##### 



EXHIBIT 99.3
 
 2006
 Audited Annual Financial
Statements and Notes




---



##### 








---



##### 



FINANCIAL REPORTING
 To the Shareholders and Board of Directors of Agrium Inc.
   INTERNAL CONTROL OVER FINANCIAL REPORTING
  Internal
Control-Integrated Framework
  -s- M. M. Wilson
    
    -s- B. G. WatermanMichael M. Wilson
    
    Bruce G. WatermanPresident & Chief Executive Officer
    
    Senior Vice President, Finance & Chief Financial Officer
 
 AGRIUM ANNUAL REPORT 2006
    
    83




---



##### 



To the Shareholders and Board of Directors of Agrium Inc.
     Internal
ControlIntegrated Framework
 
 
  To the Shareholders and Board of Directors of Agrium Inc.
 Internal ControlIntegrated Framework
 84
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



Internal ControlIntegrated Framework Internal ControlIntegrated
Framework
   
 
 AGRIUM ANNUAL REPORT 2006
    
    85




---



##### 



Years ended December 31
    
    
    2006
    
    
    
    2005
    
    
    
    2004(millions of U.S. dollars, except per share amounts)Sales
    
    
    
    4,373
    
    
    
    
    3,491
    
    
    
    
    3,001Direct Freight
    
    
    
    180
    
    
    
    
    197
    
    
    
    
    163Net sales
    
    
    
    4,193
    
    
    
    
    3,294
    
    
    
    
    2,838Cost of product
    
    
    
    3,237
    
    
    
    
    2,256
    
    
    
    
    1,933Gross profit
    
    
    
    956
    
    
    
    
    1,038
    
    
    
    
    905Expenses (income)Selling
    
    
    
    390
    
    
    
    
    254
    
    
    
    
    237General and administrative
    
    
    
    96
    
    
    
    
    79
    
    
    
    
    63Depreciation and amortization
    
    
    
    169
    
    
    
    
    146
    
    
    
    
    156Asset impairment (note 9)
    
    
    
    136
    
    
    
    
    
    
    
    
    
    Kenai award and settlement (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86
    )Royalties and other taxes
    
    
    
    20
    
    
    
    
    45
    
    
    
    
    29Other expenses (note 4)
    
    
    
    73
    
    
    
    
    14
    
    
    
    
    39Earnings before interest expense and income taxes
    
    
    
    72
    
    
    
    
    500
    
    
    
    
    467Interest on long-term debt
    
    
    
    47
    
    
    
    
    47
    
    
    
    
    65Other interest
    
    
    
    16
    
    
    
    
    2
    
    
    
    
    4Earnings before income taxes
    
    
    
    9
    
    
    
    
    451
    
    
    
    
    398Current income taxes
    
    
    
    78
    
    
    
    
    113
    
    
    
    
    99Future income taxes (recovery)
    
    
    
    (102
    )
    
    
    
    55
    
    
    
    
    33Income taxes (note 5)
    
    
    
    (24
    )
    
    
    
    168
    
    
    
    
    132Net earnings
    
    
    
    33
    
    
    
    
    283
    
    
    
    
    266Retained earnings  beginning of year
    
    
    
    584
    
    
    
    
    392
    
    
    
    
    140Common share dividends declared
    
    
    
    (15
    )
    
    
    
    (14
    )
    
    
    
    (14
    )Common share repurchases (note 19)
    
    
    
    
    
    
    
    
    (77
    )
    
    
    
    Retained earnings  end of year
    
    
    
    602
    
    
    
    
    584
    
    
    
    
    392Earnings per share(note 6)Basic
    
    
    
    0.25
    
    
    
    
    2.14
    
    
    
    
    2.03Diluted
    
    
    
    0.25
    
    
    
    
    2.12
    
    
    
    
    1.91
  86
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



Years ended December 31
    
    
    2006
    
    
    
    2005
    
    
    
    2004(millions of U.S. dollars, except per share amounts)OperatingNet earnings
    
    
    
    33
    
    
    
    
    283
    
    
    
    
    266Items not affecting cashDepreciation and amortization
    
    
    
    169
    
    
    
    
    146
    
    
    
    
    156Asset impairment (note 9)
    
    
    
    136
    
    
    
    
    
    
    
    
    
    Kenai award and settlement (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )Proceeds on settlement (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Gain on disposal of assets and investments
    
    
    
    (14
    )
    
    
    
    (4
    )
    
    
    
    (6
    )Future income taxes (recovery) (note 5)
    
    
    
    (102
    )
    
    
    
    55
    
    
    
    
    33Foreign exchange
    
    
    
    6
    
    
    
    
    (6
    )
    
    
    
    (5
    )Net changes in non-cash working capital
(net of changes from acquisitions)Accounts receivable
    
    
    
    (63
    )
    
    
    
    (29
    )
    
    
    
    (52
    )Inventories
    
    
    
    180
    
    
    
    
    (76
    )
    
    
    
    (83
    )Prepaid expenses
    
    
    
    (32
    )
    
    
    
    (35
    )
    
    
    
    4Accounts payable and accrued liabilities
    
    
    
    (118
    )
    
    
    
    107
    
    
    
    
    69Income and other taxes payable
    
    
    
    (29
    )
    
    
    
    (18
    )
    
    
    
    54Other operating
    
    
    
    (12
    )
    
    
    
    27
    
    
    
    
    15Cash provided by operating activities
    
    
    
    154
    
    
    
    
    450
    
    
    
    
    440InvestingAcquisitions, net of cash acquired (note 2)
    
    
    
    (651
    )
    
    
    
    (10
    )
    
    
    
    Capital expenditures
    
    
    
    (209
    )
    
    
    
    (175
    )
    
    
    
    (82
    )Decrease (increase) in other assets
    
    
    
    37
    
    
    
    
    (22
    )
    
    
    
    (14
    )Proceeds from disposal of assets and investments
    
    
    
    93
    
    
    
    
    13
    
    
    
    
    10Other
    
    
    
    (5
    )
    
    
    
    (18
    )
    
    
    
    7Cash used in investing activities
    
    
    
    (735
    )
    
    
    
    (212
    )
    
    
    
    (79
    )FinancingCommon shares issued (note 19)
    
    
    
    33
    
    
    
    
    50
    
    
    
    
    12Common share repurchases (note 19)
    
    
    
    
    
    
    
    
    (98
    )
    
    
    
    Bank indebtedness issued
    
    
    
    212
    
    
    
    
    
    
    
    
    
    Long-term debt issued (note 15)
    
    
    
    296
    
    
    
    
    
    
    
    
    
    Long-term debt repayment
    
    
    
    (137
    )
    
    
    
    (126
    )
    
    
    
    (134
    )Common share dividends paid
    
    
    
    (14
    )
    
    
    
    (14
    )
    
    
    
    (14
    )Preferred security repayment
    
    
    
    
    
    
    
    
    (175
    )
    
    
    
    Cash provided by (used in) financing activities
    
    
    
    390
    
    
    
    
    (363
    )
    
    
    
    (136
    )(Decrease) increase in cash and cash equivalents
    
    
    
    (191
    )
    
    
    
    (125
    )
    
    
    
    225Cash and cash equivalents  beginning of year
    
    
    
    300
    
    
    
    
    425
    
    
    
    
    200Cash and cash equivalents  end of year
    
    
    
    109
    
    
    
    
    300
    
    
    
    
    425Dividends per common share for the year
    
    
    
    0.11
    
    
    
    
    0.11
    
    
    
    
    0.11Supplemental cash flow disclosureInterest paid
    
    
    
    61
    
    
    
    
    49
    
    
    
    
    74Income taxes paid
    
    
    
    97
    
    
    
    
    132
    
    
    
    
    42
  AGRIUM ANNUAL REPORT 2006
    
    87




---



##### 



As at December 31
    
    
    2006
    
    
    
    2005(millions of U.S. dollars)ASSETSCurrent assetsCash and cash equivalents
    
    
    
    109
    
    
    
    
    300Accounts receivable (note 7)
    
    
    
    566
    
    
    
    
    443Inventories (note 8)
    
    
    
    747
    
    
    
    
    533Prepaid expenses and deposits
    
    
    
    137
    
    
    
    
    911,559
    
    
    
    
    1,367Property, plant and equipment(note 9)
    
    
    
    1,332
    
    
    
    
    1,285Intangibles(note 10)
    
    
    
    75
    
    
    
    
    Goodwill(note 11)
    
    
    
    174
    
    
    
    
    8Other assets(note 12)
    
    
    
    103
    
    
    
    
    103Future income tax assets(note 5)
    
    
    
    22
    
    
    
    
    223,265
    
    
    
    
    2,785LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesBank indebtedness (note 13)
    
    
    
    227
    
    
    
    
    5Accounts payable and accrued liabilities (note 14)
    
    
    
    732
    
    
    
    
    579Current portion of long-term debt (note 15)
    
    
    
    1
    
    
    
    
    30960
    
    
    
    
    614Long-term debt(note 15)
    
    
    
    669
    
    
    
    
    442Other liabilities(note 16)
    
    
    
    272
    
    
    
    
    277Future income tax liabilities(note 5)
    
    
    
    131
    
    
    
    
    2722,032
    
    
    
    
    1,605Commitments, guarantees,
and contingencies(notes 21, 22, and 23 respectively)Shareholders equityShare capital (note 19)Authorized: unlimited common sharesIssued and outstanding: 2006  133 million (2005  131 million)
    
    
    
    617
    
    
    
    
    583Contributed surplus
    
    
    
    5
    
    
    
    
    3Retained earnings
    
    
    
    602
    
    
    
    
    584Cumulative translation adjustment
    
    
    
    9
    
    
    
    
    101,233
    
    
    
    
    1,1803,265
    
    
    
    
    2,785
  Approved on behalf of the Board:-s- M. M. Wilson
    
    -s- H. G. SchaeferMichael M. Wilson
    
    Harry G. SchaeferDirector
    
    Director
 88
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS) 
 1.
    
    ACCOUNTING POLICIES
 Principles of consolidation and preparation of financial statements
    Cash and cash equivalents
  Inventories
    Property, plant and equipment
  AGRIUM ANNUAL REPORT 2006
    
    89




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 Intangible assets
  Goodwill
  Impairment of long-lived assets
  Other assets
   Employee future benefits
   90
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
  Environmental remediation
  Asset retirement obligations
  Future income taxes
  Revenue recognition
  Stock-based compensation
  AGRIUM ANNUAL REPORT 2006
    
    91




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
  Derivative financial instruments
      Foreign currency translation
   92
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
  Recent accounting pronouncements
 Financial instruments, hedging relationships and other comprehensive income
  2.
    
    BUSINESS ACQUISITIONS
 Fair value of net assets acquired
    
    
    Nu-Gro
    
    
    
    Royster-Clark
    
    
    
    Pursell
    
    
    
    TotalWorking capital
    
    
    
    24
    
    
    
    
    144
    
    
    
    
    6
    
    
    
    
    174Property, plant and equipment
    
    
    
    23
    
    
    
    
    178
    
    
    
    
    18
    
    
    
    
    219Future income taxes and other long-term assets
    
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    
    
    70Intangibles
    
    
    
    21
    
    
    
    
    7
    
    
    
    
    49
    
    
    
    
    77Goodwill (a)
    
    
    
    27
    
    
    
    
    121
    
    
    
    
    18
    
    
    
    
    166Future
income taxes and other long-term liabilities
    
    
    
    (9
    )
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    (20
    )Long-term debt
    
    
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    (35
    )Total consideration
    
    
    
    86
    
    
    
    
    474
    
    
    
    
    91
    
    
    
    
    651
 (a)
    
    Goodwill acquired in the Nu-Gro and Royster-Clark acquisitions is not expected to be
deductible for tax purposes.
 Nu-Gro
  Royster-Clark
  AGRIUM ANNUAL REPORT 2006
    
    93




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 Pursell Technologies
  3.
    
    KENAI AWARD AND 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
 94
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 4.
    
    OTHER EXPENSES
 2006
    
    
    
    2005
    
    
    
    2004Interest income
    
    
    
    (16
    )
    
    
    
    (22
    )
    
    
    
    (16
    )Stock-based compensation
    
    
    
    30
    
    
    
    
    13
    
    
    
    
    4Environmental remediation and accretion of asset
retirement obligation
    
    
    
    12
    
    
    
    
    9
    
    
    
    
    14Redemption premiums and write-off of deferred
charges on settlement of debt
    
    
    
    3
    
    
    
    
    14
    
    
    
    
    Realized and unrealized loss (gain) on derivative contracts
    
    
    
    35
    
    
    
    
    21
    
    
    
    
    (3
    )Foreign exchange loss (gain)
    
    
    
    3
    
    
    
    
    (5
    )
    
    
    
    (6
    )Kenai, Alaska nitrogen facility earn-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Litigation and contract settlements
    
    
    
    
    
    
    
    
    (25
    )
    
    
    
    (7
    )Other
    
    
    
    6
    
    
    
    
    9
    
    
    
    
    2573
    
    
    
    
    14
    
    
    
    
    39
 5.
    
    INCOME TAXES
  2006
    
    
    
    2005
    
    
    
    2004Earnings (loss) before income taxesCanadian
    
    
    
    (168
    )
    
    
    
    140
    
    
    
    
    118Foreign
    
    
    
    177
    
    
    
    
    311
    
    
    
    
    2809
    
    
    
    
    451
    
    
    
    
    398Statutory rate (%)
    
    
    
    38
    
    
    
    
    41
    
    
    
    
    41Income taxes at statutory rates
    
    
    
    4
    
    
    
    
    183
    
    
    
    
    165Recognition of previously unrecognized tax assets
    
    
    
    (4
    )
    
    
    
    (4
    )
    
    
    
    (20
    )Differences in foreign tax rates
    
    
    
    (24
    )
    
    
    
    (19
    )
    
    
    
    (20
    )Canadian tax rate adjustment
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    Manufacturing and processing allowance
    
    
    
    14
    
    
    
    
    (3
    )
    
    
    
    (8
    )Other
    
    
    
    4
    
    
    
    
    11
    
    
    
    
    15Income taxes
    
    
    
    (24
    )
    
    
    
    168
    
    
    
    
    132CurrentCanadian
    
    
    
    79
    
    
    
    
    15
    
    
    
    
    7Foreign
    
    
    
    (1
    )
    
    
    
    98
    
    
    
    
    9278
    
    
    
    
    113
    
    
    
    
    99FutureCanadian
    
    
    
    (148
    )
    
    
    
    42
    
    
    
    
    47Foreign
    
    
    
    46
    
    
    
    
    13
    
    
    
    
    (14
    )(102
    )
    
    
    
    55
    
    
    
    
    33(24
    )
    
    
    
    168
    
    
    
    
    132
 AGRIUM ANNUAL REPORT 2006
    
    95




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
  2006
    
    
    
    2005Future income tax liabilitiesDepreciation and amortization
    
    
    
    172
    
    
    
    
    194Deferred income
    
    
    
    24
    
    
    
    
    106Other
    
    
    
    68
    
    
    
    
    65Total future income tax liabilities
    
    
    
    264
    
    
    
    
    365Future income tax assetsLoss carry forwards expiring through 2026
    
    
    
    46
    
    
    
    
    12Asset retirement obligations and environmental liabilities
    
    
    
    64
    
    
    
    
    59Receivables, inventories and accrued liabilities
    
    
    
    40
    
    
    
    
    22Employee future benefits
    
    
    
    20
    
    
    
    
    17Other
    
    
    
    5
    
    
    
    
    13Future income tax assets before valuation allowance
    
    
    
    175
    
    
    
    
    123Valuation allowance
    
    
    
    (20
    )
    
    
    
    (8
    )Total future income tax assets, net of valuation allowance
    
    
    
    155
    
    
    
    
    115Net future income tax liabilities
    
    
    
    109
    
    
    
    
    250Future income tax assets
    
    
    
    (22
    )
    
    
    
    (22
    )Future income tax liabilities
    
    
    
    131
    
    
    
    
    272Net future income tax liabilities
    
    
    
    109
    
    
    
    
    250
 96
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 6.
    
    EARNINGS PER SHARE
  2006
    
    
    
    2005
    
    
    
    2004NumeratorNet earnings
    
    
    
    33
    
    
    
    
    283
    
    
    
    
    266Numerator for basic earnings per share
    
    
    
    33
    
    
    
    
    283
    
    
    
    
    266Preferred securities charges (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Numerator for diluted earnings per share
    
    
    
    33
    
    
    
    
    283
    
    
    
    
    276DenominatorWeighted-average number of shares outstanding for basic
earnings per share
    
    
    
    132
    
    
    
    
    132
    
    
    
    
    131Dilutive instrumentsStock options (a) (b)
    
    
    
    1
    
    
    
    
    1
    
    
    
    
    1Preferred securities converted to common shares$175-million, eight percent (a) (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Weighted-average number of shares outstanding for
diluted earnings per share
    
    
    
    133
    
    
    
    
    133
    
    
    
    
    144Basic earnings per share
    
    
    
    0.25
    
    
    
    
    2.14
    
    
    
    
    2.03Diluted earnings per share
    
    
    
    0.25
    
    
    
    
    2.12
    
    
    
    
    1.91
 (a)
    
    For diluted earnings per share, conversion or exercise is assumed only if the effect is dilutive to basic earnings 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, 2006, there were two million dilutive stock options
(December 31, 2005  five million; December 31, 2004  eight 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.
 AGRIUM ANNUAL REPORT 2006
    
    97




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 7.
    
    ACCOUNTS RECEIVABLE
 2006
    
    
    
    2005Trade accounts
    
    
    
    534
    
    
    
    
    391Allowance for doubtful accounts
    
    
    
    (17
    )
    
    
    
    (12
    )Rebates and other non-trade accounts
    
    
    
    35
    
    
    
    
    33Derivative contracts
    
    
    
    14
    
    
    
    
    31566
    
    
    
    
    443
   8.
    
    INVENTORIES
 2006
    
    
    
    2005RetailFertilizers
    
    
    
    170
    
    
    
    
    103Chemicals
    
    
    
    167
    
    
    
    
    100Other
    
    
    
    37
    
    
    
    
    17374
    
    
    
    
    220WholesaleFertilizers
    
    
    
    219
    
    
    
    
    217Operating supplies
    
    
    
    78
    
    
    
    
    71Raw materials
    
    
    
    35
    
    
    
    
    25332
    
    
    
    
    313Advanced TechnologiesControlled-release products
    
    
    
    29
    
    
    
    
    Other
    
    
    
    12
    
    
    
    
    41
    
    
    
    
    747
    
    
    
    
    533
 98
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 9.
    
    PROPERTY, PLANT AND EQUIPMENT
 2006
    
    
    
    2005Accumulated
    
    
    
    Net Book
    
    
    
    
    
    
    
    
    Accumulated
    
    
    
    Net BookCost
    
    
    
    Depreciation
    
    
    
    Value
    
    
    
    Cost
    
    
    
    Depreciation
    
    
    
    ValueLand
    
    
    
    51
    
    
     
    
    
    
    
    
    
    51
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    29Building and improvements
    
    
    
    443
    
    
    
    
    221
    
    
    
    
    222
    
    
    
    
    355
    
    
    
    
    196
    
    
    
    
    159Machinery and equipment
    
    
    
    2,178
    
    
    
    
    1,289
    
    
    
    
    889
    
    
    
    
    2,230
    
    
    
    
    1,298
    
    
    
    
    932Other
    
    
    
    213
    
    
    
    
    43
    
    
    
    
    170
    
    
    
    
    205
    
    
    
    
    40
    
    
    
    
    1652,885
    
    
    
    
    1,553
    
    
    
    
    1,332
    
    
    
    
    2,819
    
    
    
    
    1,534
    
    
    
    
    1,285
   10.
    
    INTANGIBLES
 2006
    
    
    
    2005Accumulated
    
    
    
    Net Book
    
    
    
    
    
    
    
    
    Accumulated
    
    
    
    Net BookCost
    
    
    
    Amortization
    
    
    
    Value
    
    
    
    Cost
    
    
    
    Amortization
    
    
    
    ValueTrade names (a)
    
    
    
    25
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Customer relationships
    
    
    
    27
    
    
    
    
    1
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Technology
    
    
    
    23
    
    
    
    
    1
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    2
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    2
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (a)
    
    The Corporation has determined that trade names have indefinite lives for accounting
purposes and accordingly are not amortized.
 AGRIUM ANNUAL REPORT 2006
    
    99




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 11.
    
    GOODWILL
 AdvancedRetail
    
    
    
    Technologies
    
    
    
    TotalBalance, beginning of year
    
    
    
    8
    
    
    
    
    
    
    
    
    
    8Acquired during the year
    
    
    
    121
    
    
    
    
    45
    
    
    
    
    166Balance, end of year
    
    
    
    129
    
    
    
    
    45
    
    
    
    
    174
 12.
    
    OTHER ASSETS
 2006
    
    
    
    2005South America value-added tax and other costs
    
    
    
    12
    
    
    
    
    14Long-term receivables
    
    
    
    21
    
    
    
    
    5Long-term investments
    
    
    
    37
    
    
    
    
    29Long-term derivative contracts
    
    
    
    10
    
    
    
    
    23Turnaround costs
    
    
    
    2
    
    
    
    
    12Employee future benefits (note 18)
    
    
    
    5
    
    
    
    
    5Other
    
    
    
    16
    
    
    
    
    15103
    
    
    
    
    103
 13.
    
    BANK INDEBTEDNESS
   Profertil S.A.
  100
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 14.
    
    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 2006
    
    
    
    2005Trade
    
    
    
    409
    
    
    
    
    195Non-trade
    
    
    
    54
    
    
    
    
    48Accrued liabilities
    
    
    
    225
    
    
    
    
    246Income and other taxes
    
    
    
    10
    
    
    
    
    36Accrued interest
    
    
    
    14
    
    
    
    
    11Dividends
    
    
    
    7
    
    
    
    
    7Derivative contracts
    
    
    
    10
    
    
    
    
    33Pensions and other post-retirement benefits (note 18)
    
    
    
    3
    
    
    
    
    3732
    
    
    
    
    579
 15.
    
    LONG-TERM DEBT
 2006
    
    
    
    2005Recourse debtUnsecured6.86% senior notes due December 29, 2005 to 2007 (a)
    
    
    
    
    
    
    
    
    307.06% senior notes due December 29, 2005 to 2010 (a)
    
    
    
    
    
    
    
    
    717.125% debentures due May 23, 2036 (b) (c)
    
    
    
    300
    
    
    
    
    7.7% 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 (d)
    
    
    
    20
    
    
    
    
    21670
    
    
    
    
    472Principal repayments due within one year
    
    
    
    1
    
    
    
    
    30669
    
    
    
    
    442
 (a)
    
    On June 19, 2006, the notes were redeemed from proceeds on issuance of the 7.125%
debentures.(b)
    
    On May 15, 2006, the Corporation filed a base shelf prospectus pursuant to which the
Corporation may issue up to $500-million of debt securities over a 25-month period. Terms of any
debentures offered are determined by market conditions at the date of issue. On May 24,
2006, the Corporation completed a $300-million offering for net proceeds of $296-million.(c)
    
    These notes and debentures require the Corporation to meet certain financial ratios and other
covenants.(d)
    
    Includes a capital lease of $16-million with an annual payment of $2-million, relating to land
and building with a carrying value of $12-million.
 AGRIUM ANNUAL REPORT 2006
    
    101




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 16.
    
    OTHER LIABILITIES
 2006
    
    
    
    2005Asset retirement obligations (note 17)
    
    
    
    71
    
    
    
    
    60Environmental remediation and shutdown costs
    
    
    
    117
    
    
    
    
    145Employee future benefits (note 18)Pensions
    
    
    
    12
    
    
    
    
    8Other post-retirement benefits
    
    
    
    41
    
    
    
    
    37Derivative contracts
    
    
    
    9
    
    
    
    
    16Other
    
    
    
    22
    
    
    
    
    11272
    
    
    
    
    277
 17.
    
    ASSET RETIREMENT OBLIGATIONS
   2006
    
    
    
    2005Balance, beginning of year
    
    
    
    60
    
    
    
    
    52Foreign exchange translation
    
    
    
    
    
    
    
    
    1Additions
    
    
    
    8
    
    
    
    
    3Settlements
    
    
    
    (2
    )
    
    
    
    Accretion, included in other expenses
    
    
    
    5
    
    
    
    
    4Balance, end of year
    
    
    
    71
    
    
    
    
    60
  102
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 18.
    
    EMPLOYEE FUTURE BENEFITS
  Obligations and assets
  Defined Benefit
    
    
    
    Post-retirementPension Plans
    
    
    
    Benefit Plans2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004Change in accrued benefit obligationsBalance, beginning of year
    
    
    
    177
    
    
    
    
    145
    
    
    
    
    127
    
    
    
    
    44
    
    
    
    
    48
    
    
    
    
    40Liabilities associated with acquisitions (a)
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange on Canadian obligations
    
    
    
    
    
    
    
    
    2
    
    
    
    
    5
    
    
    
    

    
    
    
    
    
    
    
    
    
    1Interest cost
    
    
    
    10
    
    
    
    
    9
    
    
    
    
    9
    
    
    
    
3
    
    
    
    
    2
    
    
    
    
    3Service cost
    
    
    
    7
    
    
    
    
    5
    
    
    
    
    6
    
    
    
    
3
    
    
    
    
    2
    
    
    
    
    3Actuarial (gain) loss
    
    
    
    (11
    )
    
    
    
    23
    
    
    
    
    5
    
    
    
    
32
    
    
    
    
    6
    
    
    
    
    4Amendments
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    (12
    )
    
    
    
    Transfer from other plans
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
1
    
    
    
    
    
    
    
    
    
    Medicare
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    (2
    )Benefits paid
    
    
    
    (8
    )
    
    
    
    (7
    )
    
    
    
    (7
    )
    
    
    
(1
    )
    
    
    
    (2
    )
    
    
    
    (1
    )Balance, end of year
    
    
    
    184
    
    
    
    
    177
    
    
    
    
    145
    
    
    
    
82
    
    
    
    
    44
    
    
    
    
    48Change in plan assetsFair value, beginning of year
    
    
    
    126
    
    
    
    
    106
    
    
    
    
    88
    
    
    
    

    
    
    
    
    
    
    
    
    
    Assets associated with acquisitions (a)
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    Foreign exchange on Canadian assets
    
    
    
    
    
    
    
    
    2
    
    
    
    
    4
    
    
    
    

    
    
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    
    10
    
    
    
    
    12
    
    
    
    
    10
    
    
    
    

    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    
    9
    
    
    
    
    13
    
    
    
    
    11
    
    
    
    

    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    
    (8
    )
    
    
    
    (7
    )
    
    
    
    (7
    )
    
    
    

    
    
    
    
    
    
    
    
    
    Fair value, end of year
    
    
    
    140
    
    
    
    
    126
    
    
    
    
    106
    
    
    
    

    
    
    
    
    
    
    
    
    
    Unfunded status
    
    
    
    44
    
    
    
    
    51
    
    
    
    
    39
    
    
    
    
82
    
    
    
    
    44
    
    
    
    
    48Unrecognized net loss
    
    
    
    (31
    )
    
    
    
    (46
    )
    
    
    
    (28
    )
    
    
    
(48
    )
    
    
    
    (17
    )
    
    
    
    (11
    )Unrecognized prior service cost
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
9
    
    
    
    
    11
    
    
    
    
    (1
    )Accrued employee future benefit liability
    
    
    
    8
    
    
    
    
    5
    
    
    
    
    11
    
    
    
    
43
    
    
    
    
    38
    
    
    
    
    36Amounts recognized in the consolidated
balance sheets consist of:Other assets: Prepaid employee future
benefits (note 12)
    
    
    
    (5
    )
    
    
    
    (5
    )
    
    
    
    (3
    )
    
    
    

    
    
    
    
    
    
    
    
    
    Current
liabilities  pensions (note 14)
    
    
    
    1
    
    
    
    
    2
    
    
    
    
    2
    
    
    
    
2
    
    
    
    
    1
    
    
    
    
    1Other
liabilities  pensions (note 16)
    
    
    
    12
    
    
    
    
    8
    
    
    
    
    12
    
    
    
    
41
    
    
    
    
    37
    
    
    
    
    358
    
    
    
    
    5
    
    
    
    
    11
    
    
    
    
43
    
    
    
    
    38
    
    
    
    
    36
 (a)
    
    Liabilities and assets associated with acquisitions relate to the Corporations acquisition
of Royster-Clark Ltd.
 AGRIUM ANNUAL REPORT 2006
    
    103




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
   Defined Benefit
    
    
    
    Post-retirementPension Plans
    
    
    
    Benefit Plans
    
    
    
    TotalExpected benefit payments2007
    
    
    
    8
    
    
    
    
    2
    
    
    
    
    102008
    
    
    
    8
    
    
    
    
    2
    
    
    
    
    102009
    
    
    
    8
    
    
    
    
    2
    
    
    
    
    102010
    
    
    
    8
    
    
    
    
    2
    
    
    
    
    102011
    
    
    
    10
    
    
    
    
    2
    
    
    
    
    122012 through 2016
    
    
    
    55
    
    
    
    
    17
    
    
    
    
    72
 Expense
  2006
    
    
    
    2005
    
    
    
    2004Defined benefit pension plansService cost for benefits earned during the year
    
    
    
    7
    
    
    
    
    5
    
    
    
    
    6Interest cost on accrued benefit obligations
    
    
    
    10
    
    
    
    
    9
    
    
    
    
    9Expected return on plan assets
    
    
    
    (9
    )
    
    
    
    (8
    )
    
    
    
    (7
    )Net amortization and deferral
    
    
    
    3
    
    
    
    
    1
    
    
    
    
    2Net expense
    
    
    
    11
    
    
    
    
    7
    
    
    
    
    10Post-retirement benefit plansService cost for benefits earned during the year
    
    
    
    3
    
    
    
    
    3
    
    
    
    
    4Interest cost on accrued benefit obligations
    
    
    
    3
    
    
    
    
    2
    
    
    
    
    3Net expense
    
    
    
    6
    
    
    
    
    5
    
    
    
    
    7Defined contribution pension plans
    
    
    
    14
    
    
    
    
    11
    
    
    
    
    11Total expense
    
    
    
    31
    
    
    
    
    23
    
    
    
    
    28
 104
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 Assumptions
  Future Benefits
    
    
    
    Future BenefitsObligation
    
    
    
    Expense(percent)
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004Defined benefit pension plansDiscount rate
    
    
    
    5
    
    
    
    
    5
    
    
    
    
    6
    
    
    
    
    5
    
    
    
    
    6
    
    
    
    
    6Long-term rate of return on assets
    
    
    
    n/a
    
    
    
    
    n/a
    
    
    
    
    n/a
    
    
    
    
    7
    
    
    
    
    8
    
    
    
    
    8Rate of increase in compensation levels
    
    
    
    4
    
    
    
    
    4
    
    
    
    
    4
    
    
    
    
    4
    
    
    
    
    4
    
    
    
    
    4Post-retirement benefit plansDiscount rate
    
    
    
    5
    
    
    
    
    5
    
    
    
    
    6
    
    
    
    
    5
    
    
    
    
    6
    
    
    
    
    6Health care cost trend rate
    
    
    
    9
    
    
    
    
    11
    
    
    
    
    12
    
    
    
    
    11
    
    
    
    
    12
    
    
    
    
    12
   One Percentage
    
    
    
    One PercentagePoint Increase
    
    
    
    Point DecreaseEffect on accumulated post-retirement benefit obligation as of
September 30, 2006
    
    
    
    15
    
    
    
    
    (11
    )Effect on total of service and interest cost
    
    
    
    1
    
    
    
    
    (1
    )
 Asset allocation and investment strategy
  Target Allocation
    
    
    
    Plan Assets(percent)Asset categories
    
    
    
    2007
    
    
    
    
    2006
    
    
    
    
    2005Equity securities (a)
    
    
    
    50 - 74
    
    
    
    
    67
    
    
    
    
    65Debt securities
    
    
    
    26 - 50
    
    
    
    
    30
    
    
    
    
    28Cash and other
    
    
    
    0 - 10
    
    
    
    
    3
    
    
    
    
    7
 (a)
    
    Equity securities held by the plans do not include any of the Corporations common shares.
 AGRIUM ANNUAL REPORT 2006
    
    105




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
   19.
    
    SHARE CAPITAL
 2006
    
    
    
    2005
    
    
    
    2004Number
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    Numberof Shares
    
    
    
    
    
    
    
    
    of Shares
    
    
    
    
    
    
    
    
    of Shares(millions)
    
    
    
    Amount
    
    
    
    (millions)
    
    
    
    Amount
    
    
    
    (millions)
    
    
    
    AmountCommon sharesIssued and outstanding,
beginning of year
    
    
    
    131
    
    
    
    
    583
    
    
    
    
    132
    
    
    
    
    553
    
    
    
    
    127
    
    
    
    
    490Issued on preferred
securities redemption (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    50Issued on exercise of stock
options
    
    
    
    2
    
    
    
    
    33
    
    
    
    
    4
    
    
    
    
    50
    
    
    
    
    1
    
    
    
    
    13Stock based compensation
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    Shares repurchased (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    Issued and outstanding, end
of year
    
    
    
    133
    
    
    
    
    617
    
    
    
    
    131
    
    
    
    
    583
    
    
    
    
    132
    
    
    
    
    553
 (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. The program provided for repurchase
of shares 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.During the twelve months ended December 31, 2005, the Corporation repurchased for cancellation
a total of five million common shares under the program at a net cost of $98-million at 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.
 106
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 20.
    
    STOCK-BASED COMPENSATION
  Stock options
  
 Tandem Stock Appreciation Rights (Tandem SARs)
    2006
    
    
    
    
    2005
    
    
    
    
    2004Options
    
    
    
    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
    
    
    
    6
    
    
    
    
    17.26
    
    
    
    
    8
    
    
    
    
    16.62
    
    
    
    
    9
    
    
    
    
    16.31Granted
    
    
    
    1
    
    
    
    
    28.06
    
    
    
    
    2
    
    
    
    
    19.99
    
    
    
    
    
    
    
    
    
    21.39Exercised
    
    
    
    (3
    )
    
    
    
    17.21
    
    
    
    
    (4
    )
    
    
    
    16.79
    
    
    
    
    (1
    )
    
    
    
    13.96Cancelled
    
    
    
    
    
    
    
    
    19.74
    
    
    
    
    
    
    
    
    
    18.32
    
    
    
    
    
    
    
    
    
    17.77Outstanding,
end of year
    
    
    
    4
    
    
    
    
    18.85
    
    
    
    
    6
    
    
    
    
    17.26
    
    
    
    
    8
    
    
    
    
    16.62Exercisable,
end of year
    
    
    
    3
    
    
    
    
    16.69
    
    
    
    
    4
    
    
    
    
    16.72
    
    
    
    
    7
    
    
    
    
    16.68
 AGRIUM ANNUAL REPORT 2006
    
    107




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
  2006
    
    
    
    
    2005
    
    
    
    
    2004As
    
    
    
    
    
    
    
    As
    
    
    
    
    
    
    
    
    AsReported
    
    
    Pro Forma
    
    
    
    Reported
    
    
    
    Pro Forma
    
    
    
    Reported
    
    
    
    Pro FormaNet earnings
    
    
    
    33
    
    
    
    32
    
    
    
    
    283
    
    
    
    
    281
    
    
    
    
    266
    
    
    
    
    262Earnings per
common shareBasic
    
    
    
    0.25
    
    
    
    0.24
    
    
    
    
    2.14
    
    
    
    
    2.13
    
    
    
    
    2.03
    
    
    
    
    2.00Diluted
    
    
    
    0.25
    
    
    
    0.24
    
    
    
    
    2.12
    
    
    
    
    2.10
    
    
    
    
    1.91
    
    
    
    
    1.89
  2006
    
    
    
    2005
    
    
    
    2004Dividend yield (%)
    
    
    
    1
    
    
    
    
    1
    
    
    
    
    1Expected stock price volatility (%)
    
    
    
    32
    
    
    
    
    32
    
    
    
    
    32Risk-free interest rate (%)
    
    
    
    4
    
    
    
    
    4
    
    
    
    
    4Expected life of the options (years)
    
    
    
    7
    
    
    
    
    7
    
    
    
    
    7
   Options Outstanding
    
    
    
    
    Options ExercisableNumber
    
    
    
    Weighted-Avg.
    
    
    
    
    
    
    
    
    NumberRange of
    
    
    Outstanding
    
    
    
    Remaining
    
    
    
    Weighted-Avg.
    
    
    
    Exercisable
    
    
    
    Weighted-Avg.Exercise Prices
    
    
    at Year End
    
    
    
    Contractual Life
    
    
    
    Exercise Price
    
    
    
    at Year End
    
    
    
    Exercise Price(C$)
    
    
    (millions)
    
    
    
    (years)
    
    
    
    (C$)
    
    
    
    (millions)
    
    
    
    (C$)Less than 11.86
    
    
    
    
    
    
    
    
    3
    
    
    
    
    11.78
    
    
    
    
    
    
    
    
    
    11.7811.86 to 15.85
    
    
    
    1
    
    
    
    
    5
    
    
    
    
    14.90
    
    
    
    
    1
    
    
    
    
    14.7515.86 to 20.15
    
    
    
    2
    
    
    
    
    6
    
    
    
    
    18.10
    
    
    
    
    1
    
    
    
    
    17.1620.16 to 28.46
    
    
    
    1
    
    
    
    
    7
    
    
    
    
    23.86
    
    
    
    
    1
    
    
    
    
    20.584
    
    
    
    
    6
    
    
    
    
    18.85
    
    
    
    
    3
    
    
    
    
    16.69
 108
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 Stock Appreciation Rights (SARs)
   Performance Share Unit Plan (PSUs)
    Directors Deferred Share Unit Plans (DSUs)
     AGRIUM ANNUAL REPORT 2006
    
    109




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 21.
    
    COMMITMENTS
 2007
    
    
    
    2008
    
    
    
    2009
    
    
    
    2010
    
    
    
    2011Cost of productOperating lease commitments
    
    
    
    57
    
    
    
    
    33
    
    
    
    
    26
    
    
    
    
    18
    
    
    
    
    11Natural gas commitments  North America
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Power, sulphuric acid and other payments
    
    
    
    69
    
    
    
    
    51
    
    
    
    
    31
    
    
    
    
    30
    
    
    
    
    29Profertil natural gas and other
    
    
    
    40
    
    
    
    
    43
    
    
    
    
    45
    
    
    
    
    47
    
    
    
    
    49796
    
    
    
    
    127
    
    
    
    
    102
    
    
    
    
    95
    
    
    
    
    89OtherLong-term debt and capital
lease repayments (a)
    
    
    
    51
    
    
    
    
    51
    
    
    
    
    51
    
    
    
    
    51
    
    
    
    
    171Total
    
    
    
    847
    
    
    
    
    178
    
    
    
    
    153
    
    
    
    
    146
    
    
    
    
    260
 (a)
    
    Includes interest payments.
      110
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 22.
    
    GUARANTEES
  23.
    
    CONTINGENCIES
 Environmental remediation
  Litigation
   Other
  24.
    
    FINANCIAL INSTRUMENTS
  Derivative Contracts
  AGRIUM ANNUAL REPORT 2006
    
    111




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 Natural gas and power derivative contracts
  Foreign exchange derivative contracts
  Fair value of derivative contracts
 2006
    
    
    
    2005Notional
    
    
    
    
    
    
    
    
    NotionalAmount or
    
    
    
    
    
    
    
    
    Amount orFair Value
    
    
    
    Quantity
    
    
    
    Fair Value
    
    
    
    QuantityGas  Non-qualifying swaps and options (a)
    
    
    
    (2
    )
    
    
    5 BCF
    
    
    
    
    34
    
    
    
    66 BCFGas  Qualifying swaps and options (b)
    
    
    
    4
    
    
    
    55 BCF
    
    
    
    
    
    
    
    
    
    Power  Non-qualifying heat rate swap (a)
    
    
    
    6
    
    
    
    263 GWh
    
    
    
    
    (1
    )
    
    
    131 GWhForeign exchange  Qualifying forward
contracts and options (c)
    
    
    
    
    
    
    
    C$107
    
    
    
    
    1
    
    
    
    
    C$1058
    
    
    
    
    
    
    
    
    
    34
 (a)
    
    Non-qualifying natural gas derivative contractsNon-qualifying natural gas and power derivative contracts are those contracts that do not
qualify for hedge accounting but still provide an economic hedge of the Corporations exposure to
natural gas and power costs. During 2006, other expenses included net realized and unrealized
losses of $45-million (2005  $40 million; 2004  $3-million) related to non-qualifying natural
gas derivative contracts and realized and unrealized gains of $10-million (2005  nil; 2004 
$1-million) related to power derivative contracts. The fair value of the non-qualifying natural gas
and power derivative contracts was recorded in the consolidated balance sheets.(b)
    
    Qualifying natural gas derivative contractsThe fair value of other natural gas derivative contracts outstanding at December 31, 2006 that
qualified for hedge accounting was $4-million. Included in the fair value are $15-million in
deferred gains remaining on the balance sheets resulting from the July 1, 2005 de-designation of
derivative contracts. There were no natural gas hedges that qualified for hedge accounting
treatment as at December 31, 2005. During 2006, $10-million (2005  $16-million) of realized gains were allocated to
inventory of which $2-million (2005  $2-million) remains in inventory at December 31, 2006.(c)
    
    Qualifying foreign exchange derivative contractsDuring 2006, net realized gains on foreign currency forward contracts of $8-million (2005 
$4-million; 2004  $3-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.
 112
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 Other Financial Instruments
   Commodity Contracts
  Counterparty Credit Risk
     AGRIUM ANNUAL REPORT 2006
    
    113




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 25.
    
    SEGMENTATION
      Advanced2006
    
    
    
    
    
    
    Retail
    
    
    
    Wholesale
    
    
    
    Technologies
    
    
    
    Other
    
    
    
    TotalNet sales
    
     external
    
    
    
    1,975
    
    
    
    
    2,126
    
    
    
    
    92
    
    
    
    
    
    
    
    
    
    4,193 inter-segment
    
    
    
    
    
    
    
    
    143
    
    
    
    
    9
    
    
    
    
    (152
    )
    
    
    
    Total net sales
    
    
    
    1,975
    
    
    
    
    2,269
    
    
    
    
    101
    
    
    
    
    (152
    )
    
    
    
    4,193Cost of product
    
    
    
    1,480
    
    
    
    
    1,834
    
    
    
    
    82
    
    
    
    
    (159
    )
    
    
    
    3,237Gross profit
    
    
    
    495
    
    
    
    
    435
    
    
    
    
    19
    
    
    
    
    7
    
    
    
    
    956ExpensesSelling
    
    
    
    361
    
    
    
    
    30
    
    
    
    
    5
    
    
    
    
    (6
    )
    
    
    
    390General and administrative
    
    
    
    23
    
    
    
    
    29
    
    
    
    
    7
    
    
    
    
    37
    
    
    
    
    96Depreciation and amortization
    
    
    
    30
    
    
    
    
    125
    
    
    
    
    8
    
    
    
    
    6
    
    
    
    
    169Asset impairment (note 9)
    
    
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Royalties and other taxes
    
    
    
    11
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    20Other (income) expenses
    
    
    
    (25
    )
    
    
    
    16
    
    
    
    
    
    
    
    
    
    82
    
    
    
    
    73Earnings (loss) before interest expense
and income taxes
    
    
    
    95
    
    
    
    
    91
    
    
    
    
    (1
    )
    
    
    
    (113
    )
    
    
    
    72Net working capital
    
    
    
    284
    
    
    
    
    559
    
    
    
    
    (29
    )
    
    
    
    (215
    )
    
    
    
    599Property, plant and equipment
    
    
    
    176
    
    
    
    
    1,019
    
    
    
    
    99
    
    
    
    
    38
    
    
    
    
    1,332Total assets
    
    
    
    1,104
    
    
    
    
    2,911
    
    
    
    
    511
    
    
    
    
    (1,261
    )
    
    
    
    3,265Capital expenditures
    
    
    
    22
    
    
    
    
    164
    
    
    
    
    1
    
    
    
    
    22
    
    
    
    
    209
 114
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
 Advanced2005
    
    
    
    
    
    
    Retail
    
    
    
    Wholesale
    
    
    
    Technologies
    
    
    
    Other
    
    
    
    TotalNet sales
    
     external
    
    
    
    1,242
    
    
    
    
    2,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,294 inter-segment
    
    
    
    
    
    
    
    
    144
    
    
    
    
    
    
    
    
    
    (144
    )
    
    
    
    Total net sales
    
    
    
    1,242
    
    
    
    
    2,196
    
    
    
    
    
    
    
    
    
    (144
    )
    
    
    
    3,294Cost of product
    
    
    
    895
    
    
    
    
    1,501
    
    
    
    
    
    
    
    
    
    (140
    )
    
    
    
    2,256Gross profit
    
    
    
    347
    
    
    
    
    695
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    1,038ExpensesSelling
    
    
    
    239
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    254General and administrative
    
    
    
    10
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    79Depreciation and amortization
    
    
    
    17
    
    
    
    
    122
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    146Royalties and other taxes
    
    
    
    7
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    45Other expenses
    
    
    
    (22
    )
    
    
    
    1
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    14Earnings before interest expense and
income taxes
    
    
    
    96
    
    
    
    
    492
    
    
    
    
    
    
    
    
    
    (88
    )
    
    
    
    500Net working capital
    
    
    
    418
    
    
    
    
    660
    
    
    
    
    
    
    
    
    
    (322
    )
    
    
    
    756Property, plant and equipment
    
    
    
    85
    
    
    
    
    1,175
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    1,285Total assets
    
    
    
    753
    
    
    
    
    2,739
    
    
    
    
    
    
    
    
    
    (707
    )
    
    
    
    2,785Capital expenditures
    
    
    
    18
    
    
    
    
    151
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    175
 Advanced2004
    
    
    
    
    
    
    Retail
    
    
    
    Wholesale
    
    
    
    Technologies
    
    
    
    Other
    
    
    
    TotalNet sales
    
     external
    
    
    
    1,114
    
    
    
    
    1,724
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,838 inter-segment
    
    
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    
    Total net sales
    
    
    
    1,114
    
    
    
    
    1,846
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    
    2,838Cost of product
    
    
    
    798
    
    
    
    
    1,257
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    
    1,933Gross profit
    
    
    
    316
    
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    905ExpensesSelling
    
    
    
    222
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    237General and administrative
    
    
    
    8
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    63Depreciation and amortization
    
    
    
    18
    
    
    
    
    131
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    156Kenai award and
settlement (note 3)
    
    
    
    
    
    
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86
    )Royalties and other taxes
    
    
    
    5
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    29Other (income) expenses
    
    
    
    (18
    )
    
    
    
    47
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    39Earnings (loss) before interest expense
and income taxes
    
    
    
    81
    
    
    
    
    432
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    
    467Net working capital
    
    
    
    359
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    396
    
    
    
    
    784Property, plant and equipment
    
    
    
    83
    
    
    
    
    1,149
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    1,231Total assets
    
    
    
    729
    
    
    
    
    2,500
    
    
    
    
    
    
    
    
    
    (568
    )
    
    
    
    2,661Capital expenditures
    
    
    
    14
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    82
 AGRIUM ANNUAL REPORT 2006
    
    115




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
  2006
    
    
    
    2005
    
    
    
    2004Net
    
    
    
    Cost of
    
    
    
    Gross
    
    
    
    Net
    
    
    
    Cost of
    
    
    
    Gross
    
    
    
    Net
    
    
    
    Cost of
    
    
    
    GrossSales
    
    
    
    Product
    
    
    
    Profit
    
    
    
    Sales
    
    
    
    Product
    
    
    
    Profit
    
    
    
    Sales
    
    
    
    Product
    
    
    
    ProfitRetailFertilizers
    
    
    
    1,065
    
    
    
    
    848
    
    
    
    
    217
    
    
    
    
    626
    
    
    
    
    485
    
    
    
    
    141
    
    
    
    
    556
    
    
    
    
    425
    
    
    
    
    131Chemicals
    
    
    
    591
    
    
    
    
    437
    
    
    
    
    154
    
    
    
    
    458
    
    
    
    
    328
    
    
    
    
    130
    
    
    
    
    416
    
    
    
    
    298
    
    
    
    
    118Other
    
    
    
    319
    
    
    
    
    195
    
    
    
    
    124
    
    
    
    
    158
    
    
    
    
    82
    
    
    
    
    76
    
    
    
    
    142
    
    
    
    
    75
    
    
    
    
    671,975
    
    
    
    
    1,480
    
    
    
    
    495
    
    
    
    
    1,242
    
    
    
    
    895
    
    
    
    
    347
    
    
    
    
    1,114
    
    
    
    
    798
    
    
    
    
    316WholesaleNitrogenAmmonia
    
    
    
    440
    
    
    
    
    387
    
    
    
    
    53
    
    
    
    
    613
    
    
    
    
    471
    
    
    
    
    142
    
    
    
    
    407
    
    
    
    
    288
    
    
    
    
    119Urea
    
    
    
    681
    
    
    
    
    484
    
    
    
    
    197
    
    
    
    
    732
    
    
    
    
    459
    
    
    
    
    273
    
    
    
    
    626
    
    
    
    
    401
    
    
    
    
    225Nitrate, sulphate
and other
    
    
    
    255
    
    
    
    
    214
    
    
    
    
    41
    
    
    
    
    277
    
    
    
    
    213
    
    
    
    
    64
    
    
    
    
    284
    
    
    
    
    219
    
    
    
    
    65Total Nitrogen
    
    
    
    1,376
    
    
    
    
    1,085
    
    
    
    
    291
    
    
    
    
    1,622
    
    
    
    
    1,143
    
    
    
    
    479
    
    
    
    
    1,317
    
    
    
    
    908
    
    
    
    
    409Phosphate
    
    
    
    298
    
    
    
    
    271
    
    
    
    
    27
    
    
    
    
    319
    
    
    
    
    260
    
    
    
    
    59
    
    
    
    
    315
    
    
    
    
    241
    
    
    
    
    74Potash
    
    
    
    213
    
    
    
    
    115
    
    
    
    
    98
    
    
    
    
    255
    
    
    
    
    98
    
    
    
    
    157
    
    
    
    
    214
    
    
    
    
    108
    
    
    
    
    106Product purchased
for resale
    
    
    
    382
    
    
    
    
    363
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,269
    
    
    
    
    1,834
    
    
    
    
    435
    
    
    
    
    2,196
    
    
    
    
    1,501
    
    
    
    
    695
    
    
    
    
    1,846
    
    
    
    
    1,257
    
    
    
    
    589Advanced TechnologiesControlled-release products
    
    
    
    68
    
    
    
    
    54
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    33
    
    
    
    
    28
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    
    82
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other inter-segment
eliminations
    
    
    
    (152
    )
    
    
    
    (159
    )
    
    
    
    7
    
    
    
    
    (144
    )
    
    
    
    (140
    )
    
    
    
    (4
    )
    
    
    
    (122
    )
    
    
    
    (122
    )
    
    
    
    Total
    
    
    
    4,193
    
    
    
    
    3,237
    
    
    
    
    956
    
    
    
    
    3,294
    
    
    
    
    2,256
    
    
    
    
    1,038
    
    
    
    
    2,838
    
    
    
    
    1,933
    
    
    
    
    905
 116
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
  2006
    
    
    
    2005
    
    
    
    2004Net
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    
    
    
    NetSales
    
    
    
    PP&E
    
    
    
    Goodwill
    
    
    
    Sales
    
    
    
    PP&E
    
    
    
    Goodwill
    
    
    
    Sales
    
    
    PP&E
    
    
    
    GoodwillCanada
    
    
    
    652
    
    
    
    
    706
    
    
    
    
    9
    
    
    
    
    745
    
    
    
    
    760
    
    
    
    
    
    
    
    
    
    576
    
    
    
    669
    
    
    
    
    United States
    
    
    
    2,954
    
    
    
    
    400
    
    
    
    
    165
    
    
    
    
    1,846
    
    
    
    
    293
    
    
    
    
    8
    
    
    
    
    1,687
    
    
    
    324
    
    
    
    
    8Argentina
    
    
    
    251
    
    
    
    
    226
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    232
    
    
    
    
    
    
    
    
    
    207
    
    
    
    238
    
    
    
    
    Other
    
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    
    4,193
    
    
    
    
    1,332
    
    
    
    
    174
    
    
    
    
    3,294
    
    
    
    
    1,285
    
    
    
    
    8
    
    
    
    
    2,838
    
    
    
    1,239
    
    
    
    
    8
 26.
    
    PROFERTIL
   Balance Sheets
    
    
    2006
    
    
    
    2005AssetsCash and cash equivalents
    
    
    
    10
    
    
    
    
    23Accounts receivable
    
     
    
    18
    
    
    
    
    13Inventories and prepaid expenses
    
    
    
    15
    
    
    
    
    11Property, plant and equipment
    
    
    
    217
    
    
    
    
    223Other assets
    
    
    
    
    
    
    
    
    1260
    
    
    
    
    271LiabilitiesBank indebtedness
    
    
    
    7
    
    
    
    
    Accounts payable and current portion of long-term debt
    
    
    
    12
    
    
    
    
    12Income and other taxes
    
    
    
    13
    
    
    
    
    19Other
    
    
    
    3
    
    
    
    
    3Future income taxes
    
    
    
    3
    
    
    
    
    338
    
    
    
    
    37Proportionate share of net assets of joint venture
    
    
    
    222
    
    
    
    
    234
 AGRIUM ANNUAL REPORT 2006
    
    117




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
 Statements of Operations
    
    
    2006
    
    
    
    2005
    
    
    
    2004Net sales
    
    
    
    183
    
    
    
    
    169
    
    
    
    
    143Cost of product
    
    
    
    66
    
    
    
    
    54
    
    
    
    
    41Gross profit
    
    
    
    117
    
    
    
    
    115
    
    
    
    
    102Selling
    
    
    
    1
    
    
    
    
    1
    
    
    
    
    1General and administrative
    
    
    
    3
    
    
    
    
    4
    
    
    
    
    3Depreciation
    
    
    
    13
    
    
    
    
    15
    
    
    
    
    15Other expenses and Argentine charges
    
    
    
    1
    
    
    
    
    11
    
    
    
    
    Earnings before interest expense and income taxes
    
    
    
    99
    
    
    
    
    84
    
    
    
    
    83Interest expense
    
    
    
    1
    
    
    
    
    8
    
    
    
    
    12Income taxes
    
    
    
    36
    
    
    
    
    31
    
    
    
    
    12Proportionate share of net earnings of joint venture
    
    
    
    62
    
    
    
    
    45
    
    
    
    
    59
 Statements of Cash Flows
    
    
    2006
    
    
    
    2005
    
    
    
    2004Operating activities
    
    
    
    60
    
    
    
    
    85
    
    
    
    
    82Investing activities
    
    
    
    (6
    )
    
    
    
    (4
    )
    
    
    
    (2
    )Financing activities
    
    
    
    (67
    )
    
    
    
    (139
    )
    
    
    
    (43
    )Proportionate share of (decrease) increase in cash and cash equivalents
of joint venture
    
    
    
    (13
    )
    
    
    
    (58
    )
    
    
    
    37
   27.
    
    RELATED PARTY TRANSACTIONS
  118
    
    AGRIUM ANNUAL REPORT 2006




---



##### 



(ARROW) (amounts in millions of U.S. dollars unless otherwise stated)
    
    Notes to the Consolidated Financial Statements
   Consolidated Statements of Operations
    
    
    2006
    
    
    
    2005
    
    
    
    2004Net earnings based on Canadian GAAP
    
    
    
    33
    
    
    
    
    283
    
    
    
    
    266AdjustmentsDerivative instruments and hedging activities,
net of tax (a)
    
    
    
    6
    
    
    
    
    (9
    )
    
    
    
    Other, net of tax
    
    
    
    3
    
    
    
    
    (4
    )
    
    
    
    (3
    )Net earnings based on U.S. GAAP
    
    
    
    42
    
    
    
    
    270
    
    
    
    
    263Earnings per common share based on U.S. GAAPBasic net earnings per share
    
    
    
    0.32
    
    
    
    
    2.04
    
    
    
    
    2.01Diluted net earnings per share
    
    
    
    0.32
    
    
    
    
    2.03
    
    
    
    
    1.89
  Consolidated Statements of Comprehensive income
    
    
    2006
    
    
    
    2005
    
    
    
    2004Net earnings based on U.S. GAAP
    
    
    
    42
    
    
    
    
    270
    
    
    
    
    263Change in foreign currency translation adjustment (c)
    
    
    
    (1
    )
    
    
    
    9
    
    
    
    
    38Change in minimum pension liability adjustment,
net of tax (b)
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    Change in unrealized (losses) gains on derivative
instruments, net of tax (a)
    
    
    
    (24
    )
    
    
    
    27
    
    
    
    
    3Change in realized gains (losses) on derivative instruments included
in inventory, net of tax (a)
    
    
    
    
    
    
    
    
    1
    
    
    
    
    (1
    )Comprehensive income based on U.S. GAAP
    
    
    
    17
    
    
    
    
    304
    
    
    
    
    303
 AGRIUM ANNUAL REPORT 2006
    
    119




---



##### 



(ARROW) Notes to the Consolidated Financial Statements
    
    (amounts in millions of U.S. dollars unless otherwise stated)
  2006
    
    
    
    2005Shareholders equity based on Canadian GAAP
    
    
    
    1,233
    
    
    
    
    1,180Unrealized gains on derivative instruments, net of tax (a)
    
    
    
    5
    
    
    
    
    29Realized gains on derivative instruments included in inventory,
net of tax (a)
    
    
    
    1
    
    
    
    
    1Additional minimum pension liability, net of tax (b)
    
    
    
    
    
    
    
    
    (13
    )Adjustment to apply FAS 158, net of tax (e)
    
    
    
    (50
    )
    
    
    
    Other, net of tax
    
    
    
    (9
    )
    
    
    
    (12
    )Shareholders equity based on U.S. GAAP
    
    
    
    1,180
    
    
    
    
    1,185
 Description of significant differences
 (a)
    
    Derivative instruments and hedging activities  The Corporation accounts for its derivative
instruments under Canadian GAAP as described in notes 1 and 24. 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 a component of 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 26 provides the details of the joint venture as included under Canadian GAAP.(e)
    
    Funded status of pension and post-retirement benefit plans  Under U.S. GAAP, FAS 158 requires
employees to recognize the overfunded or underfunded status of a defined benefit pension or other
post-retirement benefit plan on the balance sheet and recognize changes in that funded status as a
component of other comprehensive income.
 120
    
    AGRIUM ANNUAL REPORT 2006