ITEM 3.
Legal Proceedings.
Nitrochem
On May 1, 2003, Nitrochem Distribution, Ltd. (“Nitrochem”) filed an action in U.S. District Court for the Southern District of New York against our subsidiary, PCS Sales (USA), Inc. (“Sales (USA)”). Nitrochem alleges that Sales (USA) entered into a contract for ammonia in 2001 that contained an automatic renewal provision for 2002. Nitrochem further alleges that Sales (USA) failed to take delivery of a specified amount of ammonia in 2002. Sales (USA) has denied all of Nitrochem’s substantive allegations. Nitrochem is seeking damages in the amount of $12 million. The matter proceeded to trial on March 31 and April 1, 2004. On May 3, 2004, a judgment was issued declaring that Sales (USA) had no contractual obligation to purchase ammonia from Nitrochem in 2002 and denying Nitrochem’s claim for breach of contract. Nitrochem has appealed the judgment. The oral argument for the appeal is scheduled for April 8, 2005. We believe that the outcome of the appeal will not have a material adverse effect on our results of operations or financial position.
Shaw
On February 23, 1999, Shaw Constructors Inc. (“Shaw”) filed an action against ICF Kaiser Engineers, Inc. (“Kaiser”) and PCS Nitrogen Fertilizer, L.P., PCS Nitrogen Fertilizer, Inc., PCS Nitrogen, Inc. and Potash Corporation of Saskatchewan, Inc. (collectively “PCS”) in the Eighteenth Judicial District Court for the State of Louisiana seeking to recover the balance allegedly owed to it under a subcontract with Kaiser. Shaw alleges that PCS is liable for the unpaid balance allegedly due under the subcontract with Kaiser based on a lien it filed against PCS’s property pursuant to the Louisiana Private Works Act. PCS had previously entered into a contract with Kaiser for the construction of a nitric acid facility at the Geismar plant.
The litigation was subsequently removed to the United States District Court for the Middle District of Louisiana. On August 3, 2001, the trial court granted PCS’s motion for summary judgment and denied Shaw’s motion holding that Shaw had expressly waived its right in the subcontract to file any liens or claims against PCS and its property.
On February 7, 2002, Shaw filed an appeal with the Fifth Circuit Court of Appeals (the “Fifth Circuit”). On December 30, 2004, the Fifth Circuit reversed the trial court’s decision and entered summary judgment on the issue of liability in favor of Shaw ruling that Shaw has the right to enforce its lien claim against PCS. The Fifth Circuit remanded the case to the trial court for a determination as to the amount of damages that Shaw is entitled to recover from PCS. Shaw alleges that PCS is liable in the amount of approximately $2.04 million plus interest. On January 27, 2005, PCS filed a Petition for Rehearing and Petition for En Banc Rehearing with the Fifth Circuit, which were denied. PCS intends to pursue its defenses to the amount of damages claimed by Shaw on remand to the trial court.
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General
In the normal course of business, we are subject to legal proceedings being brought against us. The amounts that these proceedings may cost us are not reasonably estimable, due to uncertainty as to the final outcome. However, we do not believe these proceedings in the aggregate will have a material adverse effect on our financial position or results of operations.
Environmental Proceedings
For a description of certain environmental proceedings in which we are involved, see “Environmental Matters” under Items 1 and 2.
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” and “Shareholder Information - Ownership and - Dividends” on page 89 and “11 Year Report” on page 49 in the registrant’s 2004 Annual Report, filed as Exhibit 13, is incorporated herein by reference.
Dividends paid to U.S. holders of our 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 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” on page 49 in our 2004 Annual Report, filed as Exhibit 13, is incorporated herein by reference. Such information has been presented on the basis of accounting principles generally accepted in Canada (Canadian GAAP). These principles differ in certain significant respects from generally accepted accounting principles in the United States (US GAAP). The following supplemental financial data is provided on the basis of reconciliations between Canadian and US GAAP.
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” on pages 14 through 51 in our 2004 Annual Report, filed as Exhibit 13, is incorporated herein by reference.
ITEM 7A.
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk.
The information under “Management’s Discussion & Analysis of Financial Condition and Results of Operations - Market Risks Associated with Financial Instruments” on page 40 in our 2004 Annual Report, filed as Exhibit 13, is incorporated herein by reference.
ITEM 8.
ITEM 8.
Financial Statements and Supplementary Data.
The Consolidated Financial Statements contained on pages 55 through 86 in our 2004 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.
ITEM 9A.
ITEM 9A. Controls and Procedures.
As of December 31, 2004, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the
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effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon that evaluation and as of December 31, 2004, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports the Company files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required.
There has been no change in our internal control over financial reporting during the year ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Chartered Accountants thereon contained on pages 55 and 57 in our 2004 Annual Report, filed as Exhibit 13, are incorporated herein by reference.
ITEM 9B.
ITEM 9B.
Other Information.
The following information would otherwise have been filed on Form 8-K under the heading “Item 1.01. Entry into a Material Definitive Agreement”:
On March 10, 2005, amendments were completed to the Company’s Short-Term Incentive Plan of January 2000 and its Chief Executive Officer Medical and Dental Plan of May 2000. A description of, and information relating to, the Short-Term Incentive Plan, as amended, is contained in our 2005 Proxy Circular, attached as Exhibit 99 to this Annual Report on Form 10-K, and is incorporated herein by reference. The Short-Term Incentive Plan, as amended, is attached as Exhibit 10(x) to this Annual Report on Form 10-K. The Chief Executive Officer Medical and Dental Benefits are attached as Exhibit 10(jj) and incorporated herein by reference.
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PART III
ITEM 10.
ITEM 10.
Directors and Executive Officers of the Registrant.
The information under “Nominees For Election To The Board Of Directors” and the second paragraph under “Corporate Governance - Report of the Audit Committee” regarding “audit committee financial experts” in our 2005 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference. Information concerning executive officers is set forth under “Our Executive Officers” in Part I.
We have adopted a Code of Business Conduct that applies to all of our directors, officers and employees. We make this code, as well as our corporate governance principles and the respective Charters of our Corporate Governance and Nominating, Audit and Compensation Committees, available, free of charge, on our website, http://www.potashcorp.com or by request.
ITEM 11.
ITEM 11.
Executive Compensation.
The information under “Executive Compensation” and “Performance Graphs” in our 2005 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference. Each such 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 and Related Stockholder Matters.
The information under “Ownership of Shares,” “Nominees For Election To The Board Of Directors” and the table titled “Equity Compensation Plan Information” in our 2005 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference.
ITEM 13.
ITEM 13.
Certain Relationships and Related Transactions.
The information under “Nominees For Election To The Board Of Directors,” including the second paragraph under “Director Independence” at page 12, and “Executive Compensation” in our 2005 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference.
ITEM 14.
ITEM 14.
Principal Accountant Fees and Services.
The information under “Appointment of Auditors” in our 2005 Proxy Circular, attached as Exhibit 99, is incorporated herein by reference.
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PART IV
ITEM 15.
ITEM 15.
Exhibits and Financial Statement Schedules.
(a)
List of Documents Filed as Part of this Report
1. Consolidated Financial Statements in Annual Report
The Consolidated Financial Statements contained on pages 55 through 86 in our 2004 Annual Report, filed as Exhibit 13, are incorporated under Item 8 by reference.
2. Schedules
Schedules not listed are omitted because the required information is inapplicable or is presented in the Consolidated Financial Statements.
Potash Corporation of Saskatchewan Inc.
Schedule II - Valuation and Qualifying Accounts
(in millions of US dollars)
(unaudited)
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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 registrant’s registration statement on Form (File No. 33-31303) (the “F-1 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.
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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.
POTASH CORPORATION OF SASKATCHEWAN INC.
By:
/s/ WILLIAM J. DOYLE
William J. Doyle
President and Chief Executive Officer
March 11, 2005
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 registrant’s registration statement on Form (File No. 33-31303) (the “F-1 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.