##### 



Exhibit 13

(POTASH CORP 2002 ANNUAL REPORT)





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##### 



Reality:
Food
comes from
the land

(PICTURE)
    
    Most urbanites are so removed from modern
agriculture they take food for granted. They
assume there will always be enough food and that
grocery stores will supply it. In reality, food
comes from the land and fertilizer helps that land
provide a nutritious new crop year after year. As
people have moved to cities and lost touch with
the farm, many myths have grown up around
fertilizer and its use.




Myth Commercial fertilizers are
man-made from chemicals in
laboratories.  Farmers pour more fertilizer
on the land than crops can
possibly use. They just keep
adding it year after year!
  Growers can produce the same
crop yields without using
fertilizers.  Organic farming protects the
environment, wildlife and natural
habitats; conventional farming
harms the land.  All farmers care about is more
bushels of crops; they do not care
about the environment.


(PICTURE)


Reality Commercial fertilizers are drawn from
natureand converted to a form that is
digestible by plants. Farmers simply replace the nutrients that
are removed from the soil at harvest.
Every time a crop goes to market, it takes
some of the soils nutrients with it.
Those nutrients must be replenished for the soil
to produce another healthy crop. Without the use of fertilizers, two billion
people would starve.Soils do not contain
enough nutrients to repeatedly grow large
crops and there is not sufficient nutrient
matter from animal waste and crop residue to
maintain food production for the worlds six
billion people. Use of fertilizers actually conserves
land, making recreational areas and
natural habitats possible.
Fertilizers increase food production per
acre. Without them, millions of acres of
additional land would be needed for
agriculture, reducing animal habitats and
threatening endangered species. Farmers are environmentalists too.They not
only live on the land with their families,
they depend on it for their livelihoods. The
land is their most important asset and they
have a long-term interest in protecting its
fertility.








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##### 



| | Who we arePotashCorp is a leader in
the global fertilizer industry.
We are the world's largest
integrated producer of the
primary nutrients potash,
phosphate and nitrogen,
serving three distinct markets:
agriculture, animal nutrition
and industry. PotashCorp is
large, low-cost, global,
profit-seeking, market-driven
and shareholder-focused.
We believe that continuous
improvement, self-assessment
and a strong commitment to
doing the right thing 
for all our stakeholders 
are the essential drivers
of our success. | MAP
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---

Financial Highlights






All financial data in this report are stated in US Dollars $ millions except per share amounts2002
    
    2001
    
    2000Net sales
    
    $
    1,913.8
    
    
    $
    2,072.7
    
    
    $
    2,231.6Net income per share  diluted
    
    $
    1.03
    
    
    $
    2.32
    
    
    $
    3.76Gross margin
    
    $
    301.6
    
    
    $
    399.2
    
    
    $
    482.8EBITDA*
    
    $
    386.0
    
    
    $
    455.4
    
    
    $
    524.5Cash flow prior to working capital changes*
    
    $
    293.6
    
    
    $
    348.9
    
    
    $
    417.8Cash provided by operating activities
    
    $
    316.4
    
    
    $
    75.7
    
    
    $
    480.4
  *
 
 See Reconciliations and Financial Terms on pages 41 and 42.




1



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(PICTURE) William J. Doyle, President and Chief Executive Officer


Letter
to Shareholders  There are certain simple truths that define
the fertilizer business. Each year, crops are
planted, harvested and consumed. The land helps to
feed more than six billion people on the planet and
our fertilizer products are an important part of
the process. It is a noble and necessary industry
that, over the long term, is as consistent and
dependable as the sunrise and sunset.
     But there is another reality in the fertilizer
business: Our short-term performance is affected by
commodity cycles. The volatility of many key
factors affecting product margins  such as crop
prices, production inputs and foreign currency 
has been challenging.
     In the past three years, corn has been as low
as $1.75 per bushel and jumped almost 70 percent to
$2.95. Wheat has followed a similar pattern and
swung 70 percent in 2002  from $2.55 per bushel to
$4.35 before settling at $3.50 at year-end.
     On the input side, natural gas, which is the
basic feedstock for ammonia production, has been
equally unpredictable over the past two years. The
NYMEX daily price went from $10.20 per MMBtu as we
entered 2001 to less than $1.80 within 10 months and
back to $5.29 by December 2002. Another example is
sulfur, a key raw material for phosphate
production, which more than doubled in price over
the span of 18 months.








The same holds true for foreign currencies, which have an impact on
production costs for our company and on the purchasing power of our global
customers. Over the last five years, the Brazilian currency lost 70
percent of its value and the Indian rupee 25 percent. The euro, which had
dropped 40 percent as we entered 2002, regained half its lost value by
year-end.
     These swings have sent shock waves through certain segments of the
fertilizer industry. Some of our competitors now face decisions about
their very survival. At PotashCorp, we have the size and financial
stability to withstand these pressures.
     More importantly, we have steadfastly held to our decommoditizing
strategy that smooths these highs and lows. This strategy, which is
designed to capture the benefits of fertilizers upside while shielding
margins during the down cycle, has never been so important nor so
seriously tested.
     It is times like these, however, that show the value of our approach
to business. We have remained profitable, have strong cash flow and are
well positioned to provide the greatest possible benefit to our
shareholders over the long term.
 Ebb and flow in 2002 Commodity prices are not the only wild card in our industry. Weather
conditions, which are always unpredictable, have a major impact on
agriculture and, by association, our business. In 2002, we saw difficult
growing conditions in many of the worlds major agricultural regions that
resulted in smaller crop yields and reduced profitability.




2



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As a result, PotashCorps performance was lower in 2002 and
less than our expectations at the beginning of the year. Revenues,
at $1.9 billion, fell by 8 percent, while earnings per share were
$1.03 on a diluted basis, compared to $2.32 last year. Of that
decrease, $0.41 came from increased depreciation and amortization
charges so our cash flow remained strong. Operating income was down
38 percent, while EBITDA fell less than half that at 15 percent. As a company, we made decisions that were faithful to our
strategy and focused on long-term performance. In potash, we faced
fierce competition in both offshore and domestic markets and that
put pressure on prices and volumes. We walked away from low prices,
consistent with our strategy to maximize profitability. In the
mature domestic market, we lost some ground but offshore we
benefited from the growing world demand and our volumes were up 6
percent. We continued to develop our Chilean potassium nitrate facility
at Yumbes and worked through start-up issues that hurt our potash
gross margin. Late in the year, we reached an agreement with
Sociedad Quimica y Minera de Chile S.A. (SQM) to provide it with
8,000 tonnes of potassium nitrate every month in 2003, which will
improve performance as we move forward.




Ammonia and
   Gas Prices Linked (LINE GRAPH) The US ammonia price follows the
   natural gas spot price.






In phosphate, the industry was still digesting new production brought
on stream in India and Australia over the past two years. At the same
time, India and China, two important export markets, continued to protect
domestic production, affecting their imports. While China did increase DAP
imports in 2002, it has yet to follow the spirit of its WTO entry. In nitrogen, our industry is absorbing new capacity from the low-cost
gas regions of Trinidad, where we operate, as well as Venezuela and
Argentina. With natural gas prices climbing in North America,
rationalization is inevitable. Companies have moved slowly in making these
difficult decisions, which tempered the rebound of nitrogen prices late in
the year. Our feed and industrial operations provide an important hedge against
the fertilizer cycle. Fertilizer represented 55 percent of our net sales
and 44 percent of gross margin. Animal feed was 12 percent of net sales
and 15 percent of margin. Industrial products were 33 percent of net sales
and 41 percent of margin. Better indicators for 2003 Our achievements in 2002, despite tough market conditions, are a
testament to the efforts and ingenuity of the people who drive our company
at every level  from our mine sites to our customer service department. As we look forward to 2003, we see improvements in many of the
industrys fundamentals. The world grain stocks-to-use ratio has reached
its lowest level since the food crisis of the early 1970s and prices for
certain crop commodities that fell as much as 20 percent in 2001 recovered
significantly in 2002. Palm oil increased 37 percent, rubber 27 percent,
wheat 18 percent, rice 13 percent and corn 11 percent. Price is the most
important variable in farmers planting decisions and forecasts suggest
increased acreage this year. Thats an important trend because farmers did not apply enough
fertilizer when crop prices were low. Research has shown that nearly half
the fields in North America are lacking in phosphate and potash. Farmers
in other parts of the world also have to increase application to protect
the fertility of their soils. Inventories of all three nutrients are manageable and limited new
capacity is scheduled to come on stream. These factors are creating a
sense of optimism about 2003.






3



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PhosphateSulfur Shooting Higher (LINE GRAPH) Since mid-2001, the
price for sulfur, a
key raw material in
DAP production, has
more than doubled.


A strategyfor growth In potash, we hold 65 percent of the worlds excess capacity.
In 2002, while other global producers operated near their capacity,
we operated at only 53 percent. As demand increases, we can boost
production with minimal capital expense, increasing market share as
we go. In 2002, we witnessed this growth as Brazil imported record
tonnage and China signed an agreement with Canpotex at the end of
the year to import 1.5 million tonnes in 2003. In phosphate, our superior rock quality allows us to produce a
wider variety of products, with a focus on those that offer the
best margins. In 2003, that advantage will become even greater as we
move into an area of our rock deposit that is higher quality and
closer to our Aurora facility, which will reduce rock costs. To maximize our production diversity at Aurora, we built a new
DFP feed plant, which began operating in the third quarter of
2002, and are finishing an expansion to our purified phosphoric acid
facility, with production beginning in the first quarter of 2003. We also announced plans to restart our White Springs DAP
production in 2003. This will consume $20.0 million annually in idle
plant costs, preserve this valuable asset and maintain our access
to Chinas DAP market, as the composition of our White Springs ore
meets their proposed restrictions. We are anticipating a good
spring season and are already seeing evidence that our decision to start up White Springs was
the right move for our company at the right time.








Nitrogen holds the greatest upside potential for our 2003 earnings.
Rising prices for natural gas increase the value of our Trinidad
operations, where our long-term gas contracts provide shelter from pricing
volatility. This is a significant advantage because higher gas prices tend
to generate higher ammonia prices. In fact, the Tampa ammonia price
increased from $110 per tonne in mid-August 2002 to $195 by mid-February
2003, an increase of 77 percent. At the same time, we anticipate North
American demand increasing by roughly 3 percent, which is the equivalent
of 425,000 tonnes of ammonia. Historically, a 300,000-tonne shift can move
the price of ammonia, so this is another positive indicator for prices in
2003. Doing whats right While our operating strategies focus on profitability, our philosophy
has never strayed from a commitment to doing whats right. We have
implemented plans and programs to improve our production methods,
strengthen our safety performance and reduce our environmental footprint.
This will be discussed in greater detail in our first-ever Sustainable
Development Report to be issued later this year. One area of specific focus is our safety performance, which,
frankly, needed to be improved. We worked on it throughout 2002 and
achieved much better results by the fourth quarter. We have a stated goal
of no accidents, no harm to people and no damage to the environment. To
bring us closer to that goal, we implemented a new safety process system
built around behavior-based safety. In September, we resolved an EPA-led environmental investigation of
our Geismar facility by accepting responsibility for violations of the
federal Clean Air Act and analogous state laws and agreeing to pay $2.0
million in fines. The regular daily air emissions from the Geismar plant
were in most cases normal for facilities of its type, but we failed to
properly quantify all of the air emissions in our permit applications. We
discovered these deficiencies during our internal
review of environmental matters at Geismar in response to the
investigation. We promptly reported the violations, and took appropriate
measures to correct them and to prevent them from recurring.




4



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Leadership throughout our company PotashCorp has worked hard to be the leader in our industry 
in terms of shareholder return, responsible stewardship and
community involvement. We set high standards for our company,
employees and suppliers and encourage each group to rise to the
challenge of being a best practices company. In June, we held our second annual best practices conference,
pulling together facility leaders from all our operations. Sharing
success stories  and shortcomings  helps identify ways to improve
our performance and results. This spirit of leadership starts with our board of directors
and executive management team. PotashCorp has been ahead of the
curve on corporate governance, implementing best practices,
including an annual review of board performance, long before these
issues drew public attention. We have a fully independent corporate governance and
nominating committee, which has been effective in attracting highly
skilled people to lead our company. Mary Mogford, a member of our
board since 2001, was selected a fellow of the Institute of
Corporate Directors in 2002, a prestigious honor that is reflective
of the quality of leadership that she has brought to the board.
Wade Fetzer, another highly respected corporate leader, joined our
board in May and we have benefited from his contributions.




Performance of
PotashCorp Shares (BAR GRAPH) Over a three-year period, PotashCorp
shares returned 38 percent, while both
our sector and the Dow Jones Industrial
Average were in negative territory.






Responses to goalsfor 2002 Last year we outlined four specific goals. Here are our results: 1.
 
 Over the business cycle, provide superior return on investment that
exceeds cost of capital, outperforming our peer group and other basic
materials companies in total shareholder return. 
 
 Given the five-year downturn in our industry, we believe the past
10 years better reflect our business cycle. Over that period,
PotashCorp has generated total shareholder return of 260 percent.
The combined average of all other fertilizer companies publicly
traded on the New York Stock Exchange was 75 percent. Over the same
period, the Dow Jones Basic Materials Index provided a return of 62
percent to investors.
 
 While our performance against peers was strong, the extended down
cycle for fertilizer has hindered our ability to deliver a return
that exceeds the cost of capital. In 2002, our weighted average cost
of capital was 7.0 percent, while our cash flow return on investment
was 6.7 percent.  2.
 
 Continue to work to align our people practices with our business
goals, emphasizing consistency, fairness, shared responsibility and
rewards. 
 
 A new management position was created to focus on people
development through training, performance management and succession
planning.
 
 We instituted a new long-term incentive plan for senior management
to align total shareholder return targets with basic materials peer
comparisons, a broader peer group than simply fertilizer companies.
 
 PotashCorps human resources programs have been designed with the
objective of maintaining a stable, productive work force. That
approach has led to loyal, long-term
employees. In 2002, we presented 800 long-service awards, representing
approximately 15 percent of our work force.  3.
 
 Achieve a competitive advantage in all three nutrients by improving
our cost positions while utilizing our efficient transportation
system to be a low-cost supplier on a delivered basis. 
 
 PotashCorp operated our nitrogen facilities at a new standard of
reliability in 2002. That reduced downtime and led to lower
maintenance costs, as well as lower costs for gas and energy
consumption per tonne produced, saving the company almost $8.0
million.






5



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
 
 We saw increased costs in phosphate because of lower operating
rates and higher input costs; potash unit costs, exclusive of
Yumbes, were maintained.
 
 Our purchase of a feed plant in Joplin, MO enabled us to optimize
our Midwestern feed assets and reduce our product costs on a
delivered basis by close to $1.0 million in 2002.
 
 Our quick delivery response time out of New Brunswick enabled us
to increase our potash shipments to Brazil by 11 percent.  4.
 
 Deliver top-quality products with superior customer service to
remain the preferred supplier to existing customers while developing
new markets for our expanded production base. 
 
 In response to customer feedback, PotashCorp opened additional
channels for ordering and communication. We enhanced the
self-service features of our customer web site and 25,000 orders
were placed through electronic data interchange. This reduced the
number of calls to our customer service department but
representatives still processed 160,000 calls on our 24-hour
hotline, including 2,500 after-hours calls and 5 on Christmas Day.
 
 Our Lanigan potash facility modified the size of its granular
product to meet customers changing needs while reducing our costs.
 
 PotashCorp continued to develop the Fertile Minds education
program to provide the industry with the support needed to explain
the benefits of fertilizer to the world. In response to requests, it
was sent to customers and other interested parties in 17
countries, 43 states and 9 provinces.
 
 With our Hazmat rail car, we trained more than 1,100 people on safe
ammonia handling in 2002. Working toward our continuing goals PotashCorp operates with a long-term focus and thus we have established a
number of continuing goals. Each year, we set targets designed to surpass
our previous years performance and advance these goals.  1.
 
 Continue to outperform our peer group and other basic materials
companies in total shareholder return.2003 Targets: 
 
 Decrease our non-cash working capital as a percentage of revenue by 10 percent.
 
 Increase cash flow return by 10 percent.
 
 Implement key corporate performance metrics on a comprehensive and systematic basis.  2.
 
 Remain the leader and preferred supplier of nitrogen, phosphate and
potash products worldwide.2003 Targets: 
 
 Capture an equitable share of world potash consumption growth.
 
 Double our DAP and MAP sales volumes.
 
 Increase feed and industrial sales volumes in nitrogen by 10
percent and phosphate by 15 percent while achieving higher prices.
 
 Move specialty products from index pricing to negotiated pricing, reflecting their differentiation.
 
 Receive 20 percent of customer purchase orders through electronic interchange.  3.
 
 Be the industrys low-cost supplier.2003 Targets: 
 
 Reduce phosphate rock costs by 20 percent per tonne over the course of
the year.
 
 Replace fuel oil at our New Brunswick operations with natural gas
accessed and developed at our site, reducing costs by $2.0 million.
 
 Achieve average natural gas input costs in North America 10
percent below the average NYMEX spot price.
 
 Reduce domestic transportation costs by 5 percent.
 
 Achieve 96.5 percent reliability performance in nitrogen operations.




6



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4.
 
 Constantly stress safety and care for the
environment at our operations.2003 Targets: 
 
 Reduce recordable accident frequency rate by 10 percent.
 
 Reduce the number of environmental releases and permit excursions below 2002 levels.
 
 Complete security vulnerability analyses at all our nitrogen plants.  5.
 
 Align people practices with our
business goals.2003 Targets: 
 
 Implement a human resources administration system enabled by
information technology.
 
 Implement new systems and management processes to track benefits
and identify potential areas for savings.
 
 Review and update performance management processes across the
company to achieve consistency.
 
 Provide a competitive compensation program with a stronger
incentive-based approach.  6.
 
 Continue to take seriously our responsibilities
to our communities.2003 Targets: 
 
 Develop corporate volunteer projects in Saskatoon and Northbrook that
reflect employees interests.
 
 Produce our first Sustainable Development Report, providing
information on PotashCorps economic, social and environmental
performance.
 
 Conduct communication drills in conjunction with emergency
management exercises at all facilities, ensuring our ability to
deliver information to our communities in a crisis situation.  7.
 
 Be in the forefront of good corporate
governance standards.2003 Target: 
 
 Adopt a comprehensive statement of governance principles designed
to capture current best practices. Helping the real environmentalists One of the most important tasks we have undertaken is returning the
focus on food production to where it belongs: the land. The general public
has been caught in a wave of misinformation, which is why we developed our
Fertile Minds program to provide factual information about fertilizers and
healthy soils. I encourage you to learn more by visiting our Fertile Minds
web site  www.fertile-minds.org. At PotashCorp, we know our efforts are essential to world food
production. While many people have moved away from their farming roots,
none of us have forgotten how important it is that we have enough to eat.
In the process of providing proper plant nutrition, we are also helping to
preserve forests, natural parks and wildlife habitats for generations to
come. With this unyielding truth in mind, we will work every day to
maximize the benefits of our assets for all of our stakeholders. (-s- William J. Doyle) William J. Doyle
President and Chief Executive Officer
February 27, 2003






7



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Myth: We have more important issues than foodproduction right now.


(rule)


Reality: Food production is
the most fundamental issue
for health, the environment
and human happiness.






(PICTURE)






Dr. Norman Borlaug, Nobel
Peace Prize winner for
agricultural research: If we
want world peace, we arent
going to get it by depending
on empty stomachs and
human misery.








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The potencyof PotashCorp



1
    

Our
strategiesgive us a
specialcompetitiveadvantage




PotashCorps advantage begins with low-cost, industry-leading
positions in each of our businesses. We have analyzed our strengths
in each nutrient and developed a strategy for each designed to lift
us above the commodity cycle. Our goal is to reduce volatility and
create a rising trend of profitability. In potash, we are the
capacity leader by far and operate low-cost mines. This means we can
match supply to demand, bringing on our excess capacity as global
consumption grows. In phosphate, our wealth of quality rock reserves
confers a position of strength that allows us to pursue specialty
markets where we can achieve critical mass to maximize
profitability. In nitrogen, long-term natural gas contracts in
Trinidad give us unique flexibility and economy. We emphasize
industrial sales from our North American nitrogen production base
while controlling input costs through US gas hedges. During the
recent downturn, we were the only publicly traded fertilizer company
on the New York Stock Exchange to stay profitable.




|                                                                                                                                                                                                                            |  |                                                                                                                                                                                |  |                                                                                                                                                                                       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PotashLarge, Low-Cost, Efficient                                                                                                                                                                                            |  | PhosphateBigger...and Better                                                                                                                                                   |  | NitrogenOffshore Strength                                                                                                                                                             
|(BAR GRAPH)                                                                                                                                                                                                                 |  | (BAR GRAPH)                                                                                                                                                                    |  | (BAR GRAPH)                                                                                                                                                                           
|Our large, low-cost
potash operations
make our strategy of
matching supplyto
demand possible.
Rocanville is the
lowest-cost facility
in the world andsets
the standard for
efficiency, with
Lanigan and Allan
close behind. |  | We have lower-cost,
higher-quality and
larger phosphate
reserves than any
North American
producer. These
advantages will
become even greater
as we mine from our
best deposit. |  | Our Trinidad operation,
which has accessto
low-cost gas, gives us
greater offshore
ammonia capacity than
any othercompany in
the Western Hemisphere,
creating a competitive
advantage.

9



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Strong, Flexible Finances (BAR GRAPH) Even measured against
the toughest
fertilizer market in
history, PotashCorp
has consistently
generated exceptional
cash flow. This has
given us the
flexibility to
reinvest in projects
thatwill make us
stronger for the long
term.




2
    

We
fostera culture that    sustains success
 Responsible stewardship is at the heart of our commitment to
our stakeholders. Even more, we believe it is central to our
continued success as an organization. Our standards of
corporate governance are high because we recognize that
strong governance practices make us more responsive and
competitive. We care for the environment because responsible
management of resources is the very foundation of our
business. We understand that healthy communities are
important to strong operations and provide a platform for
growth. And we foster initiative and openness in the
workplace because we know that the growth and development of
our employees are essential to the success of PotashCorp. In
every area of our business we seek to do the right thing
 because thats the best way to sustain long-term value
creation.  3
    
    Ourfinancial strength gives usgrowth leverage
 PotashCorps ability to finance growth is envied by our
competitors. Over the past five years, and despite weak
markets, we have generated $1.8 billion in operating cash
flow. Weve used this to finance our expansions and make
acquisitions, finding properties that will offer a
competitive advantage and superior returns. We have also
directly rewarded our shareholders by repurchasing more than
$130 million in shares and paying more than $250 million in
dividends. At the same time, we have maintained a net debt to
capital ratio of 41 percent, the best in our sector.




10



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4
    

Our
underlying
marketscontinue to expand
 Fertilizer remains the key to our business. By
restoring soil energy and vitality, fertilizers
add one-third to the worlds food production each
year. This is crucial as global population rises
by about 75 million annually. There is increasing
demand for meat, too, which translates into ever
greater demand for fertilizer. Meanwhile, our
industrial applications are expanding, adding
balance to our business and the potential for more
attractive and stable margins.




Demand Keeps Us Growing (LINE GRAPH) A growing world population and desire
for more and better food are       driving
fertilizer demand  the underlying
basis of our business.






5
    

Fertilizer
indicatorsare
improving
 Our performance is affected by a number of
external factors that influence food production
and fertilizer application, including world
weather, grain stocks, crop prices and soil
fertility levels. Many of these fundamentals were
in transition in 2002. Poor growing conditions
resulted in grain stocks falling to the lowest
level since the early 1970s. Low grain stocks tend
to create higher prices for crops. Farmers look at
crop prices more than any other variable when
making planting decisions, so higher prices have
historically led to increased plantings. Farmers know they will get a great return by investing in crop
nutrients. They also know, through soil analysis, that almost half
of the fields in North America are nutrient-deficient in potassium and phosphate. To fully capture
higher crop prices, they must restore the fertility of their soil
and apply more fertilizer.




Filling the Gap (LINE GRAPH) Poor growing conditions around the
world led to grain production     falling
behind consumption again in
2002. Farmers will need     fertilizers to
help increase production in 2003.




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##### 





Myth: We can grow as much food as we needwithout fertilizer.


(rule)


Reality: Without the
increased food production
from fertilizer
application,one in every
three peoplewould
starve.




(PICTURE)




Thanks to our
life-giving
nutrients, no one
has todecide which
of thesethree it
would be.






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##### 



PotashCorp strategy



Potash: We are an      
international powerhouse PotashCorp is No.1 in potash with more capacity than any other
producer in the world. Our mines in Saskatchewan and New Brunswick
contain nearly one-quarter of world potash capacity and 65 percent
of excess capacity. If we operated flat out, we could almost double
our production and supply nearly 30 percent of annual world potash
needs. Our Rocanville mine was recognized in a recent industry
study as the low-cost leader, with our Lanigan mine No.2 and Allan
close behind. We have massive reserves of superior quality that we
will be mining for more than 100 years.






Operating from such a position of strength, PotashCorp
has the unique ability to bring on excess capacity as
market conditions warrant. As demand increases, we can
utilize capacity very quickly with little capital
expense. This further reduces our cost per tonne,
improving overall margins. Over the next five years, industry consultants expect
world demand for potash to grow by approximately 5
million tonnes while approximately 2 million tonnes of
new capacity is expected to come on stream. PotashCorp
has more exposure to offshore markets where growth rates are higher. We will be able to draw upon our excess capacity to
deliver much of the additional 3 million tonnes needed by the
market. This provides potential leverage from higher volumes, lower
costs and increased prices. Phosphate: Superior deposits        
offer a special advantage PotashCorps phosphate reserves are higher quality, lower cost and
closer to processing facilities than those of our North American
competitors, giving us a major cost advantage. In Aurora, we have
begun to mine the richest part of our reserve base, providing us with the lowest-cost rock in North
America for the foreseeable future.




Potash Ready to Flex
 (BAR GRAPH) With other world
producers                                operating
at or near
capacity,
                                PotashCorp is in
the best                                position
to use our excess
                                capacity to fill
increasing world
                                demand for potash.




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##### 





Phosphate
    Right Productsat the Right Time (BAR GRAPH) Our high-quality phosphate ore allows
    us to produce the widest range of
    products in our industry. We focus our
    production on those with the highest
    gross margin. Nitrogen
    Market-drivenSuccess (BAR GRAPH) Over the past five years, we have
    steadily increased industrial
    sales, where margins are higher
    and more stable.




We have used these cost/quality advantages to develop the most
diversified product line in the industry. This gives us the
flexibility to focus on the fertilizer market when it is strong,
and on animal feed and industrial markets when fertilizer is weak.
Our goal is to move 50 percent of our phosphate production into
high-margin feed and industrial products. Our various phosphate
products are used in such items as kitchen countertops, cake mixes
and colas. Because of our superior rock position, we expanded our purified
phosphoric acid capacity and built the worlds largest, lowest-cost
plant producing DFP (defluorinated phosphate), a special product for
poultry. These industrial and feed projects are expected to improve
our phosphate gross margin during good times and bad. Nitrogen:
The flexibilityto
                          move
with markets PotashCorps strategy is to control input costs through our US
hedges and Trinidad gas contracts while stabilizing earnings by
growing our industrial sales in North America. In the US, natural
gas at $2.00/MMBtu makes up at least 70 percent of the cost of
producing ammonia; $5.00 gas moves it to 85 percent. We control our
costs through long-term, low-cost gas contracts in Trinidad while
hedging a portion of the cost of gas supplied to our US plants.
This increases our margins when gas prices rise and our unhedged
competition shuts down, tightening the supply/demand dynamic and
raising nitrogen prices. In 2002, 60 percent of our total nitrogen sales were made to
industrial customers for use in products ranging from plastics and
adhesives to pharmaceuticals and tires. Our US facilities are
linked by pipeline to adjacent industrial customers who depend on
quality product and timely service, and will pay a premium to get
it. We will continue to emphasize growth of our higher-margin
industrial business in North America while using our input cost
advantages to sustain our competitive edge.




14



---



##### 







Myth: Modern agricultural methods have lessened the nutritional value of food.


(rule)


Reality: With access to
more food and healthier
diets, people are growing
taller and living longer.




(PICTURE)


Over the past
century, the life
expectancy for a
baby born in the
UnitedStates has
gone from49 years
to 77 years.






---



##### 





Recordable
Injury  Frequency Rate
Improves(BAR GRAPH) In 2002, we expanded our behavioral-
   based safety program, which resulted
   in a lower accident rate. Significant
Environmental  Expenditures(BAR GRAPH) With the completion of many major
   projects in recent years, our
   environmental expenditures have
   decreased somewhat. Nonetheless,
   we continue to spend substantial
   amounts to fulfill our environmental
   responsibilities. Company
Matches  Employee
Donations(PIE CHART) Our employees commit dollars to
   causes that are close to their hearts.
   A percentage of these donations is
   matched by the company.




Stewardship Responsible stewardship is at the heart             of
our sustained success At PotashCorp, we recognize that achieving superior financial
performance  and sustaining it  depends on the high standards
and values we maintain in every area where our corporation has
an impact. This is reflected not only in how we operate our businesses,
but also in how we manage our effect on the environment, how we
interact with the communities in which we operate, and how we
protect and foster the health, spirit and creativity of our
employees. It is also evident in the approach we take to
running the company  our commitment to effective corporate
governance begins with the Board and extends through the
decisions every group of PotashCorp employees makes. It helps that our primary business  fertilizers  makes a
critical contribution to peoples health and well-being around
the world. Fertilizers are drawn from nature, replace key
nutrients lost with every harvest and are a critical driver of
land conservation. Our crop nutrients not only sustain lives, they improve them.
High-yield agriculture makes food affordable, freeing up more
income and time for other necessities or luxuries. Fertilizers
give back and we strive to take our cue from this behavior in
everything we do. Watch for our new Sustainability Report In 2003, for the first time, we will be issuing a comprehensive
Sustainability Report, outlining our policies and progress in
such key areas as the environment, community relations, health
and safety, employee development and corporate governance. The
report will be available on our web site (www.potashcorp.com),
and in print to all who request a copy.




16



---



##### 





Myth: There will always
be enough land for
natural habitats and
recreational areas.


(rule)


Reality: Without fertilizer
on farmland, millions of
acres offorests and
grasslands wouldhave to be
converted forfood
production.




(PICTURE)




More than 300
mammals,including
the gray wolf, are
already on the
endangered
species
list. That number
will be even
greater if more
wildlife habitats
are neededfor food
production.








---



##### 



Industry facts

Potash
    
    Phosphate
    
    NitrogenBase Product
    
    Potassium chloride (MOP)
    
    Phosphate rock
    
    Ammonia phosphoric acidWorld Reserves
    
    Very limited
    
    Limited
    
    Readily available (natural gas)AvailabilityCost of New Capacity
    
    Approximately $500 million
    
    Approximately $1 billion for
    
    Approximately $500 million forfor
1 million tonnes KCl
    
    1 million tonnes P2O5
    
    1 million tonnes ammoniaGreenfield2
    
    5 years
    
    3 years
    
    2 yearsDevelopment TimeProducing Countries
    
    13 (based on KCl)
    
    44 (based on P2O5)
    
    More than 75 (based on ammonia)# 1  Canada
    
    # 1  US
    
    # 1  China# 2  Russia
    
    # 2  Morocco
    
    # 2  US# 3  Germany
    
    # 3  Russia
    
    # 3  India# 4  Belarus
    
    # 4  China
    
    # 4  RussiaProduction StateOwned
    
    20%
    
    38%
    
    60%or SubsidyControlledExpected Demand
    
    2%
    
    2%
    
    2%Growth RateMajor Importers
    
    (KCl)
    
    (DAP)
    
    (Ammonia)# 1  US
    
    # 1  China
    
    # 1  US# 2  China
    
    # 2  Pakistan
    
    # 2  India# 3  Brazil
    
    # 3  India
    
    # 3  South Korea# 4  India
    
    # 4  France
    
    # 4  TurkeyMarket Characteristics
    
    Global, few major players
    
    Regional, large players
    
    Mostly regionalProducts
    

Fertilizer
 KCl
    

Fertilizer
 DAP, MAP,
    

Fertilizer  Ammonia, Urea,SPA,
LoMag, Poly-N
    

Ammonium Nitrate,Nitrogen SolutionsPrimary End Uses
    
    Agriculture
    
    Agriculture
    
    AgricultureProducts
    

Industrial  KCl
    
    Industrial  Purified
    
    Industrial  Ammonia,phosphoric acid
    
    Urea, Nitric Acid,Ammonium NitratePrimary End Uses
    
    TV and computer screens,
    
    Soft drinks, food products,
    
    Pharmaceuticals, plastics,drilling fluids, water softeners,
    
    industrial ingredients,
    
    resins, adhesives, dyes,soaps, perfumes, de-icers
    
    metal treating, water
    
    pool chemicals, carpets,treatment
    
    photography, batteries, paints,tires, explosives for mining,construction and road workProducts
    
    Feed Supplements  KCl
    
    Feed Supplements 
    
    Feed Supplements  UreaDical, Monocal, DFPPrimary End Uses
    
    Livestock and poultry
    
    Livestock and poultry
    
    LivestockMajor Consuming
    
    Corn, rice, wheat, soybeans,
    
    Wheat, rice, corn, soybeans,
    
    Wheat, rice, corn, cottonCrops
    
    cotton, oil palm, sugar cane,
    
    cottoncoffee


18



---



##### 



PotashCorp facts Potash
    
    Phosphate
    
    NitrogenCapacity
    
    12.1 million tonnes KCl
    

2.5 million tonnes P2O5
    

3.9 million tonnes NH323% of world capacity
    
    6% of world capacity
    

2% of world capacityWorld Position
    
    #1
    
    
    #4
    
    
    #3by CapacityReserves
    
    More than 100 years of reserves
    
    Approximately 75 years
    
    Approximately 60 years ofat current operating rates
    
    of reserves at current
    
    reserves (based on naturaloperating rates
    
    gas reserves in Trinidad)Cost Position vs
    
    Low-cost producer
    
    Low-cost P2O5
    
    Trinidad operations low-costWorld Producers
    
    
    
    
    
    Low-cost feed
    
    US operations high-costLow-cost purified acid
    
    (consistent with all US producers)Medium-cost DAPProduction
    
    Six mines in Canada
    
    Two mines in the US
    
    Four plants in the USFacilities
    

(plus
interest in one other)Potassium nitrate plant in Chile
    

Three
processing plants in the USEight
feed plants (7  US,1  Brazil)
    
    Large complex in TrinidadKey Input
    
    Shutdown weeks, natural gas,
    
    Cost of phosphate rock,
    
    Natural gas, conversionCost Sensitivities
    
    foreign exchange rate
    
    sulfur, ammonia
    
    efficiencyCompetitive Strengths
    
    Low-cost producer
    
    Long-term reserves,
    
    Flexible product mix65% of world excess capacity
    
    high-quality rock
    
    Close ties to industrial producersGreater offshore presence
    
    Production diversity,
    
    Long-term access to low-costwidest product range
    
    gas in TrinidadNet Sales 2002
    
    28% of total
    
    33% of total
    
    39% of totalGross Margin 2002
    
    71% of total
    
    13% of total
    
    16% of totalCustomer Type1
    
    91% fertilizer
    
    49% fertilizer
    
    40% fertilizer9% feed/industrial
    
    51% feed/industrial
    
    60% feed/industrialCustomer Location1
    
    44% North America
    
    81% North America
    
    94% North America56% Offshore
    
    19% Offshore
    
    6% OffshoreMarket Share
    
    (KCl)
    
    (P2O5)
    
    
    (N)30% North America
    
    18% North America
    
    17% North America11% Offshore
    
    1% Offshore
    
    0.3% OffshoreMain Customers
    

North
America
    
    North America
    
    North AmericaLarge cooperatives
    
    Fertilizer: large cooperatives
    
    Fertilizer: US DAP producersOffshore
    
    Feed: bulk feed producers
    
    and large cooperativesBrazil, China, Japan,
    
    Industrial: manufacturers
    
    Industrial: Industrial intermediateMalaysia
    
    Offshore
    
    and product manufacturersFertilizer: China
    
    OffshoreFeed: Brazil, Mexico
    
    Limited salesMain Competitors
    
    North America
    
    North America
    
    North AmericaIMC,
Agrium, FSU2
    
    Fertilizer: IMC, Cargill, Simplot
    
    Agrium, MissChem, Farmland,Offshore
    
    Feed: IMC, Coronet
    

Terra, FSU2 and other importersSilvinit (Russia),Uralkali (Russia),
    

Industrial:
Astaris, RhodiaOffshore
    

OffshoreLimited
salesBelaruskali (Belarus),
    
    Fertilizer: Morocco, Russia,Dead
Sea Works (Israel),Kali & Salz (Germany),Arab Potash (Jordan)
    
    JordanFeed: ChinaSales Approach
    
    North America: PCS Sales
    
    North America: PCS Sales
    
    North America and Offshore:Offshore: Canpotex2 and
    

Offshore: PhosChem2
    
    PCS SalesPCS Sales
    
    (fertilizers only)1 Based on 2002 sales volumes2 See Glossary on inside back cover
 19




---



##### 



(PICTURE)

ManagementsDiscussion & Analysisof Financial Condition and Results of Operations (in US Dollars)

The following management discussion and analysis is the responsibility of
management. The Board of Directors carries out its responsibility for review of
this disclosure principally through its audit committee, consisting exclusively
of outside directors. The audit committee reviews this disclosure and
recommends its approval by the Board of Directors.



Strategy for success

PotashCorp is determined to be the industrys low-cost global supplier on a
delivered basis, and to have sufficient size in each of our three nutrients to
give us a strong presence in the marketplace. We are focused on decommoditizing
our business by designing strategies in each nutrient that reduce the
volatility of the traditional commodity earnings trend line and direct it
upwards. We have unique strengths that can enable us to take advantage of
growth in the industry and cushion us from its volatility. We strive to build
on these strengths by acquiring and maintaining low-cost, high-quality capacity
that complements our existing assets and adds strategic value. In our day-to-day business, we aim to maximize gross margin by focusing on the
right blend of price, volumes








and asset utilization, with the goal of offering superior returns through
sustained growth. Even during the current lengthy downturn in fertilizer, we
have remained profitable. We constantly link our financial performance with
areas of extended responsibility: the environment, our social and economic
stakeholders and all who depend on us. Potash: Building on global leadership

Our high-quality ore, low-cost production and excess capacity are at the root
of our strategy and strength in potash. Confident that price is more important
than volumes, we match supply to demand to minimize inventory overhang and grow
earnings  a strategy that has consistently proved itself. With 65 percent of
world excess capacity, we can respond to rising global demand by bringing








on capacity; we aim to get a significant share of that growth. Greater
production should lower our costs and increase our sales volumes. A tighter
supply/demand balance is expected to go hand-in-hand with higher prices. We
expect any potential threat to this strategy posed by new global capacity to be
deflected by the scarcity of suitable undeveloped ore bodies, and the high
capital cost and time required to bring a greenfield operation into production. We are a preferred supplier to developing nations, where we expect the greatest
growth in potash demand. Since transportation costs are an important component
of delivered costs and we have definite advantages in markets close to our
sources of supply, we often base our sales strategies on the proximity of our
customers. Thus, we supply Asia




20



---



##### 



Managements Discussion & Analysis



and the US mainly from our six Saskatchewan locations, and South America and
Europe primarily from our New Brunswick base. We minimize transportation and
marketing costs for Saskatchewan offshore sales through our membership in
Canpotex. For customers in the US and Canada, we maintain a system of
distribution warehouses that are well-positioned to provide timely delivery of
quality product to the high-demand spring and fall markets. We maximize
utilization of unit trains to obtain volume discounts from railways. We are
also working to expand our sales of potash for industrial use. Phosphate: Strength through diversification

Our high-quality, low-cost phosphate reserves allow us to diversify into a wide
range of higher-margin products, and that mix lets us respond quickly to market
changes. With approximately 75 years of reserves and multi-year mining permits,
we have the ability to








achieve critical mass in specialty markets that bring good returns and maximize
potential profitability. Our production portfolio also lets us take advantage
of fertilizer during its upcycle and remain profitable with our other product
lines when fertilizer markets turn down. Our long-term goal is to use at least half of our phosphoric acid in
higher-margin feed and industrial products and allot the rest to fertilizer
production. We constantly pursue opportunities to further diversify into the
industrial and animal feed phosphate markets. We are able to alter the
fertilizer split as required to maximize margins from the solid fertilizers DAP
and MAP, and the liquids merchant grade phosphoric acid, superphosphoric acid
and polyphosphates. Nitrogen: The best of two worlds

With our ammonia production split approximately 50-50 between our








Trinidad complex and our four plants in the US, we have a different focus for
each region and a different way of controlling input costs. We utilize our Trinidad production mainly for fertilizer, and keep production
costs down with long-term gas contracts tied to the price of ammonia in the US
Gulf. In the US, we hedge a portion of our natural gas needs and focus our
production on higher-priced industrial sales with long-term contracts,
emphasizing reliable quality and security of supply. Our varied US production
lets us maximize sales into industrial markets, supplemented by fertilizer
sales so we can run our plants at high operating rates and control costs. We
continue to use a natural gas hedging strategy to minimize the risks from the
current volatile US gas market and ensure low-cost operation in the face of
rising offshore imports.








(BAR CHART) With 65 percent of the worlds excess capacity, we could almost double our
annual production and supply nearly 30 percent of global potash consumption.








(BAR CHART) In 2002, we reinforced our diversified position in phosphate. We commissioned
our new DFP plant, added a plant to our feed group and progressed toward the
scheduled start-up of our expanded purified phosphoric acid plant early in
2003.








(BAR CHART) By maintaining long-term natural gas contracts in Trinidad and hedging a
portion of our US gas purchases, we were sheltered from the higher gas costs
faced by US nitrogen producers buying primarily on the spot market.




21



---



##### 



Managements Discussion & Analysis



Industry Indicatorswhat happened in
2002








(MAP)






Weather hurt crops in many areas

Poor weather in North America and a developing El Niño affected crops in
several parts of the world. Examples of substantial production cuts are those
experienced by US corn, Indian rice and Canadian and Australian wheat, with
year-over-year reductions of 5, 15, 25 and 60 percent respectively. Combined with rising global demand, the net effect was a drawdown in the global
grain inventory to the lowest level in nearly 30 years, with USDA projecting a
stocks-to-use ratio of 22 percent for crop year 2002/03. US natural gas prices climbed

Natural gas is a key input for nitrogen production, making up at least 70
percent of US ammonia production costs. Natural gas prices more than doubled
from $2.01/MMBtu in February to $4.13 in December. US producers without hedging
programs found their margins under pressure. Based on the Tampa ammonia price
benchmark, the high cash costs would have kept their margins in red ink for
approximately 90 percent of the year.








Grain prices strengthened

Low global production and reduced inventories have historically strengthened
crop prices, increased planted acres and encouraged fertilizer consumption.
Most important is the price of the worldwide staple, corn. By year-end, its
price was $2.32, up 21 percent from the April low. US Farm Bill supports farmers

The new US Farm Bill set in place a flexible and transparent framework that
provides farmers with price and income support for six years and is expected to
furnish a long-term incentive to restore soil fertility. The impact of the
higher grain prices on assistance paid during periods of weak prices meant
government payouts were down from the 2001 level of $20.7 billion. In spite of
this, government assistance to farmers at over $13 billion in 2002 was the
sixth highest in history.








China backtracks on WTO commitments

China joined the World Trade Organization (WTO) in December 2001, agreeing to
eliminate quantitative restrictions on fertilizer imports and implement a
tariff rate quota (TRQ) system. Under the terms of the agreement, the 2002 TRQ
level for DAP was set at 5.7 million tonnes and for urea at 1.3 million tonnes.
Prior to this agreement, urea imports had been banned for nearly five years,
and DAP imports had been limited beginning in 2001. Under the new system,
imports of both increased. As 2002 progressed, China delayed the issuance of
TRQ allocations beyond the spring fertilizer demand season and then introduced
a standard limiting the cadmium content of fertilizer. These impediments to
free trade created uncertainty in DAP markets. At year-end, the US fertilizer






(LINE GRAPH) Crop
prices rebounded in 2002,spurred by the lowest grain stockslevel since
the early 1970s.








(BAR GRAPH) China,
the worlds largest fertilizer consumer,imported more DAP and urea
after joining theWTO but considerably less than 1997 levels.








(BAR GRAPH) In the
fourth quarter, gas prices rose butammonia prices lagged and margins
forunhedged producers were negative.




22



---



##### 



Managements Discussion & Analysis



industry and regulatory bodies were countering, requesting adherence to the WTO
agreement and use of science-based standards for cadmium content. Economic growth encourages industrial usage

The US economy grew by 2.4 percent in 2002, compared to 0.3 percent in 2001.
Producers of many industrial products reduced inventory in the first half and
then began to increase production, requiring more inputs. For most of the year,
consumer spending helped support the economy, with strong automotive sales and
housing starts. The world economy moved towards recovery with 1.6 percent growth, compared to
1.0 percent in 2001. Strong growth in China (7 percent) and India (5 percent)
spurred demand for consumer goods and for improved diets. Brazil and Argentina
devalued their currencies but a natural hedge assisted their fertilizer
imports, which, like their crop exports, are in US dollars. Russia implemented
economic reforms that are ultimately expected to boost domestic fertilizer
consumption and reduce its nitrogen exports. A bill was passed allowing private
citizens the right to buy land. The US and the EU granted Russia market economy
status, though its nitrogen exports face anti-dumping charges until its
domestic gas prices rise to international levels. Russias desire to join the
WTO is expected to increase gas prices, and to reduce the future international
competitiveness of its nitrogen products.








India Slams Door onDAP Imports(BAR GRAPH) Indias discriminatory subsidies have reduced DAP imports and boosted domestic
production. India discriminates against DAP imports

India, the worlds second largest phosphate consumer, depends on imports of raw
materials or finished products. It continued to heavily subsidize its domestic
DAP producers, allowing them to increase production. This kept its imports at
the lowest level since 1987. Shifts in global meat sales and trade

US poultry exports were down 12 percent from the 2001 record. Russian veterinary
restrictions that banned US poultry imports for part of the year allowed Brazil
to increase its share of the Russian market, and Russia to boost its domestic
production. US production of beef, pork and poultry all rose as consumption per
capita grew, for a combined increase of over 3 percent. In spite of this, US
consumption of








phosphate feed supplements fell by approximately 5 percent from 2001, partly
due to the substitution of meat and bone meal. Capacity overview

Nitrogen:
Western Hemisphere nitrogen capacity outside North America has
increased by approximately 20 percent since mid-2000, when a 725,000 tonne per
year (tpy) plant in Argentina, and a 1.2 million tpy plant in Venezuela came on
stream. In mid-2002 a 640,000 tpy plant was commissioned in Trinidad. In the
US, imports from these plants have increased at the same time as higher gas
prices have squeezed margins of local producers. As a result of this new
capacity, over 1.5 million tonnes of US ammonia capacity shut
down in 2001. It
has not operated since then. In addition, US producers have curtailed
production, operating at approximately 80 percent of capacity in 2002. This
compares to a typical level of 95 to 100 percent when gas prices were near
$2/MMBtu. Phosphate:
World phosphate markets continued adjusting to the surge of
approximately 2.5 million tonnes P2O5. This new and debottlenecked phosphoric
acid capacity came on stream in 2000-2002 in India, Australia, Morocco,
Senegal and South Africa. This is approximately 6 percent of the
40 million
tonne global P2O5 capacity. This new production, most of which was upgraded to
DAP, depressed world markets. In response, individual DAP producers in the US
curtailed their output. Potash:
No major additions to capacity came on stream.








Potash Production
 2002
        
        2001World
        
        43.6 MT
        

42.0 MTPotashCorp
        

6.4 MT
        

6.1 MTPotashCorp
Share
        

14.7
        %
        
        14.5
        %
 MT = Million tonnes KCl
Source: Fertecon, PotashCorp








Phosphoric Acid Production
 2002
        
        2001World
        
        28.5 MT
        
        27.5 MTPotashCorp
        

1.5 MT
        

1.6 MTPotashCorp
Share
        
        5.3
        %
        
        5.8
        %
 MT = Million tonnes
P2O5
Source: Fertecon, PotashCorp








Nitrogen Production
 2002
        

2001World
        
        129.8 MT
        
        127.9 MTPotashCorp
        

3.7 MT
        

3.7 MTPotashCorp
Share
        

2.9%
        

        
2.9%
 MT = Million tonnes ammonia
Source: Fertecon, PotashCorp




23



---



##### 



Managements Discussion & Analysis

PotashCorp

          
          
          
          what happened in 2002Earnings guidance review
The companys initial projection for diluted earnings per share (EPS) in 2002
was in the range of $2.00 per share. The final result was $1.03 per share. The
primary causes of this variance from projected amounts are:

CAUSE
        

EFFECT
ON DILUTEDAFTER-TAX
EPSPotash sales volumes lower
        
        $
        (0.20
        )Potash realized prices lower
        
        
        (0.21
        )Lower provincial mining and other taxes
        
        
        0.20PCS Yumbes (potassium nitrate operations)
        
        
        (0.06
        )Subtotal potash
        
        
        (0.27
        )Phosphate realized prices lower
        
        
        (0.29
        )Higher phosphate unit cost of sales
        
        
        (0.32
        )Subtotal phosphate
        
        
        (0.61
        )Nitrogen unit cost of sales higher
        
        
        (0.16
        )Subtotal nitrogen
        
        
        (0.16
        )SUBTOTAL OF THE ABOVE
        
        
        (1.04
        )Lower selling and administrative expenses
        
        
        0.05Foreign exchange variance
        
        
        (0.02
        )Income tax variance
        
        
        0.04TOTAL VARIANCE FROM PROJECTED DILUTED EPS
        
        $
        (0.97
        )


Potash

| |  | Potash volumes in the domestic market and prices in both the domestic and offshore markets were down due to competitive pressures.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------

| |  | Provincial mining taxes were lower due to lower margins on potash.
|- |  | ------------------------------------------------------------------

| |  | The companys nitrate operations in Chile continued to be affected by high costs due to start-up, low operating rates and weak prices.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------

| |  | In phosphate, prices were down and higher costs were primarily
attributable to reduced production volumes, unscheduled reduced operating
rates due to sulfur shortages and increased sulfur input costs.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The unit cost of sales for nitrogen was up due to natural gas prices that were higher than those forecast, with minimal product price offset.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

| |  | Spending restraint and no amortization of goodwill reduced selling and administrative expenses.
|- |  | -----------------------------------------------------------------------------------------------

| |  | Income taxes decreased due to lower earnings.
|- |  | ---------------------------------------------

OverviewBAR

Dollars
(millions)except
per share amounts
        

%
Increase (Decrease)2002
        

2001
        

2000
        

2002
        

2001Net Sales
        
        $
        1,913.8
        
        
        $
        2,072.7
        
        
        $
        2,231.6
        
        
        
        (8
        )
        
        
        (7
        )Gross Margin
        
        $
        301.6
        
        
        $
        399.2
        
        
        $
        482.8
        
        
        
        (24
        )
        
        
        (17
        )Provision for Plant Closures and Office Consolidation
        
        
        
        
        
        
        
        
        
        $
        24.3
        
        
        
        
        
        
        
        Operating Income
        
        $
        166.9
        
        
        $
        269.7
        
        
        $
        326.8
        
        
        
        (38
        )
        
        
        (17
        )Net Income
        
        $
        53.6
        
        
        $
        121.2
        
        
        $
        198.0
        
        
        
        (56
        )
        
        
        (39
        )Net Income Per Share  Basic
        
        $
        1.03
        
        
        $
        2.34
        
        
        $
        3.78
        
        
        
        (56
        )
        
        
        (38
        )Net Income Per Share  Diluted
        
        $
        1.03
        
        
        $
        2.32
        
        
        $
        3.76
        
        
        
        (56
        )
        
        
        (38
        )


24



---



##### 



Managements Discussion & Analysis

PotashBAR

% Increase
        
        
        
        
        
        
        
        
        
        
        
        
        
        % Increase
        
        
        
        
        
        
        
        
        
        
        
        
        
        % IncreaseDollars (millions)
        
        (Decrease)
        
        Tonnes (thousands)
        
        (Decrease)
        
        Average per MT
        
        (Decrease)2002
        
        2001
        
        2000
        
        2002
        
        2001
        
        2002
        
        2001
        
        2000
        
        2002
        
        2001
        
        2002
        
        2001
        
        2000
        
        2002
        
        2001Net SalesNorth American
        
        $
        215.3
        
        
        $
        232.1
        
        
        $
        237.8
        
        
        
        (7
        )
        
        
        (2
        )
        
        
        2,780
        
        
        
        2,894
        
        
        
        2,939
        
        
        
        (4
        )
        
        
        (2
        )
        
        $
        77.45
        
        
        $
        80.21
        
        
        $
        80.92
        
        
        
        (3
        )
        
        
        (1
        )Offshore
        
        
        300.7
        
        
        
        293.4
        
        
        
        340.9
        
        
        
        2
        
        
        
        (14
        )
        
        
        3,547
        
        
        
        3,349
        
        
        
        3,973
        
        
        
        6
        
        
        
        (16
        )
        
        $
        84.76
        
        
        $
        87.62
        
        
        $
        85.79
        
        
        
        (3
        )
        
        
        2Other
        
        
        18.0534.0
        
        
        
        525.5
        
        
        
        578.7
        
        
        
        2
        
        
        
        (9
        )
        
        
        6,327
        
        
        
        6,243
        
        
        
        6,912
        
        
        
        1
        
        
        
        (10
        )
        
        $
        84.40
        
        
        $
        84.18
        
        
        $
        83.72
        
        
        
        
        
        
        
        1Cost of Goods SoldCash Costs
        
        
        272.1
        
        
        
        249.6
        
        
        
        233.8
        
        
        
        9
        
        
        
        7
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        43.00
        
        
        $
        39.98
        
        
        $
        33.82
        
        
        
        8
        
        
        
        18Depreciation and
Amortization
        
        
        46.3
        
        
        
        34.1
        
        
        
        40.9
        
        
        
        36
        
        
        
        (17
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        7.32
        
        
        $
        5.46
        
        
        $
        5.92
        
        
        
        34
        
        
        
        (8
        )318.4
        
        
        
        283.7
        
        
        
        274.7
        
        
        
        12
        
        
        
        3
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        50.32
        
        
        $
        45.44
        
        
        $
        39.74
        
        
        
        11
        
        
        
        14Gross Margin
        
        $
        215.6
        
        
        $
        241.8
        
        
        $
        304.0
        
        
        
        (11
        )
        
        
        (20
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        34.08
        
        
        $
        38.74
        
        
        $
        43.98
        
        
        
        (12
        )
        
        
        (12
        )




2002 vs 2001 The gross margin drop from 2001 in our potash segment was principally
attributable to Yumbes, our potassium nitrate plant in Chile, and to increased
competitive pressures in domestic and offshore markets. Net sales volumes from this segment rose slightly in 2002, due to higher
offshore volumes and the first year of sales from Yumbes. Previously, Yumbes
had been in preproduction and revenues had been offset by costs that were
capitalized. North American sales volumes were down, as we chose not to
participate in some lower-priced domestic sales. Volumes were further affected
by a poor spring planting season, a late harvest and an early winter. Prices
came under pressure, we believe, when North American competitors seeking higher
cash flow attempted to sell more potash to capitalize on its profitability.
Offshore, we set a sales record in March, and we sold additional tonnes to
China, Brazil, Japan and Malaysia. However, we did not get the growth we had
anticipated entering the year as we experienced aggressive competition in
offshore markets, resulting in lost sales and lower prices. Unit cost of sales (excluding Yumbes) decreased, primarily because production
tonnes were up. Start-up problems and low operating rates at Yumbes increased
its costs. Since the market has not yet absorbed all the available nitrate
capacity, prices for that nutrient have not recovered to the levels of the late
1990s. In total, Yumbes negatively affected potash gross margin.








(LINE GRAPH) Potash prices have remained relatively stable in both North American and
offshore markets. On an annual basis, they have stayed within a 3 percent range
over the last three years.






2002 POTASH PRODUCTION (million tonnes KCl)


Annual
        
        2002
        
        2001
        
        Mine SiteCapacity
        
        Production
        
        Production
        
        Employees(active)Lanigan SK
        
        
        3.828
        
        
        
        1.424
        
        
        
        1.354
        
        
        
        331Rocanville SK
        
        
        2.295
        
        
        
        1.700
        
        
        
        1.593
        
        
        
        324Allan SK
        
        
        1.885
        
        
        
        .864
        
        
        
        .768
        
        
        
        272Cory SK
        
        
        1.361
        
        
        
        .677
        
        
        
        .747
        
        
        
        184Patience Lake SK
        
        
        1.033
        
        
        
        .230
        
        
        
        .241
        
        
        
        67Esterhazy SK1
        
        
        .953
        
        
        
        .953
        
        
        
        .816
        
        
        
        0New Brunswick NB
        
        
        .785
        
        
        
        .599
        
        
        
        .609
        
        
        
        331TOTAL
        
        
        12.140
        
        
        
        6.447
        
        
        
        6.128
        
        
        
        1,509


|1 |  | Production at
Esterhazy is mined from PotashCorp reserves by IMC Esterhazy
Canada Limited Partnership under a long-term agreement. For calendar year
2003, our allocation is 0.953 million tonnes.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25



---



##### 



Managements Discussion & Analysis

PotashSimilar ShutdownsWeeks(BAR GRAPH) Shutdown weeks to control inventory are an important factor in our potash
costs. In 2002, we had 63.1 shutdown weeks, almost the same as the year before.




PotashStrategic Access to Brazil$US/Tonne(BAR GRAPH) Our New Brunswick operation can supply potash to Brazil at lower cost than any
other producer and with a 24 percent shorter sailing time compared to Belarus.




PotashCompetitive Supplier to China$US/Tonne(BAR GRAPH) Our Saskatchewan potash, with large storage facilities in Vancouver and
Portland, has a 30 percent advantage over Middle Eastern producers in sailing
time to China.




2001 vs 2000

Net sales for potash decreased in
2001. Results were significantly affected by
conditions in the offshore market as record offshore sales volumes in 2000 led
to high inventories in several key consuming countries at the beginning of
2001. These customers did not purchase product until their inventories were
reduced. Depressed prices for several offshore crops that use potash lowered
world consumption. In addition, aggressive selling by Russian marketing agency
IPC resulted in lower offshore sales volumes in 2001 as compared to 2000. North
American sales tonnes were down slightly, due primarily to reduced consumption.
Average realized sales prices were up slightly in offshore markets due to lower
freight costs but down slightly in the North American market, principally due
to competitive pressures.

The number of shutdown weeks increased significantly over those in 2000 (63
weeks in 2001 compared to 38 in 2000). The increase in shutdown weeks, high
natural gas prices in the first half of 2001 and a stronger Canadian dollar in
the first half of the year resulted in higher unit production costs for the
year.

PhosphateBAR



|                   |                               |                    |       |            |  |                    |       |            |  |                |       |            |  |            |     |      |   |      |     |      |   |      |  |       |  |      |  |            |  |      |  |       |  |  |  |     |   |  |  |     |   |            |        |        |  |   |        |        |  |   |        |        |  |  |     |    |   |  |   |    |  
|------------------ | ----------------------------- | ------------------ | ----- | ---------- |  | ------------------ | ----- | ---------- |  | -------------- | ----- | ---------- |  | ---------- | --- | ---- | - | ---- | --- | ---- | - | ---- |  | ----- |  | ---- |  | ---------- |  | ---- |  | ----- |  |  |  | --- | - |  |  | --- | - | ---------- | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | - |  | - | -- | -
|                   |                               |                    |       |            |  |                    |       |            |  |                |       |            |  | % Increase |     |      |   |      |     |      |   |      |  |       |  |      |  | % Increase |  |      |  |       |  |  |  |     |   |  |  |     |   | % Increase
|                   |                               | Dollars (millions) |       | (Decrease) |  | Tonnes (thousands) |       | (Decrease) |  | Average per MT |       | (Decrease)
|                   |                               | 2002               |       | 2001       |  | 2000               |       | 2002       |  | 2001           |       | 2002       |  | 2001       |     | 2000 |   | 2002 |     | 2001 |   | 2002 |  | 2001  |  | 2000 |  | 2002       |  | 2001
|                  
|Net Sales          |                               |                    |       |            |  |                    |       |            |  |                |       |            |  |            |     |      |   |      |     |      |   |      |  |       |  |      |  |            |  |      |  |       |  |  |  |     |   |  |  |     |   |            |        |        |  |   |        |        |  |   |        |        |  |  |     |    |   |  |   |   
|                   | Fertilizer  liquids          |                    | $     | 144.9      |  |                    | $     | 145.0      |  |                | $     | 192.3      |  |            |     |     |   |      |     | (25  | ) |      |  | 675   |  |      |  | 741        |  |      |  | 986   |  |  |  | (9  | ) |  |  | (25 | ) |            | $      | 214.55 |  |   | $      | 195.56 |  |   | $      | 195.10 |  |  |     | 10 |   |  |   |   |  
|                   | Fertilizer  solids           |                    |       | 113.4      |  |                    |       | 130.1      |  |                |       | 222.9      |  |            |     | (13  | ) |      |     | (42  | ) |      |  | 745   |  |      |  | 927        |  |      |  | 1,523 |  |  |  | (20 | ) |  |  | (39 | ) |            | $      | 152.26 |  |   | $      | 140.30 |  |   | $      | 146.31 |  |  |     | 9  |   |  |   | (4 | )
|                   | Feed                          |                    |       | 216.8      |  |                    |       | 208.6      |  |                |       | 215.4      |  |            |     | 4    |   |      |     | (3   | ) |      |  | 961   |  |      |  | 874        |  |      |  | 907   |  |  |  | 10  |   |  |  | (4  | ) |            | $      | 225.55 |  |   | $      | 238.79 |  |   | $      | 237.44 |  |  |     | (6 | ) |  |   |   |  
|                   | Industrial                    |                    |       | 157.2      |  |                    |       | 168.1      |  |                |       | 151.9      |  |            |     | (6   | ) |      |     | 11   |   |      |  | 512   |  |      |  | 503        |  |      |  | 477   |  |  |  | 2   |   |  |  | 5   |   |            | $      | 307.29 |  |   | $      | 334.32 |  |   | $      | 318.48 |  |  |     | (8 | ) |  |   | 5  |  
|                  
|                   |                               |                    |       | 632.3      |  |                    |       | 651.8      |  |                |       | 782.5      |  |            |     | (3   | ) |      |     | (17  | ) |      |  | 2,893 |  |      |  | 3,045      |  |      |  | 3,893 |  |  |  | (5  | ) |  |  | (22 | ) |            | $      | 218.58 |  |   | $      | 214.06 |  |   | $      | 201.00 |  |  |     | 2  |   |  |   | 7  |  
|                  
|Cost
of Goods Sold
|                   | Cash Costs                    |                    |       | 516.9      |  |                    |       | 517.1      |  |                |       | 640.3      |  |            |     |     |   |      |     | (19  | ) |      |  |       |  |      |  |            |  |      |  |       |  |  |  |     |   |  |  |     |   |            | $      | 178.69 |  |   | $      | 169.82 |  |   | $      | 164.47 |  |  |     | 5  |   |  |   | 3  |  
|                   | Depreciation and
Amortization |                    |       | 76.8       |  |                    |       | 72.0       |  |                |       | 68.1       |  |            |     | 7    |   |      |     | 6    |   |      |  |       |  |      |  |            |  |      |  |       |  |  |  |     |   |  |  |     |   |            | $      | 26.55  |  |   | $      | 23.65  |  |   | $      | 17.50  |  |  |     | 12 |   |  |   | 35 |  
|                  
|                   |                               |                    | 593.7 |            |  |                    | 589.1 |            |  |                | 708.4 |            |  |            | 1   |      |   |      | (17 | )    |   |      |  |       |  |      |  |            |  |      |  |       |  |  |  |     |   |  |  |     |   | $          | 205.24 |        |  | $ | 193.47 |        |  | $ | 181.97 |        |  |  | 6   |    |   |  | 6 |   
|                  
|Gross Margin       |                               | $                  | 38.6  |            |  | $                  | 62.7  |            |  | $              | 74.1  |            |  |            | (38 | )    |   |      | (15 | )    |   |      |  |       |  |      |  |            |  |      |  |       |  |  |  |     |   |  |  |     |   | $          | 13.34  |        |  | $ | 20.59  |        |  | $ | 19.03  |        |  |  | (35 | )  |   |  | 8 |   
|                  

2002 vs 2001

Overall phosphate net sales volumes decreased slightly in 2002, mainly because
we decided not to participate in low-priced offshore markets for liquid
fertilizers and, for the first half of the year, solid fertilizers. Increased
DAP imports by China encouraged a return to the offshore market in the second
half of 2002. North American feed sales volumes were

26



---



##### 



Managements Discussion & Analysis

flat as a competitor brought on new capacity, customers tightened feed
formulation and competition increased from meat and bone meal and from phytase.
Offshore feed volumes increased significantly with higher sales to Mexico and
the Philippines, and from our Brazilian feed plant. Excluding hydrofluosilic
acid (HFSA), a byproduct previously included in Other income, industrial sales
volumes and prices were each down 4 percent.

Overall liquid fertilizer prices were up due to product mix, as less low-priced
product was sold into the offshore market. Tighter supply pushed up prices for
solid fertilizers. Competitive pressures also pushed down feed prices in both
domestic and offshore markets as new capacity came on stream. Prior period
contract adjustments with a major customer, plus competitive pressures, kept
industrial prices down.

Several factors joined to raise phosphate production costs. Lower production
volumes meant fixed costs had to be allocated over fewer tonnes. We used
high-cost inventoried rock from an area where dredging costs were incurred.
Sulfur shortages late in the year cut operating rates and raised input costs,
increasing unit costs. The purified acid plant experienced operating problems
in the third quarter, which affected costs.



2002 ROCK AND ACID PRODUCTION


Phosphate Rock (million tonnes)
        
        Phosphoric Acid (million tonnes P2O5)Annual
        
        2002
        
        2001
        
        Annual
        
        2002
        
        2001
        
        EmployeesCapacity
        
        Production
        
        Production
        
        Capacity
        
        Production
        
        Production
        
        (active)Aurora NC
        
        
        6.0
        
        
        
        3.440
        
        
        
        3.900
        
        
        
        1.202
        
        
        

.852
        
        
        

.916
        
        
        

985White Springs FL
        
        
        3.6
        
        
        
        1.547
        
        
        
        1.677
        
        
        
        1.093
        
        
        

.480
        
        
        

.473
        
        
        

820Geismar LA
        
        
        
        
        
        
        
        
        
        
        
        
        
        

.202
        
        
        

.180
        
        
        

.184
        
        
        

81TOTAL
        
        
        9.6
        
        
        
        4.987
        
        
        
        5.577
        
        
        
        2.497
        
        
        
        1.512
        
        
        
        1.573
        
        
        
        1,886




2002 PHOSPHATE PRODUCTION (million tonnes product)


Aurora
        
        
        
        
        
        
        White Springs
        
        
        
        
        
        
        
        GeismarAnnual
        
        2002
        
        2001
        
        Annual
        
        2002
        
        2001
        
        Annual
        
        2002
        
        2001Capacity
        
        Production
        
        Production
        
        Capacity
        
        Production
        
        Production
        
        Capacity
        
        Production
        
        ProductionLiquids:
        
        MGA1
        
        
        1.835
        
        
        
        1.336
        
        
        
        1.377
        
        
        
        1.908
        
        
        
        .828
        
        
        
        .834
        
        
        
        .337
        
        
        
        .324
        
        
        
        .332SPA
        
        
        .676
        
        
        
        .200
        
        
        
        .219
        
        
        
        1.138
        
        
        
        .639
        
        
        
        .662
        
        
        
        .196
        
        
        
        .117
        
        
        
        .116Solids:
        
        DAP
        
        
        1.247
        
        
        
        .495
        
        
        
        .791
        
        
        
        .710
        
        
        
        .028
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        MAP
        
        
        .273
        
        
        
        .255
        
        
        
        .071
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        




|1 |  | A substantial portion is consumed internally in the production of
downstream products. The balance is exported to phosphate fertilizer
producers and sold domestically to dealers that custom-mix liquid
fertilizer.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2002 PHOSPHATE FEED PRODUCTION (million tonnes)


Annual
        
        2002
        
        2001
        
        EmployeesCapacity
        
        Production
        
        Production
        
        (active)Davenport IA1
        
        
        
        
        
        
        
        
        
        
        .003
        
        
        
        Marseilles IL
        
        
        .278
        
        
        
        .177
        
        
        
        .192
        
        
        
        36White Springs FL (monocal)
        
        
        .272
        
        
        
        .137
        
        
        
        .154
        
        
        
        23Weeping Water NE
        
        
        .209
        
        
        
        .166
        
        
        
        .170
        
        
        
        46Joplin MO2
        
        
        .163
        
        
        
        .104
        
        
        
        
        
        
        
        35Aurora NC
        
        
        .159
        
        
        
        .004
        
        
        
        
        
        
        
        32Kinston NC3
        
        
        .141
        
        
        
        .054
        
        
        
        .063
        
        
        
        21White Springs FL (DFP)
        
        
        .100
        
        
        
        .096
        
        
        
        .089
        
        
        
        35Fosfatos do Brasil
        
        
        .110
        
        
        
        .047
        
        
        
        .053
        
        
        
        74TOTAL
        
        
        1.432
        
        
        
        .785
        
        
        
        .724
        
        
        
        302




|1 |  | Ceased production January 15, 2001
|- |  | ----------------------------------

|2 |  | Purchased March 1, 2002
|- |  | -----------------------

|3 |  | Ceased production February 19, 2003
|- |  | -----------------------------------

27



---



##### 



Managements Discussion & Analysis



(LINE GRAPH) Average annual liquid and solid
fertilizer prices were the highest in
three years, while feed and industrial
prices lost some ground.








2001 vs 2000 Overall, phosphate net sales decreased in 2001. The phosphate fertilizer market
was weak due to poor world supply/demand fundamentals caused chiefly by new
production capacity in Australia and India and reduced purchases by major
importers, primarily China and India. Solid fertilizers lost money in 2001 on a
gross margin basis, primarily due to lower prices. The company cut production
during the year and by year-end was operating only the solid fertilizer
capacity required to produce our higher-margin products. That production was
being used to supply North American customers. North American fertilizer sales
volumes also declined, affected by reduced North American phosphate
consumption, down an estimated 5 percent in 2001. The industrial market
continued to provide good margins during the year. Sales volumes were up as
compared to 2000, primarily due to the additional sales provided by the purchase
of the remaining 50-percent interest in Albright & Wilson Company (A&W) near
the end of the first quarter of 2000. New customers also added to sales
volumes. Higher average prices on a year-over-year basis were also due to the
A&W acquisition as the company began selling an upgraded product that is higher
priced. PotashCorps wet acid production, which was expanding, provided shelter from the downturn in certain phosphoric
acid markets. Feed sales volumes were flat in the offshore market but down in
the North American market due to decreased demand. Sales prices for feed
products were flat overall.




The price of sulfur, a key phosphate input, decreased significantly as compared
to 2000 due to reduced demand as domestic DAP producers cut back production.
The price of ammonia (another key input) increased in the first part of the
year due to the higher natural gas prices. As the price of natural gas fell
during the year, ammonia prices tracked this decline, ending the year at levels
lower than at the end of 2000. The increase in ammonia prices in the first part
of the year more than offset the savings on sulfur and, combined with lower
production volumes (which spread fixed costs over fewer tonnes), increased
per-tonne production costs.

NitrogenBAR

%
Increase
        
        
        
        
        
        
        
        
        
        
        
        
        

% Increase
        
        
        
        
        
        
        
        
        
        
        
        
        

% IncreaseDollars (millions)
        

(Decrease)
        

Tonnes (thousands)
        

(Decrease)
        

Average per MT
        

(Decrease)2002
        
        2001
        
        2000
        
        2002
        
        2001
        
        2002
        
        2001
        
        2000
        
        2002
        
        2001
        
        2002
        
        2001
        
        2000
        
        2002
        
        2001Net SalesAmmonia
        
        $
        232.7
        
        
        $
        313.6
        
        
        $
        217.5
        
        
        
        (26
        )
        
        
        44
        
        
        
        1,867
        
        
        
        1,993
        
        
        
        1,377
        
        
        
        (6
        )
        
        
        45
        
        
        $
        124.66
        
        
        $
        157.35
        
        
        $
        157.99
        
        
        
        (21
        )
        
        
        Urea
        
        
        212.1
        
        
        
        215.4
        
        
        
        236.3
        
        
        
        (2
        )
        
        
        (9
        )
        
        
        1,592
        
        
        
        1,346
        
        
        
        1,572
        
        
        
        18
        
        
        
        (14
        )
        
        $
        133.16
        
        
        $
        160.01
        
        
        $
        150.33
        
        
        
        (17
        )
        
        
        6Nitrogen Solutions
        
        
        93.3
        
        
        
        114.9
        
        
        
        135.7
        
        
        
        (19
        )
        
        
        (15
        )
        
        
        1,097
        
        
        
        1,156
        
        
        
        1,593
        
        
        
        (5
        )
        
        
        (27
        )
        
        $
        85.04
        
        
        $
        99.34
        
        
        $
        85.15
        
        
        
        (14
        )
        
        
        17Other
        
        
        140.4
        
        
        
        149.9
        
        
        
        135.7
        
        
        
        (6
        )
        
        
        10
        
        
        
        1,489
        
        
        
        1,369
        
        
        
        1,434
        
        
        
        9
        
        
        
        (5
        )
        
        $
        94.27
        
        
        $
        109.49
        
        
        $
        94.61
        
        
        
        (14
        )
        
        
        16Carbon Dioxide
        
        
        9.5
        
        
        
        8.2
        
        
        
        9.4
        
        
        
        16
        
        
        
        (13
        )
        
        
        924
        
        
        
        858
        
        
        
        831
        
        
        
        8
        
        
        
        3
        
        
        $
        10.26
        
        
        $
        9.68
        
        
        $
        11.29
        
        
        
        6
        
        
        
        (14
        )688.0
        
        
        
        802.0
        
        
        
        734.6
        
        
        
        (14
        )
        
        
        9
        
        
        
        6,969
        
        
        
        6,722
        
        
        
        6,807
        
        
        
        4
        
        
        
        (1
        )
        
        $
        98.72
        
        
        $
        119.31
        
        
        $
        107.92
        
        
        
        (17
        )
        
        
        11Purchased
        
        
        59.5
        
        
        
        93.4
        
        
        
        135.8
        
        
        
        (36
        )
        
        
        (31
        )
        
        
        449
        
        
        
        628
        
        
        
        896
        
        
        
        (29
        )
        
        
        (30
        )
        
        $
        132.82
        
        
        $
        148.55
        
        
        $
        151.55
        
        
        
        (11
        )
        
        
        (2
        )$
        747.5
        
        
        $
        895.4
        
        
        $
        870.4
        
        
        
        (17
        )
        
        
        3
        
        
        
        7,418
        
        
        
        7,350
        
        
        
        7,703
        
        
        
        1
        
        
        
        (5
        )
        
        $
        100.77
        
        
        $
        121.82
        
        
        $
        112.99
        
        
        
        (17
        )
        
        
        8Fertilizer
        
        $
        317.4
        
        
        $
        424.7
        
        
        $
        463.2
        
        
        
        (25
        )
        
        
        (8
        )
        
        
        2,976
        
        
        
        3,282
        
        
        
        3,772
        
        
        
        (9
        )
        
        
        (13
        )
        
        $
        106.64
        
        
        $
        129.39
        
        
        $
        122.78
        
        
        
        (18
        )
        
        
        5Feed and Industrial
        
        
        430.1
        
        
        
        470.7
        
        
        
        407.2
        
        
        
        (9
        )

        
        
        16
        
        
        
        4,442
        
        
        
        4,068
        
        
        
        3,931
        
        
        
        9
        
        
        
        3
        
        
        $
        96.83
        
        
        $
        115.71
        
        
        $
        103.59
        
        
        
        (16
        )
        
        
        12747.5
        
        
        
        895.4
        
        
        
        870.4
        
        
        
        (17
        )
        
        
        3
        
        
        
        7,418
        
        
        
        7,350
        
        
        
        7,703
        
        
        
        1
        
        
        
        (5
        )
        
        $
        100.77
        
        
        $
        121.82
        
        
        $
        112.99
        
        
        
        (17
        )
        
        
        8Cost of Goods SoldCash Costs
        
        
        612.1
        
        
        
        727.9
        
        
        
        699.6
        
        
        
        (16
        )
        
        
        4
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        82.52
        
        
        $
        99.03
        
        
        $
        90.82
        
        
        
        (17
        )
        
        
        9Depreciation and
Amortization
        
        
        88.0
        
        
        
        72.8
        
        
        
        66.1
        
        
        
        21
        
        
        
        10
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        11.86
        
        
        $
        9.91
        
        
        $
        8.58
        
        
        
        20
        
        
        
        16700.1
        
        
        
        800.7
        
        
        
        765.7
        
        
        
        (13
        )
        
        
        5
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        94.38
        
        
        $
        108.94
        
        
        $
        99.40
        
        
        
        (13
        )
        
        
        10Gross Margin
        
        $
        47.4
        
        
        $
        94.7
        
        
        $
        104.7
        
        
        
        (50
        )
        
        
        (10
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        $
        6.39
        
        
        $
        12.88
        
        
        $
        13.59
        
        
        
        (50
        )
        
        
        (5
        )


28



---



##### 



Managements Discussion & Analysis

2002 vs 2001

Nitrogen net sales were down in 2002 primarily due to lower prices. Total
nitrogen sales volumes were flat in 2002, as higher sales of urea and nitric
acid more than offset lower sales of ammonia and nitrogen solutions. Urea
volumes rose as field conditions drove farmers away from ammonia, and stronger
industrial demand raised other product sales volumes. We shut down nitrogen
solutions production at Geismar for three months due to oversupply and low
prices caused by large imports, primarily from Russia, in the first half of
2002. As a result, nitrogen solutions sales volumes were down.

Until very late in the year, low natural gas prices made it feasible for North
American competitors to produce at higher rates than in 2001. In addition, new
capacity came on stream in Trinidad at mid-year. The resulting oversupply drove
product prices down. Higher gas prices near the end of the year led to
improvements in most product prices but this improvement was tempered as US
plant curtailments were lower than anticipated. Late in the year, nitrogen
solutions prices improved in anticipation that anti-dumping duties would be
levied on imported product from certain competitors.

The unit cost of sales fell in 2002, primarily because the average unit cost of
natural gas was down 15 percent on a year-over-year basis. These reductions
were partially offset by increased depreciation and amortization due to a full
years depreciation of the Trinidad plants, whose long-term leases we purchased
in May 2001, and accelerated amortization of turnaround costs.



2002 NITROGEN
PRODUCTION (million tonnes)


|           |  |          |       |             |  |                     |       |          |  |            |       |            |  |          |       |            |  |            |       |  |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|---------- |  | -------- | ----- | ----------- |  | ------------------- | ----- | -------- |  | ---------- | ----- | ---------- |  | -------- | ----- | ---------- |  | ---------- | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|           |  | Ammonia1 |       | Urea Solids |  | Nitrogen Solutions3
|           |  | Annual   |       | 2002        |  | 2001                |       | Annual   |  | 2002       |       | 2001       |  | Annual   |       | 2002       |  | 2001      
|           |  | Capacity |       | Production  |  | Production          |       | Capacity |  | Production |       | Production |  | Capacity |       | Production |  | Production
|          
|Trinidad   |  |          | 1.851 |             |  |                     | 1.768 |          |  |            | 1.835 |            |  |          | .631  |            |  |            | .674  |  |  |  | .514  |  |  |  |      |  |  |  |      |  |  |  |      | 
|          
|Augusta GA |  |          | .688  |             |  |                     | .689  |          |  |            | .612  |            |  |          | .381  |            |  |            | .363  |  |  |  | .335  |  |  |  | .581  |  |  |  | .220  |  |  |  | .292  | 
|          
|Lima OH    |  |          | .542  |             |  |                     | .496  |          |  |            | .488  |            |  |          | .329  |            |  |            | .208  |  |  |  | .191  |  |  |  | .227  |  |  |  | .124  |  |  |  | .113  | 
|          
|Geismar LA |  |          | .483  |             |  |                     | .369  |          |  |            | .475  |            |  |          |      |            |  |            |      |  |  |  |      |  |  |  | 1.028 |  |  |  | .721  |  |  |  | .807  | 
|          
|Memphis TN |  |          | .371  |             |  |                     | .324  |          |  |            | .288  |            |  |          | .409  |            |  |            | .374  |  |  |  | .295  |  |  |  |      |  |  |  |      |  |  |  |      | 
|          
|TOTAL      |  |          | 3.935 |             |  |                     | 3.646 |          |  |            | 3.698 |            |  |          | 1.750 |            |  |            | 1.619 |  |  |  | 1.335 |  |  |  | 1.836 |  |  |  | 1.065 |  |  |  | 1.212 | 
|          

[Additional columns below]

[Continued from above table, first column(s) repeated]

|           |  |                |       |                         |  |            |       |          |  |            |       |            |  |           |      |  |  |  |      |  |  |  |      |  |  |  |      | 
|---------- |  | -------------- | ----- | ----------------------- |  | ---------- | ----- | -------- |  | ---------- | ----- | ---------- |  | --------- | ---- |  |  |  | ---- |  |  |  | ---- |  |  |  | ---- | 
|           |  | Nitric Acid1,2 |       | Ammonium Nitrate Solids
|           |  | Annual         |       | 2002                    |  | 2001       |       | Annual   |  | 2002       |       | 2001       |  | Employees
|           |  | Capacity       |       | Production              |  | Production |       | Capacity |  | Production |       | Production |  | (active) 
|          
|Trinidad   |  |                |      |                         |  |            |      |          |  |            |      |            |  |           |     |  |  |  |     |  |  |  |     |  |  |  | 397  | 
|          
|Augusta GA |  |                | .541  |                         |  |            | .539  |          |  |            | .515  |            |  |           | .512 |  |  |  | .512 |  |  |  | .473 |  |  |  | 119  | 
|          
|Lima OH    |  |                | .097  |                         |  |            | .098  |          |  |            | .096  |            |  |           |     |  |  |  |     |  |  |  |     |  |  |  | 54   | 
|          
|Geismar LA |  |                | .844  |                         |  |            | .731  |          |  |            | .706  |            |  |           |     |  |  |  |     |  |  |  |     |  |  |  | 120  | 
|          
|Memphis TN |  |                |      |                         |  |            |      |          |  |            |      |            |  |           |     |  |  |  |     |  |  |  |     |  |  |  | 131  | 
|          
|TOTAL      |  |                | 1.482 |                         |  |            | 1.368 |          |  |            | 1.317 |            |  |           | .512 |  |  |  | .512 |  |  |  | .473 |  |  |  | 7725 | 
|          



|1 |  | A substantial portion is upgraded to value-added products.                                 
|- |  | -------------------------------------------------------------------------------------------
|2 |  | As 100% HNO3 tonnes.                                                                       
|3 |  | Based on 32% N content.                                                                    
|4 |  | BP Chemicals operates the Lima facility under an operational agreement with PCS Nitrogen.  
|5 |  | 353 contract employees work at the nitrogen plants, for a total active
work force of 1,125.



|                                                                                                               |  |                                                                                                                                       |  |                                                                                                                                                                
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Increasing    Nitrogen Imports(BAR GRAPH)                                                                      |  | Volatile     Nitrogen Prices(LINE GRAPH)                                                                                              |  | Our US Nitrogen     Focused on Industry(BAR GRAPH)                                                                                                             
|As anticipated, increased capacity in Trinidad and South America has displaced
US capacity and raised imports. |  | Nitrogen
prices followed the high gas prices at the end of 2000 and
fell throughout 2001, rising again in the fourth quarter of 2002. |  | Our
varied US production lets us maximize our industrial sales and supplement
them with fertilizer sales, achieving high operating rates and controlling
costs.

29





---



##### 



Managements Discussion & Analysis

2001 vs 2000

Overall, nitrogen net sales increased
in 2001. The nitrogen fertilizer market
was volatile. High natural gas prices at the beginning of the year resulted in
higher sales prices for all nitrogen fertilizer products as there were
significant domestic production curtailments. With a significant portion of our
gas costs locked in, PotashCorp was a major beneficiary of those higher prices.
However, as natural gas prices fell, more domestic production came back on
stream and nitrogen sales prices fell. In addition, the high North American
prices at the beginning of the year attracted imports from offshore
competitors. By year-end, most import activity had declined, with the exception
of nitrogen solutions where import levels remained high. Sales volumes of
manufactured ammonia increased significantly as the companys plants in
Trinidad were operational for the full year, thereby reducing the need to
supplement production with purchased product. Urea and nitrogen solutions sales
volumes were down, primarily due to competition from offshore producers and
reduced consumption. While sales in the nitrogen feed and industrial markets
were affected by the slowing economy, PotashCorps nitrogen feed and industrial
volumes were up. Average prices for feed and industrial products also increased
as compared to 2000.

The unit cost of production increased during the year as a result of higher
natural gas prices in the United States. Unexpected plant outages and some
plant idling also contributed to increased costs. The average cost of natural
gas in Trinidad was lower in 2001 than in 2000 due to renegotiation of certain
of the companys gas contracts in 2000.

Expenses and Other Income(BAR)

|                                  |  |                    |       |                       |  |      |       |      |  |      |       |   |  |  |     |   |  |  |     |  
|--------------------------------- |  | ------------------ | ----- | --------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | --- | - |  |  | --- | -
|                                  |  | Dollars (millions) |       | % Increase (Decrease)
|                                  |  | 2002               |       | 2001                  |  | 2000 |       | 2002 |  | 2001
|                                 
|Selling and administrative        |  | $                  | 91.7  |                       |  | $    | 99.7  |      |  | $    | 111.0 |   |  |  | (8  | ) |  |  | (10 | )
|                                 
|Provincial mining and other taxes |  |                    | 68.0  |                       |  |      | 70.0  |      |  |      | 77.2  |   |  |  | (3  | ) |  |  | (9  | )
|                                 
|Foreign exchange loss (gain)      |  |                    | 5.5   |                       |  |      | (13.7 | )    |  |      | (8.1  | ) |  |  |    |   |  |  | 69  |  
|                                 
|Other income                      |  |                    | (30.5 | )                     |  |      | (26.5 | )    |  |      | (48.4 | ) |  |  | 15  |   |  |  | (45 | )
|                                 
|Interest Expense                  |  |                    | 83.1  |                       |  |      | 80.3  |      |  |      | 61.6  |   |  |  | 3   |   |  |  | 30  |  
|                                 
|Income Taxes                      |  |                    | 30.2  |                       |  |      | 68.2  |      |  |      | 67.2  |   |  |  | (56 | ) |  |  | 1   |  
|                                 

2002 vs 2001

Selling and administrative expenses decreased due to spending restraint in all
areas of PotashCorp, and an accounting policy change that eliminated
amortization of goodwill. (See Note 3 to the consolidated financial
statements.) The reduction in gross margin per tonne on potash sales meant
lower provincial mining and other taxes.

For the year, the company incurred a foreign exchange loss of $5.5 million
compared to a gain of $13.7 million in 2001, a swing of $19.2 million. The 2002
foreign exchange loss primarily related to the devaluation of the Brazilian
real throughout the year as well as the strengthening of the Canadian dollar.
In 2001, the Canadian dollar weakened considerably against the US dollar,
resulting in the majority of the large foreign exchange gain for the year.

Other income increased as compared to 2001 primarily due to the adoption of
equity accounting for SQM after we increased our ownership from 18 percent in
2001 to 20 percent in 2002. This increase was partially offset by a reduction
in miscellaneous items.

Interest expense on long-term debt increased as the $600.0 million of notes
issued in May 2001 were outstanding for the full year. However, this increase
was largely offset by reduced interest expense on short-term debt as commercial
paper average balances and interest rates were lower than in 2001. Weighted
average total debt outstanding increased from $1,205.7 million in 2001 to
$1,511.7 million in 2002. The weighted average interest rate on total debt
outstanding was 6.0 percent (2001  6.2 percent).

The effective consolidated income tax rate remained at 36 percent of income
before income taxes. The current/future split approximated 80/20, compared to a
30/70 split in 2001, primarily because of higher proportional earnings in
Canada in 2002.

30



---



##### 



Managements Discussion & Analysis

2001 vs 2000

Selling and administrative expenses declined from 2000 due to a combination of
reduced compensation expense, decreased lease expense after the US office
consolidation in 2000 and reductions in relocation costs in 2001.

Fewer Saskatchewan-based sales tonnes as compared to 2000 and lower per-tonne
margins resulted in a reduction of provincial mining taxes. The provincial
mining tax rate per tonne was flat on a year-over-year basis.

Other income decreased due to the gain on sale of Moab Salt Inc. in 2000.

In May 2001, the company issued $600.0 million of 10-year 7.75 percent notes
under our shelf registration statement, the proceeds of which were used to
finance the buyout of the Trinidad plant leases (at a cost of approximately
$384.0 million) and pay down short-term debt. This had the effect of bringing
additional debt onto the balance sheet, removing lease expense from nitrogen
cost of sales (which was primarily offset by increased depreciation) and
increasing interest expense for the year. Weighted average total debt
outstanding increased from $916.4 million in 2000 to $1,205.7 million in 2001.
The weighted average interest rate on total debt outstanding during the year
was 6.2 percent (2000  6.8 percent).

The amount of the provision for income taxes was flat as compared to
2000. However, the effective consolidated income tax rate increased from 27
percent (exclusive of the gain on sale of Moab for which there was no tax
effect) of income before income taxes in 2000 to 36 percent in 2001. This
increase was primarily due to a reduction in additional tax deductions and the
geographic mix of earnings. The current/future income tax split in 2001
approximated 30/70. In 2000, the split approximated 49/51. The change is
primarily due to lower earnings in Canada in 2001.

Provision for Plant Closures

On January 19, 2001, we announced that we were suspending all DAP production at
our White Springs, FL operations, and that we permanently closed our Davenport,
IA phosphate feed plant on January 15, 2001. In the fourth quarter of 2000, the
company recorded a provision of $24.3 million for asset writedown, severance,
inventory allowance, decommissioning and other expenses attributable to these
actions.

The suspension of production at White Springs brought our total cutback in DAP production in
Florida to 0.710 million tonnes on an annualized basis. Production from
Davenport, which had an annual capacity of 0.280 million tonnes of monocal and
dical, was transferred to Feed Division plants in Marseilles, IL and Weeping
Water, NE.

Analysis of Financial Condition and Cash FlowBAR

The following table summarizes certain of the companys financial ratios and
cash flow data as calculated from the consolidated financial statements (see
Financial Terms on page 42):



FINANCIAL RATIOS AND CASH FLOW DATA


2002
        
        2001
        
        % ChangeTotal Shareholder Return
        
        
        5.2
        %
        
        
        (20.3
        )%
        
        
        Book Value per Share
        
        $
        40.18
        
        
        $
        40.16
        
        
        
        Cash Provided by Operating Activities ($ millions)
        
        $
        316.4
        
        
        $
        75.7
        
        
        
        318Cash Used in Investing Activities ($ millions)
        
        $
        (271.4
        )
        
        $
        (690.0
        )
        
        
        (61
        )Cash (Used in) Provided by Financing Activities ($ millions)
        
        $
        (65.8
        )
        
        $
        559.6
        
        
        
        


Cash provided by operating activities increased significantly over 2001,
primarily because we repaid certain natural gas margin calls to counterparties
in 2001 as a result of declining natural gas prices. In 2002, accounts payable
were a source of funds, principally due to the increase in natural gas accruals
and income taxes payable. As well, inventory levels were relatively stable in
2002, unlike 2001 when we were building inventory of wet concentrate as we
prepared to move to our NCPC phosphate area. Partially offsetting these factors
was the decline in gross margin.

Additions to property, plant and equipment of $212.2 million include $90.2
million related to the new purified acid plant and DFP plant at
Aurora. We also
invested an additional $23.2 million in SQM and spent $18.9 million on
rotational plant maintenance costs.

During the year PotashCorp paid dividends of $52.0 million (2001  $51.9
million).

31



---



##### 



Managements Discussion & Analysis



CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS


Dollars (millions)1 to 3 years
        
        4 to 5 years
        
        Over 5 years
        
        TotalLong-Term Debt
        
        
        15.2
        
        
        
        401.9
        
        
        
        606.2
        
        
        
        1,023.3Operating Leases
        
        
        113.9
        
        
        
        60.7
        
        
        
        137.7
        
        
        
        312.3Raw Material Purchase Commitments
        
        
        333.1
        
        
        
        182.4
        
        
        
        618.7
        
        
        
        1,134.2Other
        
        
        33.8
        
        
        
        
        
        
        
        
        
        
        
        33.8Total
        
        
        496.0
        
        
        
        645.0
        
        
        
        1,362.6
        
        
        
        2,503.6


Long-term debt primarily consists of $1,000.0 million of notes payable that
were issued under a shelf registration statement and $13.2 million Adjustable
Rate Industrial Revenue and Pollution Control Obligations. The notes payable
are unsecured, bear interest at rates at 7.125 percent ($400.0 million) and
7.75 percent ($600.0 million) and have no sinking fund requirements. The notes
are subject to covenants and events of default, including an event of default
for acceleration of other debt in excess of $50.0 million. The Adjustable Rate
Industrial Revenue and Pollution Control Obligations bear interest at varying
rates, are secured by bank letters of credit and have no sinking fund
requirements.

Operating leases consist primarily of three items. The first is rail cars that
are used to transport finished goods and raw materials. These leases extend out
to approximately 2020. The second is the lease of facilities at the Port of
Saint John for shipping New Brunswick potash offshore. This lease runs until
2018. The company leases two vessels for transporting ammonia from Trinidad.
These leases extend to 2008.

We have long-term agreements for the purchase of sulfur for use in the
production of phosphoric acid. These agreements provide for minimum purchase
quantities and prices based on market rates at the time of delivery. The
commitments included in the above table are based on the market prices for the
first quarter of 2003.

PotashCorps Trinidad subsidiaries have entered into long-term natural gas
contracts with the National Gas Company of Trinidad. The contracts provide for
prices which vary with ammonia market prices, escalating floor prices and
minimum purchase quantities. The commitments included in the above table are
based on floor prices and minimum purchase quantities.

We also have a long-term agreement for the purchase of phosphate rock used at
our Geismar facility. This agreement sets a base price (less volume discounts)
through to December 2003. Prices in subsequent years are subject to
renegotiation. The commitments included in the above table are based on the
expected purchase quantity and the set base price (less applicable discounts).

The company has a contractual commitment for mining of nitrates which is in
effect until 2005.



LIQUIDITY


Dollars (millions)Total
        
        Amount Outstanding
        
        Amount Available atAmount
        
        at December 31, 2002
        
        December 31, 2002Syndicated Credit Facility
        
        
        650.0
        
        
        
        
        
        
        
        177.0Lines of Credit
        
        
        149.0
        
        
        
        90.0
        
        
        
        44.5Commercial Paper
        
        
        500.0
        
        
        
        383.0
        
        
        
        117.0US Shelf Registration
        
        
        1,000.0
        
        
        
        
        
        
        
        1,000.0


PotashCorp has a syndicated credit facility, renewable annually, which provides
for unsecured advances. The amount available is the total committed amount less
the amount of commercial paper and certain lines of credit outstanding. The
lines of credit are also renewable annually and the amount available is reduced
by outstanding letters of credit. Both the syndicated credit facility and the
lines of credit have financial and other covenants which we must comply with at
each quarter-end. The principal covenants require debt to capital of less than
0.55:1, long-term debt to EBITDA of less than 3.5:1,tangible net worth greater
than $1,250.0 million and debt of subsidiaries less than $250.0 million. The
company was in compliance with these covenants at December 31, 2002.

32



---



##### 



Managements Discussion & Analysis

We also have a commercial paper program of up to $500.0 million. Access to this
source of short-term financing depends primarily on our rating by Dominion Bond
Rating Service (DBRS) and conditions in the money markets. We are currently
rated by DBRS as R1 Low which should allow unrestricted access to the money
markets.

The company may also issue up to an additional $1,000.0 million in unsecured
debt securities under its US shelf registration statement.

We believe that internally generated cash flow, supplemented by borrowing from
existing financing sources, will be sufficient to meet our anticipated capital
expenditures and other cash requirements, exclusive of any possible
acquisitions, in 2003.

Fair Value of Gas Hedging ContractsBAR

In addition to physical spot and term purchases, PotashCorp employs futures,
swaps and option agreements to establish the cost on a portion of our natural
gas requirements. These instruments are intended to hedge the future cost of
the committed and anticipated natural gas purchases for our US nitrogen and
phosphate plants. The maximum period for these hedges cannot exceed five years.
PotashCorp uses these instruments to reduce price risk, not for speculative or
trading purposes.

The fair value of our gas hedging
contracts at December 31, 2002 was $52.7
million ($8.9 million at December 31, 2001). The companys futures contracts are
exchange-traded and fair value was determined based on exchange prices. Swaps
and option agreements are traded in the over-the-counter market and fair value
was calculated based on a price that was converted to an exchange-equivalent
price. (See Note 23 to the consolidated financial statements for a discussion
of the companys financial instruments and risk management.)

Risks Associated with Financial InstrumentsBAR

PotashCorps nitrogen operations are significantly affected by the price of
natural gas. We employ derivative commodity instruments related to a portion of
our natural gas requirements (primarily futures, swaps and options) for the
purpose of managing our exposure to commodity price risk in the purchase of
natural gas. Changes in the market value of these derivative instruments have a
high correlation to changes in the spot price of natural gas. Gains or losses
arising from settled hedging transactions are deferred as a component of
inventory until the product containing the hedged item is sold. Changes in the
market value of open hedging transactions are not recognized as they generally
relate to changes in the spot price of anticipated natural gas purchases.

A sensitivity analysis has been prepared to estimate our market risk exposure
arising from derivative commodity instruments. The fair value of such
instruments is calculated by valuing each position using quoted market prices.
Market risk is estimated as the potential loss in fair value resulting from a
hypothetical 10 percent adverse change in such prices. The results of this
analysis indicate that as of December 31, 2002, our estimated derivative
commodity instruments market risk exposure was $17.6 million (2001  $21.7
million). Actual results may differ from this estimate. Changes in the fair
value of such derivative instruments, with maturities in 2003 through 2008,
will generally relate to changes in the spot price of anticipated natural gas
purchases.

The company also enters into forward exchange contracts for the sole purpose of
limiting exposure to exchange rate fluctuations relating to certain trade
accounts. Gains or losses resulting from foreign exchange contracts are
recognized at the time the contracts are entered into and are included in Other
income.

Related Party TransactionsBAR

We sell potash from our Saskatchewan mines for use outside of North America
exclusively to Canpotex Limited, a potash export, sales and marketing company
owned in equal shares by the three potash producers in the Province of
Saskatchewan. Sales for the year ended December 31, 2002 were $241.2 million
(2001  $237.6 million). Sales to Canpotex Limited are at prevailing market
prices and are settled on normal trade terms. PCS Yumbes purchases potash from
SQM at prevailing market prices. Purchases for the year amounted to $17.9
million. PCS Yumbes has also entered into a contract

33



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##### 



Managements Discussion & Analysis

with SQM to sell it 8,000 tonnes of potassium nitrate per month at an arms
length negotiated price through to December 2003. Sales during 2002 amounted to
$2.1 million. Transactions with SQM are settled on normal trade terms. The
company has no other significant related party transactions.

Critical Accounting PoliciesBAR

The companys accounting policies are in accordance with accounting principles
generally accepted in Canada. These differ in some respects from accounting
principles generally accepted in the United States. These differences are
explained and quantified in Note 29 to the consolidated financial statements.

The accounting policies followed by PotashCorp will affect the reported amount
of assets, liabilities, revenues and expenses. We believe that the following
policies are most significant in determining the results of operations and
financial position.

Revenue Recognition

Sales revenue is recognized when there is a firm sales order for product and
the product has been physically shipped from our location to the customer.
There are no significant product returns as our quality control procedures
ensure that product meets customer specifications prior to shipment. Revenue is
recorded based on the FOB (free on board) mine, plant, warehouse or terminal
price, except for certain vessel sales which are shipped on a delivered basis.
Transportation and distribution costs and freight costs recovered from
customers are netted against sales revenue.

Financial Instruments

The company enters into forward exchange contracts and natural gas futures,
swaps and option agreements to manage our exposure to exchange rate and
commodity price fluctuations. We have designated these as hedging activities.
Gains or losses on foreign currency exchange contracts are recognized monthly
and included in foreign exchange in the statement of income and retained
earnings. Gains or losses resulting from changes in the fair value of natural
gas hedging transactions which have not yet been settled are not recognized, as
they generally relate to changes in the spot price of anticipated natural gas
purchases. Gains or losses from settled transactions are deferred as a
component of inventory until the product containing the hedged item is sold, at
which time both the natural gas purchase cost and the related hedging deferral
are recorded as cost of sales.

Depreciation and Amortization

PotashCorp utilizes the units of production method of depreciation for all mine
assets and the potash mills. This method uses depreciation rates that are based
on estimates of proven and probable reserves. There may be imprecision in these
reserve estimates. In periods when there is no production from a mine or potash
mill, there is no charge for depreciation. Our other assets are depreciated on
a straight-line basis which results in a level charge for depreciation that is
approximately the same whether producing or not.

Other Assets

Costs, net of revenues earned, incurred to obtain commercial production levels
at new plants are capitalized as deferred preproduction costs and then
amortized over 10 years. Rotational plant maintenance costs which consist of
planned major maintenance projects are also capitalized when incurred and
amortized over two years.

Inventories

Inventories of finished product, raw materials and work in process are valued
at the lower of cost and net realizable value, with cost determined using the
first in, first out method. Certain inventories of materials and supplies are
valued at the lower of average cost and replacement cost and certain
inventories are valued at the lower of cost and market.

Critical Accounting EstimatesBAR

In preparing our consolidated financial statements in
accordance with Canadian
GAAP, we make estimates concerning a variety of matters. Some of these matters
are highly uncertain, and our estimates involve judgments we make based on the
information available to us. In the discussion below we have identified matters
for which our results of operations and

34



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##### 



Managements Discussion & Analysis

financial condition could be materially affected if either (a) we used
different estimates that we could reasonably have used or (b) in the future we
change our estimates in response to changes that are reasonably likely to
occur.

The discussion addresses only those estimates that we consider most important
based on the degree of uncertainty and the likelihood of a material impact if
we used a different estimate; there are many other areas in which we use
estimates about uncertain matters.

Impairment

We carry material amounts on our balance sheet for goodwill and preproduction
costs that are based on historical costs net of accumulated amortization. We
are required to evaluate goodwill on an annual basis to determine if it is
impaired. For preproduction costs, this evaluation is required when there are
circumstances that indicate impairment.

In each case the recoverability of the asset is assessed based on its capacity
to generate future cash flows. The analysis we perform requires that we
estimate the future cash flows attributable to these assets, and these
estimates require us to make a variety of judgments about our future
operations. It is possible that forecasted cash flows used to support the
values of these assets may change in the future due to uncertain market
conditions or other factors. The changes may result in non-cash charges that
could materially affect our results of operations and financial condition.

Environmental Liabilities

We have significant liabilities relating to environmental matters. The two
primary sources of these are the requirements to close the gypsum stacks and
the reclamation of land mined in our phosphate operations. The determination of
these liabilities involves significant judgments about the nature and timing
of remediation efforts that will be required. Changes in regulatory or permit
requirements, technology and operating practices may result in significant
adjustments to the recorded liabilities. Changes in estimates regarding
environmental liabilities could result in increased accruals for site
restoration and reclamation costs resulting in increased operating expenses.

Risk ManagementBAR

Understanding and managing risk is part of PotashCorps overall strategic
planning process. In 2001 our Board adopted a new, comprehensive approach to
risk identification and management. Various models of enterprise-wide risk
management were examined and the best fit for the company selected. From a
comprehensive risk universe, the risks likely to affect PotashCorp were
identified and analyzed. Those risks were then ranked in order of importance
according to severity, duration and controllability, recognizing that there are
interconnections among them. The most effective ways to manage the risks were
identified. Some of the risks we consider most serious are:

Risk to reputation is key with investors, whose general confidence in
corporations has been shaken by scandals. With the public, reputation risk
revolves around a lack of understanding of and growing concerns about
fertilizer production and use.

For investors, PotashCorp implemented a leading edge practice in corporate
governance and reaffirmed our commitment to prompt disclosure and business and
financial transparency. To educate the public on the science of fertilizer, we
developed a grassroots program called Fertile Minds. We adopted best practices
in production and implemented a crisis communication program to handle any
possible mishaps.

Commodity price volatility affects a bulk commodity business in which product
quality differentiation is negligible, prices are affected by supply/demand
dynamics and products may be susceptible to large price swings.

PotashCorp manages this risk generally through product and sales diversity. We
have three nutrients and many products within each nutrient, and sell to
diverse markets (North America, offshore) for diverse end-uses (fertilizer,
industrial, feed).

There is a particular risk in the volatility of natural gas, our highest-cost
raw material input and essential to our nitrogen production. We reduce this
risk through our hedging program and our long-term gas contracts in Trinidad.

Foreign country risk arises because many future growth opportunities are likely
to be outside North America, and may include exchange rate risk as well as
political and/or security risks.

These risks can be reduced through financial hedges for exchange rates, by
insuring against political risks, and by requiring higher investment return
thresholds for potential offshore transactions.

35



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##### 



Managements Discussion & Analysis

Risk of access to capital to finance growth.

We manage this risk by maintaining strong cash flow, a conservative balance
sheet and management credibility through high-quality disclosure and
transparency.

Security risks around some of our products.

We have increased security measures at all plants producing ammonia, with such
methods as enhanced perimeter security with restricted storage areas, searching
of incoming and outgoing trucks and extra security on site plus 24/7 patrols.

Risk to information systems particularly involves the security of data from
accidental or deliberate destruction and from outside intrusion, and the
security of corporate hardware from failure, destruction or theft.

We ensure our data are secure with state-of-the-art systems of access and
protection, and regular backup. Our hardware is protected from physical loss,
and we have backup site availability and appropriate insurance.

Workplace safety and health risks to workers from safety and health
hazards in their normal working activities.

These risks are managed directly by individuals or front-line teams and involve
the use of measures such as structured hazard potential assessments, permits to
work or lockout procedures, process safety management audits and process hazard
analyses.

Risks
to human resources come from replacement of an
aging, highly skilled work
force, medical benefit cost inflation, and increased pension liability due to
lower market returns on invested funds compounded by lower prescribed discount
rates for calculating pension liabilities.

We manage these risks by maintaining policies and programs developed to ensure
we are an employer of choice, balanced with the need for cost control through
plan design, administrative controls and employee cost-sharing.

The identification and management of risk are an ongoing process at
PotashCorp, because circumstances change and risks change with them.

OutlookBAR

Agriculture

Rising prices for many crops have brightened the world agriculture picture for
2003. With higher prices, more acreage is expected to be planted worldwide and
fertilizer application rates should improve. In the US, farmers are expected to
plant more acres to corn and wheat, which are large users of fertilizers. The
combination of higher prices and larger plantings should bring a widespread
increase in fertilizer consumption.



Corn is aBig Fertilizer
Consumer(BAR Graph) Higher corn prices usually result in
more acres planted to corn and increased application rates. As
corn is a major user of fertilizer, it is a good leading indicator of
higher consumption.








Research by the Potash & Phosphate Institute has found that 43 percent of US
soils are deficient in potash and 47 percent are deficient in phosphate. Their
nutrient content must be restored to provide optimum crop yields. By improving
farmers long-term income security, the US Farm Bill passed in 2002 is expected
to encourage them to restore soil fertility. In addition, a $3.1 billion
Disaster Relief Program for US farmers has been approved by both the Senate and
the House. Offshore, less than optimum nutrient ratios in soils in major agricultural
countries such as China, India and Brazil provide opportunity for growth in
consumption there. Brazil is bringing more land into production and its soils
are deficient in potash, so its imports of this nutrient should remain high. Both
Brazil and Argentina are increasing their agricultural output and in 2003 will,
for the first time, together produce more soybeans than the US. Maintaining
such production will require ample application of fertilizer. All these factors combine into a positive outlook for fertilizer consumption in
2003 but, as always, they will be affected by the weather during spring
planting season. Potential industry consolidation could be another important
driver in improving conditions.




36



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##### 



Managements Discussion & Analysis  US ACREAGE FORECAST
 2000
        
        2001
        
        2002E
        
        2003F
        
        +/-*Corn
        
        
        79.5
        
        
        
        75.8
        
        
        
        79.1
        
        
        
        80.5
        
        
        
        +1.8
        %All Wheat
        
        
        62.5
        
        
        
        59.6
        
        
        
        60.4
        
        
        
        63.5
        
        
        
        +5.1
        %Soybeans
        
        
        74.2
        
        
        
        74.1
        
        
        
        73.8
        
        
        
        72.4
        
        
        
        -1.9
        %Cotton
        
        
        15.5
        
        
        
        15.8
        
        
        
        14.0
        
        
        
        14.2
        
        
        
        +1.4
        %
 Source:
USDA, Doane, PotashCorp

*
2003F compared to 2002E Worldwide, the ongoing concern about animal diseases is keeping meat and bone
meal under scrutiny as an ingredient in animal feeds. The outcome of current
studies in a number of countries could place additional restrictions on the use
of meat and bone meal. This should improve prospects for higher consumption of
phosphate feed supplements such as dical, monocal and DFP, all of which we
produce. On the down side, US meat and poultry production and trade may be
affected by Russian tariffs/duties and veterinary concerns about poultry. Economy

We anticipate the global economy will continue its recovery from the severe
slump in 2001, building on the gains of 2002. Continued strong growth is
forecast for China and India, which did not experience the major downturns.
This should encourage their rising consumption of industrial goods and
higher-quality foods such as meat. The US economy is expected to continue its slow recovery, though a potential
war with Iraq could affect that. Consumer spending, housing starts and vehicle
sales have been buoyant with low interest rates. Business inventories were
depleted during the slowdown, clearing the way for increased production. Natural gas

Natural gas inventories and gas exploration drilling rates were both low as
2002 ended, and together with cool winter weather pushed gas prices over
$5.00/MMBtu. World events will likely affect prices in 2003. The impact of the
Venezuelan oil strike and the potential for a Middle Eastern conflict have put
a premium on oil and disrupted production, which supports high natural gas
prices. OPEC has pledged to boost oil production to encourage price stability. If resolution of the war issue stabilizes oil pricing, gas
prices may decline.
The February projection for 2003 averaged from seven external sources, including
NYMEX, is $4.77/MMBtu.  Potash

We anticipate a stable, growing market for potash. Domestic sales should rise
with increased domestic plantings. PotashCorp announced a $4 per ton price
increase effective February 1, 2003, and it appears that at least part of this
increase will be realized. In offshore markets, Brazils record imports of 2002
look set to continue and Chinas year-end agreement to import 1.5 million
tonnes from Canpotex sets the stage for good volumes in 2003. In addition, an
$8 per tonne price increase (partially offset by increasing freight) with
Brazil early in 2003 should positively affect spot markets. However, in both
regions continued strong competition could temper the better industry
conditions. An agreement reached near the end of 2002 with SQM to provide it with 8,000
tonnes of potassium nitrate each month from our Yumbes plant in 2003 should
improve the operating rate of that asset moving forward. However, product
prices have not recovered to 1999 levels so the operation should continue to
negatively affect potash gross margin. In New Brunswick, PotashCorp has discovered a potentially significant new
high-grade potash ore zone adjacent to our existing mine that we are exploring
for future development. Port proximity and a favorable provincial tax regime
will be factors in any decision.
    (CHART) Continued growth is expected
inglobal potash markets,
led by higherconsumption in Asia and Latin America.
  Over the long term, growth in world potash capacity will fall behind growth in
demand, and we expect to achieve a considerable share of that demand growth. As
we bring on our excess capacity, we will produce what the market requires. If
Russia chose to bring back abandoned capacity, it would need considerable
capital to do so. A resumption of domestic consumption would likely provide a
market for much of this new Russian production. 37




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##### 



Managements Discussion & Analysis Phosphate
The advantages brought by our superior rock position will become even greater
as we mine from the portion of the deposit that is higher quality and closer to
the processing facility at Aurora. That, coupled with higher mine operating
rates associated with the restart of the White Springs DAP production, should
reduce rock costs. These savings will be offset to some extent by higher
anticipated costs for the inputs ammonia and sulfur. China is expected to import
about the same DAP volumes as in 2002, and US DAP inventories remain below their
five-year average. Both these factors should support DAP prices in 2003. Global
producers need to watch for Chinas attempts to bypass WTO agreements. India
will likely continue to operate a subsidy system that discriminates against DAP
imports, despite efforts by US producers and trade officials. Domestic DAP sales and prices should rise with the likely increase in plantings
and input costs. Growth in global demand for both DAP and phosphoric acid is
expected to exceed growth in new capacity. However, until there is enough
growth in the market to absorb the current curtailed production, true sustained
recovery seems unlikely. The expansion of our purified acid plant will be completed in the first quarter
of this year, which should capture additional high-margin industrial sales
volumes. In February 2003, PotashCorp ceased production at our Kinston, NC
feed plant and converted the facility to a feed warehouse. Product will be
supplied from White Springs. A charge of $2.2 million will be taken in the
first quarter of 2003 to reflect the shutdown costs. Nitrogen

In nitrogen, the higher prices entering the year have continued to rise,
getting 2003 off to a good start. Higher ammonia prices, led by higher gas
prices, could be reinforced by the potential for a Middle Eastern conflict.
High gas prices should also accelerate rationalization of US nitrogen
production, supporting ammonia prices. Early in 2003, PotashCorp
temporarily suspended ammonia and UAN production from our Geismar, LA facility
to perform required maintenance during the period of high gas prices. We can
produce ammonia in Trinidad with favorable gas costs and upgrade it for
industrial customers at Geismar.  Fertilizer Indicators to Watch  
 
 Crop prices
 
 Weather and acreage planted
 
 North American natural gas and global sulfur prices
 
 Indias subsidies and DAP production
 
 Chinas imports and adherence to its WTO agreement
 
 Russian fertilizer export levels
 
 Industry consolidation
 Feed and Industrial Indicators to Watch  
 
 Health of US and world economies
 
 Effect of global tensions on energy prices, shipping and nitrogen supply
 
 Effect of livestock diseases and restrictions on meat trade and on use of meat and bone meal in animal feeds
 
 Consumer spending and inventory levels of vehicles, housing and retail goods
 
 Growth in world demand for both ammonia and urea is expected to exceed growth
in world capacity, and nitrogen inventories are low. US producers ended the
fourth quarter of 2002 with ammonia inventory 21 percent and urea 14 percent below the
five-year average. Moreover, Russia is increasing gas prices to nitrogen
producers by 20 percent and rail and electricity rates by more than 10 percent
each. These increases should provide a higher floor price for nitrogen products
going forward. On February 25, 2003 we announced
the sale of our 2003 natural gas
futures contracts to take advantage of current high gas markets.
While we anticipate this action
will make a positive contribution to earnings, there are no guarantees as nitrogen markets and natural
gas prices remain highly volatile and difficult to predict. The rest
of our five year
hedge remains intact. In addition to our Trinidad long-term gas
contracts, we expect to redevelop our US 2003 hedge position as the market allows. In response to concerns over security issues around nitrogen products, we will
do security vulnerability analyses of all our nitrogen plants in 2003. PotashCorp Financial Outlook

Capital expenditures for 2003 are expected to approximate $155.0 million, of
which approximately $120.0 million will be sustaining capital. Depreciation and
amortization are expected to approximate $240.0 million due to increased production of potash
and potassium nitrate, the start-up of
the new feed plant and expansion of the purified acid plant at Aurora, NC, as
well as accelerated amortization of nitrogen turnaround costs. The effective consolidated income tax rate for 2003 is expected to approximate
40 percent, all of which will be future tax. The increase from 36 percent in
2002 is primarily due to the expiration of the last tax holiday in Trinidad.
The reduction in the current tax portion is expected to result from the
utilization of tax losses and certain
   38




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##### 



Managements Discussion & Analysis reclassifications from current to future taxes. In its February 18, 2003
budget, the Canadian government announced plans to address federal tax
inequities facing the potash industry. No details were revealed. As the
corrective measures are expected to be phased in over five years, they are
unlikely to have any material impact on 2003 results. In 2003, pension expense and pension cash funding requirements are expected to
increase approximately $13 million and $16 million respectively, due to a
combination of factors such as poor equity markets and low interest rates.
Pension cash funding requirements for 2003 will include retroactive additional
contributions for 2002 of approximately $9 million. For 2004, if all assumptions
remain equal, the pension expense and pension cash funding requirements should
remain similar to 2003 levels (excluding the retroactive contributions for
2002). Overall, the company is projecting earnings to be approximately double those of
2002. The reduction in the current tax provision and the increased depreciation
are expected to increase cash flow from operating activities by approximately
$80.0 million prior to any additions from increased net income. As evidenced by
the earnings decline in 2002 relative to our initial guidance, unpredictable
intervening events  including natural gas prices, sulfur prices, spring
planting conditions, level of imports, world economic and political conditions
and trade patterns of major consumers of potash, phosphate and nitrogen  can
materially affect the accuracy of such projections. Key
Earnings Sensitivities
BAR Earnings of the companys three nutrient segments are sensitive to a number of
factors. The key factors by segment and their approximate effect on EPS based
on assumptions comparable to 2002 actuals are: Potash Price changes by $5.00 per tonne
        
        
        ±$0.26 Sales volumes changes by 100,000 tonnes
        
        
        ±$0.03Phosphate DAP/MAP price changes by $5.00 per tonne
        
        
        ±$0.08Nitrogen Ammonia price changes by $10.00 per tonne
        
        
        ±$0.12 Urea price changes by $10.00 per tonne
        
        
        ±$0.20 NYMEX gas changes by $1.00 per MMBtu
        
        
        ±$0.30
 Due to the large volumes of potash sold as compared to DAP/MAP or
urea/ammonia, the change in potash prices has a much larger effect on EPS than
do the products with lower sales volumes. Changes in potash sales volumes have
much less impact due to the additional cost of sales associated with the extra
tonnes sold. Forward-Looking
Statements
BAR Certain statements in this annual report and this Managements Discussion and
Analysis of Financial Condition and Results of Operations, including those in
the Outlook section relating to the period after December 31, 2002, are
forward-looking statements subject to risks and uncertainties. A number of
factors could cause actual results to differ materially from those expressed in
the forward-looking statements, including, but not limited to: fluctuation in
supply and demand in fertilizer, sulfur and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks associated with
natural gas and other hedging activities; changes in capital markets; changes
in currency and exchange rates; unexpected geological or environmental
conditions; imprecision in reserve estimates; the outcome of legal proceedings;
changes in government policy and regulation; worldwide political conditions;
acquisitions the company may undertake in the future; the Fertilizer and Feed
and Industrial Indicators to Watch as described herein. The company sells to a
diverse group of customers both by geography and by end product. Market
conditions will vary on a year-over-year basis and sales can be expected to
shift from one period to another. The company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, other than as required
by applicable law. 39




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##### 



11 year
Report


for the years ended December 312002
        
        2001
        
        2000
        
        1999
        
        1998
        
        1997(4)
        
        1996
        
        1995(3)
        
        1994(2)
        
        1993(1)
        
        1992Financial Data($ millions except per share amounts)Net SalesPotash
        
        
        534.0
        
        
        
        525.5
        
        
        
        578.7
        
        
        
        563.3
        
        
        
        545.5
        
        
        
        504.2
        
        
        
        403.2
        
        
        
        421.0
        
        
        
        363.1
        
        
        
        212.2
        
        
        
        214.1Phosphate
        
        
        632.3
        
        
        
        651.8
        
        
        
        782.5
        
        
        
        843.8
        
        
        
        1,011.0
        
        
        
        953.6
        
        
        
        892.0
        
        
        
        412.1
        
        
        
        
        
        
        
        
        
        
        
        Nitrogen
        
        
        747.5
        
        
        
        895.4
        
        
        
        870.4
        
        
        
        654.0
        
        
        
        751.3
        
        
        
        868.1
        
        
        
        108.7
        
        
        
        23.0
        
        
        
        
        
        
        
        
        
        
        
        Total Net Sales
        
        
        1,913.8
        
        
        
        2,072.7
        
        
        
        2,231.6
        
        
        
        2,061.1
        
        
        
        2,307.8
        
        
        
        2,325.9
        
        
        
        1,403.9
        
        
        
        856.1
        
        
        
        363.1
        
        
        
        212.2
        
        
        
        214.1Gross MarginPotash
        
        
        215.6
        
        
        
        241.8
        
        
        
        304.0
        
        
        
        301.9
        
        
        
        316.3
        
        
        
        257.6
        
        
        
        190.7
        
        
        
        217.5
        
        
        
        159.2
        
        
        
        79.8
        
        
        
        55.5Phosphate
        
        
        38.6
        
        
        
        62.7
        
        
        
        74.1
        
        
        
        127.8
        
        
        
        228.2
        
        
        
        194.6
        
        
        
        191.2
        
        
        
        87.1
        
        
        
        
        
        
        
        
        
        
        
        Nitrogen
        
        
        47.4
        
        
        
        94.7
        
        
        
        104.7
        
        
        
        (21.4
        )
        
        
        64.8
        
        
        
        133.0
        
        
        
        2.1
        
        
        
        2.3
        
        
        
        
        
        
        
        
        
        
        
        Total Gross Margin
        
        
        301.6
        
        
        
        399.2
        
        
        
        482.8
        
        
        
        408.3
        
        
        
        609.3
        
        
        
        585.2
        
        
        
        384.0
        
        
        
        306.9
        
        
        
        159.2
        
        
        
        79.8
        
        
        
        55.5Operating Income (Loss)
        
        
        166.9
        
        
        
        269.7
        
        
        
        326.8
        
        
        
        (353.0
        )
        
        
        442.3
        
        
        
        442.0
        
        
        
        297.4
        
        
        
        219.6
        
        
        
        97.5
        
        
        
        56.9
        
        
        
        50.6Net Income (Loss)*(5)
        
        
        53.6
        
        
        
        121.2
        
        
        
        198.0
        
        
        
        (412.0
        )
        
        
        261.0
        
        
        
        297.1
        
        
        
        209.0
        
        
        
        159.5
        
        
        
        91.2
        
        
        
        44.7
        
        
        
        39.8Net Income (Loss) per Share  Basic
        
        
        1.03
        
        
        
        2.34
        
        
        
        3.78
        
        
        
        (7.60
        )
        
        
        4.82
        
        
        
        5.68
        
        
        
        4.59
        
        
        
        3.68
        
        
        
        2.12
        
        
        
        1.13
        
        
        
        1.03Net Income (Loss) per Share  Diluted
        
        
        1.03
        
        
        
        2.32
        
        
        
        3.76
        
        
        
        (7.60
        )
        
        
        4.79
        
        
        
        5.63
        
        
        
        4.54
        
        
        
        3.64
        
        
        
        2.12
        
        
        
        1.12
        
        
        
        1.02Dividends per Share
        
        
        1.00
        
        
        
        1.00
        
        
        
        0.99
        
        
        
        0.99
        
        
        
        0.96
        
        
        
        1.03
        
        
        
        1.06
        
        
        
        1.06
        
        
        
        0.77
        
        
        
        0.53
        
        
        
        0.51Cash Provided by Operating Activities
        
        
        316.4
        
        
        
        75.7
        
        
        
        480.4
        
        
        
        343.6
        
        
        
        578.0
        
        
        
        467.8
        
        
        
        296.2
        
        
        
        233.5
        
        
        
        150.7
        
        
        
        49.8
        
        
        
        57.4Working Capital
        
        
        8.6
        
        
        
        47.1
        
        
        
        (148.7
        )
        
        
        (104.8
        )
        
        
        329.2
        
        
        
        281.7
        
        
        
        278.8
        
        
        
        136.1
        
        
        
        103.3
        
        
        
        37.0
        
        
        
        70.9Total Assets
        
        
        4,685.6
        
        
        
        4,597.3
        
        
        
        4,145.7
        
        
        
        3,916.8
        
        
        
        4,534.3
        
        
        
        4,427.6
        
        
        
        2,494.4
        
        
        
        2,581.8
        
        
        
        1,027.8
        
        
        
        1,036.4
        
        
        
        915.0Long-Term Debt
        
        
        1,019.9
        
        
        
        1,013.7
        
        
        
        413.7
        
        
        
        437.0
        
        
        
        933.3
        
        
        
        1,130.0
        
        
        
        620.0
        
        
        
        714.5
        
        
        
        2.0
        
        
        
        20.1
        
        
        
        48.9Shareholders Equity
        
        
        2,092.5
        
        
        
        2,086.5
        
        
        
        2,012.1
        
        
        
        1,962.4
        
        
        
        2,453.8
        
        
        
        2,227.9
        
        
        
        1,405.5
        
        
        
        1,241.9
        
        
        
        964.3
        
        
        
        903.7
        
        
        
        809.5Operating Data(thousands)Employees at Year-End(Actual #)
        
        
        5,199
        
        
        
        4,997
        
        
        
        5,338
        
        
        
        5,498
        
        
        
        5,744
        
        
        
        5,751
        
        
        
        4,490
        
        
        
        4,579
        
        
        
        1,781
        
        
        
        1,818
        
        
        
        1,415Potash Production(KCl) Tonnage
        
        
        6,447
        
        
        
        6,128
        
        
        
        7,149
        
        
        
        6,388
        
        
        
        6,995
        
        
        
        6,483
        
        
        
        5,782
        
        
        
        6,071
        
        
        
        5,298
        
        
        
        3,902
        
        
        
        3,850Phosphate
Production(P2O5) Tonnage
        
        
        1,512
        
        
        
        1,573
        
        
        
        2,042
        
        
        
        2,124
        
        
        
        2,363
        
        
        
        2,282
        
        
        
        2,096
        
        

        
        1,008
        
        
        
        
        
        
        
        
        
        
        
        Nitrogen Production(N) Tonnage
        
        
        2,990
        
        
        
        3,032
        
        
        
        2,706
        
        
        
        3,138
        
        
        
        3,121
        
        
        
        2,349
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Potash Sales KCl Tonnes
        
        
        6,327
        
        
        
        6,243
        
        
        
        6,912
        
        
        
        6,474
        
        
        
        6,283
        
        
        
        6,640
        
        
        
        5,612
        
        
        
        5,848
        
        
        
        5,569
        
        
        
        3,795
        
        
        
        3,737Phosphate Sales Product Tonnes
        
        
        2,893
        
        
        
        3,045
        
        
        
        3,893
        
        
        
        4,016
        
        
        
        4,627
        
        
        
        4,434
        
        
        
        4,305
        
        
        
        2,206
        
        
        
        
        
        
        
        
        
        
        
        Nitrogen Sales Product Tonnes
        
        
        7,418
        
        
        
        7,350
        
        
        
        7,703
        
        
        
        7,951
        
        
        
        7,825
        
        
        
        6,775
        
        
        
        535
        
        
        
        115
        
        
        
        
        
        
        
        
        
        
        
        


|    |  |                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | Data for 1993 and thereafter reflect the acquisition of Potash Company of
America assets on October 7, 1993.                                                                                                                                                                                                                                      
|(2) |  | The financial statements of the company for 1994 and prior years have been
restated to US dollars in accordance with accounting principles generally
accepted in Canada using the Translation of Convenience Method. The Canadian
dollar amounts for these periods have been converted to US dollars at the
exchange rate of US$1.00 = CDN$1.4028.
|(3) |  | Data for 1995 and thereafter reflect the acquisition of Texasgulf Inc. on
April 10, 1995 and the acquisition of White Springs Agricultural Chemicals,
Inc. on October 31, 1995.                                                                                                                                                                   
|(4) |  | Data for 1997 and thereafter reflect the acquisition of Arcadian
Corporation on March 6,1997.                                                                                                                                                                                                                                                     
|(5) |  | There were no extraordinary items nor were there any discontinued
operations in any of the accounting periods.                                                                                                                                                                                                                                    

The consolidated financial
statements of the company have been prepared in accordance with
Canadian generally accepted accounting principles. These principles
differ in some respects from those applicable in the United States.
(See Note 29 to the company's consolidated financial statements.)

Additional Information



|* Data for 2000 and 1999 include the effects of charges for plant closures and
office consolidation and asset impairments in the amounts of $24.3 million and
$591.6 million respectively.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40



---



##### 



FINANCIAL PERFORMANCE INDICATORS (in millions of dollars)
 2002
        
        2001
        
        2000
        
        1999
        
        1998
        
        1997
        
        1996
        
        1995
        
        1994
        
        1993
        
        1992SUMMARYEBITDA
    
    
    386.0
    
    
    
    455.4
    
    
    
    524.5
    
    
    
    401.8
    
    
    
    633.2
    
    
    
    612.0
    
    
    
    387.5
    
    
    
    290.6
    
    
    
    136.8
    
    
    
    86.8
    
    
    
    80.0Cash flow return (%)
    
    
    6.7
    %
    
    
    8.0
    %
    
    
    10.8
    %
    
    
    (3.5
    %)
    
    
    12.6
    %
    
    
    12.9
    %
    
    
    12.5
    %
    
    
    13.6
    %
    
    
    10.0
    %
    
    
    6.8
    %
    
    
    6.7
    %Weighted average cost
of capital (%)
    
    
    7.0
    %
    
    
    7.6
    %
    
    
    8.7
    %
    
    
    9.1
    %
    
    
    8.1
    %
    
    
    8.7
    %
    
    
    9.9
    %
    
    
    8.8
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal shareholder return (%)
    
    
    5.2
    %
    
    
    (20.3
    %)
    
    
    64.6
    %
    
    
    (23.0
    %)
    
    
    (21.9
    %)
    
    
    (1.1
    %)
    
    
    21.4
    %
    
    
    111.6
    %
    
    
    35.7
    %
    
    
    29.2
    %
    
    
    15.3
    %Net debt to capital (%)
    
    
    41.3
    %
    
    
    41.3
    %
    
    
    28.7
    %
    
    
    30.8
    %
    
    
    28.1
    %
    
    
    35.5
    %
    
    
    30.9
    %
    
    
    40.3
    %
    
    
    
    
    
    
    9.2
    %
    
    
    7.0
    %RECONCILIATIONS AND CALCULATIONSEBITDA(1)
        
        
        386.0
        
        
        
        455.4
        
        
        
        524.5
        
        
        
        401.8
        
        
        
        633.2
        
        
        
        612.0
        
        
        
        387.5
        
        
        
        290.6
        
        
        
        136.8
        
        
        
        86.8
        
        
        
        80.0Depreciation and amortization
        
        
        (219.1
        )
        
        
        (185.7
        )
        
        
        (187.0
        )
        
        
        (191.1
        )
        
        
        (190.9
        )
        
        
        (170.0
        )
        
        
        (90.1
        )
        
        
        (71.0
        )
        
        
        (39.3
        )
        
        
        (29.9
        )
        
        
        (29.4
        )Non-cash plant closure and office
consolidation and asset
impairment charges
        
        
        
        
        
        
        
        
        
        
        (10.7
        )
        
        
        (563.7
        )
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Operating income
        
        
        166.9
        
        
        
        269.7
        
        
        
        326.8
        
        
        
        (353.0
        )
        
        
        442.3
        
        
        
        442.0
        
        
        
        297.4
        
        
        
        219.6
        
        
        
        97.5
        
        
        
        56.9
        
        
        
        50.6Cash Flow prior to
working capital changes(2)
        
        
        293.6
        
        
        
        348.9
        
        
        
        417.8
        
        
        
        343.5
        
        
        
        555.9
        
        
        
        503.1
        
        
        
        330.9
        
        
        
        238.0
        
        
        
        130.9
        
        
        
        74.8
        
        
        
        69.6Changes in non-cash operating working capitalAccounts receivable
        
        
        (11.1
        )
        
        
        69.9
        
        
        
        (52.2
        )
        
        
        33.8
        
        
        
        48.8
        
        
        
        23.5
        
        
        
        (7.4
        )
        
        
        (48.8
        )
        
        
        (14.4
        )
        
        
        (6.3
        )
        
        
        (9.8
        )Inventories
        
        
        (18.2
        )
        
        
        (76.1
        )
        
        
        (27.4
        )
        
        
        (16.1
        )
        
        
        (7.9
        )
        
        
        19.9
        
        
        
        2.5
        
        
        
        9.3
        
        
        
        14.6
        
        
        
        (21.9
        )
        
        
        (11.2
        )Prepaid expenses
        
        
        (3.9
        )
        
        
        2.3
        
        
        
        (3.1
        )
        
        
        3.2
        
        
        
        (16.6
        )
        
        
        3.7
        
        
        
        (1.9
        )
        
        
        2.5
        
        
        
        0.5
        
        
        
        (0.3
        )
        
        
        0.5Accounts payable and
accrued charges
        
        
        37.0
        
        
        
        (244.6
        )
        
        
        137.4
        
        
        
        (5.0
        )
        
        
        1.3
        
        
        
        (72.0
        )
        
        
        0.5
        
        
        
        1.8
        
        
        
        
        
        
        
        
        
        
        
        8.3Current income taxes
        
        
        23.4
        
        
        
        (21.6
        )
        
        
        20.6
        
        
        
        8.1
        
        
        
        (3.8
        )
        
        
        3.4
        
        
        
        (19.2
        )
        
        
        26.6
        
        
        
        19.1
        
        
        
        3.5
        
        
        
        Accrued reclamation
        
        
        (3.0
        )
        
        
        (3.7
        )
        
        
        (2.4
        )
        
        
        (20.7
        )
        
        
        (7.4
        )
        
        
        (7.4
        )
        
        
        (5.0
        )
        
        
        5.1
        
        
        
        
        
        
        
        
        
        
        
        Other non-current liabilities
        
        
        (1.4
        )
        
        
        0.6
        
        
        
        (10.3
        )
        
        
        (3.2
        )
        
        
        7.7
        
        
        
        (6.4
        )
        
        
        (4.2
        )
        
        
        (1.0
        )
        
        
        
        
        
        
        
        
        
        
        Cash provided by operating activities
        
        
        316.4
        
        
        
        75.7
        
        
        
        480.4
        
        
        
        343.6
        
        
        
        578.0
        
        
        
        467.8
        
        
        
        296.2
        
        
        
        233.5
        
        
        
        150.7
        
        
        
        49.8
        
        
        
        57.4Operating income
        
        
        166.9
        
        
        
        269.7
        
        
        
        326.8
        
        
        
        (353.0
        )
        
        
        442.3
        
        
        
        442.0
        
        
        
        297.4
        
        
        
        219.6
        
        
        
        97.5
        
        
        
        56.9
        
        
        
        50.6Cash taxes paid
        
        
        (4.4
        )
        
        
        (41.5
        )
        
        
        (13.4
        )
        
        
        (5.8
        )
        
        
        (19.2
        )
        
        
        (41.3
        )
        
        
        (32.9
        )
        
        
        (6.2
        )
        
        
        (1.2
        )
        
        
        
        
        
        
        Depreciation and amortization
        
        
        219.1
        
        
        
        185.7
        
        
        
        187.0
        
        
        
        191.1
        
        
        
        190.9
        
        
        
        170.0
        
        
        
        90.1
        
        
        
        71.0
        
        
        
        39.3
        
        
        
        29.9
        
        
        
        29.4381.6
        
        
        
        413.9
        
        
        
        500.4
        
        
        
        (167.7
        )
        
        
        614.0
        
        
        
        570.7
        
        
        
        354.6
        
        
        
        284.4
        
        
        
        135.6
        
        
        
        86.8
        
        
        
        80.0Total assets
        
        
        4,685.6
        
        
        
        4,597.3
        
        
        
        4,145.7
        
        
        
        3,916.8
        
        
        
        4,534.3
        
        
        
        4,427.6
        
        
        
        2,494.4
        
        
        
        2,581.8
        
        
        
        1,027.8
        
        
        
        1,036.4
        
        
        
        915.0Accumulated depreciation of
property, plant and equipment
        
        
        1,454.7
        
        
        
        1,274.3
        
        
        
        1,111.8
        
        
        
        951.0
        
        
        
        812.4
        
        
        
        662.0
        
        
        
        528.7
        
        
        
        454.1
        
        
        
        388.4
        
        
        
        355.4
        
        
        
        328.1Accumulated amortization of goodwill
        
        
        7.3
        
        
        
        7.3
        
        
        
        4.3
        
        
        
        1.4
        
        
        
        27.4
        
        
        
        12.7
        
        
        
        0.3
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Accounts payable and
accrued charges
        
        
        (347.0
        )
        
        
        (271.4
        )
        
        
        (525.9
        )
        
        
        (349.1
        )
        
        
        (349.7
        )
        
        
        (348.1
        )
        
        
        (180.0
        )
        
        
        (199.2
        )
        
        
        (60.9
        )
        
        
        (34.2
        )
        
        
        (31.1
        )Adjusted assets
        
        
        5,800.6
        
        
        
        5,607.5
        
        
        
        4,735.9
        
        
        
        4,520.1
        
        
        
        5,024.4
        
        
        
        4,754.2
        
        
        
        2,843.4
        
        
        
        2,836.7
        
        
        
        1,355.3
        
        
        
        1,357.6
        
        
        
        1,212.0Average adjusted assets
        
        
        5,704.0
        
        
        
        5,171.7
        
        
        
        4,628.0
        
        
        
        4,772.3
        
        
        
        4,889.3
        
        
        
        4,436.6
        
        
        
        2,840.0
        
        
        
        2,096.0
        
        
        
        1,356.5
        
        
        
        1,284.8
        
        
        
        1,193.0Cash flow return (%)(3)
        
        
        6.7
        %
        
        
        8.0
        %
        
        
        10.8
        %
        
        

(3.5
        %)
        
        
        12.6
        %
        
        
        12.9
        %
        
        
        12.5
        %
        
        
        13.6
        %
        
        
        10.0
        %
        
        
        6.8
        %
        
        
        6.7
        %Weighted average cost
of capital (%)
        
        
        7.0
        %
        
        
        7.6
        %
        
        
        8.7
        %
        
        
        9.1
        %
        
        
        8.1
        %
        
        
        8.7
        %
        
        
        9.9
        %
        
        
        8.8
        %
        
        
        N/A
        
        
        
        N/A
        
        
        
        N/AEnd of year closing price (dollars)
        
        
        63.59
        
        
        
        61.38
        
        
        
        78.31
        
        
        
        48.19
        
        
        
        63.88
        
        
        
        83.00
        
        
        
        85.00
        
        
        
        70.88
        
        
        
        34.00
        
        
        
        25.63
        
        
        
        20.25Beginning of year opening
price (dollars)
        
        
        61.38
        
        
        
        78.31
        
        
        
        48.19
        
        
        
        63.88
        
        
        
        83.00
        
        
        
        85.00
        
        
        
        70.88
        
        
        
        34.00
        
        
        
        25.63
        
        
        
        20.25
        
        
        
        18.00Change in share price (dollars)
        
        
        2.21
        
        
        
        (16.93
        )
        
        
        30.12
        
        
        
        (15.69
        )
        
        
        (19.12
        )
        
        
        (2.00
        )
        
        
        14.12
        
        
        
        36.88
        
        
        
        8.37
        
        
        
        5.38
        
        
        
        2.25Dividends per share (dollars)
        
        
        1.00
        
        
        
        1.00
        
        
        
        0.99
        
        
        
        0.99
        
        
        
        0.96
        
        
        
        1.03
        
        
        
        1.06
        
        
        
        1.06
        
        
        
        0.77
        
        
        
        0.53
        
        
        
        0.51Total shareholder return (%)
        
        
        5.2
        %
        
        
        (20.3
        %)
        
        
        64.6
        %
        
        
        (23.0
        %)
        
        
        (21.9
        %)
        
        
        (1.1
        %)
        
        
        21.4
        %
        
        
        111.6
        %
        
        
        35.7
        %
        
        
        29.2
        %
        
        
        15.3
        %Short-term debt
        
        
        473.0
        
        
        
        501.1
        
        
        
        488.8
        
        
        
        474.5
        
        
        
        94.9
        
        
        
        101.9
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        67.9
        
        
        
        12.8Current portion of long-term debt
        
        
        3.4
        
        
        
        
        
        
        
        5.7
        
        
        
        7.4
        
        
        
        0.4
        
        
        
        2.7
        
        
        
        1.8
        
        
        
        165.9
        
        
        
        0.6
        
        
        
        3.1
        
        
        
        5.6Long-term debt
        
        
        1,019.9
        
        
        
        1,013.7
        
        
        
        413.7
        
        
        
        437.0
        
        
        
        933.3
        
        
        
        1,130.0
        
        
        
        620.0
        
        
        
        714.5
        
        
        
        2.0
        
        
        
        20.1
        
        
        
        48.9Total debt
        
        
        1,496.3
        
        
        
        1,514.8
        
        
        
        908.2
        
        
        
        918.9
        
        
        
        1,028.6
        
        
        
        1,234.6
        
        
        
        621.8
        
        
        
        880.4
        
        
        
        2.6
        
        
        
        91.1
        
        
        
        67.3Cash and cash equivalents
        
        
        (24.5
        )
        
        
        (45.3
        )
        
        
        (100.0
        )
        
        
        (44.0
        )
        
        
        (68.0
        )
        
        
        (8.8
        )
        
        
        6.3
        
        
        
        (40.5
        )
        
        
        (16.6
        )
        
        
        
        
        
        
        (6.8
        )Net debt
        
        
        1,471.8
        
        
        
        1,469.5
        
        
        
        808.2
        
        
        
        874.9
        
        
        
        960.6
        
        
        
        1,225.8
        
        
        
        628.1
        
        
        
        839.9
        
        
        
        (14.0
        )
        
        
        91.1
        
        
        
        60.5Shareholders Equity
        
        
        2,092.5
        
        
        
        2,086.5
        
        
        
        2,012.1
        
        
        
        1,962.4
        
        
        
        2,453.8
        
        
        
        2,227.9
        
        
        
        1,405.5
        
        
        
        1,241.9
        
        
        
        964.3
        
        
        
        903.7
        
        
        
        809.5Net debt to capital (%)(4)
        
        
        41.3
        %
        
        
        41.3
        %
        
        
        28.7
        %
        
        
        30.8
        %
        
        
        28.1
        %
        
        
        35.5
        %
        
        
        30.9
        %
        
        
        40.3
        %
        
        
        
        
        
        
        9.2
        %
        
        
        7.0
        %Total debt to capital (%)
        
        
        41.7
        %
        
        
        42.1
        %
        
        
        31.1
        %
        
        
        31.9
        %
        
        
        29.5
        %
        
        
        35.7
        %
        
        
        30.7
        %
        
        
        41.5
        %
        
        
        
        
        
        
        9.2
        %
        
        
        7.7
        %
 N/A  not available
Footnotes on page 42 41




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##### 



Footnotes for Page 41



|(1) |  | PotashCorp uses EBITDA as an important measure of our liquidity and
performance, including our ability to service debt, meet other payment
obligations and comply with certain covenants in our credit agreements.
Management believes EBITDA to be an important measure as it excludes the
effects of depreciation and amortization, which primarily reflect the impact of
long-term investment decisions, rather than the performance of PotashCorps
day-to-day operations. The company also believes that this measurement is used
by certain investors and analysts to measure a companys ability to service
debt and to meet other payment obligations or as a valuation measurement.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Cash flow prior to working capital changes is defined as the cash provided
by operating activities, exclusive of changes in working capital. PotashCorp
uses cash flow exclusive of changes in working capital as an important measure
in our evaluation of liquidity. Management believes that by excluding changes
in working capital, this non-GAAP measure adjusts for the effect of swings in
working capital due to seasonality and therefore assists in long-term liquidity
assessments. The company also believes that this measurement is used by certain
investors and analysts as a measure of liquidity or as a valuation measurement.                                          
|   
|(3) |  | PotashCorp uses cash flow return as an important measure of performance.
Management believes that it is an important measure as it excludes the effect
of depreciation and amortization, which primarily reflect the impact of
long-term investment decisions, rather than the performance of PotashCorps
day-to-day operations. The company also believes that this measurement is used
by certain investors and analysts as a performance measure. The company does
not believe that there is a meaningful comparable GAAP measure to cash flow
return.                                                                                                                                  
|   
|(4) |  | PotashCorp uses net debt to capital as an important measure of its financial
leverage. Management believes that netting cash and cash equivalents against
total debt provides a better measure of the companys debt position. The
company also believes that this measurement is used by certain investors and
analysts as a financial leverage measure.                                                                                                                                                                                                                                                                                                                                   



Financial Terms Total shareholder return= (change in market price per common share + dividends
per share) ÷ beginning market price per common share Book value per share= total shareholders equity ÷ number of common shares
outstanding Net debt to capital= (total debt  cash and cash equivalents) ÷ (total debt
 cash and cash equivalents + total shareholders equity) Cash flow return= (operating income  cash taxes paid + depreciation and
amortization) ÷ average (assets + accumulated depreciation
and amortization 
accounts payable and accrued charges) EBITDArepresents earnings (net income) before interest, taxes, depreciation
and amortization and non-cash plant closures and office consolidation and asset
impairment charges Weighted average cost of capital= after-tax market yield cost of debt x
(market value of debt ÷ market value of total capital) + cost of equity* x
(market value of equity ÷ market value of total capital) *Where cost of equity = Industry Beta x market risk premium These financial terms are included because certain investors and analysts use
them as a measure of liquidity, financial leverage or of a companys ability to
service debt, or as a valuation measurement. They are included for convenience
only. They are not a measure of financial performance under Canadian GAAP or US
GAAP. In evaluating them, investors should consider that the methodology
applied in calculating them may differ among companies and analysts.


42



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##### 



Managements Responsibilityfor Financial Reporting The accompanying consolidated financial statements and related financial
information are the responsibility of PotashCorp management and have been
prepared in accordance with accounting principles generally accepted in Canada
and include amounts based on estimates and judgments. Financial information
included elsewhere in this report is consistent with the consolidated financial
statements. To meet managements responsibility for financial reporting and to obtain
reasonable assurance for the integrity and reliability of the financial
reports, the companys accounting and internal control systems are designed to
safeguard assets and to properly record transactions and events. Policies and
procedures are maintained to support the accounting and internal control
systems. Our independent auditors, Deloitte & Touche LLP, provide an objective,
independent audit of the consolidated financial statements. Their report for
2002 is included. The Board of Directors, through the audit committee composed exclusively of
outside directors, meets regularly with the independent auditors  both jointly
and separately  to review significant accounting, reporting and internal
control matters. The audit committee also recommends to the Board the
independent auditors to be proposed to the shareholders for appointment at the
annual meeting. Interim consolidated financial statements are reviewed by the
audit committee prior to release to shareholders. The consolidated financial statements are approved by the Board of Directors on
the recommendation of the audit committee. -s- W. DoyleW. Doyle
President and
Chief Executive Officer
February 7, 2003

-s- W. Brownlee
W. Brownlee
Senior Vice President and
Chief Financial Officer
 Auditors Reportto the Shareholders of Potash Corporation of Saskatchewan Inc. We have audited the consolidated statements of financial position of Potash
Corporation of Saskatchewan Inc. as at December 31, 2002 and 2001 and the
consolidated statements of income and retained earnings and of cash flow for
each of the years in the three-year period ended December 31,
2002. These
financial statements are the responsibility of the company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 and United States generally accepted auditing standards. These
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. We believe
that our audits provide a reasonable basis for our opinion. In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31,
2002 and 2001, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2002 in accordance with
Canadian generally accepted accounting principles. Saskatoon, Saskatchewan

-s- DeloitteFebruary 7, 2003
        
        Chartered Accountants
 Comments by Auditor on Canada-United States Reporting Difference

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) outlining changes in
accounting principles that have been implemented in the financial statements.
The company has adopted the provisions of Section 3062 (Goodwill and Other
Intangible Assets) and Section 3870 (Stock-Based Compensation and Other
Stock-Based Payments) of the Canadian Institute of Chartered Accountants
Handbook. The impact of these changes in accounting policy is set out in Note
3 to the consolidated financial statements. 43




---



##### 



Consolidated Statements ofFinancial Position as at December 31
        
        in millions of US Dollars2002
        
        2001AssetsCurrent AssetsCash and cash equivalents
        
        $
        24.5
        
        
        $
        45.3Accounts receivable (Note 4)
        
        
        267.8
        
        
        
        256.7Inventories (Note 5)
        
        
        499.3
        
        
        
        481.1Prepaid expenses
        
        
        40.4
        
        

        
        36.5832.0
        
        
        
        819.6Property, plant and equipment (Note 6)
        
        
        3,269.9
        
        
        
        3,245.6Goodwill (Note 7)
        
        
        97.0
        
        
        
        97.0Other assets (Note 8)
        
        
        486.7
        
        
        
        435.1$
        4,685.6
        
        
        $
        4,597.3LiabilitiesCurrent LiabilitiesShort-term debt (Note 9)
        
        $
        473.0
        
        
        $
        501.1Accounts payable and accrued charges (Note 10)
        
        
        347.0
        
        
        
        271.4Current portion of long-term debt (Note 11)
        
        
        3.4
        
        
        
        823.4
        
        
        
        772.5Long-term debt (Note 11)
        
        
        1,019.9
        
        
        
        1,013.7Future income tax liability (Note 20)
        
        
        468.9
        
        
        
        457.6Accrued post-retirement/post-employment benefits (Note 13)
        
        
        195.4
        
        
        
        177.3Accrued reclamation costs (Note 14)
        
        
        80.0
        
        
        
        83.0Other non-current liabilities and deferred credits
        
        
        5.5
        
        
        

        6.72,593.1
        
        
        
        2,510.8Contingencies(Note 24)Shareholders EquityShare Capital (Note 15)
        
        
        1,186.9
        
        
        
        1,182.5Unlimited authorization of common shares without par value;
issued and outstanding 52,077,648 and 51,952,482 shares
in 2002 and 2001, respectivelyUnlimited authorization of first preferred shares; none outstandingContributed Surplus
        
        
        264.2
        
        
        
        264.2Retained Earnings
        
        
        641.4
        
        
        
        639.82,092.5
        
        
        
        2,086.5$
        4,685.6
        
        
        $
        4,597.3
 (See Notes to the Consolidated Financial Statements) Approved by the Board, /s/ Jack G. Vicq
        
        /s/ E. Robert StrombergDirector
        
        Director
 44




---



##### 



Consolidated Statements ofIncome and Retained Earnings for the years ended December 31
        
        in millions of US Dollars except per share amounts2002
        
        2001
        
        2000Net sales (Note 16)
        
        $
        1,913.8
        
        
        $
        2,072.7
        
        
        $
        2,231.6Cost of goods sold
        
        
        1,612.2
        
        
        
        1,673.5
        
        
        
        1,748.8Gross Margin
        
        
        301.6
        
        
        
        399.2
        
        
        
        482.8Selling and administrative
        
        
        91.7
        
        
        
        99.7
        
        
        
        111.0Provincial mining and other taxes (Note 17)
        
        
        68.0
        
        
        
        70.0
        
        
        
        77.2Provision for plant closures and
office consolidation (Note 18)
        
        
        
        
        
        
        
        
        
        
        24.3Foreign exchange loss (gain)
        
        
        5.5
        
        
        
        (13.7
        )
        
        
        (8.1
        )Other income
        
        
        (30.5
        )
        
        
        (26.5
        )
        
        
        (48.4
        )134.7
        
        
        
        129.5
        
        
        
        156.0Operating Income
        
        
        166.9
        
        
        
        269.7
        
        
        
        326.8Interest Expense(Note 19)
        
        
        83.1
        
        
        
        80.3
        
        
        
        61.6Income Before Income Taxes
        
        
        83.8
        
        
        
        189.4
        
        
        
        265.2Income Taxes(Note 20)
        
        
        30.2
        
        
        
        68.2
        
        
        
        67.2Net Income
        
        
        53.6
        
        
        
        121.2
        
        
        
        198.0Retained Earnings, Beginning of Year
        
        
        639.8
        
        
        
        570.5
        
        
        
        424.4Dividends
        
        
        (52.0
        )
        
        
        (51.9
        )
        
        
        (51.9
        )Retained Earnings, End of Year
        
        $
        641.4
        
        
        $
        639.8
        
        
        $
        570.5Net Income per Share  Basic(Note 21)
        
        $
        1.03
        
        
        $
        2.34
        
        
        $
        3.78Net Income per Share  Diluted(Note 21)
        
        $
        1.03
        
        
        $
        2.32
        
        
        $
        3.76Dividends per Share
        
        $
        1.00
        
        
        $
        1.00
        
        
        $
        0.99
 (See Notes to the Consolidated Financial Statements) 45




---



##### 













Consolidated Statements of Cash Flow for the years ended December 31
        
        in millions of US Dollars2002
        
        2001
        
        2000Operating ActivitiesNet income
        
        $
        53.6
        
        
        $
        121.2
        
        
        $
        198.0Items not affecting cashDepreciation and amortization
        
        
        219.1
        
        
        
        185.7
        
        
        
        187.0Loss (gain) on disposal of assets
        
        
        1.0
        
        
        
        0.4
        
        
        
        (17.9
        )Provision for future income tax
        
        
        6.0
        
        
        
        47.7
        
        
        
        34.6Provision for plant closures and
office consolidation
        
        
        
        
        
        
        
        
        
        
        10.7Foreign exchange on future tax
        
        
        1.0
        
        
        
        (8.2
        )
        
        
        (5.5
        )Share of earnings of investees
        
        
        (5.3
        )
        
        
        
        
        
        
        Provision for post-retirement/post-employment benefits
        
        
        18.2
        
        
        
        2.1
        
        
        
        10.9293.6
        
        
        
        348.9
        
        
        
        417.8Changes in non-cash operating working capitalAccounts receivable
        
        
        (11.1
        )
        
        
        69.9
        
        
        
        (52.2
        )Inventories
        
        
        (18.2
        )
        
        
        (76.1
        )
        
        
        (27.4
        )Prepaid expenses
        
        
        (3.9
        )
        
        
        2.3
        
        
        
        (3.1
        )Accounts payable and accrued charges
        
        
        37.0
        
        
        
        (244.6
        )
        
        
        137.4Current income taxes
        
        
        23.4
        
        
        
        (21.6
        )
        
        
        20.6Accrued reclamation costs
        
        
        (3.0
        )
        
        
        (3.7
        )
        
        
        (2.4
        )Other non-current liabilities and deferred credits
        
        
        (1.4
        )
        
        
        0.6
        
        
        
        (10.3
        )Cash provided by operating activities
        
        
        316.4
        
        
        
        75.7
        
        
        
        480.4Investing ActivitiesAdditions to property, plant and equipment
        
        
        (212.2
        )
        
        
        (513.7
        )
        
        
        (185.6
        )Acquisition of Albright & Wilson Company
        
        
        
        
        
        
        
        
        
        
        (32.0
        )Investment in Sociedad Quimica y Minera
de Chile S.A.(SQM)
        
        
        (23.2
        )
        
        
        (130.4
        )
        
        
        Proceeds from disposal of assets
        
        
        
        
        
        
        
        
        
        
        8.6Additions to other assets
        
        
        (36.0
        )
        
        
        (45.9
        )
        
        
        (56.4
        )Cash used in investing activities
        
        
        (271.4
        )
        
        
        (690.0
        )
        
        
        (265.4
        )Cash (deficiency) before financing activities
        
        
        45.0
        
        
        
        (614.3
        )
        
        
        215.0Financing ActivitiesProceeds from long-term obligations
        
        
        11.2
        
        
        
        600.0
        
        
        
        11.1Repayment of long-term obligations
        
        
        (1.3
        )
        
        
        (5.8
        )
        
        
        (36.1
        )Proceeds from short-term debt
        
        
        
        
        
        
        12.2
        
        
        
        169.5Repayment of short-term debt
        
        
        (28.1
        )
        
        
        
        
        
        
        (155.2
        )Dividends
        
        
        (52.0
        )
        
        
        (51.9
        )
        
        
        (51.9
        )Repurchase of shares
        
        
        
        
        
        
        
        
        
        
        (104.2
        )Issuance of shares
        
        
        4.4
        
        
        
        5.1
        
        
        
        7.8Cash (used in) provided by financing activities
        
        
        (65.8
        )
        
        
        559.6
        
        
        
        (159.0
        )(Decrease) Increase in Cash and
Cash Equivalents
        
        
        (20.8
        )
        
        
        (54.7
        )
        
        
        56.0Cash and Cash Equivalents, Beginning of Year
        
        
        45.3
        
        
        
        100.0
        
        
        
        44.0Cash and Cash Equivalents, End of Year
        
        $
        24.5
        
        
        $
        45.3
        
        
        $
        100.0Supplemental cash flow disclosureInterest paid
        
        $
        81.2
        
        
        $
        79.3
        
        
        $
        66.4Income taxes paid
        
        $
        4.4
        
        
        $
        41.5
        
        
        $
        13.4
 (See Notes to the Consolidated Financial Statements)




46



---



##### 



Notes to theConsolidated Financial Statements in millions of US Dollars except per share amounts
  1.
 
 DESCRIPTION OF BUSINESS Potash Corporation of Saskatchewan Inc. (PotashCorp) and its operating
subsidiaries (the company except to the extent the context otherwise
requires) form an integrated fertilizer and related industrial and feed
products company. The company has producing assets in the following locations:
  
 
 Potash 
 
 five mines and mills and mining rights to potash reserves at a sixth
location, all in the province of Saskatchewan 
 
 one mine and two mills in the
province of New Brunswick 
 
 one plant in Chile that produces sodium nitrate,
potassium nitrate and other products  
 
 Phosphate 
 
 vertically integrated phosphate mine and processing plant in the state of
North Carolina 
 
 phosphate feed plants in five states and one in Brazil 
 
 two industrial phosphoric acid plants, in the states of North Carolina and Ohio 
 
 a mine and two processing plant complexes in the state of Florida 
 
 processing plant complex in the state of Louisiana  
 
 Nitrogen 
 
 four domestic plants located in the states of Georgia, Louisiana, Ohio and
Tennessee 
 
 large-scale operations in Trinidad The company owns or leases
approximately 165 terminal and warehouse facilities strategically located in
Canada and the United States, and services customers with a fleet of
approximately 5,000 rail cars. PotashCorp sells potash from its Saskatchewan mines for use outside North
America exclusively to Canpotex Limited (Canpotex). Canpotex, a potash export,
sales and marketing company owned in equal shares by the three potash producers
in the Province of Saskatchewan (including the company), resells potash to
offshore customers. PCS Sales (Canada) Inc. and PCS Sales (USA), Inc.,
wholly-owned subsidiaries of PotashCorp, execute marketing and sales for the
companys potash, phosphate and nitrogen products in North America. PCS Sales
(Canada) Inc. executes offshore marketing and sales for the companys New
Brunswick potash. PCS Sales (USA), Inc. generally executes offshore marketing
and sales for the companys nitrogen, potassium nitrate and sodium nitrate
products. Phosphate Chemicals Export Association, Inc. (PhosChem), an
unrelated phosphate export association established under United States law, is
the principal vehicle through which the company executes offshore marketing and
sales for its phosphate fertilizers.  2.
       
 SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation  The companys accounting policies are in accordance with Canadian generally
accepted accounting principles (Canadian GAAP). These policies are consistent
with accounting principles generally accepted in the United States (US GAAP)
in all material respects except as outlined in Note 29. The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following policies are considered to be
significant:
    Principles of Consolidation

The consolidated financial statements include the accounts of PotashCorp and
its principal operating subsidiaries:  
 
 PCS Sales (Canada) Inc. 
 PCS Joint Venture, L.P. 
 
 PCS Sales (USA), Inc. 
 
 PCS Phosphate Company, Inc. 
 PCS Purified Phosphates 
 
 White Springs Agricultural Chemicals, Inc. (White Springs) 
 
 PCS Nitrogen, Inc. 
 PCS Nitrogen Fertilizer, L.P. 
 PCS Nitrogen Ohio, L.P. 
 PCS Nitrogen Limited 
 PCS Nitrogen Trinidad Limited 
 
 PCS Cassidy Lake Company (PCS Cassidy Lake) 
 
 PCS Yumbes S.C.M. 
 
 PCS Fosfatos do Brasil Ltda. All significant intercompany balances and transactions have been eliminated. Cash Equivalents

Highly liquid investments with an original maturity of three months or less are
considered to be cash equivalents. Inventories

Inventories of finished product, raw materials and work in process are valued
at the lower of cost and net realizable value. Cost for substantially all
finished product, raw materials and work in process inventories is determined
using the first in, first out (FIFO) method. Certain inventories of materials
and supplies are valued at the lower of average cost and replacement cost and
certain inventories of materials and supplies are valued at the lower of cost
and market. Prepaid Expenses

Prepaid expenses include prepaid freight relating to product inventory stored
at warehouse and terminal facilities, which is invoiced to customers at the
time of sale of the inventory. Property, Plant and Equipment

Property, plant and equipment (which includes mine development costs) are
carried at cost, except for mineral properties, which are carried at the lower
of cost or fair value. Costs of additions, betterments, renewals and interest
during construction are capitalized. The company periodically reviews property,
plant and equipment for indicators of potential impairment, which would be
measured by comparing book value against the estimated undiscounted future cash
flows. Any such impairment loss is included in the statement of income. Maintenance and repair expenditures, which do not improve or extend productive
life, are expensed as incurred. Depreciation and Amortization

Depreciation and amortization are provided for on a basis and at rates
calculated to amortize the cost of the property, plant and equipment over their
estimated useful lives. Depreciation and amortization rates for all mine assets
(including mine development costs) and potash mills are determined using the
units of production method based on estimates of proven and probable reserves.
Other asset classes are depreciated or amortized on a straight-line basis as
follows: land improvements 5 to 30 years, buildings and improvements 6 to 30
years and machinery and equipment 5 to 25 years.
  47




---



##### 













Notes to the Consolidated Financial Statements in millions of US Dollars except per share amounts














2. SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)Goodwill

Goodwill represents the excess of the purchase price and related costs over the
value assigned to the net tangible assets of businesses acquired and is carried
at cost. Goodwill is subject to an impairment test at least annually. An
impairment loss is recognized when the carrying amount of the goodwill of a
reporting unit exceeds the fair value of the goodwill. Other Assets

Issue costs of long-term obligations are capitalized to deferred charges and
are amortized to interest expense over the term of the related liability. Preproduction costs are capitalized to deferred charges and represent costs
incurred prior to obtaining commercial production at new milling facilities,
net of revenue earned, and are amortized on either a straight-line or units of
production basis over 10 years. The costs of constructing bases for gypsum stacks and settling ponds are
capitalized to deferred charges and are amortized on a straight-line basis over
their estimated useful lives of 3 to 5 years. Land held for sale is stated at the lower of cost or net realizable value. Investments in which the company exercises significant influence (but does not
control) are accounted for using the equity method. Other investments are
stated at cost. Rotational plant maintenance costs, which consist primarily of planned major
maintenance projects (also known as turnarounds), are capitalized when
incurred and are amortized over 2 years. Leases

Leases entered into are classified as either capital or operating leases.
Leases that transfer substantially all of the benefits and risks of ownership
of property to the company are accounted for as capital leases. At the time a
capital lease is entered into, an asset is recorded together with the related
long-term obligation. Equipment acquired under capital leases is being
depreciated on the same basis as other property, plant and equipment. Gains or
losses resulting from sale-leaseback transactions are deferred and amortized in
proportion to the amortization of the leased asset. Rental payments under
operating leases are charged to expense as incurred. Post-Employment and Post-Retirement Benefits

Accrual of the costs of the companys defined benefit pension plans are
recorded monthly and adjusted annually based on actuaries reports. Pension
expense includes the net of managements best estimate of the cost of benefits
provided, interest cost of projected benefits, return on pension plan assets
and amortization of experience gains or losses and plan amendments. Adjustments
arising from plan amendments, experience gains or losses and changes in
assumptions are amortized on a straight-line basis over the expected average
remaining service life of the employee group covered by the plan. Pension fund
assets are valued at market values. Accrual of the costs of providing certain post-retirement benefits, including
medical and life insurance coverage, during the active service period of the
employee is recorded monthly and adjusted annually as actuaries reports become
available.








Accrual during periods of active employment, for the expected cost of certain
benefits payable to former or inactive employees, is also recorded monthly and
adjusted annually. These benefits include long-term disability income payments
and related medical and insurance costs. Environmental Costs

Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Provisions for estimated costs are recorded
when environmental remedial efforts are likely and the costs can be reasonably
estimated. In determining the provisions, the company uses the most current
information available, including similar past experiences, available
technology, regulations in effect, the timing of remediation and cost-sharing
arrangements. Stock-Based Compensation Plans

The company has two stock-based compensation plans, which are described in Note
15. No compensation expense is recognized for these plans when stock options
are issued, as the exercise price is the quoted market closing price of the
companys common shares on the last trading day immediately preceding the date
of the grant. Any consideration paid on exercise of stock options is credited
to share capital. Foreign Exchange Transactions

PotashCorp and its operating subsidiaries have the US dollar as their
functional currency. Canadian dollar operating transactions are translated to US dollars at the
average exchange rate for the previous month. Trinidad dollar operating
transactions are translated to US dollars at the average exchange rate for the
period. Monetary assets and liabilities are translated at period-end exchange
rates. Non-monetary assets owned at December 31, 1994 have been translated
under the Translation of Convenience Method at the December 31, 1994 year-end
exchange rate of US $1.00 = CDN $1.4028. Additions subsequent to December 31,
1994 are translated at the exchange rate prevailing at the time of the
transaction. Derivative Financial Instruments

Derivative financial instruments are used by the company to manage its exposure
to exchange rate and commodity price fluctuations. The companys policy is not
to utilize derivative financial instruments for trading or speculative
purposes. The company enters into forward exchange contracts to hedge its
foreign currency exposure on Canadian dollar requirements for operating and
capital expenditures. Gains or losses on foreign currency exchange contracts
are recognized monthly and are included in Foreign Exchange in the income
statements. The company enters into natural gas futures, swaps and option agreements to
manage the cost of natural gas. The company formally documents all
relationships between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking the hedge transaction. This
process includes linking derivatives to specific forecasted transactions.




48



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##### 



Notes to the Consolidated Financial Statements

in millions of US Dollars except per share amounts



2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The company also assesses, both at the hedges inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values of hedged items. Gains or losses resulting from changes in the fair value of natural gas hedging
transactions which have not yet been settled are not recognized, as they
generally relate to changes in the spot price of anticipated natural gas
purchases. Gains or losses arising from settled hedging transactions are
deferred as a component of inventory until the product containing the hedged
item is sold, at which time both the natural gas purchase cost and the related
hedging deferral are recorded as cost of sales. The company regularly evaluates its unrecognized or deferred gains and losses
on these derivatives from a net realizable value of inventory perspective and
establishes appropriate provisions, if necessary. Revenue Recognition

Sales revenue is recognized when the product is shipped or a service is
performed. Revenue is recorded based on the FOB mine, plant, warehouse or
terminal price, except for certain vessel sales which are shipped on a
delivered basis. Transportation costs are recovered from the customer through
sales pricing. Natural Gas Operations

The company follows the full cost method of accounting, whereby all costs
associated with the exploration for and development of natural gas reserves are
capitalized in one Canadian cost centre. These costs include land acquisitions,
drilling of productive, non-productive and dry or abandoned wells, geological
and geophysical surveys and administrative expenses directly related to
exploration and development activities. Costs associated with dry or abandoned
wells are charged to the full cost pool and subjected to depletion. Depletion
is calculated using the units of production method based on estimated gross
proved natural gas reserves as evaluated by independent engineers. Proceeds from the disposition of natural gas properties are accounted for as a
reduction in capitalized costs, with no gain or loss recognized unless such
disposition would alter the depletion rate by more than 20 percent. The net amount at which natural gas properties are carried is subject to a cost
recovery test (the ceiling test). Under this test, an estimate is made of the
ultimate recoverable amount from future net revenues using proved reserves and
period-end prices, plus the net costs of major development projects and
improved properties, less future removal and site restoration costs, overhead,
financing costs and income taxes. If the net carrying costs exceed the ultimate
recoverable amount, additional depletion is provided. The companys natural gas operations are in the preproduction stage; therefore
all costs have been capitalized. 3. CHANGE IN ACCOUNTING POLICY

The company has adopted the provisions of section 3062 of the Canadian
Institute of Chartered Accountants Handbook Goodwill and Other Intangible
Assets. This pronouncement is being applied on a prospective basis and
requires that goodwill be subject to an impairment test at least annually
rather than be amortized. On an annual basis, the adoption of
this pronouncement will reduce amortization expense by approximately $3.0
million ($0.75 million per quarter). The company has completed its annual
assessment of goodwill and there is no impairment.








The company has also adopted the provisions of section 3870 of the Canadian
Institute of Chartered Accountants Handbook Stock-Based Compensation and Other
Stock-Based Payments. This pronouncement requires that all non-employee
stock-based compensation be accounted for using the fair value method, which
would recognize the fair value of the compensation cost in the financial
statements. Employee stock-based compensation must be accounted for using the
fair value method, for plans that are direct awards of stock or that call for
settlement in cash or other assets. The companys stock option plans are not
this type and therefore the company is not required to account for them using
the fair value method. As the exercise price of the stock options granted is
the market value the day immediately prior to the grant date, no compensation
cost is recorded. The adoption of this pronouncement has not had any effect on
the companys results of operations or financial position for any of the
periods presented. 4. ACCOUNTS RECEIVABLE 2002
        
        2001Trade accounts  Canpotex
        
        $
        36.3
        
        
        $
        41.3 Other
        
        
        212.4
        
        
        
        220.3Non-trade accounts
        
        
        25.1
        
        
        
        2.1273.8
        
        
        
        263.7Less allowance for doubtful accounts
        
        
        6.0
        
        
        
        7.0$
        267.8
        
        
        $
        256.7
 5. INVENTORIES 2002
        
        2001Finished product
        
        $
        165.0
        
        
        $
        144.7Materials and supplies
        
        
        123.5
        
        
        
        113.9Raw materials
        
        
        44.6
        
        
        
        65.6Work in process
        
        
        166.2
        
        
        
        156.9$
        499.3
        
        
        $
        481.1
 6. PROPERTY, PLANT AND EQUIPMENT 2002AccumulatedDepreciation and
        
        Net BookCost
        
        Amortization
        
        ValueLand and improvements
        
        $
        225.4
        
        
        $
        34.1
        
        
        $
        191.3Buildings and improvements
        
        
        451.3
        
        
        
        210.7
        
        
        
        240.6Machinery and equipment
        
        
        3,920.9
        
        
        
        1,160.9
        
        
        
        2,760.0Mine development costs
        
        
        127.0
        
        
        
        49.0
        
        
        
        78.0$
        4,724.6
        
        
        $
        1,454.7
        
        
        $
        3,269.9
 2001AccumulatedDepreciation and
        
        Net BookCost
        
        Amortization
        
        ValueLand and improvements
        
        $
        215.7
        
        
        $
        31.3
        
        
        $
        184.4Buildings
andimprovements
        
        
        448.7
        
        
        
        196.9
        
        
        
        251.8Machinery and equipment
        
        
        3,744.2
        
        
        
        999.9
        
        
        
        2,744.3Mine development costs
        
        
        111.3
        
        
        
        46.2
        
        
        
        65.1$
        4,519.9
        
        
        $
        1,274.3
        
        
        $
        3,245.6
 Depreciation and amortization of property, plant and equipment included in Cost
of Goods Sold and in Selling and Administrative was $188.2 (2001  $170.4;
2000  $170.6).




49



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##### 



Notes to the Consolidated
Financial Statementsin millions of US Dollars except per share amounts
      7.     GOODWILL 2002
        
        
        2001Cost
        
        $
        104.3
        
        
        $
        104.3Accumulated amortization
        
        
        7.3
        
        
        
        7.3$
        97.0
        
        
        $
        97.0
 In 2002 there was no amortization of goodwill included in Selling and
Administrative (2001  $3.0; 2000  $3.0). 8.     OTHER ASSETS 2002
        
        
        2001Deferred charges  net of
accumulated amortization
        
        $
        152.2
        
        
        $
        129.3Prepaid pension costs
        
        
        16.3
        
        
        
        25.3Land held for sale
        
        
        2.6
        
        
        
        2.6Investments, at equity
        
        
        176.4
        
        
        
        17.8Investment, at cost
        
        
        92.8
        
        
        
        223.2Rotational plant maintenance costs
 net of accumulated amortization
        
        
        29.5
        
        
        
        30.3Other
        
        
        16.9
        
        
        
        6.6$
        486.7
        
        
        $
        435.1
 Amortization of deferred charges and rotational plant maintenance costs
included in Cost of Goods Sold and in Selling and Administrative was $30.9
(2001  $12.3; 2000  $13.4). Included in Other Income is the companys share
of earnings of investees of $5.3 (2001  $NIL; 2000  $NIL). 9.     SHORT-TERM DEBT Short-term debt was $473.0 at December 31, 2002 (2001 $501.1). The weighted
average interest rate on this debt was 1.70 percent (2001 
2.29 percent). The company had lines of credit for short-term financing (net of letters
of credit of $14.5) in the amount of $134.5 at December 31, 2002 (2001 
$133.3). The lines of credit are unsecured. In addition, the company is
authorized to borrow a further $117.0 under the commercial paper program.
 10.     ACCOUNTS PAYABLE AND ACCRUED CHARGES 2002
        
        
        2001Trade accounts
        
        $
        223.9
        
        
        $
        166.1Accrued reclamation
        
        
        18.6
        
        
        
        20.3Accrued interest
        
        
        8.6
        
        
        
        6.7Accrued compensation
        
        
        37.2
        
        
        
        31.5Current portion post-retirement/post-employment benefits
        
        
        3.5
        
        
        
        Income taxes
        
        
        42.2
        
        
        
        33.8Dividends
        
        
        13.0
        
        
        
        13.0$
        347.0
        
        
        $
        271.4
    11.     LONG-TERM DEBT 2002
        
        
        2001Industrial Revenue and PollutionControl Obligations
        
        $
        13.2
        
        
        $
        13.6Adjustable Rate Industrial Revenue and
Pollution Control Obligations with
varying interest rates and with maturity
dates ranging from 2003 to 2005. No
sinking fund requirements prior to
maturity. The Adjustable Rate Industrial
Revenue and Pollution Control
Obligations bear interest at an average
rate of 1.725%. These loans are
secured by bank letters of credit.Notes Payable7.125% notes payable June 15, 2007.
        
        
        400.0
        
        
        
        400.07.75% notes payable May 31, 2011.
        
        
        600.0
        
        
        
        600.0No sinking fund requirements prior to
maturity. These notes were issued
under a shelf registration statement
covering up to $1,000 of debt
securities. The notes are unsecured.Other
        
        
        10.1
        
        
        
        0.11,023.3
        
        
        
        1,013.7Less current maturities
        
        
        3.4
        
        
        
        $
        1,019.9
        
        
        $
        1,013.7
 The fair values of all long-term obligations (except the Notes Payable whose
approximate fair value at December 31, 2002 was $1,169.0) are approximated by
their face values. Long-term debt
at December 31, 2002 will mature as follows: 2003
        
        $
        3.42004
        
        
        1.52005
        
        
        10.32006
        
        
        1.32007
        
        
        400.62011
        
        
        600.02012
        
        
        6.2$
        1,023.3
  12.     COMMITMENTS
Lease Commitments The company has long-term lease agreements for buildings, port facilities,
equipment, ocean-going transportation vessels and rail cars, the latest of
which expires in 2020 (excluding mineral leases).
 
 Future minimum lease payments under these operating leases will be
approximately as follows:
 2003
        
        $
        39.92004
        
        
        38.92005
        
        
        35.12006
        
        
        33.22007
        
        
        27.5Subsequent years
        
        
        137.7
 Rental expense for operating leases for the years ended December 31, 2002, 2001
and 2000 was $41.2, $56.7 and $86.4, respectively.


50





---



##### 



Notes to the Consolidated Financial Statements

in millions of US Dollars except per share amounts




12.     COMMITMENTS (CONTINUED)
Other Commitments The company has long-term agreements for the purchase of sulfur for use in the
production of phosphoric acid. These agreements provide for minimum purchase
quantities and prices based on market rates at the time of delivery.
 
 The companys Trinidad subsidiaries have entered into long-term natural gas
contracts with the National Gas Company of Trinidad. The contracts provide for
prices that vary with ammonia market prices, escalating floor prices and
minimum purchase quantities.
 
 The company also has a long-term agreement for the purchase of phosphate rock
used at its Geismar facility. This agreement sets base price (less volume
discounts) for the first three years. Prices in subsequent years are subject to
renegotiation.
 
 The company has a contractual commitment for mining of nitrates
which is in effect until 2005.
 
 The annual commitment under the above-mentioned long-term contracts
approximates $109.0 million.
 13.     POST-RETIREMENT/POST-EMPLOYMENT BENEFITS
Canada

Substantially all employees of the company are participants in either a defined
contribution or a defined benefit pension plan. The companys obligations under
the defined contribution plans are limited to making regular payments to the
plan to match contributions made by the employees for current services (to a
maximum of 5.5 percent of salary).

The company has established a supplemental retirement income plan for senior
management which is unfunded and non-contributory and provides a supplementary
pension benefit. The plan is provided for by charges to earnings sufficient to
meet the projected benefit obligation.



United States

The company has defined benefit pension plans that cover a substantial majority
of its employees. Benefits are based on a combination of years of service and
compensation levels, depending on the plan. Generally, contributions to the US
plans are made to meet minimum funding requirements of the Employee Retirement
Income Security Act of 1974 (ERISA). Assets of both US funded plans consist
mainly of corporate equity, US government and corporate debt securities and
units of participation in a collective short-term investment fund.



Trinidad

The company has contributory defined benefit pension plans that cover a
substantial majority of its employees. Benefits are based on service. The
plans assets consist mainly of local government and other bonds, local
mortgage and mortgage-backed securities, fixed income deposits and cash.








All Pension Plans  The components of net pension expense for the companys pension plans, computed
actuarially, were as follows: 2002
        
        
        2001
        
        
        2000Service cost for benefits
earned during the year
        
        $
        12.0
        
        
        $
        10.2
        
        
        $
        12.0Interest cost on projected
benefit obligations
        
        
        28.1
        
        
        
        27.6
        
        
        
        25.7Expected return on plan assets
        
        
        (31.9
        )
        
        
        (30.1
        )
        
        
        (20.8
        )Net amortization and deferral
        
        
        0.7
        
        
        
        
        
        
        
        1.3Net pension expense
        
        $
        8.9
        
        
        $
        7.7
        
        
        $
        18.2
 Significant actuarial assumptions used in calculating the net pension expense
for the companys funded plans were as follows: 2002
        
        2001
        
        2000Discount rate
        
        
        6.50
        %
        
        
        7.25
        %
        
        
        7.50
        %Long-term rate of
return on assets
        
        
        9.00
        %
        
        
        9.00
        %
        
        
        9.00
        %Rate of increase in
compensation levels
        
        
        4.00
        %
        
        
        4.50
        %
        
        
        5.00
        %
  Other Post-Retirement Plans  The company provides certain contributory health care plans and
non-contributory life insurance benefits for retired employees. These plans
contain certain cost-sharing features such as deductibles and coinsurance, and
are unfunded with benefits subject to change.    The components of this expense, computed actuarially, were as follows: 2002
        
        
        2001
        
        
        2000Service cost for benefits
earned during the year
        
        $
        4.1
        
        
        $
        3.6
        
        
        $
        3.3Interest cost on projected
benefit obligations
        
        
        13.9
        
        
        
        11.1
        
        
        
        10.2Net post-retirement expense
        
        $
        18.0
        
        
        $
        14.7
        
        
        $
        13.5
 The significant actuarial assumptions used in determining post-retirement
benefit expense were as follows: 2002
        
        2001
        
        2000Discount rate
        
        
        6.50
        %
        
        
        7.25
        %
        
        
        7.50
        %Health care cost trend rate
        
        
        10.00
        %
        
        
        9.00
        %
        
        
        6.00
        %
 If the health care cost trend rate was increased by 1.0 percentage point, the
accumulated post-retirement benefit obligation and the aggregate of service and
interest cost would have increased as follows: 2002
        
        
        2001
        
        
        2000Accumulated post-retirement
benefit obligation
        
        $
        35.0
        
        
        $
        30.1
        
        
        $
        21.1Aggregate of service and
interest cost
        
        
        3.3
        
        
        
        2.7
        
        
        
        2.0












51





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##### 



Notes to the Consolidated
Financial Statementsin millions of US Dollars except per share amounts












13.     POST-RETIREMENT/POST-EMPLOYMENT BENEFITS
(CONTINUED) If the health care cost trend rate was decreased by 1.0 percentage point, the
accumulated post-retirement benefit obligation and the aggregate of service and
interest cost would have decreased as follows:
 2002
        
        
        2001
        
        
        2000Accumulated post-retirement
benefit obligation
        
        $
        28.7
        
        
        $
        24.7
        
        
        $
        17.2Aggregate of service and
interest cost
        
        $
        2.7
        
        
        
        2.1
        
        
        
        1.9








All of the companys US employees may participate in defined contribution
savings plans. These plans are subject to US federal tax limitations and
provide for voluntary employee salary deduction contributions of up to 15
percent of salary and company matching contributions of up to 5 percent of
salary. The companys matching contributions were $5.0 and $4.6 for 2002 and
2001, respectively. All of the companys Canadian salaried employees
participate in the PCS Inc. Savings Plan. The company contributes 5 percent of
salary to the plan and employees may make voluntary contributions. The
companys contributions in 2002 were $1.5 (2001  $1.4).










The change in benefit obligations and change in plan assets for the above
pension and post-retirement/post-employment plans were as follows: Post-retirement/Pension
        
        Post-employment2002
        
        
        2001
        
        
        2002
        
        
        2001Change in Benefit ObligationsBalance, beginning of year
        
        $
        392.0
        
        
        $
        375.8
        
        
        $
        182.8
        
        
        $
        150.2Service cost
        
        
        12.0
        
        
        
        10.2
        
        
        
        4.1
        
        
        
        3.6Interest cost
        
        
        28.1
        
        
        
        27.6
        
        
        
        13.9
        
        
        
        11.1Participants contributions
        
        
        0.3
        
        
        
        0.4
        
        
        
        
        
        
        
        Actuarial gain
        
        
        37.0
        
        
        
        2.5
        
        
        
        12.3
        
        
        
        24.2Amendments
        
        
        1.8
        
        
        
        0.7
        
        
        
        
        
        
        
        Benefits paid
        
        
        (22.0
        )
        
        
        (25.2
        )
        
        
        (4.8
        )
        
        
        (6.3
        )Balance, end of year
        
        
        449.2
        
        
        
        392.0
        
        
        
        208.3
        
        
        
        182.8Change in Plan AssetsFair value, beginning of year
        
        
        352.7
        
        
        
        373.9
        
        
        
        
        
        
        
        Actual return on plan assets
        
        
        (17.8
        )
        
        
        (3.7
        )
        
        
        
        
        
        
        Employer contributions
        
        
        5.2
        
        
        
        7.5
        
        
        
        4.8
        
        
        
        6.3Participants contributions
        
        
        0.4
        
        
        
        0.4
        
        
        
        1.8
        
        
        
        Valuation allowance
        
        
        
        
        
        
        (0.2
        )
        
        
        
        
        
        
        Benefits paid
        
        
        (22.0
        )
        
        
        (25.2
        )
        
        
        (6.6
        )
        
        
        (6.3
        )Fair value, end of year
        
        
        318.5
        
        
        
        352.7
        
        
        
        
        
        
        
        Funded Status
        
        
        (130.7
        )
        
        
        (39.3
        )
        
        
        (208.3
        )
        
        
        (182.8
        )Unrecognized Net Loss
        
        
        109.7
        
        
        
        29.9
        
        
        
        49.7
        
        
        
        44.7Unrecognized Prior Service Cost
        
        
        1.0
        
        
        
        0.3
        
        
        
        (4.0
        )
        
        
        (4.8
        )Accrued Post-retirement/Post-employment Benefits
        
        $
        (20.0
        )
        
        $
        (9.1
        )
        
        $
        (162.6
        )
        
        $
        (142.9
        )Amounts recognized in the statements of
financial position consist of:Current and long-term liabilities
        
        $
        (36.3
        )
        
        $
        (34.4
        )
        
        $
        (162.6
        )
        
        $
        (142.9
        )Prepaid pension costs
        
        
        16.3
        
        
        
        25.3
        
        
        
        
        
        
        
        $
        (20.0
        )
        
        $
        (9.1
        )
        
        $
        (162.6
        )
        
        $
        (142.9
        )
 The aggregate pension accumulated benefit obligations and aggregate fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets are as follows: Post-retirement/Pension
        
        Post-employment2002
        
        
        2001
        
        
        2002
        
        
        2001Accumulated benefit obligation
        
        $
        431.1
        
        
        $
        377.1
        
        
        $
        208.3
        
        
        $
        182.8Fair value of plan assets
        
        
        289.7
        
        
        $
        330.0
        
        
        
        
        
        
        
        




52





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##### 



Notes to the Consolidated Financial Statements

in millions of US Dollars except per share amounts




14.     ENVIRONMENTAL COSTS
Reclamation and Restoration Costs  Site restoration and reclamation costs have been accrued for various sites. At
December 31, 2002, the company has accrued $28.1 (2001  $28.1) for the Aurora,
NC facility, $51.0 (2001  $52.6) for the White Springs, FL facility, $0.3
(2001  $0.3) for various sulfur facilities, $15.3 (2001  $18.4) for certain
PCS Joint Venture facilities and $3.9 (2001  $3.9) for the Cassidy Lake, NB
facility. The current portion of restoration and reclamation accrued in 2002
totalled $18.6 (2001  $20.3). These amounts represent the companys current
estimate of potential site restoration and reclamation costs which were last
assessed in December 2002. These expenditures are generally incurred over an
extended period of time.
 
Annual environmental expenditures for reclamation and restoration during the
years ended December 31, 2002, 2001 and 2000 were $54.6, $64.3 and $59.9
respectively. Of the 2002 amount, $45.2 (2001  $49.7; 2000  $55.2) was
charged to operations, $6.1 (2001  $13.7; 2000  $2.7) was capitalized and
$3.3 (2001  $0.9; 2000  $2.0) was charged against accrued reclamation
costs.    Capping of Byproduct Gypsum Stacks  Various jurisdictions have established programs that require companies to
reduce the potential environmental impact associated with gypsum stacks. In
Florida, the regulations implementing this legislation require companies to
cap the gypsum stacks in order to reduce seepage into the groundwater, when
such stacks reach their design capacity (for the company, in approximately 35
years at current operating rates) or if groundwater standards are not being
met. At December 31, 2002, a balance of $33.3 (2001  $35.4) was included in
accrued reclamation costs for this gypsum stack capping requirement. The
obligation of White Springs regarding the gypsum stacks is guaranteed by
PotashCorp.
 
In North Carolina, on expiry of the mines phosphate reserves,
capping of the remaining gypsum stacks must comply with the laws in place at
that time. Under Louisiana regulations, capping of gypsum stacks will be
required when the stacks are no longer active.    Other Environmental Costs  Other than reclamation, restoration and gypsum stack capping costs discussed
above, no significant costs relating to existing conditions caused by past
operations were incurred by the company during 2002. At December 31, 2002,
there were no significant environmental provisions recorded by the company,
other than those related to reclamation, restoration and gypsum stack capping,
as discussed above.   The companys estimated operating expenses, other than reclamation, restoration
and gypsum stack capping, relating to compliance with environmental laws and
regulations governing ongoing operations were approximately $20.9 for the year
ended December 31, 2002 (2001  $21.8; 2000  $23.0). In addition, capital
expenditures for other environmental compliance were approximately $5.5 for the
year ended December 31, 2002 (2001  $14.5; 2000  $11.7).








15.     SHARE CAPITAL
Authorized:The company is authorized to issue an unlimited number of common shares without
par value and an unlimited number of first preferred shares. The first
preferred shares may be issued in one or more series with rights and conditions
to be determined by the Board of Directors. Issued:
        
        2002
        
        
        2001
        
        
        2000Consideration
        
        
        Consideration
        
        
        ConsiderationIssued, beginning of year
        
        $
        1,182.5
        
        
        $
        1,177.4
        
        
        $
        1,216.5Shares issued under option
        
        
        4.3
        
        
        
        4.9
        
        
        
        7.0Shares issued for dividend
reinvestment plan
        
        
        0.1
        
        
        
        0.2
        
        
        
        0.8Shares repurchased
        
        
        
        
        
        
        
        
        
        
        (46.9
        )Issued, end of year
        
        $
        1,186.9
        
        
        $
        1,182.5
        
        
        $
        1,177.4
 Issued:
        
        2002
        
        
        2001
        
        
        2000Number of
        
        
        Number of
        
        
        Number ofCommon
        
        
        Common
        
        
        CommonShares
        
        
        Shares
        
        
        SharesIssued, beginning of year
        
        
        51,952,482
        
        
        
        51,840,572
        
        
        
        53,694,209Shares issued under option
        
        
        121,900
        
        
        
        108,400
        
        
        
        202,000Shares issued for dividend
reinvestment plan
        
        
        3,266
        
        
        
        3,510
        
        
        
        14,363Shares repurchased
        
        
        
        
        
        
        
        
        
        
        (2,070,000
        )Issued, end of year
        
        
        52,077,648
        
        
        
        51,952,482
        
        
        
        51,840,572
  Stock Options  The company has two option plans. Under the Officers and Employees Plan, the
company may, after February 3, 1998, issue up to 6,926,125 common shares
pursuant to the exercise of options. Under the Directors Plan, the company may,
after January 24, 1995, issue up to 456,000 common shares pursuant to the
exercise of options. Under both plans, the exercise price is the quoted market
closing price of the companys common shares on the last trading day
immediately preceding the date of the grant, and an options maximum term is 10
years. All options granted to date have provided that one-half of the options
granted in a year will vest one year from the date of the grant, with the other
half of the options vesting the following year.
 
A summary of the status of the
plans as of December 31, 2002, 2001 and 2000 and changes during the years ending
on those dates is presented below: Number of Shares Subject to Option 2002
        
        
        2001
        
        
        2000Outstanding,
beginning of year
        
        
        5,044,275
        
        
        
        4,236,275
        
        
        
        3,745,975Granted
        
        
        907,600
        
        
        
        922,200
        
        
        
        929,400Exercised
        
        
        (121,900
        )
        
        
        (108,400
        )
        
        
        (202,000
        )Cancelled
        
        
        (10,600
        )
        
        
        (5,800
        )
        
        
        (237,100
        )Outstanding, end of year
        
        
        5,819,375
        
        
        
        5,044,275
        
        
        
        4,236,275
 Weighted Average Exercise Price 2002
        
        
        2001
        
        
        2000Outstanding,
beginning of year
        
        $
        65.21
        
        
        $
        65.04
        
        
        $
        64.72Granted
        
        
        66.50
        
        
        
        62.81
        
        
        
        61.27Exercised
        
        
        34.93
        
        
        
        44.77
        
        
        
        34.72Cancelled
        
        
        78.40
        
        
        
        60.59
        
        
        
        65.83Outstanding, end of year
        
        
        65.98
        
        
        
        65.21
        
        
        
        65.04
 The weighted-average grant-date fair value of options granted during the year
was $20.1 (2001  $19.1; 2000  $20.0).












53





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##### 








Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts 15.   SHARE CAPITAL (CONTINUED)
The following table summarizes information about stock options outstanding at
December 31, 2002: Options Outstanding
        
        
        Options ExercisableRange of Exercise
        
        Number
        
        Weighted Average
        
        Weighted Average
        
        
        
        Weighted AveragePrices
        
        Outstanding
        
        Remaining Life
        
        Exercise Price
        
        Number
        
        Exercise Price$20.00 to $25.38
        
        
        30,700
        
        
        
        1 year
        
        
        $
        20.74
        
        
        
        30,700
        
        
        $
        20.74$32.25
        
        
        113,200
        
        
        
        2 years
        
        
        
        32.25
        
        
        
        113,200
        
        
        
        32.25$43.69
        
        
        512,550
        
        
        
        7 years
        
        
        
        43.69
        
        
        
        512,550
        
        
        
        43.69$61.27
        
        
        912,400
        
        
        
        8 years
        
        
        
        61.27
        
        
        
        912,400
        
        
        
        61.27$58.08 to $65.38
        
        
        918,900
        
        
        
        9 years
        
        
        
        62.81
        
        
        
        457,800
        
        
        
        62.81$66.50
        
        
        907,600
        
        
        
        10 years
        
        
        
        66.50
        
        
        
        
        
        
        
        $67.88
        
        
        750,500
        
        
        
        6 years
        
        
        
        67.88
        
        
        
        750,500
        
        
        
        67.88$70.38 to $74.75
        
        
        880,775
        
        
        
        4 years
        
        
        
        72.44
        
        
        
        880,775
        
        
        
        72.44$81.75 to $86.75
        
        
        792,750
        
        
        
        5 years
        
        
        
        86.45
        
        
        
        792,750
        
        
        
        86.45
 The foregoing options have expiry dates ranging from November 9, 2003 to
November 20, 2012. 16.   SEGMENT INFORMATION
The company has three reportable business segments: potash, phosphate and
nitrogen. All three segments produce fertilizers for sale to agricultural
customers. In addition, in 2002, approximately 58 percent of nitrogen net sales
and 59 percent of phosphate net sales were from feed and industrial products.
These business segments are differentiated by the chemical nutrient contained
in the product that each produces. Inter-segment net sales are made under terms
that approximate market value. 2002Potash
        
        Phosphate
        
        Nitrogen
        
        All others
        
        ConsolidatedNet sales  third party
        
        $
        534.0
        
        
        $
        632.3
        
        
        $
        747.5
        
        
        $
        
        
        
        $
        1,913.8Inter-segment net sales
        
        
        6.4
        
        
        
        6.4
        
        
        
        24.6
        
        
        
        
        
        
        
        Gross margin
        
        
        215.6
        
        
        
        38.6
        
        
        
        47.4
        
        
        
        
        
        
        
        301.6Depreciation and amortization
        
        
        46.3
        
        
        
        76.8
        
        
        
        88.0
        
        
        
        8.0
        
        
        
        219.1Assets
        
        
        1,198.4
        
        
        
        1,577.0
        
        
        
        1,602.4
        
        
        
        307.8
        
        
        
        4,685.6Expenditures for segment capital assets
        
        
        35.5
        
        
        
        126.3
        
        
        
        65.9
        
        
        
        3.4
        
        
        
        231.1
 2001Potash
        
        Phosphate
        
        Nitrogen
        
        All others
        
        ConsolidatedNet sales  third party
        
        $
        525.5
        
        
        $
        651.8
        
        
        $
        895.4
        
        
        $
        
        
        
        $
        2,072.7Inter-segment net sales
        
        
        7.1
        
        
        
        6.0
        
        
        
        37.6
        
        
        
        
        
        
        
        Gross margin
        
        
        241.8
        
        
        
        62.7
        
        
        
        94.7
        
        
        
        
        
        
        
        399.2Depreciation and amortization
        
        
        34.1
        
        
        
        72.0
        
        
        
        72.8
        
        
        
        6.8
        
        
        
        185.7Assets
        
        
        1,203.3
        
        
        
        1,471.2
        
        
        
        1,640.0
        
        
        
        282.8
        
        
        
        4,597.3Expenditures for segment capital assets
        
        
        34.7
        
        
        
        61.1
        
        
        
        436.9
        
        
        
        4.1
        
        
        
        536.8
 2000Potash
        
        Phosphate
        
        Nitrogen
        
        All others
        
        ConsolidatedNet sales  third party
        
        $
        578.7
        
        
        $
        782.5
        
        
        $
        870.4
        
        
        $
        
        
        
        $
        2,231.6Inter-segment net sales
        
        
        8.4
        
        
        
        7.9
        
        
        
        60.1
        
        
        
        
        
        
        
        Gross margin
        
        
        304.0
        
        
        
        74.1
        
        
        
        104.7
        
        
        
        
        
        
        
        482.8Depreciation and amortization
        
        
        40.9
        
        
        
        68.1
        
        
        
        66.1
        
        
        
        11.9
        
        
        
        187.0Provision for plant closures and office consolidation
        
        
        
        
        
        
        24.3
        
        
        
        
        
        
        
        
        
        
        
        24.3Assets
        
        
        1,165.4
        
        
        
        1,522.9
        
        
        
        1,250.9
        
        
        
        206.5
        
        
        
        4,145.7Expenditures for segment capital assets
        
        
        45.5
        
        
        
        136.5
        
        
        
        34.2
        
        
        
        12.6
        
        
        
        228.8




54



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##### 



Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts 16.   SEGMENT INFORMATION (CONTINUED)
Financial information by geographic area is summarized in the following table: Country of OriginCanada
        
        United States
        
        Trinidad
        
        Other
        
        Consolidated2002Net sales to customers outside the companyCanada
        
        $
        23.7
        
        
        $
        70.1
        
        
        $
        
        
        
        $
        
        
        
        $
        93.8United States
        
        
        191.6
        
        
        
        991.4
        
        
        
        175.3
        
        
        
        6.0
        
        
        
        1,364.3PhosChem
        
        
        
        
        
        
        34.4
        
        
        
        
        
        
        
        
        
        
        
        34.4Canpotex
        
        
        241.2
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        241.2Other
        
        
        59.5
        
        
        
        52.0
        
        
        
        43.9
        
        
        
        24.7
        
        
        
        180.1$
        516.0
        
        
        $
        1,147.9
        
        
        $
        219.2
        
        
        $
        30.7
        
        
        $
        1,913.8Operating income (loss)
        
        $
        145.6
        
        
        $
        17.8
        
        
        $
        20.5
        
        
        $
        (17.0
        )
        
        $
        166.9Capital assets and goodwill
        
        $
        778.0
        
        
        $
        1,899.5
        
        
        $
        633.2
        
        
        $
        85.7
        
        
        $
        3,396.42001Net sales to customers outside the companyCanada
        
        $
        24.0
        
        
        $
        62.8
        
        
        $
        
        
        
        $
        
        
        
        $
        86.8United States
        
        
        208.2
        
        
        
        1,074.1
        
        
        
        239.3
        
        
        
        
        
        
        
        1,521.6PhosChem
        
        
        
        
        
        
        65.3
        
        
        
        
        
        
        
        
        
        
        
        65.3Canpotex
        
        
        237.6
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        237.6Other
        
        
        55.7
        
        
        
        60.0
        
        
        
        33.8
        
        
        
        11.9
        
        
        
        161.4$
        525.5
        
        
        $
        1,262.2
        
        
        $
        273.1
        
        
        $
        11.9
        
        
        $
        2,072.7Operating income
        
        $
        175.4
        
        
        $
        34.0
        
        
        $
        59.8
        
        
        $
        0.5
        
        
        $
        269.7Capital assets and goodwill
        
        $
        783.4
        
        
        $
        1,843.1
        
        
        $
        662.5
        
        
        $
        83.9
        
        
        $
        3,372.92000Net sales to customers outside the companyCanada
        
        $
        28.0
        
        
        $
        52.9
        
        
        $
        
        
        
        $
        
        
        
        $
        80.9United States
        
        
        209.4
        
        
        
        1,195.2
        
        
        
        133.9
        
        
        
        
        
        
        
        1,538.5PhosChem
        
        
        
        
        
        
        146.3
        
        
        
        
        
        
        
        
        
        
        
        146.3Canpotex
        
        
        268.9
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        268.9Other
        
        
        72.4
        
        
        
        53.3
        
        
        
        58.9
        
        
        
        12.4
        
        
        
        197.0$
        578.7
        
        
        $
        1,447.7
        
        
        $
        192.8
        
        
        $
        12.4
        
        
        $
        2,231.6Operating income (loss)
        
        $
        216.2
        
        
        $
        96.0
        
        
        $
        15.4
        
        
        $
        (0.8
        )
        
        $
        326.8Capital assets and goodwill
        
        $
        794.4
        
        
        $
        1,862.6
        
        
        $
        294.3
        
        
        $
        83.5
        
        
        $
        3,034.8 17.   PROVINCIAL MINING AND OTHER TAXES
Provincial mining taxes and other taxes consist of: 2002
        
        2001
        
        2000Potash Production Tax
        
        $
        47.7
        
        
        $
        47.9
        
        
        $
        55.6Saskatchewan corporate capital taxes and other
        
        
        20.3
        
        
        
        22.1
        
        
        
        21.6$
        68.0
        
        
        $
        70.0
        
        
        $
        77.2
 18.   PROVISION FOR PLANT CLOSURES AND OFFICE CONSOLIDATION 2000
On January 19, 2001, the company announced it was suspending all DAP production
at its White Springs, FL operations and that it permanently closed its
Davenport, IA phosphate feed plant on January 15,
2001. Charges associated with plant closures and office consolidation are as follows: Balance at
        
        Reserve
        
        Balance atDec.
31, 2001
        
        Utilized
        

Dec.
31, 2002Plant Closures
Non-cash parts inventory writedown
        
        $
        0.9
        
        
        $
        0.9
        
        
        $
        Non-cash writedown of property,
plant and equipment
        
        
        25.7
        
        
        
        25.7
        
        
        
        $
        26.6
        
        
        $
        26.6
        
        
        $
        









55



---



##### 



Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts







19.   INTEREST EXPENSE 2002
        
        2001
        
        2000Interest onShort-term debt
        
        $
        8.0
        
        
        $
        21.9
        
        
        $
        29.7Long-term debt
        
        
        75.1
        
        
        
        58.4
        
        
        
        31.9$
        83.1
        
        
        $
        80.3
        
        
        $
        61.6
 20.   INCOME TAXES
As the company operates in a specialized industry and in several tax
jurisdictions, its income is subject to various rates of taxation.The provision for income taxes differs from the amount that would have resulted
from applying the Canadian statutory income tax rates to income (loss) before
income taxes as follows: 2002
        
        2001
        
        2000Income (loss) before income taxesCanada
        
        $
        56.8
        
        
        $
        96.8
        
        
        $
        155.4United States
        
        
        21.5
        
        
        
        32.1
        
        
        
        95.0Trinidad
        
        
        20.5
        
        
        
        59.8
        
        
        
        15.4Other
        
        
        (15.0
        )
        
        
        0.7
        
        
        
        (0.6
        )$
        83.8
        
        
        $
        189.4
        
        
        $
        265.2Federal and Provincial
Statutory tax rates
        
        
        46.12%
        
        
        
        46.12%
        
        
        
        46.12%Tax at statutory rates
        
        $
        38.7
        
        
        $
        87.3
        
        
        $
        122.3Adjusted for the effect of:Net non-deductible provincial
taxes and royalties and
resource allowances
        
        
        10.2
        
        
        
        12.7
        
        
        
        16.4Additional tax deductions
        
        
        (18.6
        )
        
        
        (33.7
        )
        
        
        (43.2
        )Difference between Canadian
rate and rates applicable to
subsidiaries in other countries
        
        
        0.8
        
        
        
        (1.6
        )
        
        
        (5.2
        )Other
        
        
        (0.9
        )
        
        
        3.5
        
        
        
        (23.1
        )Income tax expense
        
        $
        30.2
        
        
        $
        68.2
        
        
        $
        67.2
 Details of income tax expense are as follows: 2002
        
        2001
        
        2000CanadaCurrent
        

$
        46.2
        
        
        $
        19.2
        
        
        $
        23.2Future
        
        
        (10.1
        )
        
        
        19.9
        
        
        
        30.2United States  Federal
Current
        
        
        (27.5
        )
        
        
        (1.2
        )
        
        
        Future
        
        
        19.2
        
        
        
        16.7
        
        
        
        7.4United States  State
Current
        
        
        1.6
        
        
        
        0.2
        
        
        
        7.1Future
        
        
        (1.5
        )
        
        
        2.9
        
        
        
        1.5Trinidad and otherCurrent
        
        
        3.9
        
        
        
        2.3
        
        
        
        2.3Future
        
        
        (1.6
        )
        
        
        8.2
        
        
        
        (4.5
        )Income tax expense
        
        $
        30.2
        
        
        $
        68.2
        
        
        $
        67.2


The tax effects of temporary differences that give rise to significant portions
of the net future income tax liability are: 2002
        
        2001Future income tax assets:Loss and credit carryforwards
        
        $
        273.8
        
        
        $
        248.2Post-retirement/post-employment benefits
        
        
        61.4
        
        
        
        33.5Accrued reclamation costs
        
        
        15.6
        
        
        
        55.0Other
        
        
        2.1
        
        
        
        10.9Total future income tax assets
        
        
        352.9
        
        
        
        347.6Future income tax liabilities:Basis difference in fixed assets
        
        
        799.2
        
        
        
        778.4Other
        
        
        22.6
        
        
        
        26.8Total future income tax liabilities
        
        
        821.8
        
        
        
        805.2Net future income tax liability
        
        $
        468.9
        
        
        $
        457.6
 At December 31, 2002, the company has income tax losses carried forward of
approximately $715.0 which will begin to expire in 2010. The benefit relating to
these loss carryforwards has been recognized by reducing future income tax
liabilities. In addition, the company has alternative minimum tax credits of
approximately $18.9 which carry forward indefinitely. 21.   NET INCOME PER SHARE
Basic net income per share was calculated on the weighted average number of
shares issued and outstanding during the 12 months ended December 31, 2002 of
52,021,000 (2001 51,879,000; 2000  52,410,000). Weighted average diluted
shares outstanding during 2002 were 52,316,000 (2001 52,186,000; 2000 
52,703,000). 22.   PRO FORMA STOCK COMPENSATION
The company has two stock-based compensation plans for which fair value
accounting is not required, therefore, no compensation expense has been
recognized with respect to these plans. Had compensation expense for the
companys plans been determined based on the fair value at the grant dates for
awards under the plans, the companys net income and net income per share would
have been reduced to the pro forma amounts indicated below: 2002
        
        2001
        
        2000Net income  as reported
        
        $
        53.6
        
        
        $
        121.2
        
        
        $
        198.0Stock compensation
        
        
        14.3
        
        
        
        13.6
        
        
        
        10.7Net income  pro forma
        
        $
        39.3
        
        
        $
        107.6
        
        
        $
        187.3Basic net income per shareAs reported
        
        $
        1.03
        
        
        $
        2.34
        
        
        $
        3.78Pro forma
        
        
        0.76
        
        
        
        2.07
        
        
        
        3.57Diluted net income per shareAs reported
        
        $
        1.03
        
        
        $
        2.32
        
        
        $
        3.76Pro forma
        
        
        0.75
        
        
        
        2.06
        
        
        
        3.55
 In calculating the foregoing pro forma amounts, the fair value of each option
grant was estimated as of the date of grant using the modified Black-Scholes
option-pricing model with the following weighted assumptions: 2002
        
        2001
        
        2000Expected dividend
        
        $
        1.00
        
        
        $
        1.00
        
        
        $
        1.00Expected volatility
        
        
        32%
        
        
        
        32%
        
        
        
        31%Risk-free interest rate
        
        
        4.13%
        
        
        
        4.54%
        
        
        
        5.76%Expected life of option
        
        8 years
        
        
        8 years
        
        
        8 yearsExpected forfeitures
        
        
        10%
        
        
        
        10%
        
        
        
        10%




56



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##### 



Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts



23.   FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The company uses financial instruments, including forward exchange contracts,
futures, swaps and option agreements, to hedge foreign exchange and commodity
price risk. The company does not hold or issue financial instruments for
trading purposes. 
At
December 31, 2002, the company had commitments in the form of foreign
exchange contracts to sell US dollars in the amount of $28.0 (2001  $32.0). 
The
companys exposure to interest rate risk is limited to its long-term debt.
The effective interest rate on the long-term debt approximates the stated rate
because there are no significant premiums or discounts. 
In
addition to physical spot and term purchases, the company at times employs
futures, swaps and option agreements to establish the cost on a portion of its
natural gas requirements. These instruments are intended to hedge the future
cost of the committed and anticipated natural gas purchases for its US nitrogen
and phosphate plants. Under these arrangements, the company receives or makes
payments based on the differential between a specified price and the actual
spot price of natural gas. The company has certain available lines of credit
which are utilized to reduce cash margin requirements to maintain the
derivatives. At December 31, 2002, the company had collected cash margin
requirements of $4.6 which were included in accounts payable. 
As
at December 31, 2002, the company had derivatives qualifying for deferral in
the form of futures and swaps. The futures represented a notional amount of 6.0
million MMBtu of natural gas with maturities in 2003 through 2005. The swaps
represented a notional amount of 34.4 million MMBtu with maturities in 2003
through 2007. As at December 31, 2002, net losses arising from settled hedging
transactions, which are included as a component of finished goods inventory,
were $4.0 (2001  gains of $10.8). 
The
company is exposed to credit-related losses in the event of non-performance
by counterparties to derivative financial instruments. The company anticipates,
however, that counterparties will be able to fully satisfy their obligations
under the contracts. 
The
major concentration of credit risk arises from the companys receivables. A
majority of the companys sales are in North America and are primarily for use
in the agricultural industry. The company seeks to manage the credit risk
relating to these sales through a credit management program. Internationally,
the companys products are sold primarily through two export associations whose
accounts receivable are either insured or secured by letters of credit. 
The
carrying amount of the companys cash and cash equivalents, accounts
receivable, short-term debt and accounts payable and accrued charges
approximates fair value because of short-term maturities. The carrying amount
of the companys long-term debt (except the Notes Payable whose approximate
fair value at December 31, 2002 was $1,169.0) approximates estimated fair
value.




24.   CONTINGENCIES
PotashCorp is a shareholder in Canpotex which markets potash offshore. Should
any operating losses or other liabilities be incurred by Canpotex, the
shareholders have contractually agreed to reimburse Canpotex for such losses or
liabilities in proportion to their productive capacity. There were no such
operating losses or other liabilities in 2002. 
In
common with other companies in the industry, the company is unable to acquire
insurance for underground assets. 
On
September 10, 2002, PCS Nitrogen, Inc. agreed to conclude the federal grand
jury investigation and parallel state investigations of its Geismar facility by
pleading guilty to felony violations of the federal Clean Air Act and analogous
state laws and paying total fines of $2 million to the US government and two
state judicial districts. The amount of the fines is covered by a provision
recorded in the second quarter of 2002. The agreed-upon fines are subject to
approval by the federal court at a sentencing hearing scheduled for March 17,
2003, and by each state court at sentencing hearings which have not yet been
scheduled. 
In
1998, the company, along with other parties, was notified by EPA of
potential liability under CERCLA with respect to certain soil and groundwater
conditions at a PCS Joint Venture blending facility in Lakeland, FL and certain
adjoining property. In 1999, PCS Joint Venture signed an Administrative Order
on Consent with EPA pursuant to which PCS Joint Venture agreed to conduct a
Remedial Investigation and Feasibility Study (RI/FS) of these conditions. PCS
Joint Venture and another party are sharing the costs of the RI/FS. PCS Joint
Venture continues to assess and evaluate the nature and extent of the impacts
at the site. No final determination has yet been made of the nature, timing or
cost of remedial action that may be needed nor to what extent costs incurred
may be recoverable from third parties. 
Various
other claims and lawsuits are pending against the company. While it is
not possible to determine the ultimate outcome of such actions at this time, it
is managements opinion that the ultimate resolution of such actions, including
those pertaining to environmental matters, will not have a material effect on
the companys financial condition or results of operations. 25.   RELATED PARTY TRANSACTIONS
The company has a one-third interest in Canpotex which markets potash offshore.
Sales to Canpotex are at prevailing market prices. Sales for the year ended
December 31, 2002 were $241.2 (2001  $237.6; 2000  $268.9). 
Account
balances resulting from the Canpotex transactions are included in the
Consolidated Statements of Financial Position and settled on normal trade
terms. 
PCS
Yumbes purchases potash from SQM at prevailing market prices. Purchases for
the year amounted to $17.9. PCS Yumbes has also entered into a contract with SQM
to sell it 8,000 tonnes of potassium nitrate per month at a negotiated price
through to December 2003. Sales during 2002 amounted to $2.1. Transactions with
SQM are settled on normal trade terms.







57



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##### 








Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts 26.   QUARTERLY RESULTS (UNAUDITED)
The following quarterly information in managements opinion includes all
adjustments (consisting solely of normal recurring adjustments) necessary for
fair presentation. First Quarter
        
        Second Quarter
        
        Third Quarter
        
        Fourth Quarter2002Net sales
        
        $
        461.0
        
        
        $
        489.5
        
        
        $
        455.2
        
        
        $
        508.1Gross Margin
        
        $
        77.6
        
        
        $
        86.7
        
        
        $
        73.0
        
        
        $
        64.3Operating Income
        
        $
        40.9
        
        
        $
        38.6
        
        
        $
        44.3
        
        
        $
        43.1Net Income
        
        $
        12.8
        
        
        $
        11.9
        
        
        $
        14.5
        
        
        $
        14.4Net Income per Share  Basic
        
        $
        0.25
        
        
        $
        0.23
        
        
        $
        0.28
        
        
        $
        0.28Net Income per Share  Diluted
        
        $
        0.24
        
        
        $
        0.23
        
        
        $
        0.28
        
        
        $
        0.28 First Quarter
        
        Second Quarter
        
        Third Quarter
        
        Fourth Quarter2001Net sales
        
        $
        602.4
        
        
        $
        575.8
        
        
        $
        460.2
        
        
        $
        434.3Gross Margin
        
        $
        136.1
        
        
        $
        132.8
        
        
        $
        67.6
        
        
        $
        62.7Operating Income
        
        $
        116.5
        
        
        $
        84.4
        
        
        $
        39.8
        
        
        $
        29.0Net Income
        
        $
        62.4
        
        
        $
        43.1
        
        
        $
        11.1
        
        
        $
        4.6Net Income per Share  Basic
        
        $
        1.20
        
        
        $
        0.83
        
        
        $
        0.21
        
        
        $
        0.09Net Income per Share  Diluted
        
        $
        1.19
        
        
        $
        0.83
        
        
        $
        0.21
        
        
        $
        0.09 Net Income per Share for each quarter has been computed based on the weighted
average number of shares issued and outstanding during the respective quarter;
therefore, quarterly amounts may not add to the annual total.











27.   SEASONALITY
The companys sales of fertilizer are seasonal. Typically, the second quarter
of the year is when fertilizer sales will be highest, due to the North American
spring planting season. However, planting conditions and the timing of customer
purchases will vary each year and sales can be expected to shift from one
quarter to another. 28.   COMPARATIVE FIGURES
Certain of the prior years figures have been reclassified to conform with the
current years presentation. 29.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
A description of certain significant differences between Canadian GAAP and US
GAAP follows: Marketable
securities:The companys investment in Israel
Chemicals Ltd. (ICL) is stated at cost. US GAAP would require that this
investment be classified as available-for-sale and be stated at market value,
with the difference between market value and cost reported as Other
Comprehensive Income (OCI). Property,
plant and equipment and goodwill:The net book value of property,
plant and equipment and goodwill under Canadian GAAP is higher than under US
GAAP as provisions for asset impairment under Canadian GAAP were measured based
on the undiscounted cash flow from use together with the residual value of
assets, whereas under US GAAP they were measured based on fair value, which was
lower than the undiscounted cash flow from use together with the residual value
of the assets. Pre-operating costs:Operating costs incurred during the start-up phase of new
projects are deferred until commercial production levels are reached, at which
time they are amortized over the estimated life of the project. US GAAP would
require that these costs be expensed as incurred.




Foreign currency translation adjustment:The foreign currency translation
adjustment results from the restatement of prior periods so that all periods
presented are in the same reporting currency. US GAAP requires that the
comparative Consolidated Statements of Income and the Consolidated Statements
of Cash Flow be translated using weighted average exchange rates for the
applicable periods. In contrast, the Consolidated Statements of Financial
Position are translated using the exchange rates at the end of the applicable
periods in accordance with Canadian GAAP. The difference in these exchange
rates is what gives rise to the foreign currency translation adjustment. Additional minimum liability:The companys accumulated benefit obligation for
its US pension plans exceeds the fair value of plan assets. US GAAP requires
that the company recognize a liability that is at least equal to the unfunded
accumulated benefit obligation. If an additional liability required to be
recognized exceeds unrecognized prior service cost, the excess is to be
reported as OCI. Derivative instruments and hedging activities:The companys derivative
instruments which have not yet been settled are not recognized in the financial
statements and gains or losses arising from settled hedging transactions are
deferred as a component of inventory until the product containing the hedged
item is sold, at which time both the natural gas purchase cost and the related
hedging deferral are recorded as cost of sales. US GAAP would require that
derivative instruments be recorded at fair value in the balance sheet with the
change in fair value of instruments designated as cash flow hedges recorded as
OCI. Net sales:Sales are recorded net of freight costs (less related revenues) and
transportation and distribution expenses. US GAAP would require that net
freight costs be included in cost of sales and transportation and distribution
expenses be reported as an operating expense. Comprehensive income:Comprehensive income is not recognized under Canadian
GAAP. US GAAP would require the recognition of comprehensive income.




58



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##### 





Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts 29.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)Provision for plant closures:The provision for plant closures under Canadian
GAAP includes the non-cash parts inventory writedown. US GAAP would require
that this writedown be included in selling and administrative expenses. 
The
provision for plant closures under Canadian GAAP also includes severance
expense, which was accrued when management having the appropriate authority
approved the plan. US GAAP would require that severance not be accrued until
the plan was announced to the employees. Depreciation
and amortization: Depreciation and amortization under Canadian
GAAP is higher than under US GAAP as the net book values of property, plant and
equipment and goodwill under Canadian GAAP are higher than under US GAAP. The
application of US GAAP, as described above, would have had the following
approximate effects on net income, net income per share, total assets and
shareholders equity: 2002
        
        2001
        
        2000Net income as reported  Canadian GAAP
        
        $
        53.6
        
        
        $
        121.2
        
        
        $
        198.0Items increasing (decreasing) reported net incomeProvision for plant closures
        
        
        
        
        
        
        (9.0
        )
        
        
        9.0Pre-operating cost amortization (additions)
        
        
        2.6
        
        
        
        (41.7
        )
        
        
        (19.3
        )Depreciation and amortization
        
        
        8.4
        
        
        
        9.7
        
        
        
        9.8Future income taxes
        
        
        (4.0
        )
        
        
        14.4
        
        
        
        0.3Approximate net income  US GAAP
        
        $
        60.6
        
        
        $
        94.6
        
        
        $
        197.8Weighted average shares outstanding  US GAAP
        
        
        52,021,000
        
        
        
        51,879,000
        
        
        
        52,410,000Approximate basic net income per share  US GAAP
        
        $
        1.16
        
        
        $
        1.82
        
        
        $
        3.77Total assets as reported  Canadian GAAP
        
        $
        4,685.6
        
        
        $
        4,597.3
        
        
        $
        4,145.7Items increasing (decreasing) reported total assetsInventory
        
        
        (4.0
        )
        
        
        
        
        
        
        Available-for-sale security (unrealized holding loss/gain)
        
        
        (7.7
        )
        
        
        34.9
        
        
        
        41.7Fair value of natural gas hedging contracts
        
        
        52.7
        
        
        
        8.9
        
        
        
        Property, plant and equipment
        
        
        (143.4
        )
        
        
        (151.8
        )
        
        
        (160.2
        )Pre-operating costs
        
        
        (63.0
        )
        
        
        (65.6
        )
        
        
        (23.9
        )Goodwill
        
        
        (46.7
        )
        
        
        (46.7
        )
        
        
        (48.0
        )Approximate total assets  US GAAP
        
        $
        4,473.5
        
        
        $
        4,377.0
        
        
        $
        3,955.3Total shareholders equity as reported  Canadian GAAP
        
        $
        2,092.5
        
        
        $
        2,086.5
        
        
        $
        2,012.1Items increasing (decreasing) reported shareholders equityAccumulated other comprehensive income (loss), net of tax
        
        
        (9.1
        )
        
        
        29.8
        
        
        
        28.1Provision for plant closures
        
        
        
        
        
        
        
        
        
        
        9.0Provision for asset impairment
        
        
        (218.0
        )
        
        
        (218.0
        )
        
        
        (218.0
        )Depreciation and amortization
        
        
        27.9
        
        
        
        19.5
        
        
        
        9.8Pre-operating costs
        
        
        (63.0
        )
        
        
        (65.6
        )
        
        
        (23.9
        )Future income taxes
        
        
        62.7
        
        
        
        66.7
        
        
        
        52.3Approximate shareholders equity  US GAAP
        
        $
        1,893.0
        
        
        $
        1,918.9
        
        
        $
        1,869.4 Supplemental US GAAP DisclosureAvailable-for-Sale Security
The companys investment in ICL is classified as available-for-sale. The fair
market value of this investment at December 31, 2002 was $110.8 and the
unrealized holding gain was $17.9. New Accounting Pronouncements
During 2002, FASB issued SFAS 146 Accounting for Costs Associated with Exit or
Disposal Activities which is effective January 1, 2003. The adoption of this
standard should not have a significant effect on the results of operations or
financial position of the company.
 
SFAS 143 Accounting for Asset Retirement Obligations is also effective
January 1, 2003. This standard requires that the fair value of a liability for
an asset retirement obligation be recognized. The fair value of this liability
is added to the carrying amount of the associated asset and then depreciated
over the life of the asset. The liability is accreted at the end of each period
through charges to operating expenses. The determination of fair value is
complex. These determinations are still in process and it is not practical for
management to estimate the impact of adopting this standard as of the date of
this report.







59



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##### 










Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts 29.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED) SFAS 133 Disclosures
The companys natural gas purchase strategy is based on diversification of
price for its total gas requirements. Its objective is to acquire a reliable
supply of natural gas feedstock and fuel on a location-adjusted,
cost-competitive basis in a manner that minimizes volatility without undue
risk. It employs derivative instruments including futures, swaps and option
agreements in order to establish the cost on a portion of its natural gas
requirements. These instruments are intended to hedge the future cost of the
committed and anticipated natural gas purchase for its US nitrogen and
phosphate plants. The maximum period for these hedges cannot exceed five years.
The company uses these instruments to reduce price risk, not for speculative or
trading purposes.
 The company has designated its natural gas derivative
instruments as cash flow hedges. The gain or loss of an effective cash flow
hedge is deferred in OCI until such time as the natural gas it relates to is
used in production, at which time the gain or loss is reclassified from OCI to
cost of sales. During the year, $15.5 of gains was recognized in cost of sales.
Of the deferred amount at year-end, approximately $4.0 will be reclassified to
cost of sales within the next year.
 
The following supplemental schedules present the Consolidated Financial
Position, Income and Retained Earnings, Cash Flow and Comprehensive Income in
accordance with US GAAP as adjusted for the GAAP differences described in this
note. Supplemental Schedule of Consolidated Financial Position
As at December 31 2002
        
        2001AssetsCurrent AssetsCash and cash equivalents
        
        $
        24.5
        
        
        $
        45.3Accounts receivable
        
        
        267.8
        
        
        
        256.7Inventories
        
        
        495.3
        
        
        
        481.1Prepaid expenses
        
        
        40.4
        
        
        
        36.5Fair value of natural gas hedging contracts
        
        
        52.7
        
        
        
        8.9880.7
        
        
        
        828.5Property, plant and equipment
        
        
        3,126.5
        
        
        
        3,093.8Goodwill
        
        
        50.3
        
        
        
        50.3Other assets
        
        
        416.0
        
        
        
        404.4$
        4,473.5
        
        
        $
        4,377.0LiabilitiesCurrent LiabilitiesShort-term debt
        
        $
        473.0
        
        
        $
        501.1Accounts payable and accrued charges
        
        
        347.0
        
        
        
        280.4Current portion of long-term debt
        
        
        3.4
        
        
        
        823.4
        
        
        
        781.5Long-term debt
        
        
        1,019.9
        
        
        
        1,013.7Future income tax liability
        
        
        387.6
        
        
        
        395.9Accrued post-retirement/post-employment benefits
        
        
        264.1
        
        
        
        177.3Accrued reclamation costs
        
        
        80.0
        
        
        
        83.0Other non-current liabilities and deferred credits
        
        
        5.5
        
        
        
        6.72,580.5
        
        
        
        2,458.1Shareholders EquityShare Capital
        
        
        1,186.9
        
        
        
        1,182.5Contributed Surplus
        
        
        264.2
        
        
        
        264.2Retained Earnings

        
        
        471.9
        
        
        
        463.3Foreign Currency Translation Adjustment
        
        
        (20.9
        )
        
        
        (20.9
        )Accumulated Other Comprehensive Income
        
        
        (9.1
        )
        
        
        29.81,893.0
        
        
        
        1,918.9$
        4,473.5
        
        
        $
        4,377.0




60



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##### 



Notes to the Consolidated Financial Statementsin millions of US Dollars except per share amounts



29.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED) Supplemental Schedule of Consolidated Income and Retained Earnings
For the Years Ended December 31 2002
        
        2001
        
        2000Net sales
        
        $
        2,209.5
        
        
        $
        2,387.0
        
        
        $
        2,541.0Cost of goods sold
        
        
        1,816.4
        
        
        
        1,938.2
        
        
        
        1,981.4Gross Margin
        
        
        393.1
        
        
        
        448.8
        
        
        
        559.6Selling, distribution and administrative
        
        
        172.2
        
        
        
        181.3
        
        
        
        198.7Provincial mining and other taxes
        
        
        68.0
        
        
        
        70.0
        
        
        
        77.2Provision for plant closures and office consolidation
        
        
        
        
        
        
        9.0
        
        
        
        13.9Foreign exchange loss (gain)
        
        
        5.5
        
        
        
        (13.7
        )
        
        
        (8.1
        )Other income
        
        
        (30.5
        )
        
        
        (26.5
        )
        
        
        (48.4
        )215.2
        
        
        
        220.1
        
        
        
        233.3Operating Income
        
        
        177.9
        
        
        
        228.7
        
        
        
        326.3Interest Expense
        
        
        83.1
        
        
        
        80.3
        
        
        
        61.6Income Before Income Taxes
        
        
        94.8
        
        
        
        148.4
        
        
        
        264.7Income Taxes
        
        
        34.2
        
        
        
        53.8
        
        
        
        66.9Net Income
        
        
        60.6
        
        
        
        94.6
        
        
        
        197.8Retained Earnings, Beginning of Year
        
        
        463.3
        
        
        
        420.6
        
        
        
        274.7Dividends
        
        
        (52.0
        )
        
        
        (51.9
        )
        
        
        (51.9
        )Retained Earnings, End of Year
        
        $
        471.9
        
        
        $
        463.3
        
        
        $
        420.6Net Income Per Share  Basic
        
        $
        1.16
        
        
        $
        1.82
        
        
        $
        3.77Net Income Per Share  Diluted
        
        $
        1.16
        
        
        $
        1.81
        
        
        $
        3.77Dividends Per Share
        
        $
        1.00
        
        
        $
        1.00
        
        
        $
        0.99 Supplemental Schedule of Consolidated Comprehensive Income
For the Years Ended December 31 2002
        
        2001
        
        2000Net income
        
        $
        60.6
        
        
        $
        94.6
        
        
        $
        197.8Other comprehensive (loss) incomeChange in unrealized holding gain on available-for-sale securities
        
        
        (42.6
        )
        
        
        (6.8
        )
        
        
        15.5Increase (decrease) in fair market value of natural gas hedging contracts
        
        
        66.0
        
        
        
        (165.6
        )
        
        
        Minimum pension liability
        
        
        (68.7
        )
        
        
        
        
        
        
        Future income taxes related to other Comprehensive Income
        
        
        16.3
        
        
        
        62.4
        
        
        
        (4.3
        )(29.0
        )
        
        
        (110.0
        )
        
        
        11.2Comprehensive income (loss)
        
        $
        31.6
        
        
        $
        (15.4
        )
        
        $
        209.0 Consolidated Schedule of Accumulated Other Comprehensive Income
For the Years Ended December 31 2002
        
        2001
        
        2000Accumulated other comprehensive income, beginning of year
        
        $
        29.8
        
        
        $
        28.1
        
        
        $
        16.9SFAS 133 cumulative effect transition adjustment net of tax
        
        
        
        
        
        
        139.8
        
        
        
        Natural gas hedging gains reclassified to earnings net of tax
        
        
        (9.9
        )
        
        
        (28.1
        )
        
        
        Other comprehensive (loss) income net of tax
        
        
        (29.0
        )
        
        
        (110.0
        )
        
        
        11.2Accumulated other comprehensive (loss) income, end of year
        
        $
        (9.1
        )
        
        $
        29.8
        
        
        $
        28.1







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Notes to the Consolidated
Financial Statementsin millions of US Dollars except per share amounts
      29.   UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

Supplemental Schedule of Consolidated Cash Flow

For the Years Ended December 31 2002
        
        
        2001
        
        
        2000Operating ActivitiesNet income
        
        $
        60.6
        
        
        $
        94.6
        
        
        $
        197.8Items not affecting cashDepreciation and amortization
        
        
        208.1
        
        
        
        176.0
        
        
        
        177.2Loss (gain) on disposal of assets
        
        
        1.0
        
        
        
        0.4
        
        
        
        (17.9
        )Provision for plant closures and office consolidation
        
        
        
        
        
        
        
        
        
        
        10.7Foreign exchange on future tax
        
        
        1.0
        
        
        
        (8.2
        )
        
        
        (5.5
        )Provision for future income tax
        
        
        10.0
        
        
        
        33.3
        
        
        
        34.2Provision for post-retirement/post-employment benefits
        
        
        18.2
        
        
        
        2.1
        
        
        
        10.9Changes in non-cash operating working capitalAccounts receivable
        
        
        (11.1
        )
        
        
        69.9
        
        
        
        (52.2
        )Inventories
        
        
        (14.2
        )
        
        
        (76.1
        )
        
        
        (27.4
        )Prepaid expenses
        
        
        (3.9
        )
        
        
        2.3
        
        
        
        (3.1
        )Accounts payable and accrued charges
        
        
        27.7
        
        
        
        (235.6
        )
        
        
        128.4Current income taxes
        
        
        23.4
        
        
        
        (21.6
        )
        
        
        20.6Accrued reclamation costs
        
        
        (3.0
        )
        
        
        (3.7
        )
        
        
        (2.4
        )Other non-current liabilities and deferred credits
        
        
        (1.4
        )
        
        
        0.6
        
        
        
        (10.3
        )Cash provided by operating activities
        
        
        316.4
        
        
        
        34.0
        
        
        
        461.0Investing ActivitiesAdditions to property, plant and equipment
        
        
        (212.2
        )
        
        
        (513.7
        )
        
        
        (185.6
        )Acquisition of Albright & Wilson Company
        
        
        
        
        
        
        
        
        
        
        (32.0
        )Investment in SQM
        
        
        (23.2
        )
        
        
        (130.4
        )
        
        
        Proceeds from disposal of assets
        
        
        
        
        
        
        
        
        
        
        8.6Additions to other assets
        
        
        (36.0
        )
        
        
        (4.2
        )
        
        
        (37.0
        )Cash used in investing activities
        
        
        (271.4
        )
        
        
        (648.3
        )
        
        
        (246.0
        )Financing ActivitiesProceeds from long-term obligations
        
        
        11.2
        
        
        
        600.0
        
        
        
        11.1Repayment of long-term obligations
        
        
        (1.3
        )
        
        
        (5.8
        )
        
        
        (36.1
        )Proceeds from short-term debt
        
        
        
        
        
        
        12.2
        
        
        
        169.5Repayment of short-term debt
        
        
        (28.1
        )
        
        
        
        
        
        
        (155.2
        )Dividends
        
        
        (52.0
        )
        
        
        (51.9
        )
        
        
        (51.9
        )Repurchase of shares
        
        
        
        
        
        
        
        
        
        
        (104.2
        )Issuance of shares
        
        
        4.4
        
        
        
        5.1
        
        
        
        7.8Cash (used in) provided by financing activities
        
        
        (65.8
        )
        
        
        559.6
        
        
        
        (159.0
        )(Decrease) Increase in Cash and Cash Equivalents
        
        
        (20.8
        )
        
        
        (54.7
        )
        
        
        56.0Cash and Cash Equivalents, Beginning of Year
        
        
        45.3
        
        
        
        100.0
        
        
        
        44.0Cash and Cash Equivalents, End of Year
        
        $
        24.5
        
        
        $
        45.3
        
        
        $
        100.0


62





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Board of Directors  Frederick J. Blesi,
of Glenview, Illinois, is a
retired Chairman and CEO
of the Phosphate Chemicals
Export Association
Inc.(PhosChem), principal
exporter of US phosphate
chemicals.
Before joining
PhosChem, he was Vice
President, International
with International
Minerals and Chemical
Corporation. He joined the
PCS Board in 2001. (3,5) Douglas J. Bourne,of
Houston, Texas, is former
Chairman and CEO of Battle
Mountain Gold Company and
of Duval Corporation, the
mining subsidiary of
Pennzoil Company. He has
held many positions in
various fertilizer and
mining associations. He
joined the PCS Board in
1990. (1,4) William J. Doyle, of
Saskatoon, Saskatchewan, is
President and CEO of Potash
Corporation of Saskatchewan
Inc. He became President of
PCS Sales in 1987, after a
career with International
Minerals and Chemical
Corporation. He is Chairman
of Canpotex Limited, a
director of the Potash &
Phosphate Institute and The
Fertilizer Institute, and
is on the College Board of
Advisors at Georgetown
University. He joined the
PCS Board in 1989. (1) Wade Fetzer III,of
Glencoe, Illinois, is
Retired Partner with the
investment banking firm
Goldman Sachs. He sits on
the boards of Serologicals
Corporation, Sphere
Communications and Northern
Star Broadcasting. He is
also on the Kellogg Alumni
Advisory Board and the
boards of the University of
Wisconsin Foundation and
Rush-Presbyterian St. Lukes
Medical Center. He joined
the PCS Board in 2002. (2,3) Dallas J. Howe,of
Calgary, Alberta, serves in
a management role with GE
Medical Systems Information
Technology, of which the
company he formerly owned,
BDM Information Systems, is
now a part. He is owner and
CEO of DSTC Ltd., a
technology investment
company, and a director of
Advanced Data Systems Ltd.,
as well as a member of the
University of Saskatchewan
Board of Governors. A
director of the PCS Crown
corporation from 1982 to
1989, he joined the PCS Inc.
Board in 1991. (2,3) Jeffrey J. McCaig,
of Calgary, Alberta, is
President, CEO and a
director of Trimac
Corporation, a bulk
trucking and third-party
logistics company. Prior
to that, he practiced
law, specializing in
corporate financing and
securities. He is a
director of BOVAR
Corporation. He joined
the PCS Board in 2001. (3,5)
 (Board of Directors Photos)
 Mary Mogford,
of Newcastle, Ontario, is a
Corporate Director and Partner in Mogford
Campbell Inc., a strategic business and financial
consulting company. A former Deputy Minister
of Finance and Deputy Minister of Natural
Resources in Ontario, she is a director of Empire
Company Ltd., Falconbridge Ltd., MDS Inc. and
Sears Canada Inc., and a member of the
Altamira Advisory Council. She joined the
PCS Board in 2001. (2,5) Donald E.
Phillips,of Brandon, Mississippi, is
Chairman of the Board of Potash Corporation of
Saskatchewan Inc. Former President and CEO
of Pitman-Moore Inc. and former Chairman of
the board of directors of Synbiotics Inc., San
Diego, California, he is a director of Great Lakes
REIT Inc., Oak Brook, Illinois. He serves on the
boards of trustees of two colleges and is
president of the development foundation of
another. He joined the PCS Board in 1991. (1,2) Paul J. Schoenhals,of Calgary, Alberta,
President of Petroleum Industry Training
Service, was Chairman of Potash Corporation
of Saskatchewan, the Crown corporation,
from 1987 to 1989. He is a former Member
of the Legislative Assembly and Cabinet
Minister in Saskatchewan. He joined the
PCS Inc. Board in 1992. (3,4) E. Robert Stromberg, Q.C.,of Saskatoon,
Saskatchewan, is associated with the
Saskatchewan law firm Robertson Stromberg.
He is a director of NorSask Forest Products Inc.
and Hitachi Canadian Industries Ltd. and
Chairman of the Saskatoon Airport Authority.
He joined the PCS Board in 1991. (1,4) Jack G. Vicq,Professor Emeritus of
Accounting, University of Saskatchewan,
was formerly Associate Dean of Commerce
and responsible for the Centre for International
Business Studies. He held the A.W. Johnson
Distinguished Chair in Public Policy in the
Saskatchewan Department of Finance until
May 30, 2002, and is currently Chairman of
the Provincial Court Commission. He joined
the PCS Board in 1989. (1,5) Thomas J. Wright,of Raleigh, North Carolina,
retired as President of PCS Phosphate in 1999.
Formerly President and CEO of Texasgulf Inc.,
the predecessor to PCS Phosphate, he has been
active in many fertilizer industry associations.
He joined the PCS Board in 1999. (2,4)
  1Executive committee   2Corporate governance and nominating committee   3Compensation committee4Safety, health and environment committee   5Audit committee 63




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##### 



Shareholder information  Annual Meeting
The Annual Shareholders
meeting will be held at 10:30
a.m. Central Standard Time
May 8, 2003in the Adam
Ballroom, Delta Bessborough
Hotel,601 Spadina Crescent
East, Saskatoon,Saskatchewan. It will be carried live on
the companys web
site, www.potashcorp.com. Holders of common shares as
of March 20, 2003 are
entitled to vote at the meeting andare encouraged to participate.
 Common Share Transfer Agent
In Canada:
CIBC Mellon Trust
CompanySuite 750
 One Lombard
PlaceWinnipeg,
Manitoba R3B 0X3
Phone: (204) 987-2490
            (800) 387-0825Web
site: www.cibcmellon.com In the United States:
Mellon Investor Services, L.L.C.
85 Challenger Road, Overpeck Center
Ridgefield Park, New Jersey 07660
Phone: (800) 526-0801
Web site: www.melloninvestor.com
 Interim Reports, News Releasesand Form 10-K
Non-registered shareholders
who wish to receivequarterly reports should
contact the CorporateRelations department. News
releases are availablevia
fax and e-mail. Copies of the companys
most recent Form 10-K are
available upon request or
on our web site. Shares Listed
Toronto Stock Exchange
New York Stock Exchange Ticker Symbol: POT
  Dividends
Dividend amounts paid to
shareholders residentin
Canada are adjusted by the
exchange rate applicable on
the dividend record date. Dividendsare normally paid
in February, May, August and
November, with record dates
normally set approximately
three weeks earlier. Future
cash dividends will be paid
out of, and are conditioned
upon, the companys available
earnings. Shareholders who
wish to have their dividends
deposited directly in their
bank accounts should contact
the transfer agent and
registrar, CIBCMellon Trust
Company.
 Registered shareholders can
have dividends reinvested in
newly issued common shares of
PotashCorp at prevailing
market rates.
 Shareholders with address
changes or those withinquiries concerning their
Potash Corporation ofSaskatchewan Inc. stock
are invited to contact:
CIBC Mellon Trust (address
above), orJohn Hampton,
Corporate Secretary
PotashCorpSuite 500, 122 
1st Avenue SouthSaskatoon, Saskatchewan
S7K 7G3. Investor Inquiries
Betty-Ann Heggie, Senior
Vice President,Corporate
Relations
Canada: (800) 667-0403
US:         (800) 667-3930
e-mail: corporate.relations@potashcorp.com
Visit us at www.potashcorp.com
 POT Share Ownership
Geographic Distribution

(BAR GRAPH)






Information for
ShareholdersOutside
Canada
Dividends paid to residents
in countries with which
Canada has bilateral tax
treaties are generally
subject to the 15 percent
Canadian non-resident
withholding tax. There is no
Canadian tax on gains from
the sale of shares or debt
instruments owned by
non-residents not carrying on
business in Canada. No
government in Canada levies
estate taxes or succession
duties.
 Ownership
On February 27, 2003, there
were 2,125 holders of record
of the companys common
shares.




POT Stock Price  NYSE Composite (DOT GRAPH)






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Common Share Pricesand Volumes The adjacent table sets
forth the high and low
prices, as well as the
volumes, for the companys
common shares as traded on
the Toronto Stock Exchange
and the New York Stock
Exchange (composite
transactions) on a
quarterly basis. Potash
Corporation of
Saskatchewan Inc. is on the
S&P/TSX 60 index and the
TSX 100. 1 Trading prices are in CDN$  (POTASHCORP LOGO)




Toronto Stock Exchange1
    
    
    New York Stock ExchangeHigh
    
    
    Low
    
    
    Volume
    
    
    High
    
    
    Low
    
    
    Volume2002First Quarter
    
    
    105.65
    
    
    
    90.34
    
    
    
    4,938,188
    
    
    
    66.30
    
    
    
    56.50
    
    
    
    6,907,200Second Quarter
    
    
    109.02
    
    
    
    93.00
    
    
    
    5,751,984
    
    
    
    68.38
    
    
    
    60.75
    
    
    
    9,058,600Third Quarter
    
    
    102.00
    
    
    
    79.38
    
    
    
    8,034,108
    
    
    
    66.50
    
    
    
    49.65
    
    
    
    15,082,300Fourth Quarter
    
    
    108.50
    
    
    
    93.55
    
    
    
    7,880,053
    
    
    
    69.20
    
    
    
    60.30
    
    
    
    14,913,600Year 2002
    
    
    109.02
    
    
    
    79.38
    
    
    
    26,604,333
    
    
    
    69.20
    
    
    
    49.65
    
    
    
    45,961,7002001First Quarter
    
    
    115.55
    
    
    
    84.60
    
    
    
    9,733,001
    
    
    
    76.81
    
    
    
    54.50
    
    
    
    12,196,600Second Quarter
    
    
    98.55
    
    
    
    81.00
    
    
    
    8,030,290
    
    
    
    62.73
    
    
    
    53.10
    
    
    
    7,783,400Third Quarter
    
    
    101.67
    
    
    
    81.25
    
    
    
    6,807,762
    
    
    
    65.30
    
    
    
    52.23
    
    
    
    9,002,800Fourth Quarter
    
    
    103.98
    
    
    
    85.05
    
    
    
    4,396,052
    
    
    
    64.89
    
    
    
    54.40
    
    
    
    6,233,200Year 2001

    
    
    115.55
    
    
    
    81.00
    
    
    
    28,967,105
    
    
    
    76.81
    
    
    
    52.23
    
    
    
    35,216,000




64



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Corporate
Information Corporate Officers
andKey Management Potash Corporation
ofSaskatchewan
Inc.William J. Doyle
President and Chief Executive OfficerJames F. Dietz
Executive Vice President and Chief Operating OfficerWayne R. Brownlee
Senior Vice President, Treasurer and Chief Financial OfficerJohn L. M. Hampton
Senior Vice President, General Counsel and SecretaryBetty-Ann L. Heggie
Senior Vice President, Corporate RelationsBarry E. Humphreys
Senior Vice President and Chief Information OfficerBarbara Jane Irwin
Senior Vice President, Administration G. David Delaney
President, PCS SalesGarth W. Moore
President, PCS PotashThomas J. Regan, Jr.
President, PCS Phosphate
 Glossary Fertilizer MeasuresMetric tonne
2204.6 pounds, used for sales outside the
United States; to convert to short tons, multiply by 1.1023Short ton
2000 pounds, used for sales in the United
States; to convert to metric tonnes, divide by
1.1023K2O tonne
Measures the potassium content of fertilizers
having different chemical analyses; to
convert to a KCl tonne, divide by 0.61P2O5 tonne
Measures the phosphorus content of
fertilizers having different chemical analysesN tonne
Measures the nitrogen content of fertilizers
having different chemical analysesNutrient tonne
Measures the nutrient weight of potassium,
phosphate and nitrogen fertilizers; consists of
K2O tonnes, P2O5 tonnes and N tonnesProduct tonne
Standard measure of the weights of all types
of potash, phosphate and nitrogen products
 General TermsCanpotex
An export company owned by all
Saskatchewan producers (PotashCorp, IMC
Global and Agrium Inc.). Sales through
Canpotex are generally allocated pro rata to
each producer on the basis of productive
capacity. PotashCorp provides approximately
54% of Canpotex product.PhosChem
An association formed under the Webb-Pomerence Act for US exports of phosphate
fertilizer products. Members are PotashCorp,
IMC Global and Mississippi Chemical.
PCS Sales is responsible for export sales of
liquid fertilizers for all PhosChem members
while IMC Global is responsible for sales of
solid fertilizers for members.North America and Offshore Markets
The North American market includes the
United States and Canada while the Offshore
market is the rest of the world.FSU
Former Soviet UnionGreenfield
New operation built on undeveloped site
   Karen G. Chasez
Vice President, ProcurementRobert A. Jaspar
Vice President, Internal AuditDonald R. Roberts
Vice President, Safety, Health and EnvironmentDenis A. Sirois
Vice President and Corporate Controller Corporate
OfficesPotashCorp
Suite 500, 122  1st Avenue South
Saskatoon, SK S7K 7G3
Phone: (306) 933-8500PotashCorp
Suite 400, 1101 Skokie Boulevard
Northbrook, IL 60062
Phone: (847) 849-4200
 (PICTURE)
   Scientific Terms Potash
    
    KCl
    
    potassium chlorideK20
    
    potassium oxideKNO3
    
    potassium nitrateNaNO3
    
    sodium nitratePhosphate
    
    P2O5
    
    phosphoric acidMGA
    
    merchant grade acid, 54% P2O5 (liquid)DAP
    
    diammonium phosphate, 46% P2O5 (solid)MAP
    
    monoammonium phosphate, 52% P2O5 (solid)SPA
    
    superphosphoric acid, 70% P2O5 (liquid)Nitrogen
    
    NH3
    

anhydrous
ammonia, 82% N (gas, liquid)HNO3
    
    nitric acid (liquid)NH4NO3
    

ammonium nitrate, 34% N (solid, liquid)CO(NH2)2
    
    urea, 46% N (solid)UAN solution
    
    nitrogen solution, 28-32% N (liquid)
 MGM COMMUNICATIONS, SASKATOON, CANADA
 Nitrogen Production Factors To produce
1 short ton of:
    
    Requires:Ammonia
    
    33.5 million Btu of natural gas (CO2)Urea solution
    
    0.58 tons of ammonia0.78 tons of carbon dioxide (CO2)Urea prills (46% N)
    
    1.01 tons of urea solution (CO2)Nitric acid (22% N)
    
    0.29 tons of ammonia (CO2)Ammonium nitrate solution
    
    0.80 tons of nitric acid (CO2)0.22 tons of ammonia (CO2)UAN solution (32% N)
    
    0.45 tons of ammonium nitrate solution (CO2)0.35 tons of urea solution (CO2)
 (RECYCLE LOGO)
    
    It is the policy
of PotashCorp to manage its operations responsibly in order to safeguard those natural resources related to or affected by its activities. In keeping with this policy, the Annual Report uses paper containing at least 10% post-consumer recycled fiber and is recyclable.




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(BACK COVER)