ITEM 3. Legal Proceedings.
Former Arcadian Executive Proceedings
On May 7, 1997, J. Douglas Campbell, Alfred L. Williams and Peter H. Kesser, former officers of Arcadian, filed lawsuits against the Company in the United States District Court for the Western District of Tennessee. The complaints allege that the Company breached employment agreements between Arcadian and the officers and breached the related assumption agreement among the Company, PCS Nitrogen, and Arcadian. The complaints of Mr. Campbell, Mr. Williams and Mr. Kesser sought damages in excess of $22.2 million, $6.2 million and $3.7 million, respectively, including amounts sufficient to offset the impact of certain excise taxes (the “Excise Tax Gross Up”). On December 1, 1998 the court entered judgments in the amounts of $12.7 million, $3.2 million, and $2.6 million in favor of Mr. Campbell, Mr. Williams and Mr. Kesser, plus the Excise Tax Gross Up. On February 2, 2001, the Appellate Court substantially affirmed the judgment and remanded the case for further proceedings. The Company and PCS Nitrogen had filed an action in the Circuit Court of Tennessee against Messrs. Campbell, Williams and Kesser for declaratory relief and damages. The Company and PCS Nitrogen alleged that the defendants committed breaches of their fiduciary duties, corporate waste and self dealing related to the negotiation of, obtaining approval for, and execution of their employment agreements. On December 31, 2001, the Company and PCS Nitrogen and the former Arcadian executives entered into a comprehensive settlement of the lawsuits (including dismissal of the relevant state court action), which settlements did not have a material adverse effect on the Company’s financial condition or results of operations.
Geismar Facility Investigation
On May 11 and May 12, 1999, representatives of the EPA, Federal Bureau of Investigation, and other state and local agencies (“governmental agencies”) executed a search warrant issued by the United States District Court for the Middle District of Louisiana on the Geismar facility in connection with a grand jury investigation. In executing the search warrant, the governmental agencies seized documents and electronic media, performed environmental sampling, and interviewed Geismar facility employees and contract employees. In addition, the governmental agencies have contacted current and former Geismar facility and Company employees in connection with the investigation. The Company has also been served with grand jury subpoenas requesting documents and other information from the Geismar facility and PCS Nitrogen’s headquarters. The grand jury investigation is continuing and, in May 2001, the Company learned that the targets of the investigation include the Company and certain current and former employees, including individuals with current and/or previous management responsibility for the Company’s nitrogen operations. The Company is also conducting its own internal investigation. The Company cannot predict at this time what may result from the governments’ investigation or whether any such result would have a material adverse effect on the Company.
Environmental Proceedings
For a description of certain environmental proceedings involving the Company, see “Environmental Matters”.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
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PART II
ITEM 5.
ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters.
The information under “Common Share Prices and Volumes”, “Shareholder Information - Ownership, - Dividends” and “11 Year Report” in the registrant’s 2001 Annual Report, filed as Exhibit 13, is incorporated herein by reference.
Dividends paid to U.S. holders of Common Shares, who do not use the shares in carrying on a business in Canada, will be subject to a Canadian withholding tax under the Income Tax Act. Under the Canada-U.S. Income Tax Convention (1980) (the “Convention”), the rate of withholding is generally reduced to 15 percent. Subject to certain limitations, the Canadian withholding tax will be treated as a foreign income tax that can generally be claimed as a deduction from income or as a credit against the U.S. income tax liability of the holder. Holders will generally not be subject to tax under the Income Tax Act with respect to any gain realized from a disposition of Common Shares.
ITEM 6.
ITEM 6. Selected Financial Data.
The information under “11 Year Report” in the registrant’s 2001 Annual Report, filed as Exhibit 13, is incorporated herein by reference.
ITEM 7.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information under “Management’s Discussion & Analysis of Financial Condition and Results of Operations” in the registrant’s 2001 Annual Report, filed as Exhibit 13, is incorporated herein by reference.
ITEM 7A
ITEM 7A Risks Associated with Financial Instruments.
The Company’s nitrogen operations are significantly affected by the price of natural gas. The Company employs derivative commodity instruments related to a portion of its natural gas requirements (primarily futures, swaps and options) for the purpose of managing its exposure to commodity price risk in the purchase of natural gas. The Company does not employ these instruments for trading purposes. Changes in the market value of these derivative instruments have a high correlation to changes in the spot price of natural gas. Gains or losses arising from settled hedging transactions are deferred as a component of inventory until the product containing the hedged item is sold. Changes in the market value of open hedging transactions are not recognized as they generally relate to changes in the spot price of anticipated natural gas purchases.
A sensitivity analysis has been prepared to estimate the Company’s market risk exposure arising from derivative commodity instruments. The fair value of such instruments is calculated by valuing each position using quoted market prices. Market risk is estimated as the potential loss in fair value resulting from hypothetical 10 percent adverse change in such prices. The results of this analysis indicate that as of December 31, 2001, the Company’s estimated derivative commodity instruments market risk exposure was $21.7 million (2000 - $49.6 million). Actual results may differ from the estimate. Changes in the fair value of such derivative instruments, with maturities in 2002 through 2006, will generally relate to changes in the spot price of anticipated natural gas purchases.
The Company also enters into forward foreign exchange contracts for the sole purpose of limiting its exposure to exchange rate fluctuations relating to certain trade accounts. Gains or losses resulting from foreign exchange contracts are recognized monthly and are included in other income.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements contained in the registrant’s 2001 Annual Report, filed as Exhibit 13, are incorporated herein by reference.
ITEM 9.
ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
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PART III
ITEM 10.
ITEM 10. Directors and Executive Officers of the Registrant.
The information under “Election of Directors” in the 2002 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference. Information concerning executive officers is set forth under “Executive Officers of the Company” in Part I.
ITEM 11.
ITEM 11. Executive Compensation.
The information under “Executive Compensation” in the 2002 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference. Each incorporation by reference shall be deemed not to include the information referred to in Item 402(a)(8) of Regulation S-K.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information under “Ownership of Shares” and “Election of Directors” in the 2002 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions.
The information under “Election of Directors” and “Executive Compensation” in the 2002 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference.
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PART IV
ITEM 14.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List of Documents Filed as Part of this Report
1. Consolidated Financial Statements in Annual Report
2. Schedules
All Schedules are omitted because the required information is inapplicable or it is presented in the Consolidated Financial Statements.
3. Exhibits
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.
Exhibit
Number
Description of Document
10(a)
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 Registration Statement.
10(b)
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 Registration Statement.
10(c)
Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales, incorporated by reference to Exhibit 10(h) to the Registration Statement.
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IV-2
IV-3
(b)
Reports on Form 8-K 	
On December 21, 2001 the Company filed a current report on Form 8-K providing a description of the Company’s capital stock.
Copies of Exhibits to the Form 10-K may be obtained upon request from the Corporate Secretary, Potash Corporation of Saskatchewan Inc., Suite 500, 122 First Avenue South, Saskatoon, Saskatchewan S7K 7G3, Canada. The Company reserves the right to recover its reasonable expenses in providing copies of the Exhibits, such expenses not to exceed $.25 per page.
IV-4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
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.
Exhibit
Number
Description of Document
10(a)
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 Registration Statement.
10(b)
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 Registration Statement.
10(c)
Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales, incorporated by reference to Exhibit 10(h) to the Registration Statement.