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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 September 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 October 31, 2003, Potash Corporation of Saskatchewan Inc. had 52,484,816 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 Operations 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 10. 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.

      As described in notes 4 and 5, during the quarter the Company approved plans to restructure certain operations. These plans require significant estimates to be made of the recoverability of the carrying value of certain assets based on their capacity to generate future cash flows. Although Company management believes it has made reasonable estimates consistent with current conditions, internal planning and expected future operations, such estimates are subject to significant uncertainties and judgements. As a result, it is reasonably possible that the amounts reported for asset impairments in connection with these initiatives could be different if the Company were to use different assumptions or if conditions were to change in the future. The Company is also required to report estimated expenses for employee termination, contract termination and other exit costs. Because such activities are complex processes that can take several months to complete, they involve periodically assessing estimates. As a result, the Company may have to change originally reported estimates when actual payments are made or the activities are completed.

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.

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3.   Inventories

4.   Provision for Plant Shutdowns

Memphis and Geismar Nitrogen Operations

      In June 2003, the Company indefinitely shut down its Memphis, Tennessee plant and suspended production of ammonia and nitrogen solutions at its Geismar, Louisiana facilities due to high US natural gas costs and low product margins. In August 2003, Company management determined that there were no immediate intentions of re-starting the unprofitable plants. The Company has not yet decided whether to mothball, dismantle, or sell the shutdown facilities.

      The Company determined that all employee positions pertaining to the affected operations would be eliminated and recorded $4.8 in connection with costs of special termination benefits. The number of employees terminated as a result of the shutdowns were 187, of which 161 have left the Company as of September 30, 2003. The remaining employees are expected to leave the Company by December 31, 2003. As of September 30, 2003, the Company had made payments relating to these terminations totaling $1.5. All workforce reduction costs are expected to be paid by December 31, 2004.

      In connection with the shutdowns, management conducted an assessment of the recoverability of the long-lived assets in its nitrogen operations. As a result of its review, management determined that the carrying amounts of the long-lived assets at the Memphis and Geismar nitrogen facilities were not fully recoverable, and an impairment loss of $101.6, equal to the amount by which the carrying amount of the facilities’ asset groups exceeded their respective fair values, should be recognized. Of the total impairment charge, $100.6 related to property, plant and equipment and $1.0 related to other assets. For purposes of the impairment measurement, fair value was determined based on the present value of expected future net cash flows.

      As part of its review, management also determined that a write-down of certain parts inventories at these plants in the amount of $12.4 was required.

      In addition to the costs described above, management expects to incur other shutdown-related costs of approximately $11.1 and nominal annual expenditures for site security and other maintenance costs. These amounts have not been recorded in the consolidated financial statements as of September 30, 2003. Such costs will be recognized and recorded in the period in which they are incurred.

Kinston Phosphate Feed Plant

      The phosphate feed plant at Kinston, North Carolina ceased operations in the first quarter of 2003. During that quarter, the Company recorded $0.6 for costs of special termination benefits for Kinston employees, $0.3 for parts inventory write-downs, and $1.3 for long-lived asset impairment charges.

      In lieu of full plant closure, the Company operated the facility as a warehouse during the first and second quarters of 2003. In the third quarter of 2003, Company management determined that the cost of operating Kinston as a stand-alone warehouse was uneconomical. This decision triggered a further review by management of the carrying amounts of the plant’s long-lived assets. As a result of this review, management determined that the carrying amounts of the long-lived assets were not recoverable, and an additional impairment charge of $2.7, equal to the amount by which the carrying amount of the plant’s long-lived assets

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      The following table summarizes, by reportable segment, the total amount of costs incurred for the three months ended September 30, 2003, the total costs incurred to date, and the total costs expected to be incurred in connection with the plant shutdowns described above:

      The following table summarizes, by reportable segment, the costs accrued as of September 30, 2003 in connection with the plant shutdowns described above:

5.   Provision for PCS Yumbes S.C.M.

      On August 27, 2003, the Company provided to SQM an irrevocable option to acquire its interest in PCS Yumbes. Acquired in 1999, PCS Yumbes holds mining concessions on certain sodium nitrate reserves in the Atacama Desert in northern Chile and is a producer of potassium nitrate, sodium nitrate and iodine. The option is for a maximum period of 20 weeks at a price of $1.7. If the option is exercised, the parties will enter into a share purchase agreement under which SQM would acquire the shares of PCS Yumbes for an aggregate purchase price of $35.0 (including the price of the option), subject to adjustments.

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      Under the terms of the agreement, and prior to the sale closing, PCS Yumbes will continue to operate the facility and expeditiously liquidate the inventory of nitrates. All other working capital is to be fully realized or discharged (as applicable) by the Company prior to the close. It is expected that closing would occur no later than the end of 2004.

      Upon entering the option agreement, management commenced an assessment of the recoverability of the long-lived assets of the PCS Yumbes operations. As a result of its review, management determined that the carrying amounts of PCS Yumbes’ long-lived assets were not recoverable and recorded an impairment charge of $77.4, equal to the amount by which the carrying amount of the asset group exceeded fair value. Of the total impairment charge, $13.0 related to property, plant and equipment, $63.9 related to deferred pre-production costs, and $0.5 related to deferred acquisition costs. For purposes of the impairment measurement, fair value was determined in reference to the commercial agreement described above.

      As part of this review, management also determined that a reduction in the carrying amount of certain non-parts inventory equal to $50.2 was required due to the need to liquidate all inventories that would not be transferred to SQM under the agreement.

      The Company has determined that all employee positions at PCS Yumbes will be eliminated by December 31, 2004. Accordingly, the Company has recorded a provision of $1.8 pertaining to contractual termination benefits to be paid, primarily under Chilean law. As of September 30, 2003, approximately 68 of the employees had left the Company, and the Company had made contractual payments relating to these terminations totaling $0.5. The remaining 156 employees are expected to leave the Company by December 31, 2004, and all remaining workforce reduction costs are expected to be paid by December 31, 2004.

      In September 2003, the Company incurred early termination penalties in respect of certain PCS Yumbes contractual arrangements. The Company recorded a provision of $11.1 in respect of these contract termination costs and expects such amounts to be substantially settled by the end of fiscal 2003.

      The following table summarizes the total amount of costs incurred for the three months ended September 30, 2003, the total costs incurred to date, and the total costs expected to be incurred in connection with PCS Yumbes as described above:

      The following table summarizes the costs accrued as of September 30, 2003 in connection with PCS Yumbes as described above:

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6.   Income Taxes

      The Company’s effective consolidated income tax rate for the current period is approximately 40 percent (exclusive of the charges relating to PCS Yumbes as described in Note 5). In the third quarter of 2002, this rate was approximately 36 percent.

7.   Net (Loss) Income Per Share

      Basic net (loss) income per share for the year-to-date is calculated based on the weighted average shares issued and outstanding for the nine months ended September 30, 2003 of 52,106,000 (2002 — 52,006,000). Third quarter basic net (loss) income per share is calculated based on the weighted average shares issued and outstanding for the three months ended September 30, 2003 of 52,129,000 (2002 — 52,039,000).

      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. For periods in which there was a loss attributable to common shares, share options with exercise prices at or below the average market price for the period were excluded for the calculations of diluted net loss per share, as inclusion of these securities would have been antidilutive to the net loss per share. Weighted average shares outstanding for the diluted net (loss) income per share calculation for the nine months ended September 30, 2003 were 52,106,000 (2002 — 52,291,000). The number of shares for the third quarter diluted net (loss) income per share calculation was 52,129,000 (2002 — 52,262,000).

8.   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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9.   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 (loss) income and net (loss) income per share would have been reflected as 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:

10. 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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      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 reported as OCI.

      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.

      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 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). The ineffective portion is recognized in cost of goods sold.

      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.

      Provision for plant shutdowns: The provision for plant shutdowns under Canadian GAAP includes $12.4 (third quarter) and $12.7 (year-to-date) for write-downs of parts inventory. US GAAP would require that these write-downs be presented as a component of cost of goods sold.

      Provision for PCS Yumbes S.C.M.: The provision for PCS Yumbes S.C.M. under Canadian GAAP includes $50.2 (quarter and year-to-date) for write-downs of non-parts inventory. US GAAP would require that these write-downs be presented as a component of cost of goods sold.

      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.

      Comprehensive income: Comprehensive income is recognized under US GAAP, but not under Canadian GAAP. 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.

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