Agrium Reports Excellent First Quarter; Expects Continued Strength in Crop Input Markets
CALGARY, ALBERTA -- (Marketwire) -- 05/04/11 -- ALL AMOUNTS ARE STATED IN U.S.$
Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today consolidated net earnings ('net earnings') of $171-million ($1.09 diluted earnings per share) for the first quarter of 2011, compared with a consolidated net loss ('net loss') of $1-million in the first quarter of 2010 ($0.01 diluted loss per share). Net earnings from continuing operations, which exclude earnings associated with AWB Limited ('AWB') Commodity Management business which is under a definitive sales agreement to Cargill Incorporated ('Cargill'), were $160-million ($1.02 diluted earnings per share) for the first quarter of 2011.
The 2011 first quarter results include a pre-tax share-based payment expense of $12-million ($0.05 diluted earnings per share) and pre-tax gains of $9-million ($0.04 diluted earnings per share) on natural gas and other commodity hedges. Excluding these items, net earnings from continuing operations would have been $162-million ($1.03 diluted earnings per share from continuing operations) for the first quarter of 2011.(1)
The financial information presented and discussed in this press release is prepared in accordance with International Financial Reporting Standards ('IFRS'). All Canadian corporations are required as of January 1, 2011 to account and report current and future financial results under IFRS. First quarter 2010 figures have been restated for comparison purposes.
'Record high crop prices and overall strong fundamentals for agriculture and the crop input market provided the basis for Agrium's outstanding quarter, particularly in light of a slow start to the spring season. Crop nutrient demand was strong in North America and globally, providing underlying support to crop nutrient prices. This contributed to our Wholesale business achieving its best first quarter ever. The same strong fundamentals also supported results for our Retail operations, as they reported substantial increases across all product lines,' said Agrium President & CEO Mike Wilson.
'Our newly acquired Landmark retail business in Australia delivered solid results and managed through the challenges of 2010's flooding in Eastern Australia. The significant increase in acreage devoted to input intensive crops such as corn and cotton is expected to benefit all three of our business units this spring. With the strength in markets across most products and services, we expect a great second quarter and believe industry fundamentals will remain strong in 2011,' continued Mr. Wilson.(2)
Agrium is providing guidance for the first half of 2011 of $4.40 to $4.90 diluted earnings per share on continuing operations.(2)
(1) First quarter effective tax rate of 27 percent used for adjusted diluted earnings per share calculations.
(2) See disclosure in the section 'Outlook, Key Risks and Uncertainties' in our 2011 first quarter Management's Discussion and Analysis and additional assumptions in the section 'Management's Discussion and Analysis'.
MANAGEMENT'S DISCUSSION AND ANALYSIS
May 4, 2011
Unless otherwise indicated, the financial information presented and discussed in this Management's Discussion and Analysis ('MD&A') is prepared in accordance with International Financial Reporting Standards ('IFRS'), and all comparisons of results for the first quarter of 2011 (three months ended March 31, 2011) are against results for the first quarter of 2010 (three months ended March 31, 2010). All dollar amounts refer to United States ('U.S.') dollars except otherwise stated.
The following interim MD&A updates our annual MD&A included in our 2010 Annual Report to Shareholders, to which our readers are referred and is as of May 4, 2011. The Board of Directors carries out its responsibility for review of this disclosure principally through its Audit Committee, comprised exclusively of independent directors. The Audit Committee reviews, and prior to publication, approves, pursuant to the authority delegated to it by the Board of Directors, this disclosure. No update is provided where an item is not material or there has been no material change from the discussion in our annual MD&A. Forward-Looking Statements are outlined after the Outlook, Key Risks and Uncertainties section of this press release. The major assumptions made in preparing our first half guidance on continuing operations are outlined below and include, but are not limited to:
- Wholesale fertilizer prices approximating current market prices through the second quarter of 2011 with the exception of those volumes already committed under pricing programs;
- Wholesale fertilizer sales volumes consistent with the same levels in the second quarter of 2010;
- Retail North America fertilizer and chemical gross margin percentages consistent with margin percentages realized in the second quarter of 2010;
- Retail North American fertilizer sales volumes consistent with sales volumes in the second quarter of 2010;
- Exchange rates for the U.S. dollar relative to the Canadian and Australian dollar to stay consistent with the current trading levels;
- Average NYMEX gas pricing for the second quarter approximating $4.40 per MMBtu; and,
- The exclusion from the guidance range of the effects in the second quarter of:
-- share-based payment expense or recovery resulting from movement in Agrium's share price for which a $1 change in stock price equates to approximately a $0.01 change in earnings per share;
-- mark-to-market gains or losses on hedge positions settling in future periods; and,
-- the results of discontinued operations.
2011 First Quarter Operating Results
CONSOLIDATED NET EARNINGS
Agrium's 2011 first quarter consolidated net earnings ('net earnings') were $171-million, or $1.09 diluted earnings per share, compared to a consolidated net loss ('net loss') of $1-million, or $0.01 diluted loss per share, for the same quarter of 2010.
Financial Overview
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Three months ended March 31,
----------------------------------------------------------------------------
(Millions of U.S. dollars,
except per share amounts
and effective tax rate) 2011 2010 $ Change % Change
----------------------------------------------------------------------------
Sales 2,954 1,848 1,106 60%
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Gross profit 725 362 363 100%
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Expenses 466 333 133 40%
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Earnings from continuing operations
before finance costs and
income taxes ('EBIT') 259 29 230 793%
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Consolidated net earnings (loss)
from continuing operations(1) 160 (1) 161 N/A
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Consolidated net earnings (loss) 171 (1) 172 N/A
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Diluted earnings (loss) per share from
continuing operations 1.02 (0.01) 1.03 N/A
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Diluted earnings (loss) per share 1.09 (0.01) 1.10 N/A
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Effective tax rate 27% - N/A N/A
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(1) See 'Discontinued Operations' below for a discussion of our
discontinued operations.
Our consolidated gross profit increased by $363-million primarily due to higher gross profit from all three of our strategic business units, with highlights as follows:
- A $191-million increase in Wholesale's gross profit, as higher crop pricing drove up demand and selling prices for all major products.
- A $99-million increase in gross profit from the addition of the Landmark retail operations, where over half of the contribution came from merchandise and application and other services.
- Excluding Landmark, Retail's gross profit increased by $79-million due to higher fertilizer pricing and higher sales volume for crop nutrients and seed.
The $133-million increase in expenses was primarily driven by higher Retail selling and general and administrative expenses due to the addition of the Landmark business in the fourth quarter of 2010. Included in these costs were $8-million of severance expense related to the AWB acquisition. Our consolidated EBIT increased by $230-million for this quarter.
Below is a summary of our other expenses for the first quarter of 2011 and 2010:
Three months
ended March 31,
(Millions of U.S. dollars) 2011 2010
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Realized loss on derivative financial instruments 48 7
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Unrealized (gain) loss on derivative financial instruments (30) 61
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Foreign exchange (gain) loss (25) 1
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Potash profit and capital tax 11 3
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Gain on disposal of marketable securities - (52)
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Environmental remediation and asset retirement obligations 1 -
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Interest income (14) (8)
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Bad debt expense 5 6
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Other 5 2
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1 20
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The effective tax rate was 27 percent for the first quarter of 2011 which was comparable to the effective tax rate for the same period last year.
BUSINESS SEGMENT PERFORMANCE
Retail
Retail's 2011 first quarter sales were $1.8-billion, an increase of $762-million from the first quarter of 2010. The 72 percent increase in sales was largely due to the combination of the inclusion of the Australian Landmark retail operations, as well as higher crop input volumes and prices. Excluding acquisitions made since January 1, 2010, sales for Agrium's retail legacy operations were up 22 percent over the same period last year. Gross profit in the current quarter was $340-million, more than double the $162-million for the same period last year. Retail EBIT was a loss of $15-million in the first quarter of 2011, a significant improvement over the loss of $68-million in the first quarter of 2010. Landmark retail operations contributed a positive EBIT of $3-million and $13-million in EBITDA in the first quarter of 2011.
Crop nutrient sales were $707-million in the first quarter of 2011, compared to $371-million for the same quarter last year. The increase was due to significantly higher sales volumes and crop nutrient prices, as well as the addition of the Landmark business. Crop nutrient gross profit was $115-million this quarter compared to $63-million in the first quarter of 2010. Crop nutrient margins averaged 16 percent this quarter. Crop nutrient sales from the Landmark business accounted for 26 percent of total crop nutrient revenues this quarter and about 6 percent of gross profit. The North American nutrient margin was 21 percent in the current quarter.
Crop protection sales were $638-million in the first quarter of 2011, a 38 percent increase over the $462-million in sales for the same period last year. Gross profit this quarter was $102-million, compared with $69-million in 2010. The increase in revenue and gross profit was due to a combination of the addition of the Australian Landmark business and generally higher sales volumes across much of North America. Landmark accounted for approximately 20 percent of our crop protection total sales and gross profit this quarter.
Seed sales were $230-million in the first quarter of 2011, compared to $191-million in the same period last year. North American sales accounted for over 75 percent of the increase. Gross profit this quarter was $35-million compared to $15-million in the first quarter of 2010.
Merchandise sales totaled $144-million in the first quarter of 2011 compared to $21-million in the first quarter of 2010. Gross profit from merchandise sales was $17-million in the current quarter compared to $1-million in the same period last year. The increase in revenue and gross profit was due to the addition of the Landmark business.
Sales of application and other services were $103-million in the first quarter of 2011 compared to $15-million in the first quarter of 2010. Gross profit totaled $71-million this quarter, compared to $14-million in the first quarter of 2010. The significant increase in sales and gross profit over the previous year was due to the addition of the Landmark business and increased demand for nutrient application services in North America. Record crop prices have supported demand for application services across North American agriculture. This product segment includes a variety of service offerings at our Landmark retail operations including: livestock and wool marketing, insurance commissions and rural real estate services.
Retail selling expenses for the first quarter of 2011 were $335-million, compared to $222-million in the same quarter of 2010. The increase was due primarily to the inclusion of the Landmark retail business. Selling expenses as a percentage of sales in the first quarter of 2011 was 18 percent compared to 21 percent in the first quarter of 2010. On a same-store basis, selling expenses were 2 percent higher this quarter as compared to the same period last year. This increase in expenses was largely due to higher performance incentives and fuel prices.
Wholesale
Wholesale's sales were $1.2-billion for the first quarter of 2011, a record for a first quarter, and 45 percent higher than the $848-million achieved in the first quarter of 2010. Gross profit was $409-million in the first quarter of 2011, almost double the $218-million reported in the same period in 2010. Wholesale also reported a record first quarter EBIT of $377-million in 2011, substantially higher than the $147-million earned in the first quarter of 2010. Strong agricultural fundamentals supported demand and prices for nutrient products.
Gross profit for nitrogen was $151-million this quarter, compared to $72-million in the same quarter last year. The increase in gross profit was due to a combination of higher realized sales prices and lower natural gas costs. Urea sales volumes were impacted slightly this quarter due to the wet and cool spring in much of North America, although UAN sales were up 29 percent from last year on strong demand. Cost of product sold was $244 per tonne this quarter, 6 percent lower than the $260 per tonne in the first quarter of 2010.
The U.S. benchmark (NYMEX) natural gas price for the first quarter of 2011 was $4.14/MMBtu, versus $5.38/MMBtu in the same quarter last year and $3.81/MMBtu in the fourth quarter of 2010. The AECO (Alberta) basis differential was a $0.32/MMBtu discount to NYMEX in the first quarter of 2011, which was a slightly larger discount than in the first quarter of 2010. For the first quarter of 2011, Agrium's average natural gas cost in cost of product sold was $3.90/MMBtu ($4.11/MMBtu including the impact of realized losses on natural gas derivatives) compared to $5.00/MMBtu for the same period in 2010 ($5.21/MMBtu including the impact of realized losses on natural gas derivatives). Hedging gains or losses on all gas derivatives are reported below gross profit in other expenses and therefore not included in cost of product sold.
Gross profit for potash this quarter was $125-million, $19-million higher than the same period in 2010. The increase in gross profit was due to a significant rebound in international and domestic potash prices. International sales volumes reached 265,000 tonnes in the first quarter of 2011, a 43 percent increase from the same period last year, due to strong demand from Asia and Brazil. Domestic sales volumes were 212,000 tonnes in the first quarter of 2011, compared to 349,000 tonnes in the same period last year. The lower volumes this year were due to a late start to the spring season in the U.S. this year, compared to the strong demand in the first quarter of 2010. The total potash cost of product sold this quarter was $147 per tonne as compared to $159 per tonne in the first quarter of 2010. The decrease was due to lower freight costs per tonne, partly offset by the strengthening in the Canadian dollar against the U.S. dollar. The resulting gross margin was $262 per tonne this quarter versus $199 per tonne for the first quarter of 2010.
Phosphate gross profit was $95-million in the first quarter of 2011, over five times greater than the $18-million reported for the same quarter last year. The increase was due to substantially higher realized sales prices of $778 per tonne for the first quarter of 2011 compared to $506 per tonne for the same period in 2010. Phosphate sales volumes were 22 percent higher than the same quarter last year, as demand for phosphate products was
strong due in part to customer concerns over the potential for tight supply availability in the second quarter of 2011. Phosphate cost of product sold was $468 per tonne, an 8 percent increase over the same period last year, due to a higher cost of sulphur and phosphate rock. The resulting gross margin per tonne was $310 per tonne versus $72 per tonne in the first quarter of 2010.
Gross profit for product purchased for resale was $16-million, $4-million higher than the first quarter of 2010. The increase was due to higher sales volumes this year as global demand for all three nutrients was strong. Gross margins in the first quarter of 2011 of $18 per tonne were consistent with the first quarter of 2010.
First quarter Wholesale expenses were $32-million, $39-million lower than the same period last year. The majority of the decrease was due to mark-to-market gains on natural gas and other derivatives of $14-million in the first quarter of 2011 compared to $61-million in losses for the same period in 2010. Realized losses on natural gas and other derivatives were $6-million compared to a loss of $7-million in 2010. Equity earnings from the MOPCO Egyptian nitrogen facility were $7-million lower this quarter than in the first quarter of 2010 primarily due to a one-time deferred tax adjustment of $6-million this quarter. The MOPCO facility has continued to run at normal operating rates in 2011 and the project to triple the production capacity is on schedule for completion in mid-2012. In addition, potash profit and capital taxes were $8-million higher this quarter than the same period last year due primarily to a large favourable adjustment reported in the first quarter of 2010 related to the 2009 final potash tax return.
Advanced Technologies
Advanced Technologies' first quarter 2011 gross profit was $16-million compared to $15-million in the first quarter of 2010. This increase in gross profit was due to increased sales volumes of ESN and controlled-release products in the turf and ornamental segment, as well as increased sales activity in both the U.S. and Canadian retail markets. This increase in volumes was supported by new ESN production at our New Madrid facility which came on-line in March of 2010.
EBITDA this quarter was $1-million versus $3-million in the first quarter of 2010. Higher selling and general and administrative costs offset improved gross profit in the first quarter of 2011 compared to the same period last year. Selling, general and administrative costs for AAT were $5-million higher this quarter versus the same period in 2010 due primarily to the expansion of the Direct Solutions sales force which focuses on retail sales to end users. Other income decreased by $2-million in the first quarter of 2011 compared to the same period last year due to lower earnings from our equity ownership in Hanfeng Evergreen Inc.
Other
EBIT for our Other non-operating business unit for the first quarter of 2011 was a loss of $98-million compared to a loss of $49-million for the first quarter of 2010. The increase in loss was driven by:
- A $52-million gain realized from the sale of 1.2 million shares of CF Industries Holdings, Inc. ('CF') in the first quarter of 2010.
- A net loss of $26-million primarily from foreign exchange derivatives entered into in anticipation of the sale of the Commodity Management business to Cargill, Incorporated ('Cargill') as the U.S. dollar weakened during the first quarter of 2011. This was more than offset by a $29-million foreign exchange gain primarily from the remeasurement of intercompany loans.
DISCONTINUED OPERATIONS
We entered into an agreement on December 15, 2010 with Cargill to sell the majority of the Commodity Management business of AWB. Completion of the sale is expected in the first half of 2011. The purchase price to be paid by Cargill will be the net asset value of the sold businesses as at the completion date of the transaction, plus a premium. We have committed to a plan to sell certain other businesses that form part of the Commodity Management business that is not being acquired by Cargill. In addition to the sale of the Commodity Management business, the pool management operations of AWB Harvest Finance Limited ('AWBHF') will be transferred to Cargill. We have agreed to various terms and conditions and indemnifications pursuant to the sale of the Commodity Management business, including an indemnity for litigation related to the Oil-For-Food Programme, as described in note 2 of our Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2011.
Commodity Management operations included in the agreement with Cargill are reported as discontinued operations because their operations and cash flows will be eliminated from continuing operations as a result of the disposal transaction and we will not have any significant continuing involvement in the operations after the disposal transaction. Assets and liabilities related to discontinued operations are presented separately on the consolidated balance sheets.
Net earnings from discontinued operations for the first quarter of 2011 was $11-million versus nil in the same period of 2010.
FINANCIAL CONDITION
The following are changes to working capital on our Condensed Consolidated Balance Sheets in the three-month period ended March 31, 2011.
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As at March December
(millions of 31, 31, Explanation of
U.S. dollars) 2011 2010 $ Change % Change the change in balance
----------------------------------------------------------------------------
Current assets
Cash and cash See discussion under the
equivalents 447 635 (188) (30%) Section 'Liquidity and
Capital Resources'.
Accounts 2,105 1,793 312 17% Increased sales in Q1
receivable 2011 and increased
Retail rebates.
Inventories 3,656 2,502 1,154 46% Seasonal Retail inventory
build-up in preparation
for the spring season,
as well as increased
product costs.
Prepaid 415 848 (433) (51%) Drawdown of prepaid
expenses and inventory as Retail
deposits takes delivery of
product in anticipation
of the spring season
demand.
Marketable - 3 (3) (100%) -
securities
Assets of 1,632 1,320 312 24% -
discontinued
operations
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Current
liabilities
Short-term debt 547 517 30 6% Increased working capital
needs for Agrium Europe
due to increased
inventory purchases and
receivables in Q1 2011.
Accounts 3,863 2,666 1,197 45% Retail inventory
payable purchases made in
anticipation of the
spring season and
customer prepayments
received but not yet
drawn down for the
upcoming spring
application.
Current portion 53 125 (72) (58%) Debentures of
of long-term $125-million were repaid
debt February 15, 2011 while
South America Retail
line of credit of $53-
million is due in
October 2011.
Current portion 213 198 15 8% -
of other
provisions
Liabilities of 1,090 1,020 70 7% -
discontinued
operations
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Working capital 2,489 2,575 (86) (3%)
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LIQUIDITY AND CAPITAL RESOURCES
Below is a summary of our cash provided by or used in operating, investing, and financing activities as reflected in the Condensed Consolidated Statements of Cash Flows:
Three months ended March 31,
----------------------------------------------------------------------------
(Millions of U.S. dollars) 2011 2010 Change
----------------------------------------------------------------------------
Cash provided by (used in) operating activities 402 (111) 513
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Cash (used in) provided by investing activities (162) 60 (222)
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Cash (used in) provided by financing activities (108) 25 (133)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash
equivalents (10) - (10)
----------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
from continuing operations 122 (26) 148
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The sources and uses of cash for the three months ended March 31, 2011 are
summarized below:
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Cash provided by operating activities - Drivers behind the $513-million
increase in source of cash
----------------------------------------------------------------------------
Source of cash - $161-million resulting from increase in consolidated net
earnings from continuing operations adjusted for changes
in non-cash items, primarily associated with a $30-million
unrealized gain on derivative financial instruments in Q1
2011 versus a $61-million unrealized loss in Q1 2010, and
a $52-million gain on the sale of CF shares in Q1 2010.
- $389-million decrease in non-cash working capital. The
decrease in non-cash working capital was primarily driven
by higher accounts payable and lower prepaid expenses and
deposits, partially offset by higher inventories and
accounts receivable.
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Cash used in investing activities - Drivers behind the $222-million increase
in use of cash
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Use of cash - Proceeds of $117-million received on the sale of our
shares in CF in Q1 2010;
- $36-million investment purchased in Q1 2011 versus
proceeds of $25-million received in Q1 2010 on the sale
of other marketable securities; and
- $34-million increase in capital expenditures.
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Cash used in financing activities - Drivers behind the $133-million increase
in use of cash
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Use of cash - Repayment of $125-million aggregate principal amount of
debentures that were due February 15, 2011.
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Our short-term debt as at March 31, 2011 is summarized as follows:
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Short-term Debt Total Unutilized Utilized
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(millions of U.S. dollars)
North American facilities expiring 2012(a) 775 735 40
North American accounts receivable
securitization(b) 200 200 -
European facilities expiring in 2011 to 2012 201 29 172
South American facilities expiring 2011 to 2012 133 66 67
Australian facilities expiring 2011 130 44 86
Australian accounts receivable securitization(b) 258 76 182
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1,697 1,150 547
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a) Outstanding letters of credit issued under our revolving credit
facilities at March 31, 2011 were $77-million, reducing credit available
under the facilities to $658-million.
b) For further information, see discussion under the section 'Off Balance
Sheet Arrangements' on page 55 of our 2010 Annual Report.
OUTSTANDING SHARE DATA
The number of outstanding shares as at April 30, 2011 was approximately 158 million. As at April 30, 2011, the number of stock options (issuable assuming full conversion, where each option granted can be exercised for one common share) outstanding were approximately 0.4 million.
SELECTED QUARTERLY INFORMATION
(Unaudited, in millions of U.S. dollars, except per share information)
2011 2010
--------------------------------
Q1 Q4 Q3 Q2 Q1
Sales 2,954 2,398 2,066 4,431 1,848
Gross profit 725 725 498 1,063 362
Consolidated net earnings (loss)
from continuing operations 160 152 61 518 (1)
Consolidated net earnings (loss) 171 135 61 518 (1)
Earnings (loss) per share from
continuing operations
-basic 1.02 0.86 0.39 3.29 (0.01)
-diluted 1.02 0.86 0.39 3.28 (0.01)
Earnings (loss) per share
-basic 1.09 0.86 0.39 3.29 (0.01)
-diluted 1.09 0.86 0.39 3.28 (0.01)
--------------------------------
a) Presented in accordance with previous Canadian generally accepted
accounting principles ('Canadian GAAP').
2009
--------------------------------
Q4 (a) Q3 (a) Q2 (a) Q1 (a)
Sales 1,442 1,844 4,090 1,753
Gross profit 383 397 890 273
Consolidated net earnings (loss)
from continuing operations 30 26 370 (60)
Consolidated net earnings (loss) 30 26 370 (60)
Earnings (loss) per share from
continuing operations
-basic 0.19 0.16 2.36 (0.38)
-diluted 0.19 0.16 2.35 (0.38)
Earnings (loss) per share
-basic 0.19 0.16 2.36 (0.38)
-diluted 0.19 0.16 2.35 (0.38)
--------------------------------
a) Presented in accordance with previous Canadian generally accepted
accounting principles ('Canadian GAAP').
The agricultural products business is seasonal in nature. Consequently, sales and gross profit comparisons made on a year-over-year basis are more appropriate than quarter-over-quarter. Crop input sales are primarily concentrated in the spring and fall crop input application seasons, which are in the second quarter and fourth quarter. Crop nutrient inventories are normally accumulated leading up to the application season. Cash collections generally occur after the application season is complete in the Americas and Australia. Our recent acquisition of AWB, which has a majority of its earnings from the second and third quarters of the calendar year, may have some impact on comparability.
Effective January 1, 2011, Agrium adopted IFRS as issued by the International Accounting Standards Board. The selected quarterly information for 2011 and 2010 are presented based on IFRS, while those for 2009 are presented based on Canadian GAAP. As such, direct comparison may not be appropriate.
BUSINESS ACQUISITIONS
On December 3, 2010, we acquired 100 percent of AWB, an agribusiness operating in Australia, for $1.2-billion in cash and $37-million of acquisition costs. On December 15, 2010, we announced an agreement to sell the majority of the Commodity Management business of AWB. We will retain the Landmark retail operations, including over 200 company-owned retail locations and over 140 retail franchise and wholesale customer locations in Australia. The acquired business is included in the Retail operating segment.
NON-IFRS FINANCIAL MEASURES
In the discussion of our performance for the quarter, in addition to the primary measures of earnings and earnings per share reported in accordance with IFRS, we make reference to EBITDA (earnings (loss) from continuing operations before finance costs, income taxes, depreciation and amortization). We consider EBITDA to be useful measures of performance because income tax jurisdictions and business segments are not synonymous and we believe that allocation of income tax charges distorts the comparability of historical performance for the different business segments. Similarly, financing and related interest charges cannot be allocated to all business units on a basis that is meaningful for comparison with other companies.
EBITDA is not a recognized measure under IFRS, and our method of calculation may not be comparable to other companies. Similarly, EBITDA should not be used as an alternative to cash provided by (used in) operating activities as determined in accordance with IFRS.
The following table is a reconciliation of EBITDA to consolidated net earnings (loss) from continuing operations as calculated in accordance with IFRS:
Three months ended March 31
(millions of U.S. 2011
dollars) -----------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA 25 412 1 (93) 345
Depreciation and
amortization 40 35 6 5 86
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EBIT (15) 377 (5) (98) 259
----------------------------------------------------------------------------
Finance costs
related to long-
term debt (27)
Other finance
costs (13)
Income taxes (59)
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Consolidated
net earnings
(loss) from
continuing
operations 160
----------------------------------------------------------------------------
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(millions of U.S. 2010
dollars) -----------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Consolidated
----------------------------------------------------------------------------
EBITDA (41) 182 3 (47) 97
Depreciation and
amortization 27 35 4 2 68
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EBIT (68) 147 (1) (49) 29
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Finance costs
related to long-
term debt (23)
Other finance
costs (7)
Income taxes -
----------------------------------------------------------------------------
Consolidated
net earnings
(loss) from
continuing
operations (1)
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ACCOUNTING STANDARDS AND CRITICAL ACCOUNTING ESTIMATES
Please refer to note 1 of our Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2011 for our significant accounting policies and critical accounting estimates, which includes purchase price allocations in business combinations; collectability of receivables; rebates; net realizable value of inventory; estimated useful lives and impairment of long-lived assets; goodwill impairment testing; allocation of acquisition purchase prices; asset retirement obligations; environmental remediation; employee future benefits; share-based payments; income taxes; fair value of financial assets and liabilities; and, amounts and likelihood of contingencies.
BUSINESS RISKS
The information presented on risk management and key business risks on pages 70 - 79 in our 2010 Annual Report has not changed materially since December 31, 2010.
CONTROLS & PROCEDURES
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OUTLOOK, KEY RISKS AND UNCERTAINTIES
The fundamental agricultural outlook remains very positive; however, the first quarter saw volatility in commodity prices stemming primarily from political unrest in the Middle East/North Africa and the tsunami in Japan. Many global crop prices are trading at historically high levels. This is expected to lead to increased planted area and more intensive growing practices on a global scale, which is expected to support demand for crop nutrients, crop protection and seed markets throughout 2011. U.S. cash corn prices have set records in two of the past three months, driven by projections of tight carryout in 2010/11 and the need to attract a significant increase in planted area in 2011. The United States Department of Agriculture (USDA) stated in its Prospective Plantings Report that U.S. growers intended to plant 92 million acres of corn in 2011, the second highest total since the 1940s and an increase of 4 million acres from a year ago. In total, major crop area in the U.S. could increase by more than 8 million acres according to the Prospective Plantings report.
Strong agriculture fundamentals have also supported demand for crop protection products and prices for most products are largely stable to slightly higher. Chinese glyphosate prices are trending higher, driven in part by increasing raw material costs. Seed demand is expected to be strong, driven by significant increases in seeded area in general, and corn and cotton in particular. Prices for most chemicals and seed are largely set for the spring/summer season and are expected to trend higher later in 2011, particularly if crop prices remain at high levels.
Nitrogen markets have been mixed in the first quarter of 2011, with relatively strong ammonia and UAN prices and some weakening in urea prices. The pressure on urea prices in the first quarter was partly due to extremely strong shipments of urea in the second half of 2010, including large volumes of Chinese urea exports in November and December. In recent weeks, the international price of urea has firmed up and the overall nitrogen fundamentals remain positive. For the first time since 2002, The Fertilizer Institute ('TFI') reported a decline in North American urea inventories in the month of March. The key risks to the nitrogen market include the potential for significant urea exports from China, once the export taxes are lowered for the period July 1 through October 31, and the possibility for changes in natural gas prices in Europe, including the potential for Russia to lower the price of gas for Ukrainian producers.
Phosphate markets remain very strong. India is a key driver of the phosphate market given it is expected to account for 35 percent of the global DAP/MAP import market in 2011. As a result, the key risk for the phosphate market would include Indian import levels for the remainder of 2011 and the potential for Chinese exports when their export taxes are lowered from June 1 to September 30. Spot market prices for two key inputs, ammonia and sulphur, have increased in 2011 resulting in higher production costs for most phosphate producers which increases costs and may provide support to phosphate prices. Most industry analysts expect the Ma'aden Phosphate Project to begin production sometime in the second half of 2011, but most do not expect a significant export volume from the facility until 2012.
Global potash demand continues to improve. The International Fertilizer Industry Association (IFA) reported that 2010 potash deliveries totaled 55 million tonnes, significantly higher than expected earlier in the year. The TFI reported that North American potash inventories declined 9 percent in March 2011 to levels 25 percent below average. Most industry analysts expect further improvement in global potash consumption in 2011. A key uncertainty in the potash market is the timing and volume of a new supply agreement with India.
Forward-Looking Statements
Certain statements and other information included in this press release constitute 'forward looking information' within the meaning of applicable Canadian securities legislation or constitute 'forward-looking statements' within the meaning of applicable U.S. securities legislation (collectively, the 'forward-looking statements'). All statements in this press release, other than those relating to historical information or current conditions, are forward-looking statements, including, but not limited to, statements as to management's expectations with respect to: future crop and crop input volumes, demand, margins, prices and sales; business and financial prospects; and other plans, strategies, objectives and expectations, including with respect to future operations of Agrium. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions listed below. Although Agrium believes that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader should not place an undue reliance on these assumptions and such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include the following: Agrium's ability to successfully integrate and realize the anticipated benefits of its acquisitions, including the acquisition of retained AWB businesses; Agrium's ability to operate Landmark (AWB's retail business) and improve average margins for this business; and Agrium's success in integrating its business systems and supply chain management processes following the acquisition of AWB.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements, include, but are not limited to: general economic, market and business conditions, weather conditions including impacts from regional flooding and/or drought conditions; crop prices; the supply and demand and price levels for our major products; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, changes in environmental, tax and other laws or regulations and the interpretation thereof, and political risks, including civil unrest, actions by armed groups or conflict. Additionally, there are risks associated with Agrium's recent acquisition of AWB, including: timing and costs of the associated integration of the retained AWB businesses, the size and timing of expected synergies could be less favourable than anticipated; disruption from the acquisition making it more difficult to maintain relationships with customers, employees and suppliers; AWB is subject to dispute and litigation risk (including as a result of being named in litigation commenced by the Iraqi Government relating to the United Nations Oil-For-Food Programme), as well as counterparty and sovereign risk; and other risk factors detailed from time to time in Agrium reports filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States.
Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this press release as a result of new information or future events, except as may be required under applicable U.S. federal securities laws or applicable Canadian securities legislation.
OTHER
Agrium Inc. is a major Retail supplier of agricultural products and services in North America, South America and Australia and a leading global Wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through our Advanced Technologies business unit. Agrium's strategy is to grow across the value chain through acquisition, incremental expansion of its existing operations and through the development, commercialization and marketing of new products and international opportunities. Our strategy places particular emphasis on growth opportunities that both increase and stabilize our earnings profile in the continuing transformation of Agrium.
A WEBSITE SIMULCAST of the 2011 1st Quarter Conference Call will be available in a listen-only mode beginning Wednesday, May 4, 2011 at 9:30 a.m. MT (11:30 a.m. ET). Please visit the following website: www.agrium.com
AGRIUM INC.
Condensed Consolidated Statements of Operations
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales 2,954 1,848
----------------------------------------------------------------------------
Cost of product sold 2,229 1,486
----------------------------------------------------------------------------
Gross profit 725 362
----------------------------------------------------------------------------
Expenses
----------------------------------------------------------------------------
Selling 353 233
----------------------------------------------------------------------------
General and administrative 110 89
----------------------------------------------------------------------------
Loss (earnings) from associates 2 (9)
----------------------------------------------------------------------------
Other expenses (note 4) 1 20
----------------------------------------------------------------------------
Earnings before finance costs and income taxes 259 29
----------------------------------------------------------------------------
Finance costs related to long-term debt
(note 5) 27 23
----------------------------------------------------------------------------
Other finance costs (note 5) 13 7
----------------------------------------------------------------------------
Earnings (loss) before income taxes 219 (1)
----------------------------------------------------------------------------
Income taxes 59 -
----------------------------------------------------------------------------
Consolidated net earnings (loss) from
continuing operations 160 (1)
----------------------------------------------------------------------------
Consolidated net earnings from discontinued
operations (note 3) 11 -
----------------------------------------------------------------------------
Consolidated net earnings (loss) 171 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
----------------------------------------------------------------------------
Equity holders of Agrium 172 (2)
----------------------------------------------------------------------------
Non-controlling interest (1) 1
----------------------------------------------------------------------------
Consolidated net earnings (loss) 171 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (loss) per share (note 7)
----------------------------------------------------------------------------
Basic earnings (loss) per share from
continuing operations 1.02 (0.01)
----------------------------------------------------------------------------
Basic earnings per share from discontinued
operations 0.07 -
----------------------------------------------------------------------------
Basic earnings (loss) per share 1.09 (0.01)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings (loss) per share from
continuing operations 1.02 (0.01)
----------------------------------------------------------------------------
Diluted earnings per share from discontinued
operations 0.07 -
----------------------------------------------------------------------------
Diluted earnings (loss) per share 1.09 (0.01)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Condensed Consolidated Statements of Comprehensive Income
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated net earnings (loss) 171 (1)
----------------------------------------------------------------------------
Other comprehensive income (loss)
----------------------------------------------------------------------------
Available for sale financial instruments - (29)
----------------------------------------------------------------------------
Foreign currency translation 20 19
----------------------------------------------------------------------------
Loss of associates (7) (1)
----------------------------------------------------------------------------
13 (11)
----------------------------------------------------------------------------
Consolidated comprehensive income (loss) 184 (12)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
----------------------------------------------------------------------------
Equity holders of Agrium 189 (13)
----------------------------------------------------------------------------
Non-controlling interest (5) 1
----------------------------------------------------------------------------
Consolidated comprehensive income (loss) 184 (12)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Condensed Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
(Unaudited)
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating
----------------------------------------------------------------------------
Consolidated net earnings (loss) from
continuing operations 160 (1)
----------------------------------------------------------------------------
Items not affecting cash
----------------------------------------------------------------------------
Depreciation and amortization 86 68
----------------------------------------------------------------------------
Loss (earnings) from associates 2 (9)
----------------------------------------------------------------------------
Share-based payments 12 36
----------------------------------------------------------------------------
Unrealized (gain) loss on derivative
financial instruments (30) 61
----------------------------------------------------------------------------
Gain on disposal of marketable securities - (52)
----------------------------------------------------------------------------
Unrealized foreign exchange loss - 6
----------------------------------------------------------------------------
Deferred income taxes 6 -
----------------------------------------------------------------------------
Other 6 9
----------------------------------------------------------------------------
Net changes in non-cash working capital 160 (229)
----------------------------------------------------------------------------
Cash provided by (used in) operating
activities 402 (111)
----------------------------------------------------------------------------
Investing
----------------------------------------------------------------------------
Capital expenditures (110) (76)
----------------------------------------------------------------------------
Purchase of investments (36) -
----------------------------------------------------------------------------
Proceeds from disposal of investments - 25
----------------------------------------------------------------------------
Proceeds from disposal of marketable
securities - 117
----------------------------------------------------------------------------
Other (16) (6)
----------------------------------------------------------------------------
Cash (used in) provided by investing
activities (162) 60
----------------------------------------------------------------------------
Financing
----------------------------------------------------------------------------
Short-term debt 25 33
----------------------------------------------------------------------------
Repayment of long-term debt (125) (1)
----------------------------------------------------------------------------
Dividends paid (9) (9)
----------------------------------------------------------------------------
Shares issued, net of issuance costs 1 2
----------------------------------------------------------------------------
Cash (used in) provided by financing
activities (108) 25
----------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (10) -
----------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents from continuing operations 122 (26)
----------------------------------------------------------------------------
Cash and cash equivalents used in discontinued
operations (note 3) (310) -
----------------------------------------------------------------------------
Cash and cash equivalents - beginning of
period 635 933
----------------------------------------------------------------------------
Cash and cash equivalents - end of period 447 907
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest paid 42 37
----------------------------------------------------------------------------
Interest received 14 8
----------------------------------------------------------------------------
Income taxes paid 31 293
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Condensed Consolidated Balance Sheets
(Millions of U.S. dollars)
(Unaudited)
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------
Current assets
----------------------------------------------------------------------------
Cash and cash equivalents 447 907 635 933
----------------------------------------------------------------------------
Accounts receivable 2,105 1,400 1,793 1,247
----------------------------------------------------------------------------
Inventories (note 8) 3,656 2,988 2,502 2,137
----------------------------------------------------------------------------
Prepaid expenses and deposits 415 334 848 567
----------------------------------------------------------------------------
Marketable securities - 6 3 114
----------------------------------------------------------------------------
Assets of discontinued
operations (note 3) 1,632 - 1,320 -
----------------------------------------------------------------------------
8,255 5,635 7,101 4,998
----------------------------------------------------------------------------
Property, plant and equipment
(note 9) 2,209 1,886 2,154 1,797
----------------------------------------------------------------------------
Intangibles (note 10) 600 612 619 617
----------------------------------------------------------------------------
Goodwill (note 10) 2,508 1,807 2,423 1,804
----------------------------------------------------------------------------
Investment in associates 376 367 389 370
----------------------------------------------------------------------------
Other financial assets (note 11) 107 45 48 88
----------------------------------------------------------------------------
Deferred income tax assets 50 - 52 -
----------------------------------------------------------------------------
Assets of discontinued
operations (note 3) 126 - 92 -
----------------------------------------------------------------------------
14,231 10,352 12,878 9,674
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
----------------------------------------------------------------------------
Current liabilities
----------------------------------------------------------------------------
Short-term debt (note 12) 547 134 517 106
----------------------------------------------------------------------------
Accounts payable 3,863 2,938 2,666 2,342
----------------------------------------------------------------------------
Current portion of long-term
debt (note 12) 53 125 125 -
----------------------------------------------------------------------------
Current portion of other
provisions (note 13) 213 166 198 148
----------------------------------------------------------------------------
Liabilities of discontinued
operations (note 3) 1,090 - 1,020 -
----------------------------------------------------------------------------
5,766 3,363 4,526 2,596
----------------------------------------------------------------------------
Long-term debt (note 12) 2,063 1,574 2,118 1,699
----------------------------------------------------------------------------
Provisions for post-employment
benefits 142 112 136 106
----------------------------------------------------------------------------
Other provisions (note 13) 333 333 366 308
----------------------------------------------------------------------------
Other financial liabilities
(note 14) 42 57 47 34
----------------------------------------------------------------------------
Deferred income tax liabilities 498 451 490 460
----------------------------------------------------------------------------
Liabilities of discontinued
operations (note 3) 4 - 2 -
----------------------------------------------------------------------------
8,848 5,890 7,685 5,203
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shareholders' equity
----------------------------------------------------------------------------
Share capital 1,988 1,980 1,982 1,977
----------------------------------------------------------------------------
Retained earnings 3,322 2,452 3,150 2,454
----------------------------------------------------------------------------
Accumulated other comprehensive
income 70 18 53 29
----------------------------------------------------------------------------
Equity holders of Agrium 5,380 4,450 5,185 4,460
----------------------------------------------------------------------------
Non-controlling interest 3 12 8 11
----------------------------------------------------------------------------
Total equity 5,383 4,462 5,193 4,471
----------------------------------------------------------------------------
14,231 10,352 12,878 9,674
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Condensed Consolidated Statements of Shareholders' Equity
(Millions of U.S. dollars, except share data)
(Unaudited)
Accumulated
Millions other
of common Share Retained comprehensive
shares(a) capital earnings income
----------------------------------------------------------------------------
January 1, 2010 157 1,977 2,454 29
----------------------------------------------------------------------------
Consolidated net (loss) earnings (2)
----------------------------------------------------------------------------
Other comprehensive loss (11)
----------------------------------------------------------------------------
Comprehensive (loss) income
----------------------------------------------------------------------------
Share-based payment transactions 3
----------------------------------------------------------------------------
March 31, 2010 157 1,980 2,452 18
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 158 1,982 3,150 53
----------------------------------------------------------------------------
Consolidated net earnings (loss) 172
----------------------------------------------------------------------------
Other comprehensive income
(loss) 17
----------------------------------------------------------------------------
Comprehensive income (loss)
----------------------------------------------------------------------------
Share-based payment transactions 6
----------------------------------------------------------------------------
March 31, 2011 158 1,988 3,322 70
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equity Non-
holders of controlling
Agrium interest Total equity
----------------------------------------------------------------------------
January 1, 2010 4,460 11 4,471
----------------------------------------------------------------------------
Consolidated net (loss) earnings (2) 1 (1)
----------------------------------------------------------------------------
Other comprehensive loss (11) - (11)
----------------------------------------------------------------------------
Comprehensive (loss) income (13) 1 (12)
----------------------------------------------------------------------------
Share-based payment transactions 3 3
----------------------------------------------------------------------------
March 31, 2010 4,450 12 4,462
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 5,185 8 5,193
----------------------------------------------------------------------------
Consolidated net earnings (loss) 172 (1) 171
----------------------------------------------------------------------------
Other comprehensive income
(loss) 17 (4) 13
----------------------------------------------------------------------------
Comprehensive income (loss) 189 (5) 184
----------------------------------------------------------------------------
Share-based payment transactions 6 6
----------------------------------------------------------------------------
March 31, 2011 5,380 3 5,383
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Our authorized share capital consists of unlimited common shares.
Accumulated Other Comprehensive Income of Equity Holders of Agrium
Available for Foreign
sale financial Actuarial currency
instruments gains/losses translation
----------------------------------------------------------------------------
January 1, 2010 29 - -
----------------------------------------------------------------------------
Gains(losses) - - 19
----------------------------------------------------------------------------
Reclassification adjustments (48) - -
----------------------------------------------------------------------------
Deferred income taxes 19 -
----------------------------------------------------------------------------
March 31, 2010 - - 19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 - (16) 69
----------------------------------------------------------------------------
Gains(losses) - - 24
----------------------------------------------------------------------------
March 31, 2011 - (16) 93
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total
accumulated
Comprehensive other
income (loss) comprehensive
of associates income
----------------------------------------------------------------------------
January 1, 2010 - 29
----------------------------------------------------------------------------
Gains/(losses) (1) 18
----------------------------------------------------------------------------
Reclassification adjustments - (48)
----------------------------------------------------------------------------
Deferred income taxes - 19
----------------------------------------------------------------------------
March 31, 2010 (1) 18
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010 - 53
----------------------------------------------------------------------------
Gains/(losses) (7) 17
----------------------------------------------------------------------------
March 31, 2011 (7) 70
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes.
AGRIUM INC.
Summarized Notes to the Condensed Consolidated Financial Statements
For the three months ended March 31, 2011
(Millions of U.S. dollars, except per share amounts)
(Unaudited)
1. CORPORATE INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Corporate information
Agrium Inc. is incorporated under the laws of Canada with common shares listed under the symbol 'AGU' on the New York Stock Exchange and the Toronto Stock Exchange. Agrium is a major retail supplier of agricultural products and services in North and South America and Australia and a leading global producer and marketer of agricultural nutrients and industrial products. We produce and market three primary groups of nutrients: nitrogen, phosphate and potash as well as controlled-release crop nutrients and micronutrients. Our Corporate head office is located at 13131 Lake Fraser Drive S.E. Calgary, Alberta, Canada. Our operations are conducted globally from our Wholesale head office in Calgary, and our Retail and Advanced Technologies head offices in Loveland, Colorado, U.S.A.
Basis of preparation and statement of compliance
These condensed consolidated interim financial statements ('interim financial statements') of Agrium Inc. were approved for issuance by the Board of Directors on May 3, 2011. We prepared the interim financial statements in accordance with IAS 34 Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards ('IFRS') issued by the International Accounting Standards Board ('IASB'). These are our first interim financial statements for part of the period covered by our first consolidated annual financial statements prepared in accordance with IFRS for the year ending December 31, 2011. Disclosures concerning the transition from Canadian generally accepted accounting principles to IFRS are provided in note 19. These interim financial statements do not include all disclosures normally provided in consolidated annual financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2010.
Seasonality in our business results from the increased demand for our products during planting seasons. Sales are generally higher in the second and third quarters.
These interim financial statements are presented in U.S. dollars, which is our presentation and functional currency. We have prepared these interim financial statements using the historical cost basis except for certain financial instruments and non-current assets, liabilities for cash-settled share-based payment arrangements, and assets and obligations of post-employment benefit plans. Our policies for these items are set out in the notes below.
Significant accounting policies
a) Key accounting estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates are used when accounting for items such as collectibility of receivables, rebates, net realizable value of inventory, estimated useful lives and impairment of long-lived assets, goodwill impairment testing, allocation of acquisition purchase prices, asset retirement obligations, environmental remediation, employee future benefits, share-based payments, income taxes, fair value of financial assets and liabilities and amounts and likelihood of contingencies. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
b) Principles of consolidation
Subsidiaries
These consolidated financial statements include the accounts of Agrium Inc. its subsidiaries, and its proportionate share of revenues, expenses, assets and liabilities of joint ventures, which are the entities over which Agrium has control. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefit from its activities. In these interim financial statements, we, us, our and Agrium mean Agrium Inc., its subsidiaries and joint ventures. All intercompany transactions and balances have been eliminated.
Associates
Associates are those entities in which we have significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when we hold between 20 and 50 percent of the voting power of another entity, but can also arise if we hold less than 20 percent of an entity if we have the power to be actively involved and influential in policy decisions affecting the entity.
Investments in associates are accounted for using the equity method and are recognized initially at cost. Our investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include our share of the income and expenses and equity movements of equity accounted investees from the date that significant influence or joint control commences until the date that it ceases.
Joint ventures
Joint ventures are those entities over whose activity we have joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Jointly controlled entities are accounted for using proportionate consolidation. Our share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line by line basis. Where we transact with our jointly controlled entities, unrealized profits and losses are eliminated to the extent of our interest in the joint venture.
c) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments we issued in exchange for control of the acquiree. Acquisition-related costs are recognized in net earnings as incurred.
The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders' proportion of the net fair value of the assets, liabilities and contingent liabilities recognized.
d) Foreign currency translation
The functional currency for each of our subsidiaries, jointly controlled entities and associates is the currency of the primary economic environment in which they operate, which is the U.S. dollar, the Canadian dollar, the Australian dollar and the Euro. Determining the primary economic environment in which an entity operates requires management to consider several factors and use judgment.
All transactions that are not denominated in an entity's functional currency are foreign currency transactions. These transactions are initially recorded in the functional currency by applying the appropriate monthly average rate which best approximates the actual rate of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-measured at the functional currency rate of exchange at the balance sheet date. All differences are recognized in the consolidated statement of operations. Non monetary items measured at historical cost are not re-measured - they remain at the exchange rate from the date of the transaction. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
The assets and liabilities of foreign operations that are not denominated in the presentation currency, including goodwill and fair value adjustments arising on acquisition, are translated to our presentation currency at exchange rates at the reporting date. Income, expenses and capital transactions are translated at the average exchange rate for the month. Foreign currency differences are recognized directly in equity. When a foreign operation is disposed of, the relevant amount of foreign currency translation in equity is reclassified to net earnings.
e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. We recognize revenue based on individual contractual terms when all of the following criteria are met: the significant risks and rewards of ownership of the goods have been transferred to the customer; we retain neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue and costs incurred or to be incurred can be measured reliably; and, it is probable that the economic benefits associated with the transaction will flow to us. These conditions are generally satisfied when title passes to the customer according to the sales agreement which in most cases, is when product is picked up by the customer or delivered to the destination specified by the customer, which is typically a customer's premises, the vessel on which the product will be shipped, or the destination port. Revenue is reported net of sales taxes, returns, discounts and rebates.
f) Rebates
We enter into agreements with suppliers providing for vendor rebates typically based on the achievement of specified purchase volumes or sales levels. We account for rebates and prepay discounts as a reduction of the prices of the suppliers' products. Rebates that are probable and can be reasonably estimated are accrued based on total estimated crop year performance. Rebates that are not probable or estimable are accrued when certain milestones are achieved. Rebates not covered by binding agreements or published vendor programs are accrued when conclusive documentation of right of receipt is obtained.
Rebates based on the amount of materials purchased reduce cost of product as inventory is sold. Rebates that are based on sales volume are offset to cost of product when we determine that they have been earned based on sales volume of related products.
g) Income taxes
Income tax expense comprises current and deferred tax. Income tax expense is recognized in net earnings except to the extent that it relates to items recognized directly in equity, in which case it is recognized directly in equity or in other comprehensive income.
Current income tax is the expected tax payable (recoverable) on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable (recoverable) in respect of previous years.
Deferred income tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable income. Deferred income tax liabilities are generally recognized for all taxable temporary differences. Deferred income tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which those deductible temporary differences can be utilized.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when they relate to income taxes levied by the same taxation authority.
h) Financial instruments
All financial assets and financial liabilities are initially recognized at fair value. The subsequent measurement of financial instruments depends on their classification as follows:
Financial instrument classification Subsequent measurement of gains or
losses at each period-end
----------------------------------------------------------------------------
Fair value through profit or loss Fair value; unrealized gains or losses
(assets and liabilities) recognized in net earnings
----------------------------------------------------------------------------
Available for sale (assets) Fair value; unrealized gains and
losses recognized in other
comprehensive income; recognized in
net earnings on sale of the asset or
when asset is written down as impaired
----------------------------------------------------------------------------
Held to maturity investments Amortized cost using the effective
------------------------------------- interest rate method; recognized in
Loans and receivables net earnings, if asset/liability is
------------------------------------- derecognized or asset is impaired
Other financial liabilities
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Where commodity derivative contracts under master netting arrangements include both asset and liability positions, we offset the fair value amounts recognized for multiple similar derivative instruments executed with the same counterparty, including any related cash collateral asset or obligation. Transaction costs of financial instruments are recorded as a reduction of the cost of the instruments except for costs of financial instruments classified as fair value through net earnings, which are expensed as incurred.
i) Cash and cash equivalents
Cash equivalents are carried at fair value, and consist of short-term investments with an original maturity of three months or less.
j) Accounts receivable and allowance for doubtful accounts
We evaluate collectibility of specific customer receivables depending on the nature of the sale. Collectibility of receivables is reviewed and the allowance for doubtful accounts is adjusted on an ongoing basis. Account balances are charged to net earnings when we determine that it is probable that the receivable will not be collected. Interest accrues on all trade receivables from the due date, which may vary with certain geographic or seasonal programs.
We have facilities in the U.S. and Australia that enable us to sell certain short-term trade accounts receivable to third parties on an ongoing basis. We continue to service the sold accounts receivable; amounts associated with the servicing liability are not material. We record sales and derecognize accounts receivable when the arrangement transfers substantially all the risks and rewards of ownership of the receivables to a third party. Where this does not occur, the arrangements are recorded as secured borrowings.
k) Inventories
Wholesale inventories, consisting primarily of crop nutrients, operating supplies and raw materials, include both direct and indirect production and purchase costs, depreciation and amortization on assets employed directly in production, and freight to transport the product to the storage facilities. Crop nutrients include our produced products and products purchased for resale. Operating supplies include catalysts used in the production process, materials used for repairs and maintenance and other supplies. Inventories are valued at the lower of cost on a weighted-average basis and net realizable value.
Retail inventories, consisting primarily of crop nutrients, crop protection products, seed and merchandise include the cost of delivery to move the product to storage facilities. Inventories are recorded at the lower of cost on a weighted-average basis and net realizable value.
Advanced Technologies inventories, consisting primarily of raw materials and controlled-release products, include both direct and indirect production costs and depreciation on assets employed directly in production. Inventories are recorded at the lower of cost determined on a first-in, first-out basis and net realizable value.
l) Property, plant and equipment
Property, plant and equipment are measured at historical cost less accumulated depreciation and accumulated impairment loss. The cost of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. If a legal or constructive obligation exists to decommission property, plant and equipment, the discounted value of the obligation is included in the carrying value of the assets when the obligation arises.
Expenses in connection with day-to-day maintenance and repairs are recognized in the statement of operations as they are incurred. Expenses incurred in connection with major replacements, plant turnarounds and renewals that materially extend the life of property, plant and equipment or result in future economic benefits are capitalized and depreciated on a systematic basis. The carrying amount of replaced components is expensed.
If the construction or preparation for use of property, plant or equipment extends over a period of longer than twelve months, the borrowing costs incurred on borrowed capital up to the date of completion are capitalized as part of the cost of acquisition or construction.
Property, plant and equipment are depreciated on a straight-line basis using the following estimated useful lives:
Buildings and improvements 3-25 years
Machinery and equipment 3-25 years
Other 3-25 years
If the cost of an individual part of property, plant and equipment is significant relative to the total cost of the item, the individual part is accounted for and depreciated separately. Expected useful life and residual value is re-assessed annually.
m) Goodwill and intangible assets
Goodwill represents the difference between the fair value of the consideration transferred in a business combination and the fair value of the identifiable net assets acquired at the date of acquisition. Goodwill is initially determined based on provisional fair values. Fair values are finalized within 12 months of the acquisition date. Goodwill on acquisition of subsidiaries and jointly controlled entities is separately disclosed and goodwill on acquisitions of associates is included within investments in equity accounted units. Goodwill, including goodwill in equity accounted units, is not amortized; rather it is tested annually for impairment or when there is an indication of impairment.
Intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if the asset is separable or arises from contractual or legal rights, and the fair value can be measured reliably on initial recognition.
Purchased intangible assets are initially recorded at cost and finite-lived intangible assets are amortized over their useful economic lives on a straight-line basis. Intangible assets having indefinite lives and intangible assets that are not yet ready for use are not amortized and are tested annually for impairment or when there is an indication of impairment.
Intangible assets are considered to have indefinite lives when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate cash flows for us. The factors considered in making this determination include the existence of contractual rights for unlimited terms; or evidence that renewal of the contractual rights without significant incremental cost can be expected for indefinite periods into the future in view of our future investment intentions. The life cycles of the products and processes that depend on the asset are also considered.
The following useful lives, which are re-assessed annually, have been determined for classes of finite-lived intangible assets:
Trade names 5 - 15 years
Customer relationships 5 - 15 years
Technology 7 - 10 years
Other 3 - 20 years
n) Impairment
The carrying amounts of non-current assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any indication of impairment exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year during the third quarter.
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that have the ability to generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the 'cash generating unit'). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash generating units or groups of cash generating units that are expected to benefit from the synergies of the combination and reflects the lowest level at which goodwill is monitored for internal reporting purposes. If there is an indication of an impairment of an asset or cash generating unit below the level to which goodwill has been allocated, the asset or cash generating unit is tested for impairment first and any impairment loss for that asset or cash generating unit is recognized before testing at the level to which goodwill has been allocated.
An impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in net earnings. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.
o) Leases
Leases whereby we assume substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Other leases are operating leases and are not recognized on our balance sheet. Payments made under operating leases are recognized in net earnings over the term of the lease.
p) Post-employment benefits
We maintain contributory and non-contributory defined benefit and defined contribution pension plans in Canada and the United States. The majority of employees are members of defined contribution pension plans. We also maintain health care plans and life insurance benefits for retired employees. Benefits from defined benefit plans are based on either a percentage of final average earnings and years of service or a flat dollar amount for each year of service. Pension plan and post-retirement benefit costs are determined annually by independent actuaries and include current service costs, interest cost of projected benefits, return on plan assets and actuarial gains or losses. We also have non-contributory defined benefit and defined contribution plans which provide supplementary pension benefits for senior management.
Post-employment benefits are funded by us and obligations are determined using the projected unit credit method of actuarial valuation prorated over the expected length of employee service. Post-employment benefit costs for current service, interest costs and return on plan assets are charged to net earnings in the year incurred. Actuarial gains or losses are recognized immediately in other comprehensive income. Past service costs and the effects of changes in plan assumptions are amortized on a straight-line basis over the average period until the benefits become vested, or immediately if the benefits have already vested. Our contributions to defined contribution post-employment benefit plans are expensed as incurred.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. Liabilities for bonuses and profit-sharing are recognized based on a formula that takes into consideration the profit attributable to our shareholders after certain adjustments. We recognize a liability when we have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
q) Provisions
A provision is recognized if, as a result of a past event, we have a present legal or constructive obligation that can be estimated reliably, and it is more likely than not that an outflow of economic benefits will be required to settle the obligation. Where the effect of discounting is material, the expected future cash flows associated with a provision are discounted at a pre-tax rate that reflects current market assessments of the time value of money. The unwinding of the discount is recognized as a finance cost.
Environmental remediation
Environmental expenditures that relate to existing conditions caused by past operations that do not contribute to current or future revenue generation are expensed. Environmental expenditures that extend the life of the property, increase its capacity or mitigate or prevent contamination from future operations are capitalized. Costs are recorded when environmental remediation efforts are probable and the costs can be reliably estimated based on current law and existing technologies. Estimated costs are based on management's best estimate of undiscounted future costs.
Decommissioning and restoration
Provisions for decommissioning and restoration costs (asset retirement obligations) are measured based on current requirements, technology and price levels and the present value is calculated using amounts discounted over the useful economic life of the assets. The liability is recognized in the period when there is a legal or constructive obligation and a reasonable estimate can be made. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recognized and is subsequently depreciated as part of the asset. The effects of changes resulting from revisions to the timing or the amount of the original estimate of the provision are reflected on a prospective basis, by adjustment to the carrying amount of the related property, plant and equipment.
r) Share-based payments
Cash-settled plans are accounted for as liabilities where the fair value of the award is determined at the grant date using a valuation model which includes an estimated forfeiture rate. A Black-Scholes option pricing model is used for plans with a service condition and a Monte Carlo simulation model is used for plans with service and market conditions. Compensation expense is accrued, and recognized over the vesting period of the award. The fair value is re-measured at each balance sheet date and fluctuations in the fair value are recognized in the period in which the fluctuation occurs.
Equity-settled plans are accounted for using a fair value-based method. The fair value of the share-based award is determined at the grant date using a market-based option valuation model which includes an estimated forfeiture rate. The fair value of the award is recorded as compensation expense amortized over the vesting period of the award, with a corresponding increase to share capital. On exercise of the award, the proceeds are recorded as share capital.
If an employee is eligible to retire during the vesting period, we recognize compensation expense over the period from the date of grant to the retirement eligibility date. If an employee is eligible to retire on the date of grant, compensation expense is recognized on the grant date.
s) Non-current assets held for sale and discontinued operations
Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
In the consolidated statements of operations of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separate from income and expenses from continuing activities, down to the level of profit after taxes.
Once classified as held for sale, property, plant and equipment and intangible assets are not depreciated and are recognized at fair value less cost to sell. We cease using the equity method of accounting on the date from which an investment in an associate becomes held for sale.
2. BUSINESS ACQUISITION
On December 3, 2010, we acquired 100 percent of AWB Limited ('AWB'), an agribusiness operating in Australia, for $1.2-billion in cash and $37-million of acquisition costs. On December 15, 2010, we announced an agreement to sell the majority of the Commodity Management business of AWB. We will retain the Landmark retail operations, including over 200 company-operated retail locations and over 140 retail franchise and wholesale customer locations in Australia. The acquired business is included in the Retail operating segment.
Preliminary estimated fair values of assets As at As at
acquired and liabilities assumed on March 31, December 31,
December 3, 2010 2011 2010
----------------------------------------------------------------------------
Continuing operations
----------------------------------------------------------------------------
Working capital 736 736
----------------------------------------------------------------------------
Property, plant and equipment 81 81
----------------------------------------------------------------------------
Intangibles 41 41
----------------------------------------------------------------------------
Goodwill 667 589
----------------------------------------------------------------------------
Other financial assets 69 69
----------------------------------------------------------------------------
Debt and other financial liabilities (737) (744)
----------------------------------------------------------------------------
Assets of discontinued operations 1,086 1,128
----------------------------------------------------------------------------
Liabilities of discontinued operations (734) (691)
----------------------------------------------------------------------------
1,209 1,209
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The primary drivers that generate goodwill are the acquisition of a talented workforce and the value of synergies between Agrium and AWB, including expansion of geographical coverage for the sale of crop inputs and cost savings opportunities. We expect to allocate the majority of goodwill to the Retail business unit. We do not expect goodwill to be deductible for income tax purposes.
We have not completed our determination of the fair value of the assets acquired, liabilities assumed (including contingent liabilities), or related deferred income tax impacts due to the timing of the acquisition and the inherent complexity associated with the valuations. The preliminary purchase price allocation is based on carrying amounts of AWB, as adjusted for information obtained subsequent to the acquisition. Accordingly, in applying the purchase method of accounting, the excess of the purchase price over the estimated fair value of the net assets acquired has been allocated to goodwill. We expect that some of the purchase price allocated to goodwill will be allocated to property, plant and equipment, intangibles, and related deferred income tax balances. We expect that the actual amounts assigned to the fair values of the identifiable assets and liabilities acquired will differ materially from the preliminary purchase price allocation, and that some acquired property, plant and equipment and intangibles are expected to be finite-lived and accordingly subject to depreciation and amortization.
For the twelve
Unaudited pro forma consolidated summary results of months ended
operations (prepared as if the acquisition of AWB had December 31,
occurred on January 1, 2010) 2010
----------------------------------------------------------------------------
Sales 15,604
----------------------------------------------------------------------------
Net earnings 668
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales of AWB for the three months ended March 31, 2011 were $533-million. It is impracticable to provide net earnings information of AWB for the same period because corporate overheads of AWB are integrated with those of Agrium.
Oil-For-Food Programme
On April 14, 1995 the United Nations established the Oil-For-Food Programme ('OFFP'), whereby the Iraqi government was allowed to raise money through the sale of oil. The revenue from the sale of oil was placed into an escrow account, with the Iraqi government allowed to use these funds to purchase food, medical supplies and other humanitarian supplies.
On June 27, 2008 the Iraqi Government filed a civil lawsuit in the U.S. District Court for the Southern District of New York against AWB and 92 other companies who participated in the OFFP, alleging that the defendants participated in an illegal conspiracy with the 'former Saddam Hussein regime' to divert funds from the United Nations OFFP escrow account. The lawsuit seeks total damages in excess of $10-billion from the defendants, jointly and severally, as well as treble damages under the U.S. Racketeer Influenced and Corrupt Organizations Act. As to AWB specifically, the lawsuit alleges that AWB unlawfully diverted to the former Saddam Hussein regime more than $232-million from the escrow account established under the OFFP. AWB and a number of other defendants filed a motion to dismiss the complaint in January 2010. At May 4, 2011, the potential exposure is indeterminable.
As the impact on the operations of AWB arising from this legal action has not yet been fully determined, there is uncertainty as to the resultant impact, if any, on the financial position, financial performance and cash flows of AWB arising directly or indirectly from transactions under the OFFP. If the case against AWB is not dismissed, a possible adverse decision on the merits could have a material adverse effect on AWB and on Agrium's consolidated financial position and results.
3. DISCONTINUED OPERATIONS
We entered into an agreement on December 15, 2010 with Cargill, Incorporated ('Cargill') to sell the majority of the Commodity Management business of AWB. Completion of the sale is expected in the first half of 2011. The purchase price to be paid by Cargill will be the net asset value of the sold businesses as at the completion date of the transaction, plus a premium. We have committed to a plan to sell certain other businesses that form part of the Commodity Management business that is not being acquired by Cargill. In addition to the sale of the Commodity Management business, the pool management operations of AWB Harvest Finance Limited ('AWBHF') will be transferred to Cargill. We have agreed to various terms and conditions and indemnifications pursuant to the sale of the Commodity Management business, including an indemnity for litigation related to the OFFP, as described in note 2, Business Acquisition.
Commodity Management operations included in the agreement with Cargill are reported as discontinued operations because their operations and cash flows will be eliminated from continuing operations as a result of the disposal transaction and we will not have any significant continuing involvement in the operations after the disposal transaction. Assets and liabilities related to discontinued operations are presented separately on the consolidated balance sheets.
We have not completed our determination of the fair value less cost to sell of the assets, liabilities, or related deferred income tax impacts due to the timing of the disposition and the inherent complexity associated with the valuations.
As at As at
Condensed information of discontinued March 31, December 31,
operations 2011 2010
----------------------------------------------------------------------------
Operating information
----------------------------------------------------------------------------
Sales (a) 1,195 313
----------------------------------------------------------------------------
Consolidated net earnings (loss) from
discontinued operations (b) 11 (17)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash (used in) provided by
----------------------------------------------------------------------------
Operating activities (317) (252)
----------------------------------------------------------------------------
Investing activities (2) (1)
----------------------------------------------------------------------------
Financing activities 9 298
----------------------------------------------------------------------------
(310) 45
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance sheet information
----------------------------------------------------------------------------
Accounts receivable (c) 1,122 743
----------------------------------------------------------------------------
Inventories (d) 490 551
----------------------------------------------------------------------------
Prepaid expenses and deposits 13 14
----------------------------------------------------------------------------
Other current assets 7 12
----------------------------------------------------------------------------
Current assets 1,632 1,320
----------------------------------------------------------------------------
Property, plant and equipment 88 81
----------------------------------------------------------------------------
Goodwill 6 -
----------------------------------------------------------------------------
Other financial assets 7 2
----------------------------------------------------------------------------
Deferred income tax assets 25 9
----------------------------------------------------------------------------
Non-current assets 126 92
----------------------------------------------------------------------------
1,758 1,412
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Short-term debt (e) 493 471
----------------------------------------------------------------------------
Accounts payable (f) 595 549
----------------------------------------------------------------------------
Current portion of long-term debt 1 -
----------------------------------------------------------------------------
Current portion of other provisions 1 -
----------------------------------------------------------------------------
Current liabilities 1,090 1,020
----------------------------------------------------------------------------
Deferred income tax liabilities 4 2
----------------------------------------------------------------------------
Non-current liabilities 4 2
----------------------------------------------------------------------------
1,094 1,022
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Includes revenue from related parties (Pools) of $307-million (December
31, 2010 - $59-million).
(b) Net of income taxes of $8-million (December 31, 2010 - $3-million)
(c) Includes receivables from Pools of $502-million (December 31, 2010 -
$157-million).
(d) Commodity inventories measured at fair value less costs to sell;
primarily wheat of $331-million and oilseeds of $97-million (December
31, 2010 - wheat of $355-million, oilseed of $122-million).
(e) Demand facilities including $291-million (December 31, 2010 - $143-
million) secured by Pool inventories.
(f) Includes accounts payable to Pools of $174-million (December 31, 2010 -
$91-million).
Balance sheet information -
wheat, oilseeds and other Notional Fair value
commodity derivative financial (thousands, assets
instruments outstanding tonnes) Maturities (liabilities)
----------------------------------------------------------------------------
Forward physical sales 1,833 2011 79
----------------------------------------------------------------------------
Forward physical purchases 1,042 2011-2012 (44)
----------------------------------------------------------------------------
Commodity derivatives 1,802 2011-2012 20
----------------------------------------------------------------------------
55
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts receivable 164
----------------------------------------------------------------------------
Accounts payable (109)
----------------------------------------------------------------------------
55
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance sheet information -
foreign exchange derivative Notional Fair value
financial instruments (millions, buy assets
outstanding currency) Maturities (liabilities)
----------------------------------------------------------------------------
AUD/CAD forwards 225 2011 3
----------------------------------------------------------------------------
AUD/EUR forwards 156 2011 2
----------------------------------------------------------------------------
AUD/USD forwards 863 2011 22
----------------------------------------------------------------------------
CAD/AUD forwards 145 2011 (3)
----------------------------------------------------------------------------
EUR/AUD forwards 68 2011 (1)
----------------------------------------------------------------------------
USD/AUD forwards 302 2011 (6)
----------------------------------------------------------------------------
Other 1 2011 4
----------------------------------------------------------------------------
21
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts receivable 36
----------------------------------------------------------------------------
Accounts payable (15)
----------------------------------------------------------------------------
21
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. OTHER EXPENSES
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Realized loss on derivative financial
instruments 48 7
----------------------------------------------------------------------------
Unrealized (gain) loss on derivative financial
instruments (30) 61
----------------------------------------------------------------------------
Gain on disposal of marketable securities - (52)
----------------------------------------------------------------------------
Potash profit and capital tax 11 3
----------------------------------------------------------------------------
Bad debt expense 5 6
----------------------------------------------------------------------------
Interest income (14) (8)
----------------------------------------------------------------------------
Foreign exchange (gain) loss (25) 1
----------------------------------------------------------------------------
Other 6 2
----------------------------------------------------------------------------
1 20
----------------------------------------------------------------------------
----------------------------------------------------------------------------
5. FINANCE COSTS
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Finance costs related to long-term debt 27 23
----------------------------------------------------------------------------
Other finance costs
----------------------------------------------------------------------------
Environmental remediation and asset
retirement obligations 2 3
----------------------------------------------------------------------------
Other interest expense 11 4
----------------------------------------------------------------------------
13 7
----------------------------------------------------------------------------
40 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6. PERSONNEL COSTS
Total personnel expenses Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Short-term employee benefits 204 151
----------------------------------------------------------------------------
Post-employment benefits 13 11
----------------------------------------------------------------------------
Share-based payments 12 36
----------------------------------------------------------------------------
229 198
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Compensation of key management personnel Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Short-term employee benefits 1 4
----------------------------------------------------------------------------
Post-employment benefits 1 1
----------------------------------------------------------------------------
Share-based payments 5 21
----------------------------------------------------------------------------
7 26
----------------------------------------------------------------------------
----------------------------------------------------------------------------
7. EARNINGS (LOSS) PER SHARE
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Numerator
----------------------------------------------------------------------------
Consolidated net earnings (loss) from
continuing operations for the period
attributable to equity holders of Agrium 161 (2)
----------------------------------------------------------------------------
Consolidated net earnings from discontinued
operations for the period attributable to
equity holders of Agrium 11 -
----------------------------------------------------------------------------
Consolidated net earnings (loss) for the
period attributable to equity holders of
Agrium 172 (2)
----------------------------------------------------------------------------
Denominator
----------------------------------------------------------------------------
Weighted-average number of shares outstanding
for basic earnings per share 158 157
----------------------------------------------------------------------------
Dilutive instruments - stock options (a)(b) - 1
----------------------------------------------------------------------------
Weighted-average number of shares outstanding
for diluted earnings per share 158 158
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings (loss) per share from
continuing operations 1.02 (0.01)
----------------------------------------------------------------------------
Basic earnings per share from discontinued
operations 0.07 -
----------------------------------------------------------------------------
Basic earnings (loss) per share 1.09 (0.01)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings (loss) per share from
continuing operations 1.02 (0.01)
----------------------------------------------------------------------------
Diluted earnings per share from discontinued
operations 0.07 -
----------------------------------------------------------------------------
Diluted earnings (loss) per share 1.09 (0.01)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) For diluted earnings per share, conversion or exercise is assumed only
if the effect is dilutive to basic earnings per share.
(b) Using the treasury stock method, stock options with an average grant
price less than or equal to the average share price during the period
are considered dilutive and potential common share equivalents are
considered outstanding.
8. INVENTORIES
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Raw materials 281 247 267 231
----------------------------------------------------------------------------
Finished goods 391 461 268 338
----------------------------------------------------------------------------
Product for resale 2,984 2,280 1,967 1,568
----------------------------------------------------------------------------
3,656 2,988 2,502 2,137
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Depreciation and amortization
recorded in inventory 24 26 16 16
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Recorded in cost of product sold Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Depreciation and amortization 39 36
----------------------------------------------------------------------------
Direct freight 49 50
----------------------------------------------------------------------------
Inventory 2,141 1,400
----------------------------------------------------------------------------
2,229 1,486
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Our determination of net realizable value of inventories requires
considerable judgment to estimate forecasted selling prices, including
assumptions about demand and supply variables.
9. PROPERTY, PLANT AND EQUIPMENT
Buildings and Machinery and
March 31, 2011 Land improvements equipment
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
December 31, 2010 84 927 3,003
----------------------------------------------------------------------------
Additions - 10 38
----------------------------------------------------------------------------
Disposals - (2) (7)
----------------------------------------------------------------------------
Other adjustments - (3) 11
----------------------------------------------------------------------------
Foreign exchange translation 3 6 45
----------------------------------------------------------------------------
March 31, 2011 87 938 3,090
----------------------------------------------------------------------------
Accumulated depreciation
----------------------------------------------------------------------------
December 31, 2010 - (390) (1,841)
----------------------------------------------------------------------------
Depreciation (15) (52)
----------------------------------------------------------------------------
Disposals - 1 6
----------------------------------------------------------------------------
Other adjustments - (3) -
----------------------------------------------------------------------------
Foreign exchange translation - (4) (29)
----------------------------------------------------------------------------
March 31, 2011 - (411) (1,916)
----------------------------------------------------------------------------
Net book value 87 527 1,174
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets under
March 31, 2011 construction Other Total
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
December 31, 2010 335 87 4,436
----------------------------------------------------------------------------
Additions 61 1 110
----------------------------------------------------------------------------
Disposals - - (9)
----------------------------------------------------------------------------
Other adjustments (23) 5 (10)
----------------------------------------------------------------------------
Foreign exchange translation 7 1 62
----------------------------------------------------------------------------
March 31, 2011 380 94 4,589
----------------------------------------------------------------------------
Accumulated depreciation
----------------------------------------------------------------------------
December 31, 2010 - (51) (2,282)
----------------------------------------------------------------------------
Depreciation - (1) (68)
----------------------------------------------------------------------------
Disposals - - 7
----------------------------------------------------------------------------
Other adjustments - - (3)
----------------------------------------------------------------------------
Foreign exchange translation - (1) (34)
----------------------------------------------------------------------------
March 31, 2011 - (53) (2,380)
----------------------------------------------------------------------------
Net book value 380 41 2,209
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Buildings and Machinery and
December 31, 2010 Land improvements equipment
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
January 1, 2010 73 702 2,888
----------------------------------------------------------------------------
Additions 11 150 228
----------------------------------------------------------------------------
Acquisitions 2 31 37
----------------------------------------------------------------------------
Disposals (5) (34) (260)
----------------------------------------------------------------------------
Other adjustments 2 63 31
----------------------------------------------------------------------------
Foreign exchange translation 1 15 79
----------------------------------------------------------------------------
December 31, 2010 84 927 3,003
----------------------------------------------------------------------------
Accumulated depreciation
----------------------------------------------------------------------------
January 1, 2010 - (338) (1,833)
----------------------------------------------------------------------------
Depreciation - (48) (202)
----------------------------------------------------------------------------
Disposals - 22 235
----------------------------------------------------------------------------
Other adjustments - (18) 12
----------------------------------------------------------------------------
Foreign exchange translation - (8) (53)
----------------------------------------------------------------------------
December 31, 2010 - (390) (1,841)
----------------------------------------------------------------------------
Net book value 84 537 1,162
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets under
December 31, 2010 construction Other Total
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
January 1, 2010 274 78 4,015
----------------------------------------------------------------------------
Additions 110 7 506
----------------------------------------------------------------------------
Acquisitions 11 - 81
----------------------------------------------------------------------------
Disposals - (2) (301)
----------------------------------------------------------------------------
Other adjustments (73) (2) 21
----------------------------------------------------------------------------
Foreign exchange translation 13 6 114
----------------------------------------------------------------------------
December 31, 2010 335 87 4,436
----------------------------------------------------------------------------
Accumulated depreciation
----------------------------------------------------------------------------
January 1, 2010 - (47) (2,218)
----------------------------------------------------------------------------
Depreciation - (5) (255)
----------------------------------------------------------------------------
Disposals - 1 258
----------------------------------------------------------------------------
Other adjustments - 4 (2)
----------------------------------------------------------------------------
Foreign exchange translation - (4) (65)
----------------------------------------------------------------------------
December 31, 2010 - (51) (2,282)
----------------------------------------------------------------------------
Net book value 335 36 2,154
----------------------------------------------------------------------------
----------------------------------------------------------------------------
10. INTANGIBLES AND GOODWILL
Customer
March 31, 2011 Trade names relationships Technology
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
December 31, 2010 31 553 64
----------------------------------------------------------------------------
Additions developed internally - - 1
----------------------------------------------------------------------------
Adjustments to purchase price
allocation - - -
----------------------------------------------------------------------------
Other adjustments - 1 -
----------------------------------------------------------------------------
Foreign exchange translation - - -
----------------------------------------------------------------------------
March 31, 2011 31 554 65
----------------------------------------------------------------------------
Accumulated amortization
----------------------------------------------------------------------------
December 31, 2010 (7) (108) (14)
----------------------------------------------------------------------------
Amortization - (10) (3)
----------------------------------------------------------------------------
Other adjustments - 2 (1)
----------------------------------------------------------------------------
Foreign exchange translation - - -
----------------------------------------------------------------------------
March 31, 2011 (7) (116) (18)
----------------------------------------------------------------------------
Net book value 24 438 47
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total
March 31, 2011 Other Intangibles Goodwill
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
December 31, 2010 148 796 2,423
----------------------------------------------------------------------------
Additions developed internally - 1 -
----------------------------------------------------------------------------
Adjustments to purchase price
allocation - - 78
----------------------------------------------------------------------------
Other adjustments 1 2 (6)
----------------------------------------------------------------------------
Foreign exchange translation 1 1 13
----------------------------------------------------------------------------
March 31, 2011 150 800 2,508
----------------------------------------------------------------------------
Accumulated amortization
----------------------------------------------------------------------------
December 31, 2010 (48) (177) -
----------------------------------------------------------------------------
Amortization (9) (22) -
----------------------------------------------------------------------------
Other adjustments (1) - -
----------------------------------------------------------------------------
Foreign exchange translation (1) (1) -
----------------------------------------------------------------------------
March 31, 2011 (59) (200) -
----------------------------------------------------------------------------
Net book value 91 600 2,508
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Customer
December 31, 2010 Trade names relationships Technology
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
January 1, 2010 31 537 24
----------------------------------------------------------------------------
Acquisitions - 6 35
----------------------------------------------------------------------------
Disposals - - -
----------------------------------------------------------------------------
Other adjustments - 10 4
----------------------------------------------------------------------------
Foreign exchange translation - - 1
----------------------------------------------------------------------------
December 31, 2010 31 553 64
----------------------------------------------------------------------------
Accumulated amortization
----------------------------------------------------------------------------
January 1, 2010 (5) (69) (9)
----------------------------------------------------------------------------
Amortization (2) (38) (3)
----------------------------------------------------------------------------
Disposals - - -
----------------------------------------------------------------------------
Other adjustments - - (1)
----------------------------------------------------------------------------
Foreign exchange translation - (1) (1)
----------------------------------------------------------------------------
December 31, 2010 (7) (108) (14)
----------------------------------------------------------------------------
Net book value 24 445 50
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total
December 31, 2010 Other Intangibles Goodwill
----------------------------------------------------------------------------
Cost
----------------------------------------------------------------------------
January 1, 2010 138 730 1,804
----------------------------------------------------------------------------
Acquisitions - 41 589
----------------------------------------------------------------------------
Disposals (1) (1) -
----------------------------------------------------------------------------
Other adjustments 11 25 3
----------------------------------------------------------------------------
Foreign exchange translation - 1 27
----------------------------------------------------------------------------
December 31, 2010 148 796 2,423
----------------------------------------------------------------------------
Accumulated amortization
----------------------------------------------------------------------------
January 1, 2010 (30) (113) -
----------------------------------------------------------------------------
Amortization (19) (62) -
----------------------------------------------------------------------------
Disposals 1 1 -
----------------------------------------------------------------------------
Other adjustments - (1) -
----------------------------------------------------------------------------
Foreign exchange translation - (2) -
----------------------------------------------------------------------------
December 31, 2010 (48) (177) -
----------------------------------------------------------------------------
Net book value 100 619 2,423
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amortization of finite-lived intangibles Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Cost of product sold 1 1
----------------------------------------------------------------------------
Selling 18 11
----------------------------------------------------------------------------
General and administrative 3 2
----------------------------------------------------------------------------
22 14
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Certain of our trade names with a cost of $17-million (March 31, 2010 -
$17-million, December 31, 2010 - $17-million, January 1, 2010 - $17-million)
have indefinite lives for accounting purposes and accordingly are not
amortized.
11. OTHER FINANCIAL ASSETS
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Investments 40 - 2 25
----------------------------------------------------------------------------
Receivables 38 1 34 22
----------------------------------------------------------------------------
Derivative financial instruments 6 1 3 3
----------------------------------------------------------------------------
Other 23 43 9 38
----------------------------------------------------------------------------
107 45 48 88
----------------------------------------------------------------------------
----------------------------------------------------------------------------
12. DEBT
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010
----------------------------------------------------------------------------
Total Unutilized Utilized Utilized Utilized
----------------------------------------------------------------------------
Short-term debt
----------------------------------------------------------------------------
North American facilities
expiring 2012 (a) 775 735 40 - -
----------------------------------------------------------------------------
North American accounts
receivable
securitization (b) 200 200 - - -
----------------------------------------------------------------------------
European facilities
expiring 2011 to 2012
(c) 201 29 172 142 74
----------------------------------------------------------------------------
South American facilities
expiring 2011 to 2012 133 66 67 55 32
----------------------------------------------------------------------------
Australian facilities
expiring 2011 130 44 86 100 -
----------------------------------------------------------------------------
Australian accounts
receivable
securitization (b) 258 76 182 220 -
----------------------------------------------------------------------------
1,697 1,150 547 517 106
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current portion of long-
term debt 53 125 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Floating rate bank loans
due in 2012 15 14 26
----------------------------------------------------------------------------
Floating rate bank loans
due May 5, 2013 460 460 460
----------------------------------------------------------------------------
6.125% debentures due
January 15, 2041 500 500 -
----------------------------------------------------------------------------
6.75% debentures due
January 15, 2019 500 500 500
----------------------------------------------------------------------------
7.125% debentures due
May 23, 2036 300 300 300
----------------------------------------------------------------------------
7.7% debentures due
February 1, 2017 100 100 100
----------------------------------------------------------------------------
7.8% debentures due
February 1, 2027 125 125 125
----------------------------------------------------------------------------
8.25% debentures due
February 15, 2011 - - 125
----------------------------------------------------------------------------
Other 85 141 73
----------------------------------------------------------------------------
2,085 2,140 1,709
----------------------------------------------------------------------------
Unamortized transaction
costs (22) (22) (10)
----------------------------------------------------------------------------
2,063 2,118 1,699
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Outstanding letters of credit issued under our revolving credit
facilities at March 31, 2011 were $77-million reducing credit available
under the facilities to $658-million.
(b) We have revolving purchase and sale agreements to sell, with limited
recourse, accounts receivable to a maximum of $200-million and AUD$250-
million (December 31, 2010 - $200-million and AUD$250-million, January
1, 2010 - $200-million).
Accounts receivable As at As at As at
securitization March 31, December 31, January 1,
------------------------------------------------------------------------
2011 2010 2010
------------------------------------------------------------------------
Cumulative proceeds from
securitization, beginning of
period 220 - 200
------------------------------------------------------------------------
Acquisitions through business
combinations - 205 -
------------------------------------------------------------------------
Proceeds from sale of
receivables 573 225 400
------------------------------------------------------------------------
Securitization reduction
payments (613) (210) (600)
------------------------------------------------------------------------
Foreign currency translation 2 - -
------------------------------------------------------------------------
Cumulative proceeds from
securitization, end of period 182 220 -
------------------------------------------------------------------------
------------------------------------------------------------------------
(c) Of the total facility, $4-million is secured by accounts receivable.
13. OTHER PROVISIONS
Environmental Asset Cash-settled
remediation retirement share-based Legal
March 31, 2011 (a) (b) payments(c) contingencies Total
----------------------------------------------------------------------------
December 31,
2010 119 181 235 29 564
----------------------------------------------------------------------------
Additional
provisions or
changes in
estimates - 1 12 1 14
----------------------------------------------------------------------------
Draw-downs (3) (1) (28) (3) (35)
----------------------------------------------------------------------------
Accretion - 2 - - 2
----------------------------------------------------------------------------
Other
adjustments 1 1 - (7) (5)
----------------------------------------------------------------------------
Foreign
currency
translation 1 3 2 - 6
----------------------------------------------------------------------------
March 31, 2011 118 187 221 20 546
----------------------------------------------------------------------------
Current portion 10 - 183 20 213
----------------------------------------------------------------------------
Non-current
portion 108 187 38 - 333
----------------------------------------------------------------------------
118 187 221 20 546
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Environmental Asset Cash-settled
December 31, remediation retirement share-based Legal
2010 (a) (b) payments (c) contingencies Total
----------------------------------------------------------------------------
January 1, 2010 122 139 149 46 456
----------------------------------------------------------------------------
Additional
provisions or
changes in
estimates 10 56 111 16 193
----------------------------------------------------------------------------
Draw-downs (19) (7) (35) (15) (76)
----------------------------------------------------------------------------
Reversals (2) (15) - (20) (37)
----------------------------------------------------------------------------
Accretion 3 6 - - 9
----------------------------------------------------------------------------
Other
adjustments 3 (1) 4 2 8
----------------------------------------------------------------------------
Foreign
currency
translation 2 3 6 - 11
----------------------------------------------------------------------------
December 31,
2010 119 181 235 29 564
----------------------------------------------------------------------------
Current portion 10 - 159 29 198
----------------------------------------------------------------------------
Non-current
portion 109 181 76 - 366
----------------------------------------------------------------------------
119 181 235 29 564
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) We estimate that environmental remediation liabilities will be settled
between 2011 and 2038.
(b) Our asset retirement obligations generally related to dismantlement and
site restoration for nitrogen, potash and phosphate production
facilities, marketing and distribution facilities, and potash and
phosphate mine assets. We estimate these obligations will be settled
between 2011 and 2040, with the exception of obligations related to
potash operations, which are expected to occur after 100 years.
(c) We estimate the fair value of liabilities for cash-settled share-based
payment compensation plan awards using a Black-Scholes option pricing
model for awards with a service condition, and a Monte Carlo simulation
model for awards with service and market conditions.
Assumptions used to calculate
fair value of cash-settled As at As at
share-based payments As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Risk-free interest rate (%) 2.4 3.1 2.2 3.8
----------------------------------------------------------------------------
Expected annual volatility (%) 54.19 51.03 53.46 43.04
----------------------------------------------------------------------------
Expected annual dividend yield
(%) 0.12 0.16 0.12 0.18
----------------------------------------------------------------------------
Expected term of grant (in
years) 10 10 10 10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provisions are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events that can be reasonably estimated. The timing of recognition requires the application of judgment to existing facts and circumstances, which can be subject to change. Estimates of the amounts of provisions recognized are based on current legal and constructive requirements, technology and price levels. Actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions, and can take place many years in the future. Our provisions for environmental remediation and asset retirement depend on a number of uncertain factors, such as the extent and type of remediation and/or abandonment required and the cost of these activities.
14. OTHER FINANCIAL LIABILITIES
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Derivative financial instruments 29 47 33 25
----------------------------------------------------------------------------
Other 13 10 14 9
----------------------------------------------------------------------------
42 57 47 34
----------------------------------------------------------------------------
----------------------------------------------------------------------------
15. OPERATING LEASES
Operating lease commitments consist primarily of leases for rail cars and contractual commitments at distribution facilities in Wholesale, vehicles and application equipment in Retail, and office equipment and property leases throughout our operations. Commitments represent minimum payments under each agreement in each of the next five years. For the three months ended March 31, 2011, expenses for operating leases were $57-million (three months ended March 31, 2010 - $37-million).
The future minimum lease payments related to our operating leases are as follows:
Future minimum lease payments for operating leases March 31, 2011
----------------------------------------------------------------------------
2011 178
----------------------------------------------------------------------------
2012 - 2015 346
----------------------------------------------------------------------------
after 2015 101
----------------------------------------------------------------------------
625
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The classification of our leases as finance leases or operating leases is based on the extent to which the risks and rewards of ownership of a leased asset have been transferred. Making this determination requires the use of management's judgment in assessing the substance of the lease transaction.
16. FINANCIAL INSTRUMENTS
In the normal course of business, our financial position, results of operations and cash flows are exposed to various risks. Sensitivity analysis to risk is provided where the effect on net earnings or shareholders' equity could be material. Sensitivity analysis is performed by relating the reasonably possible changes in the risk variable at March 31, 2011 to financial instruments outstanding on that date while assuming all other variables remain constant.
Market risk
a) Currency risk
U.S. dollar denominated transactions in our Canadian operations generate foreign exchange gains and losses on outstanding balances which are recognized in net earnings.
Impact of U.S. dollar changes on As at As at
net earnings As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Net U.S. dollar denominated
balance in Canadian operations 948 146 625 254
----------------------------------------------------------------------------
A $10-million impact requires a
strengthening or weakening in
the U.S. dollar against the
Canadian dollar 0.01 0.10 0.02 0.06
----------------------------------------------------------------------------
----------------------------------------------------------------------------
We have foreign currency balances exposed to foreign exchange fluctuations.
Balances in non-U.S.
dollar subsidiaries As at March 31,
----------------------------------------------------------------------------
(in U.S. dollar
equivalent) 2011 2010
----------------------------------------------------------------------------
CAD Euro AUD CAD Euro
----------------------------------------------------------------------------
Cash and cash equivalents (200) 22 214 65 9
----------------------------------------------------------------------------
Accounts receivable 146 181 512 173 106
----------------------------------------------------------------------------
Short-term debt (40) (173) (88) - (111)
----------------------------------------------------------------------------
Accounts payable (565) (80) (477) (460) (36)
----------------------------------------------------------------------------
Current portion of other
provisions (148) - - (95) -
----------------------------------------------------------------------------
(807) (50) 161 (317) (32)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balances in non-U.S. As at As at
dollar subsidiaries December 31, January 1,
----------------------------------------------------------------------------
(in U.S. dollar
equivalent) 2010 2010
----------------------------------------------------------------------------
CAD Euro AUD CAD Euro
----------------------------------------------------------------------------
Cash and cash equivalents 40 6 165 (2) 5
----------------------------------------------------------------------------
Accounts receivable 126 141 447 69 65
----------------------------------------------------------------------------
Short-term debt - (142) (308) - (31)
----------------------------------------------------------------------------
Accounts payable (540) (86) (308) (183) (38)
----------------------------------------------------------------------------
Current portion of other
provisions (128) - - (80) -
----------------------------------------------------------------------------
(502) (81) (4) (196) 1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Impact of U.S. dollar
changes on comprehensive
income As at March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
CAD Euro AUD CAD Euro
----------------------------------------------------------------------------
A $10-million increase
requires a strengthening
(weakening) against the
U.S. dollar (0.01) (0.18) 0.06 (0.03) (0.34)
----------------------------------------------------------------------------
A $10-million decrease
requires a strengthening
(weakening) against the
U.S. dollar 0.01 0.12 (0.06) 0.03 0.18
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, 2011
----------------------------------------------------------------------------
Notional Fair value
(millions, buy assets
Sell/Buy currency) Maturities (liabilities)
----------------------------------------------------------------------------
USD/CAD forwards CAD 271 2011 1
----------------------------------------------------------------------------
USD/EUR forwards EUR 4 2011 -
----------------------------------------------------------------------------
CAD/USD forwards USD 668 2011 (4)
----------------------------------------------------------------------------
AUD/USD forwards USD 630 2011 (8)
----------------------------------------------------------------------------
USD/AUD forwards AUD 23 2011 3
----------------------------------------------------------------------------
NZD/AUD forwards AUD 13 2011 -
----------------------------------------------------------------------------
USD/CAD put options purchased CAD 110 2011 3
----------------------------------------------------------------------------
USD/CAD call options sold CAD 229 2011 (4)
----------------------------------------------------------------------------
(9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, 2010
----------------------------------------------------------------------------
Notional Fair value
(millions, buy assets
Sell/Buy currency) Maturities (liabilities)
----------------------------------------------------------------------------
USD/CAD forwards CAD 46 2010 2
----------------------------------------------------------------------------
USD/EUR forwards EUR 15 2010 (1)
----------------------------------------------------------------------------
CAD/USD forwards - - -
----------------------------------------------------------------------------
AUD/USD forwards - - -
----------------------------------------------------------------------------
USD/AUD forwards - - -
----------------------------------------------------------------------------
NZD/AUD forwards - - -
----------------------------------------------------------------------------
USD/CAD put options purchased - - -
----------------------------------------------------------------------------
USD/CAD call options sold - - -
----------------------------------------------------------------------------
1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2010
----------------------------------------------------------------------------
Notional Fair value
(millions, buy assets
Sell/Buy currency) Maturities (liabilities)
----------------------------------------------------------------------------
USD/CAD forwards CAD 40 2011 3
----------------------------------------------------------------------------
CAD/USD forwards USD 370 2011 (7)
----------------------------------------------------------------------------
AUD/USD forwards USD 381 2011 (24)
----------------------------------------------------------------------------
EUR/USD forwards - - -
----------------------------------------------------------------------------
GBP/USD forwards - - -
----------------------------------------------------------------------------
(28)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
January 1, 2010
----------------------------------------------------------------------------
Notional Fair value
(millions, buy assets
Sell/Buy currency) Maturities (liabilities)
----------------------------------------------------------------------------
USD/CAD forwards CAD 46 2010 1
----------------------------------------------------------------------------
CAD/USD forwards - - -
----------------------------------------------------------------------------
AUD/USD forwards - - -
----------------------------------------------------------------------------
EUR/USD forwards USD 9 2010 -
----------------------------------------------------------------------------
GBP/USD forwards USD 2 2010 -
----------------------------------------------------------------------------
1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
b) Commodity price risk
Natural gas, power and nutrient derivative financial instruments outstanding
----------------------------------------------------------------------------
March 31, 2011
----------------------------------------------------------------------------
Fair value
assets
Notional Maturities (liabilities)
----------------------------------------------------------------------------
Natural gas (BCF)
NYMEX contracts
----------------------------------------------------------------------------
Swaps 30 2011 - 2013 (46)
----------------------------------------------------------------------------
Collars (swap with options) 9 2011 - 2012 (1)
----------------------------------------------------------------------------
AECO contracts
----------------------------------------------------------------------------
Swaps 2 2011 1
----------------------------------------------------------------------------
41 (46)
----------------------------------------------------------------------------
Power - Swaps (GWh) 378 2011 - 2013 10
----------------------------------------------------------------------------
(36)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, 2010
----------------------------------------------------------------------------
Fair value
assets
Notional Maturities (liabilities)
----------------------------------------------------------------------------
Natural gas (BCF)
NYMEX contracts
----------------------------------------------------------------------------
Swaps 57 2010 - 2013 (96)
----------------------------------------------------------------------------
Collars (swap with options) 20 2010 - 2012 5
----------------------------------------------------------------------------
AECO contracts
----------------------------------------------------------------------------
Swaps 3 2010 (4)
----------------------------------------------------------------------------
80 (95)
----------------------------------------------------------------------------
Power - Swaps (GWh) 518 2010 - 2013 1
----------------------------------------------------------------------------
(94)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural gas, power and nutrient derivative financial instruments outstanding
----------------------------------------------------------------------------
December 31, 2010
----------------------------------------------------------------------------
Fair value
assets
Notional Maturities (liabilities)
----------------------------------------------------------------------------
Natural gas (BCF)
NYMEX contracts
----------------------------------------------------------------------------
Swaps 33 2011 - 2013 (50)
----------------------------------------------------------------------------
Collars (swap with options) 12 2011 - 2012 (1)
----------------------------------------------------------------------------
El Paso swaps 2 2011 -
----------------------------------------------------------------------------
AECO contracts
----------------------------------------------------------------------------
Swaps 7 2011 (2)
----------------------------------------------------------------------------
54 (53)
----------------------------------------------------------------------------
Power - Swaps (GWh) 412 2011 - 2013 4
----------------------------------------------------------------------------
Nutrient - Urea swaps (short
tons) - - -
----------------------------------------------------------------------------
(49)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
January 1, 2010
----------------------------------------------------------------------------
Fair value
assets
Notional Maturities (liabilities)
----------------------------------------------------------------------------
Natural gas (BCF)
NYMEX contracts
----------------------------------------------------------------------------
Swaps 67 2010 - 2013 (35)
----------------------------------------------------------------------------
Collars (swap with options) 23 2010 - 2012 5
----------------------------------------------------------------------------
El Paso swaps - - -
----------------------------------------------------------------------------
AECO contracts
----------------------------------------------------------------------------
Swaps - - -
----------------------------------------------------------------------------
90 (30)
----------------------------------------------------------------------------
Power - Swaps (GWh) 552 2010 - 2013 (2)
----------------------------------------------------------------------------
Nutrient - Urea swaps (short
tons) 24,500 2010 1
----------------------------------------------------------------------------
(31)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Impact of change in fair value of natural gas
derivative financial instruments Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
A $10-million increase in net earnings
requires an increase in gas prices per MMBtu 3.50 0.51
----------------------------------------------------------------------------
A $10-million increase in net earnings
requires a decrease in gas prices per MMBtu (4.39) (0.51)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Credit risk
We manage credit risk through rigorous credit approval and monitoring practices. Geographic and industry diversity also mitigate credit risk. The Wholesale business unit sells mainly to large agribusinesses and other industrial users. Letters of credit and credit insurance are used to mitigate risk. The Retail business unit sells to a large customer base dispersed over wide geographic areas in the United States, Canada, Argentina, Chile, Australia and New Zealand. The Advanced Technologies business unit sells to a diversified customer base including large suppliers in the North American professional turf application market.
Aging of trade accounts receivable March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Allowance Allowance
for for
doubtful doubtful
Gross accounts Gross accounts
----------------------------------------------------------------------------
Not past due 1,514 (20) 905 (11)
----------------------------------------------------------------------------
Less than 30 days 194 (5) 95 (3)
----------------------------------------------------------------------------
30 - 90 days 99 (7) 77 (7)
----------------------------------------------------------------------------
91 - 180 days 56 (10) 74 (15)
----------------------------------------------------------------------------
Greater than 180 days 52 (21) 60 (18)
----------------------------------------------------------------------------
1,915 (63) 1,211 (54)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Aging of trade accounts receivable December 31, January 1,
----------------------------------------------------------------------------
2010 2010
----------------------------------------------------------------------------
Allowance Allowance
for for
doubtful doubtful
Gross accounts Gross accounts
----------------------------------------------------------------------------
Not past due 1,256 (13) 716 (6)
----------------------------------------------------------------------------
Less than 30 days 241 (3) 155 (2)
----------------------------------------------------------------------------
30 - 90 days 107 (6) 76 (7)
----------------------------------------------------------------------------
91 - 180 days 90 (15) 97 (16)
----------------------------------------------------------------------------
Greater than 180 days 54 (16) 48 (15)
----------------------------------------------------------------------------
1,748 (53) 1,092 (46)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Twelve months
Three months ended ended
Allowance for doubtful accounts March 31, December 31,
----------------------------------------------------------------------------
2011 2010 2010
----------------------------------------------------------------------------
Balance, beginning of period 54 46 46
----------------------------------------------------------------------------
Additions 21 10 55
----------------------------------------------------------------------------
Write-offs (12) (2) (48)
----------------------------------------------------------------------------
Balance, end of period 63 54 53
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance as a percent of trade
accounts receivable (%) 3 4 4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
We may be exposed to certain losses in the event that counterparties to short-term investments and derivative financial instruments are unable to meet their contractual obligations. We manage this counterparty credit risk with policies requiring that counterparties to short-term investments and derivative financial instruments have an investment grade or higher credit rating and policies that limit the investing of excess funds to liquid instruments with a maximum term of one year and limit the maximum exposure to any one counterparty. We also enter into master netting agreements that mitigate our exposure to counterparty credit risk. At March 31, 2011, all counterparties to derivative financial instruments have maintained an investment grade or higher credit rating and there is no indication that any counterparty will be unable to meet their obligations under derivative financial contracts. The carrying amount of financial assets represents the maximum credit exposure.
As at As at
Maximum exposure to credit risk As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Cash and cash equivalents 447 907 635 933
----------------------------------------------------------------------------
Accounts receivable 2,105 1,400 1,793 1,247
----------------------------------------------------------------------------
Marketable securities - 6 3 114
----------------------------------------------------------------------------
Other financial assets 107 45 48 88
----------------------------------------------------------------------------
2,659 2,358 2,479 2,382
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair values
Financial instrument Category Measurement
----------------------------------------------------------------------------
Cash and cash equivalents Held for trading Fair value
----------------------------------------------------------------------------
Accounts receivable (a) Loans and Amortized cost
receivables
----------------------------------------------------------------------------
Accounts receivable - derivative Held for trading Fair value
financial instruments (b)
----------------------------------------------------------------------------
Marketable securities (b) Available for sale Fair value
or held for trading
----------------------------------------------------------------------------
Other financial assets Loans and Amortized cost
receivables
----------------------------------------------------------------------------
Other financial assets Available for sale Fair value
----------------------------------------------------------------------------
Other financial assets - derivative Held for trading Fair value
financial instruments (b)
----------------------------------------------------------------------------
Short-term debt (a) Other financial Amortized cost
liabilities
----------------------------------------------------------------------------
Accounts payable (a) Other financial Amortized cost
liabilities
----------------------------------------------------------------------------
Accounts payable - derivative Held for trading Fair value
financial instruments (b)
----------------------------------------------------------------------------
Long-term debt (c) Other financial Amortized cost
liabilities
----------------------------------------------------------------------------
Other financial liabilities Other financial Amortized cost
liabilities
----------------------------------------------------------------------------
Other financial liabilities - Held for trading Fair value
derivative financial instruments (b)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Carrying value approximates fair value due to the short-term nature of
the instruments.
(b) Fair value is recorded at the estimated amount we would receive or pay
to terminate the contracts determined based on our assessment of
available market information and valuation methodologies based on
industry accepted third-party models using assumptions about discount
rates and the timing of future cash flows, based on observable market
inputs such as interest yield curves.
(c) Fair value of floating-rate loans approximates carrying value.
Fair value and carrying value of As at March 31, As at March 31,
financial instruments 2011 2010
----------------------------------------------------------------------------
Fair Carrying Fair Carrying
value value value value
----------------------------------------------------------------------------
Cash and cash equivalents -
held for trading 447 447 907 907
----------------------------------------------------------------------------
Accounts receivable
----------------------------------------------------------------------------
Loans and receivables 2,096 2,096 1,396 1,396
----------------------------------------------------------------------------
Fair value through profit or loss 9 9 4 4
----------------------------------------------------------------------------
2,105 2,105 1,400 1,400
----------------------------------------------------------------------------
Marketable securities - held for
trading - - 6 6
----------------------------------------------------------------------------
Other financial assets
----------------------------------------------------------------------------
Loans and receivables 61 61 44 44
----------------------------------------------------------------------------
Available for sale 40 40 - -
----------------------------------------------------------------------------
Fair value through profit or loss 6 6 1 1
----------------------------------------------------------------------------
107 107 45 45
----------------------------------------------------------------------------
Short-term debt - amortized cost 547 547 134 134
----------------------------------------------------------------------------
Accounts payable
----------------------------------------------------------------------------
Amortized cost 3,832 3,832 2,887 2,887
----------------------------------------------------------------------------
Fair value through profit or loss 31 31 51 51
----------------------------------------------------------------------------
3,863 3,863 2,938 2,938
----------------------------------------------------------------------------
Current portion of long-term debt
----------------------------------------------------------------------------
Debentures - amortized cost - - 133 125
----------------------------------------------------------------------------
Floating rate debt - amortized cost 53 53 - -
----------------------------------------------------------------------------
53 53 133 125
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Debentures - amortized cost 1,716 1,525 1,143 1,025
----------------------------------------------------------------------------
Floating rate debt - amortized cost 538 538 549 549
----------------------------------------------------------------------------
2,254 2,063 1,692 1,574
----------------------------------------------------------------------------
Other financial liabilities
----------------------------------------------------------------------------
Amortized cost 13 13 10 10
----------------------------------------------------------------------------
Fair value through profit or loss 29 29 47 47
----------------------------------------------------------------------------
42 42 57 57
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value and carrying value of As at December 31, As at January 1,
financial instruments 2010 2010
----------------------------------------------------------------------------
Fair Carrying Fair Carrying
value value value value
----------------------------------------------------------------------------
Cash and cash equivalents -
held for trading 635 635 933 933
----------------------------------------------------------------------------
Accounts receivable
----------------------------------------------------------------------------
Loans and receivables 1,789 1,789 1,241 1,241
----------------------------------------------------------------------------
Fair value through profit or loss 4 4 6 6
----------------------------------------------------------------------------
1,793 1,793 1,247 1,247
----------------------------------------------------------------------------
Marketable securities
----------------------------------------------------------------------------
Available for sale - - 113 113
----------------------------------------------------------------------------
Held for trading 3 3 1 1
----------------------------------------------------------------------------
3 3 114 114
----------------------------------------------------------------------------
Other financial assets
----------------------------------------------------------------------------
Loans and receivables 43 43 60 60
----------------------------------------------------------------------------
Available for sale 2 2 25 25
----------------------------------------------------------------------------
Fair value through profit or loss 3 3 3 3
----------------------------------------------------------------------------
48 48 88 88
----------------------------------------------------------------------------
Short-term debt - amortized cost 517 517 106 106
----------------------------------------------------------------------------
Accounts payable
----------------------------------------------------------------------------
Amortized cost 2,615 2,615 2,328 2,328
----------------------------------------------------------------------------
Fair value through profit or loss 51 51 14 14
----------------------------------------------------------------------------
2,666 2,666 2,342 2,342
----------------------------------------------------------------------------
Current portion of long-term debt
----------------------------------------------------------------------------
Debentures - amortized cost 126 125 - -
----------------------------------------------------------------------------
126 125 - -
----------------------------------------------------------------------------
Long-term debt
----------------------------------------------------------------------------
Debentures - amortized cost 1,724 1,525 1,246 1,150
----------------------------------------------------------------------------
Floating rate debt - amortized cost 593 593 549 549
----------------------------------------------------------------------------
2,317 2,118 1,795 1,699
----------------------------------------------------------------------------
Other financial liabilities
----------------------------------------------------------------------------
Amortized cost 14 14 9 9
----------------------------------------------------------------------------
Fair value through profit or loss 33 33 25 25
----------------------------------------------------------------------------
47 47 34 34
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The weighted-average effective interest rate on long-term debt at March 31,
2011 is 6% (March 31, 2010 - 6%, December 31, 2010 - 6%, January 1, 2010 -
6%). The fair value of long-term debt is determined using information
classified as Level 2.
Fair value of financial
instruments Level 1 Level 2 Total
----------------------------------------------------------------------------
March 31, 2011
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 447 - 447
----------------------------------------------------------------------------
Foreign exchange derivative
financial instruments - (9) (9)
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (47) 11 (36)
----------------------------------------------------------------------------
Available for sale 40 - 40
----------------------------------------------------------------------------
March 31, 2010
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 907 - 907
----------------------------------------------------------------------------
Foreign exchange derivative
financial instruments - 1 1
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (92) (2) (94)
----------------------------------------------------------------------------
Marketable securities 6 - 6
----------------------------------------------------------------------------
December 31, 2010
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 635 - 635
----------------------------------------------------------------------------
Foreign exchange derivative
financial instruments - (28) (28)
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (52) 3 (49)
----------------------------------------------------------------------------
Marketable securities 3 - 3
----------------------------------------------------------------------------
Available for sale 2 - 2
----------------------------------------------------------------------------
January 1, 2010
----------------------------------------------------------------------------
Fair value through profit or
loss
----------------------------------------------------------------------------
Cash and cash equivalents 933 - 933
----------------------------------------------------------------------------
Foreign exchange derivative
financial instruments - 1 1
----------------------------------------------------------------------------
Gas, power and nutrient
derivative financial
instruments (30) (1) (31)
----------------------------------------------------------------------------
Marketable securities 1 - 1
----------------------------------------------------------------------------
Available for sale 138 - 138
----------------------------------------------------------------------------
----------------------------------------------------------------------------
17. CAPITAL MANAGEMENT
Our primary objectives when managing capital are to provide for: a) a prudent capital structure for raising capital at a reasonable cost for the funding of ongoing operations, capital expenditures, and new growth initiatives; and b) an appropriate rate of return to shareholders in relation to the risks underlying our assets.
We monitor the ratios outlined in the table below to manage our capital.
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Net debt to net debt plus equity
(%) (a) 29 17 29 16
----------------------------------------------------------------------------
Interest coverage (multiple) (b) 13.1 N/A (c) 12.2 N/A (c)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) Net debt includes short-term debt and long-term debt, net of cash and
cash equivalents. Equity consists of shareholders' equity.
(b) Interest coverage is the last twelve months net earnings from continuing
operations before interest expense, income taxes, depreciation,
amortization and asset impairment divided by interest, which includes
interest on long-term debt plus other interest.
(c) Twelve months of consolidated net earnings from continuing operations
before interest expense, income taxes, depreciation, amortization and
asset impairment is not available as a result of the transition to IFRS
on January 1, 2010.
(d) The measures of debt, equity and consolidated net earnings from
continuing operations described above are non-GAAP financial measures
which do not have a standardized meaning prescribed by IFRS and
therefore may not be comparable to similar measures presented by other
issuers.
(e) Our strategy for managing capital is unchanged from December 31, 2010.
Our revolving credit facilities require that we maintain specific interest coverage and debt to capital ratios as well as other non-financial covenants as defined in the debt agreement. We were in compliance with all covenants at March 31, 2011.
We have filed a base shelf prospectus in Canada and the U.S. which potentially allows issuance of up to $1.5-billion of debt, equity or other securities until December 2011. Issuance of securities requires filing a prospectus supplement and is subject to availability of funding in capital markets.
18. SEGMENTATION
Three months ended
March 31,
2011 2010
----------------------------------------------------------------------------
Consolidated sales
----------------------------------------------------------------------------
Retail
----------------------------------------------------------------------------
Crop nutrients 707 371
----------------------------------------------------------------------------
Crop protection products 638 462
----------------------------------------------------------------------------
Seed 230 191
----------------------------------------------------------------------------
Merchandise 144 21
----------------------------------------------------------------------------
Services and other 103 15
----------------------------------------------------------------------------
1,822 1,060
----------------------------------------------------------------------------
Wholesale
----------------------------------------------------------------------------
Nitrogen 334 261
----------------------------------------------------------------------------
Potash 195 191
----------------------------------------------------------------------------
Phosphate 238 127
----------------------------------------------------------------------------
Product purchased for resale 411 216
----------------------------------------------------------------------------
Other 55 53
----------------------------------------------------------------------------
1,233 848
----------------------------------------------------------------------------
Advanced Technologies 81 64
----------------------------------------------------------------------------
Other (a)(b) (182) (124)
----------------------------------------------------------------------------
2,954 1,848
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated inter-segment sales(b)
----------------------------------------------------------------------------
Retail 6 5
----------------------------------------------------------------------------
Wholesale 161 108
----------------------------------------------------------------------------
Advanced Technologies 15 11
----------------------------------------------------------------------------
182 124
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated net earnings
----------------------------------------------------------------------------
Retail (15) (68)
----------------------------------------------------------------------------
Wholesale 377 147
----------------------------------------------------------------------------
Advanced Technologies (5) (1)
----------------------------------------------------------------------------
Other (a) (98) (49)
----------------------------------------------------------------------------
Earnings before finance costs and income
taxes 259 29
----------------------------------------------------------------------------
Finance costs related to long-term debt 27 23
----------------------------------------------------------------------------
Other finance costs 13 7
----------------------------------------------------------------------------
Earnings (loss) before income taxes 219 (1)
----------------------------------------------------------------------------
Income taxes 59 -
----------------------------------------------------------------------------
Consolidated net earnings (loss) from
continuing operations 160 (1)
----------------------------------------------------------------------------
Consolidated net earnings from discontinued
operations 11 -
----------------------------------------------------------------------------
Consolidated net earnings (loss) 171 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(a) The Other segment is a non-operating segment for inter-segment
eliminations and corporate functions.
(b) Sales between segments are accounted for at prices that approximate fair
market value.
As at As at
As at March 31, December 31, January 1,
----------------------------------------------------------------------------
2011 2010 2010 2010
----------------------------------------------------------------------------
Total assets
----------------------------------------------------------------------------
Retail 8,038 6,205 6,854 5,389
----------------------------------------------------------------------------
Wholesale 2,848 2,412 2,602 3,175
----------------------------------------------------------------------------
Advanced Technologies 471 462 460 418
----------------------------------------------------------------------------
Other 1,116 1,273 1,550 692
----------------------------------------------------------------------------
Discontinued operations 1,758 - 1,412 -
----------------------------------------------------------------------------
14,231 10,352 12,878 9,674
----------------------------------------------------------------------------
----------------------------------------------------------------------------
19. TRANSITION TO IFRS
The accounting policies set out in note 1 have been applied in preparing the financial statements for the three months ended March 31, 2011, the comparative information presented in these financial statements for the three months ended March 31, 2010, for the year ended December 31, 2010 and in the preparation of an opening IFRS balance sheet at January 1, 2010 (the 'transition date').
In preparing our opening IFRS balance sheet, we have adjusted amounts reported previously in financial statements prepared in accordance with previous Canadian GAAP. An explanation of how the transition from previous Canadian GAAP to IFRS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables.
Three months Twelve months
Reconciliation of net earnings and ended ended
comprehensive income March 31, December 31,
----------------------------------------------------------------------------
2010 2010
----------------------------------------------------------------------------
Net (loss) earnings as reported under previous
Canadian GAAP (7) 714
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
net earnings:
----------------------------------------------------------------------------
Share-based payments (3) (1)
----------------------------------------------------------------------------
Incentive accrual 6 -
----------------------------------------------------------------------------
Acquisition-related costs 45 5
----------------------------------------------------------------------------
Environmental remediation and asset
retirement obligations (5) (6)
----------------------------------------------------------------------------
Reclassification of non-controlling interest 1 -
----------------------------------------------------------------------------
Income tax effect of reconciling items (41) 1
----------------------------------------------------------------------------
Other 3 -
----------------------------------------------------------------------------
Consolidated net (loss) earnings as reported
under IFRS (1) 713
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Comprehensive (loss) income as reported under
previous Canadian GAAP (13) 763
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
net earnings 6 (1)
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
other comprehensive income (5) (28)
----------------------------------------------------------------------------
Consolidated comprehensive (loss) income as
reported under IFRS (12) 734
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months Twelve months
ended ended
Reconciliation of cash flows March 31, December 31,
----------------------------------------------------------------------------
2010 2010
----------------------------------------------------------------------------
Cash provided by operating activities as
reported under previous Canadian GAAP (114) 575
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
cash provided by operating activities:
----------------------------------------------------------------------------
Consolidated net earnings 6 4
----------------------------------------------------------------------------
Share-based payments 3 1
----------------------------------------------------------------------------
Acquisition-related costs (45) (45)
----------------------------------------------------------------------------
Income tax effect of reconciling items 27 (1)
----------------------------------------------------------------------------
Reclassification of non-controlling interest (1) -
----------------------------------------------------------------------------
Consolidation of special purpose entity - 45
----------------------------------------------------------------------------
Other 13 10
----------------------------------------------------------------------------
Cash provided by operating activities as
reported under IFRS (111) 589
----------------------------------------------------------------------------
Cash provided by (used in) investing
activities as reported under previous
Canadian GAAP 60 (1,546)
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
cash provided by operating activities:
----------------------------------------------------------------------------
Acquisition-related costs - 37
----------------------------------------------------------------------------
Other - 1
----------------------------------------------------------------------------
Cash provided by (used in) investing
activities as reported under IFRS 60 (1,508)
----------------------------------------------------------------------------
Cash provided by financing activities as
reported under previous Canadian GAAP 25 518
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
cash provided by operating activities:
----------------------------------------------------------------------------
Consolidation of special purpose entity - 50
----------------------------------------------------------------------------
Cash provided by financing activities as
reported under IFRS 25 568
----------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents as reported under previous
Canadian GAAP 3 15
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
effect of exchange rate changes on cash (3) (7)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents as reported under IFRS - 8
----------------------------------------------------------------------------
Cash and cash equivalents - end of period as
reported under Canadian GAAP 907 540
----------------------------------------------------------------------------
Adjustments to increase (decrease) reported
cash and cash equivalents:
----------------------------------------------------------------------------
Consolidation of special purpose entity - 95
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents - end of period as
reported under IFRS 907 635
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation of assets As at
----------------------------------------------------------------------------
March 31, December 31, January 1,
----------------------------------------------------------------------------
2010 2010 2010
----------------------------------------------------------------------------
Total assets as reported under
previous Canadian GAAP 10,401 12,717 9,785
----------------------------------------------------------------------------
Adjustments to increase
(decrease) reported total
assets:
----------------------------------------------------------------------------
Exemption for post employment
benefits under IFRS 1 (7) (7) (7)
----------------------------------------------------------------------------
Acquisition-related costs - (45) (45)
----------------------------------------------------------------------------
Consolidation of special
purpose entity - 221 -
----------------------------------------------------------------------------
Provisions for asset
retirement 50 55 15
----------------------------------------------------------------------------
Reclassification of deferred
income taxes (95) (75) (77)
----------------------------------------------------------------------------
Other 3 12 3
----------------------------------------------------------------------------
Total assets as reported under
IFRS 10,352 12,878 9,674
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation of liabilities
and equity As at
----------------------------------------------------------------------------
March 31, December 31, January 1,
----------------------------------------------------------------------------
2010 2010 2010
----------------------------------------------------------------------------
Total liabilities as reported
under Canadian GAAP 5,819 7,370 5,193
----------------------------------------------------------------------------
Adjustments to increase
(decrease) reported total
liabilities:
----------------------------------------------------------------------------
Exemption for post employment
benefits under IFRS 1 38 38 38
----------------------------------------------------------------------------
Post-employment benefits - 16 -
----------------------------------------------------------------------------
Provisions for share-based
payments 40 38 37
----------------------------------------------------------------------------
Incentive accrual (6) - -
----------------------------------------------------------------------------
Consolidation of special
purpose entity - 221 -
----------------------------------------------------------------------------
Provisions for environmental
remediation and asset
retirement 54 60 14
----------------------------------------------------------------------------
Reclassification of non-
controlling interest (12) (8) (11)
----------------------------------------------------------------------------
Income tax effect of
reconciling items 57 15 16
----------------------------------------------------------------------------
Reclassification of deferred
income taxes (95) (75) (77)
----------------------------------------------------------------------------
Other (5) 10 (7)
----------------------------------------------------------------------------
Total liabilities as reported
under IFRS 5,890 7,685 5,203
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total shareholders' equity as
reported under previous
Canadian GAAP 4,582 5,347 4,592
----------------------------------------------------------------------------
Adjustments to increase
(decrease) reported total
shareholders' equity:
----------------------------------------------------------------------------
Exemption for employee
benefits under IFRS 1 (45) (45) (45)
----------------------------------------------------------------------------
Post-employment benefits - (16) -
----------------------------------------------------------------------------
Provisions for share-based
payments (40) (38) (37)
----------------------------------------------------------------------------
Incentive accrual 6 - -
----------------------------------------------------------------------------
Acquisition-related costs - (45) (45)
----------------------------------------------------------------------------
Provisions for environmental
remediation and asset
retirement (4) (5) 1
----------------------------------------------------------------------------
Reclassification of non-
controlling interest 12 8 11
----------------------------------------------------------------------------
Income tax effect of
reconciling items (57) (15) (16)
----------------------------------------------------------------------------
Other 8 2 10
----------------------------------------------------------------------------
Total shareholders' equity as
reported under IFRS 4,462 5,193 4,471
----------------------------------------------------------------------------
----------------------------------------------------------------------------
First-time adoption of IFRS
Our adoption of IFRS requires that we apply IFRS 1 - First Time Adoption of International Financial Reporting Standards. We have restated comparative information in compliance with IFRS for periods after the transition date. A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended December 31, 2011, and have not been applied in preparing these interim financial statements. If there are any subsequent changes to IFRS that affect the first annual IFRS financial statements, these financial statements may have to be restated.
IFRS 1 requires certain mandatory exceptions and permits certain optional exemptions from this general requirement. We prepared our opening balance sheet using the following elections under IFRS 1:
----------------------------------------------------------------------------
IFRS Exemption Options Summary of Policy Selection
----------------------------------------------------------------------------
Business Combinations
We may elect, on transition to IFRS, We have elected, on transition to
to either restate all past business IFRS, to apply the exemption such
combinations in accordance with IFRS that transactions entered into prior
3 Business Combinations or to apply to the transition date will not be
an elective exemption from applying restated. Because we did not adopt
IFRS 3 to business combinations CICA Handbook section 1582 in 2010,
completed before the transition we restated business combinations
date. completed in 2010.
----------------------------------------------------------------------------
Share-Based Payments
We may elect not to apply IFRS 2, We have elected not to apply IFRS 2
Share-Based Payments, to equity to equity instruments granted on or
instruments granted on or before before November 7, 2002, or which
November 7, 2002, or which vested vested before our transition date. We
before our transition date. We may have also elected not to apply IFRS 2
also elect not to apply IFRS 2 to to liabilities arising from share-
liabilities arising from share-based based payment transactions that
payment transactions that settled settled before the transition date.
before the transition date.
----------------------------------------------------------------------------
Employee Benefits
We may elect to recognize all We have elected to recognize all
cumulative actuarial gains and cumulative actuarial gains and losses
losses through opening retained at the date of transition as an
earnings at the transition date. adjustment to retained earnings.
Actuarial gains and losses would
have to be recalculated under IFRS
from the inception of each of our
defined benefit plans to separate
recognized and unrecognized
cumulative actuarial gains and
losses if the exemption is not
taken.
----------------------------------------------------------------------------
Foreign Exchange
On transition, cumulative translation We have elected to apply the
gains or losses in accumulated other exemption and reclassify the balance
comprehensive income can be of cumulative foreign exchange
reclassified to retained earnings at translation gains or losses from
our election. If not elected, all other comprehensive income to
cumulative translation differences retained earnings at the transition
must be recalculated under IFRS from date, with no resulting change to
inception. total shareholders' equity.
----------------------------------------------------------------------------
Asset Retirement Obligations
IFRS requires changes in obligations We have elected to apply the
to dismantle, remove and restore exemption from full retrospective
items of property, plant and application at the transition date.
equipment to be added to or deducted
from the cost of the asset. The
adjusted depreciable amount of the
asset is then depreciated over its
remaining useful life. Rather than
recalculating the effect of all such
changes throughout the life of the
obligation, we may elect to measure
the liability and the related
depreciation effects at the
transition date.
----------------------------------------------------------------------------
Estimates are a mandatory exception in IFRS 1 applied in the conversion from Canadian GAAP to IFRS. Hindsight is not used to create or revise estimates. The estimates we previously made under Canadian GAAP were not revised for application of IFRS except where necessary to reflect any differences in accounting policies.
----------------------------------------------------------------------------
Significant Differences Between IFRS Impact
and Canadian GAAP
----------------------------------------------------------------------------
Employee Benefits
IFRS permits the recognition of Transition date impact: none
actuarial gains and losses
immediately in equity, immediately Future impact: greater variability in
to earnings, or on a deferred basis shareholders' equity within
to earnings. Canadian GAAP does not accumulated other comprehensive
permit immediate recognition in income
equity. Further, IFRS requires
expensing of vested past service
costs immediately while unvested
costs are amortized on a straight-
line basis over the vesting period.
Canadian GAAP requires amortization
of past service costs over the
expected average remaining service
life of active employees and
amortization of costs over the
average life expectancy of former
employees.
----------------------------------------------------------------------------
Share-Based Payments
IFRS requires measurement of cash- Transition date impact: reduction in
settled, share-based awards at fair shareholders' equity and an increase
value, while Canadian GAAP allows in liabilities
measurement of these awards at
intrinsic value. In addition, Agrium Future impact: a continued
used straight-line depreciation to measurement difference between the
recognize graded vesting stock based intrinsic value and the fair value of
instruments under Canadian GAAP, cash-settled share based awards
while IFRS requires accounting for
each installment as a separate
arrangement.
----------------------------------------------------------------------------
Income Taxes
Classification of future income tax Transition date impact: reclassifying
under IFRS is non-current whereas all future income taxes to non-
Canadian GAAP splits future income current results in a decrease in
taxes between current and non- current assets and a decrease in non-
current components. current income tax liabilities
Future impact: remains a
classification difference
IFRS requires recognition of the Transition date impact: increase in
deferred tax impact for temporary deferred tax liabilities and a
differences arising on translation corresponding decrease in retained
of certain foreign denominated non- earnings
monetary assets or liabilities.
Canadian GAAP does not allow similar Future impact: continued recognition
treatment. of the deferred tax impact with
respect to the translation of foreign
denominated non-monetary assets or
liabilities
----------------------------------------------------------------------------
Provisions
IFRS requires discounting of Transition date impact: decrease in
provisions where the effect of the environmental liabilities and a
discounting is material. Provisions corresponding increase to retained
are not discounted under Canadian earnings
GAAP unless specifically required or
when a provision is required to be Future impact: each period there will
measured at fair value. be a charge to earnings for accretion
of the discount
The specific provisions for asset Transition date impact: increase to
retirement obligations under IFRS asset retirement obligations and a
are measured based on management's corresponding decrease to retained
best estimate. The discount rate earnings
used in calculating the present
value of the cash flow estimates is Future impact: decrease in charge to
to be based on risks specific to the earnings each period for accretion of
liability unless these risks have discount
been incorporated into the cash flow
estimates. Canadian GAAP measures
asset retirement obligations at fair
value incorporating market
assumptions. The discount rate used
is a credit-adjusted risk-free rate.
----------------------------------------------------------------------------
Impairment of Assets
Under IFRS, the impairment of assets, Transition date impact: none
excluding financial assets, is
tested and measured by comparing the
carrying value of an asset or cash
generating unit to its recoverable
amount. Recoverable amount is Future impact: increased potential
measured as the higher of fair value for impairment losses and reversal of
less cost to sell or value-in-use previously recorded losses
(discounted future cash flows). IFRS
permits impairment reversals for
assets (excluding goodwill). The
IFRS approach has the potential to
increase income statement volatility
due to the potential for increased
write-downs and reversals of write-
downs.
----------------------------------------------------------------------------
Business Combinations
IFRS does not include acquisition- Transition date impact: decrease in
related costs within consideration shareholders' equity and total assets
transferred in a business
combination whereas the cost of Future impact: potential increase in
acquisition does include direct, charges to earnings in the amount of
incremental acquisition-related acquisition-related costs for
costs under Canadian GAAP. business combinations
----------------------------------------------------------------------------
Non-Controlling Interest
IFRS requires non-controlling Transition date impact: increase in
interest to be presented as a shareholders' equity
component of shareholders' equity
separate from the parent's equity Future impact: non-controlling
while Canadian GAAP presents non- interest will continue to be
controlling interest as a separate presented within shareholders' equity
component between liabilities and
equity.
----------------------------------------------------------------------------
Consolidation of Special Purpose
Entities and Transfers of Financial
Assets
Under Canadian GAAP, a qualified On transition, (and continuing as a
special purpose entity ('QSPE') that future impact), we consolidated a
met certain conditions was not special purpose entity acquired in
consolidated by a party that was a the AWB acquisition to which we
transferor of assets to the QSPE. transferred accounts receivable.
Under IFRS, an entity that has Assets transferred that did not
transactions with a QSPE may in meet the IFRS criteria were not
substance control the entity, recorded as sales as the
requiring consolidation. In arrangement did not transfer
determining whether or not financial substantially all the risks and
assets should be derecognized on rewards of ownership of the
transfer, for example in an accounts receivables to a third party.
receivable securitization, IFRS Accordingly, we recorded cash
focuses on evaluation of whether a received on sale of receivables as
qualifying transfer has taken place, secured borrowings.
whether risks and rewards have been
transferred, and in some cases
whether control over the assets has
been transferred. Canadian GAAP
focused on an evaluation of the
transfer of control.
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20. PRINCIPAL SUBSIDIARIES AND ASSOCIATED COMPANIES
Ownership
----------------------------------------------------------------------------
Agrium, a general partnership 100%
----------------------------------------------------------------------------
Agrium U.S. Inc. 100%
----------------------------------------------------------------------------
Crop Production Services, Inc. 100%
----------------------------------------------------------------------------
Landmark Rural Holdings Limited 100%
----------------------------------------------------------------------------
Profertil S.A. 50%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Results by Segment
(Unaudited - millions of U.S. dollars)
Schedule 1
Three months ended March 31,
----------------------------------------------------------------------------
2011
----------------------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Total
----------------------------------------------------------------------------
Sales - external 1,816 1,072 66 - 2,954
- inter-segment 6 161 15 (182) -
----------------------------------------------------------------------------
Total sales 1,822 1,233 81 (182) 2,954
Cost of product sold 1,482 824 65 (142) 2,229
----------------------------------------------------------------------------
Gross profit 340 409 16 (40) 725
----------------------------------------------------------------------------
Gross profit (%) 19 33 20 25
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selling expenses 335 11 9 (2) 353
EBITDA(1) 25 412 1 (93) 345
EBIT(2) (15) 377 (5) (98) 259
Three months ended March 31,
----------------------------------------------------------------------------
2010
----------------------------------------------------------------------------
Advanced
Retail Wholesale Technologies Other Total
----------------------------------------------------------------------------
Sales - external 1,055 740 53 - 1,848
- inter-segment 5 108 11 (124) -
----------------------------------------------------------------------------
Total sales 1,060 848 64 (124) 1,848
Cost of product sold 898 630 49 (91) 1,486
----------------------------------------------------------------------------
Gross profit 162 218 15 (33) 362
----------------------------------------------------------------------------
Gross profit (%) 15 26 23 20
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selling expenses 222 9 6 (4) 233
EBITDA(1) (41) 182 3 (47) 97
EBIT(2) (68) 147 (1) (49) 29
(1) Earnings (loss) from continuing operations before finance costs, income
taxes, depreciation and amortization.
(2) Earnings (loss) from continuing operations before finance costs and
income taxes.
(3) All schedules have been restated to conform to International Financial
Reporting Standards.
AGRIUM INC.
Product Lines
(Unaudited - millions of U.S. dollars)
Schedule 2
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Cost of Cost of
product product
sold Gross sold Gross
Sales (1)(2) profit Sales (1)(2) profit
----------------------------------------------------------------------------
Retail(3)(4)
Crop nutrients 707 592 115 371 308 63
Crop protection products 638 536 102 462 393 69
Seed 230 195 35 191 176 15
Merchandise 144 127 17 21 20 1
Services and other 103 32 71 15 1 14
----------------------------------------------------------------------------
1,822 1,482 340 1,060 898 162
----------------------------------------------------------------------------
Wholesale(4)
Nitrogen 334 183 151 261 189 72
Potash 195 70 125 191 85 106
Phosphate 238 143 95 127 109 18
Product purchased for
resale 411 395 16 216 204 12
Other 55 33 22 53 43 10
----------------------------------------------------------------------------
1,233 824 409 848 630 218
----------------------------------------------------------------------------
Advanced Technologies(4)
Turf and ornamental 52 41 11 44 34 10
Agriculture 29 24 5 20 15 5
----------------------------------------------------------------------------
81 65 16 64 49 15
----------------------------------------------------------------------------
Other inter-segment
eliminations(4) (182) (142) (40) (124) (91) (33)
----------------------------------------------------------------------------
Total(4) 2,954 2,229 725 1,848 1,486 362
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Wholesale includes inventory and purchase commitment write-downs.
(2) Includes depreciation and amortization.
(3) International Retail net sales were $575-million (2010 - $27-million)
and gross profit was $108-million (2010 - $5-million) for the three
months ended March 31.
(4) Comparative figures have been reclassified to conform to the current
year's revised categories.
AGRIUM INC.
Selected Wholesale Volumes and Sales Prices
(Unaudited)
Schedule 3
Three months ended March 31,
----------------------------------------------------------------------------
2011
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Nitrogen
Domestic
Ammonia 158 484
Urea 300 495
Other 208 343
--------------------------------------------------------
Total domestic 666 445
International 83 447
----------------------------------------------------------------------------
Total nitrogen 749 446 244 202
----------------------------------------------------------------------------
Potash
Domestic 212 518
International 265 322
----------------------------------------------------------------------------
Total potash 477 409 147 262
----------------------------------------------------------------------------
Phosphate 306 778 468 310
Product purchased for resale 911 451 433 18
Other
Ammonium sulfate 88 334 173 161
Other 68
----------------------------------------------------------------------------
Total other 156
----------------------------------------------------------------------------
Total Wholesale 2,599 474 317 157
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended March 31,
----------------------------------------------------------------------------
2010
----------------------------------------------------------------------------
Cost of
Sales Selling product
tonnes price sold Margin
(000's) ($/tonne) ($/tonne) ($/tonne)
----------------------------------------------------------------------------
Nitrogen
Domestic
Ammonia 143 381
Urea 321 393
Other 178 268
--------------------------------------------------------
Total domestic 642 356
International 90 372
----------------------------------------------------------------------------
Total nitrogen 732 358 260 98
----------------------------------------------------------------------------
Potash
Domestic 349 415
International 185 250
----------------------------------------------------------------------------
Total potash 534 358 159 199
----------------------------------------------------------------------------
Phosphate 250 506 434 72
Product purchased for resale 677 319 301 18
Other
Ammonium sulfate 90 234 173 61
Other 84
----------------------------------------------------------------------------
Total other 174
----------------------------------------------------------------------------
Total Wholesale 2,367 358 266 92
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AGRIUM INC.
Depreciation and Amortization in Cost of Product Sold
(Unaudited - millions of U.S. dollars)
Schedule 4
Three months ended March 31,
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
Retail 1 -
----------------------------------------------------------------------------
Wholesale
Nitrogen 12 18
Potash 9 4
Phosphate 12 11
Product purchased for resale - -
Other 1 1
----------------------------------------------------------------------------
34 34
----------------------------------------------------------------------------
Advanced Technologies 4 2
----------------------------------------------------------------------------
Total 39 36
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contacts:
Agrium Inc.
Richard Downey
Senior Director, Investor Relations
(403) 225-7357
Agrium Inc.
Todd Coakwell
Manager, Investor Relations
(403) 225-7437
www.agrium.com