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Non-IFRS Financial Measures Included in MD&A

PotashCorp uses cash flow and cash flow return (both non-IFRS financial measures) as supplemental measures to evaluate the performance of the company’s assets in terms of the cash flow they have generated. Calculated on the total cost basis of the company’s assets rather than on the depreciated value, these measures reflect cash returned on the total investment outlay. The company believes these measures are one of the best predictors of shareholder value. As such, management believes this information to be useful to investors.

Generally, these measures are a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Cash flow and cash flow return are not measures of financial performance (nor do they have standardized meanings) under IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.

The company uses both IFRS and certain non-IFRS measures to assess performance. Management believes the non-IFRS measures provide useful supplemental information to investors in order that they may evaluate PotashCorp’s financial performance using the same measures as management. Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the company. These non-IFRS financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with IFRS.

Excel
(in millions of US dollars except percentage amounts)
 201120102009 12008 12007 12006 12005 12004 12003 12002 12001 1
Net income (loss) 3,081 1,775 981 3,466 1,104 607 543 299 (84) 55 95
Total assets 16,257 15,547 12,922 10,249 9,717 6,217 5,358 5,127 4,567 4,623 4,532
Return on assets 19.0% 11.4% 7.6% 33.8% 11.4% 9.8% 10.1% 5.8% (1.8%) 1.2% 2.1%
Net income (loss) 3,081 1,775 981 3,466 1,104 607 543 299 (84) 55 95
Income taxes 1,066 701 79 1,060 417 142 267 132 — 31 53
Change in unrealized loss (gain) on derivatives included in net income 1 — (56) 69 (17) — — — — — —
Finance costs 159 121 121 63 69 86 82 84 91 83 80
Current income taxes (700) (479) 120 (995) (297) (108) (227) (105) — (24) (21)
Depreciation and amortization 489 449 312 328 291 242 242 240 227 217 186
Cash flow 2 4,096 2,567 1,557 3,991 1,567 969 907 650 234 362 393
Total assets 16,257 15,547 12,922 10,249 9,717 6,217 5,358 5,127 4,567 4,623 4,532
Cash and cash equivalents (430) (412) (385) (277) (720) (326) (94) (459) (5) (25) (45)
Fair value of derivative assets (10) (5) (9) (18) (135) — — — — — —
Accumulated depreciation of property, plant and equipment 3,653 3,171 2,712 2,527 2,281 2,074 1,928 1,755 1,576 1,455 1,274
Net unrealized gains on available-for-sale securities (982) (2,563) (1,900) (886) (2,284) — — — — — —
Accumulated amortization of other assets and intangible assets 93 76 57 81 66 80 73 72 77 64 49
Payables and accrued charges (1,295) (1,198) (798) (1,191) (912) (545) (843) (600) (380) (347) (271)
Adjusted assets 17,286 14,616 12,599 10,485 8,013 7,500 6,422 5,895 5,835 5,770 5,539
Average adjusted assets 15,951 13,6274 11,542 9,249 7,757 6,961 6,159 5,865 5,803 5,655 5,094
Cash flow return 3 25.7% 18.8% 13.5% 43.2% 20.2% 13.9% 14.7% 11.1% 4.0% 6.4% 7.7%
1 As we adopted IFRS with effect from January 1, 2010, our 2001 to 2009 information is presented on a previous Canadian GAAP basis and, to the extent such information constitutes Canadian non-GAAP measures, is reconciled to the most directly comparable measure calculated in accordance with previous Canadian GAAP. Accordingly, information for 2001 to 2009 may not be comparable to 2010 and 2011.
2 Cash flow = net income or loss + income taxes + change in unrealized loss/(gain) on derivatives included in net income + finance costs - current income taxes + depreciation and amortization.
3 Cash flow return = cash flow / average (total assets - cash and cash equivalents - fair value of derivative assets + accumulated depreciation and amortization - net unrealized gains on available-for-sale securities - payables and accrued charges).
4 Based on adjusted assets as of January 1, 2010 of $12,637, which was calculated similarly to 2009 under previous Canadian GAAP except the following IFRS amounts were used: total assets of $12,842, accumulated depreciation of property, plant and equipment of $2,850 and payables and accrued charges of $(817).
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