33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles
Canadian GAAP varies in certain significant respects from US GAAP. As required by the United States Securities and Exchange Commission, the effect of these principal differences on the company's consolidated financial statements is described and quantified below:
(a) Long-term investments: Prior to January 1, 2007, the company's investments in ICL and Sinofert were stated at cost under Canadian GAAP. US GAAP requires that these investments be classified as available-for-sale and be stated at market value with the difference between market value and cost reported as a component of OCI. As described in Note 3, Canadian GAAP related to this matter was amended to be consistent with US GAAP on a prospective basis effective January 1, 2007.
Certain of the company's investments in international entities are accounted for under the equity method. Accounting principles generally accepted in those foreign jurisdictions may vary in certain important respects from Canadian GAAP and in certain other respects from US GAAP. The company's share of earnings of these equity investees under Canadian GAAP has been adjusted for the significant effects of conforming to US GAAP.
(b) Property, plant and equipment and goodwill: The net book value of property, plant and equipment and goodwill under Canadian GAAP is higher than under US GAAP, as past provisions for asset impairment under Canadian GAAP were measured based on the undiscounted cash flow from use together with the residual value of the assets. Under US GAAP, they were measured based on fair value, which was lower than the undiscounted cash flow from use together with the residual value of the assets. Fair value for this purpose was determined based on discounted expected future net cash flows.
(c) Depreciation and amortization: Depreciation and amortization under Canadian GAAP is higher than under US GAAP, as a result of differences in the carrying amounts of property, plant and equipment under Canadian and US GAAP.
(d) Exploration costs: Under Canadian GAAP, capitalized exploration costs are classified under property, plant and equipment. For US GAAP, these costs are generally expensed until such time as a final feasibility study has confirmed the existence of a commercially mineable deposit.
(e) Pre-operating costs: Operating costs incurred during the start-up phase of new projects are deferred under Canadian GAAP until commercial production levels are reached, at which time they are amortized over the estimated life of the project. US GAAP requires that these costs be expensed as incurred. As at December 31, 2007 and 2006, the start-up costs deferred for Canadian GAAP were not material.
(f) Pension and other post-retirement benefits: Under Canadian GAAP, when a defined benefit plan gives rise to an accrued benefit asset, a company must recognize a valuation allowance for the excess of the adjusted benefit asset over the expected future benefit to be realized from the plan asset. Changes in the pension valuation allowance are recognized in income. US GAAP does not specifically address pension valuation allowances, and the US regulators have interpreted this to be a difference between Canadian GAAP and US GAAP. In light of this, a difference between Canadian GAAP and US GAAP has been recorded for the effects of recognizing a pension valuation allowance and the changes therein under Canadian GAAP.
In addition, US GAAP requires the company to recognize the difference between the benefit obligation and the fair value of plan assets in the Consolidated Statements of Financial Position with the offset to OCI. No similar requirement currently exists under Canadian GAAP.
(g) Foreign currency translation adjustment: The company adopted the US dollar as its functional and reporting currency on January 1, 1995. At that time, the consolidated financial statements were translated into US dollars at the December 31, 1994 year-end exchange rate using the translation of convenience method under Canadian GAAP. This translation method was not permitted under US GAAP. US GAAP required the comparative Consolidated Statements of Operations and Consolidated Statements of Cash Flow to be translated at applicable weighted average exchange rates, whereas the Consolidated Statements of Financial Position were permitted to be translated at the December 31, 1994 year-end exchange rate. The use of disparate exchange rates under US GAAP gave rise to a foreign currency translation adjustment. Under US GAAP, this adjustment is reported as a component of accumulated OCI.
(h) Derivative instruments and hedging activities: Prior to January 1, 2007 under Canadian GAAP, the company's derivatives used for non-trading purposes that did not qualify for hedge accounting were carried at fair value on the Consolidated Statements of Financial Position, with changes in fair value reflected in earnings. Derivatives embedded within instruments were generally not separately accounted for except for those related to equity-linked deposit contracts, which are not applicable to the company. Gains and losses on derivative instruments held within an effective hedge relationship were recognized in earnings on the same basis and in the same period as the underlying hedged items. There was no difference in accounting between Canadian GAAP and US GAAP in respect of derivatives held by the company that do not qualify for hedge accounting. Unlike Canadian GAAP, however, the company recognized all of its derivative instruments (whether designated in hedging relationships or not, or embedded within hybrid instruments) at fair value on the Consolidated Statements of Financial Position for US GAAP purposes. Under US GAAP, the accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship. For strategies designated as fair value hedges, the effective portion of the change in the fair value of the derivative is offset in income against the change in fair value, attributed to the risk being hedged, of the underlying hedged asset, liability or firm commitment. For cash flow hedges, the effective portion of the changes in the fair value of the derivative is accumulated in OCI until the variability in cash flows being hedged is recognized in earnings in future accounting periods. For both fair value and cash flow hedges, if a derivative instrument is designated as a hedge and meets the criteria for hedge effectiveness, earnings offset is available, but only to the extent that the hedge is effective. Ineffective portions of fair value or cash flow hedges are recorded in earnings in the current period.
As described in Note 3, Canadian GAAP related to this matter was amended to be consistent with US GAAP on a prospective basis effective January 1, 2007
(i) Comprehensive income: Comprehensive income is recognized and measured under US GAAP pursuant to SFAS No. 130, "Reporting Comprehensive Income". This standard defines comprehensive income as all changes in equity other than those resulting from investments by owners and distributions to owners. Comprehensive income is comprised of net income and OCI. OCI refers to amounts that are recorded as an element of shareholders' equity but are excluded from net income because these transactions or events were attributed to changes from non-owner sources. As described in Note 3, Canadian standards relating to comprehensive income are effective January 1, 2007 on a prospective basis.
(j) Stock-based compensation: Under Canadian GAAP, the company's stock-based compensation plan awards classified as liabilities are measured at intrinsic value at each reporting period. Effective January 1, 2006, US GAAP requires that these liability awards be measured at fair value at each reporting period. As at December 31, 2007, the difference between Canadian GAAP and US GAAP was not significant. The company uses a Monte Carlo simulation model to estimate the fair value of its performance unit incentive plan liability for US GAAP purposes.
Under Canadian GAAP, stock options are recognized over the service period, which for the company is established by the option performance period. Effective January 1, 2006, under US GAAP stock options are recognized over the requisite service period which does not commence until the option plan is approved by the company's shareholders and options are granted thereunder. For options granted under the PotashCorp 2006 Performance Option Plan, the service period commenced January 1, 2006 under Canadian GAAP and May 4, 2006 under US GAAP. For options granted under the PotashCorp 2007 Performance Option Plan, the service period commenced January 1, 2007 under Canadian GAAP and May 3, 2007 under US GAAP. This difference impacts the stock-based compensation cost recorded and may impact diluted earnings per share.
(k) Stripping costs: Under Canadian GAAP, the company capitalizes and amortizes costs associated with the activity of removing overburden and other mine waste minerals in the production phase. Effective January 1, 2006, US GAAP requires such stripping costs to be attributed to ore produced in that period as a component of inventory and recognized in cost of sales in the same period as related revenue. In accordance with US GAAP, the company has recorded the effect of initially applying this consensus as a cumulative-effect adjustment recognized in the opening balance of retained earnings as of January 1, 2006.
(l) Income taxes related to the above adjustments: The income tax adjustment reflects the impact on income taxes of the US GAAP adjustments described above. Accounting for income taxes under Canadian GAAP and US GAAP is similar, except that income tax rates of enacted or substantively enacted tax law must be used to calculate future income tax assets and liabilities under Canadian GAAP, whereas only income tax rates of enacted tax law can be used under US GAAP.
(m) Income tax consequences of stock-based employee compensation: Under Canadian GAAP, the income tax benefit attributable to stock-based compensation that is deductible in computing taxable income but is not recorded in the consolidated financial statements as an expense of any period (the "excess benefit") is considered to be a permanent difference. Accordingly, such amount is treated as an item that reconciles the statutory income tax rate to the company's effective income tax rate. Under US GAAP, the excess benefit is recognized as additional paid-in capital.
(n) Income taxes related to uncertain income tax positions: US GAAP prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its consolidated financial statements uncertain income tax positions that it has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Canadian GAAP has no similar requirements related to uncertain income tax positions.
(o) Cash flow statements: US GAAP requires the disclosure of income taxes paid. Canadian GAAP requires the disclosure of income tax cash flows, which would include any income taxes recovered during the year.
The application of US GAAP, as described above, would have had the following effects on net income, net income per share, total assets, and shareholders' equity and comprehensive income.
| 2007 | 2006 | 2005 | ||||
| Net income as reported - Canadian GAAP | $ | 1,103.6 | $ | 631.8 | $ | 542.9 |
| Items increasing (decreasing) reported net income | ||||||
Cash flow hedge ineffectiveness (h) |
– | (4.5) | 2.3 | |||
Depreciation and amortization (c) |
8.5 | 8.4 | 8.4 | |||
Stock-based compensation (j) |
(1.7) | 1.3 | – | |||
Stripping costs (k) |
(10.9) | 2.6 | – | |||
Exploration costs (d) |
– | – | (6.4) | |||
Share of earnings of equity investees (a) |
(1.9) | 0.5 | 3.7 | |||
Pension and other post-retirement benefits (f) |
– | 2.0 | 2.4 | |||
Deferred income taxes relating to the above adjustments (l) |
(1.9) | (3.0) | (3.4) | |||
Income taxes related to US GAAP effective income tax rate (l, n) |
(30.3) | – | – | |||
Income taxes related to stock-based compensation (m) |
(18.4) | (13.3) | (17.2) | |||
Income taxes related to uncertain income tax positions (n) |
14.5 | – | – | |||
| Net income - US GAAP | $ | 1,061.5 | $ | 625.8 | $ | 532.7 |
| Basic weighted average shares outstanding - US GAAP | 315,641,000 | 311,880,000 | 325,705,000 | |||
| Diluted weighted average shares outstanding - US GAAP | 324,292,000 | 318,669,000 | 333,235,000 | |||
| Basic net income per share - US GAAP | $ | 3.36 | $ | 2.01 | $ | 1.64 |
| Diluted net income per share - US GAAP | $ | 3.27 | $ | 1.96 | $ | 1.60 |
| Total assets as reported - Canadian GAAP | $ | 9,716.6 | $ | 6,217.0 | ||
| Items increasing (decreasing) reported total assets | ||||||
Inventory and other current assets (h) |
– | 8.0 | ||||
Available-for-sale securities (unrealized holding gain) (a) |
– | 889.9 | ||||
Fair value of derivative instruments (h) |
– | 120.3 | ||||
Property, plant and equipment (b) |
(101.2) | (109.7) | ||||
Exploration costs (d) |
(6.4) | (6.4) | ||||
Stripping costs (k) |
(32.7) | (21.8) | ||||
Deferred debt costs |
– | (23.9) | ||||
Pension and other post-retirement benefits (f) |
(66.7) | 6.7 | ||||
Investment in equity investees (a) |
2.3 | 5.5 | ||||
Income tax asset related to uncertain income tax positions (n) |
18.4 | – | ||||
Goodwill (b) |
(46.7) | (46.7) | ||||
| Total assets - US GAAP | $ | 9,483.6 | $ | 7,038.9 | ||
| Total shareholders' equity as reported - Canadian GAAP | $ | 6,018.7 | $ | 2,780.3 | $ | 2,132.5 |
| Items increasing (decreasing) reported shareholders' equity | ||||||
Accumulated other comprehensive income, net of related income taxes, consisting of: |
||||||
Unrealized gains and losses on available-for-sale securities (a) |
– | 792.0 | 236.3 | |||
Net gains on derivatives designated as cash flow hedges (h) |
– | 79.4 | 182.4 | |||
Cumulative effect adjustment in respect of uncertain income tax positions (n)
|
(1.2) | – | – | |||
Additional minimum pension liability (f) |
– | – | (55.4) | |||
Pension and other post-retirement benefits (f) |
(85.6) | (117.9) | – | |||
Share of accumulated other comprehensive income of equity investees (a) |
– | 0.9 | 0.8 | |||
Foreign currency translation adjustment (g) |
(20.9) | (20.9) | (20.9) | |||
Foreign currency translation adjustment (g) |
20.9 | 20.9 | 20.9 | |||
Provision for asset impairment (b) |
(218.0) | (218.0) | (218.0) | |||
Depreciation and amortization (c) |
70.1 | 61.6 | 53.2 | |||
Exploration costs (d) |
(6.4) | (6.4) | (6.4) | |||
Stripping costs (k) |
(32.7) | 2.6 | – | |||
Cash flow hedge ineffectiveness (h) |
– | 0.4 | 4.9 | |||
Pension and other post-retirement benefits (f) |
16.1 | 16.1 | 14.1 | |||
Share of other comprehensive income of equity investees (a) |
2.3 | 4.2 | 3.7 | |||
Deferred income taxes relating to the above adjustments (l) |
30.4 | 24.0 | 27.0 | |||
Income taxes related to US GAAP effective income tax rate (l, n) |
(30.3) | – | – | |||
Income taxes related to uncertain income tax positions (n) |
14.5 | – | – | |||
Cumulative effect adjustment to retained earnings in respect of stripping costs (k) |
– | (16.3) | – | |||
Cumulative effect adjustment to retained earnings in respect of uncertain income tax positions (n) |
85.7 | – | – | |||
| Shareholders' equity – US GAAP | $ | 5,863.6 | $ | 3,402.9 | $ | 2,375.1 |
Supplemental US GAAP Disclosure
Recent Accounting Pronouncements
Uncertainty in Income Taxes
In July 2006, the Financial Accounting Standards Board ("FASB") issued FIN No. 48, "Accounting for Uncertainty in Income Taxes". FIN No. 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its consolidated financial statements uncertain tax positions that it has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under the model, the consolidated financial statements will reflect expected future income tax consequences of such positions presuming the taxing authorities' full knowledge of the position and all relevant facts, but without considering time values. The evaluation of tax positions under FIN No. 48 will be a two-step process, whereby: (1) the company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position; and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the company would recognize the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority. FIN No. 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits.
The company adopted the provisions of FIN No. 48 effective January 1, 2007. As a result of the implementation of FIN No. 48, the company recognized a decrease in the net tax liability for unrecognized tax benefits, reducing the liability by $84.5 to $34.2 (including interest of $10.0). This was accounted for as a cumulative effect adjustment increasing the balance in retained earnings at January 1, 2007 by $85.7 and decreasing the balance in accumulated other comprehensive income by $1.2. At December 31, 2007, the company had an asset of $18.4 and a liability of $38.1 (including interest of $8.1) for previously unrecognized income tax benefits.
The reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, for the year is as follows:
| Balance at January 1, 2007 | $24.2 |
| Additions based on tax positions related to the current year | 2.8 |
| Additions for tax positions of prior years | 12.3 |
| Reductions for tax positions of prior years | (18.0) |
| Settlements | (9.7) |
| Balance at December 31, 2007 | $11.6 |
All of the tax positions included in the balance at January 1, 2007 would, if recognized, affect the company's effective income tax rate. It is reasonably possible that a reduction in a range of $8.0 to $12.0 of unrecognized income tax benefits may occur within 12 months as a result of projected resolutions of worldwide income tax disputes. The company recognizes accrued interest related to unrecognized tax benefits and penalties in income tax expense. At December 31, 2007, $8.1 of interest was accrued to unrecognized tax benefits and for the year ended December 31, 2007, $1.9 of interest was recognized as a reduction of income tax expense. Tax years subject to examination by jurisdiction were as follows:
| Years | |
| Canada | 1997-present |
| US | 2001-present |
| Trinidad | 1999-present |
| Barbados | 1999-present |
Definition of Settlement Under FIN No. 48
In May 2007, the FASB issued FSP No. FIN 48, "The Definition of Settlement in FASB Interpretation No. 48". It amended FIN No. 48 to provide guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The guidance was effective January 1, 2007 and did not have a material impact on the company's consolidated financial statements.
Planned Major Maintenance Activities
In September 2006, the FASB issued FSP No. AUG AIR-1, "Accounting for Planned Major Maintenance Activities". The guidance in this FSP is applicable to entities in all industries. The FSP prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods. The implementation of FSP No. AUG AIR-1, effective January 1, 2007, did not have a material impact on the company's consolidated financial statements.
Framework for Fair Value Measurement
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements", which establishes a framework for measuring fair value. It also expands disclosures about fair value measurements and is effective for the first quarter of 2008. The company is currently reviewing the guidance to determine the potential impact, if any, on its consolidated financial statements.
Fair Value Option for Financial Assets and Financial Liabilities
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities". This statement permits entities to choose to measure many financial instruments and certain other items at fair value, providing the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without the need to apply hedge accounting provisions. The company is currently reviewing the guidance, which is effective for the first quarter of 2008, to determine the potential impact, if any, on its consolidated financial statements.
Business Combinations
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations". The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. The company is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
Noncontrolling Interests in Consolidated Financial Statements
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements". The standard requires all entities to report noncontrolling (minority) interests as equity in consolidated financial statements. SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The company is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
Deferred Income Taxes
The total valuation allowance recognized for deferred income tax assets in 2007 was $10.4 (2006 – $53.1). The company has determined that it is more likely than not that the deferred income tax assets net of the valuation allowance will be realized through a combination of future reversals of temporary differences and taxable income.
Stock-Based Compensation
The total compensation cost charged to income in respect of the company's seven stock-based compensation plans under US GAAP was $85.7 for the year ended December 31, 2007 (2006 – $43.0; 2005 – $37.3).
The aggregate intrinsic value of options outstanding at December 31, 2007 under the Performance Option Plans was $815.1, and the aggregate intrinsic value of options exercisable was $NIL. The aggregate intrinsic value of options outstanding at December 31, 2007 under the Officers and Employees and Directors Plans was $792.3, and the aggregate intrinsic value of options exercisable was $792.3. The total intrinsic value of stock options exercised during the year ended December 31, 2007 was $137.4 (2006 – $72.9). No stock options vested during 2007.
As of December 31, 2007, there was $15.1 of total unrecognized compensation cost related to the company's stock option plans. This cost is expected to be recognized over the period through December 31, 2009.
The company issued 18,726 performance units during 2007 (2006 – 471,495) under the performance unit incentive plan at a weighted average grant-date fair value of $98.52 per unit (2006 – $26.16). As at December 31, 2007, 434,266 units remained unvested and outstanding. Total unrecognized compensation cost approximated $59.3, which is expected to be recognized over the period through December 31, 2008. However, such amount will be subject to change, as these liability awards are re-measured at fair value at each reporting period.
Derivative Instruments and Hedging Activities
The company has designated its natural gas derivative instruments as cash flow hedges.
During the year, gains of $57.7 (including ineffectiveness) were recognized in cost of goods sold (2006 – $73.5; 2005 – $48.6).
Pension and Other Post-Retirement Benefits
The unamortized actuarial loss, unamortized prior service cost and unamortized transitional obligation included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during 2008 is $6.0, $(0.8) and $2.2, respectively.
Related Party Transactions
During the year, sales to a company associated with the immediate family of a member of the PCS Board of Directors totaled $29.7 (2006 – $16.0; 2005 – $12.6). These transactions were conducted in the normal course of business at the prevailing market prices and on normal trade terms.
Supplemental Schedules
The following supplemental schedules present the consolidated Financial Position, Operations and Retained Earnings, Comprehensive Income, Accumulated Other Comprehensive Income, and Cash Flow in accordance with US GAAP as adjusted for the GAAP differences described in this note.
Supplemental Schedule of Consolidated Financial Position
| As at December 31 | ||||
| 2007 | 2006 | |||
| Assets | ||||
| Current assets | ||||
Cash and cash equivalents |
$ | 719.5 | $ | 325.7 |
Accounts receivable |
596.2 | 442.3 | ||
Inventories |
428.8 | 494.9 | ||
Prepaid expenses and other current assets |
36.7 | 40.9 | ||
Current portion of derivative instrument assets |
30.8 | 50.9 | ||
| 1,812.0 | 1,354.7 | |||
| Derivative instrument assets | 104.2 | 69.4 | ||
| Property, plant and equipment | 3,746.4 | 3,409.8 | ||
| Investments | 3,583.8 | 2,044.3 | ||
| Other assets | 144.0 | 81.1 | ||
| Income taxes on uncertain income tax positions | 18.4 | – | ||
| Intangible assets | 24.5 | 29.3 | ||
| Goodwill | 50.3 | 50.3 | ||
| $ | 9,483.6 | $ | 7,038.9 | |
| Liabilities | ||||
| Current liabilities | ||||
Short-term debt |
$ | 90.0 | $ | 157.9 |
Accounts payable and accrued charges |
851.5 | 573.5 | ||
Current portion of long-term debt |
0.2 | 400.4 | ||
| 941.7 | 1,131.8 | |||
| Long-term debt | 1,339.4 | 1,339.8 | ||
| Deferred income tax liability | 903.0 | 668.5 | ||
| Income taxes on uncertain income tax positions | 38.1 | – | ||
| Accrued pension and other post-retirement benefits | 274.1 | 378.1 | ||
| Accrued environmental costs and asset retirement obligations | 121.0 | 110.3 | ||
| Other non-current liabilities and deferred credits | 2.7 | 7.5 | ||
| 3,620.0 | 3,636.0 | |||
| Shareholders' Equity | ||||
| Share capital | 1,461.3 | 1,431.6 | ||
| Additional paid-in capital | 169.8 | 113.1 | ||
| Accumulated other comprehensive income | 2,071.2 | 733.5 | ||
| Retained earnings | 2,161.3 | 1,124.7 | ||
| 5,863.6 | 3,402.9 | |||
| $ | 9,483.6 | $ | 7,038.9 | |
Supplemental Schedule of Consolidated Accumulated Other Comprehensive Income
| For the Years Ended December 31 | ||||||
| 2007 | 2006 | 2005 | ||||
| Accumulated other comprehensive income, beginning of year | $ | 733.5 | $ | 343.2 | $ | 96.8 |
| Other comprehensive income, net of related income taxes | 1,338.9 | 461.1 | 246.4 | |||
| Cumulative effect adjustment in respect of uncertain income tax positions | (1.2) | – | – | |||
| Cumulative effect adjustment related to pension and other post-retirement benefits | – | (70.8) | – | |||
| Accumulated other comprehensive income, end of year | $ | 2,071.2 | $ | 733.5 | $ | 343.2 |
| The balances related to each component of accumulated other comprehensive income, net of related income taxes, are as follows: | ||||||
| 2007 | 2006 | 2005 | ||||
| Net unrealized holding gains on available-for-sale securities | $ | 2,098.7 | $ | 792.0 | $ | 236.3 |
| Net unrealized gains on derivatives designated as cash flow hedges | 73.5 | 79.4 | 182.4 | |||
| Additional minimum pension liability | – | – | (55.4) | |||
| Pension and other post-retirement benefits1 | (85.6) | (117.9) | – | |||
| Share of other comprehensive income of equity investees | – | 0.9 | 0.8 | |||
| Unrealized foreign exchange gains on self-sustaining foreign operations | 6.7 | – | – | |||
| Foreign currency translation adjustment | (20.9) | (20.9) | (20.9) | |||
| Cumulative effect adjustment in respect of uncertain income tax positions | (1.2) | – | – | |||
| Accumulated other comprehensive income, end of year | $ | 2,071.2 | $ | 733.5 | $ | 343.2 |
Supplemental Schedule of Consolidated Operations and Retained Earnings
| For the Years Ended December 31 | |||||||
| 2007 | 2006 | 2005 | |||||
| Sales | $ | 5,234.2 | $ | 3,766.7 | $ | 3,847.2 | |
| Less: | Freight | 346.1 | 255.8 | 249.7 | |||
| Transportation and distribution | 124.1 | 134.1 | 121.9 | ||||
| Cost of goods sold | 2,885.9 | 2,365.4 | 2,337.5 | ||||
| Gross Margin | 1,878.1 | 1,011.4 | 1,138.1 | ||||
| Selling and administrative | 213.6 | 158.0 | 144.5 | ||||
| Provincial mining and other taxes | 135.4 | 66.5 | 137.2 | ||||
| Foreign exchange loss (gain) | 70.2 | (4.4) | 12.5 | ||||
| Share of earnings of equity investees | (74.3) | (54.9) | (55.8) | ||||
| Other income | (49.3) | (39.6) | (3.3) | ||||
| 295.6 | 125.6 | 235.1 | |||||
| Operating Income | 1,582.5 | 885.8 | 903.0 | ||||
| Interest Expense | 68.7 | 85.6 | 82.3 | ||||
| Income Before Income Taxes | 1,513.8 | 800.2 | 820.7 | ||||
| Income Taxes | 452.3 | 174.4 | 288.0 | ||||
| Net Income | 1,061.5 | 625.8 | 532.7 | ||||
| Retained Earnings, Beginning of Year | 1,124.7 | 577.5 | 572.3 | ||||
| Cumulative Effect Adjustment in Respect of Uncertain Income Tax Positions | 85.7 | – | – | ||||
| Cumulative Effect Adjustment in Respect of Stripping Costs | – | (16.3) | – | ||||
| Repurchase of Common Shares | – | – | (462.5) | ||||
| Dividends | (110.6) | (62.3) | (65.0) | ||||
| Retained Earnings, End of Year | $ | 2,161.3 | $ | 1,124.7 | $ | 577.5 | |
| Net Income per Share - Basic | $ | 3.36 | $ | 2.01 | $ | 1.64 | |
| Net Income per Share - Diluted | $ | 3.27 | $ | 1.96 | $ | 1.60 | |
| Dividends per Share | $ | 0.35 | $ | 0.20 | $ | 0.20 | |
Supplemental Schedule of Consolidated Comprehensive Income
| For the Years Ended December 31 | ||||||
| 2007 | 2006 | 2005 | ||||
| Net Income | $ | 1,061.5 | $ | 625.8 | $ | 532.7 |
| Other comprehensive income | ||||||
Net increase in unrealized gains on available-for-sale securities |
1,394.1 | 534.7 | 193.5 | |||
Net gains (losses) on derivatives designated as cash flow hedges |
49.4 | (68.2) | 255.0 | |||
Reclassification to income of net gains on cash flow hedges |
(57.8) | (79.7) | (53.5) | |||
Pension and other post-retirement benefits1 |
56.4 | – | – | |||
Unrealized foreign exchange gains on translation of self-sustaining foreign operations |
6.7 | – | – | |||
Adjustment to additional minimum pension liability |
– | 11.7 | (28.4) | |||
Share of other comprehensive income of equity investees |
(1.3) | 0.2 | 1.1 | |||
Deferred income taxes related to other comprehensive income |
(108.6) | 62.4 | (121.3) | |||
| Other Comprehensive Income | 1,338.9 | 461.1 | 246.4 | |||
| Comprehensive Income | $ | 2,400.4 | $ | 1,086.9 | $ | 779.1 |
Supplemental Schedule of Consolidated Cash Flow
| For the Years Ended December 31 | ||||||
| 2007 | 2006 | 2005 | ||||
| Operating Activities | ||||||
| Net income | $ | 1,061.5 | $ | 625.8 | $ | 532.7 |
| Adjustments to reconcile net income to cash provided by operating activities | ||||||
Depreciation and amortization |
282.8 | 234.0 | 234.0 | |||
Stock-based compensation |
40.3 | 28.5 | 27.5 | |||
Loss (gain) on disposal of property, plant and equipment and long-term investments |
7.9 | (8.6) | 11.8 | |||
Provision for auction rate securities |
26.5 | – | – | |||
Provision for plant shutdowns – phosphate segment |
– | 6.3 | – | |||
Foreign exchange on deferred income tax |
52.4 | 0.5 | 8.9 | |||
Provision for deferred income tax |
137.3 | 52.7 | 43.5 | |||
Undistributed earnings of equity investees |
(33.7) | (25.0) | (37.2) | |||
Unrealized gain on derivative instruments |
(21.1) | – | – | |||
Other long-term liabilities |
(57.9) | 13.4 | 20.2 | |||
Changes in non-cash operating working capital |
||||||
Accounts receivable |
(154.6) | 11.0 | (107.6) | |||
Inventories |
59.6 | 15.8 | (122.2) | |||
Prepaid expenses and other current assets |
7.0 | (1.8) | (8.2) | |||
Accounts payable and accrued charges |
250.9 | (269.1) | 238.1 | |||
| Cash provided by operating activities | 1,658.9 | 683.5 | 841.5 | |||
| Investing Activities | ||||||
| Additions to property, plant and equipment | (595.6) | (508.6) | (376.3) | |||
| Purchase of long-term investments | (30.7) | (352.5) | (190.9) | |||
| Purchase of investments in auction rate securities | (132.5) | – | – | |||
| Proceeds from disposal of property, plant and equipment and long-term investments | 4.5 | 22.0 | 12.4 | |||
| Other assets and intangible assets | 7.8 | (0.6) | 5.9 | |||
| Cash used in investing activities | (746.5) | (839.7) | (548.9) | |||
| Financing Activities | ||||||
| Proceeds from long-term debt obligations | 1.5 | 483.9 | – | |||
| Repayment and issue costs of long-term debt obligations | (403.6) | (1.3) | (10.1) | |||
| (Proceeds from) repayment of short-term debt obligations | (67.9) | (94.3) | 158.7 | |||
| Dividends | (93.6) | (60.9) | (65.4) | |||
| Repurchase of common shares | – | – | (851.9) | |||
| Issuance of common shares | 26.6 | 47.3 | 93.9 | |||
| Income taxes related to stock-based compensation | 18.4 | 13.3 | 17.2 | |||
| Cash (used in) provided by financing activities | (518.6) | 388.0 | (657.6) | |||
| Increase (Decrease) in Cash and Cash Equivalents | 393.8 | 231.8 | (365.0) | |||
| Cash and Cash Equivalents, Beginning of Year | 325.7 | 93.9 | 458.9 | |||
| Cash and Cash Equivalents, End of Year | $ | 719.5 | $ | 325.7 | $ | 93.9 |
| Supplemental cash flow disclosure | ||||||
Income taxes paid (o) |
$ | 221.0 | $ | 296.8 | $ | 141.6 |