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MarketScreener Homepage  >  Equities  >  Nyse  >  The Mosaic Company    MOS

THE MOSAIC COMPANY

(MOS)
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MOSAIC : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/03/2020 | 04:10pm EST
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the material under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations" included in the Annual Report on Form 10-K of The Mosaic Company
filed with the Securities and Exchange Commission for the year ended
December 31, 2019 (the "10-K Report") and the material under Item 1 of Part I of
this report.
Throughout the discussion below, we measure units of production, sales and raw
materials in metric tonnes, which are the equivalent of 2,205 pounds, unless we
specifically state we mean long ton(s), which are the equivalent of 2,240
pounds. In the following tables, there are certain percentages that are not
considered to be meaningful and are represented by "NM."
Results of Operations
The following table shows the results of operations for the three and nine
months ended September 30, 2020 and September 30, 2019:
                                          Three months ended                                                          Nine months ended
                                             September 30,                          2020-2019                           September 30,                          2020-2019
(in millions, except per share
data)                                   2020               2019             Change            Percent              2020               2019             Change            Percent
Net sales                           $ 2,381.5$ 2,753.4$ (371.9)               (14) %       $ 6,224.3$ 6,830.0$ (605.7)                (9) %
Cost of goods sold                    2,026.4            2,473.5            (447.1)               (18) %         5,570.8            6,013.4            (442.6)                (7) %
Gross margin                            355.1              279.9              75.2                 27  %           653.5              816.6            (163.1)               (20) %
Gross margin percentage                    15  %              10  %                                                   10  %              12  %
Selling, general and administrative
expenses                                 97.6               78.2              19.4                 25  %           260.6              249.8              10.8                  4  %

Impairment, restructuring and other
expenses (benefit)                          -              (15.6)             15.6                    NM               -              353.8            (353.8)                   NM
Other operating expense                 159.0               77.8              81.2                104  %           274.8              113.3             161.5                143  %
Operating earnings                       98.5              139.5             (41.0)               (29) %           118.1               99.7              18.4                 18  %

Interest expense, net                   (43.0)             (43.2)              0.2                  -  %          (133.4)            (136.2)              2.8                 (2) %
Foreign currency transaction gain
(loss)                                    5.8              (53.8)             59.6                    NM          (174.3)             (10.4)           (163.9)                   NM
Other income                              4.7                9.7              (5.0)               (52) %            11.6                4.9               6.7                137  %
Earnings (loss) from consolidated
companies before income taxes            66.0               52.2              13.8                 26  %          (178.0)             (42.0)           (136.0)                   NM
Provision for (benefit from) income
taxes                                    38.1               69.2             (31.1)               (45) %           (97.6)              64.1            (161.7)                   NM
Earnings (loss) from consolidated
companies                                27.9              (17.0)             44.9                    NM           (80.4)            (106.1)             25.7                (24) %
Equity in net (loss) of
nonconsolidated companies               (32.5)             (23.0)             (9.5)                41  %           (82.3)             (34.3)            (48.0)               140  %
Net (loss) including noncontrolling
interests                                (4.6)             (40.0)             35.4                (89) %          (162.7)            (140.4)            (22.3)                16  %
Less: Net earnings (loss)
attributable to noncontrolling
interests                                 1.6                4.1              (2.5)               (61) %            (0.9)               6.0              (6.9)                   NM

Net (loss) attributable to Mosaic $ (6.2)$ (44.1) $

  37.9                (86) %       $  (161.8)$  (146.4)$  (15.4)                11  %
Diluted net (loss) per share
attributable to Mosaic              $   (0.02)$   (0.11)$   0.09                (82) %       $   (0.43)$   (0.38)$  (0.05)                13  %
Diluted weighted average number of
shares outstanding                      379.1              385.0                                                   379.0              385.5


Overview of Consolidated Results for the three months ended September 30, 2020
and 2019
For the three months ended September 30, 2020, Mosaic had a net loss of $(6.2)
million, or $(0.02) per diluted share, compared to a net loss of $(44.1)
million, or $(0.11) per diluted share, for the prior year period. The current
period results were impacted by $125 million pre-tax, or $0.25 per diluted
share, related to the following notable items:



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•Asset retirement obligation costs of $76 million, or $(0.12) per diluted share,
related to revisions in the estimated costs of our asset retirement obligations
•Other operating expenses of $35 million, or $(0.05) per diluted share, related
to an increase in an environmental remediation reserve at our New Wales, FL
facility
•Unrealized gain on derivatives of $25 million, or $0.03 per diluted share
•Depreciation expense of $19 million, or $(0.03) per diluted share, related to
the acceleration of the closure of our K1 and K2 mine shafts at our Esterhazy,
Saskatchewan mine as we ramp up K3
•Other operating expenses of $17 million, or $(0.03) per diluted share, related
to maintaining closed and indefinitely idled facilities
•A change in the effective annual tax rate creating an expense of $14 million,
or $(0.04) per diluted share
•Other operating expenses of $8 million, or $(0.01) per diluted share, related
to an increase in reserves for legal contingencies of the Acquired Business (as
defined below)
•Other operating expenses of $7 million, or $(0.01) per share, related to
integration costs of our North American business operations
•Foreign currency transaction gain of $6 million, or $0.01 per diluted share
•Other non-operating income of $6 million, or $0.01 per diluted share, related
to a realized gain on RCRA trust securities
•Discrete income tax expense of $2 million, or $(0.01) per diluted share
During the three months ended September 30, 2019, our results included:
•Foreign currency transaction loss of $54 million, or $(0.10) per diluted share
•Discrete income tax expense of $16 million, or $(0.05) per diluted share
•Other operating expenses of $29 million, or $(0.05) per diluted share,
primarily related to revisions in the estimated costs of our asset retirement
obligations
•A benefit of $15 million, or $0.03 per diluted share, related to a revision in
the estimated cost of our asset retirement obligation at our permanently closed
Plant City, Florida phosphates manufacturing facility. Discrete income tax
expense of $4 million was associated with this.
•Depreciation expense of $12 million, or $(0.02) per diluted share, related to
the acceleration of the closure of our K1 and K2 mine shafts at our Esterhazy,
Saskatchewan mine as we ramp up K3
•Unrealized loss on derivatives of $7 million, or $(0.01) per diluted share
•Expenses of $7 million, or $(0.01) per diluted share, related to repairing the
lateral movement at the Gypstack at our Uncle Sam facility in Louisiana
•Other non-operating income of $13 million, or $0.02 per diluted share, related
to a realized gain on RCRA trust securities
Significant factors affecting our results of operations and financial condition
are listed below. Certain of these factors are discussed in more detail in the
following sections of this Management's Discussion and Analysis of Financial
Condition and Results of Operations.
In addition to the items noted above, our operating results during the three
months ended September 30, 2020, were unfavorably impacted in our Potash segment
by lower average selling prices compared to the prior year period. Selling
prices began declining in the first half of 2019 due to adverse weather
conditions in North America. They continued to decline in 2020, due to lower
export prices, as China and India contract prices set a floor for the market,
and to new suppliers entering the marketplace. Prices have begun to strengthen
in North America and Brazil however, there is generally a lag between the timing
of price increases and when the benefit is recognized. Potash sales volumes
decreased slightly in North America in the current year period following strong
sales volumes in the second quarter of 2020.




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Operating results for the three months ended September 30, 2020 were unfavorably
impacted by lower sales volumes in our Phosphates segment due to inventory
limitations resulting from a very strong spring season. During the quarter,
planned maintenance turnarounds and severe weather negatively impacted third
quarter 2020 production volumes, and together with continued customer demand,
limited the company's ability to rebuild inventory levels. In addition,
operating results were unfavorably impacted by a decrease in average selling
prices compared to the same period in the prior year. Although selling prices
have risen from the low levels seen at the end of 2019, they are still below the
same period of the prior year. Prices have risen throughout 2020 due to
tightness in global supply and demand and a decrease in competitor shipments
into North America. Competitor shipments were impacted by anticipation of
potential import duties against producers in Morocco and Russia which may result
from the countervailing duty investigations into imports of phosphate
fertilizers. Phosphate selling prices have continued to strengthen into the
fourth quarter of 2020. Operating results were favorably impacted in the current
year period by lower raw material costs, primarily sulfur and ammonia, compared
to the prior year period.
For the three months ended September 30, 2020, operating results were favorably
impacted by our Mosaic Fertilizantes segment. Sales volumes increased compared
to the same period in the prior year, due to strong market demand and efforts to
grow our market share in the current period. Operating results were also
favorably impacted by lower raw material costs in the current year compared to
the prior year period, driven by global supply and demand. Timing of maintenance
turnarounds in the current year period also favorably impacted operating
results. Operating results were unfavorably impacted by lower average selling
prices in the current year compared to the prior year period, driven by
international pricing trends, and favorable foreign currency impacts.
Other Highlights
•In July, 2020, we increased the limit of our revolving credit facility from
$2.0 billion to $2.2 billion and extended the term by one year. We continue to
hold a liquidity position, including cash and available committed lines of
credit, in excess of $3 billion.
•We received approval from the U.S. Environmental Protection Agency to re-use
phosphogypsum as roadbed material.
•Subsequent to quarter end, the company completed retirement of all short-term
financing drawn during the first quarter of 2020 to mitigate COVID-19 risk.
Overview of Consolidated Results for the nine months ended September 30, 2020
and 2019
Net loss attributable to Mosaic for the nine months ended September 30, 2020 was
$(161.8) million, or $(0.43) per diluted share, compared to a net loss of
$(146.4) million, or $(0.38) per diluted share, for the same period a year ago.
The results for the nine months ended September 30, 2020 were impacted by $487
million pre-tax, due to the following notable items:
•Foreign currency transaction loss of $174 million, or ($0.32) per diluted share
•Asset retirement obligation costs of $126 million, or $(0.19) per diluted
share, related to revisions in the estimated costs of our asset retirement
obligations
•Depreciation expense of $63 million, or $(0.09) per diluted share, related to
the acceleration of the closure of our K1 and K2 mine shafts at our Esterhazy,
Saskatchewan mine as we ramp up K3
•Other operating expenses of $52 million, or $(0.10) per diluted share, related
to maintaining closed and indefinitely idled facilities
•Other operating expenses of $35 million, or $(0.05) per diluted share related
to an increase in an environmental remediation reserve at our New Wales, FL
facility
•Discrete income tax benefit of $29 million, or $0.08 per diluted share
•A change in the effective annual tax rate, creating a benefit of $18 million,
or $0.04 per diluted share
•Unrealized loss on derivatives of $17 million, or ($0.05) per diluted share
•Other operating expenses of $17 million, or $(0.03) per diluted share, related
to an increase in reserves for legal contingencies of the Acquired Business (as
defined below)
•Other non-operating income of $14 million, or $0.02 per diluted share, related
to a realized gain on RCRA trust securities



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•Idle plant costs of $13 million, or $(0.02) per diluted share, related to the
government-mandated shutdown on March 16, 2020, of our Miski Mayo phosphate rock
mine in Peru due to the Covid-19 outbreak
•Other operating income of $7 million, or $0.01 per diluted share, related to a
legal settlement
•Other operating expenses of $7 million, or $(0.01) per share, related to
integration costs of our North American business operations
•Write-down of assets of $4 million, or $(0.01) per diluted share
During the nine months ended September 30, 2019, our results included:
•Plant City closing costs of $354 million, or $(0.70) per diluted share. There
was a discrete income tax benefit of $81 million associated with this
•Discrete income tax expense of $26 million, or $(0.07) per diluted share
•Asset retirement obligation costs of $30 million, or $(0.06) per diluted share,
related to revisions in the estimated costs of our asset retirement obligations
•Expenses of $21 million, or $(0.04) per diluted share, related to repairing the
lateral movement at the Gypstack at our Uncle Sam facility in Louisiana
•Depreciation expense of $12 million, or $(0.02) per diluted share, related to
the acceleration of the closure of our K1 and K2 mine shafts at our Esterhazy,
Saskatchewan mine as we ramp up K3
•Other operating expenses of $17 million, or $(0.04) per diluted share, related
to the Acquisition, partially offset by income of $12 million, or $0.03 per
diluted share, related to the reversal of our previously estimated and accrued
earn-out obligation to Vale
•Foreign currency transaction losses of $10 million, or $(0.01) per diluted
share
•Unrealized gains on derivatives of $25 million, or $0.05 per diluted share
•Other operating income of $8 million, or $0.02 per diluted share, related to
insurance proceeds for the 2017 flooding at the Miski Mayo mine
•Other non-operating income of $13 million, or $0.02 per diluted share, related
to a realized gain on RCRA trust securities
Results for the nine months ended September 30, 2020 and 2019 reflected the
factors discussed above in the discussion for the three months ended
September 30, 2020 and 2019, in addition to those noted below. Certain of these
factors are discussed in more detail in the following sections of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Operating results in our Potash segment for the nine months ended September 30,
2020 were unfavorably impacted by a decrease in the average selling price of
potash compared to the prior year period, partially offset by higher sales
volumes. These results were driven by the factors mentioned above in the
three-month discussion, as well as a strong winter fill program in North
America, which resulted in higher sales volumes in the first quarter of 2020,
and weather challenges in 2019 that were not experienced in 2020.
Operating results in our Phosphates segment for the nine months ended
September 30, 2020 were unfavorably impacted by lower phosphate average selling
prices compared to the prior year period. These results were driven by the
factors mentioned above in the three-month discussion. Operating results in the
current year period were favorably impacted by higher finished product sales
volumes. In addition to the factors mentioned above in the three month
discussion, North America experienced a late fall application season in 2019,
which drove increased sales volumes in the first quarter of 2020. Current year
operating results were also favorably impacted by lower idle plant and
turnaround costs compared to the prior year.
For the nine months ended September 30, 2020, operating results in our Mosaic
Fertilizantes segment were favorably impacted by an increase in sales volumes in
the current year compared to the prior year period, driven by strong market
demand, efforts to grow our market share, better performance at our production
facilities and favorable foreign currency impacts. These results were offset by
the unfavorable impact of lower average sales prices, as discussed above in the
three-month discussion.



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Other Highlights
•We continue to execute well and drive toward our 2021 operational targets.
Mosaic Fertilizantes is on track to exceed the previously announced $50 million
in transformational savings targeted for 2020. The Esterhazy K3 mine development
project continues to progress, with the fourth automated miner placed into
service in the third quarter of 2020 and the fifth subsequent to quarter end.
•Ma'aden Wa'ad Al Shamal Phosphate Company ("MWSPC"), a subsidiary of Saudi
Arabian Mining Company (Ma'aden), in which Mosaic holds a 25 percent interest,
refinanced its project level debt. The refinancing removes recourse to Mosaic by
all lenders to MWSPC, and defers principal paydown until June 30, 2022,
enhancing expected free cash flow. Mosaic's contractual commitment to make
future cash contributions to MWSPC has also been eliminated.
•On June 26, 2020, we filed petitions with the U.S. Department of Commerce and
the U.S. International Trade Commission that request the initiation of
countervailing duty investigations into imports of phosphate fertilizers from
Morocco and Russia. The purpose of the petitions is to remedy the distortions
that foreign subsidies are causing in the U.S. market for phosphate fertilizers,
and thereby restore fair competition.
•We have experienced limited adverse financial and operational Covid-19 related
impacts to our operating facilities, employees, supply chain and logistics in
2020. The Company implemented measures that are intended to provide for the
immediate health and safety of our employees, including working remotely and
alternating work schedules, in order to minimize the number of employees at one
location. In an effort to contain the spread of the virus, many government
authorities, at locations where we do business, have issued "social distancing
or shelter-in-place" orders. In accordance with such orders, operations at our
Miski Mayo mine in Peru were closed on March 16, 2020. Operations resumed on May
13, 2020. Our Patrocino operations in Brazil were also closed for ten days,
restarting operations on April 7, 2020. These closures resulted in minimal
disruptions to our operations.




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Phosphates Net Sales and Gross Margin
The following table summarizes the Phosphates segment's net sales, gross margin,
sales volume, selling prices and raw material prices:
                                        Three months ended                                                         Nine months ended
                                           September 30,                         2020-2019                           September 30,                          2020-2019
(in millions, except price per
tonne or unit)                         2020              2019            Change            Percent              2020               2019             Change            Percent
Net sales:
North America                      $   439.9$ 484.1$  (44.2)                (9) %       $ 1,204.6$ 1,326.6$ (122.0)                (9) %
International                          304.6            335.8             (31.2)                (9) %           921.7            1,216.7            (295.0)               (24) %
Total                                  744.5            819.9             (75.4)                (9) %         2,126.3            2,543.3            (417.0)               (16) %
Cost of goods sold                     722.7            839.2            (116.5)               (14) %         2,169.7            2,519.6            (349.9)               (14) %
Gross margin                       $    21.8$ (19.3)$   41.1                    NM       $   (43.4)$    23.7$  (67.1)                   NM
Gross margin as a percentage of
net sales                                  3  %            (2) %                                                   (2) %               1  %
Sales volumes(a) (in thousands of
metric tonnes)
DAP/MAP                                1,134            1,311              (177)               (14) %           3,632              3,727               (95)                (3) %
Performance and Other(b)                 930              883                47                  5  %           2,586              2,441               145                  6  %
    Total finished product tonnes      2,064            2,194              (130)                (6) %           6,218              6,168                50                  1  %
Rock                                     238              536              (298)               (56) %             526              1,401              (875)               (62) %
Total Phosphates Segment Tonnes(a)     2,302            2,730              (428)               (16) %           6,744              7,569              (825)               (11) %
Realized prices ($/tonne)
Average finished product selling
price (destination)(a)             $     354$   355$     (1)                 0  %       $     337$     396$    (59)               (15) %

DAP selling price (fob mine) $ 307$ 310 $

  (3)                (1) %       $     289$     343$    (54)               (16) %

Average cost per unit consumed in
cost of goods sold:
Ammonia (metric tonne)             $     273$   306$    (33)               (11) %       $     290$     331$    (41)               (12) %
Sulfur (long ton)                  $      86$   119$    (33)               (28) %       $      80$     136$    (56)               (41) %
Blended rock (metric tonne)        $      60$    65$     (5)                (8) %       $      61$      63$     (2)                (3) %
Production volume (in thousands of
metric tonnes) - North America         2,038            2,111               (73)                (3) %           6,015              6,153              (138)                (2) %


____________________________
(a) Includes intersegment sales volumes.
(b) Includes sales volumes of MicroEssentials® and animal feed ingredients.
Three months ended September 30, 2020 and September 30, 2019
The Phosphates segment's net sales were $744.5 million for the three months
ended September 30, 2020, compared to $819.9 million for the three months ended
September 30, 2019. The decrease in net sales in the current year period was
primarily due to lower sales volumes and an unfavorable pricing impact, due to
the mix of products sold. These two factors impacted net sales by approximately
$65 million and $10 million, respectively compared to the prior year period.
Our average finished product selling price was $354 per tonne for the three
months ended September 30, 2020, comparable to the same period a year ago.



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The Phosphates segment's sales volumes of finished products decreased by 6% for
the three months ended September 30, 2020, compared to the same period in the
prior year, due to the factors discussed in the Overview.
Gross margin for the Phosphates segment increased to $21.8 million for the three
months ended September 30, 2020, from $(19.3) million for the three months ended
September 30, 2019. The increase in gross margin in the current year period was
primarily due to significantly lower raw materials costs, as discussed below,
which favorably impacted gross margin by approximately $50 million compared to
the prior year period. This was partially offset by the unfavorable impact from
the mix of products sold of approximately $10 million in the current year.
The average consumed price for ammonia for our North American operations
decreased to $273 per tonne for the three months ended September 30, 2020, from
$306 in the same period a year ago. We typically purchase approximately
one-third of our ammonia from various suppliers in the spot market, with the
remaining two-thirds either purchased through an ammonia supply agreement or
produced internally at our Faustina, Louisiana location. The average consumed
sulfur price for our North American operations decreased to $86 per long ton for
the three months ended September 30, 2020, from $119 in the same period a year
ago. The purchase prices of these raw materials are driven by global supply and
demand. The consumed ammonia and sulfur prices also include transportation,
transformation, and storage costs.
The average consumed cost of purchased and produced phosphate rock decreased to
$60 per tonne for the three months ended September 30, 2020, compared to $65 per
tonne for the three months ended September 30, 2019. For the three months ended
September 30, 2020, our North American phosphate rock production decreased to
3.0 million tonnes from 3.1 million tonnes for the same period of the prior
year.
The Phosphates segment's production of crop nutrient dry concentrates and animal
feed ingredients decreased slightly to 2.0 million tonnes for the three months
ended September 30, 2020, compared to 2.1 million tonnes for the same period in
the prior year. Our operating rate for processed phosphate production decreased
to 82% for the three months ended September 30, 2020, from 87% for the same
period in 2019.
Nine months ended September 30, 2020 and September 30, 2019
The Phosphates segment's net sales were $2.1 billion for the nine months ended
September 30, 2020, compared to $2.5 billion for the nine months ended
September 30, 2019. The decrease in net sales was primarily due to lower selling
prices and sales volumes in the current year period, which unfavorably impacted
net sales by approximately $330 million and $80 million, respectively, compared
to the prior year period.
Our average finished product selling price was $337 per tonne for the nine
months ended September 30, 2020, a decrease of 15% per tonne from the same
period a year ago, due to the factors discussed in the Overview.
The Phosphates segment's sales volumes of finished products increased by 1% for
the nine months ended September 30, 2020, compared to the same period in the
prior year ago.
Gross margin for the Phosphates segment decreased to $(43.4) million for the
nine months ended September 30, 2020, from $23.7 million for the nine months
ended September 30, 2019. The decrease in gross margin in the current year
period was primarily due to the impact of lower finished product prices of
approximately $330 million compared to the prior year. This was partially offset
by lower raw material costs as discussed below, impacting gross margin by
approximately $230 million, and lower costs of approximately $50 million which
related to the timing of idle plant and turnaround costs in the current year
period. Gross margin was also unfavorably impacted by approximately $20 million,
due to lower sales volumes.
The average consumed price for ammonia for our North American operations was
$290 per tonne for the nine months ended September 30, 2020, compared to $331 in
the same period a year ago. The average consumed price for sulfur for our North
American operations decreased to $80 per long ton for the nine months ended
September 30, 2020, from $136 in the same period a year ago.  The purchase
prices of these raw materials are driven by global supply and demand.
The average consumed cost of purchased and produced phosphate rock was $61 per
tonne for the nine months ended September 30, 2020, compared to $63 per tonne
for the prior year period. Our North American phosphate rock production
increased to 9.8 million tonnes for the nine months ended September 30, 2020,
compared to 9.0 million for the nine months ended September 30, 2019. The
increase from the prior year is due to favorable performance of our Four Corners
mine. In the



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prior year period, production suffered due to challenges caused by weather, and
operational challenges as we transitioned into new mining areas.
The Phosphate segment's production of crop nutrient dry concentrates and animal
feed ingredients was 6.0 million tonnes for the nine months ended September 30,
2020, compared to 6.2 million tonnes in the prior year period. For the nine
months ended September 30, 2020, our operating rate for processed phosphate
production decreased to 81%, compared to 84% in the same period of the prior
year.
Potash Net Sales and Gross Margin
The following table summarizes the Potash segment's net sales, gross margin,
sales volume and selling price:
                                      Three months ended                                                        Nine months ended
                                         September 30,                         2020-2019                          September 30,                         2020-2019
(in millions, except price per
tonne or unit)                       2020              2019            Change            Percent             2020              2019             Change            Percent
Net sales:
North America                    $   251.7$ 327.7$  (76.0)               (23) %       $  849.4$  859.3$   (9.9)                (1) %
International                        212.0            288.7             (76.7)               (27) %          611.3             859.7            (248.4)               (29) %
Total                                463.7            616.4            (152.7)               (25) %        1,460.7           1,719.0            (258.3)               (15) %
Cost of goods sold                   356.1            458.1            (102.0)               (22) %        1,112.4           1,194.2             (81.8)                (7) %
Gross margin                     $   107.6$ 158.3$  (50.7)               (32) %       $  348.3$  524.8$ (176.5)               (34) %
Gross margin as a percentage of
net sales                               23  %            26  %                                                  24  %             31  %

Sales volume(a) (in thousands of
metric tonnes)
MOP                                  2,030            2,099               (69)                (3) %          6,021             5,747               274                  5  %
Performance and Other(b)               234              222                12                  5  %            701               598               103                 17  %
Total Potash Segment Tonnes          2,264            2,321               (57)                (2) %          6,722             6,345               377                  6  %
Realized prices ($/tonne)
Average finished product selling
price (destination)              $     205$   266$    (61)               (23) %       $    217$    271$    (54)               (20) %
MOP selling price (fob mine)     $     170$   235$    (65)               (28) %       $    181$    240$    (59)               (25) %
Production volume (in thousands
of metric tonnes)                    2,111            1,771               340                 19  %          6,377             6,205               172                  3  %

______________________________

(a) Includes intersegment sales volumes.
(b) Includes sales volumes of K-mag, Aspire and animal feed ingredients.
Three months ended September 30, 2020 and September 30, 2019
The Potash segment's net sales decreased to $463.7 million for the three months
ended September 30, 2020, compared to $616.4 million in the same period a year
ago. The decrease was due to lower selling prices and sales volumes, which had
unfavorable impacts on net sales of approximately $140 million and approximately
$10 million, respectively.
Our average finished product selling price was $205 per tonne for the three
months ended September 30, 2020, compared to $266 per tonne for the same period
a year ago, as a result of the factors described in the Overview.
The Potash segment's sales volumes of finished products decreased slightly to
2.26 million tonnes for the three months ended September 30, 2020, compared to
2.32 million tonnes in the same period a year ago.
Gross margin for the Potash segment decreased to $107.6 million for the three
months ended September 30, 2020, from $158.3 million in the same period of the
prior year. The decrease in gross margin in the current year period is primarily
due to approximately $140 million of lower selling prices and approximately $10
million of lower sales volumes. These were partially offset by approximately $40
million of lower maintenance related turnaround costs due to timing of when the
turnarounds



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occurred, lower plant spending of approximately $30 million, and lower Canadian
resource taxes of approximately $32 million as discussed below.
We had expense of $26.1 million from Canadian resource taxes for the three
months ended September 30, 2020, compared to $58.1 million in the same period a
year ago. Canadian royalty expense decreased to $6.9 million for the three
months ended September 30, 2020, compared to $8.5 million for the three months
ended September 30, 2019. The fluctuations in Canadian resource taxes are a
result of a decrease in average selling prices and margins, due to the factors
discussed in the Overview. The decrease in royalties is due to the reduction in
sales revenue.
We incurred $28 million in brine inflow management expenses, including
depreciation on brine assets, at our Esterhazy mine during the three months
ended September 30, 2020, compared to $32 million for the three months ended
September 30, 2019. We have been effectively managing the brine inflows at
Esterhazy since 1985, and from time to time we experience changes to the amounts
and patterns of brine inflows. Inflows continue to be within the range of our
historical experience. Brine inflow expenditures continue to reflect the cost of
addressing changing inflow patterns, including inflows from below our mine
workings, which can be more complex and costly to manage. Our past investments
in remote injection and increased pumping capacities facilitate our management
of the brine inflows and the amount of brine stored in the mine. We are
continuing the expansion of capacity in our Potash segment with the K3 shaft at
our Esterhazy mine. Once completed, this will provide us the opportunity to
eliminate future brine inflow management costs after we close our K1 and K2
shafts in the future.
Our operating rate for potash production was 87% for the current year period,
compared to 67% in the prior year period. The change in our operating rate from
the prior year period is primarily due to the timing of maintenance turnarounds
which took place in the third quarter of the prior year and are planned for the
fourth quarter of 2020.
Nine months ended September 30, 2020 and September 30, 2019
The Potash segment's net sales decreased to $1.5 billion for the nine months
ended September 30, 2020, compared to $1.7 billion in the same period a year
ago. The decrease was due to lower selling prices, which had an unfavorable
impact on net sales of approximately $370 million, partially offset by higher
sales volumes, which had a favorable impact on net sales of approximately $110
million.
Our average selling price was $217 per tonne for the nine months ended
September 30, 2020, compared to $271 per tonne for the same period a year ago,
due to the factors discussed above in the Overview.
The Potash segment's sales volumes increased to 6.7 million tonnes for the nine
months ended September 30, 2020, compared to 6.3 million tonnes in the same
period a year ago, due to the factors discussed in the Overview.
Gross margin for the Potash segment decreased to $348.3 million for the nine
months ended September 30, 2020, from $524.8 million for the same period in the
prior year. Gross margin was unfavorably impacted by approximately $370 million,
due to the decrease in average selling prices, partially offset by approximately
$40 million, due to the impact of higher sales volumes. Gross margin was
favorably impacted by lower maintenance turnaround costs of approximately $70
million due to the timing of when turnarounds occurred, and approximately $30
million of lower plant spending and fixed cost absorption due to higher
production volumes and inventory unit values, in the current year period
compared to the prior year period. Gross margin was also favorably impacted in
the current period by approximately $50 million due to lower Canadian resource
taxes and royalties, as discussed below.
We incurred $109.9 million in Canadian resource taxes for the nine months ended
September 30, 2020, compared to $161.4 million in the same period a year ago.
Canadian royalty expense decreased to $22.9 million for the nine months ended
September 30, 2020, compared to $30.7 million for the nine months ended
September 30, 2019. The fluctuations in Canadian resource taxes and royalties
are due to lower average selling prices and margins in the current year period
compared to the prior year.
We incurred expense of $79 million, including depreciation on brine assets,
related to managing the brine inflows at our Esterhazy mine during the nine
months ended September 30, 2020, compared to $104 million in the prior year
period.
Our operating rate was 88% for the current year period, compared to 79% in the
prior year period. The change in our operating rate from the prior year period
is primarily due to the timing of maintenance turnarounds, which took place in
the third quarter



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of the prior year and are planned for the fourth quarter of 2020, and to a change in our operating capacities, as we indefinitely idled our Colonsay, Saskatchewan mine in the fourth quarter of 2019.


Mosaic Fertilizantes Net Sales and Gross Margin
The following table summarizes the Mosaic Fertilizantes segment's net sales,
gross margin, sales volume and selling price.
                                            Three months ended                                                          Nine months ended
                                               September 30,                          2020-2019                           September 30,                          2020-2019
(in millions, except price per tonne
or unit)                                  2020               2019             Change            Percent              2020               2019             Change            Percent
Net Sales                             $ 1,140.5$ 1,388.3$ (247.8)               (18) %       $ 2,658.6$ 2,919.0$ (260.4)                (9) %
Cost of goods sold                        963.6            1,256.2            (292.6)               (23) %         2,314.5            2,699.3            (384.8)               (14) %
Gross margin                          $   176.9$   132.1$   44.8                 34  %       $   344.1$   219.7$  124.4                 57  %
Gross margin as a percent of net
sales                                        16  %              10  %                                                   13  %               8  %
Sales volume (in thousands of metric tonnes)
Phosphate produced in Brazil              1,343                846               497                 59  %           3,203              2,021             1,182                 58  %
Potash produced in Brazil                    85                 88                (3)                (3) %             231                241               (10)                (4) %
Purchased nutrients for distribution      2,160              2,500              (340)               (14) %           4,789              4,791                (2)                 -  %
Total Mosaic Fertilizantes Segment
Tonnes                                    3,588              3,434               154                  4  %           8,223              7,053             1,170                 17  %
Realized prices ($/tonne)
Average finished product selling
price (destination)                   $     318$     404$    (86)               (21) %       $     323$     414$    (91)               (22) %
  Brazil MAP price (delivered price
to third party)                       $     366$     406$    (40)               (10) %       $     337$     445$   (108)               (24) %
Purchases ('000 tonnes)
DAP/MAP from Mosaic                          82                201              (119)               (59) %             429                664              (235)               (35) %
MicroEssentials® from Mosaic                373                294                79                 27  %             897                852                45                  5  %
Potash from Mosaic/Canpotex                 622                868              (246)               (28) %           1,623              1,878              (255)               (14) %
Average cost per unit consumed in
cost of goods sold:
  Ammonia (metric tonne)              $     329$     375$    (46)               (12) %       $     368$     385$    (17)                (4) %
  Sulfur (long ton)                   $     107$     178$    (71)               (40) %       $     119$     190$    (71)               (37) %

Blended rock (metric tonne) $ 65$ 103$ (38)

               (37) %       $      69$     104$    (35)               (34) %
Production volume (in thousands of
metric tonnes)                            1,025                765               260                 34  %           3,057              2,341               716                 31  %

______________________________

Three months ended September 30, 2020 and September 30, 2019
The Mosaic Fertilizantes segment's net sales decreased to $1.1 billion for the
three months ended September 30, 2020, from $1.4 billion in the same period a
year ago. The decrease in net sales was due to lower sales prices, which
unfavorably impacted net sales by approximately $310 million, partially offset
by higher sales volumes in the current year period, which favorably impacted net
sales by approximately $100 million. Net sales were also unfavorably impacted by
foreign currency impacts of approximately $35 million.
Our average finished product selling price was $318 per tonne for the three
months ended September 30, 2020, compared to $404 per tonne for the same period
a year ago, due to the decline in global prices described in the Overview.



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The Mosaic Fertilizantes segment's sales volumes of finished products increased
to 3.6 million tonnes for the three months ended September 30, 2020, compared to
3.4 million tonnes in the same period a year ago, as a result of the factors
described in the Overview.
Gross margin for the Mosaic Fertilizantes segment increased to $176.9 million
for the three months ended September 30, 2020, from $132.1 million in the same
period of the prior year. Gross margin increased approximately $45 million in
the current year period compared to the same period in the prior year partly due
to a favorable impact of approximately $50 million related to better performance
at our production facilities. These facilities had higher idle costs and fixed
cost absorption in the prior year period due to lower production tonnes related
to the temporary idling of our mines, as we worked to comply with new
legislation regarding tailing dams in Brazil. Gross margin was also favorably
impacted by lower raw materials costs of approximately $25 million, lower
turnaround and idle costs of approximately $20 million due to timing of when
these occurred, a favorable impact from foreign currency changes of
approximately $20 million and an impact of approximately $10 million due to
increased sales volumes. These were partially offset by the negative impact of
approximately $80 million from lower sales prices compared to the prior year
period.
The Mosaic Fertilizantes segment's production of crop nutrient dry concentrates
and animal feed ingredients increased 34%, to 1.0 million tonnes, for the three
months ended September 30, 2020, from 0.8 million tonnes in the prior year
period. For the three months ended September 30, 2020, our operating rate
increased to 80%, compared to 62% in the same period of the prior year. In the
prior year period, two of our mines were temporarily idled to address
legislation which introduced new rules regarding tailing dam safety,
construction, environmental licenses and operations.
For the three months ended September 30, 2020, our Brazilian phosphate rock
production increased to 1.1 million tonnes from 0.7 million tonnes for the prior
year period. The lower production in the prior year was due to the idling of two
of our mines as discussed above.
Nine months ended September 30, 2020 and 2019
The Mosaic Fertilizantes segment's net sales were $2.7 billion for the nine
months ended September 30, 2020, compared to $2.9 billion in the prior year
period. In the current period, net sales were unfavorably impacted by lower
sales prices of approximately $750 million, and foreign currency changes of
approximately $75 million compared to the prior year period. These were
partially offset by the favorable impact of higher sales volumes of
approximately $565 million in the current year period compared to the prior
year.
The average finished product selling price decreased $91 per tonne to $323 per
tonne for the nine months ended September 30, 2020, compared to $414 per tonne
in the prior year period, primarily due to the decline in global prices
mentioned in the Overview.
The Mosaic Fertilizantes segment's sales volume increased to 8.2 million tonnes
for the nine months ended September 30, 2020, from 7.1 million tonnes in the
same period a year ago, due to factors mentioned above in the Overview.
Total gross margin for the nine months ended September 30, 2020, increased to
$344.1 million from $219.7 million in the same period in the prior year. In the
current year period, gross margin was favorably impacted by favorable sales
volumes of approximately $70 million, and lower raw materials costs of
approximately $80 million. Better performance at our production facilities
resulted in a favorable gross margin impact of approximately $50 million, as
certain facilities were temporarily idled in the prior year period as we worked
to comply with the new legislation mentioned above in the three-month
discussion. Gross margin was also positively impacted by lower turnaround and
idle costs of approximately $60 million, due to the timing of when these
occurred, and favorable foreign currency impacts of approximately $90 million.
These increases were partially offset by lower sales prices of approximately
$230 million in the current year period as compared to the prior year.
The Mosaic Fertilizantes segment's production of crop nutrient dry concentrates
and animal feed ingredients increased 31% to 3.1 million tonnes for the nine
months ended September 30, 2020, from 2.3 million tonnes in the prior year
period. The lower production in the prior year was due to the temporary idling
of three of our mines for a large portion of the period to address legislation
regarding tailing dams as discussed above. For the nine months ended
September 30, 2020, our operating rate was 81%, compared to 63% in the same
period of the prior year.



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For the nine months ended September 30, 2020, our Brazilian phosphate rock
production increased to 3.2 million tonnes from 1.7 million tonnes for the same
period of the prior year, due to the temporary idling of our mines in the prior
year period as discussed above.
Corporate, Eliminations and Other
In addition to our three operating segments, we assign certain costs to
Corporate, Eliminations and Other, which is presented separately in Note 17 to
our Notes to Condensed Consolidated Financial Statements. Corporate,
Eliminations and Other includes the results of the China and India distribution
businesses, intersegment eliminations, including profit on intersegment sales,
unrealized mark-to-market gains and losses on derivatives, debt expenses and
Streamsong Resort® results of operations.
For the three months ended September 30, 2020, gross margin for Corporate,
Eliminations and Other was $48.8 million, compared to $8.8 million for the same
period in the prior year. The change was driven by a net unrealized gain of
$24.7 million in the current year period, primarily on foreign currency and
commodity derivatives, compared to a net unrealized loss of $6.4 million in the
prior year period. Distribution operations in India and China had revenue of
$200.9 million and gross margin of $18.4 million in the current year period,
compared to revenue of $134.3 million and gross margin of $0.4 million in the
prior year period. The increase in revenue during the current year period
compared to the prior year was due to the timing of settlement of certain supply
agreements. Results were also impacted by the elimination of profit on
intersegment sales of $14.0 million in the current year period, compared to
$28.0 million in the prior year period.
For the nine months ended September 30, 2020, gross margin for Corporate,
Eliminations and Other was $4.5 million, compared to $48.4 million for the same
period in the prior year. The change was driven by a net unrealized loss of
$17.0 million in the current year period, primarily on foreign currency
derivatives, compared to a net unrealized gain of $25.6 million in the prior
year period. Distribution operations in India and China had revenue of $439.2
million and gross margin of $40.4 million in the current year period, compared
to revenue of $360.8 million and gross margin of $19.6 million in the prior year
period. Results were also impacted by the elimination of profit on intersegment
sales in the current year period of $3.4 million, compared to $28.8 million in
the prior year period.
Other Income Statement Items
                                           Three months ended                                                           Nine months ended
                                             September 30,                             2020-2019                          September 30,                           2020-2019
(in millions)                             2020                2019             Change            Percent              2020               2019             Change            Percent
Selling, general and
administrative expenses            $     97.6$ 78.2$    19.4                 25  %       $    260.6$ 249.8$    10.8                  4  %

Impairment, restructuring and
other expenses (benefit)                    -                (15.6)              15.6               (100) %                -            353.8             (353.8)                   NM
Other operating expense                 159.0                 77.8               81.2                104  %            274.8            113.3              161.5                143  %

Interest expense                        (50.8)               (53.1)               2.3                 (4) %           (158.6)          (161.1)               2.5                 (2) %
Interest income                           7.8                  9.9               (2.1)               (21) %             25.2             24.9                0.3                  1  %
   Interest expense, net                (43.0)               (43.2)               0.2                  -  %           (133.4)          (136.2)               2.8                 (2) %
Foreign currency transaction gain
(loss)                                    5.8                (53.8)              59.6                    NM           (174.3)           (10.4)            (163.9)                   NM
Other income                              4.7                  9.7               (5.0)               (52) %             11.6              4.9                6.7                137  %
Provision for (benefit from)
income taxes                             38.1                 69.2              (31.1)               (45) %            (97.6)            64.1             (161.7)                   NM
Equity in net (loss) of
nonconsolidated companies               (32.5)               (23.0)              (9.5)                41  %            (82.3)           (34.3)             (48.0)               140  %


Selling, General and Administrative Expenses
Selling, general and administrative expenses were $97.6 million for the three
months ended September 30, 2020, compared to $78.2 million in the same period of
the prior year. The increase was due to approximately $10 million of higher
incentive compensation related expense and approximately $10 million of higher
consulting and professional fees, related to executing on our strategic
priorities, compared to the prior year period.



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Selling, general and administrative expenses were $260.6 million for the nine
months ended September 30, 2020, compared to $249.8 million in the same period
of the prior year. The increase from the prior year period was primarily due to
the higher consulting and professional services of approximately $10 million
noted above in the three-month discussion.

Other Operating Expense
For the three months ended September 30, 2020, we had other operating expenses
of $159.0 million, compared to $77.8 million for the same period in the prior
year. The three months ended September 30, 2020 includes approximately $76
million related to revisions in estimated closure costs for our asset retirement
obligations at our closed facilities, and approximately $35 million related to
an environmental reserve for our New Wales, FL facility. The current year period
also includes approximately $17 million related to costs for closed and
indefinitely idled facilities, approximately $8 million related to reserves for
legal matters and approximately $7 million related to integration costs of our
North American business operations.

For the nine months ended September 30, 2020, we had other operating expenses of
$274.8 million, compared to $113.3 million for the same period in the prior
year. The nine months ended September 30, 2020 include approximately $126
million related to revisions in estimated closure costs for our asset retirement
obligations and $52 million related to costs for closed and indefinitely idled
facilities. The current year period also includes the environmental reserve,
reserves for legal matters and integration costs mentioned above in the three
month discussion.
Foreign Currency Transaction Gain (Loss)
We recorded a foreign currency transaction gain of $5.8 million and a loss of
$(174.3) million for the three and nine months ended September 30, 2020,
compared to losses of $(53.8) million and $(10.4) million for the three and nine
months ended September 30, 2019, respectively. For the three months ended
September 30, 2020, the gain was primarily the result of the effect of the
weakening of the U.S. dollar relative to the Canadian dollar on significant U.S.
dollar-denominated intercompany loans, partially offset by the strengthening of
the U.S. dollar relative to the Brazilian real on significant U.S.
dollar-denominated payables held by our Brazilian subsidiaries.
For the nine months ended September 30, 2020, the loss is primarily the result
of the effect of the strengthening of the U.S. dollar relative to the Brazilian
real on significant U.S. dollar-denominated payables held by our Brazilian
subsidiaries and the strengthening of the U.S. dollar relative to the Canadian
dollar on significant U.S. dollar-denominated intercompany loans. A portion of
these foreign currency gains and losses recorded in the Condensed Consolidated
Statement of (Loss) Earnings are offset in Accumulated Other Comprehensive
Income (Loss) in equity.
Equity in Net (Loss) Earnings of Nonconsolidated Companies
For the three and nine months ended September 30, 2020, we had equity in net
loss of nonconsolidated companies of $32.5 million and $82.3 million,
respectively, compared to equity in net loss of nonconsolidated companies of
$23.0 million and $34.3 million for the same periods in the prior year. This
loss is primarily related to operations at MWSPC.
Provision for (Benefit from) Income Taxes

Three months ended       Effective Tax Rate      Provision for (Benefit from) Income Taxes
September 30, 2020                   57.7  %    $                                     38.1
September 30, 2019                  132.6  %    $                                     69.2

Nine months ended        Effective Tax Rate      Provision for (Benefit from) Income Taxes
September 30, 2020                   54.8  %    $                                    (97.6)
September 30, 2019                 (152.6) %    $                                     64.1

Income tax expense was $38.1 million and the effective tax rate was 57.7% for the three months ended September 30, 2020.

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For the three months ended September 30, 2020, tax expense specific to the
period was a cost of approximately $2.3 million. This consisted primarily of tax
cost of $5.0 million recorded related to the filing of our U.S. tax return and
$2.9 million related to the impact of the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") offset by a non-U.S. benefit of $5.2 million related
to certain method changes. The CARES Act provides various tax relief measures to
taxpayers impacted by Covid-19. In addition to items specific to the period, our
income tax rate is impacted by the mix of earnings across the jurisdictions in
which we operate, by a benefit associated with depletion, and by the impact of
certain entities being taxed in both foreign jurisdictions and the U.S.,
including foreign tax credits for various taxes incurred.
For the nine months ended September 30, 2020, tax expense specific to the period
was a benefit of approximately $28.5 million. This consisted primarily of tax
benefit of $22.2 million recorded related to the impacts of the CARES Act to
prior years. The CARES Act provides various tax relief measures to taxpayers
impacted by Covid-19. Tax expense specific to the period also included a tax
cost of $5.0 million recorded related to the filing of our U.S. tax return
offset by a non-U.S. benefit of $5.2 million related to law changes and a
benefit of $5.5 million related to release of the sequestration on AMT. In
addition to items specific to the period, our income tax rate is impacted by the
mix of earnings across the jurisdictions in which we operate, by a benefit
associated with depletion, and by the impact of certain entities being taxed in
both foreign jurisdictions and the U.S., including foreign tax credits for
various taxes incurred.
Critical Accounting Estimates
The Condensed Consolidated Financial Statements are prepared in conformity with
GAAP. In preparing the Condensed Consolidated Financial Statements, we are
required to make various judgments, estimates and assumptions that could have a
significant impact on the results reported in the Condensed Consolidated
Financial Statements. We base these estimates on historical experience and other
assumptions believed to be reasonable by management under the circumstances.
Changes in these estimates could have a material effect on our Condensed
Consolidated Financial Statements.
The basis for our financial statement presentation, including our significant
accounting estimates, is summarized in Note 2 to the Condensed Consolidated
Financial Statements in this report. A summary description of our significant
accounting policies is included in Note 2 to the Consolidated Financial
Statements in our 10-K Report. Further detailed information regarding our
critical accounting estimates is included in Management's Discussion and
Analysis of Results of Operations and Financial Condition in our 10-K Report.
Liquidity and Capital Resources
As of September 30, 2020, we had cash and cash equivalents of $0.9 billion,
short-term debt of $0.2 billion, long-term debt, including current maturities,
of approximately $4.6 billion, and stockholders' equity of approximately $8.7
billion. We have a target liquidity buffer of up to $3.0 billion, including cash
and available committed and uncommitted credit lines. We expect our liquidity to
fluctuate from time to time, especially in the first quarter of each year, to
manage through the seasonality of our business. We also target debt leverage
ratios that are consistent with investment grade credit metrics. Our capital
allocation priorities include maintaining our target investment grade metrics
and financial strength, sustaining our assets, including ensuring the safety and
reliability of our assets, investing to grow our business, either through
organic growth or taking advantage of strategic opportunities, and returning
excess cash to shareholders, including paying our dividend. During the nine
months ended September 30, 2020, we invested $785.8 million in capital
expenditures.
Funds generated by operating activities, available cash and cash equivalents,
and our credit facilities continue to be our most significant sources of
liquidity. We believe funds generated from the expected results of operations
and available cash, cash equivalents and borrowings under our committed and
uncommitted credit facilities, as needed, will be sufficient to finance our
operations, including our capital expenditures, existing strategic initiatives
and expected dividend payments, for the next 12 months. There can be no
assurance, however, that we will continue to generate cash flows at or above
current levels. As of September 30, 2020, we had $2.19 billion available under
our $2.20 billion committed revolving credit facility and approximately $500
million available under uncommitted facilities. Our credit facilities, including
the revolving credit facility and our term loans, require us to maintain certain
financial ratios, as discussed in Note 10 of our Notes to Consolidated Financial
Statements in our 10-K Report.  We were in compliance with these ratios as of
September 30, 2020.
All of our cash and cash equivalents are diversified in highly rated investment
vehicles. Our cash and cash equivalents are held either in the U.S. or held by
non-U.S. subsidiaries and are not subject to significant foreign currency
exposures, as the majority



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are held in investments denominated in U.S. dollars as of September 30, 2020.
These funds may create foreign currency transaction gains or losses, however,
depending on the functional currency of the entity holding the cash. In
addition, there are no significant restrictions that would preclude us from
bringing these funds back to the U.S., aside from withholding taxes.
The following table represents a comparison of the net cash provided by
operating activities, net cash provided by or used in investing activities, and
net cash used in or provided by financing activities for the nine months ended
September 30, 2020 and September 30, 2019:
                                                   Nine months ended
               (in millions)                      September 30, 2020                 2020-2019
Cash Flow                                        2020             2019          Change       Percent
Net cash provided by operating activities    $   1,344.2$    817.8$  526.4          64  %
Net cash used in investing activities             (794.7)       (1,014.1)        219.4         (22) %
Net cash used in financing activities              (50.9)          (16.3)        (34.6)            NM


Operating Activities
During the nine months ended September 30, 2020, net cash provided by operating
activities was $1.3 billion, compared to $817.8 million for the nine months
ended September 30, 2019. Our results of operations, after non-cash adjustments
to net earnings, contributed $670.9 million to cash flows from operating
activities during the nine months ended September 30, 2020, compared to a
contribution of $1,008 million as computed on the same basis for the prior year
period. During the nine months ended September 30, 2020, we had a favorable
working capital change of $673.3 million, compared to an unfavorable change of
$190.2 million during the nine months ended September 30, 2019.
The change in working capital for the nine months ended September 30, 2020, was
primarily driven by an increase in accounts payable and accrued expenses of
$410.4 million, an increase in other noncurrent liabilities of $92.5 million,
and a decrease in inventories of $192.4 million. The increase in accounts
payable and accrued liabilities was primarily related to normal business
activities such as customer prepayments in Brazil, revisions in estimates of
AROs, and the timing of property tax payments and interest payments on long-term
debt. The increase in other noncurrent liabilities was related to increases in
estimates for our AROs and environmental liabilities. The decrease in
inventories was primarily due to higher sales volumes in the current year period
which resulted in lower inventory on hand.
Investing Activities
Net cash used in investing activities was $794.7 million for the nine months
ended September 30, 2020, compared to $1,014.1 million for the same period a
year ago. We had capital expenditures of $785.8 million for the nine months
ended September 30, 2020, compared to $931.1 million in the prior year period.
The decrease was due to deferring certain capital projects until later in the
year and the timing of payments.
Financing Activities
Net cash used in financing activities for the nine months ended September 30,
2020, was $50.9 million, compared to $16.3 million for the same period in the
prior year. For the nine months ended September 30, 2020, we had net proceeds
from borrowings on short-term debt of $184.6 million, compared to $79.6 million
in the prior year. During the current year, to increase available cash on hand,
we entered into short-term inventory and accounts receivable financing
agreements. Also, in response to the economic uncertainty created by the
Covid-19 outbreak, we drew $400 million on our revolving credit facility in the
first quarter of 2020, which was repaid in the second quarter. We had net
payments on structured accounts payable of $127 million, compared to $102.7
million in the prior year period. We also paid dividends of $56.8 million in the
current year period. We have not made any repurchases of our Common Stock during
the nine months of 2020.
Debt Instruments, Guarantees and Related Covenants
See Notes 12 and 18 to the Consolidated Financial Statements in our 10-K Report.



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Financial Assurance Requirements
In addition to various operational and environmental regulations related to our
Phosphates segment, we are subject to financial assurance requirements. In
various jurisdictions in which we operate, particularly Florida and Louisiana,
we are required to pass a financial strength test or provide credit support,
typically in the form of surety bonds, letters of credit, certificates of
deposit or trust funds. Further information regarding financial assurance
requirements is included in Management's Discussion and Analysis of Results of
Operations and Financial Condition in our 10-K Report, under "EPA RCRA
Initiative," and in Note 8 to our Condensed Consolidated Financial Statements in
this report.
Off-Balance Sheet Arrangements and Obligations
Information regarding off-balance sheet arrangements and obligations is included
in Management's Discussion and Analysis of Results of Operations and Financial
Condition in our 10-K Report and Note 15 to our Condensed Consolidated Financial
Statements in this report.
Contingencies
Information regarding contingencies is hereby incorporated by reference to Note
16 to our Condensed Consolidated Financial Statements in this report.



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Forward-Looking Statements
Cautionary Statement Regarding Forward Looking Information
All statements, other than statements of historical fact, appearing in this
report constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward looking statements
include, among other things, statements about our expectations, beliefs,
intentions or strategies for the future, including statements about proposed or
pending future transactions or strategic plans, statements concerning our future
operations, financial condition and prospects, statements regarding our
expectations for capital expenditures, statements concerning our level of
indebtedness and other information, and any statements of assumptions regarding
any of the foregoing. In particular, forward-looking statements may include
words such as "anticipate", "believe", "could", "estimate", "expect", "intend",
"may", "potential", "predict", "project" or "should". These statements involve
certain risks and uncertainties that may cause actual results to differ
materially from expectations as of the date of this filing.
Factors that could cause reported results to differ materially from those
expressed or implied by the forward-looking statements include, but are not
limited to, the following:
•business and economic conditions and governmental policies affecting the
agricultural industry where we or our customers operate, including price and
demand volatility resulting from periodic imbalances of supply and demand;
•the impact of the novel coronavirus Covid-19 pandemic on the global economy and
our business, suppliers, customers, employees and the communities in which we
operate, as further described in Part II, Item 1A of this 10-Q Report;
•the sudden and severe drop in oil demand, which could lead to a significant
decline in production, and its impact on the availability and price of sulfur, a
key raw material input for our Phosphate, segment operations;
•because of political and economic instability in Brazil or changes in
government policy in Brazil, our operations could be disrupted as higher costs
of doing business could result, including those associated with implementation
of new freight tables and new mining legislation;
•changes in farmers' application rates for crop nutrients;
•changes in the operation of world phosphate or potash markets, including
consolidation in the crop nutrient industry, particularly if we do not
participate in the consolidation;
•the expansion or contraction of production capacity or selling efforts by
competitors or new entrants in the industries in which we operate, including the
effects of actions by members of Canpotex to prove the production capacity of
potash expansion projects, through proving runs or otherwise;
•political and economic instability in the Kingdom of Saudi Arabia and, in
general, the future success of current plans for the MWSPC joint venture and any
future changes in those plans;
•build-up of inventories in the distribution channels for our products that can
adversely affect our sales volumes and selling prices;
•the effect of future product innovations or development of new technologies on
demand for our products;
•seasonality in our business that results in the need to carry significant
amounts of inventory and seasonal peaks in working capital requirements, which
may result in excess inventory or product shortages;
•changes in the costs, or constraints on supplies, of raw materials or energy
used in manufacturing our products, or in the costs or availability of
transportation for our products;
•declines in our selling prices or significant increases in costs that can
require us to write down our inventories to the lower of cost or market, or
require us to impair goodwill or other long-lived assets, or establish a
valuation allowance against deferred tax assets;
•the effects on our customers of holding high cost inventories of crop nutrients
in periods of rapidly declining market prices for crop nutrients;



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•the lag in realizing the benefit of falling market prices for the raw materials
we use to produce our products that can occur while we consume raw materials
that we purchased or committed to purchase in the past at higher prices;
•customer expectations about future trends in the selling prices and
availability of our products and in farmer economics;
•disruptions to existing transportation or terminaling facilities, including
those of Canpotex or any joint venture in which we participate;
•shortages or other unavailability of railcars, tugs, barges and ships for
carrying our products and raw materials;
•the effects of and change in trade, monetary, environmental, tax and fiscal
policies, laws and regulations;
•foreign exchange rates and fluctuations in those rates;
•tax regulations, currency exchange controls and other restrictions that may
affect our ability to optimize the use of our liquidity;
•other risks associated with our international operations, including any
potential and actual adverse effects related to the Miski Mayo mine;
•adverse weather conditions affecting our operations, including the impact of
potential hurricanes, excessive heat, cold, snow, rainfall or drought;
•difficulties or delays in receiving, challenges to, increased costs of
obtaining or satisfying conditions of, or revocation or withdrawal of required
governmental and regulatory approvals, including permitting activities;
•changes in the environmental and other governmental regulation that applies to
our operations, including federal legislation or regulatory action expanding the
types and extent of water resources regulated under federal law and the
possibility of further federal or state legislation or regulatory action
affecting or related to greenhouse gas emissions, including carbon taxes or
other measures that may be implemented in Canada or other jurisdictions in which
we operate, or of restrictions or liabilities related to elevated levels of
naturally-occurring radiation that arise from disturbing the ground in the
course of mining activities or possible efforts to reduce the flow of nutrients
into the Gulf of Mexico, the Mississippi River basin or elsewhere;
•the potential costs and effects of implementation of federal or state water
quality standards for the discharge of nitrogen and/or phosphorus into Florida
waterways;
•the financial resources of our competitors, including state-owned and
government-subsidized entities in other countries;
•the possibility of defaults by our customers on trade credit that we extend to
them or on indebtedness that they incur to purchase our products and that we
guarantee;
•any significant reduction in customers' liquidity or access to credit that they
need to purchase our products;
•the effectiveness of the processes we put in place to manage our significant
strategic priorities, including the expansion of our Potash business and our
investment in MWSPC, and to successfully integrate and grow acquired businesses;
•actual costs of various items differing from management's current estimates,
including, among others, asset retirement, environmental remediation,
reclamation or other environmental obligations and Canadian resource taxes and
royalties, or the costs of MWSPC or its existing or future funding;
•the costs and effects of legal and administrative proceedings and regulatory
matters affecting us, including environmental, tax or administrative
proceedings, complaints that our operations are adversely impacting nearby
farms, businesses, other property uses or properties, settlements thereof and
actions taken by courts with respect to approvals of settlements, costs related
to defending and resolving global audit, appeal or court activity, and other,
and other further developments in legal proceedings and regulatory matters;
•the success of our efforts to attract and retain highly qualified and motivated
employees;



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•strikes, labor stoppages or slowdowns by our work force or increased costs
resulting from unsuccessful labor contract negotiations, and the potential costs
and effects of compliance with new regulations affecting our workforce, which
increasingly focus on wages and hours, healthcare, retirement and other employee
benefits;
•brine inflows at our Esterhazy, Saskatchewan potash mine;
•accidents or other incidents involving our properties or operations, including
potential fires, explosions, seismic events, sinkholes, unsuccessful tailings
management, ineffective mine safety procedures, or releases of hazardous or
volatile chemicals;
•terrorism or other malicious intentional acts, including cybersecurity risks
such as attempts to gain unauthorized access to, or disable, our information
technology systems, or our costs of addressing malicious intentional acts;
•other disruptions of operations at any of our key production and distribution
facilities, particularly when they are operating at high operating rates;
•changes in antitrust and competition laws or their enforcement;
•actions by the holders of controlling equity interests in businesses in which
we hold a noncontrolling interest;
•changes in our relationships with other members of Canpotex or any joint
venture in which we participate or their or our exit from participation in
Canpotex or any such export association or joint venture, and other changes in
our commercial arrangements with unrelated third parties;
•the adequacy of our property, business interruption and casualty insurance
policies to cover potential hazards and risks incident to our business, and our
willingness and ability to maintain current levels of insurance coverage as a
result of market conditions, our loss experience and other factors;
•difficulties in realizing benefits under our long-term natural gas based
pricing ammonia supply agreement with CF Industries, Inc., including the risks
that the cost savings initially anticipated from the agreement may not be fully
realized over the term of the agreement or that the price of natural gas or the
market price for ammonia during the agreement's term are at levels at which the
agreement's natural gas based pricing is disadvantageous to us, compared with
purchases in the spot market; and
•other risk factors reported from time to time in our Securities and Exchange
Commission reports.
Material uncertainties and other factors known to us are discussed in Item 1A,
"Risk Factors," of our 10-K Report for the year ended December 31, 2019 and
incorporated by reference herein as if fully stated herein.
We base our forward-looking statements on information currently available to us,
and we undertake no obligation to update or revise any of these statements,
whether as a result of changes in underlying factors, new information, future
events or other developments.



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