##### 



EXHIBIT 99.3 (AGRIUM LOGO) 2005 Audited Annual Financial
Statements and Notes




---



##### 



MANAGEMENTS
& AUDITORS REPORTS
 Financial Statements & Notes
 Managements Report to the Shareholders
    Michael M. Wilson
 Bruce G. Waterman
   Auditors Report
    Chartered Accountants
 64
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



FINANCIAL
STATEMENTS
 Consolidated Statements of Operations& Retained Earnings
 Years ended December 31
    
    2005
    
    
    2004
    
    
    2003(millions of U.S. dollars, except per share amounts)
    
    
    
    
    Restated (note 2)
    
    
    Restated (note 2)Sales
    
    
    3,491
    
    
    
    3,001
    
    
    
    2,630Direct freight
    
    
    197
    
    
    
    163
    
    
    
    131Net sales
    
    
    3,294
    
    
    
    2,838
    
    
    
    2,499Cost of product
    
    
    2,247
    
    
    
    1,928
    
    
    
    1,760Gross profit
    
    
    1,047
    
    
    
    910
    
    
    
    739Expenses (income)Selling
    
    
    254
    
    
    
    237
    
    
    
    227General and administrative
    
    
    79
    
    
    
    63
    
    
    
    59Depreciation and amortization
    
    
    146
    
    
    
    156
    
    
    
    140Kenai award and settlement (note 3)
    
    
    
    
    
    
    (86
    )
    
    
    Asset impairment (note 9)
    
    
    
    
    
    
    
    
    
    
    235Royalties and other taxes
    
    
    45
    
    
    
    29
    
    
    
    17Other expenses (note 4)
    
    
    23
    
    
    
    44
    
    
    
    40Earnings before interest expense and income taxes
    
    
    500
    
    
    
    467
    
    
    
    21Interest on long-term debt
    
    
    47
    
    
    
    65
    
    
    
    75Other interest
    
    
    2
    
    
    
    4
    
    
    
    5Earnings (loss) before income taxes
    
    
    451
    
    
    
    398
    
    
    
    (59
    )Current income taxes (note 5)
    
    
    113
    
    
    
    99
    
    
    
    22Future income taxes (recovery) (note 5)
    
    
    55
    
    
    
    33
    
    
    
    (44
    )Income taxes
    
    
    168
    
    
    
    132
    
    
    
    (22
    )Net earnings (loss)
    
    
    283
    
    
    
    266
    
    
    
    (37
    )Retained earnings  beginning of year (as reported)
    
    
    398
    
    
    
    145
    
    
    
    191Cumulative
change in accounting policy
(note 2)
    
    
    (6
    )
    
    
    (5
    )
    
    
    Common share dividends declared
    
    
    (14
    )
    
    
    (14
    )
    
    
    (14
    )Common share repurchases
    
    
    (77
    )
    
    
    
    
    
    
    Retained earnings  end of year
    
    
    584
    
    
    
    392
    
    
    
    140Earnings (loss) per share(note 6)Basic
    
    
    2.14
    
    
    
    2.03
    
    
    
    (0.29
    )Diluted
    
    
    2.12
    
    
    
    1.91
    
    
    
    (0.29
    )
 AGRIUM ANNUAL REPORT 2005
    
    65




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##### 



FINANCIAL
STATEMENTS
 Consolidated Statements of Cash Flows
 As at December 31
    
    2005
    
    
    2004
    
    
    2003(millions of U.S. dollars, except per share amounts)
    
    
    
    
    Restated (note 2)
    
    
    Restated (note 2)OperatingNet earnings (loss)
    
    
    283
    
    
    
    266
    
    
    
    (37
    )Items not affecting cashDepreciation and amortization
    
    
    146
    
    
    
    156
    
    
    
    140Asset impairment (note 9)
    
    
    
    
    
    
    
    
    
    
    235Kenai award and settlement (note 3)
    
    
    
    
    
    
    (36
    )
    
    
    Proceeds on settlement (note 3)
    
    
    
    
    
    
    25
    
    
    
    Loss on disposal of assets and investments
    
    
    (4
    )
    
    
    (6
    )
    
    
    (5
    )Future income taxes (recovery) (note 5)
    
    
    55
    
    
    
    33
    
    
    
    (44
    )Foreign exchange
    
    
    (6
    )
    
    
    (5
    )
    
    
    (8
    )Net changes in non-cash working capitalAccounts receivable
    
    
    (29
    )
    
    
    (52
    )
    
    
    (98
    )Inventories
    
    
    (76
    )
    
    
    (83
    )
    
    
    12Prepaid expenses
    
    
    (35
    )
    
    
    4
    
    
    
    (25
    )Accounts payable and accrued liabilities
    
    
    107
    
    
    
    69
    
    
    
    12Income and other taxes payable
    
    
    (18
    )
    
    
    54
    
    
    
    (15
    )Other operating
    
    
    27
    
    
    
    15
    
    
    
    8Cash provided by operating activities
    
    
    450
    
    
    
    440
    
    
    
    175InvestingCapital expenditures
    
    
    (175
    )
    
    
    (82
    )
    
    
    (99
    )(Increase) decrease in other assets
    
    
    (22
    )
    
    
    (14
    )
    
    
    3Proceeds from disposal of assets and investments
    
    
    13
    
    
    
    10
    
    
    
    12Net change in non-cash working capital
    
    
    (10
    )
    
    
    
    
    
    
    26Other
    
    
    (18
    )
    
    
    7
    
    
    
    10Cash used in investing activities
    
    
    (212
    )
    
    
    (79
    )
    
    
    (48
    )FinancingCommon shares issued
    
    
    50
    
    
    
    12
    
    
    
    6Common share repurchases (note 17)
    
    
    (98
    )
    
    
    
    
    
    
    Bank indebtedness repayment
    
    
    
    
    
    
    
    
    
    
    (1
    )Long-term debt repayment
    
    
    (126
    )
    
    
    (134
    )
    
    
    (27
    )Common share dividends paid
    
    
    (14
    )
    
    
    (14
    )
    
    
    (14
    )Preferred security repayment
    
    
    (175
    )
    
    
    
    
    
    
    Cash used in financing activities
    
    
    (363
    )
    
    
    (136
    )
    
    
    (36
    )(Decrease) /increase in cash and cash equivalents
    
    
    (125
    )
    
    
    225
    
    
    
    91Cash and cash equivalents  beginning of year
    
    
    425
    
    
    
    200
    
    
    
    109Cash and
cash equivalents  end of year
    
    
    300
    
    
    
    425
    
    
    
    200Dividends per common share for the year
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.11Supplemental cash flow disclosureInterest paid
    
    
    49
    
    
    
    74
    
    
    
    78Income taxes paid
    
    
    132
    
    
    
    42
    
    
    
    30
 66
    
    AGRIUM ANNUAL REPORT 2005




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##### 



FINANCIAL
STATEMENTS
 Consolidated Balance Sheet
 As at December 31
    
    2005
    
    
    2004(millions of U.S. dollars)
    
    
    
    
    Restated (note 2)ASSETSCurrent assetsCash and cash equivalents
    
    
    300
    
    
    
    425Accounts receivable (note 7)
    
    
    443
    
    
    
    388Inventories
(note 8)
    
    
    533
    
    
    
    447Prepaid expenses
    
    
    91
    
    
    
    561,367
    
    
    
    1,316Property, plant and equipment(note 9)
    
    
    1,293
    
    
    
    1,239Other assets (note 10)
    
    
    103
    
    
    
    82Future income tax assets(note 5)
    
    
    22
    
    
    
    242,785
    
    
    
    2,661LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesBank indebtedness
    
    
    5
    
    
    
    Accounts payable and accrued liabilities (note 12)
    
    
    576
    
    
    
    472Current portion of long-term debt (note 13)
    
    
    30
    
    
    
    60611
    
    
    
    532Long-term debt(note 13)Recourse debt
    
    
    442
    
    
    
    471Non-recourse debt
    
    
    
    
    
    
    69Preferred securities (note 2)
    
    
    
    
    
    
    175442
    
    
    
    715Other liabilities(note 14)
    
    
    280
    
    
    
    257Future income tax liabilities(note 5)
    
    
    272
    
    
    
    2091,605
    
    
    
    1,713Commitments, guarantees, contingencies and subsequent event
(notes 19, 20, 21 and 26 respectively)Shareholders equityShare capital (note 17)Authorized: unlimited common sharesIssued and
outstanding: 2005  131 million (2004  132 million)
    
    
    583
    
    
    
    553Contributed surplus
    
    
    3
    
    
    
    2Retained earnings
    
    
    584
    
    
    
    392Cumulative translation adjustment
    
    
    10
    
    
    
    11,180
    
    
    
    9482,785
    
    
    
    2,661
    Michael M. Wilson
 Harry G. Schaefer
 AGRIUM ANNUAL REPORT 2005
    
    67




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Notes to the Consolidated Financial Statements
  1. Accounting Policies
 Principles of Consolidation & Preparation of Financial Statements
    Cash & Cash Equivalents
  Inventories
   Property, Plant & Equipment
    Idle Plant Costs
  Other Assets
  68
    
    AGRIUM ANNUAL REPORT 2005




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Employee Future Benefits
    Environmental Remediation
  Asset Retirement Obligations
  Future Income Taxes
  Revenue Recognition
  AGRIUM ANNUAL REPORT 2005
    
    69




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Stock-based Compensation
   Derivative Financial Instruments
      Foreign Currency Translation
    70
    
    AGRIUM ANNUAL REPORT 2005




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Recent Accounting Pronouncements
 Financial Instruments, Hedging Relationships & Other Comprehensive Income
  2. Change in Accounting Policies
 Classification of Preferred Securities as Liabilities
  As atDecember 31, 2004Balance sheetOther assets
    
    
    5Long-term debt
    
    
    175Future income tax liabilities
    
    
    8Preferred securities
    
    
    (172
    )Retained earnings
    
    
    (6
    )
 Year ended
    
    
    Year endedDecember 31, 2004
    
    
    December 31, 2003Income statementInterest on long-term debt
    
    
    14
    
    
    
    17Future income tax expense
    
    
    (4
    )
    
    
    (1
    )Earnings per shareNet earnings available for basic earnings per share
    
    
    (10
    )
    
    
    (16
    )Weighted-averages for diluted earnings per share (millions of shares)
    
    
    144
    
    
    
    126Basic earnings per share
    
    
    (0.01
    )
    
    
    (0.04
    )Diluted earnings per share
    
    
    
    
    
    
    (0.04
    )
 Stock-based Compensation
  AGRIUM ANNUAL REPORT 2005
    
    71




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 3. Kenai Award & Settlement
  2004Arbitration award
    
    
    50Settlement of legal claims
    
    
    3686
 Arbitration Award
  Settlement of Legal Claims
   2004Net cash received
    
    
    25Earn-out
adjustment (2001  2004)
    
    
    81Adjustments related to termination of gas supply
    
    
    (70
    )Net gain
    
    
    36
 4. Other Expenses
 2005
    
    
    2004
    
    
    2003Interest income
    
    
    (22
    )
    
    
    (16
    )
    
    
    (5
    )Idle plant costs
    
    
    9
    
    
    
    5
    
    
    
    10Stock-based compensation
    
    
    13
    
    
    
    4
    
    
    
    1Environmental remediation and accretion of asset retirement obligation
    
    
    9
    
    
    
    14
    
    
    
    6Costs on settlement of debt
    
    
    14
    
    
    
    
    
    
    
    Realized and unrealized loss (gain) on derivative contracts
    
    
    21
    
    
    
    (3
    )
    
    
    5Foreign exchange gain
    
    
    (5
    )
    
    
    (6
    )
    
    
    (8
    )Kenai, Alaska nitrogen facility earn-out
    
    
    
    
    
    
    28
    
    
    
    Litigation and contract settlements
    
    
    (25
    )
    
    
    (7
    )
    
    
    (2
    )Other
    
    
    9
    
    
    
    25
    
    
    
    3323
    
    
    
    44
    
    
    
    40
 72
    
    AGRIUM ANNUAL REPORT 2005




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 5. Income Taxes
  Earnings (loss) before income taxes
    
    2005
    
    
    2004
    
    
    2003Restated (note 2)
    
    Restated (note 2)Canadian
    
    
    140
    
    
    
    118
    
    
    
    49Foreign
    
    
    311
    
    
    
    280
    
    
    
    (108
    )451
    
    
    
    398
    
    
    
    (59
    )Statutory rate (%)
    
    
    41
    
    
    
    41
    
    
    
    42Income taxes at statutory rates
    
    
    183
    
    
    
    165
    
    
    
    (25
    )Recognition of previously unrecognized tax assets
    
    
    (4
    )
    
    
    (20
    )
    
    
    (13
    )Differences in foreign tax rates
    
    
    (19
    )
    
    
    (20
    )
    
    
    (5
    )Manufacturing and processing allowance
    
    
    (3
    )
    
    
    (8
    )
    
    
    (5
    )Resource royalties and allowances
    
    
    1
    
    
    
    2
    
    
    
    6Foreign exchange gains relating to Canadian and Argentine operations
    
    
    2
    
    
    
    9
    
    
    
    15Other
    
    
    8
    
    
    
    4
    
    
    
    5Income taxes
    
    
    168
    
    
    
    132
    
    
    
    (22
    )CurrentCanadian
    
    
    15
    
    
    
    7
    
    
    
    (2
    )Foreign
    
    
    98
    
    
    
    92
    
    
    
    24113
    
    
    
    99
    
    
    
    22FutureCanadian
    
    
    42
    
    
    
    47
    
    
    
    42Foreign
    
    
    13
    
    
    
    (14
    )
    
    
    (86
    )55
    
    
    
    33
    
    
    
    (44
    )168
    
    
    
    132
    
    
    
    (22
    )
  2005
    
    
    2004Future income tax liabilities
    
    
    
    
    
    Restated (note 2)Depreciation and amortization
    
    
    194
    
    
    
    196Partnership deferral
    
    
    106
    
    
    
    101Other
    
    
    65
    
    
    
    36Total future income tax liabilities
    
    
    365
    
    
    
    333Future income tax assetsLoss carry forwards expiring through 2015
    
    
    12
    
    
    
    63Asset retirement obligations and environmental liabilities
    
    
    59
    
    
    
    57Receivables, inventories and accrued liabilities
    
    
    22
    
    
    
    21Employee future benefits
    
    
    17
    
    
    
    18Other
    
    
    13
    
    
    
    12Future income tax assets before valuation allowance
    
    
    123
    
    
    
    171Valuation allowance
    
    
    (8
    )
    
    
    (23
    )Total future income tax assets, net of valuation allowance
    
    
    115
    
    
    
    148Net future income tax liabilities
    
    
    250
    
    
    
    185Future income tax assets
    
    
    (22
    )
    
    
    (24
    )Future income tax liabilities
    
    
    272
    
    
    
    209Net future income tax liabilities
    
    
    250
    
    
    
    185
 AGRIUM ANNUAL REPORT 2005
    
    73




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 6. Earnings (Loss) per Share
  2005
    
    
    2004
    
    
    2003NumeratorNet earnings (loss)
    
    
    283
    
    
    
    266
    
    
    
    (37
    )Numerator for basic earnings (loss) per share
    
    
    283
    
    
    
    266
    
    
    
    (37
    )Preferred
securities charges (a)
    
    
    
    
    
    
    10
    
    
    
    Numerator for diluted earnings (loss) per share
    
    
    283
    
    
    
    276
    
    
    
    (37
    )DenominatorWeighted-average number of shares outstanding for
basic earnings (loss) per share
    
    
    132
    
    
    
    131
    
    
    
    126Dilutive instrumentsStock
options (a) (b)
    
    
    1
    
    
    
    1
    
    
    
    Preferred
securities converted to common shares
$175-million, eight percent (a) (c)
    
    
    
    
    
    
    12
    
    
    
    Weighted-average number of shares outstanding for
diluted earnings (loss) per share
    
    
    133
    
    
    
    144
    
    
    
    126Basic earnings (loss) per share
    
    
    2.14
    
    
    
    2.03
    
    
    
    (0.29
    )Diluted earnings (loss) per share
    
    
    2.12
    
    
    
    1.91
    
    
    
    (0.29
    )
 (a)
    
    For diluted earnings (loss) per share, conversion or exercise is assumed only if the effect
is dilutive to basic earnings (loss) per share.(b)
    
    Stock options, using the treasury stock method, with an average share price less than or
equal to the average price during the year are considered dilutive and potential
common share equivalents are considered outstanding. At December 31, 2005, there were five
million dilutive stock options. At December 31, 2004, there were eight million
dilutive stock options. At December 31, 2003, there were nine million.(c)
    
    This series of preferred securities was redeemed for cash by the Corporation on February
14, 2005. At December 31, 2004, there were seven million dilutive preferred
securities. At December 31, 2003, there were seven million antidilutive preferred securities.
 7. Accounts Receivable
 2005
    
    
    2004Trade accounts
    
    
    390
    
    
    
    376Allowance for doubtful accounts
    
    
    (12
    )
    
    
    (11
    )Rebates and other non-trade accounts
    
    
    30
    
    
    
    16Derivative contracts
    
    
    31
    
    
    
    4Other
    
    
    4
    
    
    
    3443
    
    
    
    388
   74
    
    AGRIUM ANNUAL REPORT 2005




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 8. Inventories
 2005
    
    
    2004RetailFertilizers
    
    
    103
    
    
    
    85Chemicals
    
    
    100
    
    
    
    88Other
    
    
    17
    
    
    
    7220
    
    
    
    180North America WholesaleFertilizers
    
    
    213
    
    
    
    166Operating supplies
    
    
    66
    
    
    
    63Raw materials
    
    
    24
    
    
    
    27303
    
    
    
    256South America Wholesale
    
    
    10
    
    
    
    11533
    
    
    
    447
 9. Property, Plant & Equipment
 2005
    
    
    
    
    
    
    
    
    
    
    2004Accumulated
    
    
    Net Book
    
    
    
    
    
    
    Accumulated
    
    
    Net BookCost
    
    
    Depreciation
    
    
    Value
    
    
    Cost
    
    
    Depreciation
    
    
    ValueLand
    
    
    29
    
    
    
    
    
    
    
    29
    
    
    
    29
    
    
    
    
    
    
    
    29Building and improvements
    
    
    355
    
    
    
    196
    
    
    
    159
    
    
    
    328
    
    
    
    191
    
    
    
    137Machinery and equipment
    
    
    2,230
    
    
    
    1,298
    
    
    
    932
    
    
    
    2,165
    
    
    
    1,168
    
    
    
    997Other (a)
    
    
    213
    
    
    
    40
    
    
    
    173
    
    
    
    121
    
    
    
    45
    
    
    
    762,827
    
    
    
    1,534
    
    
    
    1,293
    
    
    
    2,643
    
    
    
    1,404
    
    
    
    1,239
 (a)
    
    At December 31, 2005, Other included $134-million (2004  $49-million) of assets under
construction that were not being depreciated.
  10. Other Assets
 2005
    
    
    2004Restated
(note 2)South America value-added tax and other costs
    
    
    14
    
    
    
    30Long-term receivables
    
    
    5
    
    
    
    6Long-term investments
    
    
    29
    
    
    
    23Long-term derivative contracts
    
    
    23
    
    
    
    1Turnaround costs
    
    
    12
    
    
    
    6Pension asset
    
    
    5
    
    
    
    3Other
    
    
    15
    
    
    
    13103
    
    
    
    82
 AGRIUM ANNUAL REPORT 2005
    
    75




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 11. Bank Indebtedness
   Profertil S.A.
  12. Accounts Payable & Accrued Liabilities
 2005
    
    
    2004Trade
    
    
    250
    
    
    
    204Accrued liabilities
    
    
    246
    
    
    
    201Income and other taxes
    
    
    36
    
    
    
    53Accrued interest payable
    
    
    11
    
    
    
    12Derivative contracts
    
    
    33
    
    
    
    2576
    
    
    
    472
 76
    
    AGRIUM ANNUAL REPORT 2005




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##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 13. Long-term Debt
 2005
    
    
    2004Recourse debt
    
    
    
    
    

Restated
(note 2)Unsecured6.86% senior
notes due December 29, 2005 to 2007
(a) (c)
    
    
    30
    
    
    
    457.06% senior
notes due December 29, 2005 to 2010
(b) (c)
    
    
    71
    
    
    
    867.7%
debentures due February 1, 2017
(c)
    
    
    100
    
    
    
    1007.8%
debentures due February 1, 2027
(c)
    
    
    125
    
    
    
    1258.25%
debentures due February 15, 2011
(c)
    
    
    125
    
    
    
    125SecuredOther
    
    
    21
    
    
    
    20472
    
    
    
    501Principal repayments due within one year
    
    
    30
    
    
    
    30442
    
    
    
    471Non-recourse debtSecuredProfertil
S.A.  Other (d)
    
    
    
    
    
    
    99Principal repayments due within one year
    
    
    
    
    
    
    30
    
    
    
    69Preferred securitiesUnsecured 8%
redeemable preferred securities (e)
    
    
    
    
    
    
    175
 (a)
    
    The notes have two remaining equal annual principal repayments, with the next repayment due
December 29, 2006. These notes are guaranteed by Agrium U.S. Inc. and
require the Corporation to maintain certain financial ratios and other covenants.(b)
    
    The notes have five remaining equal annual principal repayments, with the next repayment due
December 29, 2006. These notes are guaranteed by Agrium U.S. Inc. and
require the Corporation to maintain certain financial ratios and other covenants.(c)
    
    These notes and debentures require the Corporation to meet certain financial ratios and other
covenants.(d)
    
    The Corporations share of amounts outstanding under the credit agreement at December 31,
2004, was $99-million, of which $30-million was repayable within one year.
On September 30, 2005, Profertil repaid all amounts outstanding under the credit agreement.(e)
    
    On February 14, 2005, the Corporation redeemed the $175-million, eight percent redeemable
preferred securities for cash. The redemption price equaled the principal
amount of the securities plus accrued and unpaid interest to the date of redemption.
 14. Other Liabilities
 2005
    
    
    2004Asset
retirement obligations (note 15)
    
    
    60
    
    
    
    52Environmental remediation
    
    
    145
    
    
    
    145Employee
future benefits (note 16)Pensions
    
    
    10
    
    
    
    14Other post-retirement benefits
    
    
    38
    
    
    
    36Long-term derivative contracts
    
    
    16
    
    
    
    Other
    
    
    11
    
    
    
    10280
    
    
    
    257
 AGRIUM ANNUAL REPORT 2005
    
    77




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 15. Asset Retirement Obligations
   2005
    
    
    2004Balance, beginning of year
    
    
    52
    
    
    
    43Foreign exchange translation
    
    
    1
    
    
    
    2Additions
    
    
    3
    
    
    
    4Accretion, included in other expenses
    
    
    4
    
    
    
    3Balance, end of year
    
    
    60
    
    
    
    52
  16. Employee Future Benefits
  Obligations & Assets
  78
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Defined Benefit Pension Plans
    
    
    Post-retirement Benefit Plans2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003Change in accrued benefit obligationsBalance, beginning of year
    
    
    145
    
    
    
    127
    
    
    
    105
    
    
    
    48
    
    
    
    40
    
    
    
    31Foreign exchange on Canadian obligations
    
    
    2
    
    
    
    5
    
    
    
    10
    
    
    
    
    
    
    
    1
    
    
    
    2Interest cost
    
    
    9
    
    
    
    9
    
    
    
    7
    
    
    
    2
    
    
    
    3
    
    
    
    2Service cost
    
    
    5
    
    
    
    6
    
    
    
    5
    
    
    
    2
    
    
    
    3
    
    
    
    3Actuarial loss
    
    
    23
    
    
    
    5
    
    
    
    7
    
    
    
    6
    
    
    
    4
    
    
    
    3Amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    Curtailment
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Medicare
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Benefits paid
    
    
    (7
    )
    
    
    (7
    )
    
    
    (5
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    (1
    )Balance, end of year
    
    
    177
    
    
    
    145
    
    
    
    127
    
    
    
    44
    
    
    
    48
    
    
    
    40Change in plan assetsFair value, beginning of year
    
    
    106
    
    
    
    88
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange on Canadian assets
    
    
    2
    
    
    
    4
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    12
    
    
    
    10
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    13
    
    
    
    11
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (7
    )
    
    
    (7
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Fair value, end of year
    
    
    126
    
    
    
    106
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    Unfunded status
    
    
    51
    
    
    
    39
    
    
    
    39
    
    
    
    44
    
    
    
    48
    
    
    
    40Unrecognized net loss
    
    
    (46
    )
    
    
    (28
    )
    
    
    (28
    )
    
    
    (17
    )
    
    
    (11
    )
    
    
    (8
    )Unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    (1
    )
    
    
    (1
    )Accrued employee future benefit liability
    
    
    5
    
    
    
    11
    
    
    
    11
    
    
    
    38
    
    
    
    36
    
    
    
    31Amounts
recognized in theconsolidated balance sheets consist of:Other assets  prepaid employee future benefits (note 10)
    
    
    (5
    )
    
    
    (3
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Other
liabilities  pensions (note 14)
    
    
    10
    
    
    
    14
    
    
    
    13
    
    
    
    38
    
    
    
    36
    
    
    
    315
    
    
    
    11
    
    
    
    11
    
    
    
    38
    
    
    
    36
    
    
    
    31
   Defined Benefit
    
    
    Post-retirementPension Plans
    
    
    Benefit Plans
    
    
    TotalExpected benefit payments2006
    
    
    7
    
    
    
    1
    
    
    
    82007
    
    
    8
    
    
    
    1
    
    
    
    92008
    
    
    8
    
    
    
    1
    
    
    
    92009
    
    
    8
    
    
    
    1
    
    
    
    92010
    
    
    8
    
    
    
    2
    
    
    
    102011 through 2015
    
    
    49
    
    
    
    11
    
    
    
    60
 AGRIUM ANNUAL REPORT 2005
    
    79




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Expense
  2005
    
    
    2004
    
    
    2003Defined benefit pension plansService cost for benefits earned during the year
    
    
    5
    
    
    
    6
    
    
    
    5Interest cost on projected benefit obligations
    
    
    9
    
    
    
    9
    
    
    
    7Expected return on plan assets
    
    
    (8
    )
    
    
    (7
    )
    
    
    (6
    )Net amortization and deferral
    
    
    1
    
    
    
    2
    
    
    
    1Net expense
    
    
    7
    
    
    
    10
    
    
    
    7Post-retirement benefit plansService cost for benefits earned during the year
    
    
    3
    
    
    
    4
    
    
    
    3Interest cost on projected benefit obligations
    
    
    2
    
    
    
    3
    
    
    
    2Net expense
    
    
    5
    
    
    
    7
    
    
    
    5Defined contribution pension plans
    
    
    11
    
    
    
    11
    
    
    
    10Total expense
    
    
    23
    
    
    
    28
    
    
    
    22
 Assumptions
  Future Benefits Obligation
    
    
    Future Benefits Expense(percent)
    
    2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003Defined benefit pension plansDiscount rate
    
    
    5
    
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    7Long-term rate of return on assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8
    
    
    
    8Rate of increase in compensation levels
    
    
    4
    
    
    
    4
    
    
    
    3
    
    
    
    4
    
    
    
    4
    
    
    
    3Post-retirement benefit plansDiscount rate
    
    
    5
    
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Health care cost trend rate
    
    
    11
    
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12
    One Percentage
    
    
    One PercentagePoint Increase
    
    
    Point DecreaseEffect on post retirement benefit obligation
as of September 30, 2005
    
    
    5
    
    
    
    (4
    )Effect on total of service and interest cost
    
    
    1
    
    
    
    (1
    )
 80
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Asset Allocation & Investment Strategy
  Target Allocation
    
    Plan assets
    
    Plan assets(percent)
    
    2006
    
    2005
    
    2004Asset categoriesEquity
securities (a)
    
    53-71
    
    
    
    65
    
    
    
    65Debt securities
    
    28-47
    
    
    
    28
    
    
    
    33Cash and other
    
    0-7
    
    
    
    7
    
    
    
    2
 (a)
    
    Equity securities held by the plans do not include any of the Corporations common shares.
   17. Share Capital
 2005
    
    
    2004
    
    
    2003Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Numberof Shares
    
    
    
    
    
    
    of Shares
    
    
    
    
    
    
    of Shares(millions)
    
    
    Amount
    
    
    (millions)
    
    
    Amount
    
    
    (millions)
    
    
    AmountCommon sharesIssued and outstanding, beginning of year
    
    
    132
    
    
    
    553
    
    
    
    127
    
    
    
    490
    
    
    
    126
    
    
    
    484Issued on
preferred securities redemption (a)
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    50
    
    
    
    
    
    
    
    Issued on exercise of stock options
    
    
    4
    
    
    
    50
    
    
    
    1
    
    
    
    13
    
    
    
    1
    
    
    
    6Stock based compensation
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares repurchased (b)
    
    
    (5
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issued and outstanding, end of year
    
    
    131
    
    
    
    583
    
    
    
    132
    
    
    
    553
    
    
    
    127
    
    
    
    490
 (a)
    
    In January 2004, pursuant to the Corporations plan to redeem the six percent preferred
securities, all holders of the convertible, redeemable preferred securities elected to
convert the securities into common shares at the stated conversion price of $11.9677 per share,
resulting in the issuance of an additional four million common shares. The
redemption price was 103 percent of the principal amount, plus accrued and unpaid securities
charges.(b)
    
    On April 28, 2005, the Board of Directors of the Corporation authorized a share repurchase
program of up to 13-million common shares (approximately 10 percent of the
Corporations issued and outstanding common shares) through a normal course issuer bid. Shares
may be repurchased from time to time on the open market through to
May 2, 2006 at prevailing market prices. Effective October 12, 2005 the share repurchase program
was suspended pending completion of proposed acquisition activities.During the twelve months ended December 31, 2005, the Corporation repurchased for cancellation a
total of 4.7 million common shares under the program at a net cost of $98-million and an average
price per share of $20.82, resulting in a reduction of share capital of $21-million and a
reduction of retained earnings of $77-million.
 18. Stock-based Compensation
  Stock Options
  AGRIUM ANNUAL REPORT 2005
    
    81




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Tandem Stock Appreciation Rights
    2005
    
    
    2004
    
    
    2003Options
    
    
    Weighted-
    
    
    Options
    
    
    Weighted-
    
    
    Options
    
    
    Weighted-Outstanding
    
    
    Avg. Exercise
    
    
    Outstanding
    
    
    Avg. Exercise
    
    
    Outstanding
    
    
    Avg. Exercise(millions)
    
    

Price
(C$)
    
    
    (millions)
    
    

Price(C$)
    
    
    (millions)
    
    

Price(C$)Outstanding, beginning of year
    
    
    8
    
    
    
    16.62
    
    
    
    9
    
    
    
    16.31
    
    
    
    9
    
    
    
    16.21Granted
    
    
    2
    
    
    
    19.99
    
    
    
    
    
    
    
    21.39
    
    
    
    1
    
    
    
    15.59Exercised
    
    
    (4
    )
    
    
    16.79
    
    
    
    (1
    )
    
    
    13.96
    
    
    
    (1
    )
    
    
    13.19Cancelled
    
    
    
    
    
    
    18.32
    
    
    
    
    
    
    
    17.77
    
    
    
    
    
    
    
    18.25Outstanding, end of year
    
    
    6
    
    
    
    17.26
    
    
    
    8
    
    
    
    16.62
    
    
    
    9
    
    
    
    16.31Exercisable, end of year
    
    
    4
    
    
    
    16.72
    
    
    
    7
    
    
    
    16.68
    
    
    
    6
    
    
    
    16.37
  2005
    
    
    2004
    
    
    2003As Reported
    
    
    Pro Forma
    
    
    As Reported
    
    
    Pro Forma
    
    
    As Reported
    
    
    Pro FormaNet earnings (loss)
    
    
    283
    
    
    
    281
    
    
    
    266
    
    
    
    262
    
    
    
    (37
    )
    
    
    (42
    )Earnings (loss) per common shareBasic
    
    
    2.14
    
    
    
    2.13
    
    
    
    2.03
    
    
    
    2.00
    
    
    
    (0.29
    )
    
    
    (0.34
    )Diluted
    
    
    2.12
    
    
    
    2.10
    
    
    
    1.91
    
    
    
    1.89
    
    
    
    (0.29
    )
    
    
    (0.34
    )
  2005
    
    
    2004
    
    
    2003Dividend
yield (%)
    
    
    1
    
    
    
    1
    
    
    
    1Expected stock price volatility (%)
    
    
    32
    
    
    
    32
    
    
    
    32Risk-free interest rate (%)
    
    
    4
    
    
    
    4
    
    
    
    4Expected life of the options (years)
    
    
    7
    
    
    
    7
    
    
    
    7
 82
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Options Outstanding
    
    
    Options ExercisableNumbers
    
    
    Weighted-
    
    
    Weighted-
    
    
    Number
    
    
    Weighted-Outstanding
    
    
    Avg. Remaining
    
    
    Avg. Exercise
    
    
    Exercisable
    
    
    Avg. Exerciseat Year End
    
    
    Contractual Life
    
    
    Price
    
    
    at Year End
    
    
    PriceRange of
Exercise Prices(C$)
    
    (millions)
    
    
    (years)
    
    
    (C$)
    
    
    (millions)
    
    
    (C$)Less than 11.86
    
    
    
    
    
    
    4
    
    
    
    11.71
    
    
    
    
    
    
    
    11.7111.86 to 15.85
    
    
    2
    
    
    
    6
    
    
    
    14.56
    
    
    
    1
    
    
    
    14.1215.86 to 20.15
    
    
    2
    
    
    
    6
    
    
    
    17.87
    
    
    
    2
    
    
    
    17.3720.16 to 22.15
    
    
    2
    
    
    
    6
    
    
    
    20.69
    
    
    
    1
    
    
    
    20.5511.86 to 22.15
    
    
    6
    
    
    
    6
    
    
    
    17.26
    
    
    
    4
    
    
    
    16.72
 Stock Appreciation Rights
   Performance Share Unit Plan
    Directors Deferred Share Unit Plans
    AGRIUM ANNUAL REPORT 2005
    
    83




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 19. Commitments
 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010Cost of productOperating lease commitments
    
    
    41
    
    
    
    26
    
    
    
    21
    
    
    
    15
    
    
    
    12Natural gas
commitments  North
America
    
    
    986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Power, suphuric acid and other
payments
    
    
    62
    
    
    
    37
    
    
    
    27
    
    
    
    26
    
    
    
    26Profertil natural gas and other
    
    
    32
    
    
    
    30
    
    
    
    31
    
    
    
    33
    
    
    
    341,121
    
    
    
    93
    
    
    
    79
    
    
    
    74
    
    
    
    72OtherLong-term debt and capital
lease repayments (a)
    
    
    66
    
    
    
    64
    
    
    
    47
    
    
    
    46
    
    
    
    45Total
    
    
    1,187
    
    
    
    157
    
    
    
    126
    
    
    
    120
    
    
    
    117
 (a)
    
    Includes interest payments.
 
     20. Guarantees
  84
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 21. Contingencies
 Environmental Remediation
  Litigation
    Other
  22. Financial Instruments
  Derivative Contracts
  Natural Gas Derivative Contracts
  AGRIUM ANNUAL REPORT 2005
    
    85




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Foreign Exchange Derivative Contracts
   2005
    
    
    2004Notional Amount
    
    
    
    
    
    Notional AmountFair Value
    
    
    or Quantity
    
    
    Fair Value
    
    
    or QuantityGas 
de-designated swaps and options (a)
    
    
    48
    
    
    27 MMBtu
    
    
    
    
    
    
    Gas 
non-qualifying swaps and options
(b)
    
    
    (14
    )
    
    39 MMBtu
    
    
    2
    
    
    35 MMBtuGas 
qualifying swaps and options (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    20 MMBtuForeign
exchange  qualifying forward contracts and options
(d)
    
    
    1
    
    
    
    C$105
    
    
    
    3
    
    
    
    C$4535
    
    
    
    
    
    
    
    5
 (a)
    
    De-designated natural gas derivative contractsEffective July 1, 2005, the Corporations previously qualifying natural gas derivative
contracts were determined to no longer qualify for hedge accounting due to reduced correlation
between AECO based natural gas purchase contracts and NYMEX-based derivative contracts.
Accordingly, the fair value of these derivative contracts at July 1, 2005, an unrealized gain
of $40-million was deferred and recorded on the consolidated balance sheet and will be
recognized as cost of product manufactured in the same periods during which the originally
hedged gas purchases occur between 2005 and 2009. Subsequent changes in fair value of these
derivatives will be recognized through other expenses.During the period from July 1, 2005 to December 31, 2005, $10-million and $1-million of the
deferred gain were recognized as cost of product sold and inventory, respectively. At December
31, 2005, the current and long-term portions of the remaining deferred gain in the amount of
$15-million and $14-million were included in accounts payable and accrued liabilities and other
liabilities. The change in fair value of these de-designated derivative contracts subsequent to
the date of de-designation, a gain of $19-million, was recognized as a reduction to other
expense. The remaining fair value balance of $19-million was recorded in accounts receivable in
the amount of $10-million and other assets in the amount of $9-million.(b)
    
    Non-qualifying natural gas derivative contractsNon-qualifying natural gas derivative contracts are those contracts that do not qualify for
hedge accounting, but provide an economic hedge of the Corporations exposure to natural gas
costs. During 2005, other expenses included net realized and unrealized gains (losses) in the
amount of $(40)-million (2004  $3-million; 2003  $(5)-million) related to non-qualifying
natural gas derivative contracts, representing primarily AECO basis swaps. The fair value of
the non-qualifying natural gas derivative contracts was recorded in the consolidated balance
sheets.(c)
    
    Qualifying natural gas derivative contractsThe Corporation had no natural gas derivative contracts outstanding at December 31, 2005 that
qualified for hedge accounting. The fair value of qualifying natural gas derivative contracts
as at December 31, 2004 was nominal. During 2005, $15-million
(2004  nil; 2003  $11-million)
of realized gains on qualifying natural gas derivative contracts were recorded as cost of goods
sold.(d)
    
    Qualifying foreign exchange derivative contractsDuring 2005, net realized gains on foreign currency options and forward contracts of $4-million
(2004  $3-million; 2003  $7-million) were recorded in the statement of operations. The fair
value of the qualifying foreign exchange derivative contracts was not recorded in the
consolidated balance sheets.
 Other Financial Instruments
   Commodity Contracts
 2005
    
    
    2004Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueUnsecured long-term debt
    
    
    451
    
    
    
    507
    
    
    
    481
    
    
    
    602Preferred securities
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    179
  86
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 Counterparty Credit Risk
    23. Segmentation
    WholesaleNorth
    
    
    South2005
    
    Retail
    
    
    America
    
    
    America
    
    
    Other
    
    
    TotalNet sales  external
    
    
    1,242
    
    
    
    1,899
    
    
    
    153
    
    
    
    
    
    
    
    3,294 inter-segment
    
    
    
    
    
    
    132
    
    
    
    16
    
    
    
    (148
    )
    
    
    Total net sales
    
    
    1,242
    
    
    
    2,031
    
    
    
    169
    
    
    
    (148
    )
    
    
    3,294Cost of product
    
    
    895
    
    
    
    1,443
    
    
    
    54
    
    
    
    (145
    )
    
    
    2,247Gross profit
    
    
    347
    
    
    
    588
    
    
    
    115
    
    
    
    (3
    )
    
    
    1,047ExpensesSelling
    
    
    239
    
    
    
    19
    
    
    
    1
    
    
    
    (5
    )
    
    
    254General and administrative
    
    
    10
    
    
    
    21
    
    
    
    4
    
    
    
    44
    
    
    
    79Depreciation and amortization
    
    
    17
    
    
    
    107
    
    
    
    15
    
    
    
    7
    
    
    
    146Royalties and other taxes
    
    
    7
    
    
    
    35
    
    
    
    
    
    
    
    3
    
    
    
    45Other expenses
    
    
    (22
    )
    
    
    (2
    )
    
    
    11
    
    
    
    36
    
    
    
    23Earnings (loss) before interest expense and income taxes
    
    
    96
    
    
    
    408
    
    
    
    84
    
    
    
    (88
    )
    
    
    500Net working capital
    
    
    418
    
    
    
    644
    
    
    
    16
    
    
    
    (322
    )
    
    
    756Property, plant and equipment
    
    
    93
    
    
    
    952
    
    
    
    223
    
    
    
    25
    
    
    
    1,293Total assets
    
    
    753
    
    
    
    2,468
    
    
    
    271
    
    
    
    (707
    )
    
    
    2,785Capital expenditures
    
    
    18
    
    
    
    147
    
    
    
    4
    
    
    
    6
    
    
    
    175
 AGRIUM ANNUAL REPORT 2005
    
    87




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 WholesaleNorth
    
    
    South2004
    
    Retail
    
    
    America
    
    
    America
    
    
    Other
    
    
    TotalNet sales  external
    
    
    1,114
    
    
    
    1,594
    
    
    
    130
    
    
    
    
    
    
    
    2,838 inter-segment
    
    
    
    
    
    
    109
    
    
    
    13
    
    
    
    (122
    )
    
    
    Total net sales
    
    
    1,114
    
    
    
    1,703
    
    
    
    143
    
    
    
    (122
    )
    
    
    2,838Cost of product
    
    
    798
    
    
    
    1,211
    
    
    
    41
    
    
    
    (122
    )
    
    
    1,928Gross profit
    
    
    316
    
    
    
    492
    
    
    
    102
    
    
    
    
    
    
    
    910ExpensesSelling
    
    
    222
    
    
    
    17
    
    
    
    1
    
    
    
    (3
    )
    
    
    237General and administrative
    
    
    8
    
    
    
    22
    
    
    
    3
    
    
    
    30
    
    
    
    63Depreciation and amortization
    
    
    18
    
    
    
    116
    
    
    
    15
    
    
    
    7
    
    
    
    156Kenai award
and settlement (note 3)
    
    
    
    
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    (86
    )Royalties and other taxes
    
    
    5
    
    
    
    22
    
    
    
    
    
    
    
    2
    
    
    
    29Other expenses
    
    
    (18
    )
    
    
    52
    
    
    
    
    
    
    
    10
    
    
    
    44Earnings (loss) before interest expense and income taxes
    
    
    81
    
    
    
    349
    
    
    
    83
    
    
    
    (46
    )
    
    
    467Networking capital
    
    
    359
    
    
    
    (31
    )
    
    
    60
    
    
    
    396
    
    
    
    784Property, plant and equipment
    
    
    91
    
    
    
    918
    
    
    
    231
    
    
    
    (1
    )
    
    
    1,239Total assets
    
    
    729
    
    
    
    2,147
    
    
    
    353
    
    
    
    (568
    )
    
    
    2,661Capital expenditures
    
    
    14
    
    
    
    61
    
    
    
    4
    
    
    
    3
    
    
    
    82
  WholesaleNorth
    
    
    South2003
    
    Retail
    
    
    America
    
    
    America
    
    
    Other
    
    
    TotalNet sales  external
    
    
    1,015
    
    
    
    1,377
    
    
    
    107
    
    
    
    
    
    
    
    2,499 inter-segment
    
    
    
    
    
    
    88
    
    
    
    9
    
    
    
    (97
    )
    
    
    Total net sales
    
    
    1,015
    
    
    
    1,465
    
    
    
    116
    
    
    
    (97
    )
    
    
    2,499Cost of product
    
    
    717
    
    
    
    1,106
    
    
    
    34
    
    
    
    (97
    )
    
    
    1,760Gross profit
    
    
    298
    
    
    
    359
    
    
    
    82
    
    
    
    
    
    
    
    739ExpensesSelling
    
    
    214
    
    
    
    15
    
    
    
    1
    
    
    
    (3
    )
    
    
    227General and administrative
    
    
    8
    
    
    
    20
    
    
    
    3
    
    
    
    28
    
    
    
    59Depreciation and amortization
    
    
    19
    
    
    
    99
    
    
    
    15
    
    
    
    7
    
    
    
    140Asset
impairment (note 9)
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    235Royalties and other taxes
    
    
    5
    
    
    
    11
    
    
    
    
    
    
    
    1
    
    
    
    17Other expenses
    
    
    (14
    )
    
    
    28
    
    
    
    
    
    
    
    26
    
    
    
    40Earnings (loss) before interest expense and income taxes
    
    
    66
    
    
    
    (49
    )
    
    
    63
    
    
    
    (59
    )
    
    
    21Net working capital
    
    
    219
    
    
    
    465
    
    
    
    30
    
    
    
    (297
    )
    
    
    417Property, plant and equipment
    
    
    95
    
    
    
    896
    
    
    
    238
    
    
    
    31
    
    
    
    1,260Total assets
    
    
    471
    
    
    
    1,553
    
    
    
    324
    
    
    
    (70
    )
    
    
    2,278Capital expenditures
    
    
    13
    
    
    
    73
    
    
    
    3
    
    
    
    10
    
    
    
    99
 88
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2005
    
    
    2004
    
    
    2003Net
    
    
    Cost of
    
    
    Gross
    
    
    Net
    
    
    Cost of
    
    
    Gross
    
    
    Net
    
    
    Cost of
    
    
    GrossSales
    
    
    Product
    
    
    Profit
    
    
    Sales
    
    
    Product
    
    
    Profit
    
    
    Sales
    
    
    Product
    
    
    ProfitNorth America WholesaleNitrogenAmmonia
    
    
    606
    
    
    
    464
    
    
    
    142
    
    
    
    397
    
    
    
    284
    
    
    
    113
    
    
    
    382
    
    
    
    286
    
    
    
    96Urea
    
    
    584
    
    
    
    419
    
    
    
    165
    
    
    
    499
    
    
    
    365
    
    
    
    134
    
    
    
    423
    
    
    
    323
    
    
    
    100Nitrate, sulphate and other
    
    
    273
    
    
    
    206
    
    
    
    67
    
    
    
    284
    
    
    
    216
    
    
    
    68
    
    
    
    239
    
    
    
    181
    
    
    
    58Total nitrogen
    
    
    1,463
    
    
    
    1,089
    
    
    
    374
    
    
    
    1,180
    
    
    
    865
    
    
    
    315
    
    
    
    1,044
    
    
    
    790
    
    
    
    254Phosphate
    
    
    313
    
    
    
    256
    
    
    
    57
    
    
    
    309
    
    
    
    238
    
    
    
    71
    
    
    
    261
    
    
    
    217
    
    
    
    44Potash
    
    
    255
    
    
    
    98
    
    
    
    157
    
    
    
    214
    
    
    
    108
    
    
    
    106
    
    
    
    160
    
    
    
    99
    
    
    
    612,031
    
    
    
    1,443
    
    
    
    588
    
    
    
    1,703
    
    
    
    1,211
    
    
    
    492
    
    
    
    1,465
    
    
    
    1,106
    
    
    
    359South America WholesaleNitrogen
    
    
    159
    
    
    
    47
    
    
    
    112
    
    
    
    137
    
    
    
    38
    
    
    
    99
    
    
    
    111
    
    
    
    31
    
    
    
    80Other
    
    
    10
    
    
    
    7
    
    
    
    3
    
    
    
    6
    
    
    
    3
    
    
    
    3
    
    
    
    5
    
    
    
    3
    
    
    
    2169
    
    
    
    54
    
    
    
    115
    
    
    
    143
    
    
    
    41
    
    
    
    102
    
    
    
    116
    
    
    
    34
    
    
    
    82RetailFertilizers
    
    
    626
    
    
    
    485
    
    
    
    141
    
    
    
    556
    
    
    
    425
    
    
    
    131
    
    
    
    468
    
    
    
    351
    
    
    
    117Chemicals
    
    
    458
    
    
    
    328
    
    
    
    130
    
    
    
    416
    
    
    
    298
    
    
    
    118
    
    
    
    399
    
    
    
    288
    
    
    
    111Other
    
    
    158
    
    
    
    82
    
    
    
    76
    
    
    
    142
    
    
    
    75
    
    
    
    67
    
    
    
    148
    
    
    
    78
    
    
    
    701,242
    
    
    
    895
    
    
    
    347
    
    
    
    1,114
    
    
    
    798
    
    
    
    316
    
    
    
    1,015
    
    
    
    717
    
    
    
    298Other inter-segment eliminations
    
    
    (148
    )
    
    
    (145
    )
    
    
    (3
    )
    
    
    (122
    )
    
    
    (122
    )
    
    
    
    
    
    
    (97
    )
    
    
    (97
    )
    
    
    Total
    
    
    3,294
    
    
    
    2,247
    
    
    
    1,047
    
    
    
    2,838
    
    
    
    1,928
    
    
    
    910
    
    
    
    2,499
    
    
    
    1,760
    
    
    
    739
  2005
    
    
    2004
    
    
    2003Net
    
    
    Capital
    
    
    Net
    
    
    Capital
    
    
    Net
    
    
    CapitalSales
    
    
    Assets
    
    
    Sales
    
    
    Assets
    
    
    Sales
    
    
    AssetsCanada
    
    
    745
    
    
    
    760
    
    
    
    576
    
    
    
    669
    
    
    
    580
    
    
    
    641United States
    
    
    1,846
    
    
    
    301
    
    
    
    1,687
    
    
    
    332
    
    
    
    1,557
    
    
    
    374Argentina
    
    
    222
    
    
    
    232
    
    
    
    207
    
    
    
    238
    
    
    
    162
    
    
    
    245Other
    
    
    481
    
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    200
    
    
    
    3,294
    
    
    
    1,293
    
    
    
    2,838
    
    
    
    1,239
    
    
    
    2,499
    
    
    
    1,260
 AGRIUM ANNUAL REPORT 2005
    
    89




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 24. Profertil
   BALANCE SHEETS
    
    2005
    
    
    2004AssetsCash and cash equivalents
    
    
    23
    
    
    
    81Accounts receivable
    
    
    13
    
    
    
    18Inventories and prepaid expenses
    
    
    11
    
    
    
    11Property, plant and equipment
    
    
    223
    
    
    
    231Other assets
    
    
    1
    
    
    
    13271
    
    
    
    354LiabilitiesAccounts payable and current portion of long-term debt
    
    
    12
    
    
    
    42Income and other taxes
    
    
    19
    
    
    
    7Long-term
debt (note 13)
    
    
    
    
    
    
    69Other
    
    
    3
    
    
    
    Future income taxes
    
    
    3
    
    
    
    437
    
    
    
    122Proportionate share of net assets of joint venture
    
    
    234
    
    
    
    232
  STATEMENTS OF OPERATIONS
    
    2005
    
    
    2004
    
    
    2003Net sales
    
    
    169
    
    
    
    143
    
    
    
    116Cost of product
    
    
    54
    
    
    
    41
    
    
    
    34Gross profit
    
    
    115
    
    
    
    102
    
    
    
    82Selling
    
    
    1
    
    
    
    1
    
    
    
    1General and administrative costs
    
    
    4
    
    
    
    3
    
    
    
    3Depreciation
    
    
    15
    
    
    
    15
    
    
    
    15Other expenses and Argentine charges
    
    
    11
    
    
    
    
    
    
    
    Earnings before interest expense and income taxes
    
    
    84
    
    
    
    83
    
    
    
    63Interest expense
    
    
    8
    
    
    
    12
    
    
    
    16Income taxes
    
    
    31
    
    
    
    12
    
    
    
    4Proportionate share of net earnings of joint venture
    
    
    45
    
    
    
    59
    
    
    
    43
  STATEMENTS OF CASH FLOWS
    
    2005
    
    
    2004
    
    
    2003Operating activities
    
    
    85
    
    
    
    82
    
    
    
    25Investing activities
    
    
    (4
    )
    
    
    (2
    )
    
    
    17Financing activities
    
    
    (139
    )
    
    
    (43
    )
    
    
    (15
    )Proportionate share
of (decrease) increase
in cash and cash
equivalents of joint
venture
    
    
    (58
    )
    
    
    37
    
    
    
    27
 90
    
    AGRIUM ANNUAL REPORT 2005




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 25. Related Party Transactions
  26. Subsequent Event
 Acquisition of Royster-Clark Ltd.
   27.
Differences Between Accounting Principles Generally Accepted in
Canada and the United States
  CONSOLIDATED STATEMENTS OF OPERATIONS
 2005
    
    
    2004
    
    
    2003Net earnings (loss) based on Canadian GAAP
    
    
    283
    
    
    
    266
    
    
    
    (37
    )AdjustmentsDerivative
instruments and hedging activities, net of tax
(a)
    
    
    (9
    )
    
    
    
    
    
    
    Other, net of tax
    
    
    (4
    )
    
    
    (3
    )
    
    
    (1
    )Net earnings (loss) based on U.S. GAAP
    
    
    270
    
    
    
    263
    
    
    
    (38
    )Earnings (loss) per common share based on U.S. GAAPBasic net earnings (loss) per share
    
    
    2.04
    
    
    
    2.01
    
    
    
    (0.30
    )Diluted net earnings (loss) per share
    
    
    2.03
    
    
    
    1.89
    
    
    
    (0.30
    )
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 2005
    
    
    2004
    
    
    2003Net earnings (loss) based on U.S. GAAP
    
    
    270
    
    
    
    263
    
    
    
    (38
    )Change in
foreign currency translation adjustment
(c)
    
    
    9
    
    
    
    38
    
    
    
    95Change in
minimum pension liability adjustment, net of tax (b)
    
    
    (3
    )
    
    
    
    
    
    
    (4
    )Change in
unrealized gains (losses) on derivative instruments, net of tax
(a)
    
    
    27
    
    
    
    3
    
    
    
    (5
    )Change in realized gains (losses) on derivative instruments included in
inventory, net of tax (a)
    
    
    1
    
    
    
    (1
    )
    
    
    2Comprehensive income based on U.S. GAAP
    
    
    304
    
    
    
    303
    
    
    
    50
 AGRIUM ANNUAL REPORT 2005
    
    91




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 2005
    
    
    2004Shareholders equity based on Canadian GAAP
    
    
    1,180
    
    
    
    948Unrealized
gains (losses) on derivative instruments, net of tax
(a)
    
    
    29
    
    
    
    2Realized
gains on derivative instruments included in inventory, net of tax (a)
    
    
    1
    
    
    
    Additional
minimum pension liability, net of
tax(b)
    
    
    (13
    )
    
    
    (10
    )Other, net of tax
    
    
    (12
    )
    
    
    (8
    )Shareholders equity based on U.S. GAAP
    
    
    1,185
    
    
    
    932
 Description of significant differences
 (a)
    
    Derivative instruments and hedging activities  The Corporation accounts for its
derivative instruments
under Canadian GAAP as described in note 1 and 22. Under U.S. GAAP, generally all derivative
instruments
must be recognized as assets or liabilities on the balance sheet and measured at fair value. Any
change in
fair value of a derivative instrument that qualifies as a cash flow hedge is initially included
in the determination
of comprehensive income and classified in shareholders equity. The gain or loss is subsequently
included
in earnings in the same period as the hedged item. Any change in fair value of a derivative
instrument that
does not qualify for hedge accounting is recognized in earnings immediately.(b)
    
    Unfunded employee
benefits  Under U.S. GAAP an additional minimum liability is recognized if
the unfunded
employee benefits Accumulated Benefit Obligation exceeds the accrued benefit obligation that is
recorded
in the consolidated balance sheets. This additional liability is recorded as a reduction to
other comprehensive
income.(c)
    
    Foreign currency translation adjustment  Under Canadian GAAP, foreign exchange gains and
losses on
translation of self-sustaining foreign operations are included as a separate component of
shareholders
equity referred to as cumulative translation adjustment. Under U.S. GAAP, such foreign currency
translation
gains and losses are recorded as comprehensive income.(d)
    
    Joint ventures  Under U.S. GAAP, ownership in a joint venture where the venturer does not
own more than
50 percent and has a significant influence over the operating activities of the joint venture is
to be accounted
for using the equity method. Under Canadian GAAP, joint ventures are proportionately
consolidated. Net
assets and earnings of the Corporation would be the same under either method. Note 24 provides
the details of the joint venture as included under Canadian GAAP.
 92
    
    AGRIUM ANNUAL REPORT 2005