##### 



Page 57  Financial statements
and notes
    
 Managements
report to the
shareholders
    
    The audited consolidated financial statements and all information
contained in this annual report are the responsibility of management and
the audited consolidated financial statements are approved by the Board
of Directors of the Corporation. The financial statements have been
prepared by management in accordance with accounting principles
generally accepted in Canada and, where appropriate, reflect
managements best estimates and judgments based on currently available
information. The Corporation has established an internal audit program
and accounting and reporting systems supported by internal controls
designed to safeguard assets from loss or unauthorized use and ensure
the accuracy of the financial records. The financial information
presented throughout this annual report is consistent with the financial
statements. KPMG LLP, an independent firm of chartered accountants, has
been appointed by the shareholders as external auditors of the
Corporation. The Auditors Report to the Shareholders, which describes
the scope of their examination and expresses their opinion, is presented
below.The Audit Committee of the Board of Directors, whose members are
unrelated and independent of management, meets at least four times a
year with management, the internal auditors and the external auditors to
oversee the discharge of the responsibilities of the respective parties.
The Audit Committee reviews the independence of the external auditors,
pre-approves audit and permitted non-audit services and reviews the
consolidated financial statements and other financial disclosure
documents before they are presented to the Board for approval.
 -s- Michael M. Wilson
    
    -s- Bruce G. WatermanMichael M. Wilson
    
    Bruce G. WatermanPresident & Chief Executive OfficerCalgary, Canada
February 11, 2004
    
    Senior Vice President, Finance
& Chief Financial Officer
 
 Auditors report
    
    We have audited the consolidated balance sheets of Agrium Inc. as at
December 31, 2003 and 2002, and the consolidated statements of
operations and retained earnings and cash flows for each of the years in
the three-year period ended December 31, 2003. These financial
statements are the responsibility of the Corporations management. Our
responsibility is to express an opinion on these financial statements
based on our audits.We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Corporation as
at December 31, 2003 and 2002, and the results of its operations and its
cash flows for each of the years in the three-year period ended December
31, 2003, in accordance with Canadian generally accepted accounting
principles.(KPMG LLP)KPMG LLPChartered AccountantsCalgary, Canada
February 11, 2004




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##### 



Financial statements and notes
    
    Page 58
    Consolidated statements of operations
and retained earnings Years ended December 31
    
    2003
    
    
    2002
    
    
    2001(millions of U.S. dollars, except per share amounts)Sales
    
    
    2,630
    
    
    
    2,198
    
    
    
    2,174Direct freight
    
    
    131
    
    
    
    115
    
    
    
    111Net sales
    
    
    2,499
    
    
    
    2,083
    
    
    
    2,063Cost of product
    
    
    1,760
    
    
    
    1,564
    
    
    
    1,516Gross profit
    
    
    739
    
    
    
    519
    
    
    
    547ExpensesSelling, general and administrative
    
    
    286
    
    
    
    246
    
    
    
    268Depreciation and amortization
    
    
    140
    
    
    
    148
    
    
    
    141Asset impairment (note 8)
    
    
    235
    
    
    
    
    
    
    
    Royalties and other taxes
    
    
    17
    
    
    
    19
    
    
    
    22Other expenses and Argentine charges (note 3)
    
    
    40
    
    
    
    42
    
    
    
    85Earnings before interest expense and income taxes
    
    
    21
    
    
    
    64
    
    
    
    31Interest on long-term debt
    
    
    58
    
    
    
    59
    
    
    
    55Other interest
    
    
    5
    
    
    
    9
    
    
    
    19Loss before income taxes
    
    
    (42
    )
    
    
    (4
    )
    
    
    (43
    )Current income taxes (recovery) (note 4)
    
    
    22
    
    
    
    (21
    )
    
    
    28Future income taxes (reduction) (note 4)
    
    
    (43
    )
    
    
    17
    
    
    
    (26
    )Income taxes
    
    
    (21
    )
    
    
    (4
    )
    
    
    2Net loss
    
    
    (21
    )
    
    
    
    
    
    
    (45
    )Retained earnings  beginning of year
    
    
    191
    
    
    
    245
    
    
    
    315Change in accounting policy (note 2)
    
    
    
    
    
    
    (29
    )
    
    
    Common share dividends declared
    
    
    (14
    )
    
    
    (14
    )
    
    
    (13
    )Preferred securities charges
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )Retained earnings  end of year
    
    
    145
    
    
    
    191
    
    
    
    245Loss per share (note 5)Basic and diluted
    
    
    (0.25
    )
    
    
    (0.08
    )
    
    
    (0.49
    )See accompanying notes.




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##### 



Page 59 Consolidated statements of cash flows Years ended December 31
    
    2003
    
    
    2002
    
    
    2001(millions of U.S. dollars, except per share amounts)OperatingNet loss
    
    
    (21
    )
    
    
    
    
    
    
    (45
    )Items not affecting cashDepreciation and amortization
    
    
    140
    
    
    
    148
    
    
    
    141Asset impairment (note 8)
    
    
    235
    
    
    
    
    
    
    
    Foreign exchange and Argentine charges
    
    
    (8
    )
    
    
    14
    
    
    
    20Future income taxes (reduction) (note 4)
    
    
    (43
    )
    
    
    17
    
    
    
    (26
    )Net changes in non-cash working capitalAccounts receivable
    
    
    (98
    )
    
    
    1
    
    
    
    52Inventories
    
    
    12
    
    
    
    43
    
    
    
    (66
    )Prepaid expenses
    
    
    (25
    )
    
    
    (4
    )
    
    
    (2
    )Accounts payable and accrued liabilities
    
    
    12
    
    
    
    19
    
    
    
    (27
    )Income and other taxes payable
    
    
    (15
    )
    
    
    (14
    )
    
    
    40Cash provided by operating activities
    
    
    189
    
    
    
    224
    
    
    
    87InvestingCapital expenditures
    
    
    (99
    )
    
    
    (52
    )
    
    
    (164
    )Acquisition
    
    
    
    
    
    
    
    
    
    
    (19
    )Decrease (increase) in other assets
    
    
    3
    
    
    
    2
    
    
    
    (32
    )Proceeds from disposal of assets and investments
    
    
    12
    
    
    
    9
    
    
    
    3Net change in non-cash working capital
    
    
    26
    
    
    
    9
    
    
    
    27Other
    
    
    7
    
    
    
    3
    
    
    
    (15
    )Cash used in investing activities
    
    
    (51
    )
    
    
    (29
    )
    
    
    (200
    )FinancingCommon shares
    
    
    6
    
    
    
    108
    
    
    
    1Bank indebtedness repayment
    
    
    (1
    )
    
    
    (211
    )
    
    
    (97
    )Long-term debt issue (repayment)
    
    
    (27
    )
    
    
    (9
    )
    
    
    267Common share dividends paid
    
    
    (14
    )
    
    
    (14
    )
    
    
    (13
    )Preferred securities charges paid
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )Cash provided by (used in) financing activities
    
    
    (47
    )
    
    
    (137
    )
    
    
    146Increase in cash and cash equivalents
    
    
    91
    
    
    
    58
    
    
    
    33Cash and cash equivalents  beginning of year
    
    
    109
    
    
    
    51
    
    
    
    18Cash and cash equivalents  end of year
    
    
    200
    
    
    
    109
    
    
    
    51Dividends per common share for the year
    
    
    0.11
    
    
    
    0.11
    
    
    
    0.11Supplemental cash flow disclosureInterest paid
    
    
    61
    
    
    
    67
    
    
    
    72Income taxes paid (received)
    
    
    30
    
    
    
    (6
    )
    
    
    (2
    )See accompanying notes.




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##### 



Financial statements and notes
    
    Page 60
    Consolidated balance sheets As at December 31
    
    2003
    
    
    2002(millions of U.S. dollars)
    
    
    
    
    Restated (note 2)ASSETSCurrent assetsCash and cash equivalents
    
    
    200
    
    
    
    109Accounts receivable (note 6)
    
    
    314
    
    
    
    187Inventories (note 7)
    
    
    368
    
    
    
    353Prepaid expenses
    
    
    60
    
    
    
    35942
    
    
    
    684Capital assets (note 8)
    
    
    1,260
    
    
    
    1,422Other assets (note 9)
    
    
    71
    
    
    
    852,273
    
    
    
    2,191LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesBank indebtedness (note 10)
    
    
    
    
    
    
    1Accounts payable and accrued liabilities (note 11)
    
    
    404
    
    
    
    340Current portion of long-term debt (note 12)
    
    
    121
    
    
    
    25525
    
    
    
    366Long-term debt (note 12)Recourse debt
    
    
    503
    
    
    
    604Non-recourse debt
    
    
    111
    
    
    
    132614
    
    
    
    736Other liabilities (note 13)
    
    
    181
    
    
    
    160Future income taxes (note 4)
    
    
    132
    
    
    
    1651,452
    
    
    
    1,427Shareholders equityShare capital (note 16)Authorized: unlimited common shares and preferred securitiesIssued and outstanding:Common shares:
    2003  127 million (2002  126 million)
    
    
    490
    
    
    
    484Preferred securities:
    eight percent redeemable: 2003  seven million (2002 
seven million)
    
    
    172
    
    
    
    171six percent convertible, redeemable: 2003  two million (2002  two million)
    
    
    50
    
    
    
    50Contributed surplus
    
    
    1
    
    
    
    Retained earnings
    
    
    145
    
    
    
    191Cumulative translation adjustment
    
    
    (37
    )
    
    
    (132
    )821
    
    
    
    764Commitments (note 18)Contingencies (note 19)2,273
    
    
    
    2,191See accompanying notes.
 APPROVED BY THE BOARD: -s- M. M. Wilson
    
    -s- Harry G. SchaeferDirector
    
    Director




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##### 



Page 61 Notes to the consolidated
financial statements 1. ACCOUNTING POLICIES Principles of consolidation and preparation of financial statements
These consolidated financial statements are prepared and reported in U.S.
dollars in accordance with accounting principles generally accepted in Canada
(Canadian GAAP) and, except as outlined in note 23, are in accordance with
accounting principles generally accepted in the United States (U.S. GAAP). The consolidated financial statements include the accounts of the Corporation
and its subsidiaries and the Corporations proportionate share of revenues,
expenses, assets and liabilities of Profertil S.A. (see note 22). Intercompany
transactions and balances are eliminated. The underlying financial records contain amounts based on informed estimates
and best judgments of management. Certain comparative figures have been
reclassified to conform to the current years presentation. Cash and cash equivalents
Cash equivalents consist primarily of short-term investments with an original
maturity of three months or less and are stated at cost, which approximates
fair value. Inventories
Wholesale inventories, consisting primarily of fertilizers, operating supplies
and raw materials, include both direct and indirect production costs and
freight to transport the product from the production facility to the final
warehouse facility. Fertilizers include the Corporations completed product as
well as work in process. Operating supplies include catalysts used in the
Wholesale production process, materials used for maintenance and repairs and
other supplies. Wholesale inventory is valued at the lower of weighted average
cost and net realizable value. Retail inventories are recorded at the lower of purchased cost and net
realizable value and include the cost of delivery to move the product to the
respective farm centre. Capital assets
Capital assets are recorded at cost and include the cost of replacements and
betterments. Cost is defined as expenditures incurred up to the commencement of
commercial production. Depreciation is calculated using the straight-line method based on the
estimated service lives of the respective assets, ranging from three to 25
years. Management reviews capital assets on an ongoing basis to determine if
circumstances indicate impairment in the carrying value or changes in the
estimated useful life of the asset. If an impairment has occurred, an
impairment charge is recognized as an asset impairment expense in the amount
that the carrying value of the asset exceeds its fair value. Where the
estimated useful life changes, depreciation is adjusted prospectively. Facility costs
Costs incurred during the shutdown of a production facility for periodic
scheduled maintenance (a turnaround) are deferred and charged to production
costs on a straight-line basis over the period until the next scheduled
turnaround, generally one to four years. Unamortized costs that will be charged
to production costs within one year of the balance
sheet date are included in prepaid expenses, and all other costs are included
in other assets. Costs incurred during an extended facility shut down, due to
market conditions or facility failure, are charged to other expense. Other assets
Other assets include value-added tax, long-term receivables, deferred financing
costs and investments in associated companies. Value-added tax assets relate to South America operations and are accumulated
on the balance sheet as costs are incurred and are recovered against future
value-added taxes collected by the Corporation and due to the government.




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##### 



Financial statements and notes
    
    Page 62
    Notes to the consolidated
financial statements Investments in companies where the Corporation has the ability to exercise
significant influence, which is generally evidenced by ownership of between 20
percent and 50 percent of the equity, are carried on the equity basis of
accounting. The Corporations share of earnings is included in other income.
Investments where the Corporation does not exercise significant influence are
accounted for using the cost method. Employee future benefits
The Corporation maintains both defined benefit and defined contribution pension
plans in Canada and in the United States, which are both contributory and
non-contributory with regard to participants. The majority of employees are
members of defined contribution pension plans. The Corporation also maintains
certain contributory health care plans and life insurance benefits for retired
employees. Benefits from defined benefit plans are based on either years of
service and compensation or a rated amount for each year of service. The
pension plan and post-retirement benefit costs are determined annually by
independent actuaries and include current service costs and a provision for the
amortization of prior service costs. The Corporation has additional non-contributory defined benefit and defined
contribution plans for senior management, which provide supplementary pension
benefits. Employee future benefits are funded by the Corporation and obligations are
determined using the projected benefit method of actuarial valuation prorated
over the projected length of employee service. Employee future benefit costs
for current service are charged to earnings in the year incurred. Past service
costs, experience gains or losses and the effects of changes in plan
assumptions are amortized on a straight-line basis over the expected average
remaining service life of the relevant employee group. Contributions by the
Corporation to defined contribution employee future benefit plans are expensed
as incurred. Environmental remediation
Environmental costs that relate to current operations may be expensed or
capitalized. Expenditures that relate to existing conditions caused by past
operations, and that do not contribute to current or future revenue generation,
are expensed. Environmental costs are capitalized if the costs extend the life
of the property, increase its capacity and/or mitigate or prevent contamination
from future operations. Costs are recorded when environmental remediation
efforts are probable and the costs can be reasonably estimated based on current
law and existing technologies. Estimated costs are based on managements best
estimate of undiscounted future costs. Asset retirement obligations
The Corporation recognizes asset retirement obligations in the period in which
they are incurred if a reasonable estimate of fair value can be determined. The
liability is measured at fair value and is adjusted to its present value in
subsequent periods through accretion expense. The associated asset retirement
costs are capitalized as part of the
carrying amount of the long-lived asset. Future income taxes
Future income taxes are recognized for differences between the carrying values
of assets and liabilities and their respective income tax bases. Future income
tax assets and liabilities are measured using substantively enacted income tax
rates expected to apply to taxable income in the years in which temporary
differences are expected to be reversed or settled. The effect on future income
tax assets and liabilities of a change in rates is included in earnings in the
period during which the change is considered substantively enacted. Future
income tax assets are recorded in the financial statements if realization is
considered more likely than not. Revenue recognition
Revenue is recognized when the product is delivered to the customer or when the
risks and rewards of ownership are otherwise transferred to the customer.
Transportation costs are recovered from the customer through product or service
pricing. Stock-based compensation
The Corporation has several stock-based compensation plans, which are described
in note 17. Beginning in 2003, the fair value of stock options and performance
share units (PSUs) are expensed over the vesting period. For stock options
issued prior to 2003, pro-forma disclosure of the effect on net earnings (loss)
and earnings (loss) per share had the fair value been expensed is provided. The
liability for stock options that have been expensed is recorded in contributed
surplus until the options are exercised. Deferred Share Units (DSUs) to
directors and Stock Appreciation Rights (SARs) to employees are expensed to
cost of product or selling, general and administration expense when DSUs are
issued or SARs thresholds are achieved.




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##### 



Page 63 Notes to the consolidated
financial statements Derivative financial instruments
Derivative financial instruments are used by the Corporation to manage its
exposure to commodity price and foreign exchange rate fluctuations. The
Corporation enters into natural gas options and swaps to manage exposure to
changes in cash flows related to fluctuation in the market prices for natural
gas consumed in operations. The Corporation enters into forward exchange
contracts and foreign currency options to manage exposure to changes in cash
flows in its Canadian operations related to changes in the Canadian/U.S. dollar
exchange rate. These derivative contracts are initiated within the guidelines of the
Corporations risk management and hedging policies, which require specific
authorization for approval and commitment of contracts. The Corporation
formally documents all relationships between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking
the hedge transaction. Hedge accounting is used when there is a high degree of correlation between
changes in value of the derivative instrument and the cash flows of the hedged
item. The Corporation assesses, both at inception of the hedge and on a
quarterly basis, whether the derivatives that are used in hedging transactions
are highly correlated to the cash flows of the hedged item. Changes in time
value are excluded from the assessment of the hedge correlation. Derivative contracts accounted for as hedges are not recognized in the
consolidated balance sheets. Gains or losses on these contracts, including
realized gains and losses on hedging derivative contracts settled prior to
maturity, are recognized when the related hedge transaction is recognized. Any
portion of the gains or losses that is not highly correlated to the cash flows
of the hedged item is recognized in other expenses each period. If correlation
ceases, the Corporation discontinues hedge accounting and the gain or loss
previously deferred is carried forward and recognized when the hedged
transaction is recognized. Any future changes in the market value of the
derivative contract are
recognized in other expenses in the period of change. Derivative contracts that do not qualify as hedges are marked to market. Any
changes in the market value of the derivative contracts are recorded in other
expenses when those changes occur. The fair value of these instruments is
recorded as accounts receivable or payable. Foreign currency translation
The Corporations Canadian operations are considered self-sustaining and are
translated into U.S. dollars using the current rate method. Under this method,
assets and liabilities are translated at period-end exchange rates and items
included in the statements of operations and retained earnings and cash flows
are translated at the rates in effect at the time of the transaction. The gain
or loss on translation is charged to cumulative translation adjustment in
shareholders equity. The Corporations South America operations are considered integrated and are
translated into U.S. dollars using the temporal method. Under this method,
monetary assets and liabilities are translated at year-end exchange rates and
items included on the statements of operations and cash flows are translated at
rates in effect at the time of the transaction. Non-monetary assets and
liabilities are translated at historical rates. The gain or loss on translation
is charged to the statement of operations as other expense. While South America
Wholesale has always been integrated, prior to October 1, 2003, South America
Retail was considered self-sustaining and translated into U.S. dollars using
the current rate method. Foreign currency translation of South America Retail
operations was prospectively changed from the current rate method due to a
significant change in economic facts and circumstances. The functional currency
changed from the Argentine peso to U.S. dollars. The circumstances supporting
the change include the transacting of sales in U.S. dollars and the reduction
in banking restrictions in Argentina. From the effective date of change, the
exchange gains and losses deferred in the cumulative translation adjustment
remain unless there is a return in the Corporations investment. The
non-monetary balance sheet values at October 1, 2003, became the historic
values going forward. The increase in the cumulative translation adjustment of $95-million (2002 
$33-million decrease) comprises of unrealized currency translation adjustments
that arise on the translation to U.S. dollars of assets and liabilities of the
Corporations self-sustaining operations.




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##### 



Financial statements and notes
    
    Page 64
    Notes to the consolidated
financial statements 2. CHANGES IN ACCOUNTING POLICIES Stock-based compensation
In the fourth quarter of 2003, the Corporation expensed stock options on a
prospective basis effective January 1, 2003. Prospective adoption requires that
the fair value of compensation cost related to stock options granted in 2003 be
expensed in the financial statements over the vesting period. For stock options
granted prior to 2003, the Corporation will continue to provide pro forma
disclosure of the effect on net earnings (loss) and earnings (loss) per share
had the fair value been expensed. Asset retirement obligations
Effective January 1, 2003, the Corporation early-adopted the new Canadian
accounting standard for asset retirement obligations. Previously, when the cost
of site restoration exceeded the salvage value of the asset, the Corporation
accrued for site restoration costs systematically to the expected settlement
amount in the year the obligation was anticipated to settle. Under the new
accounting policy, the Corporation recognizes asset retirement obligations in
the period in which they are incurred if a reasonable estimate of fair value
can be determined. The liability is measured at discounted fair value and is
adjusted to its present value in subsequent periods as accretion expense is
recorded. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset, and the asset is depreciated over the
assets estimated useful life. The change in accounting policy was recorded
retroactively. The
effect of adoption on the balance sheet as at January 1, 2003 and 2002, is
presented below as increases (decreases): 2003
    
    
    2002Asset retirement cost, included in capital assets
    
    
    28
    
    
    
    28Accumulated depreciation on capital assets
    
    
    6
    
    
    
    4Asset retirement obligations, included in other liabilities
    
    
    28
    
    
    
    28Accumulated accretion of asset retirement obligations, included in
other liabilities
    
    
    7
    
    
    
    5Site restoration and reclamation, formerly included in other liabilities
    
    
    (15
    )
    
    
    (9
    )Long-term future income tax liabilities
    
    
    2
    
    
    
    Opening retained earnings
    
    
    
    
    
    
    
 Prior period consolidated balance sheets have been restated. Site restoration and reclamation expense recorded under the accounting policy
for prior periods approximated the depreciation and accretion expense under the
retroactive application of the new accounting policy. As a result, prior period
statements of operations were not restated. Goodwill and other intangible assets
Effective January 1, 2002, the Corporation adopted the new accounting standard
for goodwill. This standard requires that goodwill be subject to an annual
impairment test rather than being amortized. In 2002, the Corporation completed
the transitional impairment test using a discounted cash flow method for the
reporting unit that includes goodwill. The results of the test indicated that
goodwill recorded in the Corporations phosphate business, which was included
in the reportable segment entitled North America Wholesale, was impaired. The
amount of the impairment represented the entire goodwill balance of $45-million
($29-million net of tax). The resulting impairment loss was recognized as a
change in accounting policy and charged to retained earnings as of January 1,
2002.




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##### 



Page 65 Notes to the consolidated
financial statements 3. OTHER EXPENSES AND ARGENTINE CHARGES 2003
    
    
    2002
    
    
    2001Interest
    
    
    (5
    )
    
    
    
    
    
    
    (10
    )Facility costs
    
    
    10
    
    
    
    8
    
    
    
    15Performance incentives
    
    
    9
    
    
    
    
    
    
    
    Environmental remediation and accretion
of asset retirement obligation
    
    
    6
    
    
    
    10
    
    
    
    8Foreign exchange and Argentine charges(a)
    
    
    (8
    )
    
    
    14
    
    
    
    20U.S. dollar forced conversion(b)
    
    
    
    
    
    
    (10
    )
    
    
    29Other
    
    
    28
    
    
    
    20
    
    
    
    2340
    
    
    
    42
    
    
    
    85
 (a)
    
    The Corporation translates foreign exchange gains (losses) arising on U.S.
dollar working capital items in Canadian and South American self-sustaining
subsidiaries. Translation also includes foreign exchange gains (losses) arising
on the translation of integrated subsidiaries.(b)
    
    At December 31, 2001, a charge was recorded against working capital and was
made up primarily of accounts receivable in South America Retail. This
reflected the anticipated impact of the contract index law, legislating
conversion of all U.S. dollar debts to Argentine pesos on a one-to-one basis,
representing forced conversion of a portion of the Corporations U.S. dollar
assets in Argentina. During 2002, South America Retail collected receivables at
rates better than anticipated and recovered $10-million of the $29-million
charge recorded at December 31, 2001. 4. INCOME TAXES The major factors that caused variations from the expected combined Canadian
federal and provincial statutory income tax rates were the following: 2003
    
    
    2002
    
    
    2001Earnings (loss) before income taxesCanadian
    
    
    66
    
    
    
    (35
    )
    
    
    (22
    )Foreign
    
    
    (108
    )
    
    
    31
    
    
    
    (21
    )(42
    )
    
    
    (4
    )
    
    
    (43
    )Statutory rate (%)
    
    
    42
    
    
    
    43
    
    
    
    44Income taxes at statutory rates
    
    
    (18
    )
    
    
    (2
    )
    
    
    (19
    )Recognition of previously unrecognized tax assets
    
    
    (13
    )
    
    
    (4
    )
    
    
    (4
    )Differences in foreign tax rates
    
    
    (5
    )
    
    
    (10
    )
    
    
    (10
    )Manufacturing and processing allowance
    
    
    (5
    )
    
    
    6
    
    
    
    5Resource royalties and allowances
    
    
    6
    
    
    
    1
    
    
    
    4Foreign exchange gains relating to Canadian and Argentine operations
    
    
    9
    
    
    
    
    
    
    
    Argentine charges
    
    
    
    
    
    
    2
    
    
    
    22Other
    
    
    5
    
    
    
    3
    
    
    
    4Income taxes
    
    
    (21
    )
    
    
    (4
    )
    
    
    2CurrentCanadian
    
    
    (2
    )
    
    
    (4
    )
    
    
    26Foreign
    
    
    24
    
    
    
    (17
    )
    
    
    222
    
    
    
    (21
    )
    
    
    28FutureCanadian
    
    
    43
    
    
    
    
    
    
    
    (33
    )Foreign
    
    
    (86
    )
    
    
    17
    
    
    
    7(43
    )
    
    
    17
    
    
    
    (26
    )(21
    )
    
    
    (4
    )
    
    
    2




---



##### 



Financial statements and notes
    
    Page 66
    Notes to the consolidated
financial statements The significant components of future income tax liabilities and assets at
December 31 are as follows: 2003
    
    
    2002Future income tax liabilities
    
    
    
    Restated (note 2)Depreciation and amortization
    
    
    190
    
    
    
    252Partnership deferral
    
    
    60
    
    
    
    24Other
    
    
    39
    
    
    
    24Total future income tax liabilities
    
    
    289
    
    
    
    300Future income tax assetsLoss carry forwards expiring through 2011
    
    
    101
    
    
    
    111Asset retirement obligation and environmental
liabilities
    
    
    44
    
    
    
    39Receivable allowances and accrued liabilities
    
    
    21
    
    
    
    17Employee future benefits
    
    
    16
    
    
    
    15Other
    
    
    16
    
    
    
    18Future income tax assets before valuation allowance
    
    
    198
    
    
    
    200Valuation allowance
    
    
    (41
    )
    
    
    (65
    )Total future income tax assets, net of valuation
allowance
    
    
    157
    
    
    
    135Net future income tax liabilities
    
    
    132
    
    
    
    165
 5. LOSS PER SHARE The following table summarizes the computation of net loss per share: 2003
    
    
    2002
    
    
    2001NumeratorNet loss
    
    
    (21
    )
    
    
    
    
    
    
    (45
    )Preferred securities charges(a)
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )Numerator for basic loss per share
    
    
    (32
    )
    
    
    (11
    )
    
    
    (57
    )Preferred securities charges(a)
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted loss per share
    
    
    (32
    )
    
    
    (11
    )
    
    
    (57
    )DenominatorWeighted average denominator for basic loss per share
    
    
    126
    
    
    
    123
    
    
    
    115Dilutive instruments(b)Stock options(c)
    
    
    
    
    
    
    
    
    
    
    Preferred securities converted to common shares$175-million, eight percent(d)
    
    
    
    
    
    
    
    
    
    
    $50-million, six percent(e)
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted loss per share
    
    
    126
    
    
    
    123
    
    
    
    115Basic loss per share
    
    
    (0.25
    )
    
    
    (0.08
    )
    
    
    (0.49
    )Diluted loss per share
    
    
    (0.25
    )
    
    
    (0.08
    )
    
    
    (0.49
    )
 (a)
    
    Under Canadian GAAP the preferred securities (note 16) are considered equity instruments. The preferred securities charges that have been charged to retained earnings are
deducted from net earnings (loss) for the computation of basic earnings (loss) per share. For diluted earnings (loss) per share, these preferred securities charges are added
back when the impact of the equity instrument is dilutive to basic earnings (loss) per share.(b)
    
    For diluted earnings (loss) per share, these dilutive instruments are added back only when the impact of the instrument is dilutive to basic earnings (loss) per share.




---



##### 



Page 67  Notes to the consolidated
financial statements  (c)
    
    Stock options, using the treasury stock method, with an average share price
less than or equal to the average share price during the year are considered
dilutive and potential common share equivalents are considered outstanding. At
December 31, 2003, there were nine million antidilutive stock options (2002 
nine million; 2001  eight million) that could be dilutive in the future.(d)
    
    This series of preferred securities is redeemable at the option of the
Corporation. The redemption price may be paid by delivering common shares as
disclosed in note 16. At December 31, 2003, there were seven million
antidilutive preferred securities (2002  seven million; 2001  seven million)
that could be dilutive in the future.(e)
    
    This series of preferred securities is convertible to common shares as
disclosed in note 16. At December 31, 2003, there were two million antidilutive
preferred securities (2002  two million; 2001  two million) that were
converted to common shares in January 2004. 6. ACCOUNTS RECEIVABLE 2003
    
    
    2002Trade accounts
    
    
    297
    
    
    
    180Allowance for doubtful accounts
    
    
    (16
    )
    
    
    (20
    )Rebates and other non-trade accounts
    
    
    25
    
    
    
    25Income and other taxes
    
    
    7
    
    
    
    Other
    
    
    1
    
    
    
    2314
    
    
    
    187
 On an ongoing basis, certain of the Corporations U.S. subsidiaries sell their
accounts receivable balances to a subsidiary of the Corporation. The subsidiary
has an agreement to sell to a financial institution, on an ongoing basis, an
undivided percentage interest in this designated pool of receivables, on a
non-recourse basis, in an amount not to exceed $125-million. The Corporation
has granted a security interest to the financial institution for the sold
receivables. The fees and expenses are calculated based on the receivables sold
and the prevailing commercial paper rate. The agreement expires in December
2007 and may be terminated earlier by either Agrium with proper notice or the
financial institution provided certain conditions are met. Servicing of the receivables sold is performed by a U.S. subsidiary of the
Corporation which charges a fee of two percent of the pool balances. At
December 31, 2003, the accounts receivable balances sold were $-nil (2002 
$114-million). Average monthly receivables sold, fees and expenses incurred on this program
for the years ended December 31, were as follows: 2003
    
    
    2002
    
    
    2001Average monthly receivables sold
    
    
    50
    
    
    
    98
    
    
    
    98Fees and expenses paid
    
    
    1
    
    
    
    3
    
    
    
    4
 7. INVENTORIES 2003
    
    
    2002North America WholesaleFertilizers
    
    
    98
    
    
    
    110Operating supplies
    
    
    72
    
    
    
    67Raw materials
    
    
    25
    
    
    
    24195
    
    
    
    201North America RetailFertilizers
    
    
    63
    
    
    
    47Chemicals
    
    
    76
    
    
    
    70Other
    
    
    15
    
    
    
    15154
    
    
    
    132South America Wholesale
    
    
    7
    
    
    
    7South America Retail
    
    
    12
    
    
    
    13368
    
    
    
    353




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##### 



Financial statements and notes
    
    Page 68
  Notes to the consolidated
financial statements  8. CAPITAL ASSETS 20022003
    
    Restated (note 2)Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedDepreciation
    
    
    Net
    
    
    
    
    
    
    Depreciation
    
    
    Netand
    
    
    Book
    
    
    
    
    
    
    and
    
    
    BookCost
    
    
    Amortization
    
    
    Value
    
    
    Cost
    
    
    Amortization
    
    
    ValueLand
    
    
    28
    
    
    
    
    
    
    
    28
    
    
    
    28
    
    
    
    
    
    
    
    28Buildings and improvements
    
    
    308
    
    
    
    157
    
    
    
    151
    
    
    
    305
    
    
    
    132
    
    
    
    173Machinery and equipment
    
    
    2,020
    
    
    
    1,020
    
    
    
    1,000
    
    
    
    2,035
    
    
    
    871
    
    
    
    1,164Other
    
    
    110
    
    
    
    29
    
    
    
    81
    
    
    
    81
    
    
    
    24
    
    
    
    572,466
    
    
    
    1,206
    
    
    
    1,260
    
    
    
    2,449
    
    
    
    1,027
    
    
    
    1,422
 In the fourth quarter of 2003, the Corporations Kenai, Alaska, nitrogen
facility in the North America Wholesale business unit was determined to be
impaired in the amount of $235-million ($140-million net of tax). The asset
impairment was calculated as the difference between the carrying amount and the
fair value of the Alaskan nitrogen facility. The impairment loss was
proportionately allocated to reduce the cost base of the asset categories
above. 9. OTHER ASSETS 2003
    
    
    2002South America value-added tax and other costs
    
    
    34
    
    
    
    49Long-term receivables
    
    
    9
    
    
    
    10Long-term investments
    
    
    12
    
    
    
    13Other
    
    
    16
    
    
    
    1371
    
    
    
    85
 10. BANK INDEBTEDNESS Agrium Inc.
The Corporation has a $225-million, 364-day syndicated revolving credit
facility due in May 2004. This facility contains a 1.5-year term-out provision
exercisable at the Corporations option. Under this option the Corporation can
convert the facility into a term lending arrangement following expiration of
the 364-day revolving period. Agrium U.S. Inc., a subsidiary of the
Corporation, guarantees this facility. Interest rates are at either LIBOR plus
a spread, bankers acceptance rate plus a spread or a base rate established by
the bank plus variable spreads, at the election of the Corporation. The loan
agreements require the Corporation to maintain certain financial ratios and
other covenants. Agrium U.S. Inc.
The Corporations wholly owned subsidiary, Agrium U.S. Inc., has a base
revolving credit facility of up to $56-million, which expires December 4, 2004.
This facility is guaranteed by the Corporation and requires the Corporation to
maintain certain financial ratios and other covenants. Profertil S.A.
Profertil has access to limited short-term borrowings from Argentine financial
institutions at prevailing interest rates, based on LIBOR, to fund working
capital requirements.




---



##### 



Page 69  Notes to the consolidated
financial statements  11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 2003
    
    
    2002Trade
    
    
    161
    
    
    
    172Accrued liabilities
    
    
    229
    
    
    
    152Accrued interest payable
    
    
    14
    
    
    
    16404
    
    
    
    340
 12. LONG-TERM DEBT 2003
    
    
    2002Recourse debtUnsecured6.86% senior notes due December 29, 2004
to 2007 (a)(c)
    
    
    60
    
    
    
    757.06% senior notes due December 29, 2004
to 2010 (b)(c)
    
    
    100
    
    
    
    1007% debentures due February 1, 2004 (c)
    
    
    75
    
    
    
    757.7% 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
    
    
    
    125SecuredProfertil S.A.  other
    
    
    3
    
    
    
    5Other
    
    
    20
    
    
    
    16608
    
    
    
    621Principal repayments due within one year
    
    
    105
    
    
    
    17503
    
    
    
    604Non-recourse debtSecuredProfertil S.A. (d)
    
    
    127
    
    
    
    140Principal repayments due within one year
    
    
    16
    
    
    
    8111
    
    
    
    132
 (a)
    
    The notes have four remaining equal annual principal repayments, with the
next repayment due December 29, 2004. 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 seven equal annual principal repayments commencing December
29, 2004. 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, 2003, is $127-million of which $15-million is repayable within
one year. At December 31, 2003, amounts outstanding under the credit agreement
are broken into tranches of $115-million, $73-million and $64-million, of which
the Corporations share is 50 percent. The two smaller tranches accrue interest
at the LIBOR rate plus a spread. The $115-million tranche accrues interest at a
fixed rate. Principal plus accrued interest is repayable in 14 semi-annual
installments. The facility matures December 31, 2010.This facility became non-recourse to Profertil partners once completion
guarantees on the facility had been released in 2001. The Corporation has
pledged its shares in Profertil to the bank as security in the event of
default. The joint venture partners have also entered into an agreement that
limits the transfer of the ownership interests in Profertil for a period of
six years commencing from the completion date, which was November 30, 2001.




---



##### 



Financial statements and notes
    
    Page 70
  Notes to the consolidated
financial statements  13. OTHER LIABILITIES 2003
    
    
    2002Restated (note 2)Asset retirement obligations (notes 2 and 14)
    
    
    43
    
    
    
    35Environmental remediation
    
    
    87
    
    
    
    79Employee future benefits (note 15)Pensions
    
    
    13
    
    
    
    14Other post-retirement benefits
    
    
    31
    
    
    
    26Other
    
    
    7
    
    
    
    6181
    
    
    
    160
 14. ASSET RETIREMENT OBLIGATIONS The Corporation recognizes asset retirement obligations associated with
nitrogen, phosphate and potash production facilities, marketing and
distribution facilities and phosphate and potash mine assets. These obligations
generally relate to dismantlement and site restoration. A reconciliation between the opening and closing asset retirement obligation
balances is provided below: 2003
    
    
    2002Restated (note 2)Balance, beginning of year
    
    
    35
    
    
    
    33Foreign exchange translation
    
    
    5
    
    
    
    Accretion, included in other expense
    
    
    3
    
    
    
    2Balance, end of year
    
    
    43
    
    
    
    35
 The Corporation estimates that the undiscounted cash flow required to settle
the asset retirement obligation is approximately $180-million, which will be
settled between 2004 and 2080.




---



##### 



Page 71 Notes to the consolidated
financial statements 15. EMPLOYEE FUTURE BENEFITS 
 The Corporations disclosures for employee future benefits for the year ended
December 31, 2003, are measured with information from September 30, 2003.
 Obligations and assets
The change in accumulated benefit obligations and change in plan assets for the
defined benefit pension and post-retirement benefit plans are as follows: Defined Benefit
    
    Post-retirementPension Plans
    
    Benefit Plans2003
    
    
    2002
    
    
    2001
    
    
    2003
    
    
    2002
    
    
    2001Change in benefit obligationsBalance, beginning of year
    
    
    105
    
    
    
    96
    
    
    
    81
    
    
    
    31
    
    
    
    23
    
    
    
    23Foreign exchange on Canadian obligations
    
    
    10
    
    
    
    
    
    
    
    (4
    )
    
    
    2
    
    
    
    
    
    
    
    Interest and service cost
    
    
    12
    
    
    
    11
    
    
    
    9
    
    
    
    5
    
    
    
    4
    
    
    
    3Actuarial loss (gain)
    
    
    7
    
    
    
    3
    
    
    
    5
    
    
    
    3
    
    
    
    5
    
    
    
    (2
    )Curtailment
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transfer from CAI Retirement Plan (a)
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (5
    )
    
    
    (5
    )
    
    
    (5
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )Balance, end of year
    
    
    127
    
    
    
    105
    
    
    
    96
    
    
    
    40
    
    
    
    31
    
    
    
    23Change in plan assetsFair value, beginning of year
    
    
    67
    
    
    
    76
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange on Canadian assets
    
    
    9
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    8
    
    
    
    (4
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    9
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Transfer from CAI Retirement Plan (a)
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (5
    )
    
    
    (5
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Fair value, end of year
    
    
    88
    
    
    
    67
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    Unfunded status
    
    
    39
    
    
    
    38
    
    
    
    20
    
    
    
    40
    
    
    
    31
    
    
    
    23Unrecognized net loss
    
    
    (28
    )
    
    
    (26
    )
    
    
    (12
    )
    
    
    (8
    )
    
    
    (5
    )
    
    
    Unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    Accrued employee future benefits
    
    
    11
    
    
    
    12
    
    
    
    8
    
    
    
    31
    
    
    
    26
    
    
    
    23Other assets 
prepaid employee future benefits
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Other liabilities  pensions (note 13)
    
    
    13
    
    
    
    14
    
    
    
    10
    
    
    
    31
    
    
    
    26
    
    
    
    2311
    
    
    
    12
    
    
    
    8
    
    
    
    31
    
    
    
    26
    
    
    
    23
 (a)
    
    The assets and liabilities attributable to benefits accrued prior
to May 1, 1993, under the Cominco American Incorporated (CAI)
Retirement Plan, were transferred to the Corporation in 2001. These
assets and liabilities were part of the spin-off of the fertilizer
assets that formed the initial public offering to create the
Corporation in 1993. The accumulated benefit obligation at December 31, 2003, is $111-million
($85-million and $80-million for 2002 and 2001 respectively). The estimated
aggregate expected contribution to fund the Corporations defined benefit plans
for the next fiscal year is $8-million to $12-million.




---



##### 



Financial statements and notes
    
    Page 72
    Notes to the consolidated
financial statements Expense
The components of net employee future benefits expense for the Corporations
pension and post-retirement benefit plans are computed actuarially as follows: 2003
    
    
    2002
    
    
    2001Defined benefit pension plansService cost for benefits earned during the year
    
    
    5
    
    
    
    4
    
    
    
    3Interest cost on projected benefit obligations
    
    
    7
    
    
    
    7
    
    
    
    6Expected return on plan assets
    
    
    (6
    )
    
    
    (6
    )
    
    
    (5
    )Net amortization and deferral
    
    
    1
    
    
    
    1
    
    
    
    Net expense
    
    
    7
    
    
    
    6
    
    
    
    4Post-retirement benefit plansService cost for benefits earned during the year
    
    
    3
    
    
    
    2
    
    
    
    1Interest cost on projected benefit obligations
    
    
    2
    
    
    
    2
    
    
    
    2Net expense
    
    
    5
    
    
    
    4
    
    
    
    3Defined contribution pension plans
    
    
    10
    
    
    
    7
    
    
    
    7Total expense
    
    
    22
    
    
    
    17
    
    
    
    14
 Assumptions
Significant actuarial assumptions used in calculating the future benefits
obligation and the net employee future benefits expense were as follows: Future Benefits Obligation
    
    Future Benefits Expense(percent)
    
    2003
    
    
    2002
    
    
    2001
    
    
    2003
    
    
    2002
    
    
    2001Defined benefit pension plansDiscount rate
    
    
    6
    
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Long-term rate of return on assets
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8
    
    
    
    8Rate of increase in compensation levels
    
    
    3
    
    
    
    4
    
    
    
    5
    
    
    
    3
    
    
    
    4
    
    
    
    5Post-retirement benefit plansDiscount rate
    
    
    6
    
    
    
    7
    
    
    
    7
    
    
    
    6
    
    
    
    7
    
    
    
    7Health care cost trend rate
    
    
    12
    
    
    
    8
    
    
    
    8
    
    
    
    12
    
    
    
    8
    
    
    
    8
 The Corporations assumption for the long-term rate of return on assets is
based on the long-term expectations of inflation, together with the expected
long-term real return for each asset class, weighted in accordance with the
stated investment policy for the plan. Expectations of real returns and
inflation are based on a combination of current market conditions, historical
capital market data and future expectations.




---



##### 



Page 73 Notes to the consolidated
financial statements A one-percentage point change in the assumed health care cost trend rate would
have the following effects: One Percentage
    
    
    One PercentagePoint Increase
    
    
    Point DecreaseEffect on
accumulated post retirement benefit obligation as of December 31, 2003
    
    
    5
    
    
    
    (4
    )Effect on total of service and interest cost
    
    
    1
    
    
    
    (1
    )
 Asset allocation and investment strategy
Defined benefit pension plan asset allocation at December 31, 2003 and 2002, and
target allocation for 2004 are as follows: Target(percent)
    
    Allocation
    
    Plan AssetsAsset categories
    
    
    2004
    
    
    
    2003
    
    
    
    2002Equity securities (a)
    
    
    44  69
    
    
    
    58
    
    
    
    59Debt securities
    
    
    28  53
    
    
    
    40
    
    
    
    35Cash and other
    
    
    0  13
    
    
    
    2
    
    
    
    6
 (a)
    
    Equity securities held by the plans do not include any of the Corporations
common shares. The Corporations investment strategy for all defined benefit plans is
consistent with the 2004 target allocation of plan assets. 16. SHARE CAPITAL 2003
    
    2002
    
    2001Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Numberof Shares
    
    
    
    
    
    
    of Shares
    
    
    
    
    
    
    of Shares(millions
    )
    
    Amount
    
    
    (millions
    )
    
    Amount
    
    
    (millions
    )
    
    AmountCommon sharesIssued and outstanding, beginning of year
    
    
    126
    
    
    
    484
    
    
    
    115
    
    
    
    376
    
    
    
    115
    
    
    
    375Shares issued, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    106
    
    
    
    
    
    
    
    Issued on exercise of stock options
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    1Issued and outstanding, end of year
    
    
    127
    
    
    
    490
    
    
    
    126
    
    
    
    484
    
    
    
    115
    
    
    
    376Preferred securitiesIssued and outstanding, beginning of year
    
    
    9
    
    
    
    221
    
    
    
    9
    
    
    
    221
    
    
    
    9
    
    
    
    221Amortization of issuance costs
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issued and outstanding, end of year
    
    
    9
    
    
    
    222
    
    
    
    9
    
    
    
    221
    
    
    
    9
    
    
    
    221Total
    
    
    136
    
    
    
    712
    
    
    
    135
    
    
    
    705
    
    
    
    124
    
    
    
    597
 In March 2002, the Corporation issued 11.2 million common shares at $9.85 per
common share. The total proceeds from the issue, net of expenses, were
$106-million, and were used to pay down bank indebtedness. Concurrent with this
financing, the Corporations revolving credit facilities were reduced from
$375-million to $281-million and certain related covenants were amended.




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##### 



Financial statements and notes
    
    Page 74
    Notes to the consolidated
financial statements As at December 31, 2003, the Corporation has two classes of preferred
securities issued and outstanding: (a) $175-million, unsecured eight percent redeemable preferred securities due
June 30, 2047
The charges on these securities are payable quarterly in arrears and the
Corporation has the right to defer the charges for up to 20 consecutive
quarterly periods, subject to certain restrictions. The preferred securities
are redeemable at the option of the Corporation, in whole or in part, on or
after April 22, 2003, at the principal amount plus accrued and unpaid
securities charges (the redemption price) to the date of redemption. The
Corporation may, at its option, pay the redemption price or any deferred
charges in cash or by issuing common shares and using the proceeds to pay the
redemption price or deferred charges. (b) $50-million, unsecured six percent convertible redeemable preferred
securities due September 30, 2030
On December 17, 2003, the Corporation issued a redemption notice on the
outstanding $50-million six percent convertible redeemable preferred
securities. The holders of the securities had the right to elect conversion of
the securities into common shares at a price of $11.9677 per share for a
maximum issuance of an additional 4.18 million common shares or accept
redemption. The redemption price was 103 percent of the principal amount, plus
accrued and unpaid securities charges. Subsequent to December 31, 2003, all holders of the securities elected to
convert the securities into common shares at the stated conversion price. 17. STOCK-BASED COMPENSATION
The Corporation offers stock options, SARs and PSUs to certain employees and
DSUs to directors as part of compensation for services rendered. Stock options
The Corporation has a stock option plan under which the Board of Directors may
grant options to officers and employees to acquire common shares. At December
31, 2003, the Board of Directors was authorized to grant options on up to 10
million common shares (2002  11 million; 2001  nine million) on which nine
million options (2002  nine million; 2001  eight million) had been granted
at market value. An options maximum term is 10 years. Options are granted
throughout the year and vest and become exercisable equally over a four-year
period, commencing one year after the grant date. Officers of the Corporation
can receive options on the basis of one option for each common share acquired
by the officer in the open market, to a maximum of 100,000 options per officer,
with the exercise price of each option equal to the purchase price paid for the
original share. These options lapse if the officer does not hold 100 percent of
the purchased shares on the first anniversary date, 75 percent on the second
anniversary date, 50 percent on the third anniversary date and 25 percent on
the fourth anniversary date. Stock option transactions for the respective years were as follows: 2003
    
    2002
    
    2001Weighted Avg.
    
    
    
    
    
    
    Weighted Avg.
    
    
    
    
    
    
    Weighted Avg.Options
    
    
    Exercise
    
    
    Options
    
    
    Exercise
    
    
    Options
    
    
    ExerciseOutstanding
    
    
    Price
    
    
    Outstanding
    
    
    Price
    
    
    Outstanding
    
    
    Price(millions
    )
    
    (C$
    )
    
    (millions
    )
    
    (C$
    )
    
    (millions
    )
    
    (C$
    )Outstanding, beginning of year
    
    
    9
    
    
    
    16.21
    
    
    
    8
    
    
    
    16.20
    
    
    
    7
    
    
    
    15.52Granted
    
    
    1
    
    
    
    15.59
    
    
    
    1
    
    
    
    15.89
    
    
    
    1
    
    
    
    20.21Exercised
    
    
    (1
    )
    
    
    13.19
    
    
    
    
    
    
    
    10.82
    
    
    
    
    
    
    
    13.05Cancelled
    
    
    
    
    
    
    18.25
    
    
    
    
    
    
    
    18.52
    
    
    
    
    
    
    
    18.52Outstanding, end of year
    
    
    9
    
    
    
    16.31
    
    
    
    9
    
    
    
    16.21
    
    
    
    8
    
    
    
    16.20Exercisable, end of year
    
    
    6
    
    
    
    16.37
    
    
    
    6
    
    
    
    16.34
    
    
    
    5
    
    
    
    16.44




---



##### 



Page 75 Notes to the consolidated
financial statements As disclosed in note 2, the Corporation began prospectively expensing the fair
value of stock options granted in 2003 over their vesting period. In accordance
with the prospective method of adoption, the Corporation will continue to
record no compensation expense for stock options granted prior to January 1,
2003, and will continue to provide pro forma disclosure of the effect on net
loss and loss per share had the fair value been expensed as follows: 2003
    
    2002
    
    2001(millions of U.S. dollars, except per share amounts)
    
    As Reported
    
    
    Pro forma
    
    
    As Reported
    
    
    Pro forma
    
    
    As Reported
    
    
    Pro formaNet loss
    
    
    (21
    )
    
    
    (26
    )
    
    
    
    
    
    
    (6
    )
    
    
    (45
    )
    
    
    (51
    )Loss per common shareBasic
    
    
    (0.25
    )
    
    
    (0.29
    )
    
    
    (0.08
    )
    
    
    (0.14
    )
    
    
    (0.49
    )
    
    
    (0.54
    )Diluted
    
    
    (0.25
    )
    
    
    (0.29
    )
    
    
    (0.08
    )
    
    
    (0.14
    )
    
    
    (0.49
    )
    
    
    (0.54
    )
 In 2003, the Corporation recognized a total compensation expense of $1-million
for stock options granted in 2003. The fair value of all options have been estimated using a Black Scholes option
pricing model and based on the following assumptions: 2003
    
    
    2002
    
    
    2001Dividend yield (%)
    
    
    1
    
    
    
    1
    
    
    
    1Expected stock price volatility (%)
    
    
    32
    
    
    
    30
    
    
    
    38Risk-free interest rate (%)
    
    
    4
    
    
    
    5
    
    
    
    6Expected life of the options (years)
    
    
    7
    
    
    
    7
    
    
    
    7
 The weighted average fair value price per share of options granted in the years indicated was as follows: 2003  C$6.34; 2002  C$7.87;
and 2001  C$11.25. The following table summarizes stock options outstanding and exercisable under the plan at December 31, 2003: Options Outstanding
    
    Options ExercisableRange of
    
    Number
    
    
    Weighted Avg.
    
    
    Weighted Avg.
    
    
    Number
    
    
    Weighted Avg.Exercise
    
    Outstanding
    
    
    Remaining
    
    
    Exercise
    
    
    Exercisable
    
    
    ExercisePrices
    
    at Year End
    
    
    Contractual Life
    
    
    Price
    
    
    at Year End
    
    
    Price(C$)
    
    (millions
    )
    
    (years
    )
    
    (C$
    )
    
    (millions
    )
    
    (C$
    )Less than 11.86
    
    
    1
    
    
    
    5
    
    
    
    11.37
    
    
    
    1
    
    
    
    11.2511.86 to 15.85
    
    
    3
    
    
    
    7
    
    
    
    13.97
    
    
    
    1
    
    
    
    12.7315.86 to 20.15
    
    
    4
    
    
    
    5
    
    
    
    17.84
    
    
    
    3
    
    
    
    18.4520.16 to 22.15
    
    
    1
    
    
    
    6
    
    
    
    20.59
    
    
    
    1
    
    
    
    20.638.75 to 22.15
    
    
    9
    
    
    
    6
    
    
    
    16.31
    
    
    
    6
    
    
    
    16.37
 Stock Appreciation Rights
The Corporation has SARs under which all regular employees hired prior to May
5, 2003, are eligible to participate. The plan provides for cash awards based
on the appreciation of the Corporations common share price over a five-year
term ending May 4, 2004. SARs grants were made on May 5, 1999, to all regular
employees at that date, with further grants for employees hired after that date
on subsequent May 5 anniversaries up to May 5, 2003. The issuance price of the
SARs was based on the closing price of the Corporations shares on the New York
Stock Exchange (NYSE) on the day preceding the relevant grant date.




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##### 



Financial statements and notes
    

Page 76
 Notes to the consolidated
financial statements  No further grants will be made under this program subsequent to May 5, 2003.
The total number of SARs grants outstanding and their issuance price are as
follows: 2003
    
    2002
    
    2001SARs
    
    
    
    
    
    
    SARs
    
    
    
    
    
    
    SARsOutstanding
    
    
    Weighted Avg.
    
    
    Outstanding
    
    
    Weighted Avg.
    
    
    Outstanding
    
    
    Weighted Avg.(millions)
    
    
    Issue Price
    
    
    (millions)
    
    
    Issue Price
    
    
    (millions)
    
    
    Issue PriceOutstanding, beginning of year
    
    
    2
    
    
    
    9.53
    
    
    
    2
    
    
    
    9.51
    
    
    
    1
    
    
    
    9.01Granted
    
    
    
    
    
    
    11.42
    
    
    
    
    
    
    
    9.66
    
    
    
    1
    
    
    
    11.36Cancelled
    
    
    
    
    
    
    9.47
    
    
    
    
    
    
    
    9.41
    
    
    
    
    
    
    
    Outstanding, end of year
    
    
    2
    
    
    
    9.94
    
    
    
    2
    
    
    
    9.53
    
    
    
    2
    
    
    
    9.51
 Twenty-five percent of the SARs vest and are to be paid out upon attainment of
four pre-determined price hurdles of $15.00, $22.50, $33.75 and $50.00. In
order to satisfy the vesting requirement, the average closing price on the NYSE
over a period of 20 trading days is required to equal or exceed the relevant
hurdle price. The first vesting point was reached on November 14, 2003, and
eligible employees were paid 25 percent of the value of their SARs based on the
difference between the issuance price of their rights and $15.00. The total expense for SARs in 2003 was $3-million. A potential additional
expense of $5-million would be incurred if the share price reaches $22.50,
$10-million if the share price reaches $33.75 and $17-million if the share
price reaches $50 prior to May 5, 2004. Directors Deferred Share Unit Plans
The Corporation has two DSU Plans. Under the first plan, directors can elect to
have a portion or all of their directors fees paid in DSUs. The number of DSUs
issued is calculated by dividing the directors fees by the fair market value
of the Corporations common shares on the date that the fees become payable. Effective May 2002, the Corporation also implemented a DSU Plan for directors
permitting grants at the discretion of the Board of Directors. Under this plan,
a specified number of DSUs may be granted to each director upon the approval of
the Board of Directors. Under both plans, the DSUs are fully vested upon being granted but are not paid
until a directors departure from the Board. The issue amount and subsequent
changes in the common share price in relation to the DSUs issue price are
recorded as compensation expense and included in selling, general and
administrative expenses. As of December 31, 2003, the fair value of the DSUs outstanding was $1-million
(2002  less than $1-million). Performance Share Unit Plan
Effective October 2003, a new PSU Plan was approved whereby executive officers
and other eligible managers may receive grants of PSUs. The value of each PSU
will be based on the value of the Corporations common shares on the NYSE. When
cash dividends are paid on the common shares of the Corporation, additional
PSUs of equivalent value are credited to the designated employees account. PSUs vest on the third anniversary of the grant date, based upon the relative
ranking of the Corporations total shareholder return over a three-year
performance cycle, compared against the total shareholder return over the same
period of a peer group of companies. Pay-out ranges between 50 percent of the
original PSUs granted, up to 150 percent of the original PSUs granted dependent
on total shareholder return over the three-year period. On vesting, the value
of PSUs will be payable to the holders in cash. No common shares are issuable
to holders of PSUs. As of December 31, 2003, the fair value of the PSUs outstanding was less than
$1-million.




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##### 



Page 77
 Notes to the consolidated
financial statements 18.  COMMITMENTS 2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Cost of productOperating lease commitments
    
    
    41
    
    
    
    24
    
    
    
    18
    
    
    
    15
    
    
    
    13Natural gas commitments  North America
    
    
    508
    
    
    
    52
    
    
    
    33
    
    
    
    11
    
    
    
    7Power, sulphuric acid and other payments
    
    
    34
    
    
    
    23
    
    
    
    23
    
    
    
    22
    
    
    
    21Profertil natural gas and other
    
    
    26
    
    
    
    30
    
    
    
    30
    
    
    
    30
    
    
    
    30609
    
    
    
    129
    
    
    
    104
    
    
    
    78
    
    
    
    71OtherLong-term debt and capital lease repayments
    
    
    121
    
    
    
    49
    
    
    
    51
    
    
    
    54
    
    
    
    38Total
    
    
    730
    
    
    
    178
    
    
    
    155
    
    
    
    132
    
    
    
    109
 The operating lease commitments consist primarily of short-term leases for rail
cars and contractual commitments at distribution facilities in North America
Wholesale, vehicles and application equipment in North America Retail and
office equipment and property leases throughout the Corporations operations.
The commitments represent the minimum payments in each of the next five years
under each agreement. Operating lease payments expensed in 2003 were
$39-million (2002  $28-million; 2001  $23-million). The Corporation has entered into a number of agreements with suppliers to
guarantee supply of raw materials required in the production processes at its
wholesale facilities. Among these are fixed base-price natural gas agreements
at the Kenai, Alaska, and Profertil facilities and a co-generation power
contract for the Carseland facility, which are included in the commitments,
based on the minimum obligations under these contracts. Additionally, the
Corporations minimum commitments for North American natural gas purchases not
under fixed base-price contracts are calculated using the prevailing New York
Mercantile Exchange (NYMEX) forward prices at December 31, 2003, adjusted for
transportation differentials to each production facility. The Alaskan nitrogen facility has a natural gas purchase contract with a
supplier that expires on the earlier of July 1, 2009, and the satisfaction of
the suppliers delivery obligations thereunder. The delivery price formula is
based on a fixed price that is adjusted by the previous years average spot
U.S. Gulf Coast ammonia price with the adjustment being made on July 1 each
year. The Corporation entered into a power co-generation agreement for its Carseland
facility in 2001 that expires December 31, 2021. The minimum commitment under
this agreement is to purchase 60 megawatts of power per hour (MWh) for the
first 10 years of the agreement and 20 MWh for the remainder of the term. The
price for the power is based on a fixed charge adjusted for inflation and a
variable charge based on the cost of natural gas, which is provided to the
facility for power generation. Profertil has three firm supply, U.S. dollar denominated natural gas purchase
contracts expiring in 2012. Repsol-YPF, our joint venture partner in Profertil,
supplies 50 percent of this gas. These contracts, although they are denominated
in U.S. dollars, are paid in pesos. In December 2003, Profertil signed a 10-year U.S. dollar denominated contract
with Repsol-YPF for the purchase of additional natural gas. Prices have been
set for the period to December 31, 2006.




---



##### 



Financial statements and notes
    
    Page 78
 Notes to the consolidated
financial statements  19.  CONTINGENCIES 
 Contingent purchase price  Kenai, Alaska, nitrogen facility
 At December 31, 2003, the Corporations financial statements included an
accrual for the estimated amount due to Unocal under this arrangement. This
amount is included in accounts payable and accrued liabilities and is recorded
as part of the cost to acquire the Alaskan nitrogen facility and related U.S.
West Coast assets included in capital assets. The Corporation has withheld payment of Earn-out amounts which are under
dispute. While the Corporation has accrued an amount that reflects an estimate
of the disputed Earn-out obligation calculated on actual production, it
believes that no amount is payable to Unocal in the event that Unocal fails to
meet its obligations under the Alaskan gas contract. The parties also disagree
on the calculation of the Earn-out based on different views of the application
of a reference price adjustment factor as well as the calculation of the
Earn-out based on capacity or actual production, and accordingly, additional
Earn-out payments may become due if we are ultimately unsuccessful in the
litigation. On June 10, 2002, the Corporation filed a lawsuit against Unocal seeking
compensatory damages and restitution, punitive damages and certain declaratory
relief relating to gas supply, the Earn-out and environmental matters. Unocal
contemporaneously filed suit against the Corporation claiming damages for
breach of contract for non-payment of the Earn-out. Environmental remediation
The Corporation has contingent environmental liabilities arising out of
existing and discontinued operations in respect of which the Corporation has
and continues to estimate the costs likely to be incurred in connection with
such liabilities. Such contingent environmental liabilities differ from asset
retirement obligations and accrued environmental liabilities in that the
contingent environmental liabilities are not determinable, the conditions which
may give rise to the expenditures are uncertain, and the future expectations of
the applicable regulatory authorities are not known. The potential costs that
may arise in connection with such liabilities are not included in our
provisions until the source and nature of the obligation becomes clear and is
reasonably estimable. Litigation
The outcome of the Unocal dispute is uncertain, and the amounts that may be
involved in the event of any determination adverse to the Corporation are not
determinable at this time. The Corporation, in the normal course of business, is also subject to other
legal proceedings being brought against it and its subsidiaries. The amounts
involved in such legal proceedings are not reasonably estimable, due to
uncertainty as to the final outcome, and management does not believe these
proceedings in aggregate will have a material adverse effect on the
Corporations consolidated financial position or results of operations, with
the following exceptions. A personal injury claim against a subsidiary of the Corporation for a material
amount was filed in the fourth quarter of 2003. In addition, there are two
class action lawsuits against a subsidiary of the Corporation for unspecified
damages relating to chemical application. The Corporation is investigating
these lawsuits but at this time the potential exposure is indeterminable.




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##### 



Page 79
 Notes to the consolidated
financial statements  20.  FINANCIAL INSTRUMENTS 
 Balance sheet financial instruments
 The estimated fair values of recognized financial instruments have been
determined based on the Corporations assessment of available market
information and appropriate valuation methodologies; however, these estimates
may not necessarily be indicative of the amounts that could be realized or
settled in a current market transaction. The fair values of cash and cash
equivalents, accounts receivable and current liabilities approximate their
carrying amounts due to the short-term maturity of these instruments. The following table summarizes estimated fair value information about the
Corporations long-term debt, preferred securities and derivative contracts not
accounted for as hedges as at December 31: Fair value and carrying amount of balance sheet financial instruments 2003
    
    2002Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueUnsecured long-term debt (a)
    
    
    585
    
    
    
    697
    
    
    
    600
    
    
    
    650Preferred securities (a)
    
    
    222
    
    
    
    244
    
    
    
    221
    
    
    
    210Derivative financial instrumentsForeign currency option and forward contracts (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Natural gas swap and option contracts (b)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
 (a)
    
    The estimated fair value of unsecured long-term debt, including the current portion, and preferred securities is based on the quoted market price of these or similar issues or
by discounting cash flows at the rate offered to the corporation for debt and securities of the same remaining maturities.(b)
    
    The fair values of derivative instruments have been estimated using applicable market rates. These fair values approximate the amount that the Corporation would receive or
pay if the instruments were closed out at these dates. At December 31, 2003, the Corporation had entered into natural gas swap
contracts that did not qualify for hedge accounting. The swap contracts
represented a notional amount of seven million MMBtu of natural gas
(2002  16
million MMBtu) with maturities in 2004 and 2005. During 2003, net realized and
unrealized losses of $5-million on natural gas swap and option contracts (2002
 $5-million; 2001  $-nil) that did not qualify for hedge accounting were
recorded in other expense. At December 31, 2003, the Corporation had entered into foreign currency option
contracts that did not qualify for hedge accounting. The option contracts
represented an underlying amount of C$20-million expiring at various dates in
2004 at exercise prices ranging from C$1.3243 to C$1.3292. During 2003, 2002
and 2001, net realized and unrealized gains of less than $1-million that did
not qualify for hedge accounting were recorded in other expense. Unrecognized derivative financial instruments
The Corporation also enters certain derivative financial instruments, which
qualify for hedge accounting and are not recognized in the consolidated balance
sheets, as follows: Natural gas supply hedges
The Corporation purchases substantially all of its natural gas requirements
through indexed price contracts with suppliers other than gas supply agreements
for its facilities in Alaska and Argentina. The Corporation periodically enters
into natural gas swap and option contracts to protect its future earnings and
cash flows from the potential adverse impact of rising natural gas prices in
the indexed contracts. The natural gas swap and option contracts do not require the payment of
significant net premiums prior to settlement. On settlement, these contracts
result in cash receipts or payments by the Corporation for the difference
between the contract and market rates for the applicable dollars and volumes
hedged during the contract term. Such cash receipts or payments offset
corresponding decreases or increases in the Corporations natural gas supply
costs. Amounts received or paid on settlement are recognized in inventory in
the same period as the hedged transaction, and then included in the cost of
product when the related inventory is sold.




---



##### 



Financial statements and notes
    
    Page 80
 Notes to the consolidated
financial statements  At December 31, 2003, the Corporation had entered into natural gas option
contracts which qualified for hedge accounting with an underlying amount of two
million MMBtu of natural gas, maturities in 2004 and exercise prices ranging
from $6/MMBtu to $7/MMBtu. The Corporation had entered into natural gas swap
contracts that qualified for hedge accounting as at December 31, 2003. The
notional amount of the natural gas swap contracts outstanding was four million
MMBtu with maturities in 2004 and 2005. During 2003, net realized gains of $12-million on qualifying natural gas
derivative contracts (2002  $37-million net losses) were allocated to
inventory. At December 31, 2003, less than $1-million of net realized gains
(2002  $1-million net realized losses) remain in inventory, until the related
inventory sells. During 2003, $11-million of net realized gains (2002 
$47-million net realized losses; 2001  $70-million net realized gains) were
recorded as a component of cost of product. Foreign exchange hedges
The Corporation enters into foreign currency option and forward contracts to
fix the exchange rate or a range of exchange rates used to convert a portion of
the Canadian operations U.S. dollar denominated revenues into Canadian
dollars. These revenues are converted into Canadian dollars for purposes of
paying the Canadian operations Canadian dollar denominated operating costs. The foreign currency option and forward contracts do not require the payment of
significant net premiums prior to settlement. On settlement, these contracts
result in cash receipts or payments by the Corporation for the difference
between the contract and market rates for the applicable dollars hedged during
the contract term. Such cash receipts or payments are recognized in the
statement of operations. At December 31, 2003, the Corporation had entered into foreign currency options
that qualified for hedge accounting. The underlying amount of the options was
C$40-million with exercise prices ranging from C$1.3243 to C$1.3292 and
expiring at various dates in 2004. During 2003, net realized gains on foreign
currency options and forward contracts of $7-million (2002  net realized gains
of less than $1-million; 2001  net realized losses of less than $1-million)
were recorded in the statement of operations. Fair values of unrecognized financial instruments
The fair values of derivative financial instruments that qualify for hedge
accounting are the estimated amount that the Corporation would receive (pay) to
terminate the contracts. Such amounts were as follows at December 31: 2003
    
    
    2002
    
    
    2001Fair
    
    
    Fair
    
    
    FairValue
    
    
    Value
    
    
    ValueNatural gas swap and option contracts
    
    
    (1
    )
    
    
    7
    
    
    
    (21
    )Foreign currency option and forward contracts
    
    
    
    
    
    
    
    
    
    
    
 Commodity contracts
The Corporation enters into commodity contracts, including contracts with fixed
or adjustable pricing terms, as a normal course of business. The contracts
outstanding at December 31, 2003, are disclosed in note 18. No amounts are
recognized in the financial statements related to these contracts until such
time as the associated volumes are received. Counterparty credit risk
Wholesale in both North America and South America sell mainly to large
agribusinesses representing a small number of customers. Letters of credit and
credit insurance are used to mitigate risk where appropriate. Retail in both North and South America serve large customer bases dispersed
over wide geographic areas in both the United States and Argentina. This
geographic diversity, coupled with a concentration of effort on the large
financially stable entities, mitigates risk. The Corporation may be exposed to certain losses in the event that
counterparties to the derivative financial instruments are unable to meet the
terms of the contracts. The Corporations credit exposure is limited to those
counterparties holding derivative contracts with positive fair values at the
reporting date. The Corporation manages this counterparty credit risk by
entering into agreements only with investment grade counterparties in
accordance with established counterparty credit approval practices.




---



##### 



Page 81
 Notes to the consolidated
financial statements  21.  SEGMENTATION 
  Segmented net sales, expenses, net working capital, capital assets, total assets and capital expenditures North America
    
    South America2003
    
    Wholesale
    
    
    Retail
    
    
    Wholesale
    
    
    Retail
    
    
    Other
    
    
    TotalNet sales
    
     external customers
    
    
    1,377
    
    
    
    923
    
    
    
    107
    
    
    
    92
    
    
    
    
    
    
    
    2,499 internal customers
    
    
    88
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    (97
    )
    
    
    Total net sales
    
    
    1,465
    
    
    
    923
    
    
    
    116
    
    
    
    92
    
    
    
    (97
    )
    
    
    2,499Cost of product
    
    
    1,106
    
    
    
    642
    
    
    
    34
    
    
    
    75
    
    
    
    (97
    )
    
    
    1,760Gross profit
    
    
    359
    
    
    
    281
    
    
    
    82
    
    
    
    17
    
    
    
    
    
    
    
    739ExpensesSelling, general and administrative
    
    
    35
    
    
    
    208
    
    
    
    4
    
    
    
    14
    
    
    
    25
    
    
    
    286Depreciation and amortization
    
    
    99
    
    
    
    18
    
    
    
    15
    
    
    
    1
    
    
    
    7
    
    
    
    140Asset impairment
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235Royalties and other taxes
    
    
    11
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    17Other expenses and Argentine charges
    
    
    28
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    40Earnings (loss) before interest expense
and income taxes
    
    
    (49
    )
    
    
    64
    
    
    
    63
    
    
    
    2
    
    
    
    (59
    )
    
    
    21Net working capital
    
    
    465
    
    
    
    176
    
    
    
    30
    
    
    
    43
    
    
    
    (297
    )
    
    
    417Capital assets
    
    
    896
    
    
    
    88
    
    
    
    238
    
    
    
    7
    
    
    
    31
    
    
    
    1,260Total assets
    
    
    1,553
    
    
    
    401
    
    
    
    324
    
    
    
    70
    
    
    
    (75
    )
    
    
    2,273Capital expenditures
    
    
    73
    
    
    
    12
    
    
    
    3
    
    
    
    1
    
    
    
    10
    
    
    
    99




---



##### 



Financial statements and notes
    
    Page
82
 Notes to the consolidated
financial statements North America
    
    South America2002 Restated (note 2)
    
    Wholesale
    
    
    Retail
    
    
    Wholesale
    
    
    Retail
    
    
    Other
    
    
    TotalNet sales
    
     external customers
    
    
    1,094
    
    
    
    849
    
    
    
    60
    
    
    
    80
    
    
    
    
    
    
    
    2,083 internal customers
    
    
    78
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    (82
    )
    
    
    Total net sales
    
    
    1,172
    
    
    
    849
    
    
    
    64
    
    
    
    80
    
    
    
    (82
    )
    
    
    2,083Cost of product
    
    
    976
    
    
    
    593
    
    
    
    28
    
    
    
    50
    
    
    
    (83
    )
    
    
    1,564Gross profit
    
    
    196
    
    
    
    256
    
    
    
    36
    
    
    
    30
    
    
    
    1
    
    
    
    519ExpensesSelling, general and administrative
    
    
    24
    
    
    
    191
    
    
    
    4
    
    
    
    8
    
    
    
    19
    
    
    
    246Depreciation and amortization
    
    
    102
    
    
    
    20
    
    
    
    18
    
    
    
    1
    
    
    
    7
    
    
    
    148Royalties and other taxes
    
    
    13
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    19Other expenses and Argentine charges
    
    
    17
    
    
    
    (12
    )
    
    
    16
    
    
    
    (4
    )
    
    
    25
    
    
    
    42Earnings (loss) before interest expense and
income taxes
    
    
    40
    
    
    
    52
    
    
    
    (2
    )
    
    
    25
    
    
    
    (51
    )
    
    
    64Net working capital
    
    
    310
    
    
    
    71
    
    
    
    (23
    )
    
    
    47
    
    
    
    (87
    )
    
    
    318Capital assets
    
    
    1,054
    
    
    
    96
    
    
    
    248
    
    
    
    6
    
    
    
    18
    
    
    
    1,422Total assets
    
    
    1,537
    
    
    
    326
    
    
    
    314
    
    
    
    64
    
    
    
    (50
    )
    
    
    2,191Capital expenditures
    
    
    41
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    52
 North America
    
    South America2001 Restated (note 2)
    
    Wholesale
    
    
    Retail
    
    
    Wholesale
    
    
    Retail
    
    
    Other
    
    
    TotalNet sales
    
     external customers
    
    
    1,086
    
    
    
    831
    
    
    
    63
    
    
    
    83
    
    
    
    
    
    
    
    2,063 internal customers
    
    
    74
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    (82
    )
    
    Total net sales
    
    
    1,160
    
    
    
    831
    
    
    
    71
    
    
    
    83
    
    
    
    (82
    )
    
    
    2,063Cost of product
    
    
    925
    
    
    
    574
    
    
    
    43
    
    
    
    58
    
    
    
    (84
    )
    
    
    1,516Gross profit
    
    
    235
    
    
    
    257
    
    
    
    28
    
    
    
    25
    
    
    
    2
    
    
    
    547ExpensesSelling, general and administrative
    
    
    33
    
    
    
    193
    
    
    
    7
    
    
    
    16
    
    
    
    19
    
    
    
    268Depreciation and amortization
    
    
    96
    
    
    
    20
    
    
    
    13
    
    
    
    5
    
    
    
    7
    
    
    
    141Royalties and other taxes
    
    
    16
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    22Other expenses and Argentine charges
    
    
    26
    
    
    
    (12
    )
    
    
    26
    
    
    
    30
    
    
    
    15
    
    
    
    85Earnings (loss) before interest expense and
income taxes
    
    
    64
    
    
    
    51
    
    
    
    (18
    )
    
    
    (26
    )
    
    
    (40
    )
    
    
    31Net working capital
    
    
    267
    
    
    
    37
    
    
    
    (30
    )
    
    
    45
    
    
    
    (196
    )
    
    
    123Capital assets
    
    
    1,111
    
    
    
    106
    
    
    
    262
    
    
    
    15
    
    
    
    24
    
    
    
    1,518Total assets
    
    
    1,649
    
    
    
    316
    
    
    
    346
    
    
    
    73
    
    
    
    14
    
    
    
    2,398Capital expenditures
    
    
    126
    
    
    
    14
    
    
    
    18
    
    
    
    3
    
    
    
    3
    
    
    
    164




---



##### 



Page 83
 Notes to the consolidated
financial statements  Net sales and gross profit by business segment and product line 2003
    
    2002
    
    2001Net
    
    
    Cost of
    
    
    Gross
    
    
    Net
    
    
    Cost of
    
    
    Gross
    
    
    Net
    
    
    Cost of
    
    
    GrossSales
    
    
    Product
    
    
    Profit
    
    
    Sales
    
    
    Product
    
    
    Profit
    
    
    Sales
    
    
    Product
    
    
    ProfitNorth America WholesaleNitrogenAmmonia
    
    
    382
    
    
    
    286
    
    
    
    96
    
    
    
    242
    
    
    
    222
    
    
    
    20
    
    
    
    323
    
    
    
    239
    
    
    
    84Urea
    
    
    423
    
    
    
    323
    
    
    
    100
    
    
    
    330
    
    
    
    292
    
    
    
    38
    
    
    
    304
    
    
    
    253
    
    
    
    51Other
    
    
    168
    
    
    
    136
    
    
    
    32
    
    
    
    140
    
    
    
    135
    
    
    
    5
    
    
    
    150
    
    
    
    135
    
    
    
    15973
    
    
    
    745
    
    
    
    228
    
    
    
    712
    
    
    
    649
    
    
    
    63
    
    
    
    777
    
    
    
    627
    
    
    
    150Phosphate
    
    
    261
    
    
    
    217
    
    
    
    44
    
    
    
    239
    
    
    
    202
    
    
    
    37
    
    
    
    179
    
    
    
    173
    
    
    
    6Potash
    
    
    160
    
    
    
    99
    
    
    
    61
    
    
    
    158
    
    
    
    91
    
    
    
    67
    
    
    
    138
    
    
    
    80
    
    
    
    58Sulphate and other products
    
    
    71
    
    
    
    45
    
    
    
    26
    
    
    
    63
    
    
    
    34
    
    
    
    29
    
    
    
    66
    
    
    
    45
    
    
    
    211,465
    
    
    
    1,106
    
    
    
    359
    
    
    
    1,172
    
    
    
    976
    
    
    
    196
    
    
    
    1,160
    
    
    
    925
    
    
    
    235North America RetailFertilizers
    
    
    402
    
    
    
    292
    
    
    
    110
    
    
    
    366
    
    
    
    265
    
    
    
    101
    
    
    
    386
    
    
    
    278
    
    
    
    108Chemicals
    
    
    399
    
    
    
    288
    
    
    
    111
    
    
    
    361
    
    
    
    266
    
    
    
    95
    
    
    
    336
    
    
    
    245
    
    
    
    91Other products and services
    
    
    122
    
    
    
    62
    
    
    
    60
    
    
    
    122
    
    
    
    62
    
    
    
    60
    
    
    
    109
    
    
    
    51
    
    
    
    58923
    
    
    
    642
    
    
    
    281
    
    
    
    849
    
    
    
    593
    
    
    
    256
    
    
    
    831
    
    
    
    574
    
    
    
    257South America WholesaleNitrogen
    
    
    111
    
    
    
    31
    
    
    
    80
    
    
    
    61
    
    
    
    26
    
    
    
    35
    
    
    
    68
    
    
    
    41
    
    
    
    27Other products and services
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    3
    
    
    
    2
    
    
    
    1
    
    
    
    3
    
    
    
    2
    
    
    
    1116
    
    
    
    34
    
    
    
    82
    
    
    
    64
    
    
    
    28
    
    
    
    36
    
    
    
    71
    
    
    
    43
    
    
    
    28South America RetailFertilizers
    
    
    66
    
    
    
    59
    
    
    
    7
    
    
    
    53
    
    
    
    31
    
    
    
    22
    
    
    
    57
    
    
    
    38
    
    
    
    19Other products and services
    
    
    26
    
    
    
    16
    
    
    
    10
    
    
    
    27
    
    
    
    19
    
    
    
    8
    
    
    
    26
    
    
    
    20
    
    
    
    692
    
    
    
    75
    
    
    
    17
    
    
    
    80
    
    
    
    50
    
    
    
    30
    
    
    
    83
    
    
    
    58
    
    
    
    25Other  inter-segment eliminations
    
    
    (97
    )
    
    
    (97
    )
    
    
    
    
    
    
    (82
    )
    
    
    (83
    )
    
    
    1
    
    
    
    (82
    )
    
    
    (84
    )
    
    
    2Total
    
    
    2,499
    
    
    
    1,760
    
    
    
    739
    
    
    
    2,083
    
    
    
    1,564
    
    
    
    519
    
    
    
    2,063
    
    
    
    1,516
    
    
    
    547
 Net sales by market destination and assets by country 2003
    
    2002Restated (note 2)
    
    2001Restated (note 2)Net
    
    
    Capital
    
    
    
    
    
    
    Net
    
    
    Capital
    
    
    
    
    
    
    Net
    
    
    CapitalSales
    
    
    Assets
    
    
    Goodwill
    
    
    Sales
    
    
    Assets
    
    
    Goodwill
    
    
    Sales
    
    
    Assets
    
    
    GoodwillCanada
    
    
    580
    
    
    
    641
    
    
    
    
    
    
    
    403
    
    
    
    537
    
    
    
    
    
    
    
    383
    
    
    
    552
    
    
    
    United States
    
    
    1,557
    
    
    
    374
    
    
    
    
    
    
    
    1,425
    
    
    
    630
    
    
    
    
    
    
    
    1,385
    
    
    
    690
    
    
    
    45Argentina
    
    
    162
    
    
    
    245
    
    
    
    
    
    
    
    118
    
    
    
    255
    
    
    
    
    
    
    
    121
    
    
    
    276
    
    
    
    Other
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    2,499
    
    
    
    1,260
    
    
    
    
    
    
    
    2,083
    
    
    
    1,422
    
    
    
    
    
    
    
    2,063
    
    
    
    1,518
    
    
    
    45




---



##### 



Financial statements and notes
    
    Page 84
 Notes to the consolidated
financial statements  22.  PROFERTIL 
  A summary of the Corporations 50 percent interest in the joint venture at
December 31 is as follows: Balance Sheets
    
    2003
    
    
    2002AssetsCash and cash equivalents
    
    
    44
    
    
    
    18Accounts receivable
    
    
    18
    
    
    
    5Inventories and prepaid expenses
    
    
    8
    
    
    
    7Capital assets
    
    
    238
    
    
    
    248Other assets
    
    
    18
    
    
    
    36326
    
    
    
    314LiabilitiesAccounts payable and current portion of long-term debt
    
    
    39
    
    
    
    52Income and other taxes
    
    
    2
    
    
    
    1Long-term debt (note 12)
    
    
    114
    
    
    
    135Future income taxes
    
    
    (2
    )
    
    
    (3
    )153
    
    
    
    185Proportionate share of net assets of joint venture
    
    
    173
    
    
    
    129
 Statement of Operations
    
    2003
    
    
    2002
    
    
    2001Net sales
    
    
    116
    
    
    
    64
    
    
    
    71Cost of product
    
    
    34
    
    
    
    28
    
    
    
    43Gross profit
    
    
    82
    
    
    
    36
    
    
    
    28Selling, general and administrative expenses
    
    
    4
    
    
    
    4
    
    
    
    7Depreciation
    
    
    15
    
    
    
    18
    
    
    
    13Other expenses and Argentine charges
    
    
    
    
    
    
    16
    
    
    
    26Earnings (loss) before interest expense and income taxes
    
    
    63
    
    
    
    (2
    )
    
    
    (18
    )Interest expense
    
    
    16
    
    
    
    15
    
    
    
    16Income taxes
    
    
    4
    
    
    
    
    
    
    
    (4
    )Proportionate share of net earnings (loss) of joint venture
    
    
    43
    
    
    
    (17
    )
    
    
    (30
    )
 Statement of Cash Flows
    
    2003
    
    
    2002
    
    
    2001Operating activities
    
    
    25
    
    
    
    27
    
    
    
    (6
    )Investing activities
    
    
    17
    
    
    
    (5
    )
    
    
    (39
    )Financing activities
    
    
    (15
    )
    
    
    (17
    )
    
    
    58Proportionate share of increase in cash of joint venture
    
    
    27
    
    
    
    5
    
    
    
    13
 Consolidated retained earnings of the Corporation include losses from Profertil
in the amount of $6-million for the year ended December 31, 2003
(2002  $49-million). Commitments presented in note 18 include the Corporations 50 percent share in
the commitments of Profertil.




---



##### 



Page 85
 Notes to the consolidated
financial statements   23.
    
    DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND THE UNITED STATES 
  Consolidated Statements of Operations
    
    2003
    
    
    2002
    
    
    2001Net loss based on Canadian GAAP
    
    
    (21
    )
    
    
    
    
    
    
    (45
    )AdjustmentsPreferred
securities charges, net of tax (a)
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )Deferred tax
on foreign exchange translation of preferred securities (a)
    
    
    (5
    )
    
    
    
    
    
    
    Other
    
    
    (1
    )
    
    
    1
    
    
    
    Net loss before cumulative effect of change in accounting policy
    
    
    (38
    )
    
    
    (10
    )
    
    
    (57
    )Cumulative
effect of change in accounting policy, net of tax (e)
    
    
    
    
    
    
    (29
    )
    
    
    Net loss based on U.S. GAAP
    
    
    (38
    )
    
    
    (39
    )
    
    
    (57
    )Basic and diluted loss per common share based on U.S. GAAPLoss before cumulative effect of change in accounting policy
    
    
    (0.30
    )
    
    
    (0.08
    )
    
    
    (0.49
    )Net loss per share
    
    
    (0.30
    )
    
    
    (0.31
    )
    
    
    (0.49
    )
 U.S. GAAP requires the disclosure of a statement of comprehensive income.
Comprehensive income generally includes net earnings plus the results of
certain shareholders equity changes not reflected in the statement of
operations. Consolidated Statements of Comprehensive Income
    
    2003
    
    
    2002
    
    
    2001Net loss based on U.S. GAAP
    
    
    (38
    )
    
    
    (39
    )
    
    
    (57
    )Change in foreign currency translation adjustment (d)
    
    
    95
    
    
    
    (32
    )
    
    
    (56
    )Change in minimum pension liability adjustment, net of tax (c)
    
    
    (4
    )
    
    
    (6
    )
    
    
    Change in
unrealized gains (losses) on derivative instruments, net of
tax (b)
    
    
    (5
    )
    
    
    35
    
    
    
    75Change in realized gains (losses) on derivative instruments included in inventory, net of tax (b)
    
    
    2
    
    
    
    5
    
    
    
    (7
    )Cumulative effect of change in accounting policy, net of tax (b)
    
    
    
    
    
    
    
    
    
    
    (105
    )Comprehensive income (loss) based on U.S. GAAP
    
    
    50
    
    
    
    (37
    )
    
    
    (150
    )
 The cumulative effect of these adjustments on shareholders equity of the
Corporation is as follows: 2003
    
    
    2002Shareholders equity based on Canadian GAAP
    
    
    821
    
    
    
    764Preferred
securities (a)
    
    
    (222
    )
    
    
    (221
    )Deferred tax
on foreign exchange translation of preferred
securities (a)
    
    
    (5
    )
    
    
    Unrealized
gains (losses) on derivative instruments, net of
tax (b)
    
    
    (1
    )
    
    
    5Realized gains (losses) on derivative instruments included in inventory, net of tax (b)
    
    
    1
    
    
    
    (1
    )Additional minimum pension liability, net of tax (c)
    
    
    (10
    )
    
    
    (6
    )Other
    
    
    (3
    )
    
    
    (4
    )Shareholders equity based on U.S. GAAP
    
    
    581
    
    
    
    537




---



##### 



Financial statements and notes
    
    Page 86
 Notes to the consolidated
financial statements  Description of significant differences 
 (a)
    
    Preferred securities  Under Canadian GAAP, the preferred securities are classified as shareholders equity and the related annual carrying charges are recorded as a distribution
from retained earnings. Under U.S. GAAP, the $175-million preferred securities would be classified as long-term debt, the $50-million preferred securities would be classified
as the current portion of long-term debt and the related carrying charges would be recognized as interest expense. Temporary differences arising as a result of the foreign
exchange translation of the long-term debt would be recognized as deferred income tax expense. Under U.S. GAAP, in the statement of cash flows, cash flows under the
heading financing would have increased by $17-million (2002  $17-million; 2001  $17-million) and cash flows under the heading operating would have decreased by
$17-million (2002  $17-million; 2001  $17-million).(b)
    
    Derivative instruments and hedging activities  The Corporation accounts for its derivative instruments under Canadian GAAP as described in note 20. 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 portion of the change in fair value of a derivative instrument
that qualifies as a cash flow hedge is initially included in the determination of comprehensive income. The gain or loss is subsequently included in earnings in the same period as
the hedged item. Any portion of the change in fair value of a derivative instrument that does not qualify for hedge accounting is recognized in earnings immediately.(c)
    
    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 balance sheet. This additional liability is recorded as a reduction to other comprehensive income.(d)
    
    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.(e)
    
    Change in accounting policies  Effective January 1, 2002, the Corporation adopted a new standard under each of Canadian GAAP and U.S. GAAP for Goodwill and Other
Intangible Assets. The Canadian standard mirrors the U.S. standard except that, under U.S. GAAP, the goodwill impairment calculated on initial adoption of the new policy
was charged against earnings in the current period. Under Canadian GAAP, the transitional adoption of the policy was recorded against opening balance of retained earnings
in the period of adoption.(f)
    
    Joint ventures  Under U.S. GAAP, ownership in a joint venture where the venturer does not own more than 50 percent and have 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 22 provides the details of the joint venture as included under Canadian GAAP.




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##### 



Page 87
 
 Subsidiaries &
Board committees
  PRINCIPAL SUBSIDIARIES
& ASSOCIATED COMPANIES  COUNTRY OF
    
    
    OWNERSHIPOPERATION
    
    
    (percent)AGRIUM, a general partnership
    
    Canada
    
    
    
    100Agrium U.S. Inc.
    
    
    U.S.
    
    
    
    100Agrium Nitrogen Company
    
    
    U.S.
    
    
    
    100Nu-West Industries, Inc.
    
    
    U.S.
    
    
    
    100Crop Production Services, Inc.
    
    
    U.S.
    
    
    
    100Western Farm Service, Inc.
    
    
    U.S.
    
    
    
    100Agroservicios Pampeanos S.A.
    
    Argentina
    
    
    
    100Profertil S.A.
    
    Argentina
    
    
    
    50Canpotex Limited
    
    International
    
    
    


  331⁄3Viridian Inc.
    
    Canada
    
    
    
    100Viridian Fertilizers Limited
    
    Canada
    
    
    
    100
 BOARD COMMITTEES
 
 Audit Committee  FCA Chair  CA
 The Audit Committee has oversight responsibilities for our accounting and
financial reporting processes, the quality and integrity of our financial
statements and the effectiveness of our internal controls. The financial
statements are the responsibility of management, and the external auditors
express an independent opinion on the annual consolidated financial statements,
which are then approved by the Board. The Audit Committee is directly
responsible for the retention and oversight of the work of the external
auditors, who report directly to the Audit Committee. The Audit Committee has a
specific Charter that explicitly mandates direct communication with our
internal and external auditors independently of management, ongoing review of
our external auditors, including recommendations to the Board of the
appointment (subject to shareholder approval) and termination of the external
auditors, the scope of the audit and audit plans of the internal and external
auditors, pre-approval of audit and permitted non-audit services and the role,
independence and fees of the external auditors. In addition, the Committee is
responsible for overseeing management reporting, internal controls and
management information, and reviewing financial risk management issues. This
Committee reviews our audited consolidated financial statements and selected
corporate disclosure documents, including managements discussion and analysis
contained in our annual report, the annual information form, prospectuses and
offering documents, and other major shareholder communications containing
significant financial information before they are approved by the Board. It is
also responsible for approval of our interim quarterly financial statements and
reviews issues relating to legal and regulatory responsibilities to ensure
compliance.
 The Audit Committee has established procedures for (a) the receipt, retention
and treatment of complaints regarding accounting, internal accounting controls
or auditing matters and (b) the confidential, anonymous submissions by our
employees of concerns regarding questionable accounting or auditing matters. The Audit Committee is also required to review its Charter on an annual basis
and recommend any appropriate changes to the Board. This Committee met on eight
occasions in 2003. Corporate Governance & Nominating Committee
Frank W. King, Chair, Neil Carragher, D. Grant Devine,
Harry G. Schaefer FCA, T. Don Stacy The Corporate Governance & Nominating Committee (the CG&N Committee) is
responsible to assist the Board in fulfilling its responsibilities with respect
to the continuing review and development of our corporate governance system,
including our Corporate Governance Guidelines, Code of Business Conduct and
Ethics for directors, officers and employees, the Charter for our Board of
Directors, as well as Terms of Reference for our Board Chair, the Chief
Executive Officer and individual directors. The CG&N Committee is also
responsible for the review and recommendation to the Board of our reports on
compliance with the governance guidelines, recommendations and requirements of
any applicable regulator or securities exchange. The CG&N Committee reviews and
recommends compensation for Board and Committee service as well as oversees the
administration of the DSU Plans. This Committee is also responsible for the
annual evaluations of the overall performance of the Board, the Board Chair,
the Committees and individual directors pursuant to an evaluation system that
is designed to provide directors with an opportunity each year to examine how
the Board is operating and to make suggestions for improvement. The CG&N
Committee monitors the relationship between management and the Board to ensure
that the Board is able to, and in fact does, function independently of
management. This Committee also assists the Board in identifying and
recommending qualified individuals to become Board members, provides
recommendations as to the size, composition, operation and effectiveness of the
Board and its Committees, and identifies and makes recommendations respecting
the appointment of members to the Board Committees. The CG&N Committee also
develops and implements an orientation and ongoing education program for
directors and ensures that Board Committees and individual directors can engage
outside advisors. The CG&N Committee is also required to review its Charter on
an annual basis and recommend any appropriate changes to the Board. This
Committee met on four occasions in 2003.




---



##### 



Subsidiaries & Board committees
    
    Page 88
    Human Resources & Compensation Committee
Ralph S. Cunningham, Chair, Neil Carragher, G. Woody MacLaren, T. Don Stacy, Victor J. Zaleschuk CA The Human Resources & Compensation Committee (the HR&C Committee) is
established to assist the Board in fulfilling its responsibilities relating to
matters of human resources and compensation, and to establish a plan of
continuity and development of senior management. The HR&C Committee has
responsibility for overseeing the evaluation of management, reviewing and
making recommendations to the Board regarding the appointment of and the
compensation arrangements for our executives (including salaries, incentives,
equity-based compensation and benefits), as well as reviewing the annual salary
policies and programs relating to employees. The Committee also approves the
investment objectives and policies of, and any material changes, in our pension
plans. The Committee reviews and approves the use of corporate goals and
objectives that are relevant to the compensation of our Chief Executive Officer
and reviews the performance of the Chief Executive Officer in light of those
goals and objectives in order to determine and, together with the other
independent directors, approve his compensation. The HR&C Committee reviews our
management resources and plans to ensure that we properly provide for
appropriate succession plans for executives. The HR&C Committee is also
required to review its Charter on an annual basis and recommend any appropriate
changes to the Board. This Committee met on five occasions in 2003. Environment, Health & Safety Committee
D. Grant Devine, Chair, Susan A. Henry, Frank W. King,
G. Woody MacLaren, Frank W. Proto The Environment, Health & Safety Committee (the EH&S Committee) is responsible
to assist the Board in fulfilling its oversight responsibilities relating to
environment, health and safety. The EH&S Committee annually reviews and
recommends to the Board for approval our Environment, Health & Safety Policy.
The Committee monitors environmental, health and safety performance, compliance
with legal and regulatory requirements, as well as applicable industry
standards relating to environmental, health and safety matters, and reviews the
strategies and methods used to improve our environmental, health and safety
performance. This Committee also reviews our environmental, health and safety
performance goals, management systems implementation, EH&S audit programs and
plans, and the status of our remediation projects and provisions. It is the
practice of the Committee to arrange at least one visit annually for our Board
members to one of our facilities, which includes orientation sessions to
personally acquaint members of the Committee and the Board with personnel and
operations at our facilities. The Committee also reviews the methods of
communicating our environmental, health and safety policies and procedures
throughout the organization. The EH&S Committee meets separately with the
Director, Environment, Health & Safety and reports to the
 Board on such meetings. The EH&S Committee is also required to review its
Charter on an annual basis and recommend any appropriate changes to the Board.
This Committee met on five occasions in 2003. In addition, we have a corporate
environment, health and safety committee comprising members of senior
management and chaired by the Senior Vice President, North America Retail,
which is responsible for ensuring that we conduct our activities and operate
our facilities in an environmentally responsible manner and maintain the
integrity of our health and safety policies. We also have established a
company-wide Safety Council to review, enhance and ensure a sustained focus on
best safety practices throughout the organization. Officers of the Company 
 Board Chair
 John M. Van BruntBoard Vice Chair Michael M. WilsonPresident & Chief Executive Officer Garnet K. AmundsonVice President & Controller Dorothy E.A. BowerVice President, Strategic Development & Planning Patrick J. FreemanVice President & Treasurer Richard L. GearheardSenior Vice President, North America Retail James M. GrossettVice President, Human Resources William C. McClungVice President, Manufacturing Leslie A. ODonoghueVice President, General Counsel & Corporate Secretary Robert J. RennieVice President, Corporate Affairs/South America Christopher W. TworekVice President, Supply Management Bruce G. WatermanSenior Vice President, Finance & Chief Financial Officer Ron A. WilkinsonVice President, Operations & Technology John D. YokleySenior Vice President, Marketing & Distribution




---



##### 



Financial highlights
    
    Supplementary financial,
performance and other data
    
    Page 89
    The supplementary financial and performance data set out on pages 89-94 below
contains certain financial information and other items that are not measures of
our EARNINGS (LOSS) AND OPERATING CASH FLOWS (millions of U.S. dollars, except per share amounts and ratios) Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    2003
    
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    2002
    
    
    2001
    
    
    2000
    
    
    1999Net sales
    
    
    372
    
    
    
    929
    
    
    
    561
    
    
    
    637
    
    
    
    2,499
    
    
    
    318
    
    
    
    792
    
    
    
    466
    
    
    
    507
    
    
    
    2,083
    
    
    
    2,063
    
    
    
    1,873
    
    
    
    1,716Cost of product
    
    
    261
    
    
    
    677
    
    
    
    389
    
    
    
    433
    
    
    
    1,760
    
    
    
    247
    
    
    
    619
    
    
    
    333
    
    
    
    365
    
    
    
    1,564
    
    
    
    1,516
    
    
    
    1,326
    
    
    
    1,227Gross profit
    
    
    111
    
    
    
    252
    
    
    
    172
    
    
    
    204
    
    
    
    739
    
    
    
    71
    
    
    
    173
    
    
    
    133
    
    
    
    142
    
    
    
    519
    
    
    
    547
    
    
    
    547
    
    
    
    489Gross profit (%)
    
    
    30
    
    
    
    27
    
    
    
    31
    
    
    
    32
    
    
    
    30
    
    
    
    22
    
    
    
    22
    
    
    
    29
    
    
    
    28
    
    
    
    25
    
    
    
    27
    
    
    
    29
    
    
    
    28ExpensesSelling, general and administrative
    
    
    59
    
    
    
    74
    
    
    
    71
    
    
    
    82
    
    
    
    286
    
    
    
    52
    
    
    
    67
    
    
    
    64
    
    
    
    63
    
    
    
    246
    
    
    
    268
    
    
    
    253
    
    
    
    245Depreciation and amortization
    
    
    32
    
    
    
    35
    
    
    
    34
    
    
    
    39
    
    
    
    140
    
    
    
    34
    
    
    
    32
    
    
    
    42
    
    
    
    40
    
    
    
    148
    
    
    
    141
    
    
    
    107
    
    
    
    93Asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Royalties and other taxes
    
    
    5
    
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    17
    
    
    
    6
    
    
    
    3
    
    
    
    5
    
    
    
    5
    
    
    
    19
    
    
    
    22
    
    
    
    19
    
    
    
    15Other expenses and Argentine charges
    
    
    10
    
    
    
    9
    
    
    
    9
    
    
    
    12
    
    
    
    40
    
    
    
    15
    
    
    
    16
    
    
    
    3
    
    
    
    8
    
    
    
    42
    
    
    
    85
    
    
    
    5
    
    
    
    5Earnings (loss) before interest expense and income taxes
    
    
    5
    
    
    
    130
    
    
    
    54
    
    
    
    (168
    )
    
    
    21
    
    
    
    (36
    )
    
    
    55
    
    
    
    19
    
    
    
    26
    
    
    
    64
    
    
    
    31
    
    
    
    163
    
    
    
    131Interest
    
    
    15
    
    
    
    18
    
    
    
    15
    
    
    
    15
    
    
    
    63
    
    
    
    19
    
    
    
    16
    
    
    
    17
    
    
    
    16
    
    
    
    68
    
    
    
    74
    
    
    
    37
    
    
    
    37Earnings (loss) before income taxes
    
    
    (10
    )
    
    
    112
    
    
    
    39
    
    
    
    (183
    )
    
    
    (42
    )
    
    
    (55
    )
    
    
    39
    
    
    
    2
    
    
    
    10
    
    
    
    (4
    )
    
    
    (43
    )
    
    
    126
    
    
    
    94Income taxes (recovery)
    
    
    (4
    )
    
    
    43
    
    
    
    14
    
    
    
    (74
    )
    
    
    (21
    )
    
    
    (19
    )
    
    
    16
    
    
    
    1
    
    
    
    (2
    )
    
    
    (4
    )
    
    
    2
    
    
    
    44
    
    
    
    32Net earnings (loss)
    
    
    (6
    )
    
    
    69
    
    
    
    25
    
    
    
    (109
    )
    
    
    (21
    )
    
    
    (36
    )
    
    
    23
    
    
    
    1
    
    
    
    12
    
    
    
    
    
    
    
    (45
    )
    
    
    82
    
    
    
    62Add (deduct)Depreciation and amortization
    
    
    32
    
    
    
    35
    
    
    
    34
    
    
    
    39
    
    
    
    140
    
    
    
    34
    
    
    
    32
    
    
    
    42
    
    
    
    40
    
    
    
    148
    
    
    
    141
    
    
    
    107
    
    
    
    93Asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign exchange and Argentine charges
    
    
    (2
    )
    
    
    (6
    )
    
    
    3
    
    
    
    (3
    )
    
    
    (8
    )
    
    
    12
    
    
    
    7
    
    
    
    (3
    )
    
    
    (2
    )
    
    
    14
    
    
    
    20
    
    
    
    
    
    
    
    Future income taxes (recovery)
    
    
    (4
    )
    
    
    14
    
    
    
    8
    
    
    
    (61
    )
    
    
    (43
    )
    
    
    (11
    )
    
    
    15
    
    
    
    
    
    
    
    13
    
    
    
    17
    
    
    
    (26
    )
    
    
    35
    
    
    
    (28
    )Net change in non-cash working capital
    
    
    17
    
    
    
    (76
    )
    
    
    (23
    )
    
    
    (32
    )
    
    
    (114
    )
    
    
    3
    
    
    
    (2
    )
    
    
    (12
    )
    
    
    56
    
    
    
    45
    
    
    
    (3
    )
    
    
    32
    
    
    
    33Cash provided by operating activities
    
    
    37
    
    
    
    36
    
    
    
    47
    
    
    
    69
    
    
    
    189
    
    
    
    2
    
    
    
    75
    
    
    
    28
    
    
    
    119
    
    
    
    224
    
    
    
    87
    
    
    
    256
    
    
    
    160EBITDA
    
    
    37
    
    
    
    165
    
    
    
    88
    
    
    
    106
    
    
    
    396
    
    
    
    (2
    )
    
    
    87
    
    
    
    61
    
    
    
    66
    
    
    
    212
    
    
    
    172
    
    
    
    270
    
    
    
    224Capital expenditures
    
    
    9
    
    
    
    22
    
    
    
    36
    
    
    
    32
    
    
    
    99
    
    
    
    5
    
    
    
    3
    
    
    
    15
    
    
    
    29
    
    
    
    52
    
    
    
    164
    
    
    
    179
    
    
    
    234Basic earnings (loss) per share
    
    
    (0.07
    )
    
    
    0.53
    
    
    
    0.18
    
    
    
    (0.89
    )
    
    
    (0.25
    )
    
    
    (0.33
    )
    
    
    0.16
    
    
    
    (0.01
    )
    
    
    0.07
    
    
    
    (0.08
    )
    
    
    (0.49
    )
    
    
    0.65
    
    
    
    0.47Diluted earnings (loss) per share
    
    
    (0.07
    )
    
    
    0.47
    
    
    
    0.17
    
    
    
    (0.89
    )
    
    
    (0.25
    )
    
    
    (0.33
    )
    
    
    0.15
    
    
    
    (0.01
    )
    
    
    0.07
    
    
    
    (0.08
    )
    
    
    (0.49
    )
    
    
    0.62
    
    
    
    0.46CONSOLIDATED BALANCE SHEETS (millions of U.S. dollars)Q1
    
    
    
    Q2
    
    
    
    Q3
    
    
    
    Q4
    
    
    
    2003
    
    
    
    Q1
    
    
    
    Q2
    
    
    
    Q3
    
    
    
    Q4
    
    
    
    2002
    
    
    
    2001
    
    
    
    2000
    
    
    
    1999ASSETSCurrent assetCash and cash equivalents
    
    
    136
    
    
    
    152
    
    
    
    171
    
    
    
    200
    
    
    
    200
    
    
    
    8
    
    
    
    32
    
    
    
    21
    
    
    
    109
    
    
    
    109
    
    
    
    51
    
    
    
    18
    
    
    
    104Accounts receivable
    
    
    198
    
    
    
    287
    
    
    
    271
    
    
    
    314
    
    
    
    314
    
    
    
    184
    
    
    
    243
    
    
    
    216
    
    
    
    187
    
    
    
    187
    
    
    
    218
    
    
    
    303
    
    
    
    268Inventories
    
    
    545
    
    
    
    405
    
    
    
    385
    
    
    
    368
    
    
    
    368
    
    
    
    507
    
    
    
    352
    
    
    
    336
    
    
    
    353
    
    
    
    353
    
    
    
    400
    
    
    
    347
    
    
    
    256Prepaid expenses
    
    
    29
    
    
    
    26
    
    
    
    41
    
    
    
    60
    
    
    
    60
    
    
    
    46
    
    
    
    14
    
    
    
    30
    
    
    
    35
    
    
    
    35
    
    
    
    34
    
    
    
    20
    
    
    
    15908
    
    
    
    870
    
    
    
    868
    
    
    
    942
    
    
    
    942
    
    
    
    745
    
    
    
    641
    
    
    
    603
    
    
    
    684
    
    
    
    684
    
    
    
    703
    
    
    
    688
    
    
    
    643Capital assets (a)
    
    
    1,436
    
    
    
    1,472
    
    
    
    1,476
    
    
    
    1,260
    
    
    
    1,260
    
    
    
    1,486
    
    
    
    1,482
    
    
    
    1,428
    
    
    
    1,422
    
    
    
    1,422
    
    
    
    1,518
    
    
    
    1,498
    
    
    
    1,164Other assets
    
    
    87
    
    
    
    90
    
    
    
    85
    
    
    
    71
    
    
    
    71
    
    
    
    111
    
    
    
    99
    
    
    
    93
    
    
    
    85
    
    
    
    85
    
    
    
    132
    
    
    
    150
    
    
    
    115Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    49
    
    
    
    522,431
    
    
    
    2,432
    
    
    
    2,429
    
    
    
    2,273
    
    
    
    2,273
    
    
    
    2,387
    
    
    
    2,267
    
    
    
    2,124
    
    
    
    2,191
    
    
    
    2,191
    
    
    
    2,398
    
    
    
    2,385
    
    
    
    1,974LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesBank indebtedness
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    10
    
    
    
    21
    
    
    
    1
    
    
    
    1
    
    
    
    211
    
    
    
    308
    
    
    
    179Accounts payable and accrued
liabilities
    
    
    537
    
    
    
    411
    
    
    
    383
    
    
    
    404
    
    
    
    404
    
    
    
    453
    
    
    
    348
    
    
    
    275
    
    
    
    340
    
    
    
    340
    
    
    
    362
    
    
    
    370
    
    
    
    289Current portion of long-term debt
    
    
    101
    
    
    
    104
    
    
    
    104
    
    
    
    121
    
    
    
    121
    
    
    
    6
    
    
    
    7
    
    
    
    7
    
    
    
    25
    
    
    
    25
    
    
    
    7
    
    
    
    1
    
    
    
    1640
    
    
    
    515
    
    
    
    487
    
    
    
    525
    
    
    
    525
    
    
    
    533
    
    
    
    365
    
    
    
    303
    
    
    
    366
    
    
    
    366
    
    
    
    580
    
    
    
    679
    
    
    
    469Long-term debtRecourse debt
    
    
    530
    
    
    
    533
    
    
    
    532
    
    
    
    503
    
    
    
    503
    
    
    
    619
    
    
    
    623
    
    
    
    620
    
    
    
    604
    
    
    
    604
    
    
    
    621
    
    
    
    507
    
    
    
    497Non-recourse debt
    
    
    132
    
    
    
    124
    
    
    
    125
    
    
    
    111
    
    
    
    111
    
    
    
    141
    
    
    
    137
    
    
    
    131
    
    
    
    132
    
    
    
    132
    
    
    
    141
    
    
    
    
    
    
    
    662
    
    
    
    657
    
    
    
    657
    
    
    
    614
    
    
    
    614
    
    
    
    760
    
    
    
    760
    
    
    
    751
    
    
    
    736
    
    
    
    736
    
    
    
    762
    
    
    
    507
    
    
    
    497Other liabilities (a)
    
    
    169
    
    
    
    177
    
    
    
    174
    
    
    
    181
    
    
    
    181
    
    
    
    163
    
    
    
    166
    
    
    
    162
    
    
    
    160
    
    
    
    160
    
    
    
    151
    
    
    
    134
    
    
    
    91Future income taxes (a)
    
    
    166
    
    
    
    187
    
    
    
    194
    
    
    
    132
    
    
    
    132
    
    
    
    150
    
    
    
    168
    
    
    
    149
    
    
    
    165
    
    
    
    165
    
    
    
    162
    
    
    
    197
    
    
    
    1641,637
    
    
    
    1,536
    
    
    
    1,512
    
    
    
    1,452
    
    
    
    1,452
    
    
    
    1,606
    
    
    
    1,459
    
    
    
    1,365
    
    
    
    1,427
    
    
    
    1,427
    
    
    
    1,655
    
    
    
    1,517
    
    
    
    1,221Shareholders equityShare capitalCommon shares
    
    
    485
    
    
    
    485
    
    
    
    485
    
    
    
    490
    
    
    
    490
    
    
    
    482
    
    
    
    484
    
    
    
    484
    
    
    
    484
    
    
    
    484
    
    
    
    376
    
    
    
    375
    
    
    
    347Preferred securities
    
    
    221
    
    
    
    222
    
    
    
    222
    
    
    
    222
    
    
    
    222
    
    
    
    221
    
    
    
    221
    
    
    
    221
    
    
    
    221
    
    
    
    221
    
    
    
    221
    
    
    
    221
    
    
    
    171Contributed surplus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Retained earnings
    
    
    182
    
    
    
    242
    
    
    
    264
    
    
    
    145
    
    
    
    145
    
    
    
    206
    
    
    
    220
    
    
    
    189
    
    
    
    191
    
    
    
    191
    
    
    
    245
    
    
    
    315
    
    
    
    255Cumulative translation adjustment
    
    
    (94
    )
    
    
    (53
    )
    
    
    (54
    )
    
    
    (37
    )
    
    
    (37
    )
    
    
    (128
    )
    
    
    (117
    )
    
    
    (135
    )
    
    
    (132
    )
    
    
    (132
    )
    
    
    (99
    )
    
    
    (43
    )
    
    
    (20
    )794
    
    
    
    896
    
    
    
    917
    
    
    
    821
    
    
    
    821
    
    
    
    781
    
    
    
    808
    
    
    
    759
    
    
    
    764
    
    
    
    764
    
    
    
    743
    
    
    
    868
    
    
    
    7532,431
    
    
    
    2,432
    
    
    
    2,429
    
    
    
    2,273
    
    
    
    2,273
    
    
    
    2,387
    
    
    
    2,267
    
    
    
    2,124
    
    
    
    2,191
    
    
    
    2,191
    
    
    
    2,398
    
    
    
    2,385
    
    
    
    1,974
 (a)
    
    Data has been restated to record the effect of adoption of the accounting standard for asset retirement obligations.




---



##### 



Segmented financial
information
    
    Supplementary financial,
performance and other data
    
    Page 90
    SEGMENTED FINANCIAL RESULTS (millions of U.S. dollars, except ratios) 2003North America
    
    South AmericaWholesale
    
    
    Retail
    
    
    Wholesale
    
    
    Retail
    
    
    Other
    
    
    TotalNet sales
    
    
    
    
    
    
    1,465
    
    
    
    923
    
    
    
    116
    
    
    
    92
    
    
    
    (97
    )
    
    
    2,499Cost of product
    
    
    
    
    
    
    1,106
    
    
    
    642
    
    
    
    34
    
    
    
    75
    
    
    
    (97
    )
    
    
    1,760Gross profit
    
    
    
    
    
    
    359
    
    
    
    281
    
    
    
    82
    
    
    
    17
    
    
    
    
    
    
    
    739Gross profit (%)
    
    
    
    
    
    
    25
    
    
    
    30
    
    
    
    71
    
    
    
    18
    
    
    
    
    
    
    
    30ExpensesSelling, general and administrative
    
    
    
    
    
    
    35
    
    
    
    208
    
    
    
    4
    
    
    
    14
    
    
    
    25
    
    
    
    286Depreciation and amortization
    
    
    
    
    
    
    99
    
    
    
    18
    
    
    
    15
    
    
    
    1
    
    
    
    7
    
    
    
    140Asset impairment
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235Royalties and other taxes
    
    
    
    
    
    
    11
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    17Other expenses and Argentine charges
    
    
    
    
    
    
    28
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    40Earnings (loss) before interest expense and income taxes
    
    
    
    
    
    
    (49
    )
    
    
    64
    
    
    
    63
    
    
    
    2
    
    
    
    (59
    )
    
    
    21Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Earnings (loss) before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )Income taxes (recovery)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Net earnings (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Capital expenditures
    
    
    
    
    
    
    73
    
    
    
    12
    
    
    
    3
    
    
    
    1
    
    
    
    10
    
    
    
    99NET SALES AND GROSS PROFIT BY BUSINESS SEGMENT AND PRODUCT LINE (millions of U.S. dollars, except margin per tonne amounts, ratios, inventory and sales tonnes)2003Net
    
    
    Cost of
    
    
    Gross
    
    
    Gross
    
    
    Sales
    
    
    Margin
    
    
    InventorySales
    
    
    Sales
    
    
    Profit
    
    
    Profit (%
    )
    
    Tonnes (a
    )
    
    ($/Tonne
    )
    
    Tonnes (a
    )North America WholesaleNitrogenAmmonia
    
    
    382
    
    
    
    286
    
    
    
    96
    
    
    
    25
    
    
    
    1,555
    
    
    
    62
    
    
    
    176Urea
    
    
    423
    
    
    
    323
    
    
    
    100
    
    
    
    24
    
    
    
    2,220
    
    
    
    45
    
    
    
    128Other
    
    
    168
    
    
    
    136
    
    
    
    32
    
    
    
    19
    
    
    
    981
    
    
    
    33
    
    
    
    129973
    
    
    
    745
    
    
    
    228
    
    
    
    23
    
    
    
    4,756
    
    
    
    48
    
    
    
    433Phosphate
    
    
    261
    
    
    
    217
    
    
    
    44
    
    
    
    17
    
    
    
    1,090
    
    
    
    40
    
    
    
    51Potash
    
    
    160
    
    
    
    99
    
    
    
    61
    
    
    
    38
    
    
    
    1,662
    
    
    
    37
    
    
    
    188Sulphate and other products
    
    
    71
    
    
    
    45
    
    
    
    26
    
    
    
    37
    
    
    
    400
    
    
    
    65
    
    
    
    1151,465
    
    
    
    1,106
    
    
    
    359
    
    
    
    25
    
    
    
    7,908
    
    
    
    45
    
    
    
    787North America RetailFertilizers
    
    
    402
    
    
    
    292
    
    
    
    110
    
    
    
    27Chemicals
    
    
    399
    
    
    
    288
    
    
    
    111
    
    
    
    28Other products and services
    
    
    122
    
    
    
    62
    
    
    
    60
    
    
    
    49923
    
    
    
    642
    
    
    
    281
    
    
    
    30South America WholesaleNitrogen
    
    
    111
    
    
    
    31
    
    
    
    80
    
    
    
    72
    
    
    
    634
    
    
    
    126
    
    
    
    43Other products and services
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    40116
    
    
    
    34
    
    
    
    82
    
    
    
    71South America RetailFertilizers
    
    
    66
    
    
    
    59
    
    
    
    7
    
    
    
    11Other products and services
    
    
    26
    
    
    
    16
    
    
    
    10
    
    
    
    3892
    
    
    
    75
    
    
    
    17
    
    
    
    18Other
    
    
    (97
    )
    
    
    (97
    )
    
    
    
    
    
    
    Total
    
    
    2,499
    
    
    
    1,760
    
    
    
    739
    
    
    
    30(a)   000s of tonnesNET SALES AND GROSS PROFIT BY MARKET DESTINATION (millions of U.S. dollars, except margin per tonne amounts, ratios and sales tonnes)2003Net
    
    
    Cost of
    
    
    Gross
    
    
    Gross
    
    
    Sales
    
    
    MarginSales
    
    
    Sales
    
    
    Profit
    
    
    Profit (%
    )
    
    Tonnes (a
    )
    
    ($/Tonne
    )North AmericaNitrogen
    
    
    775
    
    
    
    621
    
    
    
    154
    
    
    
    20
    
    
    
    3,501
    
    
    
    44Phosphate
    
    
    261
    
    
    
    217
    
    
    
    44
    
    
    
    17
    
    
    
    1,090
    
    
    
    40Potash
    
    
    117
    
    
    
    78
    
    
    
    39
    
    
    
    33
    
    
    
    1,092
    
    
    
    36Sulphate and other products
    
    
    60
    
    
    
    36
    
    
    
    24
    
    
    
    40
    
    
    
    298
    
    
    
    North America Retail
    
    
    923
    
    
    
    642
    
    
    
    281
    
    
    
    30
    
    
    
    
    
    
    
    Other
    
    
    (88
    )
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,048
    
    
    
    1,506
    
    
    
    542
    
    
    
    26
    
    
    
    5,981InternationalNitrogen
    
    
    309
    
    
    
    155
    
    
    
    154
    
    
    
    50
    
    
    
    1,889
    
    
    
    82Potash
    
    
    43
    
    
    
    21
    
    
    
    22
    
    
    
    51
    
    
    
    570
    
    
    
    39Sulphate and other products
    
    
    15
    
    
    
    12
    
    
    
    3
    
    
    
    20
    
    
    
    102
    
    
    
    South America Retail
    
    
    92
    
    
    
    75
    
    
    
    17
    
    
    
    18
    
    
    
    
    
    
    
    Other
    
    
    (8
    )
    
    
    (9
    )
    
    
    1
    
    
    
    13
    
    
    
    
    
    
    
    451
    
    
    
    254
    
    
    
    197
    
    
    
    44
    
    
    
    2,561
    
    
    
    Total
    
    
    2,499
    
    
    
    1,760
    
    
    
    739
    
    
    
    30
    
    
    
    8,542
    
    
    
    (a)   000s of tonnes




---



##### 



Supplementary financial,
performance and other data
    
    Page 91
    SEGMENTED FINANCIAL RESULTS (millions of U.S. dollars, except ratios) 2002
    
    
    
    
    
    2001North America
    
    South America
    
    
    
    
    
    
    
    
    
    
    
    
    
    North America
    
    South AmericaWholesale
    
    
    Retail
    
    
    Wholesale
    
    
    Retail
    
    
    Other
    
    
    Total
    
    
    
    
    
    
    Wholesale
    
    
    Retail
    
    
    Wholesale
    
    
    Retail
    
    
    Other
    
    
    TotalNet sales
    
    
    
    
    
    
    1,172
    
    
    
    849
    
    
    
    64
    
    
    
    80
    
    
    
    (82
    )
    
    
    2,083
    
    
    
    
    
    
    
    1,160
    
    
    
    831
    
    
    
    71
    
    
    
    83
    
    
    
    (82
    )
    
    
    2,063Cost of product
    
    
    
    
    
    
    976
    
    
    
    593
    
    
    
    28
    
    
    
    50
    
    
    
    (83
    )
    
    
    1,564
    
    
    
    
    
    
    
    925
    
    
    
    574
    
    
    
    43
    
    
    
    58
    
    
    
    (84
    )
    
    
    1,516Gross profit
    
    
    
    
    
    
    196
    
    
    
    256
    
    
    
    36
    
    
    
    30
    
    
    
    1
    
    
    
    519
    
    
    
    
    
    
    
    235
    
    
    
    257
    
    
    
    28
    
    
    
    25
    
    
    
    2
    
    
    
    547Gross profit (%)
    
    
    
    
    
    
    17
    
    
    
    30
    
    
    
    56
    
    
    
    38
    
    
    
    (1
    )
    
    
    25
    
    
    
    
    
    
    
    20
    
    
    
    31
    
    
    
    39
    
    
    
    30
    
    
    
    (2
    )
    
    
    27ExpensesSelling, general and administrative
    
    
    
    
    
    
    24
    
    
    
    191
    
    
    
    4
    
    
    
    8
    
    
    
    19
    
    
    
    246
    
    
    
    
    
    
    
    33
    
    
    
    193
    
    
    
    7
    
    
    
    16
    
    
    
    19
    
    
    
    268Depreciation and amortization
    
    
    
    
    
    
    102
    
    
    
    20
    
    
    
    18
    
    
    
    1
    
    
    
    7
    
    
    
    148
    
    
    
    
    
    
    
    96
    
    
    
    20
    
    
    
    13
    
    
    
    5
    
    
    
    7
    
    
    
    141Asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Royalties and other taxes
    
    
    
    
    
    
    13
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    19
    
    
    
    
    
    
    
    16
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    22Other expenses and Argentine charges
    
    
    
    
    
    
    17
    
    
    
    (12
    )
    
    
    16
    
    
    
    (4
    )
    
    
    25
    
    
    
    42
    
    
    
    
    
    
    
    26
    
    
    
    (12
    )
    
    
    26
    
    
    
    30
    
    
    
    15
    
    
    
    85Earnings (loss) before interest expense and income taxes
    
    
    
    
    
    
    40
    
    
    
    52
    
    
    
    (2
    )
    
    
    25
    
    
    
    (51
    )
    
    
    64
    
    
    
    
    
    
    
    64
    
    
    
    51
    
    
    
    (18
    )
    
    
    (26
    )
    
    
    (40
    )
    
    
    31Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74Earnings (loss) before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )Income taxes (recovery)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Net earnings (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45
    )Capital expenditures
    
    
    
    
    
    
    41
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    52
    
    
    
    
    
    
    
    126
    
    
    
    14
    
    
    
    18
    
    
    
    3
    
    
    
    3
    
    
    
    164NET SALES AND GROSS PROFIT BY BUSINESS SEGMENT AND PRODUCT LINE (millions of U.S. dollars, except margin per tonne amounts, ratios, inventory and sales tonnes)2002
    
    
    
    
    
    2001Net
    
    
    Cost of
    
    
    Gross
    
    
    Gross
    
    
    Sales
    
    
    Margin
    
    
    Inventory
    
    
    Net
    
    
    Cost of
    
    
    Gross
    
    
    Gross
    
    
    Sales
    
    
    Margin
    
    
    InventorySales
    
    
    Sales
    
    
    Profit
    
    
    Profit (%
    )
    
    Tonnes (a
    )
    
    ($/Tonne
    )
    
    Tonnes (a
    )
    
    Sales
    
    
    Sales
    
    
    Profit
    
    
    Profit (%
    )
    
    Tonnes (a
    )
    
    ($/Tonne
    )
    
    Tonnes (a
    )North America WholesaleNitrogenAmmonia
    
    
    242
    
    
    
    222
    
    
    
    20
    
    
    
    8
    
    
    
    1,543
    
    
    
    13
    
    
    
    240
    
    
    
    323
    
    
    
    239
    
    
    
    84
    
    
    
    26
    
    
    
    1,610
    
    
    
    52
    
    
    
    329Urea
    
    
    330
    
    
    
    292
    
    
    
    38
    
    
    
    12
    
    
    
    2,517
    
    
    
    15
    
    
    
    141
    
    
    
    304
    
    
    
    253
    
    
    
    51
    
    
    
    17
    
    
    
    2,063
    
    
    
    25
    
    
    
    311Other
    
    
    140
    
    
    
    135
    
    
    
    5
    
    
    
    4
    
    
    
    1,099
    
    
    
    5
    
    
    
    219
    
    
    
    150
    
    
    
    135
    
    
    
    15
    
    
    
    10
    
    
    
    977
    
    
    
    15
    
    
    
    227712
    
    
    
    649
    
    
    
    63
    
    
    
    9
    
    
    
    5,159
    
    
    
    12
    
    
    
    600
    
    
    
    777
    
    
    
    627
    
    
    
    150
    
    
    
    19
    
    
    
    4,650
    
    
    
    32
    
    
    
    867Phosphate
    
    
    239
    
    
    
    202
    
    
    
    37
    
    
    
    15
    
    
    
    1,129
    
    
    
    33
    
    
    
    82
    
    
    
    179
    
    
    
    173
    
    
    
    6
    
    
    
    3
    
    
    
    869
    
    
    
    7
    
    
    
    144Potash
    
    
    158
    
    
    
    91
    
    
    
    67
    
    
    
    42
    
    
    
    1,598
    
    
    
    42
    
    
    
    195
    
    
    
    138
    
    
    
    80
    
    
    
    58
    
    
    
    42
    
    
    
    1,357
    
    
    
    43
    
    
    
    273Sulphate and other products
    
    
    63
    
    
    
    34
    
    
    
    29
    
    
    
    46
    
    
    
    397
    
    
    
    73
    
    
    
    136
    
    
    
    66
    
    
    
    45
    
    
    
    21
    
    
    
    32
    
    
    
    428
    
    
    
    49
    
    
    
    971,172
    
    
    
    976
    
    
    
    196
    
    
    
    17
    
    
    
    8,283
    
    
    
    24
    
    
    
    1,013
    
    
    
    1,160
    
    
    
    925
    
    
    
    235
    
    
    
    20
    
    
    
    7,304
    
    
    
    32
    
    
    
    1,381North America RetailFertilizers
    
    
    366
    
    
    
    265
    
    
    
    101
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386
    
    
    
    278
    
    
    
    108
    
    
    
    28Chemicals
    
    
    361
    
    
    
    266
    
    
    
    95
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336
    
    
    
    245
    
    
    
    91
    
    
    
    27Other products and services
    
    
    122
    
    
    
    62
    
    
    
    60
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    51
    
    
    
    58
    
    
    
    53849
    
    
    
    593
    
    
    
    256
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    574
    
    
    
    257
    
    
    
    31South America WholesaleNitrogen
    
    
    61
    
    
    
    26
    
    
    
    35
    
    
    
    57
    
    
    
    517
    
    
    
    68
    
    
    
    61
    
    
    
    68
    
    
    
    41
    
    
    
    27
    
    
    
    40
    
    
    
    508
    
    
    
    53
    
    
    
    32Other products and services
    
    
    3
    
    
    
    2
    
    
    
    1
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    2
    
    
    
    1
    
    
    
    3364
    
    
    
    28
    
    
    
    36
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    43
    
    
    
    28
    
    
    
    39South America RetailFertilizers
    
    
    53
    
    
    
    31
    
    
    
    22
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    38
    
    
    
    19
    
    
    
    33Other products and services
    
    
    27
    
    
    
    19
    
    
    
    8
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    20
    
    
    
    6
    
    
    
    2380
    
    
    
    50
    
    
    
    30
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    58
    
    
    
    25
    
    
    
    30Other
    
    
    (82
    )
    
    
    (83
    )
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    (84
    )
    
    
    2
    
    
    
    (2
    )Total
    
    
    2,083
    
    
    
    1,564
    
    
    
    519
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,063
    
    
    
    1,516
    
    
    
    547
    
    
    
    27(a)   000s of tonnesNET SALES AND GROSS PROFIT BY MARKET DESTINATION (millions of U.S. dollars, except margin per tonne amounts, ratios and sales tonnes)2002
    
    
    
    
    
    2001Net
    
    
    Cost of
    
    
    Gross
    
    
    Gross
    
    
    Sales
    
    
    Margin
    
    
    
    
    
    
    Net
    
    
    Cost of
    
    
    Gross
    
    
    Gross
    
    
    Sales
    
    
    MarginSales
    
    
    Sales
    
    
    Profit
    
    
    Profit (%
    )
    
    Tonnes (a
    )
    
    ($/Tonne
    )
    
    
    
    
    
    Sales
    
    
    Sales
    
    
    Profit
    
    
    Profit (%
    )
    
    Tonnes (a
    )
    
    ($/Tonne
    )North AmericaNitrogen
    
    
    567
    
    
    
    516
    
    
    
    51
    
    
    
    9
    
    
    
    3,786
    
    
    
    13
    
    
    
    
    
    
    
    606
    
    
    
    494
    
    
    
    112
    
    
    
    18
    
    
    
    3,295
    
    
    
    34Phosphate
    
    
    239
    
    
    
    202
    
    
    
    37
    
    
    
    15
    
    
    
    1,129
    
    
    
    33
    
    
    
    
    
    
    
    179
    
    
    
    173
    
    
    
    6
    
    
    
    3
    
    
    
    869
    
    
    
    7Potash
    
    
    118
    
    
    
    74
    
    
    
    44
    
    
    
    37
    
    
    
    1,110
    
    
    
    40
    
    
    
    
    
    
    
    98
    
    
    
    64
    
    
    
    34
    
    
    
    35
    
    
    
    887
    
    
    
    38Sulphate and other products
    
    
    55
    
    
    
    28
    
    
    
    27
    
    
    
    49
    
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    41
    
    
    
    19
    
    
    
    32
    
    
    
    358
    
    
    
    North America Retail
    
    
    849
    
    
    
    593
    
    
    
    256
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    574
    
    
    
    257
    
    
    
    31
    
    
    
    
    
    
    
    Other
    
    
    (78
    )
    
    
    (79
    )
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    (76
    )
    
    
    2
    
    
    
    (3
    )
    
    
    
    
    
    
    1,750
    
    
    
    1,334
    
    
    
    416
    
    
    
    24
    
    
    
    6,342
    
    
    
    
    
    
    
    
    
    
    
    1,700
    
    
    
    1,270
    
    
    
    430
    
    
    
    25
    
    
    
    5,409
    
    
    
    InternationalNitrogen
    
    
    206
    
    
    
    159
    
    
    
    47
    
    
    
    23
    
    
    
    1,890
    
    
    
    25
    
    
    
    
    
    
    
    239
    
    
    
    174
    
    
    
    65
    
    
    
    27
    
    
    
    1,863
    
    
    
    35Potash
    
    
    40
    
    
    
    17
    
    
    
    23
    
    
    
    58
    
    
    
    488
    
    
    
    47
    
    
    
    
    
    
    
    40
    
    
    
    16
    
    
    
    24
    
    
    
    60
    
    
    
    470
    
    
    
    51Sulphate and other products
    
    
    11
    
    
    
    8
    
    
    
    3
    
    
    
    27
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    6
    
    
    
    3
    
    
    
    33
    
    
    
    70
    
    
    
    South America Retail
    
    
    80
    
    
    
    50
    
    
    
    30
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    58
    
    
    
    25
    
    
    
    30
    
    
    
    
    
    
    
    Other
    
    
    (4
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    230
    
    
    
    103
    
    
    
    31
    
    
    
    2,458
    
    
    
    
    
    
    
    
    
    
    
    363
    
    
    
    246
    
    
    
    117
    
    
    
    32
    
    
    
    2,403
    
    
    
    Total
    
    
    2,083
    
    
    
    1,564
    
    
    
    519
    
    
    
    25
    
    
    
    8,800
    
    
    
    
    
    
    
    
    
    
    
    2,063
    
    
    
    1,516
    
    
    
    547
    
    
    
    27
    
    
    
    7,812
    
    
    
    (a)   000s of tonnes




---



##### 



Performance
    
    Supplementary financial,performance and other data
    
    Page 92
 KEY
RATIOS (millions of U.S. dollars, except per share amounts and ratios) 2003
    
    
    2002
    
    
    2001
    
    
    2000
    
    
    1999DataNet sales
    
    
    2,499
    
    
    
    2,083
    
    
    
    2,063
    
    
    
    1,873
    
    
    
    1,716EBITDA
    
    
    396
    
    
    
    212
    
    
    
    172
    
    
    
    270
    
    
    
    224EBIT
    
    
    21
    
    
    
    64
    
    
    
    31
    
    
    
    163
    
    
    
    131Interest
    
    
    63
    
    
    
    68
    
    
    
    74
    
    
    
    37
    
    
    
    37Net earnings (loss)
    
    
    (21
    )
    
    
    
    
    
    
    (45
    )
    
    
    82
    
    
    
    62Cash flow from operations
    
    
    189
    
    
    
    224
    
    
    
    87
    
    
    
    256
    
    
    
    160Working capital
    
    
    417
    
    
    
    318
    
    
    
    123
    
    
    
    9
    
    
    
    174Total assets
    
    
    2,273
    
    
    
    2,191
    
    
    
    2,398
    
    
    
    2,385
    
    
    
    1,974Total debt (bank indebtedness + long-term debt)
    
    
    735
    
    
    
    762
    
    
    
    980
    
    
    
    816
    
    
    
    677Shareholders equity
    
    
    821
    
    
    
    764
    
    
    
    743
    
    
    
    868
    
    
    
    753Enterprise value
    
    
    2,609
    
    
    
    2,078
    
    
    
    2,148
    
    
    
    2,641
    
    
    
    1,503Average shares outstanding  basic
    
    
    126
    
    
    
    123
    
    
    
    115
    
    
    
    112
    
    
    
    113Year-end shares outstanding
    
    
    127
    
    
    
    126
    
    
    
    115
    
    
    
    115
    
    
    
    112Year-end shares outstanding  diluted
    
    
    127
    
    
    
    126
    
    
    
    115
    
    
    
    132
    
    
    
    133Closing share price U.S.
    
    
    16.46
    
    
    
    11.31
    
    
    
    10.60
    
    
    
    14.63
    
    
    
    7.88Number of employees
    
    
    4,667
    
    
    
    4,829
    
    
    
    4,988
    
    
    
    4,958
    
    
    
    4,536North America Wholesale
    
    
    1,985
    
    
    
    2,104
    
    
    
    2,230
    
    
    
    2,208
    
    
    
    1,765North America Retail
    
    
    2,229
    
    
    
    2,202
    
    
    
    2,206
    
    
    
    2,271
    
    
    
    2,347Corporate
    
    
    250
    
    
    
    267
    
    
    
    263
    
    
    
    234
    
    
    
    218South America
    
    
    203
    
    
    
    256
    
    
    
    289
    
    
    
    245
    
    
    
    206Value Ratios (:1 except per share amounts)EBITDA per share
    
    
    3.14
    
    
    
    1.72
    
    
    
    1.50
    
    
    
    2.41
    
    
    
    1.98Price to earnings ratio (P/E)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    17Price to cash flow (P/CF)
    
    
    11
    
    
    
    6
    
    
    
    14
    
    
    
    6
    
    
    
    6Enterprise value to EBITDA
    
    
    7
    
    
    
    10
    
    
    
    12
    
    
    
    10
    
    
    
    7Price to book value
    
    
    3.5
    
    
    
    2.6
    
    
    
    2.3
    
    
    
    2.6
    
    
    
    1.5Shareholders equity to total assets
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.4Book value per common share
    
    
    4.75
    
    
    
    4.31
    
    
    
    4.54
    
    
    
    5.63
    
    
    
    5.20Liquidity RatiosQuick ratio
    
    
    1.1
    
    
    
    0.9
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.8Current ratio
    
    
    1.8
    
    
    
    1.9
    
    
    
    1.2
    
    
    
    1.0
    
    
    
    1.4Working capital to sales
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.1Sales to total assets
    
    
    1.1
    
    
    
    1.0
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.9Total asset turnover
    
    
    1.1
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9Profitability RatiosReturn on average invested capital (%)
    
    
    1
    
    
    
    3
    
    
    
    0
    
    
    
    7
    
    
    
    7Return on average common shareholders equity (%)
    
    
    (5
    )
    
    
    (2
    )
    
    
    (10
    )
    
    
    12
    
    
    
    10Debt Ratios (:1 except percentages)Debt-to-debt plus equity (%)
    
    
    47
    
    
    
    50
    
    
    
    57
    
    
    
    48
    
    
    
    47EBIT interest coverage
    
    
    0.3
    
    
    
    0.9
    
    
    
    0.4
    
    
    
    4.4
    
    
    
    3.5EBITDA interest coverage
    
    
    6.3
    
    
    
    3.1
    
    
    
    2.3
    
    
    
    7.3
    
    
    
    6.1
 DEFINITIONS Quick ratio
    
    =
    
    
    current asset  inventoriescurrent liabilitiesReturn on average commonshareholders equity
    
    =
    
    net income (loss)  preferred security chargesaverage common shareholders equityEBIT interest coverage
    
    =
    
    
    EBITinterest expenseEBITA interest coverage
    
    =
    
    
    EBITDAinterest expenseEnterprise value
    
    =
    
    (total debt at book value, excluding preferred shares  cash)
+ (diluted shares outstanding × closing share price)Current ratio
    
    =
    
    
    current assetscurrent liabilitiesEBIT
    
    =
    
    earnings (loss) before interest expense and income taxesEBITDA
    
    =
    
    earnings (loss) before interest expense, income taxes,
depreciation, amortization and asset impairmentDebt-to-debt-plus-equity
    
    =
    
    long-term debt + bank indebtedness
long-term debt + shareholders equity + bank indebtednessReturn on average invested capital
    
    =
    
    
    EBIT after income taxes
average invested capital




---



##### 



Capital stock andtrading history
    
    Supplementary financial,performance and other data
    
    Page 93
  COMMON SHARE DATA (millions, except per share amounts and where otherwise noted) Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000
    
    
    1999Basic earnings (loss) per share
    
    
    (0.07
    )
    
    
    0.53
    
    
    
    0.18
    
    
    
    (0.89
    )
    
    
    (0.25
    )
    
    
    (0.08
    )
    
    
    (0.49
    )
    
    
    0.65
    
    
    
    0.47Diluted earnings (loss) per share
    
    
    (0.07
    )
    
    
    0.47
    
    
    
    0.17
    
    
    
    (0.89
    )
    
    
    (0.25
    )
    
    
    (0.08
    )
    
    
    (0.49
    )
    
    
    0.62
    
    
    
    0.46Weighted average common shares outstanding
    
    
    126
    
    
    
    126
    
    
    
    126
    
    
    
    126
    
    
    
    126
    
    
    
    123
    
    
    
    115
    
    
    
    112
    
    
    
    113Period end common shares outstanding
    
    
    126
    
    
    
    126
    
    
    
    126
    
    
    
    127
    
    
    
    127
    
    
    
    126
    
    
    
    115
    
    
    
    115
    
    
    
    112Weighted average diluted shares outstanding
    
    
    126
    
    
    
    147
    
    
    
    146
    
    
    
    126
    
    
    
    126
    
    
    
    123
    
    
    
    115
    
    
    
    132
    
    
    
    133Period end diluted shares outstanding
    
    
    126
    
    
    
    147
    
    
    
    145
    
    
    
    127
    
    
    
    127
    
    
    
    126
    
    
    
    115
    
    
    
    134
    
    
    
    134Canadian trading volume
    
    
    27
    
    
    
    28
    
    
    
    23
    
    
    
    44
    
    
    
    122
    
    
    
    105
    
    
    
    91
    
    
    
    90
    
    
    
    66U.S. trading volume
    
    
    18
    
    
    
    23
    
    
    
    21
    
    
    
    27
    
    
    
    89
    
    
    
    75
    
    
    
    77
    
    
    
    40
    
    
    
    38Total trading volume
    
    
    45
    
    
    
    51
    
    
    
    44
    
    
    
    71
    
    
    
    211
    
    
    
    180
    
    
    
    168
    
    
    
    130
    
    
    
    104Average share price C$
    
    
    16.04
    
    
    
    15.76
    
    
    
    16.17
    
    
    
    19.99
    
    
    
    17.00
    
    
    
    15.40
    
    
    
    17.18
    
    
    
    14.29
    
    
    
    13.28Closing share price C$
    
    
    15.75
    
    
    
    14.75
    
    
    
    17.17
    
    
    
    21.39
    
    
    
    21.39
    
    
    
    17.70
    
    
    
    16.85
    
    
    
    21.65
    
    
    
    11.20High share price C$
    
    
    18.18
    
    
    
    16.90
    
    
    
    17.90
    
    
    
    21.47
    
    
    
    21.47
    
    
    
    17.85
    
    
    
    21.00
    
    
    
    21.95
    
    
    
    15.75Low share price C$
    
    
    14.35
    
    
    
    14.28
    
    
    
    14.62
    
    
    
    16.88
    
    
    
    14.28
    
    
    
    12.66
    
    
    
    14.00
    
    
    
    10.00
    
    
    
    11.20Market capitalization C$
    
    
    1,985
    
    
    
    1,859
    
    
    
    2,163
    
    
    
    2,717
    
    
    
    2,717
    
    
    
    2,230
    
    
    
    1,938
    
    
    
    2,490
    
    
    
    1,254Average share price U.S.$
    
    
    10.63
    
    
    
    11.28
    
    
    
    11.72
    
    
    
    15.14
    
    
    
    12.21
    
    
    
    9.81
    
    
    
    11.11
    
    
    
    9.62
    
    
    
    8.93Closing share price U.S.$
    
    
    10.75
    
    
    
    10.96
    
    
    
    12.56
    
    
    
    16.46
    
    
    
    16.46
    
    
    
    11.31
    
    
    
    10.60
    
    
    
    14.63
    
    
    
    7.88High share price U.S.$
    
    
    11.65
    
    
    
    12.21
    
    
    
    13.10
    
    
    
    16.48
    
    
    
    16.48
    
    
    
    11.42
    
    
    
    13.94
    
    
    
    14.69
    
    
    
    10.63Low share price U.S.$
    
    
    9.54
    
    
    
    10.57
    
    
    
    10.62
    
    
    
    12.50
    
    
    
    9.54
    
    
    
    8.02
    
    
    
    9.00
    
    
    
    6.75
    
    
    
    7.50Market capitalization U.S.$
    
    
    1,355
    
    
    
    1,381
    
    
    
    1,593
    
    
    
    2,090
    
    
    
    2,090
    
    
    
    1,425
    
    
    
    1,219
    
    
    
    1,682
    
    
    
    883Dividends per share U.S.$
    
    
    0.0¢
    
    
    
    5.5¢
    
    
    
    0.0¢
    
    
    
    5.5¢
    
    
    
    11¢
    
    
    
    11¢
    
    
    
    11¢
    
    
    
    11¢
    
    
    
    11¢
 DEBT RATING Senior Unsecured
    
    Preferredas at December 31, 2003
    
    Notes and Debentures
    
    SecurityMoodys Investors Service
    
    Baa2
    
    Baa3Dominion Bond Rating Service
    
    BBB
    
    Pfd  3YStandard & Poors
    
    BBB
    
    BB+
 (SHARE PRICE AND VOLUME HISTORY LINE CHART) (HISTORICAL SHARE PERFORMANCE LINE CHART)




---



##### 



General information
    
    Supplementary financial,performance and other data
    
    Page 94
  ANNUAL PRODUCTION CAPACITY BY PRODUCT GROUP (000s of tonnes) Nitrogen
    
    Phosphate
    
    Potash
    
    Sulphate
    
    MicronutrientsBorger, Texas
    
    
    442Carseland, Alberta
    
    
    860Conda, Idaho
    
    
    
    
    
    
    590Ft. Saskatchewan, Alberta
    
    
    650Homestead, Nebraska
    
    
    190Joffre, Alberta
    
    
    480Kenai, Alaska
    
    
    1,740Kennewick, Washington
    
    
    545Profertil, Argentina (a)
    
    
    585Redwater, Alberta
    
    
    1,365
    
    
    
    680
    
    
    
    
    
    
    
    300Reese, Michigan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Standard/Granum, Alberta
    
    
    120Vanscoy, Saskatchewan
    
    
    
    
    
    
    
    
    
    
    1,790West Sacramento, California
    
    
    185Total
    
    
    7,162
    
    
    
    1,270
    
    
    
    1,790
    
    
    
    300
    
    
    
    27
 (a)
    
    Represents 50% Profertil S.A. production NUTRIENT TONNES Metric tonne
    
    2204.6 pounds or 1,000 kilograms, used for offshore sales.Nutrient tonne
    
    Measures the nutrient content of potassium, phosphate and nitrogen nutrients; consists of Nitrogen N tonnes, Phosphate
P2O5 tonnes and Potash K2O tonnes.Product tonne
    
    Standard measure of the weights of all types of nitrogen, phosphate and potash products.
 PRODUCTION FACTORS Ammonia (82% N)
    
    production of 1 tonne of ammonia requires:n
    
    32-38 MMBtu of natural gasUrea (46% N)
    
    production of 1 tonne of urea requires:n
    
    0.58 tonnes of ammonian
    
    0.76 tonnes of carbon dioxideAmmonium Nitrate (34% N)
    
    production of 1 tonne of 34% N ammonium nitrate requires:n
    
    0.21 tonnes of ammonian
    
    0.78 tonnes of nitric acid1 tonne of nitric acid requires:0.226 tonnes of ammoniaUAN (32% N)
    
    production of 1 tonne of UAN requires:n
    
    0.44 tonnes of ammonium nitraten
    
    0.35 tonnes of ureaMAP (monoammonium phosphate)
    
    production of 1 tonne of MAP requires:n
    
    0.15 tonnes of ammonian
    
    1.35 tonnes of 40% P2O5 phosphoric acid1 tonne of 40% P2O5 acid requires:1.32 tonnes of phosphate rock1.12 tonnes of sulphuric acid