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2007 Financial Overview

This section provides an overview of our financial performance based on our consolidated financial statements. All references to per-share amounts pertain to diluted net income per share (EPS). Certain of the prior years' figures have been reclassified to conform with the current year's presentation.

Dollars (millions, except per-share amounts) % Increase (Decrease)
2007 2006 2005 2007 2006 
Sales $ 5,234.2 $ 3,766.7 $ 3,847.2 39 (2)
Gross Margin $ 1,881.2 $ 1,002.0 $ 1,125.0 88 (11)
Operating Income $ 1,588.5 $ 875.5 $ 892.6 81 (2)
Net Income $ 1,103.6 $ 631.8 $ 542.9   75 16 
Net Income per Share – Diluted $ 3.40 $ 1.98 $ 1.63   72 21 
2007 Earnings Compared to Guidance
The company's initial midpoint estimate for 2007 EPS, based on the Outlook and assumptions described in our 2006 Financial Review Annual Report, was approximately $2.25 per share. The final result was $3.40 per share. The primary causes of this variance from our guidance midpoint were:
Cause Effect on EPS
Potash realized prices higher $0.23 
Potash sales volumes higher 0.13 
Increased potash costs due to foreign exchange (0.06)
Increased brine inflow costs (0.11)
Increased potash other operating costs (0.04)
Lower provincial mining taxes 0.02 
Subtotal potash 0.17 
Nitrogen realized prices higher (exclusive of purchased and miscellaneous product) 0.49 
Manufactured nitrogen sales volumes higher 0.17 
Increased net cost of natural gas (0.06)
Increased nitrogen other operating costs (exclusive of cost of natural gas) and higher purchased and miscellaneous product margin (0.12)
Subtotal nitrogen 0.48 
Phosphate realized prices higher 0.70 
Phosphate sales volumes higher 0.08 
Increased input costs for sulfur, rock and ammonia (0.10)
Phosphate other operating costs higher (0.11)
Subtotal phosphate 0.57 
Increase in other income (exclusive of provision for auction rate securities) 0.13 
Provision for auction rate securities in 2007 (0.06)
Increase in selling and administrative (0.11)
Foreign exchange variance (0.14)
Subtotal other (0.18)
Subtotal of the above 1.04 
Higher weighted averaged number of shares outstanding (0.01)
Canadian federal income tax rate reductions during 2007 0.12 
Total variance from 2007 diluted EPS guidance $1.15 
2007 Earnings Compared to 2006
The company's EPS for 2006 was $1.98 per share. The final EPS for 2007 was $3.40 per share. The primary causes of this increase from last year's actuals were:
Cause Effect on EPS
Potash offshore realized prices higher $0.31 
Potash North American realized prices higher 0.15 
Potash offshore sales volumes higher 0.26 
Potash North American sales volumes higher 0.19 
Increased potash costs due to foreign exchange (0.07)
Lower potash other operating costs 0.04 
Increased brine inflow costs (0.11)
Higher provincial mining taxes (0.14)
Subtotal potash 0.63 
Nitrogen realized prices higher (exclusive of purchased and miscellaneous product) 0.43 
Manufactured nitrogen sales volumes higher 0.19 
Increased net cost of natural gas and higher purchased and miscellaneous product margin (0.03)
Increased nitrogen other operating costs (exclusive of cost of natural gas and purchased ammonia) (0.11)
Subtotal nitrogen 0.48 
Phosphate realized prices higher 0.70 
Phosphate sales volumes higher 0.07 
Increased input costs for sulfur, rock and ammonia (0.04)
Phosphate other operating costs higher (0.05)
Subtotal phosphate 0.68 
Increase in other income (exclusive of provision for auction rate securities) 0.12 
Provision for auction rate securities in 2007 (0.06)
Increase in selling and administrative (0.13)
Foreign exchange variance and decrease in interest expense (0.13)
Subtotal other (0.20)
Subtotal of the above 1.59 
Higher weighted average number of shares outstanding (0.05)
Income tax refunds and higher rate reductions during 2006 (0.12)
Total variance from 2006 diluted EPS $1.42