PotashCorp Reports Fourth-Quarter Earnings of $0.80 per Share
Symbol: POT
Listed: TSX, NYSE
SASKATOON,
Despite the lowest potash sales volumes since becoming a publicly traded company in 1989, our core nutrient remained the largest driver of gross margin, contributing 74 percent of the
Our offshore investments in Arab Potash Company Ltd. (APC) in
"The fertilizer industry, like many other businesses, felt the impact of the global economic downturn in 2009," said PotashCorp President and Chief Executive Officer
Market Conditions
In sharp contrast to the close of 2008, when economic uncertainty led farmers to become extremely cautious, the fourth quarter of 2009 reflected the beginning of the recovery in fertilizers. Strong crop margins - the result of improving commodity prices and lower input costs - appeared to refocus farmers and fertilizer dealers on the need to address nutrient shortfalls in the soils and the distribution chain created by nearly 18 months of limited fertilizer purchasing. This was most apparent in
While demand in potash markets began to show signs of improvement during the quarter, buyers were resistant to commit to inventory restocking and prices moved lower. Domestic shipments from North American producers were up 10 percent over the fourth quarter of 2008, as fertilizer buyers responded to immediate demand from farmers. Offshore,
Phosphate fourth-quarter sales volumes to North American and offshore markets approached historical levels, due to strong crop economics, low producer inventories and limited perceived pricing risk. In nitrogen, improved demand in the quarter for agricultural and industrial products resulted in US sales volumes increasing compared to the same period last year. Prices for both nutrients remained well below those of the previous year, but were moved up compared to the trailing quarter by higher input costs and strong demand.
Potash
Potash gross margin of
Fourth-quarter sales of 1.1 million tonnes represented more than one-third of our 2009 total of 3.0 million tonnes. This was 23 percent lower on a quarter-over-quarter basis, but reflected an improvement over the 65 percent decline experienced for the full year. We shipped 0.5 million tonnes to North American customers, a 30 percent increase over the same period last year, and 0.6 million tonnes to offshore markets, which was 42 percent below fourth-quarter 2008 levels. Canpotex Limited (Canpotex), the offshore marketing company for Saskatchewan potash producers, sold 36 percent of its volumes to
Average realized prices recalibrated over the course of the year, resulting in a 46 percent decline from the fourth quarter of 2008. Realized prices continued to be impacted by fixed transportation and distribution costs spread over fewer tonnes.
In keeping with our long-held strategy of matching potash production to market demand, we produced 1.1 million tonnes in fourth-quarter 2009, 46 percent less than the 2.1 million tonnes we produced in the same period last year - a comparative total that was unusually low because of work stoppages at three of our Saskatchewan mines in 2008. Potash per-tonne cost of sales in the fourth quarter increased as fixed costs were allocated over fewer tonnes.
Phosphate
Phosphate gross margin of
While prices for all product categories were significantly lower in 2009's fourth quarter, our industrial segment continued to benefit from sales tied to cost-plus or market index provisions that lag current market conditions. Industrial and feed products contributed nearly all of phosphate gross margin in both the quarter and the year, reinforcing the value of our product diversification strategy.
Phosphate demand improved near the end of the year. Quarterly sales volumes were 67 percent higher than those in the slow fourth quarter of 2008, primarily due to improved demand for liquid and solid fertilizers. Total 2009 phosphate sales volumes were 8 percent lower than those in 2008.
Phosphate cost of goods sold declined compared to fourth-quarter 2008 due to lower input costs for sulfur and ammonia.
Nitrogen
Nitrogen generated
Total average realized nitrogen prices for fourth-quarter 2009 were 34 percent below the same quarter last year. Sales volumes were up 7 percent quarter-over-quarter, while full-year 2009 sales were essentially flat compared to 2008 levels.
Our total average natural gas cost, including hedge, was
Financial
With significantly reduced potash sales volumes and lower profitability, provincial mining and other taxes in fourth-quarter 2009 fell to
Our expenditures on property, plant and equipment were
Outlook
Despite the severe global economic downturn of 2009, the long-term drivers of our business - growth in population and stronger economies in developing nations leading to greater demand for food - remain intact. Global grain consumption rose by 2 percent in 2009, demonstrating the power of these trends. Rising demand for food places pressure on the world's grain supplies and, as a result, crop prices remain well above historical levels. This has created a favorable situation for many farmers, whose planting decisions are influenced by the ability to generate a return on their investment. We believe crop prices will remain strong over the coming years, providing farmers with the financial incentive to strive for increased production.
This environment is supportive of our business, as the science of food production is inescapable: balanced fertilization is necessary to support healthy plant growth and optimize crop yields. Nutrients in the food supply come from the soil and, following a year of substantially reduced potash and phosphate applications, we believe that farmers now must address the resulting need to sustain future production. Replenishing nutrients in the soil is a long-term exercise. Recognizing the opportunity that comes with strong margins, farmers appear to be gradually returning to normal fertilization practices and are expected to demand more fertilizer in the years ahead.
At PotashCorp, we are preparing to meet rising demand for potash, and understand the importance of capacity being available to meet the world's growing needs. Developing capacity - brownfield or greenfield - requires significant time, capital and a margin sufficient to justify the investment.
We expect global shipments will be approximately 50 million tonnes in 2010, marking the transition between the historically low levels of 2009 and a return to higher demand in 2011. This will be a significant improvement from 2009 levels but will not address the multi-year process of refilling distributor inventories and soil nutrient levels. Weaker crop margins or delayed buyer engagement could result in potash shipments below the forecast for this year, while stronger crop economics or significant engagement of key markets could raise demand above this level.
Supportive crop prices, improved potash price clarity and an empty supply chain are prompting buyers to begin positioning product in advance of key growing seasons. We expect
While these levels would mark an improvement in demand, many of these countries need to further increase food production, especially in light of reduced crop yields in 2009. We believe this will require them to apply more potash to improve the balance with other nutrients.
In
Based on these conditions, we expect our 2010 potash gross margin to be in the range of
In our other nutrients, we expect increased demand and higher prices to push 2010 combined phosphate and nitrogen gross margin to
We expect capital expenditures, excluding capitalized interest, to approximate
With these assumptions, PotashCorp is forecasting 2010 net income per share in the range of
Conclusion
"We believe the need for more food - and the nutrients to produce it - is irrefutable," said Doyle. "Even though fertilizer demand can be deferred on a short-term basis, as we saw in 2009, the long-term requirement cannot be denied. We enter 2010 with a sense of optimism, as we look ahead to helping fertilizer dealers and farmers begin replenishing nutrients in the soil and supply chain. We believe this is an opportunity to further demonstrate the strength of our assets, this year and for decades to come."
Notes
-----
1. All references to per-share amounts pertain to diluted net income per
share.
2. See reconciliation and description of non-GAAP measures in the
attached section titled "Selected Non-GAAP Financial Measures and
Reconciliations."
Potash Corporation of Saskatchewan Inc. is the world's largest fertilizer enterprise producing the three primary plant nutrients and a leading supplier to three distinct market categories: agriculture, with the largest capacity in the world in potash, third largest in each of nitrogen and phosphate; animal nutrition, with the world's largest capacity in phosphate feed ingredients; and industrial chemicals, as the largest global producer of industrial nitrogen products and the world's largest capacity for production of purified industrial phosphoric acid.
This release contains forward-looking statements. These statements are based on certain factors and assumptions including foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities and effective income tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to: fluctuations in supply and demand in fertilizer, sulfur, transportation and petrochemical markets; changes in competitive pressures, including pricing pressures; the recent global financial crisis and conditions and changes in credit markets; the results of sales contract negotiations with
PotashCorp will host a conference call on Thursday, January 28, 2010
at 1:00 pm Eastern Time.
To join the call, dial (412) 317-6578 at least 10 minutes
prior to the start time.
No reservation ID is required.
Alternatively, visit www.potashcorp.com for a
live webcast of the conference call.
Webcast participants can submit questions to management
online from their audio player pop-up window.
This news release is also available at our website.
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Financial Position
(in millions of US dollars except share amounts)
(unaudited)
December 31, December 31,
2009 2008
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 385.4 $ 276.8
Accounts receivable (Note 2) 1,137.9 1,189.9
Inventories 623.5 714.9
Prepaid expenses and other current assets 124.9 85.6
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2,271.7 2,267.2
Property, plant and equipment 6,413.3 4,812.2
Investments 3,760.3 2,750.7
Other assets 359.9 300.2
Intangible assets 20.0 21.5
Goodwill 97.0 97.0
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$ 12,922.2 $ 10,248.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current liabilities
Short-term debt and current portion
of long-term debt $ 728.8 $ 1,324.1
Accounts payable and accrued charges 779.3 1,183.6
Current portion of derivative
instrument liabilities 51.8 108.1
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1,559.9 2,615.8
Long-term debt (Note 3) 3,319.3 1,739.5
Derivative instrument liabilities 123.2 120.4
Future income tax liability 999.3 794.2
Accrued pension and other post-retirement
benefits 280.8 253.4
Accrued environmental costs and asset
retirement obligations 134.8 133.4
Other non-current liabilities and
deferred credits 4.2 3.2
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6,421.5 5,659.9
-------------------------------------------------------------------------
Shareholders' Equity
Share capital 1,430.3 1,402.5
Unlimited authorization of common shares
without par value; issued and outstanding
295,975,550 and 295,200,987 at December
31, 2009 and 2008, respectively
Contributed surplus 149.5 126.2
Accumulated other comprehensive income 1,648.8 657.9
Retained earnings 3,272.1 2,402.3
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6,500.7 4,588.9
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$ 12,922.2 $ 10,248.8
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Operations and Retained Earnings
(in millions of US dollars except per-share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Sales (Note 4) $ 1,099.1 $ 1,870.6 $ 3,976.7 $ 9,446.5
Less: Freight 60.8 37.7 191.0 324.9
Transportation and
distribution 27.1 35.2 128.1 132.4
Cost of goods sold 731.6 924.6 2,631.6 4,081.8
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Gross Margin 279.6 873.1 1,026.0 4,907.4
-------------------------------------------------------------------------
Selling and administrative 50.9 29.8 183.6 188.4
Provincial mining and other
taxes 12.0 109.0 29.0 543.4
Foreign exchange gain (34.1) (62.8) (35.4) (126.0)
Other income (Note 5) (78.8) (78.3) (343.4) (333.5)
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(50.0) (2.3) (166.2) 272.3
-------------------------------------------------------------------------
Operating Income 329.6 875.4 1,192.2 4,635.1
Interest Expense (Note 6) 40.1 20.6 120.9 62.8
-------------------------------------------------------------------------
Income Before Income Taxes 289.5 854.8 1,071.3 4,572.3
Income Taxes (Note 7) 45.9 66.8 83.5 1,077.1
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Net Income $ 243.6 $ 788.0 987.8 3,495.2
-----------------------
-----------------------
Retained Earnings,
Beginning of Year 2,402.3 2,279.6
Repurchase of Common Shares - (3,250.3)
Dividends (118.0) (122.2)
-------------------------------------------------------------------------
Retained Earnings, End
of Year $ 3,272.1 $ 2,402.3
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Net Income Per Share (Note 8)
Basic $ 0.82 $ 2.63 $ 3.34 $ 11.37
Diluted $ 0.80 $ 2.56 $ 3.25 $ 11.01
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Dividends Per Share $ 0.10 $ 0.10 $ 0.40 $ 0.40
-------------------------------------------------------------------------
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(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statements of Cash Flow
(in millions of US dollars)
(unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Operating Activities
Net income $ 243.6 $ 788.0 $ 987.8 $ 3,495.2
-------------------------------------------------------------------------
Adjustments to reconcile net
income to cash provided by
operating activities
Depreciation and
amortization 84.6 80.4 312.1 327.5
Stock-based compensation 3.3 4.1 29.5 36.2
(Gain) loss on disposal
of property, plant and
equipment and long-term
investments (0.7) 1.2 7.7 (27.1)
Provision for (gain on
disposal of) auction
rate securities - 17.5 (115.3) 88.8
Foreign exchange on
future income tax (0.3) (82.5) (1.3) (106.4)
Provision for future
income tax 137.4 6.7 203.2 82.2
Undistributed earnings
of equity investees (1.5) (32.9) (2.8) (166.7)
Derivative instruments 8.0 67.1 (62.0) 48.7
Other long-term liabilities 29.1 (0.5) (8.0) 2.3
-------------------------------------------------------------------------
Subtotal of adjustments 259.9 61.1 363.1 285.5
-------------------------------------------------------------------------
Changes in non-cash operating
working capital
Accounts receivable 0.2 183.1 53.1 (593.7)
Inventories 17.7 36.1 88.2 (324.4)
Prepaid expenses and
other current assets 30.4 10.4 21.2 (23.7)
Accounts payable and
accrued charges 16.3 (315.4) (589.5) 174.3
-------------------------------------------------------------------------
Subtotal of changes in
non-cash operating
working capital 64.6 (85.8) (427.0) (767.5)
-------------------------------------------------------------------------
Cash provided by operating
activities 568.1 763.3 923.9 3,013.2
-------------------------------------------------------------------------
Investing Activities
Additions to property,
plant and equipment (573.6) (427.7) (1,763.8) (1,198.3)
Purchase of long-term
investments (3.2) (116.1) (3.2) (445.6)
Proceeds from disposal
of property, plant and
equipment and long-term
investments 3.5 2.3 19.4 43.2
Proceeds from disposal of
auction rate securities - - 132.5 -
Other assets and intangible
assets (18.0) (13.5) (54.1) (46.6)
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Cash used in investing
activities (591.3) (555.0) (1,669.2) (1,647.3)
-------------------------------------------------------------------------
Cash before financing
activities (23.2) 208.3 (745.3) 1,365.9
-------------------------------------------------------------------------
Financing Activities
Proceeds from long-term
debt obligations 75.0 400.0 4,108.7 400.0
Repayments and finance costs
of long-term debt obligations (269.9) - (3,561.3) (0.2)
Proceeds from (repayments of)
short-term debt obligations 237.9 (352.4) 403.2 1,233.9
Dividends (29.0) (30.3) (116.9) (122.6)
Repurchase of common shares - (453.5) - (3,356.4)
Issuance of common shares 3.4 5.2 20.2 36.7
-------------------------------------------------------------------------
Cash provided by (used in)
financing activities 17.4 (431.0) 853.9 (1,808.6)
-------------------------------------------------------------------------
(Decrease) Increase in Cash
and Cash Equivalents (5.8) (222.7) 108.6 (442.7)
Cash and Cash Equivalents,
Beginning of Period 391.2 499.5 276.8 719.5
-------------------------------------------------------------------------
Cash and Cash Equivalents,
End of Period $ 385.4 $ 276.8 $ 385.4 $ 276.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents
comprised of:
Cash $ 121.6 $ 29.9 $ 121.6 $ 29.9
Short-term investments 263.8 246.9 263.8 246.9
-------------------------------------------------------------------------
$ 385.4 $ 276.8 $ 385.4 $ 276.8
-------------------------------------------------------------------------
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Supplemental cash flow
disclosure
Interest paid $ 59.3 $ 31.4 $ 115.4 $ 82.8
Income taxes (received)
paid $ (98.9) $ 74.2 $ 640.3 $ 669.9
-------------------------------------------------------------------------
(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statement of Comprehensive Income (Loss)
(in millions of US dollars)
(unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
(Net of related income taxes) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net income $ 243.6 $ 788.0 $ 987.8 $ 3,495.2
-------------------------------------------------------------------------
Other comprehensive
income (loss)
Net increase (decrease)
in unrealized gains on
available-for-sale
securities(1) 435.2 (934.7) 988.6 (1,336.9)
Net losses on derivatives
designated as cash flow
hedges(2) (24.0) (105.8) (63.9) (166.0)
Reclassification to income
of net losses (gains) on
cash flow hedges(3) 13.2 6.3 53.1 (8.1)
Unrealized foreign
exchange gains (losses)
on translation of
self-sustaining foreign
operations 1.1 (7.7) 13.1 (10.0)
-------------------------------------------------------------------------
Other comprehensive income
(loss) 425.5 (1,041.9) 990.9 (1,521.0)
-------------------------------------------------------------------------
Comprehensive income (loss) $ 669.1 $ (253.9) $ 1,978.7 $ 1,974.2
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(1) Available-for-sale securities are comprised of shares in Israel
Chemicals Ltd. and Sinofert Holdings Limited and investments in
auction rate securities. The amounts are net of income taxes of $NIL
(2008 - $(118.5)) for the three months ended December 31, 2009 and
$26.5 (2008 - $(61.5)) for the twelve months ended December 31, 2009.
(2) Cash flow hedges are comprised of natural gas derivative instruments,
and are net of income taxes of $(14.4) (2008 - $(76.2)) for the three
months ended December 31, 2009 and $(38.7) (2008 - $(100.8)) for the
twelve months ended December 31, 2009.
(3) Net of income taxes of $7.9 (2008 - $1.1) for the three months ended
December 31, 2009 and $32.2 (2008 - $(4.8)) for the twelve months
ended December 31, 2009.
Potash Corporation of Saskatchewan Inc.
Condensed Consolidated Statement of Accumulated
Other Comprehensive Income
(in millions of US dollars)
(unaudited)
December 31, December 31,
(Net of related income taxes) 2009 2008
-------------------------------------------------------------------------
Net unrealized gains on available-for-sale
securities(1) $ 1,750.4 $ 761.8
Net unrealized losses on derivatives
designated as cash flow hedges(2) (111.4) (100.6)
Unrealized foreign exchange gains (losses)
on translation of self-sustaining foreign
operations 9.8 (3.3)
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Accumulated other comprehensive income $ 1,648.8 $ 657.9
Retained earnings 3,272.1 2,402.3
-------------------------------------------------------------------------
Accumulated Other Comprehensive Income
and Retained Earnings $ 4,920.9 $ 3,060.2
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(1) $1,900.8 before income taxes (2008 - $885.7).
(2) $(177.6) before income taxes (2008 - $(160.2)).
(See Notes to the Condensed Consolidated Financial Statements)
Potash Corporation of Saskatchewan Inc.
Notes to the Condensed Consolidated Financial Statements
For the Three and Twelve Months Ended December 31, 2009
(in millions of US dollars except share and per-share amounts)
(unaudited)
1. Significant Accounting Policies
With its subsidiaries, Potash Corporation of Saskatchewan Inc. ("PCS") -
together known as "PotashCorp" or "the company" except to the extent the
context otherwise requires - forms an integrated fertilizer and related
industrial and feed products company. The company's accounting policies
are in accordance with accounting principles generally accepted in Canada
("Canadian GAAP"). The accounting policies used in preparing these
unaudited condensed consolidated financial statements are consistent with
those used in the preparation of the 2008 annual consolidated financial
statements, except as described below.
These unaudited condensed consolidated financial statements include the
accounts of PCS and its subsidiaries; however, they do not include all
disclosures normally provided in annual consolidated financial statements
and should be read in conjunction with the 2008 annual consolidated
financial statements. In management's opinion, the unaudited condensed
consolidated financial statements include all adjustments (consisting
solely of normal recurring adjustments) necessary to present fairly such
information.
Change in Accounting Policy
Effective January 1, 2009, the company adopted amended accounting
standards on goodwill and intangible assets as well as amendments to
standards which previously permitted the deferral of costs that did not
meet the definition of an asset. The implementation of these standards
did not have a material impact on the company's consolidated financial
statements.
2. Accounts Receivable
December 31, December 31,
2009 2008
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Trade accounts - Canpotex $ 164.3 $ 691.2
- Other 264.4 342.7
Less allowance for doubtful accounts (8.4) (7.7)
-------------------------------------------------------------------------
420.3 1,026.2
Income taxes receivable 287.4 -
Provincial mining and other taxes receivable 234.6 -
Margin deposits on derivative instruments 108.9 91.1
Other non-trade accounts 86.7 72.6
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$ 1,137.9 $ 1,189.9
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3. Long-Term Debt
On May 1, 2009, the company closed the issuance of $500.0 of 5.250
percent senior notes due May 15, 2014 and $500.0 of 6.500 percent senior
notes due May 15, 2019. In addition, on September 28, 2009, the company
closed the issuance of $500.0 of 3.750 percent senior notes due
September 30, 2015 and $500.0 of 4.875 percent senior notes due March 30,
2020. The debt securities were issued under the company's US shelf
registration statement filed on December 12, 2007.
In December 2009, the company replaced its $1,850.0 and $180.0 credit
facilities with a $2,500.0 credit facility that matures December 11,
2012. During the three months ended December 31, 2009, the company
received proceeds from its long-term credit facilities of $75.0, and made
repayments of $255.0 under these facilities. During the twelve months
ended December 31, 2009, the company received proceeds of $2,130.0 and
made repayments of $3,530.0 under these facilities. At December 31, 2009,
no amounts were outstanding under the credit facilities.
4. Segment Information
The company has three reportable business segments: potash, phosphate and
nitrogen. These business segments are differentiated by the chemical
nutrient contained in the product that each produces. Inter-segment sales
are made under terms that approximate market value. The accounting
policies of the segments are the same as those described in Note 1.
Three Months Ended December 31, 2009
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Potash Phosphate Nitrogen All Others Consolidated
-------------------------------------------------------------------------
Sales $ 412.5 $ 362.4 $ 324.2 $ - $ 1,099.1
Freight 24.4 25.1 11.3 - 60.8
Transportation
and distribution 10.9 3.1 13.1 - 27.1
Net sales - third
party 377.2 334.2 299.8 -
Cost of goods
sold 171.0 303.9 256.7 - 731.6
Gross margin 206.2 30.3 43.1 - 279.6
Depreciation and
amortization 13.5 43.9 24.9 2.3 84.6
Inter-segment
sales - - 21.9 - -
Three Months Ended December 31, 2008
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Potash Phosphate Nitrogen All Others Consolidated
-------------------------------------------------------------------------
Sales $ 932.2 $ 505.3 $ 433.1 $ - $ 1,870.6
Freight 15.7 11.9 10.1 - 37.7
Transportation
and distribution 6.9 14.2 14.1 - 35.2
Net sales - third
party 909.6 479.2 408.9 -
Cost of goods
sold 164.8 368.8 391.0 - 924.6
Gross margin 744.8 110.4 17.9 - 873.1
Depreciation and
amortization 16.3 36.1 26.0 2.0 80.4
Inter-segment
sales - 0.7 28.2 - -
Twelve Months Ended December 31, 2009
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Potash Phosphate Nitrogen All Others Consolidated
-------------------------------------------------------------------------
Sales $ 1,315.8 $ 1,374.4 $ 1,286.5 $ - $ 3,976.7
Freight 58.5 83.4 49.1 - 191.0
Transportation
and distribution 35.3 37.9 54.9 - 128.1
Net sales - third
party 1,222.0 1,253.1 1,182.5 -
Cost of goods
sold 491.6 1,149.3 990.7 - 2,631.6
Gross margin 730.4 103.8 191.8 - 1,026.0
Depreciation and
amortization 40.1 163.9 99.2 8.9 312.1
Inter-segment
sales - - 66.0 - -
Twelve Months Ended December 31, 2008
-------------------------------------------------------------------------
Potash Phosphate Nitrogen All Others Consolidated
-------------------------------------------------------------------------
Sales $ 4,068.1 $ 2,880.7 $ 2,497.7 $ - $ 9,446.5
Freight 167.3 101.1 56.5 - 324.9
Transportation
and distribution 42.1 39.4 50.9 - 132.4
Net sales - third
party 3,858.7 2,740.2 2,390.3 -
Cost of goods
sold 803.2 1,625.7 1,652.9 - 4,081.8
Gross margin 3,055.5 1,114.5 737.4 - 4,907.4
Depreciation and
amortization 82.0 140.5 97.1 7.9 327.5
Inter-segment
sales - 23.1 173.6 - -
5. Other Income
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Share of earnings of equity
investees $ 33.5 $ 62.8 $ 133.7 $ 255.8
Dividend income 19.9 43.0 71.7 107.0
(Provision for) gain on
disposal of auction rate
securities - (17.5) 115.3 (88.8)
Other 25.4 (10.0) 22.7 34.2
Gain on forward purchase
contract for shares in
Sinofert - - - 25.3
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$ 78.8 $ 78.3 $ 343.4 $ 333.5
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In April 2009, the company recognized a gain on the disposal of auction
rate securities of $115.3 due to the settlement of a claim the company
filed in an arbitration proceeding against an investment firm that
purchased auction rate securities with a par value of $132.5 for the
company's account without the company's authorization. The investment
firm paid the company the full par value of $132.5 in exchange for the
transfer of the auction rate securities to the investment firm. The
company retained all interest paid and accrued on these securities
through the date of the transfer of the securities to the investment
firm. The company was also reimbursed by the investment firm for $3.0 of
the company's legal costs. Prior to the settlement, the company had
recognized in net income a loss of $115.3 related to these unauthorized
securities placed in its account.
6. Interest Expense
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Interest expense on
Short-term debt $ 9.2 $ 11.5 $ 26.5 $ 28.5
Long-term debt 53.3 23.6 173.1 94.9
Interest capitalized to
property, plant and equipment (21.4) (10.8) (68.2) (42.9)
Interest income (1.0) (3.7) (10.5) (17.7)
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$ 40.1 $ 20.6 $ 120.9 $ 62.8
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7. Income Taxes
The company's income tax provision was $45.9 for the three months ended
December 31, 2009 as compared to $66.8 for the same period last year. For
the twelve months ended December 31, 2009, the company's income tax
provision was $83.5 (2008 - $1,077.1). The effective tax rate for the
three and twelve months ended December 31, 2009 was 16 percent and
8 percent, respectively, compared to 8 percent and 24 percent,
respectively, for the three and twelve months ended December 31, 2008.
The provision for the twelve months ended December 31, 2009 included:
- A future income tax recovery of $119.2 for a tax rate reduction
resulting from an internal restructuring during the first quarter.
- A current income tax recovery of $47.6 recorded in the first
quarter that related to an increase in permanent deductions in the
US from prior years. The recovery had a positive impact on cash.
- A future income tax expense of $24.4 related to a second-quarter
functional currency election by the parent company for Canadian
income tax purposes.
- In the fourth quarter, a current income tax expense of $8.6
related to currency fluctuations on the repayment of intercompany
debt.
- The benefit of a lower percentage of consolidated income earned in
higher-tax jurisdictions.
The provision for the twelve months ended December 31, 2008 included:
- The benefit of a scheduled one and a half percentage point
reduction in the Canadian federal income tax rate applicable to
resource companies along with the elimination of the one percent
surtax that became effective at the beginning of the year.
- In the third quarter of 2008, a current income tax recovery of
$29.1 was recorded that related to an increase in permanent
deductions in the US from prior years. This was in addition to the
future income tax recovery of $42.0 recorded during the first
quarter of 2008 that related to an increase in permanent
deductions in the US from prior years.
- No tax expense on the $25.3 gain recognized in the first quarter
that resulted from the change in fair value of the forward
purchase contract for shares in Sinofert Holdings Limited
("Sinofert") as the gain was not taxable.
8. Net Income Per Share
Basic net income per share for the quarter is calculated on the weighted
average shares issued and outstanding for the three months ended
December 31, 2009 of 295,915,000 (2008 - 299,819,000). Basic net income
per share for the twelve months ended December 31, 2009 is calculated on
the weighted average shares issued and outstanding for the period of
295,580,000 (2008 - 307,480,000).
Diluted net income per share is calculated based on the weighted average
number of shares issued and outstanding during the period. The
denominator is: (1) increased by the total of the additional common
shares that would have been issued assuming exercise of all stock options
with exercise prices at or below the average market price for the period;
and (2) decreased by the number of shares that the company could have
repurchased if it had used the assumed proceeds from the exercise of
stock options to repurchase them on the open market at the average share
price for the period. The weighted average number of shares outstanding
for the diluted net income per share calculation for the three months
ended December 31, 2009 was 304,350,000 (2008 - 307,511,000) and for the
twelve months ended December 31, 2009 was 303,943,000 (2008 -
317,438,000).
9. Comparative Figures
Certain of the prior periods' figures have been reclassified to conform
with the current period's presentation.
Potash Corporation of Saskatchewan Inc.
Selected Operating and Revenue Data
(unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Potash Operating Data
Production (KCl Tonnes -
thousands) 1,113 2,079 3,405 8,697
Shutdown weeks 36.1 23.6 152.8 49.9
Sales (tonnes - thousands)
Manufactured Product
North America 494 379 1,093 2,962
Offshore 612 1,058 1,895 5,585
-------------------------------------------------------------------------
Manufactured Product 1,106 1,437 2,988 8,547
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Net Sales
(US $ millions)
Sales $412.5 $932.2 $1,315.8 $4,068.1
Less: Freight 24.4 15.7 58.5 167.3
Transportation and
distribution 10.9 6.9 35.3 42.1
-------------------------------------------------------------------------
Net Sales $377.2 $909.6 $1,222.0 $3,858.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product
North America $195.3 $280.4 $506.8 $1,307.5
Offshore 176.0 617.3 698.9 2,526.8
Other miscellaneous and
purchased product 5.9 11.9 16.3 24.4
-------------------------------------------------------------------------
Net Sales $377.2 $909.6 $1,222.0 $3,858.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Average Price per MT
North America $395.54 $740.48 $463.74 $441.38
Offshore $287.63 $583.27 $368.84 $452.43
-------------------------------------------------------------------------
Manufactured Product $335.83 $624.70 $403.56 $448.60
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc.
Selected Operating and Revenue Data
(unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Phosphate Operating Data
Production (P2O5 Tonnes -
thousands) 413 338 1,505 1,873
P2O5 Operating Rate 77% 59% 70% 82%
Sales (tonnes - thousands)
Manufactured Product
Fertilizer - Liquid
phosphates 263 173 791 893
Fertilizer - Solid
phosphates 305 80 1,182 1,069
Feed 135 102 531 654
Industrial 151 157 551 706
-------------------------------------------------------------------------
Manufactured Product 854 512 3,055 3,322
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Net Sales
(US $ millions)
Sales $362.4 $505.3 $1,374.4 $2,880.7
Less: Freight 25.1 11.9 83.4 101.1
Transportation and
distribution 3.1 14.2 37.9 39.4
-------------------------------------------------------------------------
Net Sales $334.2 $479.2 $1,253.1 $2,740.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product
Fertilizer - Liquid
phosphates $79.4 $175.7 $235.2 $734.6
Fertilizer - Solid
phosphates 91.7 83.1 354.2 996.8
Feed 58.8 96.8 260.0 492.9
Industrial 100.1 116.9 386.6 471.0
Other miscellaneous and
purchased product 4.2 6.7 17.1 44.9
-------------------------------------------------------------------------
Net Sales $334.2 $479.2 $1,253.1 $2,740.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Phosphate Average Price per MT
Fertilizer - Liquid
phosphates $302.22 $1,016.58 $297.53 $823.17
Fertilizer - Solid
phosphates $300.95 $1,041.79 $299.51 $932.44
Feed $434.50 $948.20 $489.78 $753.90
Industrial $659.90 $744.85 $701.62 $666.97
-------------------------------------------------------------------------
Manufactured Product $386.23 $923.51 $404.60 $811.50
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Potash Corporation of Saskatchewan Inc.
Selected Operating and Revenue Data
(unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Nitrogen Operating Data
Production (N Tonnes -
thousands) 613 617 2,551 2,780
Average Natural Gas Production
Cost per MMBtu $4.55 $6.16 $3.86 $7.54
Sales (tonnes - thousands)
Manufactured Product
Ammonia 354 395 1,740 1,794
Urea 341 279 1,433 1,186
Nitrogen solutions/Nitric
acid/Ammonium nitrate 437 381 1,794 2,062
-------------------------------------------------------------------------
Manufactured Product 1,132 1,055 4,967 5,042
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer sales tonnes 446 353 2,084 1,794
Industrial/Feed sales tonnes 686 702 2,883 3,248
-------------------------------------------------------------------------
Manufactured Product 1,132 1,055 4,967 5,042
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Net Sales
(US $ millions)
Sales $324.2 $433.1 $1,286.5 $2,497.7
Less: Freight 11.3 10.1 49.1 56.5
Transportation and
distribution 13.1 14.1 54.9 50.9
-------------------------------------------------------------------------
Net Sales $299.8 $408.9 $1,182.5 $2,390.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Manufactured Product
Ammonia $106.3 $176.4 $425.3 $999.5
Urea 101.4 104.6 416.6 633.1
Nitrogen solutions/Nitric
acid/Ammonium nitrate 66.4 108.3 284.3 577.9
Other miscellaneous and
purchased product 25.7 19.6 56.3 179.8
-------------------------------------------------------------------------
Net Sales $299.8 $408.9 $1,182.5 $2,390.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer net sales $104.4 $119.9 $492.3 $809.6
Industrial/Feed net sales 169.7 269.4 633.9 1,400.9
Other miscellaneous and
purchased product 25.7 19.6 56.3 179.8
-------------------------------------------------------------------------
Net Sales $299.8 $408.9 $1,182.5 $2,390.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nitrogen Average Price per MT
Ammonia $300.27 $447.13 $244.43 $557.05
Urea $297.25 $374.54 $290.64 $533.77
Nitrogen solutions/Nitric
acid/Ammonium nitrate $152.00 $283.95 $158.50 $280.34
-------------------------------------------------------------------------
Manufactured Product $242.14 $368.95 $226.73 $438.43
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fertilizer average price
per MT $234.18 $339.39 $236.25 $451.19
Industrial/Feed average
price per MT $247.31 $383.83 $219.85 $431.37
-------------------------------------------------------------------------
Manufactured Product $242.14 $368.95 $226.73 $438.43
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Exchange Rate (Cdn$/US$)
2009 2008
-------------------------------------------------------------------------
December 31 1.0466 1.2246
Fourth-quarter average conversion rate 1.0654 1.1538
Potash Corporation of Saskatchewan Inc.
Selected Non-GAAP Financial Measures and Reconciliations
(in millions of US dollars)
(unaudited)
The following information is included for convenience only. Generally, a
non-GAAP financial measure is a numerical measure of a company's
performance, financial position or cash flows that either excludes or
includes amounts that are not normally excluded or included in the most
directly comparable measure calculated and presented in accordance with
generally accepted accounting principles ("GAAP"). EBITDA, adjusted
EBITDA, EBITDA margin, cash flow prior to working capital changes and
free cash flow are not measures of financial performance (nor do they
have standardized meanings) under either Canadian GAAP or US GAAP. In
evaluating these measures, investors should consider that the methodology
applied in calculating such measures may differ among companies and
analysts.
The company uses both GAAP and certain non-GAAP measures to assess
performance. The company's management believes these non-GAAP measures
provide useful supplemental information to investors in order that they
may evaluate PotashCorp's financial performance using the same measures
as management. PotashCorp's management believes that, as a result, the
investor is afforded greater transparency in assessing the financial
performance of the company. These non-GAAP financial measures should not
be considered as a substitute for, nor superior to, measures of financial
performance prepared in accordance with GAAP.
A. EBITDA, ADJUSTED EBITDA AND EBITDA MARGIN
-----------------------------------------
Set forth below are reconciliations of "EBITDA" and "adjusted EBITDA" to
net income, and "EBITDA margin" to net income as a percentage of sales,
the most directly comparable financial measures calculated and presented
in accordance with Canadian GAAP.
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Net income $ 243.6 $ 788.0 $ 987.8 $ 3,495.2
Income taxes 45.9 66.8 83.5 1,077.1
Interest expense 40.1 20.6 120.9 62.8
Depreciation and amortization 84.6 80.4 312.1 327.5
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EBITDA 414.2 955.8 1,504.3 4,962.6
Provision for (gain on
disposal of) auction rate
securities - 17.5 (115.3) 88.8
-------------------------------------------------------------------------
Adjusted EBITDA $ 414.2 $ 973.3 $ 1,389.0 $ 5,051.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDA is calculated as earnings before interest, income taxes,
depreciation and amortization. Adjusted EBITDA is calculated as earnings
before interest, income taxes, depreciation and amortization, certain
gains and losses on disposal of assets, and certain impairment charges.
PotashCorp uses EBITDA and adjusted EBITDA as supplemental financial
measures of its operational performance. Management believes EBITDA and
adjusted EBITDA to be important measures as they exclude the effects of
items which primarily reflect the impact of long-term investment
decisions, rather than the performance of the company's day-to-day
operations. As compared to net income according to GAAP, these measures
are limited in that they do not reflect the periodic costs of certain
capitalized tangible and intangible assets used in generating revenues in
the company's business, or the non-cash charges associated with
impairments and certain gains and losses on disposal of assets.
Management evaluates such items through other financial measures such as
capital expenditures and cash flow provided by operating activities. The
company believes that these measurements are useful to measure a
company's ability to service debt and to meet other payment obligations
or as a valuation measurement.
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Sales $ 1,099.1 $ 1,870.6 $ 3,976.7 $ 9,446.5
Freight (60.8) (37.7) (191.0) (324.9)
Transportation and
distribution (27.1) (35.2) (128.1) (132.4)
-------------------------------------------------------------------------
Net sales 1,011.2 1,797.7 3,657.6 8,989.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income as a percentage
of sales 22.2% 42.1% 24.8% 37.0%
EBITDA margin 41.0% 53.2% 41.1% 55.2%
EBITDA margin is calculated as EBITDA divided by net sales (sales less
freight and transportation and distribution). Management believes
comparing the company's operations (excluding the impact of long-term
investment decisions) to net sales earned (net of costs to deliver
product) is an important indicator of efficiency. In addition to the
limitations given above in using EBITDA as compared to net income, EBITDA
margin as compared to net income as a percentage of sales is also limited
in that freight and transportation and distribution costs are incurred
and valued independently of sales. Management evaluates these expenses
individually on the consolidated statements of operations.
Potash Corporation of Saskatchewan Inc.
Selected Non-GAAP Financial Measures and Reconciliations
(in millions of US dollars)
(unaudited)
B. CASH FLOW
---------
Set forth below is a reconciliation of "cash flow prior to working
capital changes" and "free cash flow" to cash provided by operating
activities, the most directly comparable financial measure calculated and
presented in accordance with Canadian GAAP.
Three Months Ended Twelve Months Ended
December 31 December 31
2009 2008 2009 2008
-------------------------------------------------------------------------
Cash flow prior to working
capital changes(1) $ 503.5 $ 849.1 $ 1,350.9 $ 3,780.7
-------------------------------------------------------------------------
Changes in non-cash
operating working capital
Accounts receivable 0.2 183.1 53.1 (593.7)
Inventories 17.7 36.1 88.2 (324.4)
Prepaid expenses and
other current assets 30.4 10.4 21.2 (23.7)
Accounts payable and
accrued charges 16.3 (315.4) (589.5) 174.3
-------------------------------------------------------------------------
Changes in non-cash
operating working capital 64.6 (85.8) (427.0) (767.5)
-------------------------------------------------------------------------
Cash provided by operating
activities $ 568.1 $ 763.3 $ 923.9 $ 3,013.2
Additions to property,
plant and equipment (573.6) (427.7) (1,763.8) (1,198.3)
Other assets and intangible
assets (18.0) (13.5) (54.1) (46.6)
Changes in non-cash
operating working capital (64.6) 85.8 427.0 767.5
-------------------------------------------------------------------------
Free cash flow(2) $ (88.1) $ 407.9 $ (467.0) $ 2,535.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The company uses cash flow prior to working capital changes as a
supplemental financial measure in its evaluation of liquidity.
Management believes that adjusting principally for the swings in
non-cash working capital items due to seasonality or other timing
issues assists management in making long-term liquidity assessments.
The company also believes that this measurement is useful as a
measure of liquidity or as a valuation measurement.
(2) The company uses free cash flow as a supplemental financial measure
in its evaluation of liquidity and financial strength. Management
believes that adjusting principally for the swings in non-cash
operating working capital items due to seasonality or other timing
issues, additions to property, plant and equipment, and changes to
other assets assists management in the long-term assessment of
liquidity and financial strength. The company also believes that this
measurement is useful as an indicator of the company's ability to
service its debt, meet other payment obligations and make strategic
investments. Readers should be aware that free cash flow does not
represent residual cash flow available for discretionary
expenditures.
%SEDAR: 00001608E
For further information: Investors: Denita Stann, Senior Director, Investor Relations, Phone: (847) 849-4277, Email: [email protected]; Media: Bill Johnson, Director, Public Affairs, Phone: (306) 933-8849, Email: [email protected]; Web Site: www.potashcorp.com
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