Agrium Reports In-Line Fourth Quarter Results: Foresees Solid Spring Season

CALGARY, AB--(Marketwired - February 09, 2017) - Agrium Inc. (TSX: AGU) (NYSE: AGU) announced today its 2016 fourth quarter results, with a net earnings to equity holders of Agrium of $67-million ($0.49 diluted earnings per share) compared to net earnings of $201-million ($1.45 diluted earnings per share) in the fourth quarter of 2015. The reduction in net earnings was driven primarily by lower year-over-year nutrient pricing. On an annual basis, 2016 earnings to equity holders of Agrium were $592-million ($4.29 diluted earnings per share) compared to $988-million ($6.98 diluted earnings per share) in 2015.

Highlights:

• Fourth quarter guidance relevant earnings were $94-million or $0.68 diluted earnings per share which is in-line with our guidance. Retail reported record EBITDA for the fourth quarter, supported by strong crop protection product sales and record International earnings, as Australian operations delivered a 29 percent increase in annual EBITDA in 2016.
• Cash provided by operating activities was $1.5-billion in the fourth quarter.
• Wholesale achieved record production for nitrogen this year and successfully completed construction of the 610,000 tonne urea plant at its nitrogen facility in Borger, Texas, within the previously disclosed revised timeline and cost parameters. Commissioning is underway and production is expected to commence in the first quarter of 2017.
• Agrium had a record year for retail small to mid-sized acquisitions, with over $500-million of expected annual sales.
• Agrium's commitment to Operational Excellence continued to deliver results this quarter, and on an annual basis we delivered approximately $145-million of EBITDA cash cost savings across the company. Supporting this was $66-million in fixed cost savings in Wholesale, while Retail's cash operating coverage ratio improved to 61 percent on an annual basis.
• Agrium has announced our 2017 annual guidance range of $4.50 to $6.00 diluted earnings per share (see page 3 for guidance assumptions and further details).

'Agrium continued to deliver solid results across our business this quarter, supported by record fourth quarter results in our Retail business and strong wholesale operating performance. We delivered on our promise of value-added growth in 2016 by successfully bringing our Borger expansion to completion and growing retail at a record pace through acquisitions,' commented Chuck Magro, Agrium's President and CEO. 'We have been encouraged by the recent firming in global nutrient markets and we anticipate solid demand for crop inputs in the coming spring application season,' added Mr. Magro.

ADJUSTED NET EARNINGS AND GUIDANCE RELEVANT EARNINGS RECONCILIATIONS

MARKET OUTLOOK

Agricultural and Crop Input Fundamentals

• Crop prices are similar to or higher than where they were a year ago, despite record global crop production in 2016/17.
• Strong global demand for grains and oilseeds has helped to partly offset the impact from record grain production. The United States Department of Agriculture ('USDA') projects that combined global grain and oilseed demand will grow by over 3 percent in 2016/17. Over the past four years, global demand has grown at an annual rate of 2.8 percent, which is the highest four year growth rate in the past thirty five years.
• We expect growers will continue to be cautious when making crop input decisions in 2017, despite improved margins partly associated with lower crop input prices. North American crop input prepay levels are higher than the same time last year, partly due to strong anticipated spring nutrient purchases in Canada due to the shortened fall ammonia season in 2016.
• We expect U.S. corn acreage to be between 90 million to 92 million acres in 2017, down from 94 million acres in 2016. We anticipate the decline in corn acreage to result in a 1 to 3 percent decline in 2016/17 U.S. crop nutrient demand, as well as lower expenditures on seed. However, total crop protection expenditures are expected to be relatively stable in 2017.

Nitrogen

• Global nitrogen prices rallied in late 2016 and early 2017, with benchmark urea and ammonia prices up between $80 and over $100 per tonne from second half 2016 lows. The rise in nitrogen prices was primarily in response to reduction in supply and export availability from China and Eastern Europe, largely due to low global prices earlier in the year.
• Chinese coal prices increased by between 40 and 140 percent between the low and high of 2016, depending on the type of coal. The increase in costs and relatively low global urea prices resulted in Chinese urea exports in the fourth quarter declining by more than 65 percent year-over-year, while annual exports declined from 13.8 million tonnes in 2015 to 8.9 million tonnes in 2016. We anticipate exports will decline further in 2017 to between six and eight million tonnes, despite the recent removal of the Chinese urea export tax in late 2016.
• U.S. offshore imports of urea were down more than one million tonnes in the second half of 2016 compared to 2015 levels, which was more than double the estimated increase in domestic production during the same time period. The shortfall in supply has lent further support to urea prices in early 2017.

Potash

• Strong potash demand supported global potash prices in the second half of 2016 and into the first half of 2017 as most potash buyers had relatively low inventories by the end of 2016. We expect that global potash shipments will be between 60 to 62 million tonnes in 2017, up from 59 million tonnes in 2016.
• Analysts expect new potash capacity to begin ramping up in the first half of 2017, which would increase available supply in the second half of 2017, however much will depend on the rate at which new supplies become available relative to the rate of international demand growth.

Phosphate

• The phosphate market was relatively weak by the end of 2016, in part due to strong exports from China late in the year; however, exportable supplies from China have tightened in early 2017 and both global and North American prices have recently increased as a result.
• Increased raw material costs are also supportive of phosphate prices, particularly the rise in the price of ammonia.

2017 ANNUAL GUIDANCE

Based on our assumptions set out under the heading 'Market Outlook', Agrium expects to achieve annual diluted earnings per share of $4.50 to $6.00 in 2017. We have maintained a range width encompassing approximately $300-million of EBITDA variability to reflect the risk and opportunity associated with crop nutrient prices and demand for crop inputs at this time of year. We are assuming a normal spring and fall application season, recognizing there is always a risk that inclement weather could affect the timing and duration of each season. Our earnings per share guidance assumes some recovery from current nitrogen prices during the key application seasons.

Based on these and other assumptions regarding prices and demand for crop nutrients set out under the heading 'Market Outlook', we expect Retail EBITDA to be $1.125-billion to $1.225-billion, and Retail nutrient sales volumes to range between 10.2 million to 10.6 million tonnes in 2017.

Based on our expected increase in utilization rate for our nitrogen assets, we anticipate nitrogen production to total 3.6 to 3.8 million tonnes. Agrium continues its hedging program for gas requirements in 2017 and is monitoring the market to mitigate any upward pressure on prices through near-term hedging. Our earnings per share guidance assumes NYMEX gas prices will be between $3.05 and $3.85 per MMBtu in 2017.

Agrium's expectation for potash production in 2017 assumes the full ramp-up of production following the expansion project at our Vanscoy mine. We expect to produce between 2.4 and 2.8 million tonnes of potash in 2017.

Total capital expenditures are expected to be in the range of $650-million to $750-million, of which approximately $500-million to $550-million is expected to be sustaining capital expenditures.

Agrium's annual effective tax rate for 2017 is expected to range between 27 to 29 percent.

This guidance and updated additional measures and related assumptions are summarized in the table below. Guidance excludes the impact of share-based payments expense (recovery), gains (losses) on foreign exchange and non-qualifying derivative hedges, and merger related costs. Volumetric and earnings estimates assume normal seasonal growing and harvest patterns in the geographies where Agrium operates.

2017 ANNUAL GUIDANCE RANGE AND ASSUMPTIONS

February 9, 2017

All comparisons of results for the fourth quarter of 2016 (three months ended December 31, 2016) and for the twelve months ended December 31, 2016 are against results for the fourth quarter of 2015 (three months ended December 31, 2015) and twelve months ended December 31, 2015. All dollar amounts refer to United States (U.S.) dollars except where otherwise stated. This news release should be read in conjunction with our audited annual financial statements and related notes, prepared in accordance with IFRS, contained in our 2015 Annual Report, available at www.agrium.com.

The financial measures cash operating coverage ratio, cash selling and general and administrative expenses, cash cost of product manufactured, and EBITDA used in this news release are not prescribed by, and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Our method of calculation may not be directly comparable to that of other companies. We consider these non-IFRS financial measures to provide useful information to both management and investors in measuring our financial performance and financial condition. These non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. Please refer to the section entitled 'Non-IFRS Financial Measures' for further details, including a reconciliation of such measures to their most directly comparable measure calculated in accordance with IFRS.

2016 Fourth Quarter Operating Results

CONSOLIDATED NET EARNINGS

• Retail's sales and gross profit increased in the fourth quarter of 2016 primarily as a result of higher crop protection product sales due to higher demand for herbicides and glyphosate in the U.S. Corn Belt and favorable weather conditions in Australia.
• Wholesale's sales and gross profit decreased in the fourth quarter compared to the same period last year due to lower market prices for all nutrients.

Expenses

• General and administrative expenses decreased by $9-million (12 percent) as a result of organization-wide cost control measures.
• Earnings from associates and joint ventures increased as a result of the devaluation of the Egyptian pound that led to a $35-million foreign exchange gain in MOPCO, net of tax.
• Our share price increased during the current quarter leading to higher share-based payments expense of $18-million.
• Other expenses increased during the quarter primarily due to the following:
  
  • Merger and related costs of $14-million
  • Impairment loss of $15-million related to an international investment
  • Information Technology outsourcing costs of $7-million

For further breakdown on Other expenses, see table below:

Depreciation and Amortization

Depreciation and amortization breakdown

Effective Tax Rate

• The effective tax rate of 25 percent for the fourth quarter of 2016 was higher than the tax rate of 20 percent for the same period in 2015 due to a decrease in the recognition of previously unrecognized tax assets in Canada.

BUSINESS SEGMENT PERFORMANCE

• Retail reported record fourth quarter gross profit and EBITDA, supported by robust demand for crop protection products and application services in the U.S and Australia. On an annual basis, Retail, and specifically Australia, reported record EBITDA while U.S. operations reported a record EBITDA to sales margin of 10.4 percent supported by higher margin proprietary product sales and cost savings.
• Total Retail selling and general and administrative expenses were up $11-million from the fourth quarter of last year. However, total cash expenses were down by $12-million after adjusting for costs associated with the retail locations acquired in 2016. Our cash operating coverage ratio also improved due to our continued focus on Operational Excellence, moving down to 61 percent on a rolling four quarter basis from 62 percent for the same period last year.
• Regionally, U.S. EBITDA was up slightly this quarter, while our Canadian operations reported weaker results due to an early winter, which shortened the fall application season. Australia reported a $20-million increase in EBITDA primarily due to strong crop protection product sales and accompanying application services. Our South American Retail operations reported slightly higher gross profit but lower EBITDA this quarter.

Crop nutrients

• Total crop nutrient sales were 8 percent lower this quarter compared to the same period last year, due to significantly lower prices across all nutrients, partly offset by higher crop nutrient volumes.
• The increase in crop nutrient volumes was due primarily to a 26 percent increase in U.S. sales tonnes this quarter, partly offset by a slight decline in nutrient volumes in Canada due to some fall weather challenges.
• Total crop nutrient gross profit was 5 percent lower this quarter due to lower selling prices and margins. North American nutrient per tonne margins were down $19 this quarter due to weaker nutrient prices, but margins as a percentage of sales rose to 19 percent this quarter compared to 18 percent in the fourth quarter of 2015.

Crop protection products

• Total crop protection product sales were up 15 percent this quarter due to strong demand in Australia, an open window in the U.S. for fall applications and some catch up in demand for crop protection products resulting from the reduced sales of these products experienced during the third quarter.
• Gross profit in the fourth quarter was up 10 percent over last year due to strong volumes and an increase in proprietary product sales. Crop protection product margins as a percentage of sales were down slightly this quarter as a result of a higher sales mix to wholesalers and selling higher volumes of lower margin products such as glyphosate, which is used for post-harvest burndown.
• Proprietary crop protection product sales as a percentage of total crop protection product sales reached 18 percent this quarter, up two percentage points over the same period last year. On an annual basis, proprietary crop protection sales grew 11 percent in 2016 and represented 24 percent of total crop protection product sales this year.

Seed

• Total seed sales were 35 percent higher this period compared to last year due to increased sales of product to wholesalers in the U.S and higher demand in Australia. Gross profit declined by 20 percent, partly related to the higher sales mix to wholesalers which traditionally represents lower margins. As a result, total seed margins as a percentage of sales was 43 percent this quarter - a 29 percent decrease from the fourth quarter of 2015. On an annual basis, however, seed margins were 20 percent the same as in 2015.

Merchandise

• Merchandise sales increased 7 percent, while gross profit remained in line with the same period last year. The increase in sales was primarily due to stronger results in Australia and increased merchandise sales in the U.S. due to some of the recent retail acquisitions.

Services and other

• Sales for services and other was up 7 percent this quarter, while gross profit was 15 percent higher. The increase in sales and profit was related to higher crop nutrient and crop protection product applications in the U.S. and Australia this quarter.

• Wholesale earnings this quarter were primarily impacted by lower global fertilizer prices across all nutrients compared to the same period last year. This was partly offset by lower fixed costs related to ongoing Operational Excellence initiatives.

Nitrogen

• Nitrogen gross profit was down 54 percent compared to the same period last year primarily due to significantly lower global nitrogen prices.
• Sales volumes were slightly higher than the same period last year due to strong demand for urea and nitrogen solutions. Ammonia sales volumes were 11 percent lower than the same period last year as a result of the early winter weather in Western Canada and the Northern Plains of the U.S. this year.
• Realized selling prices per tonne were down 26 percent compared to the same period last year due to lower global benchmark nitrogen prices.
• Cost of product sold per tonne increased by 5 percent compared to the same period last year partly due to higher natural gas input costs. Partially offsetting this were higher utilization rates and lower fixed costs at our facilities. Average nitrogen margins were $89 per tonne this quarter, while ammonia and urea margins averaged approximately $100 per tonne.

Potash

• Potash gross profit declined by 67 percent compared to the same period last year due to lower global potash prices.
• Sales volumes were 10 percent lower in the current period primarily due to lower opening inventory levels this year.
• Realized selling prices have declined over the past year with selling prices down 33 percent internationally and 25 percent for North American markets compared to the same period last year.
• Our cost of product sold per tonne was 16 percent lower than the same period last year due to a product mix with higher proportion of sales to offshore markets, where freight is excluded from cost of product sold. A weaker Canadian dollar and fixed cost savings also contributed to reduced costs this quarter. Cash cost of product manufactured on an annual basis also declined by 18 percent to $79 per tonne compared to 2015 due to higher production volumes and lower fixed costs.

Phosphate

• Phosphate gross profit was 78 percent lower than the same period last year due to continuing pressure on phosphate benchmark prices. Lower sales volumes also contributed to the decline in gross profit but were more than offset by lower cost of product sold per tonne.
• Sales volumes were 7 percent lower than the same period last year due to an early winter in Western Canada this quarter and a shorter window for fall applications of phosphate.
• Cost of product sold per tonne was down 9 percent compared to the same period last year due to lower input costs and the lower Canadian dollar benefiting the Redwater phosphate facility.

• Gross profit from Wholesale Other was lower than the same period last year primarily due to overall lower realized nutrient prices. This was partly offset by higher sales volumes of ESN and ammonium sulfate this quarter.

Expenses

• Wholesale expenses decreased by $48-million in the current quarter due to higher equity earnings of $32-million from our investments, primarily as a result of the Egyptian pound devaluation leading to a foreign exchange gain; a 16 percent reduction in selling, general and administrative expenses as a result of our on-going Operational Excellence initiatives; and a $19-million goodwill impairment on our Europe purchased for resale business included in the same period last year. This was partially offset by a $17-million gain on the sale of the West Sacramento nitrogen upgrading facility recognized in the same period last year.

Other

EBITDA for our Other non-operating business unit for the fourth quarter of 2016 had a net expense of $115-million, compared to a net expense of $92-million for the fourth quarter of 2015. The variance was primarily due to:

• Merger and related costs of $14-million
• An increase of $18-million in share-based payments expense as a result of an increase in our share price
• Impairment loss of $15-million on an international investment
• Partially offset by a $10-million decrease in gross profit elimination as a result of lower intersegment inventory held at the end of the fourth quarter of 2016

• Our total capital expenditures decreased in the fourth quarter and twelve months of 2016 compared to the same periods last year due to the ramp-up of our Vanscoy potash facility in 2015 combined with decreased spending on the Borger project in 2016.
• We completed the acquisitions of 16 farm centers located in the provinces of Alberta and Saskatchewan from Andrukow Group Solutions Inc. and 18 farm centers located across the northern U.S. Corn Belt region from Cargill AgHorizons (U.S.) in 2016.

SHARE REPURCHASES

Pursuant to the agreement dated September 11, 2016 with PotashCorp, under which the companies will combine in a merger of equals, we are restricted from purchasing our outstanding shares prior to completion of the proposed plan of arrangement. No shares were repurchased under the Normal Course Issuer Bid in 2016 or the period from January 1, 2017 to February 18, 2017. During 2015, we purchased for cancellation 5,574,331 shares at an average share price of $100.25.

OUTSTANDING SHARE DATA

Agrium had 138,176,000 outstanding shares at February 3, 2017. At February 3, 2017, the number of shares issuable pursuant to stock options outstanding (issuable assuming full conversion, where each option granted can be exercised for one common share) was approximately 937,528.

The agricultural products business is seasonal. Consequently, year-over-year comparisons are more appropriate than quarter-over-quarter comparisons. Crop input sales are primarily concentrated in the spring and fall crop input application seasons. Crop nutrient inventories are normally accumulated leading up to each application season. Our cash collections from accounts receivables generally occur after the application season is complete, and our customer prepayments are concentrated in December and January.

NON-IFRS FINANCIAL MEASURES

Financial measures that are not specified, defined or determined under IFRS are non-IFRS measures unless they are presented in our Consolidated Financial Statements. The following table outlines our non-IFRS financial measures, their definitions and why management uses the measures.

FORWARD-LOOKING STATEMENTS

Certain statements and other information included in this document constitute 'forward-looking information' and/or 'financial outlook' 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 news 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: 2017 annual guidance, including expectations regarding our diluted earnings per share and Retail EBITDA; capital spending expectations for 2017; expectations regarding performance of our business segments in 2017; expectations regarding completion of previously announced expansion projects (including timing and volumes of production associated therewith) and acquisitions; our market outlook for 2017, including nitrogen, potash and phosphate outlook and including anticipated supply and demand for our products and services, expected market and industry conditions with respect to crop nutrient application rates, planted acres, crop mix, prices and the impact of currency fluctuations and import and export volumes; and the proposed merger with PotashCorp, including timing of completion thereof. These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such forward-looking statements. As such, undue reliance should not be placed on these 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 referred to below and elsewhere in this document. 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 additional key assumptions that have been made include, among other things, assumptions with respect to Agrium's ability to successfully integrate and realize the anticipated benefits of its already completed and future acquisitions and that we will be able to implement our standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters expected by Agrium, including with respect to prices, margins, product availability and supplier agreements; the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations for 2017 and in the future; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to identify suitable candidates for acquisitions and negotiate acceptable terms; our ability to maintain our investment grade rating and achieve our performance targets; the receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects' approach; the receipt, on a timely basis, of regulatory approvals in respect of the proposed merger with PotashCorp and satisfaction of other closing conditions relating thereto. Also refer to the discussion under the heading 'Key Assumptions and Risks in Respect of Forward-Looking Statements' in our 2015 annual MD&A and under the heading 'Market Outlook' herein, with respect to further material assumptions associated with our forward-looking statements.

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 global economic, market and business conditions; weather conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our major products may vary from what we currently anticipate; governmental and regulatory requirements and actions by governmental authorities, including changes in government policy, government ownership requirements, 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, regional natural gas supply restrictions, as well as counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions at the Egyptian Misr Fertilizers Production Company S.A.E. nitrogen facility expansion in Egypt; the risk of additional capital expenditure cost escalation or delays in respect of our expansion projects; the risks that are inherent in the nature of the proposed merger with PotashCorp, including the failure to obtain required regulatory approvals and failure to satisfy all other closing conditions in accordance with the terms of the proposed merger with PotashCorp, in a timely manner or at all; 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 U.S. including those disclosed under the heading 'Risk Factors' in our Annual Information Form for the year ended December 31, 2015 and under the headings 'Enterprise Risk Management' and 'Key Assumptions and Risks in respect of Forward-Looking Statements' in our 2015 annual MD&A.

The purpose of our expected diluted earnings per share and Retail EBITDA guidance range is to assist readers in understanding our expected and targeted financial results, and this information may not be appropriate for other purposes.

Agrium disclaims any intention or obligation to update or revise any forward-looking statements in this document 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 global producer and distributor of agricultural products, services and solutions. Agrium produces nitrogen, potash and phosphate fertilizers, with a combined wholesale nutrient capacity of over nine million tonnes and with significant competitive advantages across our product lines. We supply key products and services directly to growers, including crop nutrients, crop protection, seed, as well as agronomic and application services, thereby helping growers to meet the ever growing global demand for food and fiber. Agrium retail-distribution has an unmatched network of over 1,400 facilities and over 3,800 crop consultants who provide advice and products to our grower customers to help them increase their yields and returns on hundreds of different crops. With a focus on sustainability, the company strives to improve the communities in which it operates through safety, education, environmental improvement and new technologies such as the development of precision agriculture and controlled-release nutrient products. Agrium is focused on driving operational excellence across our businesses, pursuing value-enhancing growth opportunities and returning capital to shareholders. For more information visit: www.agrium.com.

A WEBSITE SIMULCAST of the 2016 4 Quarter Conference Call will be available in a listen-only mode beginning Friday, February 10, 2017 at 8:00 a.m. MT (10:00 a.m. ET). Please visit the following website: www.agrium.com.

Basis of preparation and statement of compliance

These consolidated interim financial statements ('interim financial statements') were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and were approved for issuance by the Audit Committee on February 9, 2017. These interim financial statements do not include all information and disclosures normally provided in annual or quarterly financial statements and should be read in conjunction with our audited annual financial statements and related notes, prepared in accordance with IFRS, contained in our 2015 Annual Report, available at www.agrium.com.

The accounting policies applied in these interim financial statements are the same as those applied in our audited annual financial statements in our 2015 Annual Report.

AGRIUM INC.
Summarized Notes to the Consolidated Financial Statements
For the three and twelve months ended December 31, 2016
(millions of U.S. dollars, unless otherwise stated)
(Unaudited)

1. Corporate Management

Corporate information

Agrium Inc. ('Agrium') is incorporated under the laws of Canada with common shares listed under the symbol 'AGU' on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX). Our Corporate head office is located at 13131 Lake Fraser Drive S.E., Calgary, Canada. We conduct our operations globally from our Wholesale head office in Calgary and our Retail head office in Loveland, Colorado, United States. In these financial statements, 'we', 'us', 'our' and 'Agrium' mean Agrium Inc., its subsidiaries and joint arrangements.

We categorize our operating segments within the Retail and Wholesale business units as follows:

• Retail: Distributes crop nutrients, crop protection products, seed and merchandise and provides financial and other services directly to growers through a network of farm centers in two geographical segments:
  
  • North America: including the United States and Canada
  • International: including Australia and South America
• Wholesale: Produces, markets and distributes crop nutrients and industrial products through the following businesses:
  
  • Nitrogen: Manufacturing in Alberta and Texas
  • Potash: Mining and processing in Saskatchewan
  • Phosphate: Production facilities in Alberta and production and mining facilities in Idaho
  • Wholesale Other: Purchasing and reselling crop nutrient products from other suppliers to customers primarily in Europe; producing blended crop nutrients and Environmentally Smart Nitrogen (ESN) polymer-coated nitrogen crop nutrients; and operations of joint ventures and associates

Additional information on our operating segments is included in note 2.

Seasonality in our business results from increased demand for our products during planting seasons. Sales are generally higher in spring and fall.

2.Operating Segments