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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED December 31, 2005. | |
OR | ||
o
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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
A.
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Full title of the plan and the address of the plan, if different from that of the issuer named below: |
B.
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Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Page | ||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1 | |||
FINANCIAL STATEMENTS: |
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Statements of Net Assets Available for Benefits as of
December 31, 2005 and 2004 |
2 | |||
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2005 |
3 | |||
Notes to Financial Statements |
48 | |||
SUPPLEMENTAL SCHEDULE |
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Form 5500, Schedule H, Part IV, Line 4iSchedule of Assets (Held at
End of Year) as of December 31, 2005 |
9 |
Note: | All other schedules required by Section 2520.103-10 of the Department
of Labors Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted because
they are not applicable. |
2005 | 2004 | |||||||
ASSETS: |
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Participant-directed investments (Note 3) |
$ | 202,937,467 | $ | 200,562,919 | ||||
Receivables: |
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Participant contributions |
25,436 | |||||||
Company matching contributions |
7,977 | |||||||
Company performance contribution |
2,944,952 | 2,905,040 | ||||||
Unsettled trades |
1,400 | 24,135 | ||||||
Total assets |
205,883,819 | 203,525,507 | ||||||
LIABILITIESCorrective distributions payables |
(27,869 | ) | ||||||
NET ASSETS AVAILABLE FOR BENEFITS |
$ | 205,855,950 | $ | 203,525,507 | ||||
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ADDITIONS: |
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Contributions: |
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Company matching contributions |
$ | 2,609,491 | ||
Company performance contribution |
2,953,274 | |||
Participant contributions |
8,193,523 | |||
Rollover contributions |
523,444 | |||
Total contributions |
14,279,732 | |||
Investment income: |
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Net depreciation in fair value of investments (Note 3) |
(532,135 | ) | ||
Interest and dividends |
8,671,982 | |||
Net investment income |
8,139,847 | |||
Total additions |
22,419,579 | |||
DEDUCTIONS: |
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Benefits paid to participants |
(20,044,912 | ) | ||
Corrective distributions |
(27,869 | ) | ||
Administrative expenses |
(16,328 | ) | ||
Net other |
(27 | ) | ||
Total deductions |
(20,089,136 | ) | ||
INCREASE IN NET ASSETS |
2,330,443 | |||
NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of year |
203,525,507 | |||
End of year |
$ | 205,855,950 | ||
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1. | DESCRIPTION OF PLAN | |
The following description of the PCS U.S. Employees Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan Document for more complete information. | ||
GeneralThe Plan is a defined contribution plan sponsored by PCS Administration (USA), Inc. (the Company) covering all eligible employees of the Company, PCS Phosphate Company, Inc., PCS Sales (USA), Inc, certain employees of White Springs Agricultural Chemicals, Inc., and certain employees of PCS Nitrogen, as defined in the Plan Document. The Employee Benefits Committee of the Company controls and manages the operation and administration of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). | ||
ContributionsParticipants may contribute up to 50% of base compensation each year, as defined in the Plan Document, subject to certain Internal Revenue Code limitations. The Plan has an Automatic Enrollment provision under which new participants are set up with a 2% pretax deferral unless they formally waive participation or elect a different participation level. | ||
The Company will match $.50 for each $1.00 of participant contributions, excluding catch-up contributions, up to 6% of base compensation, subject to certain limitations as described in the Plan agreement and the Internal Revenue Code of 1986, as amended. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans (rollover contributions), which are not eligible for the Company Match. | ||
The Company may also make a discretionary Company Performance Contribution ranging from 0% to 3% of each eligible participants base pay. The Company made a 2005 Company Performance Contribution of 3% of each eligible participants base pay. | ||
Participant AccountsIndividual accounts are maintained for each Plan participant. Each participants account is credited with the participants contribution, the Companys Matching Contribution, the Companys Performance Contribution when applicable, and allocations of Plan earnings, and is charged with withdrawals, an allocation of plan losses and administrative expenses. Allocations are based on participant earnings or account balances, as defined in the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participants account. | ||
InvestmentsParticipants direct the investment of their account balances and contributions into various investment options offered by the Plan. The Plan currently offers Potash Corporation of Saskatchewan Inc. (PCS) Common Stock, twelve mutual funds, and one pooled investment stable value fund. The U.S. Government Reserves Fund is used to maintain dividends distributed with the ESOP option and is not available as a participant-directed investment option. The PCS stock purchase account is a money market fund that is used in the recordkeeping of the purchases and sales of fractional shares of Company stocks and is not available as a participant-directed investment option. Participants who are enrolled in the Plan under the Automatic Enrollment provision and who have not otherwise directed, will have their contributions and the employer contributions invested in the Fidelity Managed Income Portfolio II. |
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VestingParticipants are immediately vested in their account balances. | ||
Participant LoansParticipants may borrow from their fund accounts up to a maximum amount equal to the lesser of $50,000 or 50% of the participant contribution portion of their account balance. Loan terms range from one to five years or up to 20 years for the purchase of a primary residence. The loans are secured by the balance in the participants account and bear interest at two percentage points above the rate for five-year U.S. Treasury Notes on the last day of the preceding calendar quarter in which the funds are borrowed. Loans for the purchase of a primary residence bear interest at the standard lending rate for 20-year fixed rate home mortgage loans. Principal and interest are paid ratably through monthly payroll deductions. | ||
Payments of BenefitsOn termination of service, a participant may elect to receive either a lump-sum amount equal to the value of the participants interest in his or her account; or monthly, quarterly or annual installments over the participants estimated life span. Other forms of benefits are also provided to participants whose accounts were transferred from other plans. A participant may elect to receive payment of benefits prior to termination of service, as defined in the Plan. Participants may elect to receive their investment in the PCS Stock Fund in cash or in whole shares of PCS Common Stock. The Plan includes an ESOP feature with a dividend payout program whereby participants may elect to receive dividends paid on their shares of PCS Common Stock in the PCS Stock Fund. | ||
Plan AmendmentsEffective March 28, 2005, the Plan was amended to reduce the cashout limit under the Plan from $5,000 to $1,000. Lump sum distributions without participant consent can now only be made to terminated participants whose balances, as defined in the Plan Document, are under $1,000. | ||
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of AccountingThe financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. | ||
Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Plan management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates. The Plan utilizes various investment instruments, including mutual funds, a pooled investment stable value fund, and common stock. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. | ||
Investment Valuation and Income RecognitionThe Plans investments are stated at fair value. The PCS Common Stock is valued at its quoted market price. Shares of mutual funds are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. The Fidelity Managed Income Portfolio II is valued at the amount of participant and Company contributions, plus accrued interest thereon (contract value). Participant loans are valued at the outstanding loan balances. | ||
The Fidelity Managed Income Portfolio II is a stable value fund that is a commingled pool of the Fidelity Group Trust for Employee Benefit Plans. The portfolio may invest in fixed interest insurance investment contracts, money market funds, corporate and government bonds, mortgage-backed securities, bond funds, and other fixed income securities. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. The crediting interest rates were 3.61% and 3.76% at December 31, 2005 and 2004, respectively, which were based on the interest |
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rates of the underlying portfolio of assets. The average yield for the year ended December 31, 2005 was 3.71%. | ||
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. | ||
Management fees and operating expenses charged to the Plan for investment in the mutual funds and pooled fund are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of net appreciation (depreciation) in fair market value of investments for such investments. | ||
Administrative ExpensesAdministrative expenses of the Plan are paid by the Plan or the Plan Sponsor, as provided in the Plan Document. | ||
Payment of BenefitsBenefit payments to participants are recorded upon distribution. There were no amounts allocated to accounts of participants who had elected to withdraw from the Plan but had not yet been paid at December 31, 2005 and 2004. | ||
Corrective Distributions PayableThe Plan is required to return contributions received during the Plan year in excess of the IRC limits. | ||
3. | INVESTMENTS | |
The Plans investments are shown below. Investments that represent 5% or more of the Plans net assets available for benefits as of December 31, 2005 and 2004 are marked with an asterisk: |
2005 | 2004 | |||||||||||
Fixed Income and Bond Funds: |
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Fidelity Managed Income Portfolio II |
$ | 59,314,210 | * | $ | 57,449,948 | * | ||||||
Fidelity Retirement Money Market Portfolio |
7,609,320 | 6,955,156 | ||||||||||
Fidelity Institutional Short-Intermediate
Government Fund |
5,303,658 | 4,999,004 | ||||||||||
Fidelity U.S. Government Reserves Fund |
42 | 22 | ||||||||||
Equity Funds: |
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Clipper Fund |
2,126,063 | 2,083,943 | ||||||||||
Fidelity Puritan Fund |
14,929,611 | * | 15,199,332 | * | ||||||||
Fidelity Magellan Fund |
19,080,549 | * | 19,855,488 | * | ||||||||
Fidelity Growth and Income Portfolio |
27,096,047 | * | 29,656,023 | * | ||||||||
Fidelity Overseas Fund |
7,013,550 | 5,270,228 | ||||||||||
Fidelity Aggressive Growth Fund |
13,996,389 | * | 14,383,739 | * | ||||||||
Fidelity Mid-Cap Stock Fund |
4,090,156 | 2,547,338 | ||||||||||
Fidelity Small Cap Stock Fund |
4,865,363 | 4,657,333 | ||||||||||
Fidelity Spartan US Equity Index Fund |
11,802,435 | * | 12,261,088 | * | ||||||||
PCS Common Stock |
20,834,444 | * | 20,567,385 | * | ||||||||
PCS Stock Purchase Account |
5,144 | |||||||||||
Participant Loans |
4,870,486 | 4,676,892 | ||||||||||
Total |
$ | 202,937,467 | $ | 200,562,919 | ||||||||
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During 2005, the Plans investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows: |
Fixed Income and Bond Funds: |
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Fidelity Institutional Short-Intermediate Government Fund |
$ | (76,348 | ) | |
Equity Funds: |
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Clipper Fund |
(40,084 | ) | ||
Fidelity Puritan Fund |
(173,947 | ) | ||
Fidelity Magellan Fund |
466,586 | |||
Fidelity Growth and Income Portfolio |
(2,789,923 | ) | ||
Fidelity Overseas Fund |
1,015,475 | |||
Fidelity Aggressive Growth Fund |
937,337 | |||
Fidelity Mid-Cap Stock Fund |
395,779 | |||
Fidelity Small Cap Stock Fund |
41,702 | |||
Fidelity Spartan US Equity Index Fund |
357,624 | |||
PCS Common Stock |
(666,336 | ) | ||
Net depreciation of investments |
$ | (532,135 | ) | |
4. | EXEMPT PARTY-IN-INTEREST TRANSACTIONS | |
Certain Plan investments are shares of investment funds managed by Fidelity Management Trust Company (Fidelity). Fidelity is the trustee as defined by the Plan and, therefore, these transactions qualify as exempt party-in-interest transactions. Fees paid by the Plan for the investment management services were included as a reduction of the return earned on each fund. | ||
At December 31, 2005 and 2004, the Plan held 259,716.328 and 247,620.819 shares, respectively, of common stock of Potash Corporation of Saskatchewan (Potash Corporation), the parent company of the Plan sponsor, with a cost basis of $14,491,115 and $11,235,149, respectively. During the year ended December 31, 2005, the Plan recorded dividend income of $152,325. | ||
5. | PLAN TERMINATION | |
Although it has not expressed any intention to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in ERISA. |
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6. | FEDERAL INCOME TAX STATUS | |
The Internal Revenue Service has determined and informed the Company by a letter, dated November 13, 2001, that the Plan was designed in accordance with applicable Internal Revenue Code requirements. The Plan has been amended since receiving the determination letter. However, the Company and Plan administrator believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code and continues to be tax-exempt. Therefore, no provision for income taxes has been included in the Plans financial statements. | ||
7. | SUBSEQUENT EVENT | |
Plan AmendmentsEffective April 1, 2006, the Plan was amended and the annuity option was discontinued as a benefit payment option. | ||
8. | RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 | |
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: |
2005 | 2004 | |||||||
Net assets
available for benefits per the financial statements |
$ | 205,855,950 | $ | 203,525,507 | ||||
Corrective distributions payable at December 31 |
(27,869 | ) | ||||||
Net assets available for benefits per the Form 5500 |
$ | 205,883,819 | $ | 203,525,507 | ||||
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Description of Investment, | ||||||||
Including Maturity Date, | ||||||||
Identity of Issue, Borrower, | Rate of Interest, Collateral, | Current | ||||||
Lessor, or Similar Party | Par, or Maturity Value | Cost** | Value | |||||
SHARES OF REGISTERED INVESTMENT COMPANIES: | ||||||||
Pacific Financial Research | Clipper Fund |
$ | 2,126,063 | |||||
* Fidelity Management Trust Company | Puritan Fund |
14,929,611 | ||||||
* Fidelity Management Trust Company | Magellan Fund |
19,080,549 | ||||||
* Fidelity Management Trust Company | Growth and Income Portfolio |
27,096,047 | ||||||
* Fidelity Management Trust Company | Overseas Fund |
7,013,550 | ||||||
* Fidelity Management Trust Company | Aggressive Growth Fund |
13,996,389 | ||||||
* Fidelity Management Trust Company | Retirement Money Market Portfolio |
7,609,320 | ||||||
* Fidelity Management Trust Company | Mid-Cap Stock Fund |
4,090,156 | ||||||
* Fidelity Management Trust Company | Small Cap Stock Fund |
4,865,363 | ||||||
* Fidelity Management Trust Company | Spartan US Equity Index Fund |
11,802,435 | ||||||
* Fidelity Management Trust Company | Institutional Short-Intermediate Government Fund |
5,303,658 | ||||||
* Fidelity Management Trust Company | U.S. Government Reserves Fund |
42 | ||||||
COMMINGLED POOL | ||||||||
* Fidelity Management Trust Company | Managed Income Portfolio II |
59,314,210 | ||||||
* POTASH CORPORATION OF SASKATCHEWAN | PCS Common Stock, 259,716.328 shares |
20,834,444 | ||||||
PCS stock purchase account | Money Market |
5,144 | ||||||
* PARTICIPANT LOANS | Due 2006
through 2026; interest rates ranging from 4.75% to 8.5% |
4,870,486 | ||||||
TOTAL ASSETS HELD FOR INVESTMENT | $ | 202,937,467 | ||||||
* | Party in interest. | |
** | Cost information is not required for participant-directed investments and, therefore, is not included. |
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Date: June 15, 2006 | PCS U.S. Employees Savings
Plan (Name of Plan) |
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/s/ Barbara Jane Irwin | ||||
Barbara Jane Irwin | ||||
Senior Vice
President, Administration PCS Administration (USA), Inc. as Plan Administrator |
Exhibit Number | Description of Exhibit | |
23.1
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Consent of Deloitte & Touche LLP |