-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V2hmKQ8a+f0Ss9jnGGZhmXqXpE2cI8uRGi0WeWyQv1BSWRM1m5VYBk39/O6ZPvuz m2GtMvwu0AB2ggm0XHC8dQ== 0000950150-96-000821.txt : 19960813 0000950150-96-000821.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950150-96-000821 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POTASH CORPORATION OF SASKATCHEWAN INC CENTRAL INDEX KEY: 0000855931 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10351 FILM NUMBER: 96608632 BUSINESS ADDRESS: STREET 1: 122 1ST AVE S STREET 2: SASKATOON CITY: SASKATCHEWAN CANADA STATE: A9 BUSINESS PHONE: 3069338500 10-Q 1 FORM 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ------------------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 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) ------------------------ SASKATCHEWAN, CANADA N/A (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 122 - 1ST AVENUE SOUTH SASKATOON, SASKATCHEWAN 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 X No __ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As at July 31, 1996 45,544,896 Shares. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS These interim consolidated financial statements do not include all disclosure normally provided in annual financial statements. In management's opinion, the unaudited financial information includes all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year. POTASH CORPORATION OF SASKATCHEWAN INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 --------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Net sales....................................... $352,369 $204,447 $719,240 $340,424 Cost of goods sold.............................. 259,667 118,976 515,738 181,954 -------- -------- -------- -------- Gross Margin.................................... 92,702 85,471 203,502 158,470 -------- -------- -------- -------- Research and development........................ 308 278 565 625 Selling and administrative...................... 14,126 12,313 28,843 21,444 Provincial mining and other taxes............... 8,981 11,595 20,901 23,873 Other income.................................... (5,079) (3,089) (8,295) (4,440) -------- -------- -------- -------- 18,336 21,097 42,014 41,502 -------- -------- -------- -------- Operating Income................................ 74,366 64,374 161,488 116,968 Interest Expense................................ 11,904 12,367 25,746 12,444 -------- -------- -------- -------- Income Before Income Taxes...................... 62,462 52,007 135,742 104,524 Income Taxes.................................... 10,064 4,263 19,666 5,305 -------- -------- -------- -------- Net Income...................................... $ 52,398 $ 47,744 116,076 99,219 ======== ======== Retained Earnings, Beginning of Period.......... 277,689 164,037 Dividends....................................... (23,853) (22,313) -------- -------- Retained Earnings, End of Period................ $369,912 $240,943 ======== ======== Net Income Per Share (Note 3)................... $ 1.15 $ 1.11 $ 2.55 $ 2.31 ======== ======== ======== ======== Dividends Per Share (Note 4).................... $ 0.26 $ 0.26 $ 0.52 $ 0.51 ======== ======== ======== ========
(See Notes to the Consolidated Financial Statements) 1 3 POTASH CORPORATION OF SASKATCHEWAN INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS OF U.S. DOLLARS) ASSETS
JUNE 30, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) Current Assets Cash and short-term deposits..................................... $ 7,290 $ 40,497 Accounts receivable.............................................. 210,158 223,377 Inventories (Note 2)............................................. 222,747 221,911 Prepaid expenses................................................. 16,922 12,041 Other current assets............................................. 8,535 3,315 ---------- ---------- 465,652 501,141 Property, plant and equipment...................................... 1,985,705 2,032,339 Other assets....................................................... 46,238 48,337 ---------- ---------- $2,497,595 $2,581,817 ========== ========== LIABILITIES Current Liabilities Accounts payable and accrued charges............................. $ 167,653 $ 199,222 Current portion of long-term debt................................ 88,755 164,971 Current obligations under capital leases......................... 265 870 ---------- ---------- 256,673 365,063 Long-term debt..................................................... 638,465 711,585 Obligations under capital leases................................... 1,335 2,913 Deferred income tax liability...................................... 15,264 4,743 Accrued post-retirement/post-employment benefits................... 92,625 89,570 Accrued reclamation costs.......................................... 150,786 151,531 Other non-current liabilities and deferred credits................. 6,478 14,537 ---------- ---------- 1,161,626 1,339,942 ---------- ---------- SHAREHOLDERS' EQUITY Share Capital...................................................... 629,571 627,700 Contributed Surplus................................................ 336,486 336,486 Retained Earnings.................................................. 369,912 277,689 ---------- ---------- 1,335,969 1,241,875 ---------- ---------- $2,497,595 $2,581,817 ========== ==========
(See Notes to the Consolidated Financial Statements) 2 4 POTASH CORPORATION OF SASKATCHEWAN INC. CONSOLIDATED STATEMENTS OF CASH FLOW (IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30 ----------------------- 1996 1995 --------- --------- Operating Activities Net income........................................................... $ 116,076 $ 99,219 Items not affecting cash Depreciation and amortization...................................... 46,106 32,959 Loss on disposal of property, plant and equipment.................. 150 36 Provision for deferred income taxes................................ 10,521 981 Provision for post-retirement/post-employment benefits............. 3,055 363 --------- --------- 175,908 133,558 Changes in non-cash operating working capital Accounts receivable................................................ 13,219 (5,195) Inventories........................................................ 311 (25,370) Prepaid expenses................................................... (4,882) 36 Other current assets............................................... (5,220) 9,857 Accounts payable and accrued charges............................... (31,569) 27,701 Accrued reclamation costs.......................................... (750) (473) Other non-current liabilities and deferred credits................. (8,059) (1,156) --------- --------- Cash provided by operating activities................................ 138,958 138,958 --------- --------- Investing Activities Acquisition of PCS Phosphate......................................... -- (798,728) Additions to property, plant and equipment........................... (22,042) (8,606) Proceeds on disposal of property, plant and equipment................ 22,497 287 Disposals of (additions to) other assets............................. 881 (274) --------- --------- Cash provided by (used in) investing activities...................... 1,336 (807,321) --------- --------- Cash (deficiency) before financing activities........................ 140,294 (668,363) --------- --------- Financing Activities (Repayment of) proceeds from long-term obligations................... (151,519) 759,119 Dividends............................................................ (23,853) (22,313) Issuance of shares................................................... 1,871 1,336 --------- --------- Cash (used in) provided by financing activities...................... (173,501) 738,142 --------- --------- (Decrease) Increase in Cash.......................................... (33,207) 69,779 Cash, Beginning of Period............................................ 40,497 16,576 --------- --------- Cash, End of Period.................................................. $ 7,290 $ 86,355 ========= ========= Supplemental cash flow disclosure Interest paid...................................................... $ 26,583 $ 8,629 Income taxes paid.................................................. $ 22,860 $ 5,714 ========= =========
(See Notes to the Consolidated Financial Statements) 3 5 POTASH CORPORATION OF SASKATCHEWAN INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The Company's accounting policies are in accordance with accounting principles generally accepted in Canada. These policies are consistent with accounting principles generally accepted in the United States except as outlined in Note 5. Basis of presentation The consolidated financial statements include the accounts of Potash Corporation of Saskatchewan Inc. and its operating subsidiaries (the "Company" except to the extent the context otherwise requires): -- PCS Sales (Canada) Inc. (PCS Sales) -- PCS Sales (Iowa), Inc. -- PCS Sales (Indiana), Inc. -- Potash Corporation of Saskatchewan (Florida) Inc. -- Potash Corporation of Saskatchewan Transport Limited -- PCS Sales (USA), Inc. -- PCS Phosphate Company, Inc. (PCS Phosphate) -- White Springs Agricultural Chemicals, Inc. (White Springs) 2. INVENTORIES
JUNE 30, DECEMBER 31, 1996 1995 -------- ------------ Finished product..................................... $105,010 $115,491 Materials and supplies............................... 75,762 66,708 Raw materials........................................ 13,128 11,954 Work in process...................................... 28,847 27,758 -------- -------- $222,747 $221,911 ======== ========
3. EARNINGS PER SHARE Earnings per share for the year-to-date are calculated on the weighted average shares issued and outstanding during the six months ended June 30, 1996 of 45,513,000 (1995 -- 43,016,000). 4. DIVIDENDS The Company declares its dividends in Canadian dollars. 5. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES A description of the accounting principles which differ significantly in certain respects from generally accepted accounting principles in the United States (US GAAP) follows: Earnings per share: In computing primary earnings per share, under US GAAP, the stock options are included in the calculation to the extent that they are exercisable. 4 6 POTASH CORPORATION OF SASKATCHEWAN INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF U.S. DOLLARS) (UNAUDITED) Deferred income taxes: Deferred tax assets have been recognized only to the extent of reducing deferred tax liabilities. US GAAP would require that deferred tax assets be recorded when their realization is more likely than not. The application of US GAAP, as described above, would have had the following approximate effects on net income, net income per share, total assets and shareholders' equity:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------- ------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Net income as reported in the consolidated statements of income and retained earnings................................ $ 52,398 $ 47,744 $ 116,076 $ 99,219 Item decreasing reported net income Deferred income taxes..................... (1,091) -- (4,318) -- ---------- ---------- ---------- ---------- Approximate net income -- US GAAP......... $ 51,307 $ 47,744 $ 111,758 $ 99,219 ========== ========== ========== ========== Weighted average shares outstanding -- US GAAP.................................... 45,975,000 43,310,000 45,975,000 43,210,000 ========== ========== ========== ========== Net income per share -- US GAAP........... $ 1.12 $ 1.10 $ 2.43 $ 2.30 ========== ========== ========== ==========
JUNE 30, DECEMBER 31, 1996 1995 ---------- ------------ Total assets as reported in the consolidated statements of financial position............................................... $2,497,595 $2,581,817 Item increasing reported total assets Deferred income tax asset.......................................... 14,280 18,598 ---------- ---------- Approximate total assets -- US GAAP................................ $2,511,875 $2,600,415 ========== ========== Shareholders' equity as reported in the consolidated statements of financial position............................................... $1,335,969 $1,241,875 Item increasing reported shareholders' equity Deferred income taxes.............................................. 14,280 18,598 ---------- ---------- Approximate shareholders' equity -- US GAAP........................ $1,350,249 $1,260,473 ========== ==========
6. COMPARATIVE FIGURES Certain of the prior period's comparative figures have been reclassified to conform with the current period's presentation. Results for the first six months of 1995 do not include: (1) the results of White Springs which was acquired October 31, 1995, and (2) the results of PCS Phosphate (formerly Texasgulf Inc.) prior to April 10, 1995, the date of acquisition. 5 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overview Second quarter and year-to-date June 30 results for 1995 do not include (1) the results of White Springs, which was acquired October 31, 1995, and (2) the results of PCS Phosphate (formerly Texasgulf Inc.) prior to April 10, 1995, the date of acquisition. Net sales and net income for the three months ended June 30, 1996, improved 72 percent and 10 percent, respectively, over the same period in 1995. Net income for the three months ended June 30, 1996, was $52.4 million (1995 -- $47.7 million) on net sales of $352.4 million (1995 -- $204.4 million), or $1.15 per share (1995 -- $1.11 per share). For the second quarter of 1996, gross margin and operating income were $92.7 million and $74.4 million, respectively, compared to a gross margin of $85.5 million and an operating income of $64.4 million for the same period in 1995 (increase of 8 percent and 16 percent, respectively). For the three months ended June 30, 1996, North American and offshore net sales revenue were $204.4 million (1995 -- $100.8 million) and $148.0 million (1995 -- $103.6 million), respectively. North American net sales revenue represented 58 percent (1995 -- 49 percent) of total net sales revenue, whereas offshore sales represented 42 percent of net sales revenue (1995 -- 51 percent). Potash, phosphate and ammonia revenue for the quarter ended June 30, 1996 were $103.9 million (1995 -- $109.2 million), $222.1 million (1995 -- $95.2 million), and $26.4 million (1995 -- not applicable), respectively, a decrease of $5.3 million in potash revenue, a $126.9 million increase in phosphate revenue and a $26.4 million increase in ammonia revenue, when compared to the same period a year ago. Gross margins for the second quarter of 1996 increased $7.2 million or 8 percent over the same quarter in 1995. Gross margin for potash was $48.7 million, a decrease of $17.3 million when compared to the same quarter of 1995. Gross margins for phosphate fertilizer, feed, industrial and ammonia products were $29.8 million (1995 -- $8.8 million), $6.9 million (1995 -- $3.2 million) , $6.6 million (1995 -- $7.5 million) and $.7 million (1995 -- not applicable), respectively. The increase in net income of $4.7 million for the quarter ended June 30, 1996 is largely attributable to additional earnings from the phosphate acquisitions and lower provincial mining taxes. This was offset by an increase in cost of goods sold, income taxes and selling and administrative expenses. Net sales and net income for the six months ended June 30, 1996 improved 111 percent and 17 percent, respectively, over the same period in 1995. Net income for the six months ended June 30, 1996 was $116.1 million (1995 -- $99.2 million) on net sales of $719.2 million (1995 -- $340.4 million), or $2.55 per share (1995 -- $2.31 per share). For the first six months of 1996, gross margin and operating income were $203.5 million and $161.5 million, respectively, compared to a gross margin of $158.5 million and operating income of $117.0 million for the same period in 1995 (increases of 28 percent and 38 percent, respectively). For the six months ended June 30, 1996, North American and offshore net sales revenue were $435.3 million (1995 -- $144.9 million) and $283.9 million (1995 -- $195.5 million), respectively. North American net sales revenue represented 61 percent (1995 -- 43 percent) of total net sales revenue, whereas offshore sales represented 39 percent of net sales revenue (1995 -- 57 percent). Potash, phosphate and ammonia revenue for the first half of 1996 was $207.8 million (1995 -- $245.2 million), $446.2 million (1995 -- $95.2 million), and $65.3 million (1995 -- not applicable), respectively, a decrease of $37.4 million in potash revenue, a $350.9 million increase in phosphate revenue and a $65.3 million increase in ammonia revenue, when compared to the same period a year ago. Gross margins for the first six months of 1996 increased $45.0 million or 28 percent over the same period in 1995. Gross margin for potash was $103.8 million, a decrease of $35.2 million when compared to the first half of 1995. This decrease was more than offset by a gross margin of $99.7 million for phosphate and ammonia. Of this $99.7 million gross margin, $64.6 million (1995 -- $8.8 million) is attributable to phosphate 6 8 fertilizer products, $19.7 million (1995 -- $3.2 million) is attributable to feed products, $13.6 million (1995 -- $7.5 million) is attributable to industrial products, and $1.8 million (1995 -- not applicable) is attributable to ammonia. The increase in net income of $16.9 million for the six months ended June 30, 1996 is largely attributable to additional earnings from the phosphate acquisitions. This was offset by an increase in interest expense of $13.3 million relating to debt financing of $878.8 million incurred to purchase PCS Phosphate and White Springs, a $333.8 million increase in cost of sales, a $14.4 million increase in income taxes, and an increase in selling and administrative expenses of $7.4 million. Although the Company had increased earnings in the first half of 1996 when compared to the same period in 1995, market conditions did not live up to the expectations for the fertilizer industry in general. Weather put a damper on the domestic scene, resulting in the usual problems associated with a delayed season. In the export market, large purchases at the end of 1995, delayed grain price increases to the farmers and local distribution problems resulted in fewer sales to China during the first half of 1996 when compared to first half 1995. Uncertainty in India due to large purchases in 1995 and national elections in 1996 resulted in slower fertilizer movement to that country and first quarter shipments to Brazil were dampened by economic conditions. Potash Revenue Potash net sales revenue for the quarter ended June 30, 1996 decreased by $5.3 million or 5 percent as compared to the same period in 1995 (1996 -- $103.9 million; 1995 -- $109.2 million). The Company sold 1.430 million tonnes of potash in the second quarter of 1996, compared to 1.508 million tonnes sold in the same period last year, a decrease of .078 million tonnes or 5 percent. Potash prices were flat for the second quarter of 1996 when compared to the second quarter of 1995. In the second quarter of 1996, North American and offshore potash sales volumes increased 34 percent and decreased 28 percent, respectively, over the same period in 1995. Potash prices increased 14 percent in the offshore market. There was a greater proportion of higher priced New Brunswick tonnes sold in the export market compared to the same period a year ago. Realizations in the domestic market were down by 11 percent from the second quarter a year ago. North American prices were under pressure during the second quarter of 1996 as intense competition was exacerbated by the lateness of the season. North American realizations were also affected by the inclusion in the mix of some lower priced sales to another producer. North American net sales revenue from potash operations represented 43 percent of the potash net sales revenue of the Company during the second quarter of 1996 (1995 -- 34 percent). In the second quarter of 1996, the increase in North American potash sales volumes and the decrease in North American prices resulted in a $7.4 million increase in North American potash net sales revenue over the same period in 1995. North American potash sales volumes for the second quarter of 1996 increased .187 million tonnes (1996 -- .732 million tonnes; 1995 -- .545 million tonnes) compared to the second quarter of 1995. Sales volumes of .049 million tonnes to another producer increased North American volumes. In the second quarter of 1996, offshore net sales revenue from potash operations represented 57 percent of net potash sales revenue of the Company (1995 -- 66 percent). In the second quarter of 1996, the decrease in offshore sales volumes and the increase in overall offshore selling price resulted in a $12.7 million decrease in offshore potash net sales revenue over the same period in 1995. In the offshore market, the Company sold .698 million potash tonnes during the second quarter of 1996 (1995 -- .963 million tonnes), a decrease of 28 percent. Of the .698 million tonnes, .503 million tonnes were sold through Canpotex and the remaining .195 million tonnes were produced by PCS New Brunswick and sold and delivered to offshore markets, such as Brazil, by PCS Sales. Potash net sales revenue for the first six months of 1996 decreased by $37.4 million or 15 percent as compared to the first six months of 1995 (1996 -- $207.8 million; 1995 $245.2 million). The Company sold 2.887 million tonnes of potash in the first half of 1996, compared to 3.452 million tonnes sold in the same 7 9 period last year, a decrease of .565 million tonnes or 16 percent. Potash prices experienced an overall increase of 1 percent in the first half of 1996 as compared to the first half of 1995. In the first six months of 1996, North American and offshore potash sales volumes increased 5 percent and decreased 29 percent, respectively, over the same period in 1995. Potash prices increased 9 percent in the offshore market where customers agreed in February to a $5 per tonne increase. Price increases scheduled by the Company for the domestic market were not attained. North American net sales revenue from potash operations represented 39 percent of the potash net sales revenue of the Company during this year's first half. In the first half of 1996, the increase in North American potash sales volumes and a decrease in North American prices resulted in a $.5 million decrease in North American potash net sales revenue over the same period in 1995. North American potash sales volumes for the first half of 1996 increased .067 million tonnes (1996 -- 1.321 million tonnes; 1995 -- 1.254 million tonnes) compared to the first half of 1995. For the first half, domestic sales volumes were up 5 percent over the same period in 1995 but the quarterly sales pattern was reversed. In 1995, the majority of the spring sales volumes occurred in the first quarter while this year's spring season sales volumes were realized in the second quarter. In the first half of 1996, offshore net sales revenue from potash operations represented 61 percent of net potash sales revenue of the Company. In the first half of 1996, the decrease in offshore sales volumes and the increase in overall offshore selling price resulted in a $36.9 million decrease in offshore potash net sales revenue over the same period in 1995. In the offshore market, the Company sold 1.566 million potash tonnes during the first half of 1996 (1995 -- 2.198 million tonnes), a decrease of 29 percent. Of the 1.566 million tonnes, 1.226 million tonnes were sold through Canpotex and the remaining .340 million tonnes were produced by PCS New Brunswick and sold and delivered to offshore markets. The anticipated lull in offshore orders during this year's second quarter reduced potash sales volumes on a year-over-year basis. China bought record tonnage from Canpotex in 1995 which included large purchases in November and December. Normally, those shipments would have begun in 1996. This timing difference makes it difficult to compare six months ended June 30, 1996 to the comparable period in 1995. Phosphate Revenue For the quarter ended June 30, 1996, phosphate net sales revenue was $222.0 million; phosphate fertilizer $160.5 million (72 percent); and non-fertilizer products $61.5 million (28 percent). For the same quarter in 1995 net sales revenue was $95.2 million; phosphate fertilizer $53.1 million (56 percent); non-fertilizer products $39.9 million (42 percent); and phosphate rock $2.2 million (2 percent). During the second quarter of 1996, the Company sold .814 million tonnes of phosphate fertilizer (.346 million tonnes in North America; 0.468 million tonnes in the offshore market); .242 million tonnes of non-fertilizer products (.226 million tonnes in North America; .016 million tonnes in the offshore market); and .026 million tonnes of phosphate rock (.002 million tonnes in North America and the remaining .024 million tonnes in the offshore market). For the same comparable period in 1995, the Company sold .299 million tonnes of phosphate fertilizer (.114 million tonnes in North America; .185 million tonnes in the offshore market); .156 million tonnes of non-fertilizer products (.149 million tonnes in North America; .007 million tonnes in the offshore market); and .102 million tonnes of phosphate rock (.011 million tonnes in North America and the remaining .091 million tonnes in the offshore market). For the second quarter of 1996, North American phosphate net sales revenue accounted for $133.4 million (60 percent) of total phosphate net sales revenue of $222.0 million. In the quarter ended June 30, 1996, 56 percent of the Company's North American phosphate net sales revenue was earned from phosphate fertilizer products which represented 60 percent of the Company's North American phosphate sales volumes. Offshore sales accounted for 40 percent of total phosphate product net sales revenue for the second quarter of 1996 and 47 percent of volumes. In the quarter ended June 30, 1996, 96 percent of the Company's offshore phosphate net sales revenue was earned from phosphate fertilizer products which represented 92 percent of the Company's offshore phosphate sales volumes. 8 10 Second quarter 1996 net sales revenue from liquid and solid fertilizer was $160.5 million (1995 -- $53.1 million) with sales volumes of .814 million tonnes (1995 -- .300 million tonnes). Solid phosphate fertilizer (substantially all DAP) accounted for 63 percent or $100.8 million of the total. Offshore net sales revenue of DAP accounted for 63 percent of solid fertilizer net sales revenue while North American net sales revenue of liquid fertilizer accounted for 63 percent of liquid fertilizer net sales revenue. Fertilizer products were affected by a late wet spring throughout the Northern Hemisphere which delayed seeding and affected fertilizer sales. The average net sales price for liquid and solid fertilizer improved by 11 percent and 8 percent, respectively. DAP prices were down for the second quarter of 1996 when compared to the first quarter of 1996, but began to recover by the end of the second quarter. Export liquid and solid fertilizer sales prices improved by 11 percent and 14 percent, respectively, compared to the same period a year ago. North American liquid fertilizer sales prices improved 1 percent while solid fertilizer sales prices remained flat when compared to the same period in 1995. Net sales revenue from non-fertilizer products (animal feed and industrial) during the quarter ended June 30, 1996, were $61.5 million (1995 -- $39.9 million) with sales volumes of .242 million tonnes (1995 -- .156 million tonnes). For the second quarter of 1996, feed sales tonnage was .182 million tonnes (1995 -- .106 million tonnes) with 9 percent sold offshore while the remaining .060 million tonnes were industrial products sold to North America customers. Recent high grain prices are a disadvantage for the feed industry as the livestock head count has been diminished reducing feed requirements. Feed product prices for the quarter ended June 30, 1996, improved by 4 percent when compared to the same period a year ago. North American industrial selling prices increased by 1 percent for the second quarter of 1996 when compared to the same period in 1995. Consistent with the Company's strategy of increasing the gross margin for its products, the Company has reduced its rock sales. Rock not sold at satisfactory price levels will be kept for internal production. Phosphate net sales revenue for the six months ended June 30, 1996 was $446.2 million. The distribution of this revenue was as follows: phosphate fertilizer $310.8 million (69 percent); non-fertilizer products (animal feed and industrial products) $132.2 million (30 percent); and phosphate rock $3.2 million (1 percent). During the six months ended June 30, 1996, the Company sold 1.530 million tonnes of phosphate fertilizer (.756 million tonnes in North America; .774 million tonnes in the offshore market); .518 million tonnes of non-fertilizer products (.475 million tonnes in North America; .043 million tonnes in the offshore market); and .107 million tonnes of phosphate rock (.002 million tonnes in North America and the remaining .105 million tonnes in the offshore market). For the comparable period in 1995, the Company sold .299 million tonnes of phosphate fertilizer (.114 million tonnes in North America; .185 million tonnes in the offshore market); .156 million tonnes of non-fertilizer products (.149 million tonnes in North America; .007 million tonnes in the offshore market); and .102 million tonnes of phosphate rock (.011 million tonnes in North America and the remaining .091 million tonnes in the offshore market). For the first half of 1996, North American phosphate net sales revenue accounted for $289.2 million (65 percent) of total phosphate net sales revenue of $446.2 million. In the six months ended June 30, 1996, 57 percent of the Company's North American phosphate net sales revenue was earned from phosphate fertilizer products which represented 61 percent of the Company's North American phosphate sales volumes. Offshore sales accounted for 35 percent of total phosphate product net sales revenue for the first half of 1996 and 43 percent of volumes. In the six months ended June 30, 1996, 92 percent of the Company's offshore phosphate net sales revenue was earned from phosphate fertilizer products which represented 84 percent of the Company's offshore phosphate sales volumes. First half 1996 net sales revenue from liquid and solid fertilizers was $310.8 million (1995 -- $53.1 million) with sales volumes of 1.530 million tonnes (1995 -- .300 million tonnes). Solid phosphate fertilizer (substantially all DAP) accounted for 62 percent or $192.1 million of the total. Offshore net sales revenue of DAP accounted for 55 percent of solid fertilizer net sales revenue while North American net sales revenue of liquid fertilizer accounted for 68 percent of liquid fertilizer net sales revenue. The average net sales price for liquid and solid fertilizer improved by 14 percent and 12 percent, respectively. Export liquid and solid 9 11 fertilizer sales prices improved by 10 percent and 19 percent, respectively, compared to the same period a year ago. North American liquid and solid fertilizer sales prices improved 1 percent and 2 percent, respectively, when compared to the same period in 1995. Net sales revenue from animal feed and industrial products during the six months ended June 30, 1996, were $132.2 million (1995 -- $39.9 million) with sales volumes of .518 million tonnes (1995 -- .156 million tonnes). For the first half of 1996, feed sales tonnage was .393 million tonnes (1995 -- .106 million tonnes) with 11 percent sold offshore while the remaining .125 million tonnes were industrial products sold to North American customers. Feed product prices for the six months ended June 30, 1996, improved by 6 percent when compared to the same period a year ago. North American industrial selling prices declined by 1 percent for the first half of 1996 when compared to the same period in 1995. AMMONIA REVENUE For the quarter ended June 30, 1996, ammonia sales contributed $26.4 million to net sales revenue with sales volumes of .136 million tonnes. Ammonia sales for the six months ended June 30, 1996 contributed $65.3 million to net sales revenue with sales volumes of .323 million tonnes. COST OF GOODS SOLD During the second quarter of 1996 the Company produced 1.512 million potassium chloride (KC1) tonnes, a 26 percent decrease from the 2.045 million tonnes produced in the second quarter of 1995, due to lower demand. During the second quarter of 1996 the Company produced .507 million phosphoric acid (P2O5) tonnes (1995 -- .272 million tonnes), an increase of 86 percent, due principally to the addition of White Springs. Potash unit cost of sales increased by 35 percent in the second quarter of 1996 compared to the same period in 1995 due in part to 14.7 additional shutdown weeks. Costs were also affected by the product mix as the Company pulled more product from New Brunswick to supply increased demand in Brazil. In the second quarter of 1996, lower input cost for both sulfur and ammonia reduced phosphate cost of goods sold. These lower costs were offset by higher production costs of phosphate fertilizer. Higher costs of phosphate fertilizer production were experienced in the second quarter as virtually all maintenance scheduled for White Springs was rescheduled to the second quarter of the year. Higher feed costs were the result of distributing fixed costs over a reduced sales volume thereby increasing the unit costs. Depreciation expense for the second quarter of 1996 was $22.8 million compared to $19.5 million in 1995, an increase of $3.3 million or 17 percent. The increase is a result of $4.1 million additional depreciation from the acquired phosphate operations. Depreciation expense for the potash operations decreased by $.8 million as a result of additional shutdown weeks in the second quarter of 1996 when compared to the same period in 1995. For the six months ended June 30, 1996, the Company produced 3.211 million potassium chloride (KCl) tonnes, compared to 3.930 million tonnes in the first half of 1995, a decrease of .719 million tonnes (18 percent) compared to 1995. For the six months ended June 30, 1996, the Company produced 1.020 million phosphoric acid (P2O5) tonnes from its phosphate operations, compared to .272 million tonnes in 1995. Potash unit cost of sales increased by 17 percent in the first six months of 1996 compared to the same period in 1995 due in part to 16.6 additional shutdown weeks and a greater proportion of higher cost New Brunswick production in the product mix. Depreciation expense for the first half of 1996 was $46.1 million compared to $33.0 million in 1995, an increase of $13.1 million or 40 percent. The increase is a result of $17.5 million additional depreciation from the acquired phosphate operations. Depreciation expense for the potash operations decreased by $4.4 million as a result of additional shutdown weeks in the first half of 1996 when compared to the same period in 1995. 10 12 SELLING AND ADMINISTRATIVE Selling and administrative expenses during the second quarter of 1996 were $14.1 million as compared to $12.3 million in 1995, an increase of $1.8 million. During the first half of 1996, selling and administrative expenses were $28.8 million as compared to $21.4 million in 1995, an increase of $7.4 million. The increase is attributable to the acquisitions of PCS Phosphate and White Springs and to general increases in supplies, compensation and benefits. PROVINCIAL MINING AND OTHER TAXES Saskatchewan's potash production tax is comprised of a base tax per tonne of product sold and an additional tax based on mine-by-mine profits. The New Brunswick division and the Saskatchewan divisions pay a provincial crown royalty, which is accounted for under cost of goods sold. Increased profitability at certain of the mines increased the rate of taxes paid to the Saskatchewan government but total taxes were reduced by lower prices and potash sales volumes from Saskatchewan. For the second quarter of 1996, Saskatchewan provincial mining and other taxes were $9.0 million as compared to $11.6 million in the second quarter of 1995, a decrease of 22 percent. Potash production tax for the second quarter of 1996 was $5.8 million compared to $7.9 million in the same period in 1995, a decrease of 27 percent. Saskatchewan capital tax was $3.2 million in the second quarter ended June 30, 1996 compared to $3.7 million in the same period in 1995, a decrease of 14 percent. For the first half of 1996, Saskatchewan provincial mining and other taxes were $20.9 million as compared to $23.9 million in the first half of 1995, a decrease of 12 percent. Potash production tax for the first half of 1996 was $14.2 million compared to $15.7 million in the same period in 1995, a decrease of 9 percent. Saskatchewan capital tax was $6.8 million in the six months ended June 30, 1996 compared to $8.2 million in the same period in 1995, a decrease of 17 percent. INTEREST EXPENSE For the second quarter of 1996, interest expense was $11.9 million as compared to $12.4 million in the same period in 1995. For the first half of 1996, interest expense was $25.7 million as compared to $12.4 million in the same period in 1995. The 1996 amount includes the debt incurred with the acquisition of the phosphate properties last year in April and October while the 1995 amount includes only the April acquisition. INCOME TAXES Income taxes in the second quarter of 1996 were $10.1 million, compared to $4.3 million in the same period of 1995, an increase of $5.8 million. Income taxes in the first half of 1996 were $19.7 million, compared to $5.3 million in the same period of 1995, an increase of $14.4 million. The increase is largely attributable to US withholding taxes, alternative minimum taxes and deferred income tax, relating to the Company's acquired phosphate operations. The tax rate applicable to the U.S. operations for the first half of 1996 is approximately 20 percent of income before taxes. This rate for 1995 was approximately 24 percent of income before taxes. ANALYSIS OF FINANCIAL CONDITION AND CASH FLOW Working capital for the first half of 1996 increased by $72.9 million. Cash flow from operations was $139.0 million. Quick and current ratios were .85 and 1.8 at June 30, 1996. The Company paid down its debt by $151.5 million (of which $36 million was voluntary) and paid dividends of $23.9 million. At the end of the first half of 1996, the debt to capital ratio was at 35.3 percent and the interest coverage ratio was 6.3 to 1. The net debt to market capitalization at June 30, 1996 was 23.9 percent. OUTLOOK The statements in this "Management Discussion and Analysis" in this "Outlook" section, relating to the period after June 30, 1996, are forward-looking statements subject to uncertainties. The Company's financial 11 13 performance continues to be affected by price, worldwide state of supply and demand for potash and phosphate products, application rates, government assistance programs, weather conditions, exchange rates and agricultural and trade policies of producing and consuming nations which, among other things, are influenced by domestic political conditions. The Company sells to a diverse group of customers both by geography and by end product. Market conditions by country will vary on a year-over-year basis and sales shift from one period to another. The rising world population and the demand for better diets in developing nations will continue to drive consumption for fertilizer products over the long-term. Over the short-term, there should be increased fertilizer usage over the next few years as world grain stocks are critically low, crop prices continue to rise, and governments around the world focus on food production. The Company expects to be an important supplier to these markets. While the consumption trend line is expected to continue to climb over the long-term, there will be, at times, fluctuations in demand. The recently announced subsidy programs in India and Brazil and the likelihood of further demand in China, are expected to firm markets and support prices in the second half of 1996. DAP markets began to recover by the end of the second quarter of 1996 and are expected to continue to improve. PhosChem recently sold significant additional tonnage to SinoChem for second half delivery and has concluded phosphoric acid negotiations in India. North American potash and phosphate demand in fertilizer is generally considered mature but is expected to fluctuate from year to year, as a function of acres planted and application rates per acre which are influenced by crop prices and weather. The North American market is expected to have strong fall potash and phosphate demand which is expected to firm markets and support prices in the second half of 1996. PCS continues to operate its potash mines by matching production to sales demand. Shutdowns at potash mines for inventory correction will influence potash production costs on a quarter over quarter comparative basis. Natural gas costs are expected to be reduced by approximately 15 percent in the Saskatchewan operations based on existing contracts for 1996. Sulphur and ammonia prices have moderated and are expected to impact favourably upon phosphate processing input costs for 1996. Capital expenditures in 1996 will exceed those in 1995 primarily due to a full year of phosphate ownership and operation. Plans for such expenditures are limited to sustaining capital. The narrative, included under this Management Discussion and Analysis, has been prepared with reference to the financial statements reported under Canadian Generally Accepted Accounting Principles (GAAP). PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS CIVIL ANTITRUST COMPLAINTS In June, 1993, the Company and a wholly-owned subsidiary, Potash Corporation of Saskatchewan Sales Limited, whose name has been changed to PCS Sales (Canada) Inc. ("PCS Sales"), were served with a complaint relating to a suit filed in the United States District Court for Minnesota against most North American potash producers, including the Company. The complaint alleges a conspiracy among the defendants to fix the price of potash purchased by the plaintiffs as well as potash purchased by the members of a class of certain purchasers proposed by the plaintiffs. The complaint seeks treble damages in an unspecified amount and other relief. Similar complaints were filed in the United States District Courts for the Northern District of Illinois and the Western District of Virginia. On motion of the defendants, all of the complaints were transferred and consolidated for pre-trial purposes in the United States District Court for Minnesota. Amended complaints were filed in March and April 1994. On January 12, 1995, the Minnesota Federal Court granted the plaintiffs' motion for class certification. The Company and PCS Sales filed a motion for summary judgment on December 22, 1995. The Court held oral argument on that motion on April 18, 1996. The trial is now scheduled to start on October 31, 1996. 12 14 Additional complaints were filed in the California and Illinois State Courts on behalf of purported classes of indirect purchasers of potash in those states. The Company moved to dismiss the California State Court lawsuit for lack of personal jurisdiction and the court ruled that it does not have personal jurisdiction over the Company but that it does have personal jurisdiction over PCS Sales. The case remains at an early stage; no merits discovery has taken place. The Illinois State Court dismissed the Illinois State Court complaint for failure to state a cause of action. The Illinois plaintiff has appealed that dismissal. In the litigation, the plaintiffs have retained an economist who has issued a report in which he states that if the plaintiffs prevail, in his opinion, the plaintiffs would be entitled to a total of approximately $311 million in damages (subject to trebling) from all the defendants. However, the Company believes that the approach used by the plaintiffs' economist is so seriously flawed as to be untenable and insofar as the allegations of wrongdoing relate to the Company, management of the Company, having consulted with legal counsel, believes that the allegations are without merit, that the Company has valid defences and that the lawsuits will not have a material adverse effect on the Company. However, management of the Company cannot predict with certainty the outcome of the litigation. GRAND JURY PROCEEDINGS PCS Sales received a grand jury subpoena on December 29, 1993 from the Antitrust Division of the U.S. Department of Justice for certain documents relating to its North American potash business activities. On June 14, 1996, the Department of Justice confirmed that it had closed its investigation of alleged price fixing in the potash industry and that there will be no further action regarding the matter. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. (a) On May 9, 1996, the Company held an annual and special meeting (the "Meeting") of its shareholders. (c) At the Meeting, the Company's shareholders voted upon each of the following proposed director nominees with results of the voting as set forth opposite the name of each such nominee.
FOR WITHHELD ---------- -------- Isabel Anderson....................................... 36,450,120 19,008 Douglas J. Bourne..................................... 36,439,266 29,862 Charles E. Childers................................... 36,438,813 30,315 Denis J. Cote......................................... 36,450,983 18,145 William J. Doyle...................................... 36,450,514 18,614 Hon. Willard Z. Estey, Q.C............................ 36,426,678 42,450 Dallas Howe........................................... 36,451,286 17,842 James F. Lardner...................................... 36,435,729 33,399 Donald E. Phillips.................................... 36,449,381 19,747 Paul J. Schoenhals.................................... 36,369,760 99,368 Daryl K. Seaman....................................... 36,366,337 102,791 E. Robert Stromberg, Q.C.............................. 36,424,361 44,767 Jack G. Vicq.......................................... 36,407,794 61,334 Barrie A. Wigmore..................................... 36,447,566 21,562 Paul S. Wise.......................................... 36,434,879 34,249
The Company's shareholders also voted upon a resolution to approve and ratify the Stock Option Plan -- Unaffiliated Directors (the "Directors' Stock Option Plan"). The Directors' Stock Option Plan was designed to comply with the exemptive provisions of Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of 1934. Under the Company's Stock Option Incentive Plan, which formerly permitted the grant of options to unaffiliated directors, the Board of Directors had authority to determine recipients of options and the number of shares subject to each option. In an attempt to provide unaffiliated directors with the benefits of Rule 16b-3 13 15 (as it existed at that time), the Board of Directors introduced the Directors' Stock Option Plan which replaced discretion with a formula, under which unaffiliated directors will receive options for the same number of shares as in the past. The results of the vote were: 30,226,085 shares for, 6,075,560 shares against and 167,483 shares abstained. The Company's shareholders also voted upon the appointment of the firm of Deloitte & Touche, the present auditors, as the Company's auditors, to hold office until the next annual meeting of the Company's shareholders. The results of the vote were: 36,404,893 shares for, 32,433 shares against and 31,802 shares abstained. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT -------------- --------------------------------------------------------------------- 3(i) Restated Articles of Incorporation of the registrant dated October 31, 1989, as amended May 11, 1995, incorporated by reference to Exhibit 3(i) to the registrant's report on Form 10-K for the year ended December 31, 1995 (the "Form 10-K"). 3(ii) Bylaws of the registrant dated March 2, 1995, incorporated by reference to Exhibit 3(ii) to the Form 10-K. 4(a) Shareholders Rights Agreement dated November 10, 1994, as amended on March 28, 1995, and May 4, 1995, and approved by shareholders on May 11, 1995, incorporated by reference to Exhibit 4(a) to the Form 10-K. 4(b) Non-revolving Term Credit Facilities Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated April 10, 1995, incorporated by reference to Exhibit 4(b) to the Form 10-K. 4(c) First Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated May 23, 1995, incorporated by reference to Exhibit 4(c) to the registrant's report on Form 10-Q for the quarterly period ended March 31, 1996 (the "Form 10-Q"). 4(d) Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated October 18, 1995, incorporated by reference to Exhibit 4(d) to the Form 10-Q. 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. 10 (a) Suspension Agreement concerning Potassium Chloride from Canada dated January 7, 1988, among U.S. Department of Commerce, Potash Corporation of Saskatchewan, International Minerals and Chemical (Canada) Limited, Noranda, Inc. (Central Canada Potash Co.), Potash Company of America, a Division of Rio Algom Limited, S & P Canada, II (Kalium Chemicals), Cominco Ltd., Potash Company of Canada Limited, Agent for Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd., incorporated by reference to Exhibit 10(a) to the registrant's Form F-1 (File No. 33-31303) (the "F-1 Registration Statement"). 10 (b) Sixth Voting Agreement dated April 22, 1978, between Central Canada Potash, Division of Noranda, Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales and Texasgulf Inc., incorporated by reference to Exhibit 10(f) to the F-1 Registration Statement.
14 16
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT -------------- --------------------------------------------------------------------- 10(c) Canpotex Limited Shareholders Seventh Memorandum of Agreement effective April 21, 1978, between Central Canada Potash, Division of Noranda Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as amended by Canpotex S & P amending agreement dated November 4, 1987, incorporated by reference to Exhibit 10(g) to the F-1 Registration Statement. 10(d) Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales, incorporated by reference to Exhibit 10(h) to the F-1 Registration Statement. 10(e) PCS Sales -- Saskterra Special Canpotex Entitlement effective June 13, 1990, incorporated by reference to Exhibit 10(n) to the registrant's Form S-1 (File No. 33-36283). 10(f) Canpotex/PCS Amending Agreement, dated with effect October 1, 1992, incorporated by reference to Exhibit 10(f) to the Form 10-K. 10(g) Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated with effect October 7, 1993, incorporated by reference to Exhibit 10(g) to the Form 10-K. 10(h) Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between International Minerals and Chemical Corporation (Canada) Limited and the registrant's predecessor, incorporated by reference to Exhibit 10(e) to the F-1 Registration Statement. 10(i) Agreement dated December 21, 1990, between International Minerals & Chemical Corporation (Canada) Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, incorporated by reference to Exhibit 10(p) to the registrant's report on Form 10-K for the year ended December 31, 1990. 10(j) Agreement dated October 13, 1995 between the registrant and Charles E. Childers, incorporated by reference to Exhibit 10(j) to the Form 10-K. 10(k) Potash Corporation of Saskatchewan Inc. Stock Option Plan -- Unaffiliated Directors, incorporated by reference to Exhibit 4.b. to post-effective amendment No. 5 ("Amendment No. 5") to the registrant's Form S-8 (File No. 33-37855). 10(l) Potash Corporation of Saskatchewan Inc. Stock Option Plan -- Officers and Key Employees, incorporated by reference to Exhibit 4.a. to Amendment No. 5. 10(m) Short Term Incentive Plan of the registrant, effective January 1, 1995, incorporated by reference to Exhibit 10(m) to the Form 10-K. 10(n) Long-Term Incentive Plan of the registrant, as amended December 15, 1995, incorporated by reference to Exhibit 10(n) to the Form 10-K. 10(o) Resolution and Forms of Agreement for Supplemental Retirement Income Plan, for officers and key employees of the registrant, incorporated by reference to Exhibit 10(o) to the Form 10-K. 10(p) Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant, concerning a change in control of the registrant, incorporated by reference to Exhibit 10(p) to the Form 10-K. 10(q) Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant, incorporated by reference to Exhibit 10(q) to the Form 10-K. 10(r) Deferred Compensation Plan, for certain officers of PCS Phosphate Company, Inc, incorporated by reference to Exhibit 10(r) to the Form 10-K.
15 17
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT -------------- --------------------------------------------------------------------- 10(s) Supplemental Retirement Benefits Plan, for eligible employees of PCS Phosphate Company, Inc., incorporated by reference to Exhibit 10(s) to the Form 10-K. 10(t) Second Amended and Restated Membership Agreement dated January 1, 1995, among Phosphate Chemicals Export Association, Inc. and members of such association, including Texasgulf Inc. (now PCS Phosphate Company, Inc.), incorporated by reference to Exhibit 10(t) to the Form 10-K. 10(u) International Agency Agreement dated January 1, 1995, between Phosphate Chemicals Export Association, Inc. and Texasgulf Inc. (now PCS Phosphate Company, Inc.) establishing Texasgulf Inc. as exclusive marketing agent for such association's wet phosphatic materials, incorporated by reference to Exhibit 10(u) to the Form 10-K. 10(v) General Partnership Agreement forming Albright & Wilson Company, dated July 29, 1988 and amended January 31, 1995, between Texasgulf Inc. (now PCS Phosphate Company, Inc.) and Albright & Wilson Americas, Inc., incorporated by reference to Exhibit 10(v) to the Form 10-K. 10(w) Royalty Agreement dated October 7, 1993, by and between the registrant and Rio Algom Limited, incorporated by reference to Exhibit 10(x) to the Form 10-K. 10(x) Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant. 10(y) Employment Agreement dated May 16, 1996, by and between PCS Phosphate Company, Inc. and Thomas J. Wright. 11 Statement re Computation of Per Share Earnings. 27 Financial Data Schedule.
(b) No reports on Form 8-K were filed by the registrant during the second quarter of 1996. 16 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POTASH CORPORATION OF SASKATCHEWAN INC. July 31, 1996 By: /s/ CHARLES E. CHILDERS -------------------------------------------- Charles E. Childers Chief Executive Officer July 31, 1996 By: /s/ BARRY E. HUMPHREYS -------------------------------------------- Barry E. Humphreys Sr. Vice President, Finance and Treasurer (Principal Financial and Accounting Officer)
17 19 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------- 3(i) Restated Articles of Incorporation of the registrant dated October 31, 1989, as amended May 11, 1995, incorporated by reference to Exhibit 3(i) to the registrant's report on Form 10-K for the year ended December 31, 1995 (the "Form 10-K"). 3(ii) Bylaws of the registrant dated March 2, 1995, incorporated by reference to Exhibit 3(ii) to the Form 10-K. 4(a) Shareholders Rights Agreement dated November 10, 1994, as amended on March 28, 1995, and May 4, 1995, and approved by shareholders on May 11, 1995, incorporated by reference to Exhibit 4(a) to the Form 10-K. 4(b) Non-revolving Term Credit Facilities Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated April 10, 1995, incorporated by reference to Exhibit 4(b) to the Form 10-K. 4(c) First Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated May 23, 1995, incorporated by reference to Exhibit 4(c) to the registrant's report on Form 10-Q for the quarterly period ended March 31, 1996 (the "Form 10-Q"). 4(d) Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated October 18, 1995, incorporated by reference to Exhibit 4(d) to the Form 10-Q. 10(a) Suspension Agreement concerning Potassium Chloride from Canada dated January 7, 1988, among U.S. Department of Commerce, Potash Corporation of Saskatchewan, International Minerals and Chemical (Canada) Limited, Noranda, Inc. (Central Canada Potash Co.), Potash Company of America, a Division of Rio Algom Limited, S & P Canada, II (Kalium Chemicals), Cominco Ltd., Potash Company of Canada Limited, Agent for Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd., incorporated by reference to Exhibit 10(a) to the registrant's Form F-1 (File No. 33-31303) (the "F-1 Registration Statement"). 10(b) Sixth Voting Agreement dated April 22, 1978, between Central Canada Potash, Division of Noranda, Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales and Texasgulf Inc., incorporated by reference to Exhibit 10(f) to the F-1 Registration Statement. 10(c) Canpotex Limited Shareholders Seventh Memorandum of Agreement effective April 21, 1978, between Central Canada Potash, Division of Noranda Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as amended by Canpotex S & P amending agreement dated November 4, 1987, incorporated by reference to Exhibit 10(g) to the F-1 Registration Statement. 10(d) Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales, incorporated by reference to Exhibit 10(h) to the F-1 Registration Statement. 10(e) PCS Sales -- Saskterra Special Canpotex Entitlement effective June 13, 1990, incorporated by reference to Exhibit 10(n) to the registrant's Form S-1 (File No. 33-36283). 10(f) Canpotex/PCS Amending Agreement, dated with effect October 1, 1992, incorporated by reference to Exhibit 10(f) to the Form 10-K. 10(g) Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated with effect October 7, 1993, incorporated by reference to Exhibit 10(g) to the Form 10-K.
18 20
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------- 10(h) Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between International Minerals and Chemical Corporation (Canada) Limited and the registrant's predecessor, incorporated by reference to Exhibit 10(e) to the F-1 Registration Statement. 10(i) Agreement dated December 21, 1990, between International Minerals & Chemical Corporation (Canada) Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, incorporated by reference to Exhibit 10(p) to the registrant's report on Form 10-K for the year ended December 31, 1990. 10(j) Agreement dated October 13, 1995 between the registrant and Charles E. Childers, incorporated by reference to Exhibit 10(j) to the Form 10-K. 10(k) Potash Corporation of Saskatchewan Inc. Stock Option Plan -- Unaffiliated Directors, incorporated by reference to Exhibit 4.b. to post-effective amendment No. 5 ("Amendment No. 5") to the registrant's Form S-8 (File No. 33-37855). 10(l) Potash Corporation of Saskatchewan Inc. Stock Option Plan -- Officers and Key Employees, incorporated by reference to Exhibit 4.a. to Amendment No. 5. 10(m) Short Term Incentive Plan of the registrant, effective January 1, 1995, incorporated by reference to Exhibit 10(m) to the Form 10-K. 10(n) Long-Term Incentive Plan of the registrant, as amended December 15, 1995, incorporated by reference to Exhibit 10(n) to the Form 10-K. 10(o) Resolution and Forms of Agreement for Supplemental Retirement Income Plan, for officers and key employees of the registrant, incorporated by reference to Exhibit 10(o) to the Form 10-K. 10(p) Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant, concerning a change in control of the registrant, incorporated by reference to Exhibit 10(p) to the Form 10-K. 10(q) Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant, incorporated by reference to Exhibit 10(q) to the Form 10-K. 10(r) Deferred Compensation Plan, for certain officers of PCS Phosphate Company, Inc, incorporated by reference to Exhibit 10(r) to the Form 10-K. 10(s) Supplemental Retirement Benefits Plan, for eligible employees of PCS Phosphate Company, Inc., incorporated by reference to Exhibit 10(s) to the Form 10-K. 10(t) Second Amended and Restated Membership Agreement dated January 1, 1995, among Phosphate Chemicals Export Association, Inc. and members of such association, including Texasgulf Inc. (now PCS Phosphate Company, Inc.), incorporated by reference to Exhibit 10(t) to the Form 10-K. 10(u) International Agency Agreement dated January 1, 1995, between Phosphate Chemicals Export Association, Inc. and Texasgulf Inc. (now PCS Phosphate Company, Inc.) establishing Texasgulf Inc. as exclusive marketing agent for such association's wet phosphatic materials, incorporated by reference to Exhibit 10(u) to the Form 10-K. 10(v) General Partnership Agreement forming Albright & Wilson Company, dated July 29, 1988 and amended January 31, 1995, between Texasgulf Inc. (now PCS Phosphate Company, Inc.) and Albright & Wilson Americas, Inc., incorporated by reference to Exhibit 10(v) to the Form 10-K.
19 21
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------ ----------------------------------------------------------------------- 10(w) Royalty Agreement dated October 7, 1993, by and between the registrant and Rio Algom Limited, incorporated by reference to Exhibit 10(x) to the Form 10-K. 10(x) Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant. 10(y) Employment Agreement dated May 16, 1996, by and between PCS Phosphate Company, Inc. and Thomas J. Wright. 11 Statement re Computation of Per Share Earnings. 27 Financial Data Schedule.
20 EX-10.X 2 AMENDING RESOLUTION/REVISED FORMS OF AGREEMENT 1 Exhibit 10(x) POTASH CORPORATION OF SASKATCHEWAN INC. BOARD OF DIRECTORS RESOLUTION WHEREAS by resolution made May 9, 1991 the Corporation adopted a supplemental retirement income plan (the "Plan"); AND WHEREAS it is desirable that certain amendments be made to the terms of the Plan; THEREFORE BE IT RESOLVED: 1. That the terms of the Plan be amended as follows: i. to provide that supplemental benefits payable under the Plan to the Executive and his or her spouse shall, upon direction of the Executive, be paid in a lump sum provided that such benefits shall be actuarially calculated to reflect a cost neutral position to the Corporation: ii. to provide that the automatic form of benefit payable if the Executive has a spouse on the date benefits are due to commence shall be an actuarially reduced monthly benefit with 60% of the reduced amount continuing for the life the Executive's spouse upon the Executive's death; iii. to provide that the term "Earnings" shall mean the Executive's annual base pay plus all bonuses paid or payable to the Executive in a calendar year. 2. That any two directors or officers of the Corporation be and hereby are authorized to execute on behalf of the Corporation any documentation required to reflect the amendments to the Plan as aforesaid. 2 THIS AGREEMENT made as of this _______________ day of ________________, 1996. B E T W E E N: POTASH CORPORATION OF SASKATCHEWAN INC., a corporation incorporated under the laws of the province of Saskatchewan (hereinafter called "PCS Inc") - AND - of the City of Saskatoon, in the province of Saskatchewan, an executive of the Corporation (hereinafter called the "Executive") WHEREAS the Executive is in the employ of PCS Inc. or one of its direct or indirect subsidiaries (hereinafter collectively the "Corporation") and renders valuable service to the Corporation; AND WHEREAS the Executive is a member of the Potash Corporation of Saskatchewan Inc. Pension Plan (the "Pension Plan"); AND WHEREAS the Corporation desires to recognize the value of the Executive's service and to secure his continued employment; NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Executive and the Corporation covenant and agree as follows: 1 3 1. DEFINITIONS For purposes of this Agreement, the terms "CONTINUOUS SERVICE", and "SPOUSE" shall have the meanings given those terms in the Pension Plan from time to time. The term "EARNINGS" shall mean the Executive's annual base pay plus 100% of all bonuses paid or payable to the Executive in a calendar year. For purposes of this Agreement, the term Pension Plan shall also include any prior or alternate plans from which the Executive is entitled to benefits by reason of his service with the Corporation. 2. QUALIFICATION FOR PENSION PLAN SUPPLEMENT To qualify for the supplemental retirement benefits described in this Agreement, the Executive shall: (a) remain in the continuous service of the Corporation from the date of this Agreement until his retirement from the Corporation; and (b) not retire from the Corporation prior to age 55. For purposes of this Agreement, any termination of employment from the Corporation by the Executive on or after age 55 shall be deemed to be the Executive's retirement from the Corporation. 2 4 3. RETIREMENT DATES (a) NORMAL RETIREMENT Upon the Executive's retirement from the Corporation at age 65, the Executive shall receive the supplemental retirement benefits as described in paragraph 4. (b) EARLY RETIREMENT If the Executive retires from the Corporation after attaining age 55, but prior to attainment of age 65, the Executive shall receive supplemental retirement benefits as described in paragraph 4, except that such supplemental retirement benefits shall be reduced by 5/12 of 1% for each month that the commencement date of the supplemental retirement benefit payments precedes the Executive's attainment of age 62. (c) POSTPONED RETIREMENT If the Executive retires from the Corporation after attaining age 65, the Executive shall continue to accrue benefits under this Agreement until his actual retirement date and shall receive the supplemental retirement benefits as described in paragraph 4. 3 5 4. AMOUNT OF SUPPLEMENT The annual supplemental retirement benefit payable under this Agreement, if any, shall be calculated as follows: (a) 5% of the Executive's average 3 highest calendar years' Earnings multiplied by the Executive's years (including partial years calculated to the last full month completed) of Continuous Service up to a maximum of 10 years PLUS (b) 2% of the Executive's average 3 highest calendar years' Earnings multiplied by the Executive's years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years MINUS (c) the annual retirement benefit which can be provided to the Executive under the Pension Plan on a life-only basis. 4 6 5. PAYMENT OF PENSION PLAN SUPPLEMENT (a) NORMAL FORM The supplemental retirement benefits payable pursuant to paragraph 4 shall be paid to the Executive upon direction of the Executive by way of either: i) equal monthly installments for his lifetime, commencing on the first day of the month coincident with or next following the date of the Executive's retirement from the Corporation and ceasing with the payment due for the month in which the Executive dies, or ii) a lump sum payment to be received by the Executive within thirty days of retirement. The lump sum payment shall reflect the present value of the supplemental retirement benefit on a life only basis which shall be calculated to reflect a cost neutral position to the Corporation when compared to (i) above. If either (i) or (ii) is selected by the Executive and such Executive has a Spouse on the date that supplemental retirement benefits are to begin, the Spouse of such Executive shall be required to waive the right to any further benefit under the Supplemental Retirement Income plan. Such waiver shall be in the form prepared by the Corporation. (b) OPTIONAL FORMS OF PAYMENT If the Executive has a Spouse on the date that the supplemental retirement benefit payments are due to commence, such Executive may elect that a percentage of his monthly benefits be continued to his Spouse after the Executive's death. Such percentage shall be either 60%, 75% or 100% or some other percentage or manner as selected by the Executive on an actuarially reduced basis. 5 7 6. DEATH PRIOR TO RETIREMENT Should the Executive die after attaining age 55 but prior to his retirement from the Corporation, the Executive's Spouse (if any) shall receive an annual supplemental retirement benefit equal to the annual benefit the Spouse would have received had the Executive retired immediately prior to his death and elected a 60% survivor pension. The Executive's Spouse may elect to have such benefit paid in a lump sum which benefit shall be actuarially calculated to reflect a cost neutral position to the Corporation. The Executive shall not receive any benefits pursuant to this Agreement if he should die prior to attaining age 55. 7. FUNDING The Corporation will not be required to establish or contribute to a trust fund or other funding arrangement of any kind for the provision of the supplemental retirement benefit or any other payment which may become payable under this Agreement. Neither the Executive nor any other person shall acquire by reason of this Agreement any right in or title to any assets, funds or property of the Corporation. Any benefits which become payable hereunder shall be paid from the general assets of the Corporation. The Executive shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Corporation. Nothing contained in this Agreement constitutes a guarantee by the Corporation that the assets of the Corporation shall be sufficient to pay any benefit to any person. The Corporation agrees to purchase a letter of credit from a financial institution to secure the benefits of the Executive. 8. SUCCESSORS AND ASSIGNS This Agreement shall enure to the benefit of and be binding upon the Corporation and its assigns and upon the Executive and his heirs, executors, administrators, successors and assigns. 6 8 9. WITHHOLDING TAX The benefits payable pursuant to this Agreement shall be subject to such withholding tax as required by law. 10. AMENDMENT This Agreement may be amended at any time upon the written agreement of the Corporation and the Executive. This Agreement when duly signed by the Corporation and the Executive shall replace any prior Agreement dealing with Supplemental Executive Retirement Income. 11. GOVERNING LAWS This Agreement shall be governed by the laws applicable in the province of Saskatchewan. IN WITNESS WHEREOF the Corporation has executed this Agreement by its duly authorized officers on its behalf and the Executive has executed this Agreement as of the date first above written. Potash Corporation of Saskatchewan Inc. ----------------------------------- Executive: ----------------------------------- SIGNED SEALED AND DELIVERED in the presence of: __________________________________ Name of Witness __________________________________ Signature of Witness 7 9 THIS AGREEMENT made as of this _______________ day of ________________, 1996. B E T W E E N: POTASH CORPORATION OF SASKATCHEWAN INC., a corporation incorporated under the laws of the province of Saskatchewan (hereinafter called "PCS Inc.") - AND - of the City of Saskatoon, in the province of Saskatchewan, an executive of the Corporation (hereinafter called the "Executive") WHEREAS the Executive is in the employ of PCS Inc. or one of its direct or indirect subsidiaries (hereinafter collectively the "Corporation") and renders valuable service to the Corporation; AND WHEREAS the Executive is a member of the Potash Corporation of Saskatchewan Inc. Pension Plan (the "Pension Plan"); AND WHEREAS the Corporation desired to recognize the value of the Executive's service and to secure his continued employment; NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Executive and the Corporation covenant and agree as follows: 1 10 1. DEFINITIONS For purposes of this Agreement, the terms "CONTINUOUS SERVICE", and "SPOUSE" shall have the meanings given those terms in the Pension Plan from time to time. The term "EARNINGS" shall mean the Executive's annual base pay plus 100% of all bonuses paid or payable to the Executive in a calendar year. For purposes of this Agreement, the term Pension Plan shall also include any prior or alternate plans from which the Executive is entitled to benefits by reason of his service with the Corporation. 2. QUALIFICATION FOR PENSION PLAN SUPPLEMENT To qualify for the supplemental retirement benefits described in this Agreement, the Executive shall: (a) remain in the continuous service of the Corporation from the date of this Agreement until his retirement from the Corporation; and (b) not retire from the Corporation prior to age 55. For purposes of this Agreement, any termination of employment from the Corporation by the Executive on or after age 55 shall be deemed to be the Executive's retirement from the Corporation. 2 11 3. RETIREMENT DATES (a) NORMAL RETIREMENT Upon the Executive's retirement from the Corporation at age 65, the Executive shall receive the supplemental retirement benefits as described in paragraph 4. (b) EARLY RETIREMENT If the Executive retires from the Corporation after attaining age 55, but prior to attainment of age 65, the Executive shall receive supplemental retirement benefits as described in paragraph 4, except that such supplemental retirement benefits shall be reduced by 5/12 of 1% for each month that the commencement date of the supplemental retirement benefit payments precedes the Executive's attainment of age 62. (c) POSTPONED RETIREMENT If the Executive retires from the Corporation after attaining age 65, the Executive shall continue to accrue benefits under this Agreement until his actual retirement date and shall receive the supplemental retirement benefits as described in paragraph 4. 3 12 4. AMOUNT OF SUPPLEMENT The annual supplemental retirement benefit payable under this Agreement, if any, shall be calculated as follows: (a) 2% of the Executive's average 3 highest calendar years' Earnings multiplied by the Executive's years (including partial years calculated to the last full month completed) of Continuous Service up to a maximum of 35 years minus (b) the annual retirement benefit which can be provided to the Executive under the Pension Plan on a life-only basis. 4 13 5. PAYMENT OF PENSION PLAN SUPPLEMENT (a) NORMAL FORM The supplemental retirement benefits payable pursuant to paragraph 4 shall be paid to the Executive upon direction of the Executive by way of either: i) equal monthly installments for his lifetime, commencing on the first day of the month coincident with or next following the date of the Executive's retirement from the Corporation and ceasing with the payment due for the month in which the Executive dies, or ii) a lump sum payment to be received by the Executive within thirty days of retirement. The lump sum payment shall reflect the present value of the supplemental retirement benefit on a life only basis which shall be calculated to reflect a cost neutral position to the Corporation when compared to (i) above. If either (i) or (ii) is selected by the Executive and such Executive has a Spouse on the date that supplemental retirement benefits are to begin, the Spouse of such Executive shall be required to waive the right to any further benefit under the Supplemental Retirement Income plan. Such waiver shall be in the form prepared by the Corporation. (b) OPTIONAL FORMS OF PAYMENT If the Executive has a Spouse on the date that the supplemental retirement benefit payments are due to commence, such Executive may elect that a percentage of his monthly benefits be continued to his Spouse after the Executive's death. Such percentage shall be either 60%, 75% or 100% or some other percentage or manner as selected by the Executive on an actuarially reduced basis. 5 14 6. DEATH PRIOR TO RETIREMENT Should the Executive die after attaining age 55 but prior to his retirement from the Corporation, the Executive's Spouse (if any) shall receive an annual supplemental retirement benefit equal to the annual benefit the Spouse would have received had the Executive retired immediately prior to his death and elected a 60% survivor pension. The Executive's Spouse may elect to have such benefit paid in a lump sum which benefit shall be actuarially calculated to reflect a cost neutral position to the Corporation. The Executive shall not receive any benefits pursuant to this Agreement if he should die prior to attaining age 55. 7. FUNDING The Corporation will not be required to establish or contribute to a trust fund or other funding arrangement of any kind for the provision of the supplemental retirement benefit or any other payment which may become payable under this Agreement. Neither the Executive nor any other person shall acquire by reason of this Agreement any right in or title to any assets, funds or property of the Corporation. Any benefits which become payable hereunder shall be paid from the general assets of the Corporation. The Executive shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Corporation. Nothing contained in this Agreement constitutes a guarantee by the Corporation that the assets of the Corporation shall be sufficient to pay any benefit to any person. The Corporation agrees to purchase a letter of credit from a financial institution to secure the benefits of the Executive. 8. SUCCESSORS AND ASSIGNS This Agreement shall enure to the benefit of and be binding upon the Corporation and its assigns and upon the Executive and his heirs, executors, administrators, successors and assigns. 6 15 9. WITHHOLDING TAX The benefits payable pursuant to this Agreement shall be subject to such withholding tax as required by law. 10. AMENDMENT This Agreement may be amended at any time upon the written agreement of the Corporation and the Executive. This Agreement duly signed by the Corporation and the Executive shall replace any prior Agreement dealing with Supplemental Executive Retirement Income. 11. GOVERNING LAWS This Agreement shall be governed by the laws applicable in the province of Saskatchewan. IN WITNESS WHEREOF the Corporation has executed this Agreement by its duly authorized officers on its behalf and the Executive has executed this Agreement as of the date first above written. Potash Corporation of Saskatchewan Inc. ---------------------------------------- Executive: ---------------------------------------- SIGNED SEALED AND DELIVERED in the presence of: __________________________________ Name of Witness __________________________________ Signature of Witness 7 16 THIS AGREEMENT made as of this _______________ day of ________________, 1996. B E T W E E N: POTASH CORPORATION OF SASKATCHEWAN INC., a corporation incorporated under the laws of the province of Saskatchewan (hereinafter called "PCS Inc") - AND - of the City of Saskatoon, in the province of Saskatchewan, an executive of the Corporation (hereinafter called the "Executive") WHEREAS the Executive is in the employ of PCS Inc. or one of its direct or indirect subsidiaries (hereinafter collectively the "Corporation") and renders valuable service to the Corporation; AND WHEREAS the Executive is a member of the Pension Plan; AND WHEREAS the Corporation desires to recognize the value of the Executive's service and to secure his continued employment; NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Executive and the Corporation covenant and agree as follows: 1 17 1. DEFINITIONS For purposes of this Agreement, the terms "CONTINUOUS SERVICE", and "SPOUSE" shall have the meanings given those terms in the Pension Plan from time to time. The term "EARNINGS" shall mean the Executive's annual base pay plus 100% of all bonuses paid or payable to the Executive in a calendar year. For purposes of this Agreement, the term Pension Plan means the Potash Corporation of Saskatchewan Pension Plan and also includes any prior or alternate plans from which the Executive is entitled to benefits by reason of his service with the Corporation. 2. QUALIFICATION FOR PENSION PLAN SUPPLEMENT To qualify for the supplemental retirement benefits described in this Agreement, the Executive shall: (a) remain in the continuous service of the Corporation from the date of this Agreement until his retirement from the Corporation; and (b) not retire from the Corporation prior to age 55. For purposes of this Agreement, any termination of employment from the Corporation by the Executive on or after age 55 shall be deemed to be the Executive's retirement from the Corporation. 2 18 3. RETIREMENT DATES (a) NORMAL RETIREMENT Upon the Executive's retirement from the Corporation at age 65, the Executive shall receive the supplemental retirement benefits as described in paragraph 4. (b) EARLY RETIREMENT If the Executive retires from the Corporation after attaining age 55, but prior to attainment of age 65, the Executive shall receive supplemental retirement benefits as described in paragraph 4, except that such supplemental retirement benefits shall be reduced by 5/12 of 1% for each month that the commencement date of the supplemental retirement benefit payments precedes the Executive's attainment of age 62. (c) POSTPONED RETIREMENT If the Executive retires from the Corporation after attaining age 65, the Executive shall continue to accrue benefits under this Agreement until his actual retirement date and shall receive the supplemental retirement benefits as described in paragraph 4. 3 19 4. AMOUNT OF SUPPLEMENT The annual supplemental retirement benefit payable under this Agreement, if any, shall be calculated as follows: (a) 5% of the Executive's average 3 highest calendar years' Earnings multiplied by the Executive's years (including partial years calculated to the last full month completed) of Continuous Service up to a maximum of 10 years PLUS (b) 2% of the Executive's average 3 highest calendar years' Earnings multiplied by the Executive's years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years MINUS (c) the annual retirement benefit which can be provided to the Executive under the Pension Plan on a life-only basis. 4 20 5. PAYMENT OF PENSION PLAN SUPPLEMENT (a) NORMAL FORM The supplemental retirement benefits payable pursuant to paragraph 4 shall be paid to the Executive upon direction of the Executive by way of either: i) equal monthly installments for his lifetime, commencing on the first day of the month coincident with or next following the date of the Executive's retirement from the Corporation and ceasing with the payment due for the month in which the Executive dies, or ii) a lump sum payment to be received by the Executive within thirty days of retirement. The lump sum payment shall reflect the present value of the supplemental retirement benefit on a life only basis which shall be calculated to reflect a cost neutral position to the Corporation when compared to (i) above. If either (i) or (ii) is selected by the Executive and such Executive has a Spouse on the date that supplemental retirement benefits are to begin, the Spouse of such Executive shall be required to waive the right to any further benefit under the Supplemental Retirement Income plan. Such waiver shall be in the form prepared by the Corporation. (b) OPTIONAL FORMS OF PAYMENT If the Executive has a Spouse on the date that the supplemental retirement benefit payments are due to commence, such Executive may elect that a percentage of his monthly benefits be continued to his Spouse after the Executive's death. Such percentage shall be either 60%, 75% or 100% or some other percentage or manner as selected by the Executive on an actuarially reduced basis. 5 21 6. DEATH PRIOR TO RETIREMENT Should the Executive die after attaining age 55 but prior to his retirement from the Corporation, the Executive's Spouse (if any) shall receive an annual supplemental retirement benefit equal to the annual benefit the Spouse would have received had the Executive retired immediately prior to his death and elected a 60% survivor pension. The Executive's Spouse may elect to have such benefit paid in a lump sum which benefit shall be actuarially calculated to reflect a cost neutral position to the Corporation. The Executive shall not receive any benefits pursuant to this Agreement if he should die prior to attaining age 55. 7. FUNDING The Corporation will not be required to establish or contribute to a trust fund or other funding arrangement of any kind for the provision of the supplemental retirement benefit or any other payment which may become payable under this Agreement. Neither the Executive nor any other person shall acquire by reason of this Agreement any right in or title to any assets, funds or property of the Corporation. Any benefits which become payable hereunder shall be paid from the general assets of the Corporation. The Executive shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Corporation. Nothing contained in this Agreement constitutes a guarantee by the Corporation that the assets of the Corporation shall be sufficient to pay any benefit to any person. The Corporation agrees to purchase a letter of credit from a financial institution to secure the benefits of the Executive. 8. SUCCESSORS AND ASSIGNS This Agreement shall enure to the benefit of and be binding upon the Corporation and its assigns and upon the Executive and his heirs, executors, administrators, successors and assigns. 6 22 9. WITHHOLDING TAX The benefits payable pursuant to this Agreement shall be subject to such withholding tax as required by law. 10. AMENDMENT This Agreement may be amended at any time upon the written agreement of the Corporation and the Executive. This Agreement when duly signed by the Corporation and the Executive shall replace any prior Agreement dealing with Supplemental Executive Retirement Income. 11. GOVERNING LAWS This Agreement shall be governed by the laws applicable in the province of Saskatchewan. IN WITNESS WHEREOF the Corporation has executed this Agreement by its duly authorized officers on its behalf and the Executive has executed this Agreement as of the date first above written. Potash Corporation of Saskatchewan Inc. --------------------------------------- Executive: --------------------------------------- SIGNED SEALED AND DELIVERED in the presence of: __________________________________ Name of Witness __________________________________ Signature of Witness 7 EX-10.Y 3 EMPLOYMENT AGREEMENT DATED 05/16/96, PCS PHOSP. 1 Exhibit 10(y) EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, made and entered into as of the 16th day of May, 1996, by and between PCS PHOSPHATE COMPANY, INC. (formerly Texasgulf Inc.), a Delaware Corporation (the "Company"), and THOMAS J. WRIGHT ("Employee"). W I T N E S S E T H: WHEREAS, the Company recognizes that Employee's contribution to the growth and success of the Company has been substantial and desires to assure the Company of Employee's continued employment, and WHEREAS, Employee is desirous of continuing to serve the Company on the terms herein provided; NOW THEREFORE, in consideration of the promises hereinafter set forth, the parties agree as follows: 1. Employment. The Company agrees to continue to employ Employee, and Employee agrees to continue to serve the Company, subject to the terms and conditions set forth herein. 2. Term. The employment of Employee by the Company as provided in Section 1. hereof will be for a period commencing on the date hereof and ending on March 31, 1998, unless further extended or sooner terminated as herein provided. 3. Position and Duties. During the term of this Agreement, Employee shall serve as Executive Vice President of the Company with general responsibility for all phosphate and feed operations. Employee agrees to devote all of his business time, skill, attention and best efforts during normal business hours to the business of the Company to the extent necessary to discharge the responsibilities assigned to him during the period of his employment hereunder, except for (i) service on other corporate, civic or charitable boards or committees not significantly interfering with is duties hereunder and (ii) usual, ordinary and customary periods of vacation. 4. Compensation i. Base Salary. Employee shall receive a base salary ("Base Salary") at a monthly rate of $34,166.67 during the term of this Agreement. The Base Salary shall be reviewed at least once each year. Any increase in Base Salary or other compensation shall in no way limit or reduce any other obligation of the Company hereunder, and once established at an increased rate, the Base Salary hereunder shall not thereafter be reduced. 1 2 ii. Incentive Compensation; Bonuses. In addition to Base Salary, Employee shall be entitled to participate in incentive plans and stock option plans of Potash Corporation of Saskatchewan Inc. ("PCS") for key employees of PCS and its subsidiaries in effect from time to time. iii. Deferred Compensation. Employee will be protected for the full amount standing to his credit in his deferred compensation account as at February 29, 1996 and will be entitled to payments, upon retirement, in accordance with the Texasgulf deferred compensation program as it existed April 10, 1995. Employee's compensation may not, after February 29, 1996, be deferred. iv. Expenses. During the term of Employee's employment hereunder, Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Employee in accordance with the policies and procedures of the Company. v. Benefit Plans. Employee shall be entitled to participate in or receive benefits under all of the Company's benefit plans, policies, practices and arrangements in which Employee is presently eligible to participate, or plans and arrangements substituted herefor. Employee shall be entitled to participate in or receive benefits under any pension plan, profit-sharing plan, savings plan, life insurance, health and accident plan, short or long-term disability plan or arrangement or other benefit plan (collective, the "Benefit Plans") made available by the Company in the future to its executives or key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such Benefit Plans. The Company agrees to secure payment by it of all non-qualified deferred compensation benefits promised to Employee, including but not limited to (a) benefits under any deferred compensation agreements entered into between the Company and Employee and (b) benefits under the Company's non-qualified excess benefits pension plan, in a manner consistent with general corporate practice to protect such benefits. vi. Vacations. Employee shall be entitled to paid vacation in accordance with Company's vacation policy as in effect from time to time. Employee shall be entitled to all paid holidays given by the Company to its employees. vii. Perquisites. Employee shall be entitled to continue to receive fringe benefits and perquisites, including without limitation the use of an automobile and the payment by the Company of initiation fees and dues for country clubs, luncheon clubs, or similar facilities in accordance with the Company's policy presently in effect. 5. Termination i. Death. This Agreement shall terminate automatically upon the death of 2 3 Employee, subject to the provisions of subparagraphs 6(i) and 6(v) hereof. ii. Cause. The Company may terminate Employee's employment for Cause. For the purpose of this Agreement, the Company shall have "Cause" to terminate Employee's employment hereunder upon (A) the willful and continued failure by Employee to substantially perform his duties with the Company (other than any such failure resulting from Employee's incapacity due to physical or mental illness), after a demand for substantial performance is delivered to Employee that specifically identifies the manner in which the Company believe that Employee has not substantially performed his duties, or (B) the willful engaging by Employee in gross misconduct materially and demonstrably injurious to the Company. For the purpose of this paragraph, no act, or failure to act, on Employee's part shall be considered "willful" unless done, or omitted to be done, by Employee in bad faith and without reasonable belief that Employee's action or omission was in the best interest of the Company. iii. Good Reason. Employee may terminate his employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: A. without the express written consent of Employee, (x) the assignment to Employee of any duties materially inconsistent with Employee's present position, duties, responsibilities and status with the Company, or (y) over Employee's objection, a substantial reduction of Employee's duties and responsibilities; B. a reduction by the Company in Employee's Base Salary; C. the failure by the Company to continue in effect any Benefit Plan, unless a substitute plan or plans provide Employee with a substantially similar level of benefits; D. any failure of the Company to obtain the assumption of the obligation to perform this Agreement by any successor as contemplated in paragraph 8. hereof; or E. any purported termination of Employee's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (iv) below; and for purpose of this Agreement, no such purported termination shall be effective. iv. Notice of Termination. Any termination by the Company for Cause or by Employee for Good Reason or otherwise shall be communicated by Notice of Termination to the other party 3 4 hereto. "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. v. Date of Termination. "Date of Termination" shall mean the date specified in the Notice of Termination; provided that if within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date finally determined to be the Date of Termination, either by mutual written agreement of the parties or by a binding and final arbitration award. 6. Compensation Upon Termination or Death i. If Employee's employment is terminated by reason of Employee's death, this Agreement shall terminate, and no further compensation shall be payable to Employee hereunder except as specifically provided herein; provided, however, that Employee's estate, heirs and beneficiaries shall be entitled to receive the full amount of the Base Salary for the month in which death occurs, the amount payable under the Survivorship Plan and all other benefits available to them under the Company's Benefit Plans. ii. If Employee's employment shall be terminated for Cause, or if Employee terminates his employment other than for Good Reason, the Company shall pay Employee his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. Employee's rights under Benefit Plan or other agreements shall be determined by the provisions contained therein. iii. If the Company shall terminate Employee's employment other than for Cause, or if Employee shall terminate his employment for Good Reason, then the Company shall pay to Employee as liquidated damages in a lump sum on the fifteenth day following the Date of Termination, the following amounts: A. Employee's full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given; B. in lieu of any further salary payments to Employee for periods subsequent to the Date of Termination, an amount equal to the product of (a) Employee's Base Salary at the rate in effect as of the Date of Termination, multiplied by the number of months, including 4 5 partial months, remaining in the term of this Agreement; C. all reasonable legal fees and other reasonable expenses incurred by Employee as a result of such termination. iv. If the Company terminates Employee other than for Cause, or if Employee terminates his employment for Good Reason, the Company shall retain in full force and effect for the continued benefit of Employee and his eligible dependents and beneficiaries, until the last day of the term of this Agreement, the employee benefits under the Company's Benefit Plans that they were eligible to receive immediately prior to the Date of Termination, subject to the terms and conditions of the Benefit Plans, provided that Employee's continued participation or the participation of such eligible dependents or beneficiaries is possible under the general terms and provisions of such Benefit Plans. In the event that Employee's participation or the participation of such eligible dependents or beneficiaries in any such Benefit Plan is barred, the Company shall arrange to provide Employee or such eligible dependents or beneficiaries for such period with benefits substantially similar to those which Employee and such eligible dependents or beneficiaries would be entitled to receive under such Benefit Plans. At the end of the period of coverage, Employee shall have the option to have assigned to him at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to Employee. The provisions of this subparagraph 6.(iv) shall be in addition to and not in limitation of the provisions of subparagraph 6.(v) below. v. If the Employee shall be terminated by the Company other than for Cause, or if Employee terminates his employment for Good Reason, or if Employee shall die after such termination and during what would otherwise be the term of this Agreement, then, in addition to the other payment provided for in this paragraph 6., Employee and his eligible dependents and beneficiaries shall be entitled to receive from the Company benefits equivalent to the retirement and death benefits they would have been entitled to receive under the Company's retirement and death benefit plans if Employee had been employed pursuant to this Agreement throughout the entire term of this Agreement, or to the date of his death, as the case may be. vi. Employee shall not receive payments of Base Salary under this Agreement for any period during which Employee receive payments under the Company's short or long-term disability plans. vii. Employee shall not be required to mitigate the amount of any payment 5 6 provided for in this paragraph 6. by seeking other employment or otherwise, nor shall the amount of any payment provided for in this paragraph 6. be reduced by any compensation earned by Employee as the result of employment by another employer after the Date of Termination, or otherwise. viii. Employee's rights under deferred compensation agreements shall be determined by the provisions contained therein. 7. Confidential Information. During the course of his employment, Employee will have access to confidential records, data, formulae, specifications and secret inventions and processes owned and developed by and use in the course of the business of the Company and its subsidiaries and which will be disclosed to Employee in confidence. Employee agrees that he will not, during the term or after the conclusion of his employment by the Company, except as may be reasonably necessary or appropriate in connection with the performance by Employee of his duties as an executive of the Company or as may be authorized by the written consent of the Company, either directly or indirectly, use, publish or disclose, or authorized anyone else to use, publish or disclose, any proprietary knowledge or information concerning any such records, data, formulae, specifications, inventions or processes relating to the business of the Company and its subsidiaries. 8. Successors; Binding Agreement. i. The Company shall require any successor to all or substantially all of the business or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise), by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 8. or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. ii. This Agreement shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 9. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: 6 7 If to the Employee: Mr. Thomas J. Wright 3604 Ranlo Drive Raleigh, North Carolina 27612 If to the Company: PCS Phosphate Company, Inc. c/o Potash Corporation of Saskatchewan Inc. 500, 122 First Avenue South Saskatoon, Saskatchewan S7K 7G3 Attention: Chief Executive Officer, PCS Inc. or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 10. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Employee and an appropriate officer of the Company. No waiver by either part at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina. 11. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 12. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. The decision of the arbitrator shall be final and binding on both parties. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 13. Headings. The headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of any provision of this Agreement. 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. PCS PHOSPHATE COMPANY, INC. By: /s/ C.E. CHILDERS ------------------------------- By: /s/ JOHN HAMPTON ------------------------------- THOMAS J. WRIGHT /S/ THOMAS J. WRIGHT ----------------------------------- 8 EX-11 4 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 Exhibit 11 POTASH CORPORATION OF SASKATCHEWAN INC. COMPUTATION OF PER SHARE EARNINGS FOR THE PERIODS ENDED JUNE 30 (Figures and amounts expressed in thousands, except per share and per option amounts)
YTD-1996 YTD-1995 Q2-1996 Q2-1995 A Net Income as reported, Canadian GAAP 116,076 99,219 52,398 47,744 B Items adjusting net income (4,318) - (1,091) - C Net income, US GAAP (A+B) 111,758 99,219 51,307 47,744 D Weighted average number of shares outstanding 45,513 43,016 45,543 43,036 E Options outstanding to purchase equivalent shares 1,289 974 1,289 974 F Average exercise price per option 43.55 34.74 43.55 34.74 G Average market price per share 67.91 43.37 65.47 48.34 H Period end market price per share 66.25 55.88 66.25 55.88 I Rate of Return available on option proceeds 0.05 0.05 0.05 0.05 CANADIA GAAP Basic earnings per share (A/D) 2.55 2.31 1.15 1.11 Fully diluted earnings per share J Imputed earnings on option proceeds (E*F*I) 2,806 1,691 2,806 1,691 Fully diluted earnings per share ((A+J)/(D+E)) 2.54 2.29 1.18 1.12 UNITED STATES GAAP Primary earnings per share K Net additional shares issuable (E-(E*F/G)) 462 194 432 274 Primary earnings per share (C/(D+K)) 2.43 2.30 1.12 1.10 Fully diluted earnings per share L Net additional shares issuable (E-(E*F/H)) 442 368 442 368 Fully diluted earnings per share (C/(D+L)) 2.43 2.29 1.12 1.10 D+K Weighted average shares for US GAAP 45,975 43,210 45,975 43,310
EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 7,290 0 214,661 (4,503) 222,747 465,652 2,483,616 (497,911) 2,497,595 256,673 639,800 0 0 629,571 706,398 2,497,595 719,240 719,240 515,738 515,738 42,014 0 25,746 135,742 19,666 0 0 0 0 116,076 2.55 2.54
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