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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2003

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-10351

POTASH CORPORATION OF SASKATCHEWAN INC.

306-933-8500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x  NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

YES x  NO o

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     As at July 31, 2003 Potash Corporation of Saskatchewan Inc. (the “Company”) had 52,106,586 Common Shares outstanding.

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PART I.     FINANCIAL INFORMATION

      These interim consolidated financial statements do not include all disclosures normally provided in annual consolidated financial statements and should be read in conjunction with the most recent annual consolidated financial statements. In management’s opinion, the unaudited consolidated financial information includes all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.

Potash Corporation of Saskatchewan Inc.

Consolidated Statements of Income and Retained Earnings

(See Notes to the Consolidated Financial Statements)

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Potash Corporation of Saskatchewan Inc.

Consolidated Statements of Financial Position

(See Notes to the Consolidated Financial Statements)

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Potash Corporation of Saskatchewan Inc.

Consolidated Statements of Cash Flow

(See Notes to the Consolidated Financial Statements)

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Potash Corporation of Saskatchewan Inc.

Notes to the Consolidated Financial Statements

1.   Significant Accounting Policies

      The company’s accounting policies are in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”). These policies are consistent with accounting principles generally accepted in the United States (“US GAAP”) except as outlined in Note 8. The accounting policies used in preparing these interim consolidated financial statements are consistent with those used in the preparation of the annual consolidated financial statements, except as disclosed in Note 2.

Basis of Presentation

      The consolidated financial statements include the accounts of Potash Corporation of Saskatchewan Inc. and its principal operating subsidiaries (the “company” except to the extent the context otherwise requires):

     — PCS Sales (Canada) Inc.

2.   Change in Accounting Policy

      Effective January 1, 2003, the company changed the method of determining cost for substantially all finished product inventories from the first in, first out method to the weighted average cost method. This change was made to more closely align product costing with product movement. This change in accounting policy had no significant effect on the company’s results of operations or financial position for any of the periods presented.

3.   Inventories

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4.   Income Taxes

      The company’s effective consolidated income tax rate for the second quarter and year-to-date for 2003 approximates 40 percent (2002 — 36 percent).

5.   Net Income Per Share

      Basic net income per share for the quarter is calculated on the weighted average shares issued and outstanding for the three months ended June 30, 2003 of 52,100,000 (2002 — 52,018,000). Basic net income per share for the year-to-date is calculated on the weighted average shares issued and outstanding for the six months ended June 30, 2003 of 52,094,000 (2002 — 51,989,000). Diluted net income per share is calculated based on the weighted average shares issued and outstanding during the period, adjusted by the total of the additional common shares that would have been issued assuming exercise of all share options with exercise prices at or below the average market price for the period. Weighted average shares outstanding for the diluted net income per share calculation for the quarter were 52,337,000 (2002 — 52,391,000) and for the year-to-date were 52,331,000 (2002 — 52,304,000).

6.   Segment Information

      The company has three reportable business segments: potash, phosphate and nitrogen. These business segments are differentiated by the chemical nutrient contained in the product that each produces. Inter-segment net sales are made under terms which approximate market prices.

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7.   Pro Forma Stock Compensation Expense

      The company has two stock-based compensation plans for which fair value accounting is not required. No compensation expense has been recognized with respect to these plans as the exercise price is the quoted market closing price of the company’s common shares on the last trading day immediately preceding the date of the grant. Had compensation expense for the company’s plans been determined based on the fair value at the grant dates for awards under the plans, the company’s net income and net income per share would have been reduced to the pro forma amounts indicated below:

      In calculating the foregoing pro forma amounts, the fair value of each option grant was estimated as of the date of grant using the Modified Black-Scholes option-pricing model with the following weighted average assumptions:

8.   United States Generally Accepted Accounting Principles (US GAAP)

      A description of certain significant differences between Canadian GAAP and US GAAP follows:

      Marketable securities: The company’s investment in Israel Chemicals Ltd. (“ICL”) is stated at cost. US GAAP would require that this investment be classified as available-for-sale and be stated at market value with the difference between market value and cost reported as Other Comprehensive Income (“OCI”).

      Property, plant and equipment and goodwill: The net book value of property, plant and equipment and goodwill under Canadian GAAP is higher than under US GAAP, as past provisions for asset impairment under Canadian GAAP were measured based on the undiscounted cash flow from use together with the residual value of the assets. Under US GAAP they were measured based on fair value, which was lower than the undiscounted cash flow from use together with the residual value of the assets.

      Pre-operating costs: Operating costs incurred during the start-up phase of new projects are deferred until commercial production levels are reached, at which time they are amortized over the estimated life of the project. US GAAP would require that these costs be expensed as incurred.

      Asset retirement obligations: Asset retirement obligations are not presently required under Canadian GAAP. US GAAP would require that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The

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      Foreign currency translation adjustment: The foreign currency translation adjustment results from the restatement of prior periods so that all periods presented are in the same reporting currency. US GAAP requires that the comparative Consolidated Statements of Income and the Consolidated Statements of Cash Flow be translated using weighted average exchange rates for the applicable periods. In contrast, the Consolidated Statements of Financial Position are translated using the exchange rates at the end of the applicable periods. The difference in these exchange rates is what gives rise to the foreign currency translation adjustment.

      Additional minimum liability: The company’s accumulated benefit obligation for its US pension plans exceeds the fair value of plan assets. US GAAP requires that the company recognize a liability that is at least equal to the unfunded accumulated benefit obligation. If an additional liability required to be recognized exceeds unrecognized prior service cost, the excess is to be reported as OCI.

      Derivative instruments and hedging activities: The company’s derivative instruments which have not yet been settled are not recognized in the consolidated financial statements and gains or losses arising from settled hedging transactions are deferred as a component of inventory until the product containing the hedged item is sold, at which time both the natural gas purchase cost and the related hedging deferral are recorded as cost of goods sold. US GAAP would require that derivative instruments be recorded at fair value in the Consolidated Statement of Financial Position with the change in fair value of instruments designated as cash flow hedges recorded as OCI. The portion of the gain or loss on derivative instruments designated as cash flow hedges that are effective at offsetting changes in the hedged item is reported as a component of OCI and reclassified into cost of goods sold when the product containing the hedged item is sold (see supplemental Derivative Instruments and Hedging Activities disclosures below).

      Net sales: Sales are recorded net of freight costs (less related revenues) and transportation and distribution expenses. US GAAP would require that net freight costs be included in cost of goods sold and transportation and distribution expenses be reported as operating expenses.

      Comprehensive income: Comprehensive income is not recognized under Canadian GAAP. US GAAP would require the recognition of comprehensive income. Comprehensive income is comprised of two components, net income and OCI. OCI refers to amounts that under US GAAP are recorded as an element of shareholders’ equity but are excluded from net income because these transactions or events were attributed to changes from non-owner sources.

      Depreciation and amortization: Depreciation and amortization under Canadian GAAP is higher than under US GAAP, as the net book values of property, plant and equipment and goodwill under Canadian GAAP are higher than under US GAAP.

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      The application of US GAAP, as described above, would have had the following approximate effects on net income, net income per share, total assets and shareholders’ equity:

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Supplemental US GAAP Disclosures

Available-for-Sale Securities

      The company’s investment in ICL is classified as available-for-sale. The fair market value of this investment at June 30, 2003 was $144.9 and the unrealized holding gain was $52.1.

New Accounting Pronouncements

      Effective January 1, 2003, the company adopted SFAS No. 143 “Accounting for Asset Retirement Obligations”. This statement requires that the fair value of a liability for an asset retirement obligation be recognized. The fair value of this liability is added to the carrying amount of the associated tangible long-lived asset and then depreciated over the life of the asset. The liability is accreted during the period through charges to operating expenses. The adoption of this pronouncement has had no significant effect on the financial position of the company. On an annual basis, the impact of accretion related to these obligations will be approximately $1.9 after tax (approximately $0.04 per diluted share).

      Effective January 1, 2003, the company adopted FASB Interpretation (“FIN”) No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. This interpretation requires recognition, at the inception of the guarantee, of a liability for the fair value of the obligation undertaken in issuing the guarantee and clarifies the disclosures that are necessary. The adoption of this interpretation has not had any significant effect on the results of operations or financial position of the company.

      In July 2002, the FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 nullifies the guidance previously provided under Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Among other things, SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred as opposed to when there is commitment to a restructuring plan as set forth under the nullified guidance. The company adopted SFAS No. 146 effective January 1, 2003 and there was no significant effect on the results of operations or financial position of the company.

      In December 2002, the FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation — Transition and Disclosure”. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. The company adopted the disclosure provisions of SFAS No. 148 and there was no significant effect on the results of operations or financial position of the company.

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      In January 2003, the FASB issued FIN No. 46 “Consolidation of Variable Interest Entities”, which addresses consolidation by a business of variable interest entities in which it is the primary beneficiary. FIN No. 46 is effective immediately for certain disclosure requirements and for variable interest entities created after January 1, 2003, and in the first fiscal year or interim period beginning after June 15, 2003 for all other variable interest entities. The company is currently in the process of determining the effects, if any, on its financial position, results of operations and cash flows that will result from the adoption of FIN No. 46.

      In April 2003, the FASB issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. This statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This statement is effective for contracts entered into or modified after June 30, 2003, for hedging relationships designated after June 30, 2003, and to certain preexisting contracts. The company will adopt SFAS No. 149 on a prospective basis at its effective date. The company is assessing the impact that SFAS No. 149 may have on its financial statements.

      In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This statement establishes standards for how to classify and measure certain financial instruments with characteristics of both liabilities and equity. It requires that a financial instrument within its scope be classified as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. The company is assessing the impact that SFAS No. 150 may have on its financial statements.

Derivative Instruments and Hedging Activities

      The company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The company’s natural gas purchase strategy is based on diversification of price for its total gas requirements. Its objective is to acquire a reliable supply of natural gas feedstock and fuel on a location-adjusted, cost-competitive basis in a manner that minimizes volatility without undue risk. It employs derivative instruments including futures, swaps and option agreements in order to manage the cost on a portion of its natural gas requirements. These instruments are intended to hedge the future cost of the committed and anticipated natural gas purchases primarily for its US nitrogen plants. The maximum period for these hedges cannot exceed five years. The company uses these instruments to reduce price risk, not for speculative purposes.

      The company formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in cash flows or fair value of the hedged item. Fluctuations in the value of the derivative instruments are generally offset by changes in the hedged item; however, if it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the company will discontinue hedge accounting prospectively for the affected derivative.

      The company has designated its natural gas derivative instruments as cash flow hedges. The gain or loss of an effective cash flow hedge is deferred in OCI until such time as the natural gas that it relates to is used in production, at which time the gain or loss is reclassified from OCI to cost of goods sold. In the second quarter of 2003, a gain of $28.0 was recognized in cost of goods sold ($55.0 gain on a year-to-date basis). Of the deferred gains at the quarter end, approximately $57.8 will be reclassified to cost of goods sold within the next twelve months. The fair value of the company’s gas hedging contracts at June 30, 2003 was $93.2.

9.   Seasonality

      The company’s sales of fertilizer are seasonal. Typically, the second quarter of the year is when fertilizer sales will be highest, due to the North American spring planting season. However, planting conditions and the timing of customer purchases will vary each year and sales can be expected to shift from one quarter to another.

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10. Comparative Figures

      Certain of the prior period’s figures have been reclassified to conform with the current period’s presentation.

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      The narrative included under this Management’s Discussion and Analysis of Financial Condition and Results of Operations has been derived with reference to the unaudited interim consolidated financial statements reported under Canadian GAAP. All references to per share amounts pertain to diluted earnings per share.

Earnings Guidance Review

      The company’s initial projection for earnings per share for second-quarter 2003 was in the range of $0.90 to $1.00 and this guidance was updated during the quarter. The final result was $0.57 per share. During the quarter, the Canadian dollar continued to strengthen, ending up $0.11 higher relative to the US dollar at March 31, 2003. This resulted in a foreign exchange loss of $22.4 million ($0.26 per share), substantially all of which is non-cash. The stronger dollar also impacted the company’s Canadian cash costs of potash production, freight and administration. This reduced earnings by another $0.10 per share during the quarter. The remaining variance was primarily due to higher costs in phosphate.

Overview of Actual Results

      Second-quarter net income was more than double the amount earned in the same period last year. Volumes were up in all three nutrients, but the main contributors to better earnings were higher nitrogen prices and the gas hedge realization.

      The Canadian dollar exchange rate compared to the US dollar started the year at 1.5796, ended the first quarter at 1.4693 and ended the second quarter at 1.3553. This strengthening of the Canadian dollar impacts the company’s consolidated financial statements in two ways: on its foreign exchange gain or loss line arising from currency conversion and on its Canadian dollar operating costs. The largest component of the unrealized foreign exchange loss in both second-quarter and first-half 2003 pertains to the translation of future income tax liabilities on the Consolidated Statement of Financial Position at June 30, 2003.

      The strengthening Canadian dollar, relative to the US dollar, negatively affected earnings in both the second quarter and the first half of 2003. There was a quarterly foreign exchange loss of $0.26 per share and a year-to-date loss of $0.45 per share, which were primarily non-cash. Additionally, foreign exchange affected the Canadian cash costs of potash production, freight and administration. The stronger Canadian dollar increased the US dollar equivalent of these expenses by $10.9 million since the beginning of the year. This reduced earnings by $0.03 per share in the first quarter and $0.10 per share in the second quarter. Based on the December 31, 2002 exchange rate of 1.5796, the stronger Canadian dollar has reduced earnings by $0.58 per share on a year-to-date basis.

      While the company’s potash, phosphate and nitrogen sales volumes were all better than last year’s same quarter, lower-than-expected corn and wheat plantings in North America took away most of the potential spring season upside. As expected, the higher production costs in all three nutrients experienced in the first quarter continued in the second quarter, but potash and phosphate prices did not rise enough to offset these

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Potash