<PAGE>   1
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
   
                                  FORM 10-Q/A
    
 
   
                                AMENDMENT NO. 1
    
                            ------------------------
 
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934
 
       FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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)
 
                            ------------------------
 
<TABLE>
<S>                                           <C>
             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 OFFICES)                     (ZIP CODE)
</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 July 31, 1996
45,544,896 Shares.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<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         SIX MONTHS ENDED
                                                         JUNE 30                   JUNE 30
                                                  ---------------------     ---------------------
                                                    1996         1995         1996         1995
                                                  --------     --------     --------     --------
<S>                                               <C>          <C>          <C>          <C>
Net sales.......................................  $352,369     $204,447     $719,240     $340,424
Cost of goods sold..............................   259,667      118,976      515,738      181,954
                                                  --------     --------     --------     --------
Gross Margin....................................    92,702       85,471      203,502      158,470
                                                  --------     --------     --------     --------
Research and development........................       308          278          565          625
Selling and administrative......................    14,126       12,313       28,843       21,444
Provincial mining and other taxes...............     8,981       11,595       20,901       23,873
Other income....................................    (5,079)      (3,089)      (8,295)      (4,440)
                                                  --------     --------     --------     --------
                                                    18,336       21,097       42,014       41,502
                                                  --------     --------     --------     --------
Operating Income................................    74,366       64,374      161,488      116,968
Interest Expense................................    11,904       12,367       25,746       12,444
                                                  --------     --------     --------     --------
Income Before Income Taxes......................    62,462       52,007      135,742      104,524
Income Taxes....................................    10,064        4,263       19,666        5,305
                                                  --------     --------     --------     --------
Net Income......................................  $ 52,398     $ 47,744      116,076       99,219
                                                  ========     ========
Retained Earnings, Beginning of Period..........                             277,689      164,037
Dividends.......................................                             (23,853)     (22,313)
                                                                            --------     --------
Retained Earnings, End of Period................                            $369,912     $240,943
                                                                            ========     ========
Net Income Per Share (Note 3)...................  $   1.15     $   1.11     $   2.55     $   2.31
                                                  ========     ========     ========     ========
Dividends Per Share (Note 4)....................  $   0.26     $   0.26     $   0.52     $   0.51
                                                  ========     ========     ========     ========
</TABLE>
 
              (See Notes to the Consolidated Financial Statements)
 
                                        1
<PAGE>   3
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                         (IN THOUSANDS OF U.S. DOLLARS)
 
                                     ASSETS
 
   
<TABLE>
<CAPTION>
                                                                                    
                                                                                    
                                                                      JUNE 30,       DECEMBER 31,
                                                                        1996             1995
                                                                     -----------     ------------
                                                                     (UNAUDITED)
<S>                                                                  <C>             <C>
Current Assets
  Cash and cash equivalents........................................   $    7,290      $   40,497
  Accounts receivable..............................................      210,158         223,377
  Inventories (Note 2).............................................      222,747         221,911
  Prepaid expenses.................................................       16,922          12,041
  Other current assets.............................................        8,535           3,315
                                                                      ----------      ----------
                                                                         465,652         501,141
Property, plant and equipment......................................    1,985,705       2,032,339
Other assets.......................................................       46,238          48,337
                                                                      ----------      ----------
                                                                      $2,497,595      $2,581,817
                                                                      ==========      ==========
                                           LIABILITIES
Current Liabilities
  Accounts payable and accrued charges.............................   $  167,653      $  199,222
  Current portion of long-term debt................................       88,755         164,971
  Current obligations under capital leases.........................          265             870
                                                                      ----------      ----------
                                                                         256,673         365,063
Long-term debt.....................................................      638,465         711,585
Obligations under capital leases...................................        1,335           2,913
Deferred income tax liability......................................       15,264           4,743
Accrued post-retirement/post-employment benefits...................       92,625          89,570
Accrued reclamation costs..........................................      150,786         151,531
Other non-current liabilities and deferred credits.................        6,478          14,537
                                                                      ----------      ----------
                                                                       1,161,626       1,339,942
                                                                      ----------      ----------
 
                                      SHAREHOLDERS' EQUITY
Share Capital......................................................      629,571         627,700
Contributed Surplus................................................      336,486         336,486
Retained Earnings..................................................      369,912         277,689
                                                                      ----------      ----------
                                                                       1,335,969       1,241,875
                                                                      ----------      ----------
                                                                      $2,497,595      $2,581,817
                                                                      ==========      ==========
</TABLE>
    
 
              (See Notes to the Consolidated Financial Statements)
 
                                        2
<PAGE>   4
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
 
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)
 
   
<TABLE>
<CAPTION>
                                                                          SIX MONTHS ENDED
                                                                               JUNE 30
                                                                       -----------------------
                                                                         1996          1995
                                                                       ---------     ---------
<S>                                                                    <C>           <C>
Operating Activities
Net income...........................................................  $ 116,076     $  99,219
Items not affecting cash
  Depreciation and amortization......................................     46,106        32,959
  Loss on disposal of property, plant and equipment..................        150            36
  Provision for deferred income taxes................................     10,521           981
  Provision for post-retirement/post-employment benefits.............      3,055           363
                                                                       ---------     ---------
                                                                         175,908       133,558
Changes in non-cash operating working capital
  Accounts receivable................................................     13,219        (5,195)
  Inventories........................................................        311       (25,370)
  Prepaid expenses...................................................     (4,882)           36
  Other current assets...............................................     (5,220)        9,857
  Accounts payable and accrued charges...............................    (31,569)       27,701
  Accrued reclamation costs..........................................       (750)         (473)
  Other non-current liabilities and deferred credits.................     (8,059)       (1,156)
                                                                       ---------     ---------
Cash provided by operating activities................................    138,958       138,958
                                                                       ---------     ---------
Investing Activities
Acquisition of PCS Phosphate.........................................         --      (798,728)
Additions to property, plant and equipment...........................    (22,042)       (8,606)
Proceeds on disposal of property, plant and equipment................     22,497           287
Disposals of (additions to) other assets.............................        881          (274)
                                                                       ---------     ---------
Cash provided by (used in) investing activities......................      1,336      (807,321)
                                                                       ---------     ---------
Cash (deficiency) before financing activities........................    140,294      (668,363)
                                                                       ---------     ---------
Financing Activities
(Repayment of) proceeds from long-term obligations...................   (151,519)      759,119
Dividends............................................................    (23,853)      (22,313)
Issuance of shares...................................................      1,871         1,336
                                                                       ---------     ---------
Cash (used in) provided by financing activities......................   (173,501)      738,142
                                                                       ---------     ---------
(Decrease) Increase in Cash..........................................    (33,207)       69,779
Cash and Cash Equivalents, Beginning of Period.......................     40,497        16,576
                                                                       ---------     ---------
Cash and Cash Equivalents, End of Period.............................  $   7,290     $  86,355
                                                                       =========     =========
Supplemental cash flow disclosure
  Interest paid......................................................  $  26,583     $   8,629
  Income taxes paid..................................................  $  22,860     $   5,714
                                                                       =========     =========
</TABLE>
    
 
              (See Notes to the Consolidated Financial Statements)
 
                                        3
<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 Potash
Corporation of Saskatchewan Inc. 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.
 
        -- Potash Corporation of Saskatchewan Transport Limited
 
        -- PCS Sales (USA), Inc.
 
        -- PCS Phosphate Company, Inc. (PCS Phosphate)
 
        -- White Springs Agricultural Chemicals, Inc. (White Springs)
 
 2. INVENTORIES
 
<TABLE>
<CAPTION>
                                                               JUNE 30,     DECEMBER 31,
                                                                 1996           1995
                                                               --------     ------------
        <S>                                                    <C>          <C>
        Finished product.....................................  $105,010       $115,491
        Materials and supplies...............................    75,762         66,708
        Raw materials........................................    13,128         11,954
        Work in process......................................    28,847         27,758
                                                               --------       --------
                                                               $222,747       $221,911
                                                               ========       ========
</TABLE>
 
 3. EARNINGS PER SHARE
 
     Earnings per share for the year-to-date are calculated on the weighted
average shares issued and outstanding during the six months ended June 30, 1996
of 45,513,000 (1995 -- 43,016,000).
 
 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.
 
                                        4
<PAGE>   6
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
 
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                         (IN THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)
 
     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.
 
     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             SIX MONTHS ENDED
                                                     JUNE 30                       JUNE 30
                                            -------------------------     -------------------------
                                               1996           1995           1996           1995
                                            ----------     ----------     ----------     ----------
<S>                                         <C>            <C>            <C>            <C>
Net income as reported in the consolidated
  statements of income and retained
  earnings................................  $52,398....    $   47,744     $  116,076     $   99,219
Item decreasing reported net income
Deferred income taxes.....................      (1,091)            --         (4,318)            --
                                            ----------     ----------     ----------     ----------
Approximate net income -- US GAAP.........  $   51,307     $   47,744     $  111,758     $   99,219
                                            ==========     ==========     ==========     ==========
Weighted average shares outstanding -- US
  GAAP....................................  45,975,000     43,310,000     45,975,000     43,210,000
                                            ==========     ==========     ==========     ==========
Net income per share -- US GAAP...........  $     1.12     $     1.10     $     2.43     $     2.30
                                            ==========     ==========     ==========     ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                      JUNE 30,      DECEMBER 31,
                                                                        1996            1995
                                                                     ----------     ------------
<S>                                                                  <C>            <C>
Total assets as reported in the consolidated statements of
  financial position...............................................  $2,497,595      $2,581,817
Item increasing reported total assets
Deferred income tax asset..........................................      14,280          18,598
                                                                     ----------      ----------
Approximate total assets -- US GAAP................................  $2,511,875      $2,600,415
                                                                     ==========      ==========
Shareholders' equity as reported in the consolidated statements of
  financial position...............................................  $1,335,969      $1,241,875
Item increasing reported shareholders' equity
Deferred income taxes..............................................      14,280          18,598
                                                                     ----------      ----------
Approximate shareholders' equity -- US GAAP........................  $1,350,249      $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 six months
of 1995 do not include: (1) the results of White Springs which was acquired
October 31, 1995, and (2) the results of PCS Phosphate (formerly Texasgulf Inc.)
prior to April 10, 1995, the date of acquisition.
 
                                        5
<PAGE>   7
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
RESULTS OF OPERATIONS
 
  Overview
 
     Second quarter and year-to-date June 30 results for 1995 do not include (1)
the results of White Springs, which was acquired October 31, 1995, and (2) the
results of PCS Phosphate (formerly Texasgulf Inc.) prior to April 10, 1995, the
date of acquisition.
 
     Net sales and net income for the three months ended June 30, 1996, improved
72 percent and 10 percent, respectively, over the same period in 1995. Net
income for the three months ended June 30, 1996, was $52.4 million
(1995 -- $47.7 million) on net sales of $352.4 million (1995 -- $204.4 million),
or $1.15 per share (1995 -- $1.11 per share). For the second quarter of 1996,
gross margin and operating income were $92.7 million and $74.4 million,
respectively, compared to a gross margin of $85.5 million and an operating
income of $64.4 million for the same period in 1995 (increase of 8 percent and
16 percent, respectively).
 
     For the three months ended June 30, 1996, North American and offshore net
sales revenue were $204.4 million (1995 -- $100.8 million) and $148.0 million
(1995 -- $103.6 million), respectively. North American net sales revenue
represented 58 percent (1995 -- 49 percent) of total net sales revenue, whereas
offshore sales represented 42 percent of net sales revenue (1995 -- 51 percent).
 
     Potash, phosphate and ammonia revenue for the quarter ended June 30, 1996
were $103.9 million (1995 -- $109.2 million), $222.1 million (1995 -- $95.2
million), and $26.4 million (1995 -- not applicable), respectively, a decrease
of $5.3 million in potash revenue, a $126.9 million increase in phosphate
revenue and a $26.4 million increase in ammonia revenue, when compared to the
same period a year ago.
 
     Gross margins for the second quarter of 1996 increased $7.2 million or 8
percent over the same quarter in 1995. Gross margin for potash was $48.7
million, a decrease of $17.3 million when compared to the same quarter of 1995.
Gross margins for phosphate fertilizer, feed, industrial and ammonia products
were $29.8 million (1995 -- $8.8 million), $6.9 million (1995 -- $3.2 million) ,
$6.6 million (1995 -- $7.5 million) and $.7 million (1995 -- not applicable),
respectively.
 
     The increase in net income of $4.7 million for the quarter ended June 30,
1996 is largely attributable to additional earnings from the phosphate
acquisitions and lower provincial mining taxes. This was offset by an increase
in cost of goods sold, income taxes and selling and administrative expenses.
 
   
     The phosphate acquisitions contributed an additional $153.2 million revenue
to PCS's consolidated revenues and an additional $24.5 million to the gross
margin when compared with the comparable quarter in 1995. North American potash
and phosphate sales pricing was under some pressure in the second quarter as a
wet spring placed considerable pressure on inventories, while in the feed
industry, recent high grain prices resulted in reduced livestock head count
which reduced feed requirements. Higher costs were experienced by both potash
and phosphate but for different reasons. Potash experienced almost 15 additional
weeks of shutdown because of a lower demand by the offshore markets while in
phosphate the higher costs were caused by a rescheduling of the White Springs
maintenance to be completed all within the second quarter. This was partially
offset by lower input costs in the phosphate process. 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.
    
 
     Net sales and net income for the six months ended June 30, 1996 improved
111 percent and 17 percent, respectively, over the same period in 1995. Net
income for the six months ended June 30, 1996 was $116.1 million (1995 -- $99.2
million) on net sales of $719.2 million (1995 -- $340.4 million), or $2.55 per
share (1995 -- $2.31 per share). For the first six months of 1996, gross margin
and operating income were $203.5 million and $161.5 million, respectively,
compared to a gross margin of $158.5 million and operating income of $117.0
million for the same period in 1995 (increases of 28 percent and 38 percent,
respectively).
 
     For the six months ended June 30, 1996, North American and offshore net
sales revenue were $435.3 million (1995 -- $144.9 million) and $283.9 million
(1995 -- $195.5 million), respectively. North
 
                                        6
<PAGE>   8
 
American net sales revenue represented 61 percent (1995 -- 43 percent) of total
net sales revenue, whereas offshore sales represented 39 percent of net sales
revenue (1995 -- 57 percent).
 
     Potash, phosphate and ammonia revenue for the first half of 1996 was $207.8
million (1995 -- $245.2 million), $446.2 million (1995 -- $95.2 million), and
$65.3 million (1995 -- not applicable), respectively, a decrease of $37.4
million in potash revenue, a $350.9 million increase in phosphate revenue and a
$65.3 million increase in ammonia revenue, when compared to the same period a
year ago.
 
     Gross margins for the first six months of 1996 increased $45.0 million or
28 percent over the same period in 1995. Gross margin for potash was $103.8
million, a decrease of $35.2 million when compared to the first half of 1995.
This decrease was more than offset by a gross margin of $99.7 million for
phosphate and ammonia. Of this $99.7 million gross margin, $64.6 million
(1995 -- $8.8 million) is attributable to phosphate fertilizer products, $19.7
million (1995 -- $3.2 million) is attributable to feed products, $13.6 million
(1995 -- $7.5 million) is attributable to industrial products, and $1.8 million
(1995 -- not applicable) is attributable to ammonia.
 
     The increase in net income of $16.9 million for the six months ended June
30, 1996 is largely attributable to additional earnings from the phosphate
acquisitions. This was offset by an increase in interest expense of $13.3
million relating to debt financing of $878.8 million incurred to purchase PCS
Phosphate and White Springs, a $333.8 million increase in cost of sales, a $14.4
million increase in income taxes, and an increase in selling and administrative
expenses of $7.4 million.
 
   
     Although the Company had increased earnings in the first half of 1996 when
compared to the same period in 1995, market conditions did not live up to the
expectations for the fertilizer industry in general. Weather put a damper on the
domestic scene, resulting in the usual problems associated with a delayed
season. In the export market, large purchases at the end of 1995, delayed grain
price increases to the farmers and local distribution problems resulted in fewer
sales to China during the first half of 1996 when compared to first half 1995.
Uncertainty in India due to large purchases in 1995 and national elections in
1996 resulted in slower fertilizer movement to that country and first quarter
shipments to Brazil were dampened by economic conditions.
    
 
  Potash Revenue
 
     Potash net sales revenue for the quarter ended June 30, 1996 decreased by
$5.3 million or 5 percent as compared to the same period in 1995 (1996 -- $103.9
million; 1995 -- $109.2 million). The Company sold 1.430 million tonnes of
potash in the second quarter of 1996, compared to 1.508 million tonnes sold in
the same period last year, a decrease of .078 million tonnes or 5 percent.
Potash prices were flat for the second quarter of 1996 when compared to the
second quarter of 1995.
 
     In the second quarter of 1996, North American and offshore potash sales
volumes increased 34 percent and decreased 28 percent, respectively, over the
same period in 1995. Potash prices increased 14 percent in the offshore market.
There was a greater proportion of higher priced New Brunswick tonnes sold in the
export market compared to the same period a year ago. Realizations in the
domestic market were down by 11 percent from the second quarter a year ago.
North American prices were under pressure during the second quarter of 1996 as
intense competition was exacerbated by the lateness of the season. North
American realizations were also affected by the inclusion in the mix of some
lower priced sales to another producer.
 
     North American net sales revenue from potash operations represented 43
percent of the potash net sales revenue of the Company during the second quarter
of 1996 (1995 -- 34 percent). In the second quarter of 1996, the increase in
North American potash sales volumes and the decrease in North American prices
resulted in a $7.4 million increase in North American potash net sales revenue
over the same period in 1995. North American potash sales volumes for the second
quarter of 1996 increased .187 million tonnes (1996 -- .732 million tonnes;
1995 -- .545 million tonnes) compared to the second quarter of 1995. Sales
volumes of .049 million tonnes to another producer increased North American
volumes.
 
     In the second quarter of 1996, offshore net sales revenue from potash
operations represented 57 percent of net potash sales revenue of the Company
(1995 -- 66 percent). In the second quarter of 1996, the decrease in
 
                                        7
<PAGE>   9
 
offshore sales volumes and the increase in overall offshore selling price
resulted in a $12.7 million decrease in offshore potash net sales revenue over
the same period in 1995. In the offshore market, the Company sold .698 million
potash tonnes during the second quarter of 1996 (1995 -- .963 million tonnes), a
decrease of 28 percent. Of the .698 million tonnes, .503 million tonnes were
sold through Canpotex and the remaining .195 million tonnes were produced by PCS
New Brunswick and sold and delivered to offshore markets, such as Brazil, by PCS
Sales.
 
     Potash net sales revenue for the first six months of 1996 decreased by
$37.4 million or 15 percent as compared to the first six months of 1995
(1996 -- $207.8 million; 1995 $245.2 million). The Company sold 2.887 million
tonnes of potash in the first half of 1996, compared to 3.452 million tonnes
sold in the same period last year, a decrease of .565 million tonnes or 16
percent. Potash prices experienced an overall increase of 1 percent in the first
half of 1996 as compared to the first half of 1995.
 
     In the first six months of 1996, North American and offshore potash sales
volumes increased 5 percent and decreased 29 percent, respectively, over the
same period in 1995. Potash prices increased 9 percent in the offshore market
where customers agreed in February to a $5 per tonne increase. Price increases
scheduled by the Company for the domestic market were not attained.
 
     North American net sales revenue from potash operations represented 39
percent of the potash net sales revenue of the Company during this year's first
half. In the first half of 1996, the increase in North American potash sales
volumes and a decrease in North American prices resulted in a $.5 million
decrease in North American potash net sales revenue over the same period in
1995. North American potash sales volumes for the first half of 1996 increased
 .067 million tonnes (1996 -- 1.321 million tonnes; 1995 -- 1.254 million tonnes)
compared to the first half of 1995. For the first half, domestic sales volumes
were up 5 percent over the same period in 1995 but the quarterly sales pattern
was reversed. In 1995, the majority of the spring sales volumes occurred in the
first quarter while this year's spring season sales volumes were realized in the
second quarter.
 
     In the first half of 1996, offshore net sales revenue from potash
operations represented 61 percent of net potash sales revenue of the Company. In
the first half of 1996, the decrease in offshore sales volumes and the increase
in overall offshore selling price resulted in a $36.9 million decrease in
offshore potash net sales revenue over the same period in 1995. In the offshore
market, the Company sold 1.566 million potash tonnes during the first half of
1996 (1995 -- 2.198 million tonnes), a decrease of 29 percent. Of the 1.566
million tonnes, 1.226 million tonnes were sold through Canpotex and the
remaining .340 million tonnes were produced by PCS New Brunswick and sold and
delivered to offshore markets. The anticipated lull in offshore orders during
this year's second quarter reduced potash sales volumes on a year-over-year
basis. China bought record tonnage from Canpotex in 1995 which included large
purchases in November and December. Normally, those shipments would have begun
in 1996. This timing difference makes it difficult to compare six months ended
June 30, 1996 to the comparable period in 1995.
 
  Phosphate Revenue
 
     For the quarter ended June 30, 1996, phosphate net sales revenue was $222.0
million; phosphate fertilizer $160.5 million (72 percent); and non-fertilizer
products $61.5 million (28 percent). For the same quarter in 1995 net sales
revenue was $95.2 million; phosphate fertilizer $53.1 million (56 percent);
non-fertilizer products $39.9 million (42 percent); and phosphate rock $2.2
million (2 percent).
 
     During the second quarter of 1996, the Company sold .814 million tonnes of
phosphate fertilizer (.346 million tonnes in North America; 0.468 million tonnes
in the offshore market); .242 million tonnes of non-fertilizer products (.226
million tonnes in North America; .016 million tonnes in the offshore market);
and .026 million tonnes of phosphate rock (.002 million tonnes in North America
and the remaining .024 million tonnes in the offshore market). For the same
comparable period in 1995, the Company sold .299 million tonnes of phosphate
fertilizer (.114 million tonnes in North America; .185 million tonnes in the
offshore market); .156 million tonnes of non-fertilizer products (.149 million
tonnes in North America; .007 million tonnes in the offshore market); and .102
million tonnes of phosphate rock (.011 million tonnes in North America and the
remaining .091 million tonnes in the offshore market).
 
                                        8
<PAGE>   10
 
     For the second quarter of 1996, North American phosphate net sales revenue
accounted for $133.4 million (60 percent) of total phosphate net sales revenue
of $222.0 million. In the quarter ended June 30, 1996, 56 percent of the
Company's North American phosphate net sales revenue was earned from phosphate
fertilizer products which represented 60 percent of the Company's North American
phosphate sales volumes. Offshore sales accounted for 40 percent of total
phosphate product net sales revenue for the second quarter of 1996 and 47
percent of volumes. In the quarter ended June 30, 1996, 96 percent of the
Company's offshore phosphate net sales revenue was earned from phosphate
fertilizer products which represented 92 percent of the Company's offshore
phosphate sales volumes.
 
     Second quarter 1996 net sales revenue from liquid and solid fertilizer was
$160.5 million (1995 -- $53.1 million) with sales volumes of .814 million tonnes
(1995 -- .300 million tonnes). Solid phosphate fertilizer (substantially all
DAP) accounted for 63 percent or $100.8 million of the total. Offshore net sales
revenue of DAP accounted for 63 percent of solid fertilizer net sales revenue
while North American net sales revenue of liquid fertilizer accounted for 63
percent of liquid fertilizer net sales revenue. Fertilizer products were
affected by a late wet spring throughout the Northern Hemisphere which delayed
seeding and affected fertilizer sales. The average net sales price for liquid
and solid fertilizer improved by 11 percent and 8 percent, respectively. DAP
prices were down for the second quarter of 1996 when compared to the first
quarter of 1996, but began to recover by the end of the second quarter. Export
liquid and solid fertilizer sales prices improved by 11 percent and 14 percent,
respectively, compared to the same period a year ago. North American liquid
fertilizer sales prices improved 1 percent while solid fertilizer sales prices
remained flat when compared to the same period in 1995.
 
     Net sales revenue from non-fertilizer products (animal feed and industrial)
during the quarter ended June 30, 1996, were $61.5 million (1995 -- $39.9
million) with sales volumes of .242 million tonnes (1995 -- .156 million
tonnes). For the second quarter of 1996, feed sales tonnage was .182 million
tonnes (1995 -- .106 million tonnes) with 9 percent sold offshore while the
remaining .060 million tonnes were industrial products sold to North America
customers. Recent high grain prices are a disadvantage for the feed industry as
the livestock head count has been diminished reducing feed requirements. Feed
product prices for the quarter ended June 30, 1996, improved by 4 percent when
compared to the same period a year ago. North American industrial selling prices
increased by 1 percent for the second quarter of 1996 when compared to the same
period in 1995.
 
     Consistent with the Company's strategy of increasing the gross margin for
its products, the Company has reduced its rock sales. Rock not sold at
satisfactory price levels will be kept for internal production.
 
     Phosphate net sales revenue for the six months ended June 30, 1996 was
$446.2 million. The distribution of this revenue was as follows: phosphate
fertilizer $310.8 million (69 percent); non-fertilizer products (animal feed and
industrial products) $132.2 million (30 percent); and phosphate rock $3.2
million (1 percent).
 
     During the six months ended June 30, 1996, the Company sold 1.530 million
tonnes of phosphate fertilizer (.756 million tonnes in North America; .774
million tonnes in the offshore market); .518 million tonnes of non-fertilizer
products (.475 million tonnes in North America; .043 million tonnes in the
offshore market); and .107 million tonnes of phosphate rock (.002 million tonnes
in North America and the remaining .105 million tonnes in the offshore market).
For the comparable period in 1995, the Company sold .299 million tonnes of
phosphate fertilizer (.114 million tonnes in North America; .185 million tonnes
in the offshore market); .156 million tonnes of non-fertilizer products (.149
million tonnes in North America; .007 million tonnes in the offshore market);
and .102 million tonnes of phosphate rock (.011 million tonnes in North America
and the remaining .091 million tonnes in the offshore market).
 
     For the first half of 1996, North American phosphate net sales revenue
accounted for $289.2 million (65 percent) of total phosphate net sales revenue
of $446.2 million. In the six months ended June 30, 1996, 57 percent of the
Company's North American phosphate net sales revenue was earned from phosphate
fertilizer products which represented 61 percent of the Company's North American
phosphate sales volumes. Offshore sales accounted for 35 percent of total
phosphate product net sales revenue for the first half of 1996 and 43 percent of
volumes. In the six months ended June 30, 1996, 92 percent of the Company's
offshore phosphate
 
                                        9
<PAGE>   11
 
net sales revenue was earned from phosphate fertilizer products which
represented 84 percent of the Company's offshore phosphate sales volumes.
 
     First half 1996 net sales revenue from liquid and solid fertilizers was
$310.8 million (1995 -- $53.1 million) with sales volumes of 1.530 million
tonnes (1995 -- .300 million tonnes). Solid phosphate fertilizer (substantially
all DAP) accounted for 62 percent or $192.1 million of the total. Offshore net
sales revenue of DAP accounted for 55 percent of solid fertilizer net sales
revenue while North American net sales revenue of liquid fertilizer accounted
for 68 percent of liquid fertilizer net sales revenue. The average net sales
price for liquid and solid fertilizer improved by 14 percent and 12 percent,
respectively. Export liquid and solid fertilizer sales prices improved by 10
percent and 19 percent, respectively, compared to the same period a year ago.
North American liquid and solid fertilizer sales prices improved 1 percent and 2
percent, respectively, when compared to the same period in 1995.
 
     Net sales revenue from animal feed and industrial products during the six
months ended June 30, 1996, were $132.2 million (1995 -- $39.9 million) with
sales volumes of .518 million tonnes (1995 -- .156 million tonnes). For the
first half of 1996, feed sales tonnage was .393 million tonnes (1995 -- .106
million tonnes) with 11 percent sold offshore while the remaining .125 million
tonnes were industrial products sold to North American customers. Feed product
prices for the six months ended June 30, 1996, improved by 6 percent when
compared to the same period a year ago. North American industrial selling prices
declined by 1 percent for the first half of 1996 when compared to the same
period in 1995.
 
AMMONIA REVENUE
 
     For the quarter ended June 30, 1996, ammonia sales contributed $26.4
million to net sales revenue with sales volumes of .136 million tonnes. Ammonia
sales for the six months ended June 30, 1996 contributed $65.3 million to net
sales revenue with sales volumes of .323 million tonnes.
 
COST OF GOODS SOLD
 
     During the second quarter of 1996 the Company produced 1.512 million
potassium chloride (KC1) tonnes, a 26 percent decrease from the 2.045 million
tonnes produced in the second quarter of 1995, due to lower demand. During the
second quarter of 1996 the Company produced .507 million phosphoric acid 
(P(2)O(5)) tonnes (1995 -- .272 million tonnes), an increase of 86 percent, due
principally to the addition of White Springs.
 
     Potash unit cost of sales increased by 35 percent in the second quarter of
1996 compared to the same period in 1995 due in part to 14.7 additional shutdown
weeks. Costs were also affected by the product mix as the Company pulled more
product from New Brunswick to supply increased demand in Brazil.
 
     In the second quarter of 1996, lower input cost for both sulfur and ammonia
reduced phosphate cost of goods sold. These lower costs were offset by higher
production costs of phosphate fertilizer. Higher costs of phosphate fertilizer
production were experienced in the second quarter as virtually all maintenance
scheduled for White Springs was rescheduled to the second quarter of the year.
Higher feed costs were the result of distributing fixed costs over a reduced
sales volume thereby increasing the unit costs.
 
     Depreciation expense for the second quarter of 1996 was $22.8 million
compared to $19.5 million in 1995, an increase of $3.3 million or 17 percent.
The increase is a result of $4.1 million additional depreciation from the
acquired phosphate operations. Depreciation expense for the potash operations
decreased by $.8 million as a result of additional shutdown weeks in the second
quarter of 1996 when compared to the same period in 1995.
 
     For the six months ended June 30, 1996, the Company produced 3.211 million
potassium chloride (KCl) tonnes, compared to 3.930 million tonnes in the first
half of 1995, a decrease of .719 million tonnes (18 percent) compared to 1995.
For the six months ended June 30, 1996, the Company produced 1.020 million
phosphoric acid (P(2)O(5)) tonnes from its phosphate operations, compared to 
 .272 million tonnes in 1995.
 
                                       10
<PAGE>   12
 
     Potash unit cost of sales increased by 17 percent in the first six months
of 1996 compared to the same period in 1995 due in part to 16.6 additional
shutdown weeks and a greater proportion of higher cost New Brunswick production
in the product mix.
 
     Depreciation expense for the first half of 1996 was $46.1 million compared
to $33.0 million in 1995, an increase of $13.1 million or 40 percent. The
increase is a result of $17.5 million additional depreciation from the acquired
phosphate operations. Depreciation expense for the potash operations decreased
by $4.4 million as a result of additional shutdown weeks in the first half of
1996 when compared to the same period in 1995.
 
SELLING AND ADMINISTRATIVE
 
     Selling and administrative expenses during the second quarter of 1996 were
$14.1 million as compared to $12.3 million in 1995, an increase of $1.8 million.
During the first half of 1996, selling and administrative expenses were $28.8
million as compared to $21.4 million in 1995, an increase of $7.4 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 rate of taxes
paid to the Saskatchewan government but total taxes were reduced by lower prices
and potash sales volumes from Saskatchewan. For the second quarter of 1996,
Saskatchewan provincial mining and other taxes were $9.0 million as compared to
$11.6 million in the second quarter of 1995, a decrease of 22 percent. Potash
production tax for the second quarter of 1996 was $5.8 million compared to $7.9
million in the same period in 1995, a decrease of 27 percent. Saskatchewan
capital tax was $3.2 million in the second quarter ended June 30, 1996 compared
to $3.7 million in the same period in 1995, a decrease of 14 percent. For the
first half of 1996, Saskatchewan provincial mining and other taxes were $20.9
million as compared to $23.9 million in the first half of 1995, a decrease of 12
percent. Potash production tax for the first half of 1996 was $14.2 million
compared to $15.7 million in the same period in 1995, a decrease of 9 percent.
Saskatchewan capital tax was $6.8 million in the six months ended June 30, 1996
compared to $8.2 million in the same period in 1995, a decrease of 17 percent.
 
INTEREST EXPENSE
 
     For the second quarter of 1996, interest expense was $11.9 million as
compared to $12.4 million in the same period in 1995. For the first half of
1996, interest expense was $25.7 million as compared to $12.4 million in the
same period in 1995. The 1996 amount includes the debt incurred with the
acquisition of the phosphate properties last year in April and October while the
1995 amount includes only the April acquisition.
 
INCOME TAXES
 
     Income taxes in the second quarter of 1996 were $10.1 million, compared to
$4.3 million in the same period of 1995, an increase of $5.8 million. Income
taxes in the first half of 1996 were $19.7 million, compared to $5.3 million in
the same period of 1995, an increase of $14.4 million. The increase is largely
attributable to US withholding taxes, alternative minimum taxes and deferred
income tax, relating to the Company's acquired phosphate operations. The tax
rate applicable to the U.S. operations for the first half of 1996 is
approximately 20 percent of income before taxes. This rate for 1995 was
approximately 24 percent of income before taxes.
 
                                       11
<PAGE>   13
 
ANALYSIS OF FINANCIAL CONDITION AND CASH FLOW
 
     Working capital for the first half of 1996 increased by $72.9 million. Cash
flow from operations was $139.0 million. Quick and current ratios were .85 and
1.8 at June 30, 1996. The Company paid down its debt by $151.5 million (of which
$36 million was voluntary) and paid dividends of $23.9 million. At the end of
the first half of 1996, the debt to capital ratio was at 35.3 percent and the
interest coverage ratio was 6.3 to 1. The net debt to market capitalization at
June 30, 1996 was 23.9 percent.
 
OUTLOOK
 
     The statements in this "Management Discussion and Analysis" in this
"Outlook" section, relating to the period after June 30, 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. The recently announced subsidy
programs in India and Brazil and the likelihood of further demand in China, are
expected to firm markets and support prices in the second half of 1996.
 
     DAP markets began to recover by the end of the second quarter of 1996 and
are expected to continue to improve. PhosChem recently sold significant
additional tonnage to SinoChem for second half delivery and has concluded
phosphoric acid negotiations in India.
 
     North American potash and phosphate demand in fertilizer is generally
considered mature but is expected to fluctuate from year to year, as a function
of acres planted and application rates per acre which are influenced by crop
prices and weather. The North American market is expected to have strong fall
potash and phosphate demand which is expected to firm markets and support prices
in the second half of 1996.
 
     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 on a quarter over quarter comparative basis. Natural gas costs
are expected to be reduced by approximately 15 percent in the Saskatchewan
operations based on 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).
    
 
                                       12
<PAGE>   14
 
                                   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.
 
                                          POTASH CORPORATION OF
                                            SASKATCHEWAN INC.
 
   
<TABLE>
<S>                                            <C>
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>
    
 
                                       13