<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
   
                                  FORM 10-Q/A
    
   
                                AMENDMENT NO. 1
    
 
<TABLE>
<S>  <C>                                                                 <C>
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
     THE SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
     THE SECURITIES EXCHANGE ACT OF 1934
     COMMISSION FILE NUMBER 1-10351
 
                   POTASH CORPORATION OF SASKATCHEWAN INC.
            (Exact name of registrant as specified in its charter)
       Saskatchewan, Canada                               N/A
 (State or other jurisdiction of                    (I.R.S. Employer
  incorporation or organization)                  Identification No.)
      122 - 1st Avenue South
     Saskatoon, Saskatchewan                            S7K 7G3
 (Address of principal executive                       (Zip Code)
              offices)
</TABLE>
 
                                  306-933-8500
              (Registrant's telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
 
                     APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As at April 30, 1996 45,540,656
Shares.
 
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<PAGE>   2
 
PART I.  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
     These interim consolidated financial statements do not include all
disclosure normally provided in annual financial statements. In management's
opinion, the unaudited financial information includes all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
such information. Interim results are not necessarily indicative of the results
expected for the fiscal year.
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
            CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                               MARCH 31
                                                                         ---------------------
                                                                           1996         1995
                                                                         --------     --------
<S>                                                                      <C>          <C>
Net sales............................................................    $366,871     $135,977
Cost of goods sold...................................................     256,071       62,978
                                                                         --------     --------
Gross Margin.........................................................     110,800       72,999
                                                                         --------     --------
Research and development.............................................         257          347
Selling and administrative expenses..................................      14,717        9,131
Provincial mining and other taxes....................................      11,920       12,278
Other income.........................................................      (3,216)      (1,351)
                                                                         --------     --------
                                                                           23,678       20,405
                                                                         --------     --------
Operating Income.....................................................      87,122       52,594
Interest Expense.....................................................      13,842           77
                                                                         --------     --------
Income Before Income Taxes...........................................      73,280       52,517
Income Taxes.........................................................       9,602        1,042
                                                                         --------     --------
Net Income...........................................................      63,678       51,475
Retained Earnings, Beginning of Period...............................     277,689      164,037
Dividends............................................................     (11,757)     (10,673)
                                                                         --------     --------
Retained Earnings, End of Period.....................................    $329,610     $204,839
                                                                         ========     ========
Net Income Per Share (Note 3)........................................       $1.40        $1.20
                                                                         ========     ========
Dividends Per Share (Note 4).........................................        $.26         $.25
                                                                         ========     ========
</TABLE>
 
              (See Notes to the Consolidated Financial Statements)
 
                                        2
<PAGE>   3
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                         (IN THOUSANDS OF U.S. DOLLARS)
 
   
<TABLE>
<CAPTION>
                                                                       MARCH 31,       DECEMBER
                                                                         1996          31, 1995
                                                                      -----------     -----------
                                                                      (UNAUDITED)
<S>                                                                   <C>             <C>
ASSETS
Current Assets
  Cash and cash equivalents.......................................     $       --      $   40,497
  Accounts receivable.............................................        199,056         223,377
  Inventories (Note 2)............................................        235,380         221,911
  Prepaid expenses................................................         17,740          12,041
  Other current assets............................................          8,509           3,315
                                                                      -----------     -----------
                                                                          460,685         501,141
Property, plant and equipment.....................................      2,016,607       2,032,339
Other assets......................................................         47,807          48,337
                                                                      -----------     -----------
                                                                       $2,525,099      $2,581,817
                                                                        =========       =========
LIABILITIES
Current Liabilities
  Bank indebtedness...............................................     $    3,280      $       --
  Accounts payable and accrued charges............................        174,860         199,222
  Current portion of long-term debt...............................         70,755         164,971
  Current obligations under capital leases........................            871             870
                                                                      -----------     -----------
                                                                          249,766         365,063
Long-term debt....................................................        711,565         711,585
Obligations under capital leases..................................          2,852           2,913
Deferred income tax liability.....................................          9,191           4,743
Accrued post-retirement/post-employment benefits..................         91,313          89,570
Accrued reclamation costs.........................................        153,057         151,531
Other non-current liabilities and deferred credits................         11,782          14,537
                                                                      -----------     -----------
                                                                        1,229,526       1,339,942
                                                                      -----------     -----------
Shareholders' Equity
Share Capital.....................................................        629,477         627,700
Contributed Surplus...............................................        336,486         336,486
Retained Earnings.................................................        329,610         277,689
                                                                      -----------     -----------
                                                                        1,295,573       1,241,875
                                                                      -----------     -----------
                                                                       $2,525,099      $2,581,817
                                                                        =========       =========
</TABLE>
    
 
              (See Notes to the Consolidated Financial Statements)
 
                                        3
<PAGE>   4
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                          (IN THOUSANDS OF US DOLLARS)
                                  (UNAUDITED)
 
   
<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                              MARCH 31
                                                                       -----------------------
                                                                         1996          1995
                                                                       ---------     ---------
<S>                                                                    <C>           <C>
OPERATING ACTIVITIES
Working capital from operations
  Net income.......................................................    $  63,678     $  51,475
  Depreciation and amortization....................................       23,300        13,456
  Loss (Gain) on disposal of property, plant and equipment.........           69            (1)
  Provision for deferred income taxes..............................        4,448            --
  Provision for post-retirement/post-employment benefit............        1,743            --
                                                                       ---------     ---------
                                                                          93,238        64,930
Changes in non-cash operating working capital
  Accounts receivable..............................................       24,321       (10,619)
  Inventories......................................................      (12,429)        3,683
  Prepaid expenses.................................................       (5,699)        4,189
  Other current assets.............................................       (5,194)           --
  Accounts payable and accrued charges.............................      (24,362)        8,794
Accrued reclamation costs..........................................        1,524            --
Other non-current liabilities and deferred credits.................       (2,755)           --
                                                                       ---------     ---------
Cash provided by operating activities..............................       68,644        70,977
                                                                       ---------     ---------
Investing Activities
  Additions to property, plant and equipment
  -- Sustaining operations.........................................       (8,384)       (2,026)
  Proceeds on disposal of property, plant and equipment............          324            27
  Additions to other assets........................................          (85)       (2,824)
                                                                       ---------     ---------
Cash used in investing activities..................................       (8,145)       (4,823)
                                                                       ---------     ---------
Cash before financing activities...................................       60,499        66,154
                                                                       ---------     ---------
Financing Activities
  Repayment of long-term obligations...............................      (94,296)           (6)
  Dividends........................................................      (11,757)      (10,673)
  Issuance of shares...............................................        1,777           325
                                                                       ---------     ---------
Cash used in financing activities..................................     (104,276)      (10,354)
                                                                       ---------     ---------
(Decrease) Increase in Cash........................................      (43,777)       55,800
Cash and Cash Equivalents, Beginning of Period.....................       40,497        16,576
                                                                       ---------     ---------
(Bank Indebtedness) Cash and Cash Equivalents, End of Period.......    $  (3,280)    $  72,376
                                                                       =========     =========
Supplemental cash flow disclosure
  Interest paid....................................................    $  14,612     $       6
                                                                       =========     =========
  Income taxes paid................................................    $  20,164     $   2,432
                                                                       =========     =========
</TABLE>
    
 
              (See Notes to the Consolidated Financial Statements)
 
                                        4
<PAGE>   5
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)
 
1.   SIGNIFICANT ACCOUNTING POLICIES
 
     The Company's accounting policies are in accordance with accounting
principles generally accepted in Canada. These policies are consistent with
accounting principles generally accepted in the United States except as outlined
in Note 5.
 
BASIS OF PRESENTATION
 
     The consolidated financial statements include the accounts of PCS and its
operating subsidiaries (the "Company" except to the extent the context otherwise
requires):
 
     -- PCS Sales (Canada) Inc. (PCS Sales)
 
       -- PCS Sales (Iowa), Inc.
 
       -- PCS Sales (Indiana), Inc.
 
       -- Potash Corporation of Saskatchewan (Florida) Inc. (PCS Florida)
 
     -- Potash Corporation of Saskatchewan Transport Limited (PCS Transport)
 
     -- PCS Sales (USA), Inc.
 
     -- PCS Phosphate Company Inc. (PCS Phosphate)
 
     -- White Springs Agricultural Chemicals, Inc. (White Springs)
 
2.   INVENTORIES
 
<TABLE>
<CAPTION>
                                                                        MARCH       DECEMBER 31,
                                                                       31, 1996         1995
                                                                       --------     ------------
<S>                                                                    <C>          <C>
Finished product...................................................    $118,482       $115,491
Materials and supplies.............................................      80,614         66,708
Raw materials......................................................       8,988         11,954
Work in process....................................................      27,296         27,758
                                                                       --------     ------------
                                                                       $235,380       $221,911
                                                                       ========     ==========
</TABLE>
 
3.   EARNINGS PER SHARE
 
     Earnings per share are calculated on the weighted average shares issued and
outstanding during the three months ended March 31, 1996 of 45,484,000 (1995 --
42,995,000).
 
4.   DIVIDENDS
 
     The Company declares its dividends in Canadian dollars.
 
5.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
 
     A description of the accounting principles which differ significantly in
certain respects from generally accepted accounting principles in the United
States (US GAAP) follows:
 
     Earnings per share: In computing primary earnings per share, under US GAAP,
the stock options are included in the calculation to the extent that they are
exercisable.
 
     Deferred income taxes: Deferred tax assets have been recognized only to the
extent of reducing deferred tax liabilities. US GAAP would require that deferred
tax assets be recorded when their realization is more likely than not.
 
                                        5
<PAGE>   6
 
     The application of US GAAP, as described above, would have had the
following approximate effects on net income, net income per share, total assets
and shareholders' equity:
 
<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                            MARCH 31
                                                                    -------------------------
                                                                       1996           1995
                                                                    ----------     ----------
<S>                                                                 <C>            <C>
Net income as reported in the consolidated statements of income
  and retained earnings.........................................    $   63,678     $   51,475
Item decreasing reported net income
  Deferred income taxes.........................................        (3,227)            --
                                                                    ----------     ----------
Approximate net income -- US GAAP...............................    $   60,451     $   51,475
                                                                    ==========     ==========
Weighted average shares outstanding -- US GAAP..................    45,976,000     43,093,000
                                                                    ==========     ==========
Net income per share -- US GAAP.................................    $     1.31     $     1.19
                                                                    ==========     ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                  
                                                                    MARCH 31,     DECEMBER 31,
                                                                       1996           1995
                                                                    ----------    ------------
<S>                                                                 <C>            <C>
Total assets as reported in the consolidated statements of
  financial position............................................    $2,525,099     $2,581,817
Item increasing reported total assets
  Deferred income tax asset.....................................        15,371         18,598
                                                                    ----------     ----------
Approximate total assets -- US GAAP.............................    $2,540,470     $2,600,415
                                                                    ==========     ==========
Shareholders' equity as reported in the consolidated statements
  of financial position.........................................    $1,295,573     $1,241,875
Item increasing reported shareholders' equity
  Deferred income taxes.........................................        15,371         18,598
                                                                    ----------     ----------
Approximate shareholders' equity -- US GAAP.....................    $1,310,944     $1,260,473
                                                                    ==========     ==========
</TABLE>
 
6.   COMPARATIVE FIGURES
 
     Certain of the prior period's comparative figures have been reclassified to
conform with the current period's presentation. Results for the first quarter of
1995 do not include the operations of PCS Phosphate (formerly Texasgulf Inc.)
acquired April 10, 1995 or the operations of White Springs acquired October 31,
1995.
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
RESULTS OF OPERATIONS
 
OVERVIEW
 
   
     When comparing the first quarter of 1996 to the first quarter of 1995 there
are two primary factors to consider. 1995 was a record first quarter in potash
during which the Company earned 32 percent of its net earnings compared to the
five year average of 14 percent for the years 1990 to 1994. In addition, the
Company did not own its phosphate operations one year ago so there are no prior
period results of the Company with which to compare.
    
 
     Net sales and net income for the three months ended March 31, 1996 improved
170 percent and 24 percent, respectively, over the same period in 1995. Net
income for the first quarter of 1996 was $63.7 million (1995 -- $51.5 million)
on net sales of $366.9 million (1995 -- $136.0 million), or $1.40 per share
(1995 -- $1.20 per share). For the first quarter of 1996, gross margin and
operating income were $110.8 million and $87.1 million, respectively, compared
to a gross margin of $73.0 million and an operating income of $52.6 million for
the same period in 1995 (increases of 52 percent and 66 percent, respectively).
 
                                        6
<PAGE>   7
 
     For the three months ended March 31, 1996, North American and offshore net
sales were $230.9 million (1995 -- $44.1 million) and $136.0 million (1995 --
$91.9 million), respectively. North American net sales represented 63 percent
(1995 -- 32 percent) of total net sales, whereas offshore sales represented 37
percent of net sales (1995 -- 68 percent).
 
     Gross margins for the first three months of 1996 increased $37.8 million or
52 percent over the same period in 1995. Potash and phosphate contributed
equally to earnings. Gross margin for potash was $55.1 million, a decrease of
$17.9 million when compared to first quarter 1995, the highest quarter for sales
volumes in the Company's history. This decrease was more than offset by a gross
margin of $55.7 million for phosphate, feed and ammonia. Of this $55.7 million
gross margin, 62 percent is attributable to phosphate fertilizer products, 23
percent is attributable to feed products, 13 percent is attributable to
industrial products and 2 percent is attributable to ammonia.
 
     The $230.9 million increase in net sales is comprised as follows:
 
<TABLE>
<CAPTION>
                                                                           ($MILLIONS)
                                                                           -----------
          <S>                                                              <C>
          POTASH.........................................................    $ (32.1)
          PHOSPHATES
          Phosphate Rock.................................................        3.3
          Phosphate Fertilizer...........................................      150.2
          Non-fertilizer Products........................................       70.6
          AMMONIA........................................................       38.9
                                                                           -----------
          Total Increase in Sales Revenue................................    $ 230.9
                                                                            ========
</TABLE>
 
     The increase in net income of $12.2 million is largely attributable to
additional earnings from the phosphate acquisitions which were offset by an
increase in interest expense of $13.8 million relating to debt financing of
$878.8 million incurred to purchase PCS Phosphate and White Springs, and an $8.6
million increase in income taxes.
 
   
     The phosphate acquisitions contributed $263.0 million additional revenue to
PCS's consolidated revenues and an additional $55.7 million to the gross margin
compared to the comparable quarter in 1995 (which was prior to the acquisitions
of both Texasgulf and White Springs). In potash, first quarter offshore
shipments were dampened by economic conditions in Brazil as well as the effect
of large 1995 purchases by China and India. Potash and phosphate operation costs
were adversely affected by the colder than normal winter temperatures and potash
costs were further increased by the incurrence of two additional weeks of
shutdown. Gross margins (as a percentage of sales) earned on potash have proven
to be higher than the various phosphate products. Ammonia gross margins
represent sales commissions for purchased ammonia which PCS resells.
    
 
1996 VERSUS 1995
 
OVERALL REVENUE
 
     Net sales revenue for the first quarter of 1996 was $366.9 million, an
increase of $230.9 million or 170 percent over the first three months of 1995.
Potash, phosphate and ammonia revenue for the first quarter of 1996 was $103.9
million, $224.1 million, and $38.9 million, respectively.
 
POTASH REVENUE
 
     Potash net sales revenue for the first three months of 1996 decreased by
$32.1 million or 24 percent as compared to the first three months of 1995 (1996
-- $103.9 million; 1995 -- $136.0 million). In the first quarter of 1995, large
potash purchases by China and Brazil were supplemented by strong pre-season
buying in the U.S. While the first quarter of 1996 volumes were less than those
of the first quarter of 1995 they were the second highest first quarter volumes
in the Company's history and well above the five-year average. As a result, the
Company sold 1.457 million tonnes of potash in this year's first quarter,
compared to a record 1.944 million tonnes sold in the same period last year, a
decrease of .487 million tonnes or 25 percent. Potash
 
                                        7
<PAGE>   8
 
prices experienced an overall increase of 2 percent in the first quarter of 1996
as compared to the first quarter of 1995. The overall decrease in potash volumes
of 25 percent resulted in a $33.8 million decrease in potash net sales revenue,
while the 2 percent increase in overall potash prices resulted in a $1.7 million
improvement in potash net sales revenue.
 
     In the first quarter of 1996, North American and offshore potash sales
volumes decreased 17 percent and 30 percent, respectively, over the same period
in 1995. Potash prices increased 5 percent in the offshore market where
customers agreed in February to a $5 increase. Price increases scheduled by the
Company for the domestic market were not attained and, as a result, realizations
in this market were down by 1 percent from the first quarter a year ago.
 
     The decrease in North American potash sales volumes and prices resulted in
a $7.9 million decrease in North American potash net sales revenue. North
American potash sales volumes for the first quarter of 1996 decreased .119
million tonnes (1996 -- .589 million tonnes; 1995 -- .708 million tonnes)
compared to the first quarter of 1995. North American sales revenue from potash
operations represented 35 percent of the potash net sales revenue of the Company
during this year's first quarter. Strong pre-season buying in the United States
boosted last year's first quarter volumes and revenues to record levels. In 1995
field work began early, compared to the slow start to this year's spring season
due to weather.
 
     The decrease in offshore sales volumes and the increase in overall offshore
selling price resulted in a $24.2 million decrease in offshore potash net sales
revenue. In the offshore market, the Company sold .868 million potash tonnes
during the first quarter (1995 -- 1.236 million tonnes), a decrease of 30
percent. Of the .868 million tonnes, .723 million tonnes were sold through
Canpotex and the remaining .145 million tonnes were produced by PCS New
Brunswick and sold and delivered to offshore markets, such as Brazil and Europe,
by PCS Sales. Canpotex delivered nearly 500,000 tonnes of potash to China
compared to 700,000 in the same period a year ago. In the first quarter of 1996,
offshore net sales revenue from potash operations represented 65 percent of net
potash sales revenue of the Company.
 
     In the first quarter of 1995, the Company sold more than twice as much
tonnage to the offshore market as it did in 1994. First quarter 1996 offshore
volumes were less than 1995 but were still the second highest quarter sales
volumes in the Company's history and 76 percent above the average of the five
year period 1990 to 1994. Cold weather throughout the northern hemisphere has
slowed spring plantings in the first quarter of 1996, which affected shipments.
 
PHOSPHATE REVENUE
 
     Phosphate net sales revenue for the three months ended March 31, 1996 was
$224.1 million. The distribution of this revenue was as follows: phosphate
fertilizer $150.2 million (67 percent); non-fertilizer products (animal feed and
industrial products) $70.6 million (32 percent); and phosphate rock $3.3 million
(1 percent). Gross margin for phosphate revenues was $54.6 million.
 
     First quarter net sales revenue from liquid and solid fertilizers was
$150.2 million with sales volumes of .716 million tonnes. Solid phosphate
fertilizer (substantially all DAP) accounted for 61 percent or $91.2 million of
the total. Offshore sales of DAP accounted for 47 percent of solid fertilizer
net sales revenue while liquid fertilizers had a 72 percent share of net sales
revenue in the North American market. The average net sales price for these
fertilizers continued to improve throughout the first three months of 1996 when
compared to the fourth quarter of 1995.
 
     Net sales from animal feed and industrial products during the first quarter
were $70.6 million with sales volumes of .275 million tonnes. Feed sales tonnage
was .210 million tonnes with 12 percent sold offshore while the remaining .065
million tonnes were industrial products sold to North American customers. When
compared to the fourth quarter of 1995, feed product prices continued to improve
while industrial product prices declined 2 percent.
 
     Net sales revenue from phosphate rock was $3.3 million with sales volumes
of .081 million tonnes. The average net sales price improved throughout the
first quarter of 1996 when compared to the fourth quarter of 1995.
 
                                        8
<PAGE>   9
 
     North American phosphate net sales revenue accounted for $155.8 million (70
percent) of total phosphate net sales revenue of $224.1 million. In the three
months ended March 31, 1996, 58 percent of the Company's North American
phosphate net sales revenue was earned from phosphate fertilizer products which
represented 62 percent of the Company's North American phosphate sales volumes.
 
     PhosChem, a phosphate export association established under U.S. law, is the
principal vehicle through which the Company executes offshore marketing and
sales for its phosphate fertilizers. Offshore sales accounted for 30 percent of
total phosphate product net sales revenue in 1996 and 39 percent of volumes. In
the three months ended March 31, 1996, 87 percent of the Company's offshore
phosphate net sales revenue was earned from phosphate fertilizer products which
represented 74 percent of the Company's offshore phosphate sales volumes.
 
AMMONIA REVENUE
 
     First quarter ammonia sales contributed $38.9 million to sales revenue with
sales volumes of .187 million tonnes.
 
COST OF GOODS SOLD
 
     For the three months ended March 31, 1996, the Company produced 1.699
million potassium chloride (KCl) tonnes, compared to 1.886 million tonnes in the
first quarter of 1995, a decrease of .187 million tonnes (10 percent) compared
to 1995 but still 53 percent above the 1994 first quarter level.
 
     In this year's first quarter, the Company produced .514 million phosphoric
acid (P205) tonnes from its phosphate operations.
 
     Potash unit cost of sales increased by 3 percent in the first three months
of 1996 compared to the same period in 1995 due to two additional shutdown
weeks.
 
     The cold winter contributed to additional potash and phosphate operation
costs.
 
     Depreciation expense for the first quarter of 1996 was $23.3 million
compared to $13.5 million in 1995, an increase of 73 percent. The increase is a
result of the additional depreciation from the acquired phosphate operations.
 
SELLING AND ADMINISTRATIVE
 
     Selling and administrative expenses during the first quarter of 1996 were
$14.7 million as compared to $9.1 million in 1995, an increase of $5.6 million.
The increase is attributable to the acquisitions of PCS Phosphate and White
Springs and to general increases in supplies, compensation and benefits.
 
PROVINCIAL MINING AND OTHER TAXES
 
     Saskatchewan's potash production tax is comprised of a base tax per tonne
of product sold and an additional tax based on mine-by-mine profits. The New
Brunswick division and the Saskatchewan divisions pay a provincial crown
royalty, which is accounted for under cost of goods sold.
 
     Increased profitability at certain of the mines increased the taxes paid to
the Saskatchewan government but taxes were reduced by lower potash sales
volumes. For the first quarter of 1996, Saskatchewan provincial mining and other
taxes were $11.9 million as compared to $12.3 million in the first quarter of
1995, a decrease of 3 percent. Potash production tax for the first quarter of
1996 was $8.5 million compared to $7.8 million in the same period in 1995, an
increase of 9 percent. The increase is explained by the Allan and Rocanville
mines having been joined by Esterhazy mine in incurring the profits tax as well
as by increased profitability on a per tonne basis. Saskatchewan capital tax was
$3.6 million in the three months ended March 31, 1996 compared to $4.5 million
in the prior comparable period, a decrease of 20 percent.
 
                                        9
<PAGE>   10
 
INTEREST EXPENSE
 
     For the first quarter of 1996, interest expense was $13.8 million. The
increase in interest expense is the result of the debt incurred to finance the
phosphate acquisitions. The Company had virtually no debt in the first quarter
of 1995.
 
INCOME TAXES
 
     Income taxes in the first quarter of 1996 were $9.6 million, compared to
$1.0 million in the same period of 1995, an increase of $8.6 million. The
increase is largely attributable to US withholding taxes, alternative minimum
taxes and deferred income taxes relating to the Company's acquired phosphate
operations. The tax rate applicable to the U.S. operations for 1996 is
approximately 26 percent of income before taxes. This rate for 1995 was
approximately 24 percent of income before taxes.
 
ANALYSIS OF FINANCIAL CONDITION AND CASH FLOW
 
     Working capital for the first quarter 1996 increased by $74.8 million. Cash
flow from operations was $68.6 million. Quick and current ratios were .80 and
1.84 at March 31, 1996. The Company paid down its debt by $94.3 million (of
which $36.0 million was voluntary) and paid dividends of $11.8 million. At the
end of the quarter, the debt to capital ratio was at 38 percent and the interest
coverage ratio was 6.3 to 1. The net debt to market capitalization at March 31,
1996 was 28 percent.
 
OUTLOOK
 
     The statements in this "Management Discussion and Analysis", including
those in this "Outlook" section relating to the period after March 31, 1996, are
forward-looking statements subject to uncertainties. The Company's financial
performance continues to be affected by price, worldwide state of supply and
demand for potash and phosphate products, application rates, government
assistance programs, weather conditions, exchange rates and agricultural and
trade policies of producing and consuming nations which, among other things, are
influenced by domestic political conditions. The Company sells to a diverse
group of customers both by geography and by end product. Market conditions by
country will vary on a year over year basis and sales shift from one period to
another.
 
     The rising world population and the demand for better diets in developing
nations will continue to drive consumption for fertilizer products over the
long-term. Over the short-term, there should be increased fertilizer usage over
the next few years as world grain stocks are critically low, crop prices
continue to rise, and governments around the world focus on food production. The
Company expects to be an important supplier to these markets. While the
consumption trend line is expected to continue to climb over the long-term,
there will be, at times, fluctuations in demand. For example, Brazil was a major
purchaser in the first quarter of 1995, but credit problems with farmers reduced
purchases for the remainder of the year. This has now been resolved and Brazil
has begun purchasing again. There are reports of high inventories in India of
potassium and phosphate which will affect purchases this year. China purchased
both products in the first quarter of 1996 but shipments have slowed. The
Chinese government continues to emphasize agricultural production which should
encourage purchases in the balance of 1996.
 
     North American potash and phosphate demand in fertilizer is generally
considered mature but is expected to fluctuate slightly from year to year, as a
function of acres planted and application rates per acre which are influenced by
crop prices and weather. While the outlook for 1996 in the domestic market has
been bullish due to a new Farm Bill and no set asides, the late spring in 1996
is affecting consumption in some areas which is having a dampening effect on
demand and prices. However, some volumes are expected to be made up during the
second quarter.
 
     PCS continues to operate its potash mines by matching production to sales
demand. Shutdowns at potash mines for inventory correction will influence potash
production costs.
 
     Mining costs are not expected to increase at a rate greater than the
anticipated rate of inflation. Natural gas costs are expected to be reduced by
approximately 15 percent in the Saskatchewan operations based on
 
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<PAGE>   11
 
existing contracts for 1996. Sulphur and ammonia prices have moderated and are
expected to impact favourably upon phosphate processing input costs for 1996.
 
     Capital expenditures in 1996 will exceed those in 1995 primarily due to a
full year of phosphate ownership and operation. Plans for such expenditures are
limited to sustaining capital.
 
   
     The narrative, included under this Management Discussion and Analysis, has
been prepared with reference to the financial statements reported under Canadian
Generally Accepted Accounting Principles (GAAP).
    
 
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<PAGE>   12
 
                                   SIGNATURES
 
     Pursuant to the requirements 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.
 
   
<TABLE>
<S>                                              <C>
                                                 Potash Corporation of Saskatchewan Inc.
 
January 10, 1997                                 By: /s/ BARRY E. HUMPHREYS
                                                     --------------------------------
                                                     Barry E. Humphreys
                                                     Sr. Vice President, Finance and
                                                     Treasurer
 
January 10, 1997                                 By: /s/ BARRY E. HUMPHREYS
                                                     --------------------------------
                                                     Barry E. Humphreys
                                                     Sr. Vice President, Finance and
                                                     Treasurer
                                                     (Principal Financial and Accounting
                                                     Officer)
</TABLE>
    
 
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