obligations			(81	)			68				(60	)			404
Dividends			(82	)			(206	)			(164	)			(519	)
Issuance of common shares			–				5				1				25
Cash used in financing activities			(163	)			(135	)			(224	)			(94	)
Increase in Cash and Cash Equivalents			35				69				65				52
Cash and Cash Equivalents, Beginning of Period			62				74				32				91
Cash and Cash Equivalents, End of Period		$	97			$	143			$	97			$	143
Cash and cash equivalents comprised of:
Cash		$	28			$	31			$	28			$	31
Short-term investments			69				112				69				112
		$	97			$	143			$	97			$	143

(See Notes to the Condensed Consolidated Financial Statements)

 

 

3		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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Condensed Consolidated Statements of Changes in Equity

 

Unaudited		In millions of US dollars

 

										Accumulated Other Comprehensive (Loss) Income
		Share Capital				Contributed Surplus				Net unrealized gain (loss) on available-for- sale investments				Net (loss) gain on derivatives designated as cash flow hedges				Net actuarial loss on defined benefit plans				Other				Total Accumulated Other Comprehensive (Loss) Income				Retained Earnings				Total Equity 1
Balance – December 31, 2016		$	1,798			$	222			$	43			$	(60	)		$	–	2		$	(8	)		$	(25	)		$	6,204			$	8,199
Net income			–				–				–				–				–				–				–				350				350
Other comprehensive income			–				–				93				12				–				3				108				–				108
Dividends declared			–				–				–				–				–				–				–				(167	)			(167	)
Effect of share-based compensation including issuance of common shares			2				3				–				–				–				–				–				–				5
Shares issued for dividend reinvestment plan			3				–				–				–				–				–				–				–				3
Balance – June 30, 2017		$	1,803			$	225			$	136			$	(48	)		$	–	2		$	(5	)		$	83			$	6,387			$	8,498
Balance – December 31, 2015		$	1,747			$	230			$	77			$	(117	)		$	–	2		$	(10	)		$	(50	)		$	6,455			$	8,382
Net income			–				–				–				–				–				–				–				196				196
Other comprehensive (loss) income			–				–				(103	)			31				(103	)			2				(173	)			–				(173	)
Dividends declared			–				–				–				–				–				–				–				(421	)			(421	)
Effect of share-based compensation including issuance of common shares			35				(5	)			–				–				–				–				–				–				30
Shares issued for dividend reinvestment plan			10				–				–				–				–				–				–				–				10
Transfer of net actuarial loss on defined benefit plans			–				–				–				–				103				–				103				(103	)			–
Balance – June 30, 2016		$	1,792			$	225			$	(26	)		$	(86	)		$	–	2		$	(8	)		$	(120	)		$	6,127			$	8,024

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)

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		4

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Condensed Consolidated Statements of Financial Position

 

Unaudited		In millions of US dollars except as otherwise noted

 

 

 

5		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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Notes to the Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2017

 

Unaudited		In millions of US dollars except as otherwise noted

1. Significant Accounting Policies

Basis of Presentation

 

 

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 7, Statement of Cash Flows		Issued to require a reconciliation of the opening and closing liabilities that form part of an entity’s financing activities, including both changes arising from cash flows and non-cash changes.		Adopted prospectively effective January 1, 2017, with required disclosures included in Note 5.
Amendments to IAS 12, Income Taxes		Issued to clarify the requirements on recognition of deferred tax assets for unrealized losses on debt instruments measured at fair value.		Adopted effective January 1, 2017, with no change to the company’s interim financial statements. No changes are expected to the company’s annual consolidated financial statements.

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		6

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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 as at June 30, 2017. The company does not anticipate early adoption of these standards at this time.

 

Standard		Description		Expected Impact		Effective Date 1
IFRS 15, Revenue From Contracts With Customers		Issued to provide guidance on the recognition of revenue from contracts with customers, including multiple-element arrangements and transactions not previously addressed comprehensively, and to enhance disclosures about revenue.		The company is reviewing the standard to determine the potential impact, if any.		January 1, 2018, applied retrospectively with certain practical expedients available.
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.
Amendments to IFRS 2, Share-Based Payment		Issued to provide clarification on the classification and measurement of share-based transactions. Specifically, accounting for cash-settled share-based transactions, share-based payment transactions with a net settlement feature and modifications of share-based payment transactions that change classification from cash-settled to equity settled.		The company is reviewing the standard to determine the potential impact, if any.		January 1, 2018, with the option of retrospective or prospective application.
IFRS 16, Leases		Issued to supersede IAS 17, IFRIC 4, SIC-15 and SIC-27, providing the principles for the recognition, measurement, presentation and disclosure of leases. Lessees will be required to recognize assets and liabilities for the rights and obligations created by leases. Lessors will continue to classify leases using a similar approach to that of the superseded standards but with enhanced disclosure to improve information about a lessor’s risk exposure, particularly to residual value risk.		The company is reviewing the standard to determine the potential impact.		January 1, 2019, applied retrospectively with certain practical expedients available.
IFRIC 23, Uncertainty Over Income Tax Treatments		Issued to provide guidance on recognition and measurement of uncertain income tax treatments.		The company is reviewing the standard to determine the potential impact, if any.		January 1, 2019, applied retrospectively with certain practical expedients available.
IFRS 17, Insurance Contracts		Issued to replace IFRS 4, providing guidance for the recognition, measurement, presentation and disclosure of insurance contracts giving consideration to: substantive rights and obligations arising from a contract, law or regulation; enforceable rights and obligations in a contract; and whether contracts are written, oral or implied by customary business practices.		Although the company does not underwrite insurance contracts, all significant contracts will be reviewed under the scope of the standard to determine the potential impact, if any.		January 1, 2021, applied retrospectively with certain practical expedients available.

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

 

7		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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2. Segment Information

The company has three reportable operating segments: potash, nitrogen and phosphate. These segments are differentiated by the chemical nutrient contained in the products that each produces. 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. Inter-segment sales are made under terms that approximate market value. The company’s operating segments have been determined based on reports, used to make strategic decisions, that are reviewed by the Chief Executive Officer, assessed to be the company’s chief operating decision-maker.

 

		Three Months Ended June 30, 2017
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales – third party		$	461			$	384			$	275			$	–			$	1,120
Freight, transportation and distribution – third party			(50	)			(32	)			(34	)			–				(116	)
Net sales – third party			411				352				241				–
Cost of goods sold – third party			(198	)			(292	)			(259	)			–				(749	)
Margin (cost) on inter-segment sales 1			–				8				(8	)			–				–
Gross margin			213				68				(26	)			–				255
Items included in cost of goods sold, selling and administrative expenses or other expenses:
Depreciation and amortization			(56	)			(47	)			(56	)			(9	)			(168	)
Assets			9,787				2,466				2,265				2,801				17,319
Cash outflows for additions to property, plant and equipment			36				40				51				1				128

¹ Inter-segment net sales were $17.

 

		Three Months Ended June 30, 2016
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales – third party		$	393			$	383			$	277			$	–			$	1,053
Freight, transportation and distribution – third party			(64	)			(27	)			(27	)			–				(118	)
Net sales – third party			329				356				250				–
Cost of goods sold – third party			(206	)			(236	)			(250	)			–				(692	)
Margin (cost) on inter-segment sales 1			–				10				(10	)			–				–
Gross margin			123				130				(10	)			–				243
Items included in cost of goods sold, selling and administrative expenses or other expenses:
Depreciation and amortization			(52	)			(52	)			(55	)			(9	)			(168	)
Share of Canpotex’s 2 Prince Rupert project exit costs			(33	)			–				–				–				(33	)
Assets			9,780				2,509				2,323				2,714				17,326
Cash outflows for additions to property, plant and equipment			74				65				45				27				211

¹ Inter-segment net sales were $17.

² Canpotex Limited (“Canpotex”).

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		8

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		Six Months Ended June 30, 2017
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales – third party		$	890			$	759			$	583			$	–			$	2,232
Freight, transportation and distribution – third party			(114	)			(64	)			(71	)			–				(249	)
Net sales – third party			776				695				512				–
Cost of goods sold – third party			(403	)			(549	)			(508	)			–				(1,460	)
Margin (cost) on inter-segment sales 1			–				19				(19	)			–				–
Gross margin			373				165				(15	)			–				523
Items included in cost of goods sold, selling and administrative expenses or other expenses:
Depreciation and amortization			(111	)			(97	)			(114	)			(18	)			(340	)
Assets			9,787				2,466				2,265				2,801				17,319
Cash outflows for additions to property, plant and equipment			81				73				102				5				261

¹ Inter-segment net sales were $39.

 

		Six Months Ended June 30, 2016
		Potash				Nitrogen				Phosphate				All Others				Consolidated
Sales – third party		$	774			$	811			$	677			$	–			$	2,262
Freight, transportation and distribution – third party			(123	)			(60	)			(68	)			–				(251	)
Net sales – third party			651				751				609				–
Cost of goods sold – third party			(440	)			(534	)			(560	)			–				(1,534	)
Margin (cost) on inter-segment sales 1			–				20				(20	)			–				–
Gross margin			211				237				29				–				477
Items included in cost of goods sold, selling and administrative expenses or other expenses:
Depreciation and amortization			(100	)			(106	)			(112	)			(17	)			(335	)
Share of Canpotex’s Prince Rupert project exit costs			(33	)			–				–				–				(33	)
Termination benefit costs			(32	)			–				–				–				(32	)
Impairment of property, plant and equipment			–				–				(27	)			–				(27	)
Assets			9,780				2,509				2,323				2,714				17,326
Cash outflows for additions to property, plant and equipment			165				134				88				70				457

¹ Inter-segment net sales were $34.

 

9		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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3. Other (Expenses) Income

 

		Three Months Ended June 30								Six Months Ended June 30
		2017				2016				2017				2016
Foreign exchange loss		$	(9	)		$	(2	)		$	(8	)		$	(19	)
Proposed Transaction costs (Note 13)			(14	)			–				(23	)			–
Other income			7				3				5				10
		$	(16	)		$	1			$	(26	)		$	(9	)

4. 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
		2017				2016				2017				2016
Income tax (recovery) expense		$	(62	)		$	24			$	(49	)		$	56
Actual effective tax rate on ordinary earnings			7%				17%				9%				21%
Actual effective tax rate including discrete items			(44%	)			16%				(16%	)			22%
Discrete tax adjustments that impacted the tax rate		$	(71	)		$	(4	)		$	(76	)		$	–

Significant items to note include the following:

 

·

The actual effective tax rate on ordinary earnings for the three and six months ended June 30, 2017 decreased compared to the same periods last year primarily due to significantly lower forecasted annual earnings in the United States.

 

·

In the second quarter of 2017, a discrete deferred tax recovery of $68 was recorded as a result of a Saskatchewan income tax rate decrease.

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, 2017				December 31, 2016
Current income tax assets
Current		Receivables		$	43			$	41
Non-current		Other assets			60				67
Deferred income tax assets		Other assets			10				10
Total income tax assets				$	113			$	118
Current income tax liabilities
Current		Payables and accrued charges		$	(7	)		$	(25	)
Non-current		Other non-current liabilities and deferred credits			(47	)			(43	)
Deferred income tax liabilities		Deferred income tax liabilities			(2,375	)			(2,463	)
Total income tax liabilities				$	(2,429	)		$	(2,531	)

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		10

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5. Consolidated Statements of Cash Flow

 

		Three Months Ended June 30								Six Months Ended June 30
		2017				2016				2017				2016
Reconciliation of cash provided by operating activities
Net income		$	201			$	121			$	350			$	196
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization			168				168				340				335
Impairment of property, plant and equipment			–				–				–				27
Net distributed (undistributed) earnings of equity-accounted investees			35				61				(2	)			44
Impairment of available-for-sale investment			–				10				–				10
Share-based compensation			2				3				7				5
Recovery of deferred income tax			(82	)			(7	)			(96	)			(1	)
Pension and other post-retirement benefits			18				13				33				28
Asset retirement obligations and accrued environmental costs			3				9				2				25
Other long-term liabilities and miscellaneous			7				2				11				(8	)
Subtotal of adjustments			151				259				295				465
Changes in non-cash operating working capital
Receivables			23				186				38				145
Inventories			(9	)			(51	)			(58	)			(43	)
Prepaid expenses and other current assets			(9	)			5				(14	)			3
Payables and accrued charges			(29	)			(96	)			(60	)			(154	)
Subtotal of changes in non-cash operating working capital			(24	)			44				(94	)			(49	)
Cash provided by operating activities		$	328			$	424			$	551			$	612
Supplemental cash flow disclosure
Interest paid		$	74			$	64			$	103			$	93
Income taxes paid		$	38			$	35			$	53			$	46

The following is a summary of changes in liabilities arising from financing activities:

 

		December 31, 2016				Cash Flows 1				Non-cash Changes				June 30, 2017
Short-term debt and current portion of long-term debt 1		$	884			$	(60	)		$	–			$	824
Long-term debt			3,707				(1	)			2				3,708
Total liabilities from financing activities		$	4,591			$	(61	)		$	2			$	4,532

¹ Cash inflows and cash outflows arising from short-term debt transactions are presented on a net basis.

 

11		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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6. Inventories

 

		June 30, 2017				December 31, 2016
Finished products		$	320			$	269
Intermediate products			200				174
Raw materials			68				75
Materials and supplies			257				250
		$	845			$	768

The following items affected cost of goods sold during the period:

 

		Three Months Ended June 30								Six Months Ended June 30
		2017				2016				2017				2016
Expensed inventories before the following items		$	661			$	587			$	1,345			$	1,299
Reserves, reversals and writedowns of inventories			29				20				33				19
		$	690			$	607			$	1,378			$	1,318

The carrying amount of inventory recorded at net realizable value was $118 as at June 30, 2017 (December 31, 2016 – $47), with the remaining inventory recorded at cost.

7. 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, 2016			839,790,379			$	1,798
Issued under option plans			114,900				2
Issued for dividend reinvestment plan			181,295				3
Balance – June 30, 2017			840,086,574			$	1,803

Dividends Declared

The company declared dividends per share of $0.10 (2016 – $0.25) during the three months ended June 30, 2017 and $0.20 (2016 – $0.50) during the six months ended June 30, 2017.

Under the terms of the agreement governing the Proposed Transaction, as described in Note 13, the company is permitted to pay quarterly dividends up to but not in excess of levels existing at the time of signing such agreement.

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		12

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8. Share-Based Compensation

During the three and six months ended June 30, 2017, the company issued stock options and performance share units (“PSUs”) to eligible employees under the 2016 Long-Term Incentive Plan (“LTIP”). Information on stock options and PSUs is summarized below:

 

		LTIP								Expense for all employee share-based compensation  plans
		Units Granted in 2017				Units Outstanding as at June 30, 2017				Three Months Ended June 30								Six Months Ended June 30
										2017				2016				2017				2016
Stock options			1,482,829				4,511,906			$	2			$	5			$	5			$	6
Share-settled PSUs			555,918				959,700				1				2				2				2
Cash-settled PSUs			857,774				1,538,826				–				2				2				4
										$	3			$	9			$	9			$	12

Grant date fair value per unit for stock options and share-settled PSUs granted during the first quarter of 2017 was $4.36 and $19.93, respectively.

 

 

13		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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9. Financial Instruments

Fair Value

Estimated fair values for financial instruments are designed to approximate amounts for 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.

Financial instruments included in the unaudited interim condensed consolidated statements of financial position are measured either at fair value or amortized cost. The tables below explain the valuation methods used to determine the fair value of each financial instrument and its associated level in the fair value hierarchy.

 

Financial Instruments Measured at Fair Value		Fair Value Method
Cash and cash equivalents		Carrying amount (approximation to fair value assumed due to short-term nature).
Available-for-sale investments		Closing bid price of the common shares (Level 1) as at the statements of financial position dates.
Foreign currency derivatives not traded in an active market		Quoted forward exchange rates (Level 2) as at the statements of financial position dates.
Natural gas swaps not traded in an active market		A discounted cash flow model. 1
1  Inputs 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). Futures contract prices used as inputs in the model were supported by prices quoted in an active market and therefore categorized in Level 2.
Financial Instruments Measured at Amortized Cost		Fair Value Method
Receivables, short-term debt and payables and accrued charges		Carrying amount (approximation to fair value assumed due to short-term nature).
Long-term debt senior notes		Quoted market prices (Level 1 or 2 depending on the market liquidity of the debt).
Other long-term debt instruments		Carrying amount.

Presented below is a comparison of the fair value of the company’s senior notes to their carrying values.

 

		June 30, 2017								December 31, 2016
		Carrying Amount of Liability 1				Fair Value of Liability				Carrying Amount of Liability 1				Fair Value of Liability
Long-term debt senior notes		$	4,204			$	4,547			$	4,202			$	4,384

1	Includes net unamortized debt issue costs.

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		14

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

 

						Fair Value Measurements at Reporting Dates 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
June 30, 2017
Derivative instrument assets
Natural gas derivatives		$	7			$	–			$	7
Available-for-sale investments 3			1,033				1,033				–
Derivative instrument liabilities
Natural gas derivatives			(84	)			–				(84	)
December 31, 2016
Derivative instrument assets
Natural gas derivatives		$	6			$	–			$	6
Available-for-sale investments 3			940				940				–
Derivative instrument liabilities
Natural gas derivatives			(97	)			–				(97	)

1	During the six months ended June 30, 2017 and twelve months ended December 31, 2016, there were no transfers between Level 1 and Level 2. The company’s policy is to recognize transfers at the end of the reporting period.

2	During the six months ended June 30, 2017 and twelve months ended December 31, 2016, there were no amounts categorized as Level 3.

3	Available-for-sale investments are comprised of shares in ICL, Sinofert and other.

 

 

15		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		16

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17		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		18

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RISK

In our 2016 AIR, we provide an overview of our approach to risk (page 28), explain how we use a risk management-ranking methodology to assess the key risks specific to our company (page 49) and provide a description of, management approach to, and any significant developments for, each key risk (pages 50 to 55).

Our risk-ranking matrix, in terms of residual severity of consequence and likelihood, is displayed below.

 

 

19		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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Key risks with rankings unchanged from our 2016 AIR were as follows:

 

Risk		Risk Ranking		Associated Strategies 1		Risk		Risk Ranking		Associated Strategies 1
Extreme loss		B				Safety, health and security		C
Offshore potash sales and distribution		B				Stakeholder support for our business plans		C
Competitive supply		B				Sustaining growth		C
Global potash demand		B				Trinidad natural gas supply		C
Cyber security		C				Realization of asset values		D
Environment		C				Capital management		D
International operations and non-operated assets		C

1	Brighter sections indicate the strategic priority (described on page 18 of this Form 10-Q) impacted by the risk. Faded sections mean the strategic priority is not significantly affected by the risk.

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		20

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KEY PERFORMANCE DRIVERS – PERFORMANCE COMPARED TO TARGETS

Through our integrated value model, we set, evaluate and refine our targets to drive improvements that benefit all those impacted by our business. We demonstrate our accountability by tracking and reporting our performance against targets related to each strategic priority set out on pages 32 to 47 in our 2016 AIR. A summary of our progress against selected strategic priorities and representative annual targets is set out below.

 

Strategic Priority		Representative 2017 Annual Target		Performance to June 30, 2017
Portfolio & Return Optimization		Exceed total shareholder return (TSR) performance for our sector and the DAXglobal Agribusiness Index.		PotashCorp’s TSR was -8 percent in the first six months of 2017 compared to our sector’s weighted average return based on market capitalization1 of -4 percent and the DAXglobal Agribusiness Index weighted average return (based on market capitalization) of 4 percent.
Operational Excellence		Achieve a 95 percent ammonia reliability rate for our nitrogen division.		Our ammonia reliability rate was 93 percent for the first six months of 2017.
People Development		Maintain an annual employee turnover rate of 5 percent or less.		Employee turnover rate on an annualized basis for the first six months of 2017 was 4 percent.
Safety & Health Excellence		Achieve zero life-altering injuries at our sites.		There were no life-altering injuries at our sites during the first six months of 2017.
		Reduce total site recordable injury rate to 0.75 (or lower) and total lost-time injury rate to 0.07 (or lower).		During the first six months of 2017, total site recordable injury rate was 0.90 and total lost-time injury rate was 0.07.
Environmental Excellence		By 2018, reduce environmental incidents (releases, permit excursions and spills) by 40 percent from 2014 levels.		Annualized total environmental incidents were down 58 percent through the first six months of 2017 compared to 2014 annual levels. Compared to the first six months of 2016, total reportable incidents were down 58 percent.

1	TSRs are based on the currencies of the primary exchanges in which the relevant shares are traded.

PERFORMANCE OVERVIEW

This discussion and analysis are based on the company’s unaudited interim condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q (financial statements in this Form 10-Q) based on International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), unless otherwise stated. All references to per-share amounts pertain to diluted net income per share.

For an understanding of trends, events, uncertainties and the effect of critical accounting estimates on our results and financial condition, this Form 10-Q should be read carefully, together with our 2016 AIR.

REVISED ANNUAL EARNINGS GUIDANCE ¹ AND FIRST SIX MONTHS 2017 RESULTS

 

		Revised  Annual Company Guidance		First Six Months Actual Results
Earnings per share		$  0.45 – $  0.65		$  0.42

¹ Revised effective April 27, 2017, and maintained on July 27, 2017

 

21		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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OVERVIEW OF ACTUAL RESULTS

 

		Three Months Ended June 30																Six Months Ended June 30
Dollars (millions), except per-share amounts		2017				2016				Change				% Change				2017				2016				Change				% Change
Sales		$	1,120			$	1,053			$	67				6			$	2,232			$	2,262			$	(30	)			(1	)
Gross margin			255				243				12				5				523				477				46				10
Operating income			200				199				1				1				421				358				63				18
Net income			201				121				80				66				350				196				154				79
Net income per share – diluted			0.24				0.14				0.10				71				0.42				0.23				0.19				83
Other comprehensive income (loss)			69				(184	)			253				n/m				108				(173	)			281				n/m

n/m = not meaningful

 

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		22

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OPERATING SEGMENT REVIEW

We report our results (including gross margin) in three business segments: potash, nitrogen and phosphate as described in Note 2 to the financial statements in this Form 10-Q. Our reporting structure reflects how we manage our business and how we classify our operations for planning and measuring performance. We include net sales in segment disclosures in the financial statements in this Form 10-Q pursuant to IFRS, which require segmentation based upon our internal organization and reporting of revenue and profit measures. As a component of gross margin, net sales (and the related per-tonne amounts) are the primary revenue measures we use and review in making decisions about operating matters on a business segment basis. These decisions include assessments about potash, nitrogen and phosphate performance and the resources to be allocated to these segments. We also use net sales (and the related per-tonne amounts) for business planning and monthly forecasting. Net sales are calculated as sales revenues less freight, transportation and distribution expenses. Realized prices refer to net sales prices.

Our discussion of segment operating performance is set out below and includes nutrient product and/or market performance results, where applicable, to give further insight into these results.

 

 

23		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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POTASH PERFORMANCE

FINANCIAL PERFORMANCE

 

		Three Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne 1
		2017				2016				% Change				2017				2016				% Change				2017				2016				% Change
Manufactured product
Net sales
North America		$	135			$	167				(19	)			651				850				(23	)		$	208			$	196				6
Offshore			276				160				73				1,709				1,272				34			$	161			$	125				29
			411				327				26				2,360				2,122				11			$	174			$	154				13
Cost of goods sold			(193	)			(192	)			1															$	(82	)		$	(91	)			(10	)
Gross margin			218				135				61															$	92			$	63				46
Other miscellaneous and purchased product gross margin 2			(5	)			(12	)			(58	)
Gross Margin		$	213			$	123				73															$	90			$	58				55

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

2	Comprised of net sales $NIL million (2016 – $2 million) less cost of goods sold $5 million (2016 – $14 million).

 

		Six Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne 1
		2017				2016				% Change				2017				2016				% Change				2017				2016				% Change
Manufactured product
Net sales
North America		$	298			$	305				(2	)			1,510				1,628				(7	)		$	198			$	187				6
Offshore			474				340				39				3,029				2,277				33			$	156			$	149				5
			772				645				20				4,539				3,905				16			$	170			$	165				3
Cost of goods sold			(389	)			(421	)			(8	)														$	(86	)		$	(108	)			(20	)
Gross margin			383				224				71															$	84			$	57				47
Other miscellaneous and purchased product gross margin 2			(10	)			(13	)			(23	)
Gross Margin		$	373			$	211				77															$	82			$	54				52

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

2	Comprised of net sales $4 million (2016 – $6 million) less cost of goods sold $14 million (2016 – $19 million).

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		24

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Potash gross margin variance was attributable to:

 

		Three Months Ended June 30 2017 vs. 2016																				Six Months Ended June 30 2017 vs. 2016
						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		$	(22	)		$	5			$	12			$	(5	)						$	(9	)		$	15			$	54			$	60
Offshore			19				60				9				88								51				22				26				99
Change in market mix			11				(14	)			3				–								10				(14	)			4				–
Total manufactured product		$	8			$	51			$	24			$	83							$	52			$	23			$	84			$	159
Other miscellaneous and purchased product															7																				3
Total														$	90																			$	162

Sales to major offshore markets by Canpotex ¹ were as follows:

 

		Three Months Ended June 30												Six Months Ended June 30
		Percentage of Sales Volumes												Percentage of Sales Volumes
		2017				2016				% Change				2017				2016				% Change
Other Asian markets 2			40				37				8				38				42				(10	)
Latin America			40				47				(15	)			33				39				(15	)
India			10				–				n/m				11				2				450
China			3				7				(57	)			10				8				25
Other markets			7				9				(22	)			8				9				(11	)
			100				100								100				100

1	Canpotex Limited (Canpotex).

2	All Asian markets except China and India.

n/m = not meaningful

 

25		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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The most significant contributors to the change in total gross margin were as follows (direction of arrows refers to impact on gross margin):

 

Sales Volumes

Net Sales Prices

Cost of Goods Sold

Quarter over Quarter

North American volumes were lower than the historically strong second quarter of 2016.

Our average realized price reflected a continued recovery in global spot prices.

Costs were lower in 2017 due to our portfolio optimization, including a greater share of production from our lower-cost mines, particularly Rocanville.

Offshore shipments increased, led by strong demand in Brazil.

Offshore prices were also higher due to the impact of our share of Canpotex’s project exit costs following its decision not to proceed with development of an export terminal in Prince Rupert, British Columbia impacting the second quarter of 2016.

Offshore cost of goods sold variance was less positive than North America as a relatively higher percentage of products sold was produced at higher-cost mines.

Year over Year

Offshore volumes were higher due primarily to stronger demand in all key markets.

Prices were higher mainly due to a continued recovery in most global spot markets.

Costs were lower in 2017 due to our portfolio optimization, including a greater share of production from our lower-cost mines, particularly Rocanville.

North American volumes were slightly lower despite strong demand compared to the historically strong second quarter of 2016.

Offshore prices were also higher due to the impact of our share of Canpotex’s project exit costs following its decision not to proceed with development of an export terminal in Prince Rupert, British Columbia impacting the second quarter of 2016.

Costs were also lower in 2017 as the first quarter of 2016 included costs associated with the indefinite suspension of potash operations at Picadilly.

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		26

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NON-FINANCIAL PERFORMANCE

The most significant contributors to the change in our non-financial performance highlights were as follows:

QUARTER OVER QUARTER

 

 

 

27		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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YEAR OVER YEAR

 

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		28

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NITROGEN PERFORMANCE

FINANCIAL PERFORMANCE

 

		Three Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne 1
		2017				2016				% Change				2017				2016				% Change				2017				2016				% Change
Manufactured product 2
Net sales
Ammonia		$	181			$	177				2				602				543				11			$	302			$	325				(7	)
Urea			69				71				(3	)			293				261				12			$	236			$	274				(14	)
Solutions, nitric acid, ammonium nitrate			105				119				(12	)			699				703				(1	)		$	150			$	169				(11	)
			355				367				(3	)			1,594				1,507				6			$	223			$	244				(9	)
Cost of goods sold			(290	)			(242	)			20															$	(182	)		$	(160	)			14
Gross margin			65				125				(48	)														$	41			$	84				(51	)
Other miscellaneous and purchased product gross margin 3			3				5				(40	)
Gross Margin		$	68			$	130				(48	)														$	43			$	86				(50	)

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 $17 million, cost of goods sold $9 million and 40,000 sales tonnes (2016 – net sales $17 million, cost of goods sold $7 million and 39,000 sales tonnes). Inter-segment profits are eliminated on consolidation.

3	Including third-party net sales $14 million and cost of goods sold $11 million (2016 – net sales $6 million and cost of goods sold $1 million).

 

		Six Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne 1
		2017				2016				% Change				2017				2016				% Change				2017				2016				% Change
Manufactured product 2
Net sales
Ammonia		$	340			$	365				(7	)			1,148				1,144				–			$	297			$	318				(7	)
Urea			158				157				1				613				567				8			$	258			$	278				(7	)
Solutions, nitric acid, ammonium nitrate			216				252				(14	)			1,400				1,460				(4	)		$	154			$	173				(11	)
			714				774				(8	)			3,161				3,171				–			$	226			$	244				(7	)
Cost of goods sold			(556	)			(546	)			2															$	(176	)		$	(172	)			2
Gross margin			158				228				(31	)														$	50			$	72				(31	)
Other miscellaneous and purchased product gross margin 3			7				9				(22	)
Gross Margin		$	165			$	237				(30	)														$	52			$	75				(31	)

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 $39 million, cost of goods sold $20 million and 95,000 sales tonnes (2016 – net sales $34 million, cost of goods sold $14 million and 79,000 sales tonnes). Inter-segment profits are eliminated on consolidation.

3	Including third-party net sales of $20 million and cost of goods sold $13 million (2016 – net sales $11 million and cost of goods sold $2 million).

 

29		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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Nitrogen gross margin variance was attributable to:

 

		Three Months Ended June 30 2017 vs. 2016																				Six Months Ended June 30 2017 vs. 2016
						Change in Prices/Costs																				Change in Prices/Costs
Dollars (millions)		Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total								Change in Sales Volumes				Net Sales				Cost of Goods Sold				Total
Manufactured product
Ammonia		$	5			$	(13	)		$	(3	)		$	(11	)						$	–			$	(25	)		$	12			$	(13	)
Urea			2				(12	)			(5	)			(15	)							3				(12	)			(2	)			(11	)
Solutions, nitric acid, ammonium nitrate			(1	)			(13	)			(22	)			(36	)							(4	)			(23	)			(31	)			(58	)
Hedge			–				–				2				2								–				–				12				12
Change in product mix			–				5				(5	)			–								–				3				(3	)			–
Total manufactured product		$	6			$	(33	)		$	(33	)		$	(60	)						$	(1	)		$	(57	)		$	(12	)		$	(70	)
Other miscellaneous and purchased product															(2	)																			(2	)
Total														$	(62	)																		$	(72	)

 

		Three Months Ended June 30																Six Months Ended June 30
		Sales Tonnes (thousands)								Average Net Sales Price per Tonne								Sales Tonnes (thousands)								Average Net Sales Price per Tonne
		2017				2016				2017				2016				2017				2016				2017				2016
Fertilizer			672				547			$	236			$	267				1,292				1,213			$	233			$	248
Industrial and Feed			922				960			$	214			$	230				1,869				1,958			$	221			$	242
			1,594				1,507			$	223			$	244				3,161				3,171			$	226			$	244

The most significant contributors to the change in total gross margin were as follows (direction of arrows refers to impact on gross margin while ● symbol is neutral):

 

Sales Volumes

Net Sales Prices

Cost of Goods Sold

Quarter over Quarter

Volumes were higher, largely due to stronger fertilizer demand.

Our average realized price declined as increased global supply weighed on benchmark pricing, pulling down realizations for nearly all our products.

Average costs, including our hedge position, for natural gas used as feedstock in production increased 10 percent. Costs for natural gas used as feedstock in Trinidad production fell four percent (contract price indexed, in part, to Tampa ammonia prices) while our US spot costs for natural gas increased 56 percent. Including losses on our hedge position, our US gas prices increased 28 percent.

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		30

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Sales Volumes

Net Sales Prices

Cost of Goods Sold

Year over Year

●

There were no significant changes.

Weaker benchmark pricing lowered our average realized price during the first half of 2017.

Average costs, including our hedge position, for natural gas used as feedstock in production increased eight percent. Costs for natural gas used as feedstock in Trinidad production fell six percent (contract price indexed, in part, to Tampa ammonia prices) while our US spot costs for natural gas increased 53 percent. Including losses on our hedge position, our US gas prices increased 24 percent.

Ammonia cost of goods sold variance was positive due to lower natural gas costs in Trinidad more than offsetting higher natural gas costs in the US.

 

 

31		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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NON-FINANCIAL PERFORMANCE

The most significant contributors to the change in our non-financial performance highlights were as follows:

QUARTER OVER QUARTER

 

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		32

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YEAR OVER YEAR

 

 

 

33		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PHOSPHATE PERFORMANCE

FINANCIAL PERFORMANCE

 

		Three Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne 1
		2017				2016				% Change				2017				2016				% Change				2017				2016				% Change
Manufactured product
Net sales
Fertilizer		$	117			$	108				8				348				274				27			$	337			$	397				(15	)
Feed and Industrial			123				140				(12	)			242				238				2			$	507			$	587				(14	)
			240				248				(3	)			590				512				15			$	407			$	485				(16	)
Cost of goods sold			(266	)			(259	)			3															$	(452	)		$	(506	)			(11	)
Gross margin			(26	)			(11	)			136															$	(45	)		$	(21	)			114
Other miscellaneous and purchased product gross margin 2			–				1				(100	)
Gross Margin		$	(26	)		$	(10	)			160															$	(44	)		$	(20	)			120

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

2	Comprised of net sales $1 million (2016 – $2 million) less cost of goods sold $1 million (2016 – $1 million).

 

		Six Months Ended June 30
		Dollars (millions)												Tonnes (thousands)												Average per Tonne 1
		2017				2016				% Change				2017				2016				% Change				2017				2016				% Change
Manufactured product
Net sales
Fertilizer		$	253			$	299				(15	)			716				711				1			$	354			$	421				(16	)
Feed and Industrial			257				307				(16	)			513				518				(1	)		$	501			$	592				(15	)
			510				606				(16	)			1,229				1,229				–			$	415			$	493				(16	)
Cost of goods sold			(526	)			(579	)			(9	)														$	(428	)		$	(471	)			(9	)
Gross margin			(16	)			27				n/m															$	(13	)		$	22				n/m
Other miscellaneous and purchased product gross margin 2			1				2				(50	)
Gross Margin		$	(15	)		$	29				n/m															$	(12	)		$	24				n/m

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

2	Comprised of net sales $2 million (2016 – $3 million) less cost of goods sold $1 million (2016 – $1 million).

n/m = not meaningful

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		34

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Phosphate gross margin variance was attributable to:

 

		Three Months Ended June 30 2017 vs. 2016																				Six Months Ended June 30 2017 vs. 2016
						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		$	6			$	(23	)		$	5			$	(12	)						$	–			$	(48	)		$	4			$	(44	)
Feed and Industrial			–				(19	)			16				(3	)							(1	)			(47	)			49				1
Change in product mix			2				(5	)			3				–								1				(1	)			–				–
Total manufactured product		$	8			$	(47	)		$	24			$	(15	)						$	–			$	(96	)		$	53			$	(43	)
Other miscellaneous and purchased product															(1	)																			(1	)
Total														$	(16	)																		$	(44	)

The most significant contributors to the change in total gross margin were as follows (direction of arrows refers to impact on gross margin while ● symbol is neutral):

 

Sales Volumes

Net Sales Prices

Cost of Goods Sold

Quarter over Quarter

Sales volumes were higher mainly due to stronger agriculture demand in North America.

Our average realized price was down, as prices for nearly all products decreased, most notably liquid fertilizers.

Feed and industrial was positive as the increase in asset retirement obligations, primarily due to discount rate reductions, was lower than in 2016.

Sulfur costs were down eight percent, decreasing our cost of goods sold.

 

35		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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Sales Volumes

Net Sales Prices

Cost of Goods Sold

Year over Year

●

There were no significant changes.

Our average realized price was down, reflecting lower benchmark pricing for all of our products.

In 2016, there was an impairment of property, plant and equipment related to product that the company no longer produces. There was no such impairment in 2017, resulting in a positive cost of goods sold variance in feed and industrial.

Feed and industrial was positive as the increase in asset retirement obligations due to discount rate adjustments was lower than in 2016.

Sulfur costs were down 14 percent, decreasing our cost of goods sold.

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		36

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NON-FINANCIAL PERFORMANCE

The most significant contributors to the change in our non-financial performance highlights were as follows:

QUARTER OVER QUARTER

 

 

 

37		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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YEAR OVER YEAR

 

 

 

OTHER EXPENSES AND INCOME

 

		Three Months Ended June 30																				Six Months Ended June 30
Dollars (millions), except percentage amounts		2017				2016				Change				% Change								2017				2016				Change				% Change
Selling and administrative expenses		$	(48	)		$	(55	)		$	7				(13	)						$	(98	)		$	(108	)		$	10				(9	)
Provincial mining and other taxes			(44	)			(26	)			(18	)			69								(78	)			(57	)			(21	)			37
Share of earnings of equity-accounted investees			49				30				19				63								88				49				39				80
Dividend income			4				16				(12	)			(75	)							12				16				(4	)			(25	)
Impairment of available-for-sale investment			–				(10	)			10				(100	)							–				(10	)			10				(100	)
Other (expense) income			(16	)			1				(17	)			n/m								(26	)			(9	)			(17	)			189
Finance costs			(61	)			(54	)			(7	)			13								(120	)			(106	)			(14	)			13
Income taxes			62				(24	)			86				n/m								49				(56	)			105				n/m

n/m = not meaningful

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		38

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The most significant contributors to the change in other expenses and income were as follows:

 

				Quarter over Quarter		Year over Year
Provincial Mining and Other Taxes				Provincial mining and other taxes increased primarily due to stronger potash prices.
Share of Earnings of Equity-Accounted Investees				Share of earnings of equity-accounted investees pertains primarily to SQM and APC. Higher earnings were mainly due to higher earnings at SQM.
Finance Costs				There were no significant changes.
Income Taxes				Income taxes decreased primarily due to a discrete $68 million deferred tax recovery recorded in the second quarter of 2017 as a result of a Saskatchewan income tax rate decrease. As well, significantly lower forecasted annual earnings in the United States contributed to the reduction. For the first six months of 2017, 163 percent of the effective tax rate on the current year’s ordinary earnings pertained to current income taxes (2016 – 89 percent) and (63) percent related to deferred income taxes (2016 – 11 percent). The decrease in the deferred portion is due to significantly lower forecasted annual earnings in the United States.
				EFFECTIVE TAX RATES AND DISCRETE ITEMS
						Three Months Ended June 30								Six Months Ended June 30
				Dollars (millions), except percentage amounts		2017				2016				2017				2016
				Actual effective tax rate on ordinary earnings			7	%			17	%			9	%			21	%
				Actual effective tax rate including discrete items			(44	%)			16	%			(16	%)			22	%
				Discrete tax adjustments that impacted the tax rate		$	71			$	4			$	76			$	–

OTHER NON-FINANCIAL INFORMATION

 

		Three Months Ended June 30																Six Months Ended June 30
Dollars (millions), except percentage amounts		2017				2016				Change				% Change				2017				2016				Change				% Change
Taxes and royalties 1		$	80			$	81			$	(1	)			(1	)		$	174			$	159			$	15				9

1	Includes tax and royalty amounts on an accrual basis calculated as: current income tax expense less investment tax credits and realized excess tax benefit related to share-based compensation plus potash production tax, resource surcharge, royalties, municipal taxes and other miscellaneous taxes.

 

39		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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The most significant contributors to the change in other non-financial information quarter over quarter and year over year were as follows:

 

		Quarter over Quarter		Year over Year
Taxes and Royalties		There were no significant changes.		Taxes and royalties increased primarily due to higher provincial mining and other taxes as a result of stronger potash prices. This was partially offset by lower current income taxes as a result of significantly lower forecasted annual earnings in the United States.

FINANCIAL CONDITION REVIEW

STATEMENT OF FINANCIAL POSITION ANALYSIS

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		40

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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
		Inventory was higher mainly due to an increase in potash and phosphate finished goods inventory.				Payables and accrued charges were lower mainly due to lower trade payables.
		Property, plant and equipment decreased primarily as depreciation exceeded additions.				Deferred income tax liabilities have decreased primarily due to a discrete deferred tax recovery as a result of a Saskatchewan income tax rate decrease.
		Investments were impacted by higher fair value of our available-for-sale investment in ICL more than offsetting a decrease in the fair value of our available-for-sale investment in Sinofert and an increase in the value of our equity-accounted investment in SQM more than offsetting a decrease in the value of APC.
Equity
		Retained earnings were higher as a result of net income (discussed in more detail on page 22) exceeding dividends declared.
		Accumulated other comprehensive loss changed to accumulated other comprehensive income, primarily as a result of the net change in fair value of our available-for-sale investments noted above.

As at June 30, 2017, $73 million (December 31, 2016 – $21 million) of our cash and cash equivalents was held in certain foreign subsidiaries. There are no current plans to repatriate the funds at June 30, 2017 in a manner that would result in tax consequences.

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Our contractual obligations and other commitments detailed on page 84 of our 2016 AIR summarize certain of our liquidity and capital resource requirements, excluding obligations that have original maturities of less than one year and planned (but not legally committed) capital expenditures. There have been no significant changes to these contractual obligations and other commitments or to our planned capital expenditures during the first six months of 2017.

SOURCES AND USES OF CASH

The company’s cash flows from operating, investing and financing activities are summarized in the following table:

 

		Three Months Ended June 30																				Six Months Ended June 30
Dollars (millions), except percentage amounts		2017				2016				Change				% Change								2017				2016				Change				% Change
Cash provided by operating activities		$	328			$	424			$	(96	)			(23	)						$	551			$	612			$	(61	)			(10	)
Cash used in investing activities			(130	)			(220	)			90				(41	)							(262	)			(466	)			204				(44	)
Cash used in financing activities			(163	)			(135	)			(28	)			21								(224	)			(94	)			(130	)			138
Increase in Cash and Cash Equivalents		$	35			$	69			$	(34	)		$	(49	)						$	65			$	52			$	13			$	25

 

41		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		42

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The most significant contributors to the changes in cash flows were as follows:

 

		Quarter over Quarter		Year over Year
Cash Provided by Operating Activities		Cash provided by operating activities was impacted by: •Higher net income in 2017; •Lower cash inflows from receivables in 2017; •Higher recovery of deferred income tax; and •Lower cash outflows on payables and accrued charges in 2017.		Cash provided by operating activities was impacted by: •Higher net income in 2017; •Lower cash inflows from receivables in 2017; •Higher recovery of deferred income tax; and •Lower cash outflows on payables and accrued charges in 2017.
Cash Used in Investing Activities		Cash used in investing activities was primarily for additions to property, plant and equipment.
Cash Used in Financing Activities		Cash used in financing activities in 2017 was largely the result of repayment of commercial paper and dividends paid. Cash used in financing activities in 2016 was largely the result of dividends paid more than offsetting proceeds from the issuance of commercial paper.		Cash used in financing activities in 2017 was largely the result of repayment of commercial paper and dividends paid. Cash used in financing activities in 2016 was largely the result of dividends paid more than offsetting proceeds from the issuance of commercial paper.

We believe that internally generated cash flow, supplemented by available borrowings under our existing financing sources, if necessary, will be sufficient to meet our anticipated capital expenditures and other cash requirements for at least the next 12 months, inclusive of requirements relating to the Proposed Transaction and our working capital deficiency, but exclusive of any possible acquisitions. At this time, we do not reasonably expect any presently known trend or uncertainty to affect our ability to access our potential sources of liquidity.

 

 

43		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		44

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QUARTERLY FINANCIAL HIGHLIGHTS

 

Dollars (millions), except as otherwise noted		June 30, 2017				March 31, 2017				December 31, 2016				September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
Financial Performance
Sales		$	1,120			$	1,112			$	1,058			$	1,136			$	1,053			$	1,209			$	1,354			$	1,529
Gross margin			255				268				163				190				243				234				386				505
Net income			201				149				46				81				121				75				201				282
Net income per share – basic 1			0.24				0.18				0.05				0.10				0.14				0.09				0.24				0.34
Net income per share – diluted 1			0.24				0.18				0.05				0.10				0.14				0.09				0.24				0.34
Non-Financial Performance
Total shareholder return percentage			(4	)			(5	)			12				2				(3	)			2				(15	)			(33	)
Employee turnover rate (annualized percentage)			4				4				3				3				4				3				3				4
Total recordable injury rate			0.85				0.95				0.74				0.92				0.69				1.15				0.97				1.29
Environmental incidents			3				2				1				5				3				9				8				6

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.

Refer to Note 10 to the financial statements in this Form 10-Q for information pertaining to sales that can be seasonal.

In the fourth quarter of 2016, earnings were impacted by a $20 million non-cash impairment charge to property, plant and equipment in the phosphate segment. In the first quarter of 2016, earnings were impacted by a $27 million non-cash impairment charge to property, plant and equipment in the phosphate segment. In the second quarter of 2016, earnings were impacted by $33 million in exit costs related to Canpotex’s Prince Rupert terminal in the potash segment and a $10 million non-cash impairment charge on our available-for-sale investment in Sinofert.

 

 

45		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		46

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47		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		48

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49		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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PART II. OTHER INFORMATION

 

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		50

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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)
2(a)		Arrangement Agreement, dated September 11, 2016, between Potash Corporation of Saskatchewan Inc. and Agrium Inc.		8-K		9/12/2016		2.1
3(a)		Articles of Continuance of the registrant dated May 15, 2002.		10-Q		6/30/2002
3(b)		General By-Law of the registrant, as amended through April 27, 2015.		8-K		4/27/2015		3(a)
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 $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 $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 $500,000,000 principal amount of 4.875% Notes due March 30, 2020.		8-K		9/25/2009		4(b)
4(e)		Form of Note relating to the registrant’s $750,000,000 principal amount of 3.625% Notes due March 15, 2024.		8-K		3/7/2014		4(a)
4(f)		Form of Note relating to the registrant’s $500,000,000 principal amount of 3.000% Notes due April 1, 2025.		8-K		3/26/2015		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 dated as of May 24, 2013.		8-K		5/28/2013		4(a)
4(j)		Form of Note relating to the registrant’s $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 $500,000,000 principal amount of 5.625% Notes due December 1, 2040.		8-K		11/29/2010		4(b)
4(l)		Agreement of Resignation, Appointment and Acceptance, dated as of June 25, 2013, by and among the registrant, The Bank of Nova Scotia Trust Company of New York and U.S. Bank National Association.		8-K		6/27/2013		4(a)
4(m)		Revolving Term Credit Facility Third Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated July 8, 2014.		10-Q		7/29/2014
4(n)		Revolving Term Credit Facility Fourth Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated January 25, 2016.		8-K		1/29/2016		4(a)
4(o)		Extension Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated June 27, 2016.		10-Q		8/3/2016
4(p)		Form of Note relating to the registrant’s $500,000,000 principal amount of 4.000% Notes due December 15, 2026.		8-K		12/6/2016		4(a)

 

51		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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

 

				Incorporated By Reference (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)		First Amending Agreement dated January 1, 2016, between Canpotex Limited, Agrium Inc., Mosaic Canada Crop Nutrition, LP, by its general partner, 4379934 Canada Ltd. and the registrant, to the Consolidated, Restated and Amended Producer Agreement Eight Memorandum of Agreement, dated January 1, 2014.		10-Q		9/30/2016
10(d)		Second Amending Agreement dated December 20, 2016, between Canpotex Limited, Agrium Inc., Mosaic Canada Crop Nutrition, LP, by its general partner, 4379934 Canada Ltd. and the registrant, to the Consolidated, Restated and Amended Producer Agreement Eighth Memorandum of Agreement dated January 1, 2014.		10-Q		3/31/2017
10(e)		Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended.		8-K		3/13/2012		10(a)
10(f)		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(g)		Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant.		10-Q		6/30/1996		10(x)
10(h)		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(i)		Amendment, dated February 23, 2009, to the amended and restated Supplemental Executive Retirement Income Plan.		10-K		12/31/2008		10(r)
10(j)		Amendment, dated December 29, 2010, to the amended and restated Supplemental Executive Retirement Income Plan.		10-K		12/31/2010		10(r)
10(k)		Amended and restated Supplemental Executive Retirement Income Plan of the registrant, dated February 22, 2016.		10-K		12/31/2015		10(i)
10(l)		Form of Letter of amendment to existing supplemental income plan agreements of the registrant.		10-K		12/31/2002		10(cc)
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 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(o)		Supplemental Retirement Agreement dated December 24, 2008, between the registrant and Stephen F. Dowdle.		10-K		12/31/2011		10(bb)

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		52

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				Incorporated By Reference (File No. 001-10351, unless otherwise indicated)
Exhibit Number		Description of Document		Form		Filing Date/Period End Date		Exhibit Number (if different)
10(p)		PCS Supplemental Retirement Plan for U.S Executives (as amended and restated and in effect as of January 1, 2016).		10-K		12/31/2015		10(n)
10(q)		Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.		10-K		12/31/1995
10(r)		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(s)		Resolution and Form of Agreement of Indemnification dated January 24, 2001.		10-K		12/31/2000		10(ii)
10(t)		Resolution and Form of Agreement of Indemnification dated July 21, 2004.		10-Q		6/30/2004		10(ii)
10(u)		Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors.		10-Q		3/31/2012		10(ll)
10(v)		Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.		10-Q		3/31/2007		10(ee)
10(w)		Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement.		10-Q		3/31/2008		10(ff)
10(x)		Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement.		10-Q		3/31/2009		10(mm)
10(y)		Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement.		8-K		5/7/2010		10.1
10(z)		Potash Corporation of Saskatchewan Inc. 2011 Performance Option Plan and Form of Option Agreement.		8-K		5/13/2011		10(a)
10(aa)		Potash Corporation of Saskatchewan Inc. 2012 Performance Option Plan and Form of Option Agreement.		8-K		5/18/2012		10(a)
10(bb)		Potash Corporation of Saskatchewan Inc. 2013 Performance Option Plan and Form of Option Agreement.		8-K		5/17/2013		10(a)
10(cc)		Potash Corporation of Saskatchewan Inc. 2014 Performance Option Plan and Form of Option Agreement.		8-K		5/16/2014		10(a)
10(dd)		Potash Corporation of Saskatchewan Inc. 2015 Performance Option Plan and Form of Option Agreement.		8-K		5/13/2015		10(a)
10(ee)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan.		8-K		5/11/2016		10.1
10(ff)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan – Form of Performance Share Unit Agreement (2016-2018 Phased Grant).		8-K		5/11/2016		10.2
10(gg)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan – Form of Performance Share Unit Agreement.		8-K		5/11/2016		10.3
10(hh)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan – Form of Option Agreement.		8-K		5/11/2016		10.4
10(ii)		Executive Employment Agreement, dated July 1, 2014, between registrant and Jochen E. Tilk.		10-K		9/30/2014		10(nn)
10(jj)		PCS Supplemental Executive Retirement Plan for Canadian Executives.		10-K		12/31/2014		10(oo)
10(kk)		CEO Multi-Year Incentive Plan.		10-K		12/31/2014		10(pp)
10(ll)		Letter Agreement, dated January 13, 2016 and revised February 2, 2016, between registrant and G. David Delaney.		10-K		12/31/2015		10(gg)
10(mm)		Short-Term Incentive Plan, dated February 22, 2016.		10-K		12/31/2015		10(hh)
10(nn)		Form of Company Support Agreement.		8-K		9/12/2016		10.1
10(oo)		Form of Agrium Support Agreement.		8-K		9/12/2016		10.2
10(pp)		Form of Change in Control Agreement between the registrant and certain Canadian executives.		10-Q		9/30/2016

 

53		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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				Incorporated By Reference (File No. 001-10351, unless otherwise indicated)
Exhibit Number		Description of Document		Form		Filing Date/Period End Date		Exhibit Number (if different)
10(qq)		Form of Change in Control Agreement, between the registrant and certain U.S. executives.		10-Q		9/30/2016
10(rr)		Letter Agreement, dated January 20, 2016 and revised February 2, 2016, between registrant and Paul E. Dekok.		10-K		12/31/2016
31(a)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95		Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q		54

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Signatures

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

 

		POTASH CORPORATION OF SASKATCHEWAN INC.
August 2, 2017		By:		/s/ Joseph Podwika
				Joseph Podwika
				Senior Vice President, General Counsel and Secretary
August 2, 2017		By:		/s/ Wayne R. Brownlee
				Wayne R. Brownlee
				Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

 

55		PotashCorp 2017 Second Quarter Quarterly Report on Form 10-Q

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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)
2(a)		Arrangement Agreement, dated September 11, 2016, between Potash Corporation of Saskatchewan Inc. and Agrium Inc.		8-K		9/12/2016		2.1
3(a)		Articles of Continuance of the registrant dated May 15, 2002.		10-Q		6/30/2002
3(b)		General By-Law of the registrant, as amended through April 27, 2015.		8-K		4/27/2015		3(a)
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 $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 $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 $500,000,000 principal amount of 4.875% Notes due March 30, 2020.		8-K		9/25/2009		4(b)
4(e)		Form of Note relating to the registrant’s $750,000,000 principal amount of 3.625% Notes due March 15, 2024.		8-K		3/7/2014		4(a)
4(f)		Form of Note relating to the registrant’s $500,000,000 principal amount of 3.000% Notes due April 1, 2025.		8-K		3/26/2015		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 dated as of May 24, 2013.		8-K		5/28/2013		4(a)
4(j)		Form of Note relating to the registrant’s $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 $500,000,000 principal amount of 5.625% Notes due December 1, 2040.		8-K		11/29/2010		4(b)
4(l)		Agreement of Resignation, Appointment and Acceptance, dated as of June 25, 2013, by and among the registrant, The Bank of Nova Scotia Trust Company of New York and U.S. Bank National Association.		8-K		6/27/2013		4(a)
4(m)		Revolving Term Credit Facility Third Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated July 8, 2014.		10-Q		7/29/2014
4(n)		Revolving Term Credit Facility Fourth Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated January 25, 2016.		8-K		1/29/2016		4(a)
4(o)		Extension Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated June 27, 2016.		10-Q		8/3/2016
4(p)		Form of Note relating to the registrant’s $500,000,000 principal amount of 4.000% Notes due December 15, 2026.		8-K		12/6/2016		4(a)

 

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

 

				Incorporated By Reference (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)		First Amending Agreement dated January 1, 2016, between Canpotex Limited, Agrium Inc., Mosaic Canada Crop Nutrition, LP, by its general partner, 4379934 Canada Ltd. and the registrant, to the Consolidated, Restated and Amended Producer Agreement Eight Memorandum of Agreement, dated January 1, 2014.		10-Q		9/30/2016
10(d)		Second Amending Agreement dated December 20, 2016, between Canpotex Limited, Agrium Inc., Mosaic Canada Crop Nutrition, LP, by its general partner, 4379934 Canada Ltd. and the registrant, to the Consolidated, Restated and Amended Producer Agreement Eighth Memorandum of Agreement dated January 1, 2014.		10-Q		3/31/2017
10(e)		Short-Term Incentive Plan of the registrant effective January 1, 2000, as amended.		8-K		3/13/2012		10(a)
10(f)		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(g)		Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant.		10-Q		6/30/1996		10(x)
10(h)		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(i)		Amendment, dated February 23, 2009, to the amended and restated Supplemental Executive Retirement Income Plan.		10-K		12/31/2008		10(r)
10(j)		Amendment, dated December 29, 2010, to the amended and restated Supplemental Executive Retirement Income Plan.		10-K		12/31/2010		10(r)
10(k)		Amended and restated Supplemental Executive Retirement Income Plan of the registrant, dated February 22, 2016.		10-K		12/31/2015		10(i)
10(l)		Form of Letter of amendment to existing supplemental income plan agreements of the registrant.		10-K		12/31/2002		10(cc)
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 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(o)		Supplemental Retirement Agreement dated December 24, 2008, between the registrant and Stephen F. Dowdle.		10-K		12/31/2011		10(bb)

 

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				Incorporated By Reference (File No. 001-10351, unless otherwise indicated)
Exhibit Number		Description of Document		Form		Filing Date/Period End Date		Exhibit Number (if different)
10(p)		PCS Supplemental Retirement Plan for U.S Executives (as amended and restated and in effect as of January 1, 2016).		10-K		12/31/2015		10(n)
10(q)		Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.		10-K		12/31/1995
10(r)		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(s)		Resolution and Form of Agreement of Indemnification dated January 24, 2001.		10-K		12/31/2000		10(ii)
10(t)		Resolution and Form of Agreement of Indemnification dated July 21, 2004.		10-Q		6/30/2004		10(ii)
10(u)		Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors.		10-Q		3/31/2012		10(ll)
10(v)		Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.		10-Q		3/31/2007		10(ee)
10(w)		Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement.		10-Q		3/31/2008		10(ff)
10(x)		Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan and Form of Option Agreement.		10-Q		3/31/2009		10(mm)
10(y)		Potash Corporation of Saskatchewan Inc. 2010 Performance Option Plan and Form of Option Agreement.		8-K		5/7/2010		10.1
10(z)		Potash Corporation of Saskatchewan Inc. 2011 Performance Option Plan and Form of Option Agreement.		8-K		5/13/2011		10(a)
10(aa)		Potash Corporation of Saskatchewan Inc. 2012 Performance Option Plan and Form of Option Agreement.		8-K		5/18/2012		10(a)
10(bb)		Potash Corporation of Saskatchewan Inc. 2013 Performance Option Plan and Form of Option Agreement.		8-K		5/17/2013		10(a)
10(cc)		Potash Corporation of Saskatchewan Inc. 2014 Performance Option Plan and Form of Option Agreement.		8-K		5/16/2014		10(a)
10(dd)		Potash Corporation of Saskatchewan Inc. 2015 Performance Option Plan and Form of Option Agreement.		8-K		5/13/2015		10(a)
10(ee)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan.		8-K		5/11/2016		10.1
10(ff)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan – Form of Performance Share Unit Agreement (2016-2018 Phased Grant).		8-K		5/11/2016		10.2
10(gg)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan – Form of Performance Share Unit Agreement.		8-K		5/11/2016		10.3
10(hh)		Potash Corporation of Saskatchewan Inc. 2016 Long-Term Incentive Plan – Form of Option Agreement.		8-K		5/11/2016		10.4
10(ii)		Executive Employment Agreement, dated July 1, 2014, between registrant and Jochen E. Tilk.		10-K		9/30/2014		10(nn)
10(jj)		PCS Supplemental Executive Retirement Plan for Canadian Executives.		10-K		12/31/2014		10(oo)
10(kk)		CEO Multi-Year Incentive Plan.		10-K		12/31/2014		10(pp)
10(ll)		Letter Agreement, dated January 13, 2016 and revised February 2, 2016, between registrant and G. David Delaney.		10-K		12/31/2015		10(gg)
10(mm)		Short-Term Incentive Plan, dated February 22, 2016.		10-K		12/31/2015		10(hh)
10(nn)		Form of Company Support Agreement.		8-K		9/12/2016		10.1
10(oo)		Form of Agrium Support Agreement.		8-K		9/12/2016		10.2
10(pp)		Form of Change in Control Agreement between the registrant and certain Canadian executives.		10-Q		9/30/2016

 

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				Incorporated By Reference (File No. 001-10351, unless otherwise indicated)
Exhibit Number		Description of Document		Form		Filing Date/Period End Date		Exhibit Number (if different)
10(qq)		Form of Change in Control Agreement, between the registrant and certain U.S. executives.		10-Q		9/30/2016
10(rr)		Letter Agreement, dated January 20, 2016 and revised February 2, 2016, between registrant and Paul E. Dekok.		10-K		12/31/2016
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.