<PAGE>   1
 
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-Q
 (MARK ONE)
     [X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
 
                                       OR
 
     [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
           FOR THE TRANSITION PERIOD FROM              TO 
                                          ------------    ----------
 
                         COMMISSION FILE NUMBER 1-11028
 
                            ARCADIAN PARTNERS, L.P.
             (Exact name of registrant as specified in its charter)
 
                   DELAWARE                                     62-1500798
       (State or other jurisdiction of                       (I.R.S. Employer
        incorporation or organization)                      Identification No.)
 
                         6750 POPLAR AVENUE, SUITE 600
                         MEMPHIS, TENNESSEE 38138-7419
                    (Address of principal executive offices)
                                   (Zip Code)
 
                                 (901) 758-5200
              (Registrant's telephone number, including area code)
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.     Yes  [X]  No  [ ]
 
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<PAGE>   2
 
                            ARCADIAN PARTNERS, L.P.
 
                               TABLE OF CONTENTS
                                      FOR
                         QUARTERLY REPORT ON FORM 10-Q
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
                               PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
  Independent Auditors' Report........................................................    3
  Condensed Consolidated Balance Sheet as of September 30, 1996, and December 31,
     1995.............................................................................    4
  Condensed Consolidated Statements of Operations for --
     Nine Months Ended September 30, 1996 and 1995....................................    5
     Three Months Ended September 30, 1996 and 1995...................................    6
  Condensed Consolidated Statements of Cash Flows for --
     Nine Months Ended September 30, 1996 and 1995....................................    7
     Three Months Ended September 30, 1996 and 1995...................................    8
  Notes to Condensed Consolidated Financial Statements................................    9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS....................................................................   12
                                PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................................   15
SIGNATURE.............................................................................   16
</TABLE>
 
                                        1
<PAGE>   3
 
                                     PART I
 
                             FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
 
                                 See next page.
 
                                        2
<PAGE>   4
 
                          INDEPENDENT AUDITORS' REPORT
 
The Partners
Arcadian Partners, L.P.:
 
     We have reviewed the condensed consolidated balance sheet of Arcadian
Partners, L.P. as of September 30, 1996, and the related condensed consolidated
statements of operations and cash flows for the three and nine-month periods
ended September 30, 1996 and 1995, in accordance with standards established by
the American Institute of Certified Public Accountants.
 
     A review of interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
 
     Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
 
     We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Arcadian Partners, L.P. as of
December 31, 1995, and the related consolidated statements of operations,
partners' capital, and cash flows for the year then ended (not presented
herein); and in our report dated February 9, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1995, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
 
                                            KPMG PEAT MARWICK LLP
 
Memphis, Tennessee
November 14, 1996
 
                                        3
<PAGE>   5
 
                            ARCADIAN PARTNERS, L.P.
 
                      CONDENSED CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,
                                                                         1996          DECEMBER 31,
                                                                      (UNAUDITED)          1995
                                                                        ($000)            ($000)
                                                                     -------------     ------------
<S>                                                                  <C>               <C>
                                              ASSETS
Cash and Cash Equivalents..........................................    $  111,518       $  195,809
Restricted Reserve Accounts........................................        57,801           50,450
Accounts Receivable, Net...........................................       124,192          108,910
Inventories........................................................       118,342          136,623
Other..............................................................        12,083            6,539
                                                                       ----------       ----------
          Total Current Assets.....................................       423,936          498,331
Property, Plant and Equipment, Net.................................       557,768          561,979
Other, Net.........................................................        68,889           61,374
                                                                       ----------       ----------
                                                                       $1,050,593       $1,121,684
                                                                       ==========       ==========
                                LIABILITIES AND PARTNERS' CAPITAL
Accounts Payable and Accrued Liabilities...........................    $  132,537       $  154,272
Current Portion of Long-Term Debt..................................        15,000           15,000
                                                                       ----------       ----------
          Total Current Liabilities................................       147,537          169,272
                                                                       ----------       ----------
Long-Term Debt, Less Current Portion...............................       510,000          525,000
Deferred Foreign Income Taxes......................................        44,128           51,566
Other Long-Term Liabilities........................................        19,692           20,881
                                                                       ----------       ----------
                                                                          573,820          597,447
                                                                       ----------       ----------
Partners' Capital..................................................       329,236          354,965
                                                                       ----------       ----------
                                                                       $1,050,593       $1,121,684
                                                                       ==========       ==========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        4
<PAGE>   6
 
                            ARCADIAN PARTNERS, L.P.
 
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                           NINE MONTHS ENDED
                                                                             SEPTEMBER 30,
                                                                         ---------------------
                                                                           1996         1995
                                                                          ($000)       ($000)
                                                                         --------     --------
<S>                                                                      <C>          <C>
Net Sales..............................................................  $935,164     $961,176
Cost of Sales..........................................................   680,415      684,569
                                                                         --------     --------
  Gross Profit.........................................................   254,749      276,607
Selling, General and Administrative Expenses...........................    39,711       45,270
                                                                         --------     --------
  Operating Income.....................................................   215,038      231,337
Interest Expense, Net..................................................    31,000       37,373
Other, Net.............................................................     1,419          137
                                                                         --------     --------
Income Before Income Taxes and Minority Interest.......................   182,619      193,827
Income Tax Provision...................................................    11,392       17,854
                                                                         --------     --------
Income Before Minority Interest........................................   171,227      175,973
Minority Interest......................................................    (1,362)      (1,370)
                                                                         --------     --------
Net Income.............................................................  $169,865     $174,603
                                                                         ========     ========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        5
<PAGE>   7
 
                            ARCADIAN PARTNERS, L.P.
 
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                             SEPTEMBER 30,
                                                                         ---------------------
                                                                           1996         1995
                                                                          ($000)       ($000)
                                                                         --------     --------
<S>                                                                      <C>          <C>
Net Sales..............................................................  $293,482     $269,479
Cost of Sales..........................................................   231,402      196,600
                                                                         --------     --------
  Gross Profit.........................................................    62,080       72,879
Selling, General and Administrative Expenses...........................    15,318       16,570
                                                                         --------     --------
  Operating Income.....................................................    46,762       56,309
Interest Expense, Net..................................................    10,963       11,802
Other, Net.............................................................       710         (186)
                                                                         --------     --------
Income Before Income Taxes and Minority Interest.......................    35,089       44,693
Income Tax Provision...................................................     1,784        5,785
                                                                         --------     --------
Income Before Minority Interest........................................    33,305       38,908
Minority Interest......................................................      (268)        (272)
                                                                         --------     --------
Net Income.............................................................  $ 33,037     $ 38,636
                                                                         ========     ========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        6
<PAGE>   8
 
                            ARCADIAN PARTNERS, L.P.
 
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED
                                                                            SEPTEMBER 30,
                                                                       -----------------------
                                                                         1996          1995
                                                                        ($000)        ($000)
                                                                       ---------     ---------
<S>                                                                    <C>           <C>
Cash Flows From Operating Activities:
  Net Income.........................................................  $ 169,865     $ 174,603
  Adjustments to Reconcile Net Income to Cash from Operating
     Activities:
     Depreciation and Amortization...................................     45,906        46,228
     Amortization of Deferred Financing Costs........................      1,663         1,916
     Minority Interest...............................................      1,362         1,370
     Deferred Foreign Income Taxes...................................     (7,438)        5,804
     Net Change in Operating Assets and Liabilities:
       Short-Term Investments........................................         --         8,751
       Accounts Receivable...........................................    (15,282)       18,915
       Inventories...................................................     18,281        26,039
       Other Current Assets..........................................     (5,544)       (3,946)
       Accounts Payable, Accrued Expenses and Other Liabilities......    (22,252)      (17,525)
       Other, Net....................................................     (6,160)       (5,514)
                                                                       ---------     ---------
          Cash Provided by (Used for) Operating Activities...........    180,401       256,641
                                                                       ---------     ---------
Cash Flows from Investing Activities:
  Purchase of Property, Plant and Equipment, Net.....................    (30,634)      (13,747)
  Rotational Plant Maintenance Costs.................................    (14,294)       (1,603)
                                                                       ---------     ---------
          Cash Provided by (Used for) Investing Activities...........    (44,928)      (15,350)
                                                                       ---------     ---------
Cash Flows from Financing Activities:
  Restricted Reserve Accounts........................................     (7,351)       25,931
  Cash Distributions.................................................   (197,628)      (92,408)
  Proceeds from (Repayment of) Debt, Net.............................    (15,000)      (63,218)
  Financing Fees.....................................................        215        (1,287)
                                                                       ---------     ---------
          Cash Provided by (Used for) Financing Activities...........   (219,764)     (130,982)
                                                                       ---------     ---------
Increase (Decrease) in Cash and Cash Equivalents.....................    (84,291)      110,309
Cash and Cash Equivalents at Beginning of Period.....................    195,809        42,738
                                                                       ---------     ---------
Cash and Cash Equivalents at End of Period...........................  $ 111,518     $ 153,047
                                                                       =========     =========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        7
<PAGE>   9
 
                            ARCADIAN PARTNERS, L.P.
 
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                            SEPTEMBER 30,
                                                                        ----------------------
                                                                          1996          1995
                                                                         ($000)        ($000)
                                                                        ---------     --------
<S>                                                                     <C>           <C>
Cash Flows From Operating Activities:
  Net Income..........................................................  $  33,037     $ 38,636
  Adjustments to Reconcile Net Income to Cash from Operating
     Activities:
     Depreciation and Amortization....................................     15,300       15,184
     Amortization of Deferred Financing Costs.........................        584          597
     Minority Interest................................................        268          272
     Deferred Foreign Income Taxes....................................     (1,934)        (919)
     Net Change in Operating Assets and Liabilities:
       Accounts Receivable............................................    (20,989)      (7,799)
       Inventories....................................................    (14,601)      (3,397)
       Other Current Assets...........................................     (6,682)       1,925
       Accounts Payable, Accrued Expenses and Other Liabilities.......     10,077       26,368
       Other, Net.....................................................     (2,428)      (4,469)
                                                                        ---------     --------
          Cash Provided by (Used for) Operating Activities............     12,632       66,398
                                                                        ---------     --------
Cash Flows from Investing Activities:
  Purchase of Property, Plant and Equipment, Net......................    (13,357)      (5,580)
  Rotational Plant Maintenance Costs..................................    (13,633)      (1,126)
                                                                        ---------     --------
          Cash Provided by (Used for) Investing Activities............    (26,990)      (6,706)
                                                                        ---------     --------
Cash Flows from Financing Activities:
  Restricted Reserve Accounts.........................................    (10,718)      31,887
  Cash Distributions..................................................   (152,607)     (59,313)
  Proceeds from (Repayment of) Debt, Net..............................         --           (6)
  Financing Fees......................................................        (20)        (232)
                                                                        ---------     --------
          Cash Provided by (Used for) Financing Activities............   (163,345)     (27,664)
                                                                        ---------     --------
Increase (Decrease) in Cash and Cash Equivalents......................   (177,703)      32,028
Cash and Cash Equivalents at Beginning of Period......................    289,221      121,019
                                                                        ---------     --------
Cash and Cash Equivalents at End of Period............................  $ 111,518     $153,047
                                                                        =========     ========
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        8
<PAGE>   10
 
                            ARCADIAN PARTNERS, L.P.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
1. BASIS OF PRESENTATION
 
     The accompanying condensed consolidated financial statements of Arcadian
Partners, L.P. ("Partners") and its subsidiaries (collectively "Partnership")
are unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
 
     In the opinion of Arcadian Corporation ("Corporation"), the general partner
of the Partnership, the accompanying condensed consolidated financial statements
contain all adjustments (consisting of only normal, recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows of the Partnership as of the dates and for the periods presented.
 
     Because of the seasonal nature of the Partnership's business, the results
of operations for the periods presented are not necessarily indicative of the
results of operations for a full fiscal year.
 
     The accompanying condensed consolidated financial statements of the
Partnership include the results of operations of Partners and its subsidiaries,
including Arcadian Fertilizer, L.P. ("Fertilizer"), on a consolidated basis. All
intercompany balances and transactions have been eliminated in consolidation.
 
2. SUPPLEMENTAL CASH FLOW INFORMATION
 
     The Partnership considers highly liquid investments with an original
maturity of three months or less to be cash equivalents, except for those which
are part of the restricted reserve accounts. The following is supplemental cash
flow information:
 
<TABLE>
<CAPTION>
                                                        NINE MONTHS ENDED     THREE MONTHS ENDED
                                                          SEPTEMBER 30,          SEPTEMBER 30,
                                                        ------------------    -------------------
                                                         1996       1995       1996         1995
                                                        ($000)     ($000)     ($000)       ($000)
                                                        -------    -------    ------       ------
<S>                                                     <C>        <C>        <C>          <C>
Interest Paid.........................................  $32,281    $33,740    $8,947       $4,830
Income Taxes Paid.....................................   13,750      2,151     3,097          121
</TABLE>
 
3. INVENTORIES
 
     Inventories consist of the following:
 
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,
                                                                         1996          DECEMBER 31,
                                                                      (UNAUDITED)          1995
                                                                        ($000)            ($000)
                                                                     -------------     ------------
<S>                                                                  <C>               <C>
Finished Products..................................................     $ 46,872         $ 70,459
Raw Materials and Supplies.........................................       71,470           66,164
                                                                        --------         --------
                                                                        $118,342         $136,623
                                                                        ========         ========
</TABLE>
 
                                        9
<PAGE>   11
 
                            ARCADIAN PARTNERS, L.P.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
4. DEBT
 
     Debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30,
                                                                     1996          DECEMBER 31,
                                                                  (UNAUDITED)          1995
                                                                    ($000)            ($000)
                                                                 -------------     ------------
    <S>                                                          <C>               <C>
    First Mortgage Notes.......................................     $185,000         $200,000
    Senior Notes...............................................      340,000          340,000
    Revolving Credit Facility..................................           --               --
                                                                    --------         --------
                                                                     525,000          540,000
    Less Current Portion of Long Term Debt.....................       15,000           15,000
                                                                    --------         --------
                                                                    $510,000         $525,000
                                                                    ========         ========
</TABLE>
 
     At September 30, 1996, there was no outstanding balance on the
Partnership's $100 million revolving credit facility, and the amount available
for borrowing in the form of loans and letters of credit, after considering
outstanding and committed letters of credit of $40 million, was $60 million.
 
5. RESTRICTED RESERVE ACCOUNTS
 
     At September 30, 1996, restricted reserve accounts of $58 million were
comprised of a $28 million Cash Collateral Account maintained by Fertilizer for
the benefit of the holders of the First Mortgage Notes, a $20 million Debt
Service Reserve Account maintained by Partners for the benefit of the holders of
the 10 3/4% Series B Senior Notes due 2005 ("Senior Notes"), and a $10 million
Cash Reserve Account maintained by Fertilizer for the benefit of the Second
Lessor (as defined in Note 6).
 
6. COMMITMENTS AND CONTINGENCIES
 
OPERATING LEASE COMMITMENT
 
     In March 1996, Fertilizer entered into a lease agreement with an
unaffiliated entity ("Second Lessor") with respect to an ammonia plant to be
constructed at the Trinidad plant site ("Second Trinidad Plant Lease"). Upon
completion of construction, the Second Lessor will lease the plant to
Fertilizer. The annual lease payments under the Second Trinidad Plant Lease are
expected to be approximately $21 million. The initial seven-year lease term is
renewable for an additional five-year term, subject to certain conditions. If
the Second Trinidad Plant Lease is not renewed or is otherwise terminated,
Fertilizer may be required to make a residual termination payment equal to 85%
of the estimated $285 million total cost of the project. In addition, the
Corporation has an option to purchase the plant during the term of the Second
Trinidad Plant Lease for a price approximating its fair market value at the date
of exercise. The plant is expected to be operational in 1998.
 
LAKE CHARLES PLANT
 
     In connection with an incident at its Lake Charles plant in 1992, the
Partnership is contesting penalties proposed by the United States Occupational
Safety and Health Administration ("OSHA") totaling $4 million. The OSHA legal
proceeding to date has generally been favorable to the Partnership. While
management and legal counsel believe that any civil penalty ultimately paid by
the Partnership will be substantially less than the remaining $4 million penalty
proposed by OSHA, they cannot predict with certainty the outcome of this
proceeding.
 
     In September 1996, the Partnership's liability insurers negotiated
preliminary settlements of substantially all of the civil litigation arising
from the Lake Charles incident. The settlements, which in the aggregate are
within the policy limits of the Partnership's liability insurance, are subject
to the negotiation and execution of definitive settlement agreements and, with
respect to the class action civil litigation, approval as to fairness by
 
                                       10
<PAGE>   12
 
                            ARCADIAN PARTNERS, L.P.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
the court. There remain three lawsuits against the Partnership arising from the
incident, which were brought by former employees at the Lake Charles plant who
allege that they were wrongfully terminated by the Partnership following the
incident. Management and legal counsel believe that these lawsuits are without
merit, and that there will be no material adverse effect on the Partnership upon
their resolution.
 
PORT AUTHORITY OF NEW YORK AND NEW JERSEY
 
     On March 13, 1996, the Corporation, two other nitrogen producers, and up to
30 unidentified parties were named as defendants in a lawsuit filed in the name
of the Port Authority of New York and New Jersey (the "Port Authority") in New
Jersey state court. The lawsuit was actually filed by attorneys hired by the
Port Authority's subrogated insurance carriers. The Port Authority's insurers
are seeking to recover damages allegedly incurred as a result of the explosion
at the World Trade Center in New York City on February 26, 1993. The Port
Authority's insurers allege in their complaint that the two other named
defendants and one or more unidentified parties (as manufacturers of ammonium
nitrate), the Corporation and one or more unidentified parties (as producers of
urea), and one or more unidentified makers of nitric acid are liable under
various tort theories for unspecified property damages, business interruption
losses, lost rent and other damages allegedly incurred by the Port Authority as
a result of the World Trade Center explosion. The Corporation and the other
defendants have removed the case to federal court in New Jersey. Pending the
resolution of the Port Authority's motion to disqualify its insurers' counsel,
the court stayed substantive proceedings in the lawsuit. That motion was
resolved by an order dated September 23, 1996, and substantive proceedings are
scheduled to resume on November 26, 1996. Although neither the Port Authority
nor its subrogated insurers have alleged or otherwise revealed the amount of
damages sought from the Corporation in the lawsuit, the Port Authority stated in
an affidavit submitted to the court in support of its motion to disqualify its
insurers' counsel that as of April 9, 1996, the Port Authority had submitted to
its insurers claims relating to the explosion totaling approximately $340
million, of which the insurers had paid approximately $160 million. The
Corporation is unaware of any basis for liability and intends to vigorously
defend the lawsuit.
 
7. MERGER
 
TERMINATION OF POTENTIAL BUSINESS COMBINATION WITH FREEPORT
 
     On September 2, 1996, the Corporation terminated its previously disclosed
non-binding letter of intent dated August 5, 1996, with Freeport-McMoRan Inc.
regarding their potential business combination.
 
PROPOSED ACQUISITION BY PCS
 
     On September 2, 1996, the Corporation, Potash Corporation of Saskatchewan
Inc. ("PCS"), and PCS Nitrogen, Inc., a wholly owned subsidiary of PCS ("Merger
Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which, subject to the satisfaction or waiver of certain conditions,
PCS will acquire the Corporation through the merger of the Corporation with and
into Merger Sub (the "Merger"). In the Merger, subject to adjustment and to
certain exceptions, each outstanding share of the Company's Common Stock,
including each share resulting from the mandatory conversion of the outstanding
shares of the Company's Mandatorily Convertible Preferred Stock, Series A
("Preferred Stock") immediately prior to the Merger, will be converted into the
right to receive $12.25 in cash and a fraction of a common share of PCS expected
to have a market value of between $12.75 and $14.75. The obligations of the
Corporation and PCS to consummate the Merger are subject to various conditions,
including the condition that the holders of a majority of the outstanding shares
of Common Stock and Preferred Stock, voting together as a single class, vote in
favor of the approval of the Merger Agreement. The Corporation expects to hold a
special meeting of stockholders in January 1997, at which the stockholders will
consider and vote upon the Merger Agreement. If the necessary stockholder vote
is obtained and all other conditions are satisfied or waived, the Corporation
expects that the Merger will be consummated shortly thereafter.
 
                                       11
<PAGE>   13
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
RESULTS OF OPERATIONS
 
     Because of the seasonal nature of the Partnership's business, the results
of operations for the periods presented are not necessarily indicative of the
results for a full fiscal year.
 
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
 
     For the nine months ended September 30, 1996, the Partnership generated net
income of $170 million, compared to net income of $175 million, for the same
period last year. Operating income decreased $16 million for the nine months
ended September 30, 1996, from the prior year period.
 
     For the nine months ended September 30, 1996, compared to the same period
last year, net sales decreased $26 million or 3%, of which 4% was related to
decreased selling prices, partially offset by a 1% increase in sales volumes.
Lower ammonia selling prices were partially offset by an increase in the selling
prices of nitrogen solutions. Higher sales volumes reflect increased sales
tonnage of low margin purchased ammonia for resale.
 
     Gross profit decreased $22 million for the reasons noted above. Gross
profit as a percentage of net sales decreased from 29% for the nine months ended
September 30, 1995, to 27% for the nine months ended September 30, 1996,
partially as a result of the lower ammonia selling prices. The per unit natural
gas cost included in cost of sales remained relatively flat.
 
     Selling, general and administrative expenses as a percentage of net sales
decreased from 5% for the nine months ended September 30, 1995, to 4% for the
nine months ended September 30, 1996.
 
     Net interest expense decreased 17% to $31 million in the nine months ended
September 30, 1996, compared to $37 million in the same period in 1995,
reflecting the improvement in the Partnership's net debt.
 
THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
 
     For the three months ended September 30, 1996, the Partnership generated
net income of $33 million compared to net income of $39 million for the same
period last year. Operating income decreased $10 million for the three months
ended September 30, 1996, from the prior year period.
 
     For the three months ended September 30, 1996, compared to the same period
last year, net sales increased $24 million or 9%, of which 14% was related to
increased sales volumes, partially offset by a 5% decrease in selling prices.
Higher sales volumes reflect increased sales tonnage of low margin purchased
ammonia for resale and increased sales tonnage of nitrogen solutions. Lower
ammonia and nitrogen solutions selling prices were partially offset by an
increase in the selling prices of urea.
 
     Gross profit decreased $11 million for the reasons noted above. Gross
profit as a percentage of net sales decreased from 27% in third quarter of 1995
to 21% in the third quarter of 1996 partially as a result of the lower ammonia
and nitrogen solutions selling prices. The per unit natural gas cost included in
cost of sales increased approximately 5% from 1995.
 
     Selling, general and administrative expenses as a percentage of net sales
decreased from 6% for the three months ended September 30, 1995, to 5% for the
three months ended September 30, 1996.
 
     Net interest expense decreased 7% to $11 million in the third quarter of
1996 compared to $12 million for the same period in 1995, reflecting the
improvement in the Partnership's net debt.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  Operating Activities
 
     Net cash provided by operating activities was $180 million and $257 million
for the nine months ended September 30, 1996 and 1995, and $13 million and $66
million for the three months ended September 30,
 
                                       12
<PAGE>   14
 
1996 and 1995, respectively. At September 30, 1996 and 1995, working capital,
net of restricted reserve accounts, was $219 million and $256 million,
respectively.
 
  Investing Activities
 
     Net cash used for investing activities of $45 million and $15 million for
the nine months ended September 30, 1996 and 1995, and $27 million and $7
million for the three months ended September 30, 1996 and 1995, respectively,
reflects primarily capital expenditures and rotational plant maintenance cost.
 
  Financing Activities
 
     Net cash used for financing activities was $220 million and $131 million
for the nine months ended September 30, 1996 and 1995, and $163 million and $28
million for the three months ended September 30, 1996 and 1995, respectively.
The nine months ended September 30, 1995, amount reflected a $61 million
reduction in the outstanding balance under the revolving credit facility.
 
     At September 30, 1996, there was no outstanding balance on the revolving
credit facility, and the amount available for borrowing in the form of loans and
letters of credit, after considering outstanding and committed letters of credit
of $40 million, was $60 million.
 
     In February, May, June, July and August 1996, the Partnership made cash
distributions to the Corporation totaling $17 million, $16 million, $12 million,
$32 million and $121 million, respectively.
 
     Management believes that its present working capital position, combined
with projected cash flows from operations and available borrowing capacity, will
be sufficient to meet the Partnership's remaining 1996 and anticipated 1997 cash
requirements for operating needs and projected capital expenditures.
 
     From 1997 through 2000, the Partnership's principal long-term liquidity
requirements will focus on maturities of long-term debt. Excluding the revolving
credit facility, maturities of long-term debt will range from $15 million to $18
million in 1997 through 2000. Cash from operations is expected to be sufficient
for the payment of all such maturities of long-term debt.
 
     The Partnership's 10 3/4% Series B Senior Notes due 2005, its First
Mortgage Notes, and the revolving credit facility contain provisions restricting
distributions on the equity interests of Arcadian Partners L.P., Arcadian
Fertilizer, L.P., and certain other subsidiaries in the event that certain
financial covenants are not met. Management believes that such subsidiaries will
continue to meet all such financial covenants for the foreseeable future.
 
  Operating Lease Commitment
 
     In March 1996, Fertilizer entered into a lease agreement with an
unaffiliated entity ("Second Lessor") with respect to an ammonia plant to be
constructed at the Trinidad plant site ("Second Trinidad Plant Lease"). Upon
completion of construction, the Second Lessor will lease the plant to
Fertilizer. The annual lease payments under the Second Trinidad Plant Lease are
expected to be approximately $21 million. The initial seven-year lease term is
renewable for an additional five-year term, subject to certain conditions. If
the Second Trinidad Plant Lease is not renewed or is otherwise terminated,
Fertilizer may be required to make a residual termination payment equal to 85%
of the estimated $285 million total cost of the project. In addition, the
Corporation has an option to purchase the plant during the term of the Second
Trinidad Plant Lease for a price approximating its fair market value at the date
of exercise. The plant is expected to be operational in 1998.
 
  Lake Charles Plant
 
     In connection with an incident at its Lake Charles plant in 1992, the
Partnership is contesting penalties proposed by the United States Occupational
Safety and Health Administration ("OSHA") totaling $4 million. The OSHA legal
proceeding to date has generally been favorable to the Partnership. While
management and legal counsel believe that any civil penalty ultimately paid by
the Partnership will be
 
                                       13
<PAGE>   15
 
substantially less than the remaining $4 million penalty proposed by OSHA, they
cannot predict with certainty the outcome of this proceeding.
 
     In September 1996, the Partnership's liability insurers negotiated
preliminary settlements of substantially all of the civil litigation arising
from the Lake Charles incident. The settlements, which in the aggregate are
within the policy limits of the Partnership's liability insurance, are subject
to the negotiation and execution of definitive settlement agreements and, with
respect to the class action civil litigation, approval as to fairness by the
court. There remain three lawsuits against the Partnership arising from the
incident, which were brought by former employees at the Lake Charles plant who
allege that they were wrongfully terminated by the Partnership following the
incident. Management and legal counsel believe that these lawsuits are without
merit, and that there will be no material adverse effect on the Partnership upon
their resolution.
 
  Port Authority of New York and New Jersey
 
     On March 13, 1996, the Corporation, two other nitrogen producers, and up to
30 unidentified parties were named as defendants in a lawsuit filed in the name
of the Port Authority of New York and New Jersey (the "Port Authority") in New
Jersey state court. The lawsuit was actually filed by attorneys hired by the
Port Authority's subrogated insurance carriers. The Port Authority's insurers
are seeking to recover damages allegedly incurred as a result of the explosion
at the World Trade Center in New York City on February 26, 1993. The Port
Authority's insurers allege in their complaint that the two other named
defendants and one or more unidentified parties (as manufacturers of ammonium
nitrate), the Corporation and one or more unidentified parties (as producers of
urea), and one or more unidentified makers of nitric acid are liable under
various tort theories for unspecified property damages, business interruption
losses, lost rent and other damages allegedly incurred by the Port Authority as
a result of the World Trade Center explosion. The Corporation and the other
defendants have removed the case to federal court in New Jersey. Pending the
resolution of the Port Authority's motion to disqualify its insurers' counsel,
the court stayed substantive proceedings in the lawsuit. That motion was
resolved by an order dated September 23, 1996, and substantive proceedings are
scheduled to resume on November 26, 1996. Although neither the Port Authority
nor its subrogated insurers have alleged or otherwise revealed the amount of
damages sought from the Corporation in the lawsuit, the Port Authority stated in
an affidavit submitted to the court in support of its motion to disqualify its
insurers' counsel that as of April 9, 1996, the Port Authority had submitted to
its insurers claims relating to the explosion totaling approximately $340
million, of which the insurers had paid approximately $160 million. The
Corporation is unaware of any basis for liability and intends to vigorously
defend the lawsuit.
 
  Termination of Potential Business Combination with Freeport
 
     On September 2, 1996, the Corporation terminated its previously disclosed
non-binding letter of intent dated August 5, 1996, with Freeport-McMoRan Inc.
regarding their potential business combination.
 
  Proposed Acquisition by PCS
 
     On September 2, 1996, the Corporation, Potash Corporation of Saskatchewan
Inc. ("PCS"), and PCS Nitrogen, Inc., a wholly owned subsidiary of PCS ("Merger
Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which, subject to the satisfaction or waiver of certain conditions,
PCS will acquire the Corporation through the merger of the Corporation with and
into Merger Sub (the "Merger"). In the Merger, subject to adjustment and to
certain exceptions, each outstanding share of the Company's Common Stock,
including each share resulting from the mandatory conversion of the outstanding
shares of the Company's Mandatorily Convertible Preferred Stock, Series A
("Preferred Stock") immediately prior to the Merger, will be converted into the
right to receive $12.25 in cash and a fraction of a common share of PCS expected
to have a market value of between $12.75 and $14.75. The obligations of the
Corporation and PCS to consummate the Merger are subject to various conditions,
including the condition that the holders of a majority of the outstanding shares
of Common Stock and Preferred Stock, voting together as a single class, vote in
favor of the approval of the Merger Agreement. The Corporation expects to hold a
special meeting of stockholders in January 1997, at which the stockholders will
consider and vote upon the Merger Agreement. If the necessary stockholder vote
is obtained and all other conditions are satisfied or waived, the Corporation
expects that the Merger will be consummated shortly thereafter.
 
                                       14
<PAGE>   16
 
                                    PART II
 
                               OTHER INFORMATION
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
  (a) Exhibits
 
     The following materials are filed as exhibits to this report:
 
<TABLE>
<CAPTION>
      EXHIBIT
       NUMBER                                 DESCRIPTION OF EXHIBIT
      -------                                 ----------------------
<S>                  <C>
          2          -- Agreement and Plan of Merger dated as of September 2, 1996, among
                        Potash Corporation of Saskatchewan Inc., Arcadian Corporation, and
                        PCS Nitrogen, Inc. (incorporated by reference to Exhibit 2 to
                        Arcadian Corporation's Quarterly Report on Form 10-Q for the quarter
                        ended September 30, 1996 ("Arcadian Corporation 09/30/96 Quarterly
                        Report")).
         10.1        -- Agreement for Lease dated as of June 29, 1995, between Trinidad
                        Ammonia Company, Limited Partnership, and Arcadian Fertilizer, L.P.,
                        as amended by Amendment No. 1 to Agreement for Lease dated as of
                        August 20, 1996, between Trinidad Ammonia Company, Limited
                        Partnership, and Arcadian Fertilizer, L.P. (incorporated by reference
                        to Exhibit 10.21 to the Registration Statement on Form S-4
                        (Registration No. 33-90290) relating to Arcadian Corporation's
                        offering of Preferred Stock ("Preferred Stock Registration
                        Statement") and Exhibit 10.1 to the Arcadian Corporation 09/30/96
                        Quarterly Report).
         10.2        -- Lease Agreement dated as of June 29, 1995, between Trinidad Ammonia
                        Company, Limited Partnership, and Arcadian Fertilizer, L.P., as
                        amended by Amendment No. 1 to Lease Agreement dated as of August 20,
                        1996, between Trinidad Ammonia Company, Limited Partnership, and
                        Arcadian Fertilizer, L.P., and Amendment No. 2 to Lease Agreement
                        dated as of August 26, 1996, between Trinidad Ammonia Company,
                        Limited Partnership, and Arcadian Fertilizer, L.P. (incorporated by
                        reference to Exhibit 10.22 to the Preferred Stock Registration
                        Statement and Exhibit 10.2 to the Arcadian Corporation 09/30/96
                        Quarterly Report).
         10.3        -- Agreement for Lease dated as of March 27, 1996, between Nitrogen
                        Leasing Company, Limited Partnership, and Arcadian Fertilizer, L.P.,
                        as amended by Amendment No. 1 to Agreement for Lease dated as of May
                        24, 1996, between Nitrogen Leasing Company, Limited Partnership, and
                        Arcadian Fertilizer, L.P. (incorporated by reference to Exhibit 10.3
                        to the Arcadian Corporation 09/30/96 Quarterly Report).
         10.4        -- Lease Agreement dated as of March 27, 1996, between Nitrogen Leasing
                        Company, Limited Partnership, and Arcadian Fertilizer, L.P., as
                        amended by Amendment No. 1 to Lease Agreement dated as of August 26,
                        1996, between Nitrogen Leasing Company, Limited Partnership, and
                        Arcadian Fertilizer, L.P. (incorporated by reference to Exhibit 10.4
                        to the Arcadian Corporation 09/30/96 Quarterly Report).
         10.5        -- Purchase Option Agreement dated as of March 27, 1996, between
                        Nitrogen Leasing Company, Limited Partnership, and Arcadian
                        Corporation (incorporated by reference to Exhibit 10.5 to the
                        Arcadian Corporation 09/30/96 Quarterly Report).
         10.6        -- Employment Agreement between Arcadian Corporation and certain of its
                        officers (incorporated by reference to Exhibit 10.6 to the Arcadian
                        Corporation 09/30/96 Quarterly Report).
         27          -- Financial Data Schedule.
</TABLE>
 
  (b) Current Reports on Form 8-K
 
     Partners did not file any Current Report on Form 8-K during the quarter
ended September 30, 1996.
 
                                       15
<PAGE>   17
 
                                   SIGNATURE
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on November 14,
1996.
 
                                            ARCADIAN PARTNERS, L.P.
 
                                            By: Arcadian Corporation
                                                General Partner
 
                                              By:         A. L. WILLIAMS
                                                 -------------------------------
                                                         A. L. Williams
                                                 Vice President -- Finance and
                                                    Chief Financial Officer
 
                                       16
<PAGE>   18
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
                                                                                     SEQUENTIALLY
      EXHIBIT                                                                          NUMBERED
       NUMBER                            DESCRIPTION OF EXHIBIT                          PAGE
      -------                            ----------------------                      ------------
<S>                  <C>                                                             <C>
          2          -- Agreement and Plan of Merger dated as of September 2, 1996,
                        among Potash Corporation of Saskatchewan Inc., Arcadian
                        Corporation, and PCS Nitrogen, Inc. (incorporated by
                        reference to Exhibit 2 to Arcadian Corporation's Quarterly
                        Report on Form 10-Q for the quarter ended September 30,
                        1996 ("Arcadian Corporation 09/30/96 Quarterly Report")).
         10.1        -- Agreement for Lease dated as of June 29, 1995, between
                        Trinidad Ammonia Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P., as amended by Amendment No. 1 to
                        Agreement for Lease dated as of August 20, 1996, between
                        Trinidad Ammonia Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P. (incorporated by reference to Exhibit
                        10.21 to the Registration Statement on Form S-4
                        (Registration No. 33-90290) relating to Arcadian
                        Corporation's offering of Preferred Stock ("Preferred Stock
                        Registration Statement") and Exhibit 10.1 to the Arcadian
                        Corporation 09/30/96 Quarterly Report).
         10.2        -- Lease Agreement dated as of June 29, 1995, between Trinidad
                        Ammonia Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P., as amended by Amendment No. 1 to Lease
                        Agreement dated as of August 20, 1996, between Trinidad
                        Ammonia Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P., and Amendment No. 2 to Lease Agreement
                        dated as of August 26, 1996, between Trinidad Ammonia
                        Company, Limited Partnership, and Arcadian Fertilizer, L.P.
                        (incorporated by reference to Exhibit 10.22 to the
                        Preferred Stock Registration Statement and Exhibit 10.2 to
                        the Arcadian Corporation 09/30/96 Quarterly Report).
         10.3        -- Agreement for Lease dated as of March 27, 1996, between
                        Nitrogen Leasing Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P., as amended by Amendment No. 1 to
                        Agreement for Lease dated as of May 24, 1996, between
                        Nitrogen Leasing Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P. (incorporated by reference to Exhibit 10.3
                        to the Arcadian Corporation 09/30/96 Quarterly Report).
         10.4        -- Lease Agreement dated as of March 27, 1996, between
                        Nitrogen Leasing Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P., as amended by Amendment No. 1 to Lease
                        Agreement dated as of August 26, 1996, between Nitrogen
                        Leasing Company, Limited Partnership, and Arcadian
                        Fertilizer, L.P. (incorporated by reference to Exhibit 10.4
                        to the Arcadian Corporation 09/30/96 Quarterly Report).
         10.5        -- Purchase Option Agreement dated as of March 27, 1996,
                        between Nitrogen Leasing Company, Limited Partnership, and
                        Arcadian Corporation (incorporated by reference to Exhibit
                        10.5 to the Arcadian Corporation 09/30/96 Quarterly
                        Report).
</TABLE>
<PAGE>   19
 
<TABLE>
<CAPTION>
                                                                                     SEQUENTIALLY
      EXHIBIT                                                                          NUMBERED
       NUMBER                            DESCRIPTION OF EXHIBIT                          PAGE
      -------                            ----------------------                      ------------
<S>                  <C>                                                             <C>
         10.6        -- Employment Agreement between Arcadian Corporation and
                        certain of its officers (incorporated by reference to
                        Exhibit 10.6 to the Arcadian Corporation 09/30/96 Quarterly
                        Report).
         27          -- Financial Data Schedule.
</TABLE>